Goldtent TA Paradise

US Inflation

1. YYZ says:

   March 17, 2017 - 12:19 pm at 12:19 pm

   Initially I was going to post the comment below at SpockM but thought this a better place given the title – going over to Surf’s site next.

   The more I think about what happened on 3/15 the more I believe it’s the turning point for the easy BTFD money to be made in markets – Despite all other reasons for NOT raising into a WEAK economy (a keynesian product of the TPTB over the past 8 yrs IMO), there is only ONE reason to cause the Fed to act twice in 3 months to raise rates – INFLATION Trend since mid ’15 (based on outlook today – the Fed ceased to be forward looking quite a while ago). The other thing I think markets are missing is that Fed action has now signaled it is starting to chase the vast sea of cash in the economy and that money is going from a casual stroll to a brisk walk – by the time the velocity of money ticks to a new monthly high (see interactive chart here >> https://www.crystalbull.com/stock-market-timing/Velocity-Of-Money-chart/M2/ ), it will be at a jog, then to a run then a sprint. All this time we in PM’s will be munching popcorn. From this point forward we’ll know that when the Fed STOPS their pace of rate raises (whether soon or late), the next crisis will be upon us or we’ll already be in the midst of it.

   I’m in disbelief that no-one (mkts in general – not here in the tent of course) seem to see what is unfolding and that PM’s haven’t reacted yet to the sudden acceleration (from 1 year apart to now 3 months) in rate raise responses. 1976-1979 stagflation is upon us. If I was a PM bull before 3/15, I’m a freek’n raging bull now.

   • Fullgoldcrown says:

     March 17, 2017 - 12:27 pm at 12:27 pm

     Thanks for this insightful comment YYZ. Something we need to keep an eye on as Jordan has posted before is the real Interest rate . 10yr rate – Inflation rate…if this scenario is correct there will be increasingly negative real rates…which some bright minds say… has always been the primary driver of gold.

     We have so many great posters here I have forgotten , but I think you stated in your resume you worked inside the system at some point ?

   • Fullgoldcrown says:

     March 17, 2017 - 12:29 pm at 12:29 pm

     Wow that velocity of money chart looks exactly like the Dow Chart !!!

2. YYZ says:

   March 17, 2017 - 3:43 pm at 3:43 pm

   Here is a chart of the risk premium on lending in the US going back to the early 60’s. This shows how little room the Fed has to combat inflation before causing another debt crisis – they are going to have to resort to other measures to fight inflation much sooner than later.

   http://data.worldbank.org/indicator/FR.INR.RISK?locations=US

   Note data stops at 2014 however I calculated and the 2016 avg was 3.1% and we’re currently at around 3.24%

   Normal tools to combat inflation
   1) raise rates (in progress but can’t kill bond market) very low ceiling on this.
   2) increase reserve requirements (restrict lending), non-option with GDP at 2%
   3) reduce money supply via

3. YYZ says:

   March 17, 2017 - 4:06 pm at 4:06 pm

   crap, hit send too early.

   via a) call in debts owed to the gov’t (student debt – yea right, riots) b) incentivize purchase of gov’t debt through selling bonds above market rates
   and….the most OBVIOUS plan I see coming especially the way Gov’t has already enacted rules that have effectively corralled into Gov’t securities a huge chunk of M2 supply (commercial/private paper has practicaly disapeared and MMKT funds are now Govt. MMKTS plus talk of killing off $100bill) C) charging NEGATIVE interest rates on M2 supply. For C to be an effective tool at all, alternatives to Gov’t debt (AKA paper CASH and equivalents outside Gov’t control of value), must be reduced to near zero. Everyone here at the tent is already aware of these developments however we should regularly revisit them in light of current actions taken by the FED. THEIR interest absolutely lie in self preservation and it starts with #1 above and ends most likely with #3C.

4. Cervantes says:

   March 19, 2017 - 12:24 pm at 12:24 pm

   https://dailyreckoning.com/markets-finally-woken/

   I think like Rickards here…

   “The Fed is desperate to raise rates before the next recession (so they can cut them again) and will take every opportunity to do so”