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1 comment to KEY TAKE AWAY FROM BREXIT, VOTERS ARE FED UP! — Mish Shedlock

  • rich

    July 20, 2016

    By: Simon Mikhailovich

    This is why for 5,000 years, a mariner needed a clear view of the skies to gauge his true position. Without the stars as fixed reference markers, there was no way to know one’s location. Similarly, for the past 5,000 years, market-set interest rates (the cost of scarce capital) and money anchored to tangible value have been financial stars that have guided capital allocation and served as a basis for setting asset values.

    Today, reliance on the self-referencing economic models, epic debts, digital money printing and negligible to negative rates, have combined to blanket investors in the impenetrable fog from which no reference markers are visible. Having long forgotten how to navigate without models, investors and regulators are mesmerized by the virtual reality of computer-driven markets, where asset prices (including gold’s) are based on manipulated rates and measured on a USD speedometer that conflates apparent, i.e. nominal, gains with the accretion of lasting purchasing power.

    Despite the present and clear dangers, the markets and the global financial system continue to navigate by the rigged markers and operate without any back ups. As stocks and bonds and the USD keep hitting all time or near all time highs, complacency rules. Neither the regulators nor the investors want to question whether the profits are real or merely apparent. My own answer was unexpectedly reinforced last Saturday afternoon – apparent returns won’t fund your retirement any more than sailing against a faster current will get you where you want to go.

    Until the monetary fog lifts and un-rigged navigational markers re-emerge, physical gold remains the only hard reference point capable of providing an essential back up plan for one’s nest egg. After all, just as the Navy took protective measures after realizing that no one can hack a sextant, investors should realize that no matter how many fiat dollars get printed, no one can print gold bars. The time to take protective measures is before they are needed. Now is that time.

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