from Birch Gold Group:
It’s the end of an era. The days of mispriced risk are over, and the entire financial world is turning upside down in a scramble for safety…
This week, Your News to Know rounds up the latest top stories involving precious metals and the overall economy. There’s a whole lot going on right now, so the choice of stories to feature this week wasn’t easy… Eventually I settled on these three: We may be witnessing a once-in-a-lifetime repricing of financial assets (including gold); Britain’s £21 billion decision to liquidate gold early; and Zimbabwe’s currency issues aren’t gold’s fault.
TRUTH LIVES on at https://sgtreport.tv/
The whole world is repricing risk (and gold, too)
Others will say that it isn’t right to call a week of $2,360-$2,400 gold “lackluster” in any way. And they’re probably right. Still, we went a whole week without a single “wow” moment.
So we’re looking at “wow” moments elsewhere. It might be that the debate has shifted to the Federal Reserve’s lack of influence.
It appears completely dominated by inflation. We’ve gone from expecting rate cuts by now to some arguing that we won’t see any for the rest of the year.
And that is still not the bear-end of the take. No, going there means acknowledging the points bestselling author Larry McDonald made in a recent interview with Kitco. It’s a long interview, but worth watching! Check it out, or keep reading for my highlights:
More than just being bound to higher interest rates, McDonald says a gradual move up and away from the 2% inflation target marks a kind of re-imagining of the global financial system.
Already prone to liquidity squeezes, the economy will now face an army of investors wanting to spend as minimal amount of a time in cash as possible.
McDonald does believe the hiking will have an effect, but not necessarily the kind that U.S. dollar holders might be hoping for.
He raises the same point we’ve come across over and over: Inflation is the preferred method of paying off unmanageable debt. It might be the only method, and now that the debt figure has climbed to $35 trillion, solutions are what’s desired.
McDonald says that the U.S. will be direct in its approach and simply maintain an interest rate that is higher than the inflation rate. This will require a formal move away from the 2% inflation target, something that McDonald doesn’t expect the Fed to waste time holding out on.
Biden’s head economic cheerleader Paul Krugman is already laying the groundwork for a revision of the Fed’s 2% inflation target:
After all, 2 percent is a rather arbitrary number (blame New Zealand!). Is it worth risking a recession to squeeze out those last few decimal points?
All of this obviously leaves gold in a good place. Yes, the Fed might raise the official inflation target to 4%. That alone could be the best thing that has happened to gold for decades. It’s a total concession that the U.S. dollar and the global financial system running on dollars is structurally flawed – the foundations are crumbling as we watch.
We’ve been keen to repeat that gold almost always does well in hiking cycles:
2015-2018: Nine rate hikes, gold rose 17%
