Gold News

Central Planning: Job Well Done. For Now

Fade words like "fiat", "debasement" and "hyperinflation" from the pro-gold cult...
TODAY'S rolling inflation of credit and money won't hit the value of money, especially not the US Dollar, until confidence is lost in the system, writes Gary Tanashian in his Notes from the Rabbit Hole.
We are about a million miles away from that condition right now (see second chart below). Confidence will be lost first in the assets that are benefiting from the inflation – like stocks, so strategically at the heart of the wealth effect that policy makers are trying to stimulate – and then in policy makers themselves. Then we'd have a big bull market in gold for all to see.
But if confidence comes out of inflated assets, like over priced momentum stocks and hideously over priced junk debt (benefiting from a full frontal and manic chase for yield) money is going to rush to safe havens sure, and ironically Uncle Buck would be a prime beneficiary; again, as long as the majority continue to think in linear terms like "oh, asset markets are dropping, I better go to cash". Only when the system begins its death rattle will the currency put on its death mask.
People have been wrong in fetishizing currency collapse since the beginning of the gold bull market. The 'Dollar Collapse' cult is a cartoon that presents its case for easy understanding by the masses (and the marks). Ultimately, the case for gold is the case for a lack of confidence in the economy and in those trying to blow asset bubbles in support of the economy.
Gold vs. the CCI commodity index (counter cyclical asset vs. cyclical assets) is but one big picture view that – as long as point 4 remains a viable 'higher low' to point 2 – tunes out all of the hysterical 'currency collapse' noise and simply awaits a turn on the global macro backdrop.
Meanwhile, gold exists in a lowly state for a reason and that reason is confidence in the system. In very simple and even cartoonish terms, gold is not going anywhere while people are feasting upon the wonderful benefits of what has thus far been wildly successful (and ever so cynically maniacal) policy making.
The above is a picture of confidence and a job well done over at Central Planning. Gold is boxed in at the depths of a bull market breakdown as measured in S&P 500 units. Fact.
When confidence starts to wane then safe havens like Uncle Buck and gold should get bids to varying degrees and at varying times. Don't over complicate it by waiting for the 'Dollar Collapse' cult to be right. Minimize words like "fiat", "debasement" and "hyperinflation" and value words like well...value...and patience...and perspective.
The Dollar has no intrinsic value whatsoever? Well yes it does, it has a whopping negative value due to the debt-for-growth (official credit bubble vs. Greenspan's commercial credit bubble) Ponzi Scheme that simply has to keep on rolling. But in an environment of confidence by the majority, it has functional value and people would probably flock to USD like Lemmings (wait, do Lemmings flock?) in the next market liquidation. At least initially.
As for gold, it simply has monetary value and it is going to get where it is going. Watch point 4 on the first chart above and have patience and perspective. People are falling all over themselves lately jumping from the gold bear to gold bull camp (and in some cases right back again) and they are increasing your noise level.
"Shhh. Be vewy vewy quiet, I'm hunting wabbits."

Gary Tanashian successfully owned and operated a progressive medical component manufacturing company for 21 years, through various economic cycles. This experience gave Gary an understanding of and appreciation for global macroeconomics as it relates to individual markets and sectors. Along the way, Gary developed an almost geek-like interest in technical analysis (TA), to add to a long-time interest in human psychology. Various unique macro market ratio indicators were also added to the mix, with the result being a financial market newsletter, Notes From the Rabbit Hole (NFTRH) that combines these attributes.

See the full archive of Gary Tanashian.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals