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The Monetized New Millennium



Courtesy of the StealthFlation Blog

I'm certain that the Pompom waving Stock Market fanatics and official Federal Reserve cheer-leading squad will have a hard time accepting this, but fortunately, despite their fantasy football gymnastics, facts remain facts.  As such, I will categorically point out that even with its substantial sell off, Gold remains by far the best performing asset class of the Monetized New Millennium.  That veritable fact is as startling, as it is significant.

Most of the excitable equity equestrians will undoubtedly brush off this striking statement as insignificant, and simply discard it as the typical cherry picking of particular data price points during an exceptional performance period.  Well, ok, but that entirely misses the most critical and crucial point here.  Namely, that the dubiously debt driven bubble economy ushered in by the Monetized New Millennium shows no signs of relenting.

QE or no QE, ZIRP lumbers on.  They can talk about it all they want, but until they actually let interest rates normalize it's just talk, simply more hot air spewing from the blathering bogus balloon blowers.  The Fed can keep reflating the captured capital markets via zero cost funds to their preferred multinational banking institutions, they can keep encouraging the selling of naked digital shorts to contain the Gold market, and they can massage all the economic data they want.  However, what they are utterly unable to conjure up out of thin air is legitimate, productive and sustainable economic growth at the ground level for the average U. S. citizen.

It really is quite simple.  It's all a matter of confidence going forward.

As soon as it becomes self evident that this monetized, synthetically engineered, juiced market economy can not reach escape velocity, unable to establish genuine sustainable economic growth for all of America, the confidence in the monetization paradigm which the financial authorities have unwittingly embraced will be shattered.  At that point, even though the Fed will have lost all credibility, as the economy inevitably stalls they will nevertheless double down and once again try to re-monetize.  Let's face it, that's all they really know how to do, well, besides looking the other way as Wall Street's bought off sheriff.

Clearly, the renewed called for further monetary accommodation will invariably fail once more, and simply exacerbate the real structural economic problem we all know we have.  An economy addicted to and utterly dependent upon cheap debt monetization that invariably brings with it diminishing returns is not a viable regimen, but rather, a lethal injection.

Having lost all faith in the monetary authorities, America will lose confidence in its ability to grow, and the dollar will start to slide as it becomes clear for all to see that the most indebted nation on the face of the earth, without real and sustainable growth, will be unable to pay down its debts in stable valued dollars.  At which point, both foreign and domestic creditors will demand higher interest to finance American treasury obligations.

This is the tipping point where gold will simply explode as our misguided monetary authorities finally face the music and pay the piper, forced to further debase the currency in order to pay off the monumental national debt.  This is the crucial and absolute truth the designated financial cheerleaders conveniently ignore and don't want you to even think about.  Yet, this is precisely why Gold remains the best performing asset class of the Monetized New Millennium.  To paraphrase the infamous words of Al Pacino; "It's just getting warmed up here"

The country simply can not sustain higher interest rates, it can only appear to grow via this ongoing monetization abomination.  That Jerry-rigged jig is nearly up, and sure signs of its having jeopardized our sustainable future growth are already popping up in many crucial economic data points.

Just the facts Jackson:

  • US real median family income has declined to the level of twenty years ago.
  • Labor participation rate has dropped to a 36 year low.
  • Total U.S. household debt, currently over $10 trillion, nearly tripled during the new millennium.
  • U.S. debt to GDP ratio up over 100% since we entered the new millennium.
  • Anemic to flat-line average Real GDP growth throughout the new millennium.
  • As for the new millennium inflation results, take a peak at the chart below, it will blow your mind.

Inflated nominal equity prices have certainly been a windfall for the minority of Americans that actually own a stock portfolio, but in the end, they do little for the country as a whole, and the shortsighted effort may well have greatly harmed our nation.  In terms of genuine and sustainable economic growth that lifts U.S. boats of all shapes and sizes, the Fed's fantasy free funds will end up flooding the ship of state.

The financial sector now compromises nearly 30% of our economy.   In my view, as mass counterfeiters, we are simply ignobly living off the vestiges of a world reserve currency which was so honorably achieved by a once monumentally productive America.  Today, the West prints and parties while the rest of the world works and weeps, that is not a sign of exceptionalism, it's a sign of weakness and an empire in decadent decline.

So when the next eternally eager equity beaver tells you that gold is nothing but a barbarous relic from monetary ages gone by, you can tell them this;  "As the best performing asset class bar none, Gold officially welcomes you to the Monetized New Millennium".

The bottom line is that we need genuine productive growth to maintain a stable dollar and pay back our monumental national debt.  The Fed's Monetization abomination evidently has diminishing returns and eventually will blow up a debased fiat currency..................same as it ever was.

You show me sustainable growth without monetization and I'll take my bat & ball and go home. Until then, you're blowing hot air up my backside.