Gold starts to Move

 

Gold just finished a push upward back to all time highs and then immedialtely dropped back below $2000.

The upward move was motivated by a combinatioin of war, inflation and pressure on a stock market that old timers like Jeremy Grantham refer to as a SuperBubble.

But this is just a prelude for Gold.  

Because Gold is not a hedge against war or inflation.  War and inflation cause instability in the financial system.  It is the Instability the Gold hedges against.

If you look at the inflation you'll see it has been forty yearts in the making.  Ever since Paul Volker raised rates to the level of actual inflation - where they theoritcally belong in a free market economy - every subsequent Fed Head from Greenspan onward has simply lowered rates at every mild bump suffered by the economy.  Thus rates have been kept systematically negative compared to where they would be if they reflected real inflation  plus a Risk Premium for lending money.

And every minute rates are below the actual cost of money Debters are being paid to borrow money.  So they do.  And Debt piles up and piles up to the current unimaginable levels that could and will never be repaid.  

When you include Debt Derivatives the global debt load is in the Quadrillions.  I don't even know how many zeros that is.  It doesn't really matter any more.

Now rates are at Functional Zero and inflation is bad enough that everyone is beginning to notice.

That's the key.  People are noticing.  Not just in starving third and second world countries.  But right here in the USA.

People noticing that it is becoming difficult just to feed their families and pay rent.  Right here in the USA.  Not the wealthy top 10 percent that own 90 percwnt of the ASSETS.  But everyone else.

There is no solution.  Because to raise rates to the real cost of money would crash the Risk Asset Universe and then everyone will lose their pensions, their social security and all their investments and then even the Wealthy will become much less wealthy.  Shudder.  

Now add in War.  An insance actor from a Second World Country - himself the richest man in the wolrd - but his country is languishing - so he starts a war that cannot be won - but also can not be lost since he has a nuclear stockpile.  Enter the New Global Arms race.  And enter permanent commodity dislocation as the two countries at war account for most of the global grain supply as well as much of the oil and gas and base metals.

This is also a very unstable situation.

But - That's not all.  Add in the fact that right here in the USA there is a major political party that has an element that is very sympathetic to Russia and Putin.   An element that longs for a strong Authoritarian leader to save us all from WOKENESS (whatever the hell that is).  An element that insists our electoral system is broken, and that our financial system is becoming broken by Socialists (whatever they are) And that is extraordinarily UNSTABLE.

Because the efficacy of our very system is being querstionred by some of those in charge of the system

That's a lot of instability.  

So why is gold mired around $2000?

Because we Americans are optimists,  We believe in America's finncial superiority.  The markets always go up.  The dollar is always King.  And our leaders will ultimately prevail - at least economically.  We cant' concieve of a situation where the economy collapses.

After all it collapsed twice in the last 20 years and both times the FED just bailed it out, First with 3 trillion,  and the  with 10 Trillion.  All given to the wealthiest 1 perent.  (is that the socialism that frightens people?) And on top of that a few hundred billion also given to bail out the masses.  

So the idea that the government can endlessly bail out any probelm has become embedded.

But how do you bail out inflation when you can't raise rates without crashing risk assets?

And how do you end war when part of the the establishment supports those who perpetuate the war?

And how do you stabilize a political system when half the country doesn't believe it works anymore?

I'm afraid these probelms have no current solution.

And when others become afraid these problems have no current solution - that instability will propel gold up for the next leg of this rally.