Inflate or Die

We’ve had a long consolidation in metals now with gold and silver running up against resistance and the dollar hovering in the mid 90’s range. So what’s next?

 

When you get a prolonged consolidation as we have had the last month, and me not really finding anything worth writing about, but their will be a break one way or the other coming here soon. Because I don’t mince words on what I write, I can say that we should look to the dollar for direction on gold and silver. The dollar as you can see from the first chart has overall been falling since the beginning of the year and gold is up 25% during the same time. But look at the 2nd chart of the dollar. You can see that the dollar has a long way to go to get to the lows that we reached in June of 2008 when it hit under 75. But there is a lot of belief in what Trump is doing and that faith has had the stock market bounce up since the April lows to a Demark 13 level that should have you being cautious about being long stocks (again).

This is a doldrums summer where I don’t see a lot of moves in metals but later this year we should break through to the higher highs that solidify this bull market. While we should get a temporary bounce in the dollar and perhaps a little bit higher in the stock market on Trump euphoria, there are many cracks in the armor of this economy. The Big Beautiful Bill that was passed is set to add $5 trillion to the already massive debt we have amassed proving once again that it matters not who is elected. Those elected will always vote for their own pocketbook, promising everything to everyone, until the system collapses. And collapse it will. And that’s why you have some insurance in gold and silver.

If gold has hit record high after record high with just a small drop in the dollar, imagine what it would do if we break 90 again? The answer is an bigger move that will have investors saying, I should have bought when it was $3,000 or any number around there. Then they will say I should have bought when it was $4,000. Each time they utter those words, the price will continue higher and then they will say, it’s too high. I’ll wait for a pullback. And the pullback won’t come. When gold hits $7,000 or higher they’ll just be frozen in place and will never buy.

Am I being far fetched? Hardly. We still have so many investors chasing an unknown asset like Bitcoin or other crypto currencies that will eventually cause them to lose most all they put into it. While crypto can still have a further tulip phenomena on the upside, it will end up the same, even if Trump says he likes crypto. Trump has already backpedaled on so many things that a little fly on his shoulder called crypto where he attended crypto conferences to get votes, and started his own crypto coin (TRUMP) which has done nothing but fall 70% since its inception. Naturally I assume he would have taken some profit off the table, just as I’m sure he did with his social media company Truth Social which has fallen 50% since he took office.

But Trump is on record of saying he would reduce the national debt. Like every President since Bush he has promised to reduce the national debt. He actually branded himself as the “king of debt” and promised to eliminate the national debt in 8 years. Are we not yet convinced that every politician will say whatever they want to get elected? Are we not going to learn from past mistakes or just have the hope that all will work out in the end because we have the strongest military in the world and no matter what, that is what will dictate monetary policy? The truth of the matter is, the funding of the military industrial complex is what is bankrupting our country. Instead of reaching out to the world in peace we govern with an Iron fist. What are we fearful of? Has our foreign policy made us safer abroad or does the world hate us more? Those are question for a future book that I have been working on 19 years, but the point is, we can’t continue to afford to police the world.

See Video of 867 Military Bases Around the World

.https://youtu.be/ZV1OgJYqa1U

.Simple math tells you what’s coming. We generate $15,193 in revenue per citizen. Each tax paying citizen is responsible for $323,052 of debt. We have a total US National Debt of $37.07 trillion. How is this going to be paid down? How are you going to pay your fair share of $323,052 when federally the government collects $15,193 per person? The math doesn’t and can’t add up.

This leaves us two choices that will come to fruition at this point no matter what the Republicans or Democrats do. Inflate or Die. 

Inflate or Die – What does it mean?

This is the part where I have heard year after year for decades that the dollar is going to crash. Many have written books on the subject, and all have been wrong for so many years. In reality, the book I wrote on the dollar stands out as most don’t consider that one currency priced in a basket of other currencies technically can’t crash if all those other currencies also have the same debt to GDP issues and future obligations that can’t be sustained. But I wrote an article over a decade ago that concluded, the Fed is Relevant, For Now. When you have a currency that is created out of thin air, is faith based, and not redeemable in anything, it’s a pure Ponzi scheme just as crypto technically is. You need buyers of the currency or crypto for the scheme to continue.

