As we near the end of the first trading month of 2021, here is a look at gold, inflation and peak central bank.
Inflation And Gold
January 26 (King World News) – Egon von Greyerz out of Switzerland: “So far the $10s of trillions of printed money has not translated into inflation in official consumer prices. But we are now seeing major inflation in commodity prices. If we just look at food commodity prices, they are up 54% since July 2020.
It is a travesty that the real price of gold is set in a casino with worthless electronic entries that have nothing to do with gold. This fake gold market will one day discover that there is no physical gold to settle the fake contracts.”
Global Madness Continues
Peter Boockvar: I know you didn’t wake up thinking about the Czech National Bank ahead of tomorrow’s FOMC meeting but it is a hint of what’s to come in the back half of 2021 when the vaccine is mass rolled out. They seem to understand that the main reason for all the easing in 2020 was because of Covid and when Covid is under control in 2021, it’s time to think about removing some of this accommodation. This is unlike the Fed who says they won’t raise rates until 2024 which bears no relationship to why they eased to begin with, Covid. And who knows when they’ll taper.
The Czech Governor said “The pace of normalization could be roughly in line with our forecast, but the whole process will be slightly delayed in time. I don’t know if we’ll do zero, one or two hikes.” Yes, they are telling us they might hike up to two times in 2021 although “We will tread very cautiously to make sure we don’t undercut the fragile economic recovery by acting too early or tightening monetary conditions too fast. Other than that, the outlook for gradual rate hikes is still valid and we’ll be mainly fine tuning the timing.” This is called prudent monetary policy where rates go down and they go back up unlike in the developed world where they only seem to go down and if they do go up, it seemingly takes forever, and they don’t stay up for long because something eventually breaks…
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I discuss the Czech National Bank because I believe it is what every single central banker should be thinking about right now with the vaccine here, however long it takes to rollout this year. You did what you did because of Covid, you need to reverse at least some of it because of the vaccine at some point this year. Tomorrow though we will hear no hint of that. The Fed is deathly afraid and is completely control BY THE MARKETS as when they say they don’t want to repeat the Taper Tantrum of 2013, that implies fear of the markets. That means we have major financial instability because of this drug like dependence.
I’ll guarantee this, NO MATTER WHEN the Fed decides on tapering and eventually on raising rates, it will not be like watching paint dry as the markets have never been more addicted to Fed easing than it is now. That lunch bill will be paid so the Fed has a stark choice, wait as long as you can or start gradually ripping the band off as the economy comes back to more full life in the latter part of 2021. Or, the Fed can just sit and do nothing, and watch the US Treasury market tighten for them in response to the inflation that is here and will be intensifying.
Either way, the only thing US monetary policy is good for right now, outside of elevating markets to historic valuations, is to monetize and finance the massive amount of US government spending and its deficits. As for its impact on US housing, the most interest rate sensitive part of the US economy, the home price inflation they’ve created has completely offset the benefits of lower rates. Today S&P CoreLogic is expected to say that home prices rose 8.9% in November y/o/y. If you want to discuss/debate income/wealth inequality, if you’re not talking about the Federal Reserve and its complicity, you are not having an honest conversation.
Peak Central Bank
In a mea culpa that was years in the making, the Bank of Japan Governor Haruhiko Kuroda said today “the BoJ deployed a maximum amount of stimulus and yet, we have not achieved our 2% inflation target. This shows that monetary policy does have some limits.” It only took the ownership of half the JGB market and about 75% of the equity ETF market for him to realize this. We’ve reached peak central bank.
James Turk discussed the silver cup and handle formation and why we’re headed into a mania in the precious metals, to listen to his powerful audio interview CLICK HERE OR ON THE IMAGES BELOW.
To hear Alasdair Macleod discuss the takedown in the gold and silver markets and what to expect next CLICK HERE OR ON THE IMAGE BELOW.
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