Silver and Gold Market Update 8/29/2022 | Jack Mullen
Short story, the middle class is under financial attack and, sadly, there is no remedy available to a financial system supported by a self-consuming debt-based currency. The writing is on the wall for the dollar and only those with a clear understanding of what is happening will come out on the other side with the necessary assets to go forward.
The dollar is not a unit of money but rather a unit of debt. The dollar is borrowed into existence and interest is paid on each dollar remaining in circulation. As the number of dollars rises, not only does inflation rise, but so does the size of the interest payment required to maintain the currency in circulation. Eventually, interest payments and inflation begin to rise exponentially. The Austrian economist Ludwig Von Mises called the period of rapidly rising inflation and interest payments the “Crack Up Boom.”
In the final months of a dying debt-based currency, here is what we can expect. Debt markets are becoming increasingly unstable and a war between debt selloffs and the lender and buyer of last resort breaks-out.
This war is visible by noticing that what were once stable interest rates have begun to oscillate. The gyration is the notification that traditional debt based currency remedies for rising inflation and unstable rates are failing. It is as though the dam-of-currency is stressing the debt markets through rising interest rates. Soon the dam craters and rates explode along with overall prices and finally a credit crisis appears, finishing the “boom” in a very short period of time.
Currently, we see the battle in the 10 year yield with the private Federal Reserve and approved allies like Blackrock buying all debt dumped on the market hoping to push rates back down, but, unfortunately, this strategy does not work very long, and the rates begin to rise again.
The 10 year yield is currently above 3.11% and that appears to be the hill on which the current battle is taking place. Eventually, we should see the battleground rate move higher, indicating the efforts are failing to reduce the rates.
Meanwhile, inflation is at its highest rate since 1982 and the effects are being felt in all markets, including the housing market with year over year sales down 29%.
It gets worse for housing and the signs are that we are moving into a housing sales collapse worse than 2008. According to the latest Affordability of Homes Fixed Index, affordability of homes is now the lowest since 1989. Keep in mind that interest rates for home buyers in 1989 were of the order of 9%. In this market, interest rates are still only around 5% – indicating affordability of a new home is going to get much worse as interest rates rise.
Recently, Fed Chairman Powell had this to say about inflation: “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.”
Powell is correct that there will be a lot of pain, but implying that Federal Reserve interest rate hikes will ultimately bring down inflation is just not the truth, and worse – raising interest rates in tiny increments (the current plan) while the government explodes with subsidies, bailouts, and boondoggles like the “Inflation Reduction Act” – clearly indicates the Fed has not and cannot control inflation.
It is impossible now to control inflation when such massive amounts of inflation causing cash must be dumped on the interest-rate fire seemingly about to burn out of control.
Controlling inflation while simultaneously stabilizing the debt market is impossible.
The market is also signaling greater numbers of layoffs coming down the pike and we can expect bank collapses to punctuate the layoffs as people reach into whatever savings they may still have to live another day in a lifestyle slipping away.
Folks, most economic theory is very simple and can be understood in an easy to read treatise like Henry Hazlitt’s brilliant Economics In One Lesson. That understanding the markets and economics is made so complicated (in our current system of control) is by design.
Those that control your credit control your life.
To regain control of your life, you must master your mind and use it to make your own decisions and choices. And, in the case of the coming collapse of the American middle class, you must also take control of your own money.
Acting now to divest assets held in dollars is my recommendation. Becoming your own bank using money that retains value while paper currency is inflated is part of the process of becoming master of your own resources.
Inflation is the word for the idea that the purchasing power of the dollar is collapsing. Maintaining a supply of liquid assets that do not decline in purchasing power while the dollar declines is prudent.
My personal choice for divesting “resting” paper currency is to trade them for silver. And right now, because those that are rigging the collapse of this financial system are forced to keep the prices of silver (and gold) much lower than free economic theory would predict, we are in a buyers' market.
Hone your thinking skills – critical thinking is our tool for survival and for a happy and fulfilling life.
Now, more than ever, you need to think-again!