This is the real reason why gold and silver are surging today.
By Peter Boockvar, author of the Boock Report
November 6 (King World News) – Here is what Peter Boockvar wrote as the world awaits the next round of monetary madness: It’s refreshing to hear from a central banker some honesty about what the result of excessively easy money is and the risks that are created. The Governor of the PBOC Zhou wrote a paper titled “Safeguarding the Bottom Line of No Systemic Financial Risks.” He said:
“High leverage is the ultimate origin of macro financial vulnerability…In sectors of the real economy, this is reflected as excessive debt, and in the financial system, this is reflected as credit that has been expanding too quickly.”
With respect to the risks created he described them as being “hidden, complex, sudden, contagious and hazardous.”
He then laid out a laundry list of things they will try to do to safeguard things, by reducing leverage, further opening up their capital markets, continue on path to capital account convertibility, etc… This commentary is not that much different than his Minsky Moment reference a few weeks ago but the Shanghai property stock index (poster boy for leverage) closed down 1% for a 2nd straight day. The H share index was down by 2/3 of a percent but was lower by 2% early morning. The Hang Seng closed flat but was down 1.5% early on. The Shanghai comp though was up by .5%…
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I bring up this commentary from Zhou because as we approach the end of Janet Yellen’s tenure we are going to hear a lot of praise of her achievements. I’m not going to rehash the past and her Federal Reserve career since 2004 with commentary. I’m just going to say generally speaking that I hope everyone understands what modern day central banking basically entails. It simply is the encouragement of borrowing which will incentivize economic behavior to take place via debt today rather than savings tomorrow. Over time the economy and its participants become credit addicts and the Federal Reserve and other central bankers are the credit dealers/enablers. There is no nobility here. But I digress.
The real reason why gold & silver are surging today
As WTI is now at a 28 month high, I include a chart of the CRB index because as you can see we are about 6 pts from breaking out to a multi year high vs today’s 8 month high. The rise in oil prices hopefully will have Mario Draghi and Haruhiko Kuroda excited as this helps them get closer to their inflation goals if the move is sustained.
CRB approaching multi-year highs
***To listen to legend Pierre Lassonde discuss $12,000 gold and the coming global shock CLICK HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Billionaire Pierre Lassonde – Greyerz – The Alice In Wonderland Fantasy Is About To Come To An End CLICK HERE.
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