Demand For Money Could Cause Deflation

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 BANKING CRISIS = LIQUIDITY CRISIS = DEMAND FOR MONEY

Events this past week are indicative of what could be a more formidable problem for the Fed, investors, and the economy. Before we talk about that, lets first emphasize the key point made in my article SVB, MMT, TNT.

What happened at Silicon Valley Bank, Signature Bank, and now, Credit Suisse and First Republic banks, are not individual issues. All of them are the obvious signs of banking system fragility due to the practice of fractional-reserve banking. Therefore…

What has been termed a banking crisis is actually a liquidity crisis; and the loss of liquidity translates to a DEMAND for money.

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SVB, MMT, TNT

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SVB (Silicon Valley Bank)

The Silicon Valley Bank fiasco is an in-your-face example of the systemic risk inherent in fractional-reserve banking. (see Elephant In The Room)

You cannot reliably expect to avoid indefinitely the results of reckless behavior. That should be apparent to all of us after 2008 – 2011. Sooner or later, the full onboard cost will be paid.

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End To Inflation – Three Possibilities

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END OF INFLATION IS INEVITABLE

At first, the statement above may seem counterintuitive; especially in light of the ongoing increase in the cost of goods and services experienced recently that seem to have no limit.

Besides, inflation never stops. All governments, with the help of central banks, intentionally inflate and destroy their own currencies. There are changes in momentum, of course, but an ever-expanding supply of money and credit leads to continual loss in purchasing power of the  currency (i.e., U.S. dollar).

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Still Betting On Gold Stocks?

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Whatever enthusiasm investors have remaining for their gold stocks holdings must be waning rapidly, if not already dissipated. Below is a year-to-date chart (source) for GDX (VanEck Gold Miners ETF) showing the latest swoon in prices…

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Gold In The Aftermath of 2020

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GOLD SINCE 2020 

When gold was trading above $2000 oz. in the summer of 2020 the yellow metal was receiving its fair share of attention.  After a low point just under $1050 oz. in December 2015, the gold price had doubled in four and one-half years and bullish optimism was at fever pitch.

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Silver ‘Sediment’ – Encore For Silver

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SILVER SEDIMENT

 “Sediment is solid material that is moved and deposited in a new location. Sediment can consist of rocks and minerals…” and “matter that settles to the bottom…”

The silver price closed on Friday at $22.30 oz., down $1.15 from its closing price the day before.

What is worse, though, is that it follows a drop of $.50 oz. on Thursday. And, on both Thursday and Friday, the silver price collapsed early in the day,  found the bottom level and stayed there.

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Orderly Markets vs. Chaos

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A SYSTEM OF ORDER

For the most part we are the beneficiaries of orderly financial markets.  For more than two hundred years market makers and traders have bought and sold – for themselves and in behalf of others – without long-term disruptions to the orderly function of markets.

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Gold Is Up $300 Since November – So What?!

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GOLD HEADLINES – UP $300

Advisors and marketers are ecstatic:…

“Nothing will be able to stop gold when it breaks to a new all-time high”  or “On the cusp of a breakout where gold can go up to $5000”  are two examples of recent exclamations about prospects for higher gold prices. The euphoria can be contagious.

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Gold’s Nasty Divorce

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Gold’s nasty divorce from the U.S. dollar was finalized in August 1971 when President Richard Nixon suspended any further convertibility of U.S. dollars into gold by non-U.S. citizens. That action removed any remaining links between the dollar and gold.

Without convertibility, any official price for gold became meaningless. At that time, the official U.S. dollar price of gold was raised from $40.00 oz to $42.50; but nobody paid much attention.

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Gold Stock Charts – All Negative

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GOLD STOCK CHARTS

Every time gold stocks hiccup to the upside, there is a groundswell that emanates from the depths of disappointment and disillusionment.  Promoters use words like exhaustion and capitulation to describe the conditions surrounding what they refer to as “a major turning point” for gold mining shares.

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