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Saturday, February 22, 2020


Probably anyone reading this is well aware the gold has finally woken from a multi year slumber as last week it crossed out of the top end of a multi year trading range and is rising in every currency.

The reasons for this go way beyond the immediate catalyst of the corona virus.

1) The US and Europe have been in a manufacturing recession for over a year thanks in no small part to Trump's global trade war.

2) The Us and Europe have been in a coroporate capital expenditures recession for over a year thanks in no small part to Trump's trade war.

3) In spite of record Government Deficit Spending, Record Corporate tax cuts, and Three completely unnecessary Fed "Insurance Cuts" prompted by White House pressure,  The US is growing at onl 2 percent - and that's only possible with the cooperation of Government Accounting Tricks that grossly under-represent Real Inflation.

4) The Vaunted Consumer who had been "Holding Up Admirably" had done so by taking on record debt loads - as wages have been stagnant under the Trump regime.  Consumer, Government and Corporate debt are at record highs.

5) And - Most Important - The Fed has embarked on a major Quantitative Easing program - called Repo Assisstance Operations - (Or Not QE-QE) which has majorly expanded their balance sheet, while the ECB has been engaged in a massive balance sheet expansion for several years in Europe.

NOW ENTER THE CARONA VIRUS:  As the gobal economy hits stall speed (Despite Governmnet and Big Bank shills constantly seeing invisible "Green Shoots" everywhere) we are suffering the first Exogenous shock in about 10 years.  

What are the possible fiscal and monetary policy reponses to this shock?

Well, since the US shot its load goosing the economy over the last 2 years we are functionally out of bullets at the time we need them most.  The Trade War yeilded a "Deal" that is now functionally dead.  The Rate Cuts have left the Fed with a week arsenal.  The tax cuts yeilded no additional growth while blowing a hole in the budget.  And the massive spending spree has also yielded no additional growth.

The only real policy repsonse left is to lower rates to Zero and then below - while engaging in QE QE QE QE to Infinity.

QE is by definition a massive destruction of the value of the currency.

The one alternate currency employed by the Central Banks of all the world that benefits from this is GOLD.