It is time to start bringing the famous von Mises event back into the equation. More and more it looks like one of only two things; interim deflationary ‘impulse’ leading to Crack Up Boom or ‘do not pass go, do not collect $200 and go straight to Crack Up Boom’. That is what the hinted-at rebellion in long bonds is point toward.
This is a monetary event and the treasury market is the largest receptacle of money in the world. I rarely write the word hyperinflation, but we are forced to consider it now that bonds are postured at a tipping point and policy makers still show no signs (is this a macro bluff of epic proportions?) of backing off the accelerator.
In a recent newsletter, I mentioned that in a ‘typical’ expansion or boom, gold will underperform the go-go assets like industrial commodities and growth stocks. Ah, but what of the Crack Up Boom? What of the idea that if interest rates rise (knocking down the barn door defined as the secular monthly EMA 100) they will croak the supposed ‘economy’ in due time and all that will be left is real money and funny munny? What are the possibilities with regard to where the next bubble may lie?
So much to look at, and look at it we shall. We live in interesting times and you know, worse statements could be made than that.
Edit (12:25) Coincidentally, weighing in on the subject is the MSM in the form of the funnily named Howard Gold of MarketWatch: Deflation May Be the Real Enemy
This is the typical pablum that fixates on what prices are doing or what prices are likely to do. I have beat the deflation drum here repeatedly in the face of the inflation commanders (many of whom fixate on price as well, in the opposite direction) but really, deflation is only going to come about as an impulsive reaction; a liquidation of excess.
The INFLATION HAS ALREADY HAPPENED, but these knuckleheads continue to peer into their crystal balls looking for price increases due to positive economic activity as being inflationary and good for gold. If anything, improved economic functioning is going to be bad for the real price of gold and gold stocks ultimately. This guy’s oh so scary deflation scenario is exactly what gold sector investors should be hoping for if one is looking for improved gold sector fundamentals and future panicked inflationary policy.
Silly MSM. Regardless, it is comforting being a chart guy because the yield on the long bond will tell me all I need to know in due time. Meanwhile, so will this and others like it…