“Sentiment is fairly weak
at the moment, even while the fundamental picture is improving. Look at
some of the evidence. For example, Brent crude is at a 9-month high
and approaching $120 per barrel. All of the usual excuses for this
price rise are being given, like strong demand from China, lower OPEC
production, and ongoing concerns about political instability in North
Africa.
These factors are having an
impact of course, but what is being ignored is the most important
explanation because people aren't paying attention. There is no
shortage of crude oil. Rather, there are just too many dollars, euros,
pounds and other fiat currencies being printed by central banks....
“Increasing attention needs
to be given to what is happening with the quantity of money, Eric. All
the money printing ordered by central planners is starting to take
effect. US dollar M1 has now been growing at double-digit rates for two
years. Over the same period M2 growth has been in the high single
digits. Even the broader measure of dollars, M3, which is calculated by
ShadowStats.com, is at 4.5%, which is the highest rate of growth in
more than 3½ years.
Money is no different from
any other good or service. It too complies with the laws of supply and
demand. If you create money at a rate faster than the demand for it,
its ‘price’ declines, which for money is its purchasing power. With
crude oil and other commodity prices like copper continuing to work
their way higher, the purchasing power of dollars and other fiat
currencies is being eroded. So all of this money printing is clearly
taking hold and becoming apparent. That gold and silver prices remain
in their trading ranges suggests to me that both of them have some
catching up to do with the price rises we are seeing in some basic
commodities.
What is clear is that
central banks have flooded the world with QE - or in other words, money
printing - but it is a policy that doesn't work. Look how much QE has
been unleashed by the European Central Bank, which has not stopped
Europe from sliding into a recession. It’s the same in the US, where
the Federal Reserve's balance sheet has started growing again. Its
total assets topped $3 trillion a few weeks ago.
In fact, the QE4
announcement may have been the tipping point because US government debt
purchases by the Fed have apparently switched from being bond friendly
to bond bearish because of the hyperinflationary implications from
turning government debt into currency. The evidence for this conclusion
is that yields have been rising since then, notwithstanding continuing
purchases by the Fed.
Importantly, the suspension
of the debt ceiling we spoke about last time has been signed into law
by the President. There is now no limit whatsoever on what the federal
government can borrow, and therefore spend. The federal government has
now taken a big leap down the road to hyperinflation of the US dollar.
Remember, hyperinflation is
not an event, it is a process. Hyperinflation occurs when changes are
made to eliminate prudent checks-and-balances. The big change occurred
in August 1971 when President Nixon broke the US dollar's constitutional
link to gold. That is when the US government fell over the fiscal
cliff, and has been falling since then.
There have been dozens of
other changes since 1971, but suspending the debt ceiling means the last
restraint on government spending has been eliminated. With the Federal
Reserve committed to buying US government debt, nearly everything is in
place for hyperinflation.
The sovereign debt
downgrades in recent years have lit a slow fuse. It is a sign that the
big countries resting on their past laurels can no longer expect a
free-ride from the rating agencies. Therefore, it won't be long before
this burning fuse hits the UK, the US, Japan or a number of other
countries. When it does, an explosion in prices will be the
hyperinflationary result. Thousands of years of history have taught us
unequivocally that the best way to protect investors and savers from the
coming carnage is to own physical gold and silver.”
© 2013 by King World News®.
All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page
is permitted and encouraged.
The interviews with Gerald Celente, Eric Sprott, Art Cashin, Michael Pento, MEP Nigel Farage, and Michael Belkin are available now.
Also, be sure to listen to the other recent KWN interviews which
included James Dines, William Kaye, John Embry, Jean-Marie Eveillard,
Rick Rule and Pierre Lassonde by CLICKING HERE.
Eric King
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