Here is a look at helicopter drops, inflation and all hell breaking loose.
“The minutes showed participants agreed the U.S. economy remained far from the Fed’s goals. At the same time, a number of Fed policymakers thought that if the economy continued to show rapid progress, then it would be appropriate “at some point” for upcoming meetings to begin discussing tapering of monetary policy measures.” — Reuters
Helicopter Drops, Inflation And All Hell Breaking Loose
May 19 (King World News) – Alasdair Macleod: Well, that said it all! The Fed minutes tried to walk a narrow path between non-action and the possibility of some action in the future.
Everyone knows, except officials in denial, that prices are taking off. It is the consequence of monetary inflation in the form of helicopter drops and unspent money due to lockdowns being released into an economy with insufficient supply of goods (due to those lockdowns) and supply chain disruptions. Put into the mix roaring commodity prices and labour shortages, and all that money printing last year is fuelling the inflation fan.
For some time, I have been arguing this was bound to happen. And it’s only just started. So, we must face the fact that bond yields will rise with the 10-year US Treasury yield going through 2% and not stopping.
This is the beginning of the end for the equity bull market. And as if to soften up the bulls, cryptos have begun to collapse, a malaise that’s bound to spread…
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Gold & Silver
Gold and silver should be bought on dips created by these events, because they are only being marked down in the hope that amateur players will panic and sell. Just remember the 1970s, which began with prime rates at 6% and gold at $35. The decade ended with primes at 20% and gold having touched $850. The point is the Fed will always keep the brakes on interest rates, raising them too little too late. That is what I read into the Fed’s reluctance to accept the inflation outlook: I’ve been in this game long enough to recognise the bullish consequences for gold, silver and the mines.
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