Global Monetary Madness And Keynesian Double Speak by Rory Hall, Sprott Money

The economy, not only in the U.S. but around the world, is in uncharted territory. With billions, if not trillions, of sovereign bonds issued at a negative interest rate and still billions, if not trillions, more issued at near zero interest rates, sovereign debt has become quite unstable. Yes, U.S. Treasuries, Japanese bonds, and various other sovereign bonds are still being issued and still being added to other nations’ and institutions’ ledger sheets. However, when these begin to actually impact these ledger sheets or are brought back to market, then what? What will happen as a financial investment instrument comes to market that no one wants or matures and the investor has actually lost a lot of capital?

In a recent interview with one of the architects of this global monetary nightmare that has been foisted upon the people of this planet, the picture became oh-so-clear how much Keynesian Kool-Aid these people have been drinking. The tell-tale signs are in the words of the person that I spoke with and the double-speak that was spewed across the airwaves.

If a person, in the U.S., eats, pays rent or a mortgage, has insurance of any type, or is involved with the education system at any level, they know first-hand how insidious inflation has become over the past several years. What we are told, through Federal Reserve “policies” and by way of the pressitute media, is that inflation is running just under 2% and the Federal Reserve wishes to see it go a little higher and achieve a 2% rate.

Inflation, by its very nature, is wealth transfer, or said more plainly, theft. As John Maynard Keynes described it, “By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” What more does a person need to understand about inflation?

Imagine someone coming into your home, everyday, getting into your wallet/purse, and helping themselves to 2% of your funds. Imagine this person, not only coming into your home but also getting into your bank account, your 401k, IRA, or whatever investment vehicles you possess and doing exactly the same thing. This is how ugly inflation truly is and the reason it sickens me is because every time I hear someone speak about inflation, they act like it is some kind of benefit to me and my family.

Monetary Madness

Monetary Madness

As you can see from the charts above, inflation is tricky to measure. Over the course of the past three-four decades, the federal government has chosen to re-define inflation and what is actually measured. Items like food and energy were removed from the calculation. The justification? There is no justification other than to hide the truth. We also find this chart, produced in 2014 by David Stockman, former Director of Office of Management and Budget under President Ronald Reagan. This chart demonstrates (while a couple of years old, it is still relevant to the argument) the overall impact of real inflation.

Monetary Madness

Monetary Madness

Does anyone see anything close to 2% on that chart? Does anyone see inflation running in single digits? The line labeled “CPI” demonstrates how much of your wealth was transferred to someone else via inflation. That line demonstrates how inflation confiscated, secretly and unobserved, 39.09% of your wealth. If you had $1,000 in a savings account beginning in 2000 and removed $1,000 in 2014, the actual value would only be $641. Sounds pretty cool, eh?

Had a person acquired 3 ounces in physical gold in 2000, it would have cost approximately $880.50 (average exchange rate for the year). That same 3 ounces of physical gold, in 2014, would have had a value of approximately $1,282.50 (average exchange rate for the year). Or said another way, physical gold would have protected your wealth from the ravages of inflation over that 14 year period.

“The reason the Federal Reserve and most other central banks have chosen a low rate [referring to inflation] rather than zero, usually most of them have chosen 2%, is there is wide spread belief that the CPI (Consumer Price Index – how inflation is measured) and other indices of prices overstate true inflation.” Source

When was the last time you decided to make a purchase, looked at the price and said to yourself – “WOW! That’s great – the price didn’t go up and it may have gone down!” This has not been the case in the U.S. since 1913. Recently, gasoline for vehicles has come down a little. One of the reasons for the current price of gasoline is due to global demand. According to some very smart people, the global demand for gasoline has fallen off a cliff. Why? Because the global economy is in such terrible condition, combined with extremely high unemployment in the U.S., that people are driving way less than has been the case over the past several years. Another reason for the drop in the price of gasoline that I have read is political. Either way, this is only one item in our basket of daily goods that we should be measuring against inflation but, currently, we are not.

Gold controls inflation. If gold were to back our currency, inflation would be stable at 3% or less per annum. It would rarely fluctuate as the supply of gold would determine how much currency could be allowed to come online each year. If the central bank were only to acquire 0.50% new gold holdings, that would be the rate of inflation. Inflation is the volume of currency in the system. This includes items like cash, mortgages, credit card debt, and various other forms of debt. A measurement of these items gives you a total of the currency in a particular system. Gold, being at a fixed rate, would help curb the monetary madness we are currently experiencing.

Anyone arguing against gold as money either has an agenda or is arguing against 4,000+ years of monetary history.

“China is not a major gold producer. So, they would have no interest in promoting the world demand for gold” Source

Monetary Madness

Several years ago, the government of China was very public about the citizens of China holding physical gold as part of their individual investment strategy. China still promotes this position and makes it very easy for the citizens to acquire gold by having physical gold available in every single bank in China.

The point is, the global monetary masters have lied and cheated in order to steal our gold. Our money, gold, has been replaced with an illusion and we are told, over and over, this illusion has value. Gold has had value for 4,000+ years and it has been used as money, until recently, as money for that entire stretch of time. The real kicker – silver has been money even longer. Physical gold and physical silver are real money – always have been, and always will be.