When I first heard these words Inflate or Die from my mentor Richard Russell, he said the following that I think will soon enough come back to fruition again. That is the Fed buying all assets that no one else wants as the “buyer of last result.” They will add this debt to their balance sheet and eventually everyone loses faith in the Fed. Where will investors turn? The stock market? Crypto? Gold? My answer is gold.

Here is what Richard Russell wrote in 2014 but he has been saying these words for decades until his passing 10 years ago soon after writing the following. I do think the Fed will begin to buy back assets again as the economy deteriorates but ask yourself this question. Have we had the “inflate” part of Inflate or Die already? Have you seen inflation almost everywhere creeping into your world? How has gold responded?

“I understand that there was almost a revolt at the Fed.  Certain members warned Bernanke to halt the Fed’s wild money creation, fearing that it would wind up in hyper-inflation.  But the Fed cannot completely halt its QE.  The Fed is now buying 90% of the Treasuries that are put out for sale.

If the Fed halts its buying of Treasuries, who will buy them?  Certainly not China or USA investors.  Bernanke’s thinking or hoping is that continued Fed stimulus will result in the US economy becoming so strong on its own that in due time it won’t need any Fed stimulus.

However, matters are not working out in the way Bernanke wishes.  The economy is still dragging its feet, and employment is still lagging.  In the meantime, the banks, not the US populace, have prospered.  The banks’ reserves have been swelling.  What dissenting Fed members are worried about is that bank reserves are growing and are beginning to resemble water behind a dam, pressuring to be released.  When the dam finally breaks, all assets will go through the roof, and, as usual, leave the ever-suffering middle class behind.

So that’s the story and the problem of the era.  As I said years ago, the choice is, “inflate or die.”

Then there’s another excellent reason why Bernanke can’t cut back completely on the Fed’s machinations.  You see, the Fed has manipulated interest rates to ridiculously low levels.  The US must manage or carry trillions of dollars in Federal debt.  We are currently rolling over this debt at very low Fed-controlled interest rates.  But if interest rates are allowed to climb to their normal uncontrolled levels, the cost of carrying the nation’s debt (now $250 billion dollars annually) could rise to prohibitive levels — even into the trillions of dollars.

So there we are — to continue the Fed’s stimulation and manipulation adventures — or to back off and let the economy survive on its own?

So what do we do as investors and survivors?  My own choice is to hold physical gold with just enough cash to carry us through each week.  The amount of physical gold in the US is shrinking, and it’s going to China and India.  I believe the only danger to my plan is that possibly, in desperation, the US could confiscate gold from its people.

True, this was done by FDR back in 1933.  But this is a different world, and it’s not 1933.  I believe there would be so much opposition to a “gold confiscation” today that the government could not get away with it.  Besides, today many wealthy and influential people own gold, and they would constitute a powerful force against a government attempt to call in the people’s gold.

At any rate, I’ve been doing a lot of thinking on this subject, and my conclusion is that holding physical gold in your possession is safe and the best policy for surviving the difficult years that I believe lie ahead.

 

We have had tame inflation so far but at some point when the Fed starts to buy back assets again we’ll see super inflation come. The interest paid on the ever increasing debt will force Congress hands. A new Political Party called The America Party put out as an alternative option for a 3rd choice, to vote into power wont’ have the good results that everyone may hope for. We have to hit a hard landing (Die) before any new party can take hold. And when that party does come to fruition, the number one pillar has to be to have government live within its means. We have to do it or declare bankruptcy and get a fresh start. The U.S. needs to declare bankruptcy and get a fresh start but a clean slate of politicians that are for the People and not turning us into Serfs is what’s needed.

Meanwhile, any reason to buy gold that you can see? Odds are you don’t have enough of it. Buy any dips that come and go enjoy your life!