The Aristocrats of Oppositeland... rulers of the Empire of Lies... present:
QE isn't what you think it is...
Just did the math: One dollars worth of gold* priced as purchased in 1913... is today worth $93.
But the rate of change in the price of gold as the value of a dollar declined since that time was not close to uniform. The gold price was stable for 80 years prior to 1913. And, it didn't change that much after 1913, either, up until the 1970's when it did a 10X. And, since the 1980's... in spite of the blistering pace in the now exponential growth in the supply of money**... inflation metrics and the price of gold have not really kept up.
Why ? Some is... the dollar is not actually a U.S. currency, or tied to the U.S. economy... but is the banking cabal's global reserve currency... its growth properly paired against growth in the global dollar-based GDP, and not just the U.S. national GDP. Many significant errors imposed, recently, due to those disconnects created by comparing dollar apples to dollar oranges... mistaking U.S. economic functions for global functions and visa versa by looking at them through a dollar lens. The scaling issues matter... as do the structure of the flows ? The NEW Repo facility... accounts for that... where the old one did not ? Will that make for a smoother transition from Reverse Repo back to Repo, soon, as the Fed attempts... yet again... to "taper" QE by reeling it back in? For now... after accounting for the scaling of perception to match metrics in growth of the money supply to the scope of the actual growth in the global market and its use of dollars... let's re-focus on the inflation question... in context of MOPE... the management of performance expectations... which requires lying to people to get them to behave as you want... which they are expected to do, when they believe the lies you tell...
Why have inflation metrics and the price of gold not kept up with "excess" growth in the money supply ?
A big part of the reason, as apparent in the charts** linked above... is that since Black Monday (the mini-crash of 1987), caused when market insiders first understood the banks policy had shifted to fostering frauds and blowing bubbles, and 2000 and 2008, when the bubbles and frauds failed and the bubbles began deflating: the pairing of QE and the declining velocity of money during the still ongoing bubble deflation depression, along with the still expanding corruption of the financial markets, has broken the price discovery function, and has enabled suppressing the price by deliberately restricting the flow of money into gold. Meanwhile banks, under cover of BIS rules and purposeful regulatory neglect of fraud and market and price manipulation, are seeking to buy gold at below market prices, to enable future re-valuations, with those future events tasked in plugging the holes in banks balances sheets that were caused by (or, finally recognized in) the GFC in 2008... where QE is now a placeholder providing balance sheet filler in that space... with QE enabled for that... and, probably, to function in providing an accumulator as a metric.]
The easiest way to understand why... is to recognize that QE is not inflationary, but deflationary... which is why the charts show velocity declines, step-wise, with each incremental increase in QE. QE is "an accounting only balance sheet entry" that fakes the addition of money into the economy, fostering "the expectation of inflation" to modify market participants behavior away from that occurring when they are expecting deflation (the reality. QE adds the fake value directly to the banks balance sheets... without allowing it to contribute anything to real economic activity. QE is synthetic money... so the larger the portion of synthetic money becomes, of the total in the economy... the less aggregate "real function" there is in the supply of real money that exists that can enable velocity, as its function is diluted by the mass of synthetic money.
If you begin to withdraw the QE... you, first, expose the fact of the accumulated deflation that has already occurred... and, second, you appear to suddenly shrink the supply of money in the economy (which you are not doing, in fact, as the QE is not real... but people have been taught to expect that.) But, in fact, removing QE has you incrementally restoring greater velocity to the real money that is left in the economy by removing the QE generated obstacles to its function. While velocity function is being restored, any new additions of real money will have un-suppressed functions that are amplified... or, at least, impacts that are "greater than market expectations" in markets that are inured to expect inflation from QE when that delivers the opposite.
The withdrawal of QE will necessarily be timed to coincide with [other events and] fiscal "stimulus"... the synthetic money being withdrawn will have to be replaced in a sleight of hand... with a substitution of real money for the synthetic money being removed... as the replacement also has its functions suddenly restored. They expect that to enable the creation of a massive amount of new money... without markets recognizing that fact in the act, and without expecting any impact in inflation... because the "holes" the new money being created will be plugged into have been filled by QE, they have been"pre-deflated"... over the life of the QE program.
