Throughout history, America has witnessed wild cycles of economic advance, often accompanied with inflationary price surges, then economic contractions which some might classify as deflationary crashes.
Yet throughout these boom and bust cycles from the founding of the Federal Reserve until the modern era, the assurances were provided that the establishment of an American private central bank that these cyclical declines would not be as severe nor the inflationary surges as dramatic as the era during the first 100 years of America’s existence.
So much for that idea.
The instability in America’s financial system since the Great Financial Crisis is more than quite evident where the most common phrase in financial media on an almost regular basis is “gold reaches a new all time high” or other words to that effect.
The chart for gold prices since March of 2009 when the Federal Reserve dusted off its 1920’s playbook and created a modernized version called Quantitative Easing does not lie.
The recent great reflation has create a state of higher for longer of course, unfortunately that is for the consumer who has seen their living expenses surge to a seemingly permanently higher plateau. If one is to extrapolate what is next, first a perspective on what other nations are doing in preparation for what appears to be another impending Federal Reserve monetary mistake.
The accumulation of gold reserves by foreign nations in anticipation of more monetary mismanagement is the most under reported story of 2024. Here is a small sampling below of what has been in the “alternative” and overseas media to reflect this idea:
Saudi Central Bank Caught Secretly Buying 160 Tonnes of Gold in Switzerland
What’s Behind China’s Gold-Buying Spree?
Gold boosted to new records as China beefs up reserves
India outpaces the rest of the G20 in gold purchases
And even stories from US mainstream financial media, in this case Marketwatch:
Gold’s an ‘all-weather hedge,’ even if the Fed’s next move isn’t as expected
Yeah, that’s a pretty safe bet based on what is about to happen.
In fact, the distribution of gold reserves across the gold indicates that the faith the almighty US dollar might just be slipping faster and faster:
The loss of faith in fiat currency and central banks is demonstrated dramatically by the percentage gains of gold by price against major currencies around the world:
From the “silent” or hidden financial crisis of December of 2018, gold price acceleration against all of the major currencies is stunning if not shocking. The price acceleration of 25% or more against almost all of those currencies in 2024 is warning of major economic problems moving forward.
In December of 2023, these pages warned in the story title Gold’s Dangerous Rally to New All Time Highs, the four items which would propel the price of gold to new all time highs:
1. Geopolitical Risk
2. Financial Instability
3. Political Incompetence
4. Four Charts That Support this Rally
Thus far that prediction has been spot on and 100% accurate. Nothing has changed and with the Federal Reserve poised to begin another wave of MMT (Modern Monetary Theory) possibly beginning to avoid a recession which has probably already begun many months ago.
In fact the series of economic mistakes has lead to the best investment of the past five years has not been the equity market but in fact gold because of the reasons cited above:
Yet the media mavens would have one believe that buying speculative stocks is the key to a secure future without hedging against a series of central bank errors on a global basis.
The potential for another monetary mistake by Jay Powell and Co. is very high this week as the wrong comment, the insufficient level of the cut, or the hint that this will begin a long term series of rate reductions will trigger a decline in the dollar and of course, more global economic instability trapping other central banks in a lose-lose situation; especially the Bank of Japan.
While inflation might be tempered by an economic contraction, cyclical inflation with negative GDP due to monetary policy, aka, stagflation is the most likely outcome in an attempt to service the massive debt loads of Western nations.
The odds of a mistakes by traders, politicians, and military incompetence during the next 90 days is so high, if one is not hedging against this it is a very dangerous game. The world’s central banks are sending the same warning by acquiring gold at a record pace that the day of the dollar’s dominance while not approaching an end game, may well present alternative courses for world trade should conditions continue to erode at the current pace.
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