The Monetary Times They Are a Changin'

By: Jeff Berwick | Thu, Sep 27, 2012
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Bernanke Record Cover Spoof

Bob Dylan's iconic, "The Times They Are A Changin'" starts off with the following lyrics:

Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone

Nothing could better symbolize the monetary state of affairs going on in the world today. We will all soon be drenched to the bone.

But, before I go into detail on what is currently happening, let's briefly look back at the last year to examine the massive changes afoot (Thanks to friend, Michael Pollaro, of The Contrarian Take for reminding us of these events).


Low Tide Monetarily For The Last Year

First, note that the Federal Reserve crime organization's balance sheet was flat over the last year.

FED Balance Sheet

That's a marked difference from the last five years.

FED Balance Sheet

But notice that the YoY monetary base increase has still continued to stay above 10%.

TDV Austrian Money Supply Measure - 3 Year

This means that the commercial banks have been pulling the monetary inflation weight for the last year. But notice, the increase in the monetary supply has begun to slow of late.

Meanwhile in Europe the European Central Bank's (ECB) balance sheet has erupted 50% in the last year.

ECB Balance Sheet

But 70% of that total increase is owing to LTRO which, while blowing up total balance sheet footings, has ZERO direct impact on the Euro money supply.

This means that as far as QE is concerned, neither the US nor Europe have had their foot on the gas for the last 12 months.

Even the Bank of Japan (BoJ) has only increased its balance sheet by 8% YoY. Only the Bank of England (BOE) has been printing like mad, up over 50% YoY.

In other words, up until lately, excluding the Bank of England, most of the Western world's central banks have been on a one-year vacation.


Fast Forward To Today

In the last month alone, and in eerie synchronization, the Fed, BOE, and Japan have all announced massive new QE programs.

The ECB's unlimited QE program has been announced and is about ready to go.

Even the Chinese central banksters have jumped aboard and just injected a record 290 billion yuan into the banking system via open market operations with much more likely to come.

And in this mercantilist, nation-state, democratic and fasco-socialist Western world of today, no one can ever resist devaluing their currencies along with the big players, which will likely mean almost every major country in the world will have to step things up or they risk the chance that their currencies won't get to zero as quickly as the others, which will anger their exporters.

In other words, this could be the final stages of the crackup boom, as Ludwig von Mises predicted. Now that Ben Bernanke and others have committed to QE to infinity, it certainly looks that way. But, exactly how long it will take is the main question.


Time For A Gold Stock Maria?

We here at TDV believe we should still have at least another 3-5 years before the total collapse. Could we be wrong? Absolutely! No one can predict the future. That's just our best guess. Could it be faster? Certainly. Could it take longer? Doubtful, but possibly.

As with all things in life, the key is in the timing. If the system all out collapses in the next year then there will not be enough time for a gold stock mania to foment, and enough time to sell and get into another hard asset before the collapse.

But if the system can last another few years I am now pegging the possibility of a gold stock mania at "near certainty". Ben Bernanke and the like have all but guaranteed it. Their bizarre mental affliction, a not-so rare disease called Keynesianism, has consumed them and they will go into the final stages of hyperinflation printing more money, just like they did in Weimar.

Germany Weimar Hyperinflation

Just look at some of the quotes of the Bernanke's of the day as the value of the Mark was well into hyperinflation.

In the end, junior gold stock investors may make John Maynard Keynes their god, solely for making them so rich. Many of these stocks went up thousands of percent during the last stagflationary crisis in the late 1970s. And this crisis is set to make the last one look like a non-event.

Bob Dylan's lyrics again are very apt:

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin'
And the first one now
Will later be last
For the [monetary] times they are a-changin'

Thanks to Ben Bernanke and all the other Keyniacs the line is drawn and the die is cast. Where all this new funny money goes is anyone's guess, but we are gambling a small part of our portfolio on the junior gold stocks that we cover at TDV Premium and at the TDV Golden Trader.

 


 

Jeff Berwick

Author: Jeff Berwick

Jeff Berwick
Chief Editor
The Dollar Vigilante

Jeff Berwick

Anarcho-Capitalist. Libertarian. Freedom fighter against mankind's two biggest enemies, the State and the Central Banks. Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast. Jeff is a prominent speaker at many of the world's freedom, investment and gold conferences as well as regularly in the media including CNBC, CNN and Fox Business.

Jeff's background in the financial markets dates back to his founding of Canada's largest financial website, Stockhouse.com, in 1994. In the late '90s the company expanded worldwide into 8 different countries and had 250 employees and a market capitalization of $240 million USD at the peak of the "tech bubble". To this day more than a million investors use Stockhouse.com for investment information every month.

Jeff was the CEO from 1994 until 2002 when he sold the company and still continued on as a director afterwards until 2007. Afterwards, Berwick went forth to live on and travel the world by sailboat but after one year of sailing his boat sank in a storm off the coast of El Salvador. After being saved clinging to his surfboard with nothing but a pair of surfing shorts left of all his material possessions he decided to "live nowhere" and travel the world as spontaneously as possible with one overarching goal: See and understand the world with his own eyes, not through the lens of the media.

He went on to visit nearly 100 countries over four years and did and saw things that no education could ever teach. He met and spoke with a plethora of amazing people, from self-made billionaires to some of the brightest minds in finance - as well as entrepreneurs from a broad range of backgrounds and locations from tech companies in southern China to resource developers in Mongolia, Thailand, Russia and Chile. He also read everything he could find on how the world really works... politically and financially. A pursuit he continues to this day.

He expatriated, long ago from his country of birth, Canada, and considers himself a citizen of the world. He has lived in numerous locales since including Los Angeles, Hong Kong, Bangkok and currently lives in Acapulco, Mexico and is building a home in Cafayate, Argentina. In essence, everything he writes about here for TDV he has done or is doing.

As well, during his travels, both real and virtual (through the internet), he met some amazing people who have a similar shared vision of what is currently going on in the world and enticed them to come aboard TDV and provide their own brand of analysis.

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TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/