Michael Ballanger: Banks Continue To Smack Gold Speculators Around Like Common Farm Animals
In all of my years of following markets, I have always been able to appreciate the importance of history in its relationship to movements in markets but those movements are over very long periods of time. For example, world wars are long wave events and totally “event driven” as every headline as to the success or failure of the battles contained within the wars could send sentiment either soaring or plummeting. This is the world in which we live; we are forced to take the gold-silver narrative and minimize the importance of short wave moves as “noise.”
It is the long wave utility of gold and silver that counts because the drivers for gold and silver priced in U.S. dollars are anchored in the actions taken by the Federal Reserve and the U.S. Treasury department over long stretches of time. By example, cumulative U.S. debt has grown from $14 trillion to $23 trillion in ten years since the U.S. Treasury and the Fed combined to rescue the banking system from surefire default and failure. However, that exogenous shock to the money supply has been muted through intervention and faulty reporting of the economic data, aided and abetted by equally massive monetary expansion by the Europeans and the Chinese. This has had the effect of supporting the dollar index, which keeps the rate of change of U.S. import prices tame such that reported “inflation” is easily understated. On that note, it is interesting that the costs for domestic “services” including health care and education have been inflating wildly for years and are accelerating sharply since the 2009 bailouts and the explosion in debt.
As investors, we must always remember that the Great Financial Crisis/Bailout/Fraud of 2008 was “fixed” by way of a colossal experiment, the result of which is yet to be determined. Despite what the economists and the bankers and the politicians and Fed Governors are telling the world, the reality is that they have gotten it wrong for decades. Quality of life for the average American worker has been in decline for decades and we see that in wage growth and in the types of jobs available. As Ray Dalio stated on “60 Minutes” last week, “that capitalism is broken and desperately needs to be fixed lest we have a revolution,” followed by the assertion that with wealth inequality so prevalent everywhere, it has now become a political football with both Republicans and Democrats lining up on each side of the aisle.
Here in Canada, while we are different in some respects, our government (and its citizens) are sporting a hefty 83.81% Debt-to-GDP ratio compared with China at 54.44% and Russia at 19.48%. Japan is numero uno at 234.18% with the U.S.A. at 109.45%. However, as you go down the list, you come to realize that Canada is particularly at risk because the Eastern Canadian Establishment, dominated by Quebec, has been alienating Alberta with greater intensity in the past five years to the point where Alberta’s dependence on energy has become a veritable Achilles Heel and the failure of Ottawa to build a pipeline out of the province for its tar sand oil has created a clarion call for separation.