from Zero Hedge:
Gordon Brown, back when he was the UK Chancellor of the Exchequer, distinguished himself by selling off approximately one-half of Great Britain’s gold reserves at what turned out to be a near-bottom at the end of the secular bear market in gold which lasted from 1980 to 2000-ish.However, the news that the new Canadian Finance Minister Bill Morneau has completed selling all remaining Government of Canada gold reserves may remove Brown’s laughing-stock status.
Sooner or later, everybody sits down to a banquet of consequences”
– Robert Louis Stevenson
Gordon Brown, back when he was the UK Chancellor of the Exchequer, distinguished himself by selling off approximately one-half of Great Britain’s gold reserves at what turned out to be a near-bottom at the end of the secular bear market in gold which lasted from 1980 to 2000-ish. He will probably be remembered for this more than anything else he ever did, even as Prime Minister. He’ll be somewhat of a laughing stock because of it (gold now, even after a vicious near 5-year cyclical bear, worth a paltry 300% to 400% more than what England garnered from it’s sales). That chapter among those who pay attention to this sort of thing is affably called “The Brown Bottom”.
Two events recently converged in the news to create an analogous moment here in Canada:
1) the news that the new Finance Minister Bill Morneau has completed selling allremaining Government of Canada gold reserves. Canada, the 5th largest gold producer in the world, as a nation holds exactly zero ounces of gold as currency reserves.
2) Gold has resumed it’s secular bull market. This is something I have not been alone in anticipating, but it looks like Mr. Morneau has managed to pick off the exact end of the cyclical bear, selling just as the price of gold, driven by negative rates, impending bans on cash and generalized financial repression, is commencing lift off.
Still it’s been a trying 5 years for gold investors. Even those who aren’t self-described “goldbugs” but who can’t bring themselves to drink the kool-aid of perpetual central bank intervention: ZIRP, now NIRP, war on cash – who were waiting, waiting, waiting for some kind of reaction to the grotesque distortions being driven into the markets by policy wonks, banksters and academics were close to capitulation.
Something had to give, and the shortlist included precious metals – but when? Was it possible the central banks really did pull off a perpetual motion machine? Could a handful of academics suspend the business cycle by suppressing market signalling, printing money, expanding credit, screwing savers and bailing out their financier friends whenever their rent-seeking, plutocratic excesses experienced a speed-wobble?
It is clear that Central Banks believe it is impermissible to let the incumbent equity markets go down, also impermissible to allow interest rates to rise (and thus it is impermissible to allow bonds to go down either). Given the ECBs latest maneuver, and further hinting they may even buy equities outright, it sounds more like Motorhead’s “Everything louder than everything else” rather than rational economic stewardship.
The Fed-Put addicted financial sector of petulant babies have been calling for more intervention after a 10% decline, are you fscking kidding me? We’re at the end of the runway for Keynesian interventions. It doesn’t work anymore. It’s like heroin or hair-of-the-dog, you may get away with it a few times in the early going but once one becomes dependent on it each dosage causes more damage than the returns. And what’s worse, we’re at the end of that runway and we don’t have lift-off, we don’t have green shoots, there is no escape velocity. What we’re looking at instead is coming face-to-face with a brick wall called “consequences”.
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