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If Reflation Is Here, Then Gold Is Your Ultimate Hedge

from Gold Silver Worlds:

Today’s market situation shows similarities with the reflationary periods of 1897 to 1914 and 1933 to 1939. As we all know, they ended in inflation and war. We are currently in a highly deflationary environment, and the banks are fighting this by pumping up trillions of liquidity in the system, hoping for a sustainable recover. At the same time, however, strongly opposing forces are at play destabilizing the whole globe (think of the Middle East, Africa, Ukraine).

Given this evolution, and given that history rhymes, what can we expect going forward? Claudio Grass, managing director of Global Gold in Switzerland, sound money and monetary history specialist, discusses his view on the ongoing trend based on history with Casey Research (source).

After 2008, the central banks tried to counter deflation by printing huge amounts of money. But the velocity of money, which is the credit in the system, is 30% down compared to 2008. It means that all the newly created “money” has not gone in the real economy. Most of the money has gone in the stock market, real estate market and government bonds. This could go on for a while.

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1 comment to If Reflation Is Here, Then Gold Is Your Ultimate Hedge

  • Ed_B

    “It means that all the newly created “money” has not gone in the real economy. Most of the money has gone in the stock market, real estate market and government bonds. This could go on for a while.”

    Yes, it does and it sure can. Additionally, many companies have used their profits to buy back their own shares, which reduces the amount available to stock investors. The result is that we now have a lot more money chasing fewer shares. There is one and only one way in which the stock market can rationalize this discrepancy: share prices MUST rise, which is exactly what the US Gov and Fed want. This not only sops up the excess liquidity that is now sloshing around the market but also is used to score political points for “an improving economy”. That this is not true is beside the point. The claim is presented to the public and reinforced by the MSM, so it simply MUST be true, right? Well, no, actually not. Wall Street IS doing better these days but Main Street is not. I submit that “the economy” is more a matter of Main Street than is Wall Street because Main Street creates the economy while Wall Street primarily stirs the pot and skims the cream.

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