So you think inflation is dead?

Posted | 17/02/2015 / Views | 2981
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Macro financial news is dominated by the word deflation at the moment and that is certainly appropriate for normal consumer goods.  But as we discussed here there has been a binge of debt since the GFC and much of that $57t new debt has found its way to financial markets in a desperate bid to find yield in a zero interest world.  Last night we posted an excellent, balanced article on how we are now seeing inflation in financial markets accordingly and how completely unsustainable this is.  Anyone invested in or thinking of investing in gold or silver should read and understand this article.  The upshot is the overinflated financial markets are now worth around $294t.  The precarious nature of them means there will be a collapse of some sort and an ensuing flight to non financial safe havens – ala the kings of these, gold and silver.  The article talks about what would happen to the gold price if just some of the $294t tried to squeeze into the TOTAL $7.1t gold market.  But as they allude in the article, it is not a $7.1t market, but a mere fraction of that as central banks and ‘strong hands’ who will not sell the gold, especially in such circumstances are not ‘in the market’.  We posted this piece last July where ‘market’ gold accounts for just 0.5% of all financial assets and indeed Ted Butler’s view is it is even less.  Just pause now and try to envisage the price action of $294t of panicked financial assets trying to fit into a gold market that size.  For those following the COMEX fiasco at the moment, consider then what would happen when all those futures contracts out there, contracts far far in excess of physical gold and silver held, asked for delivery… So whilst the world is (rightly) concerned about deflation on broad measures; there exists a very scary nonchalance (refer low VIX at moment) about the over inflated financial markets.  History tells us such “everything is awesome” complacency precedes a crash.  The bubble is tight awaiting a prick.  Greece anyone?

PS – speaking of inflation I received a reminder yesterday when my cousin brought this note back from Zimbabwe.  How quickly we forget the repercussions of excessive money printing…

So you think inflation is dead?