Tapering QE... performed in Oppositeland... is really a form of stimulus... which the market expects to work oppositely as it will... just as the market wrongly assumed that QE would be massively inflationary as its synthetic balance sheet fillers were being created...
But, IMO, it won't work... First, because synthetic money with velocity = 0 is really "soft" in being deflationary, and might even be mistaken for disinflation... as long as the pace is controlled and the frogs in the pot don't pay too close attention to slow changes in the temperature. But, fiscal policy creating new real money with velocity >1 is really "hard" in being inflationary: because there is a huge gap in the step change higher that occurs between " velocity = 0" and "velocity > 1" in the multiplier effected...
Second, own a $100 stock... and a price change of $0.10 is no big deal... Own a $0.05 stock... and a price change of $0.10 is a very big deal ? Same principle... applied to inflation... depending on where you are in the economy with economic "set points" in relation to the inflator. The impact of the gap change higher from "velocity =0" to "velocity >1" is magnified all the more the closer the economy is to having adapted to a set point in velocity near 1... or even less than 1... so even small changes are dramatic in both real and perceived impact.
And, third, given the nature of the step change, the frogs in the pot will feel it all the more, again, as lies told re inflation versus deflation have misled people into mis-calibrating their perceptions of their experiences, and thus their expectations of the future... that are based on incorrect perceptions of their recent experiences...
The MOPE lie about QE largely worked... since deflation lied about as inflation... still means a "change" enabled in opposite of the expectation... is one that easily fits in the budget... As things get relatively cheaper, against expectation, instead of more expensive over time, under the lie about "fake" inflation... that makes it not hard to hide it. The opposite is not true...as (creating and then meeting the need for) the first round of post-Covid stimulus showed. When prices do rise... budgets don't stretch elastically to cover the difference... so the lie that worked on the way down... will NOT work when the trend is reversed...
And it will not work A LOT... when the subtle incremental shifts lower... reverse into a step change higher.
As 1 > 0... I expect the inflator to function with a step change in a multiple of the inverse of the slope of the decline in velocity in the charts**.
If I'm wrong and it all works perfectly... then we're very near the bottom of the GFC induced depression ongoing since 2008... and from here velocity will increase, again, and the economy will grow again in real terms... boom, actually, in a long delayed recovery... and, perhaps doing that without any inflation...
Except, that also still requires undergoing a "reset" for gold to be repriced upwards (all fiat being devalued) to compensate for and replace the mass lost into the black hole in the banks balance sheets, cause by derivatives losses accumulated (and counter-balanced by QE) since 2008... and, in parallel, to recognize and counter-balance the dislocations in prices that have been created by "imposition of control".
Only, for all that to actually work in delivering a benefit... would also require correcting errors in changed fundamentals... ending the lies... and restoring actual free market functions... price discovery... and market incentives versus centrally directed economic policies with price setting under monopolies enabled as a merge between national socialism and mercantilism.
Another problem... is that the reversal in the QE driven problem of deflation... hasn't even started yet ?
And, we ALREADY have inflation... even without reversing the monetary policy driving us into deflation?
Reality is the new globalist agenda driven economy... based in fraud, monopoly and mercantilism... is failing now. And there is already inflation ? That inflation is not being caused by the reversal of the monetary drivers from deflationary to inflationary, but by the accumulated market failures of the system of mercantilism... now aggregating into systemic structural failures. The inflation we see now... is systemic and structural... not a product of monetary policy, or fiscal policy... but of trade policy... and "rule of law" issues... the fairness (or not) of competition... and the market impacts of "its broken"... and we've lost the part, so can't put it back together. The inflation we do have now is not yet adding in the (nonlinear) inflationary impacts that will come... with the reversals in the monetary and fiscal policy influences yet to come...
So, what is the price of gold (and silver) going to do... AFTER the multiple and overlapping SETS of changes that have only just begun occurring now... are fully recognized for what they are... and what they mean is true about :value: in the price of currencies, and money ?
Got gold ?
* Gold was $18.92 in 1913, according to this link: Historic Gold Prices, 1833 to Present.
nma.org
** M2 Money Supply vs. CPI and GDP
longtermtrends.net |
