Scary Stuff!

I have not talked much about my IDW lately but with the every bubble starting to deflate at an accelerated pace, I felt it was time to flash this picture your way once again. Chairman Powell began to tighten credit in November. “Not to worry,” Wall Street cheerleaders proclaimed, as stocks continued to rise. Reflecting the continued bubble inflation even after Powell started reducing the growth of money, my IDW hit a peak of 166.08 on January 26, 2018. The don’t-worry-be-happy crowd asserted that rates were rising for good reasons, namely because the economy was doing so well. Of course, Keynesian indoctrination through our statist universities has blinded Wall Street to the realities of debt, which becomes especially pernicious now that debt is growing exponentially relative to little or no growth in GDP. A real dose of that reality started to hit the markets this week and it is pictured in my IDW shown above. The IDW plunged through the three-year average like a hot knife through butter and threatens to quickly move through the five-year average.

How has gold fared since the peak of my IDW on January 26, 2018? Gold was quoted on that day at $1,353.90. It closed this week at $1,259, or 7% below that peak. But my IDW fell from 166.08 to 148.67, or 10.5%. And for the first time in quite a while I started to hear some folks talk about gold in addition to U.S. Treasuries as a “safe haven” asset. The real question in my mind is how much longer will U.S. Treasuries be considered a Safe Haven, leaving only gold as the place to hide? Following the 2008 financial crisis when the existing monetary regime was massively damaged but not killed, China, Russia, and a number of other countries not entirely joyful about the abuse of the dollar regime over many decades began to build up their gold reserves and set up all manner of trade and financing infrastructure to protect themselves not only from an ambitious world power run by the Anglo-American based Military Industrial Complex but also from the next major global financial catastrophe. After ten years of massive fraudulent cocaine money that has led to a global economy in worse shape now than in 2008, one wonders if this sudden plunge in asset prices is now setting the stage for the end of the dollar hegemony. The handwriting on the wall was obvious after 2008. Most Americans did not see it, but Russia and China did, and they responded by buying gold. A few Americans who understand Austrian economics and that humans cannot overwrite the laws of Nature’s economy have been doing what Russia and China have been doing. We have been buying gold. My expectations are that gold will perform at least as well now as it did following 2008.

About Jay Taylor