I’m going to hop around a bit here today, so try and follow the plot I’m laying out. First off, if you follow markets, you know that this week the PPI and CPI both came in blazing hot.
I’m going to hop around a bit here today, so try and follow the plot I’m laying out. First off, if you follow markets, you know that this week the PPI and CPI both came in blazing hot. I want to talk about the CPI for a minute.
The CPI is the consumer price index and it is roughly the “inflation gauge” commonly used to speak about how much inflation there is. Now, the lying Federal Reserve, has told us for months ( Years) that it is under 2% and they won’t stop with their programs until it is up over that level. Yet we learned that prices in April jumped 0.9%.
That’s in a month. Translate that out to a year, and you’re over 9% inflation. But wait… it gets better ( worse). Every year since the 1980’s, they’ve employed gimmicks and tactics to hide inflation. They have to keep it hidden or the entire Federal Reserve narrative falls apart.
So what they’ve done is change what gets calculated for the price discovery and if something is too expensive, they substitute it for something that hasn’t. That’s pretty nasty on its own, but then add in their hedonic adjustments and things just get batcrap crazy.
Substitution is an easy one to understand. If steak is soaring in price, they will use hamburger or chicken instead. If cars are getting expensive, they’ll use leasing instead. Always on the lookout for things that haven’t gone up dramatically, so they can hide the fact that your prime rib went from 14.99 to 21.00.
But then enter hedonic adjustments. This is truly some Olympic level mental gymnastics. These genius bean counters came up with the idea that if a product is better than it used to be, even though it’s more expensive, it’s actually cheaper because it works better, and thus more productive to the overall economy.
Yeah. You read that right. You’re not “trippin” so to speak. So, in their perverse imaginations, if you go into a store to buy “X” product and it’s $45.00, but you tell the sales manager of the store that you bought the same product last year for $34.99, why is it more expensive? , he can say that “no, see it’s faster this year, so it’s cheaper!”
You respond, it’s the same company with the same box and components, yet its ten bucks more. No, no , no they say. Because the software makes it faster, it’s then better for overall production, so it actually costs less. This is EXACTLY what they do folks. Hedonic quality adjustments. Look it up, it’s like reading something from the Twilight Zone.
If we measured inflation, like they did in 1980, when Volker had to hike interest rates to 20% to crush it, our inflation rate would be 18 – 22%. Naturally ( for a day anyway) the market hated it, and pouted by dropping the DOW 680 points on the day. Interestingly enough, the next day all fear was gone and the market soared higher.
So hold that thought, that inflation is soaring, because it is. Now, something else goofy happened this week. Elon ‘he’s so cool!” Musk did an about face on Bitcoin this week. Somehow he says, he didn’t know it took so much energy to make bitcoin, that’s bad for the environment and he’s not going to accept it as payment for his cars.
That is a monumental turn around. What happened? Don’t give me the crap that he didn’t know of the energy consumption issue, he sends rockets to space and lands them again! He knew. So again we ask, what changed?
I believe the powers that be, pulled him over and whispered in his ear that “we’re going to regulate the snot out of this crypto stuff. We can’t have it competing against the dollar, and if you want to keep your lucrative contracts and awards for all your space stuff, you’d best start shying away from it.”
So then we learned something very interesting. When the Colonial pipeline went down, supposedly over a ransom ware event, at first they said “We won’t be paying that ransom.” But Wall! News broke that indeed, they now say they DID pay the ransom. But they did it in “untraceable” Crypto currency. Are you following the plot here?
A major gas distribution line that supplies the East coast goes down. NOT because it was physically cut. Not because parts were blown up. Nope, down because of a software hack, and the only way to save the “suffering” citizens was to pay in “untraceable” Crypto currency.
Now, here’s where it gets fun. The IMF has warned that things like Bitcoin can help the criminals do bad things. The tax man says using crypto is a way to hide taxes. The Central banks have suggested that bitcoin might be used for nefarious reasons. And then out of the blue, a supposed Russian hacker outfit shuts down a quarter of the country, only to be paid via a crypto? Pretty damn convenient.
Do you see what they’re doing? They’re building up examples of why they just “have to” either ban Bitcoin ( not probable) or regulate it to death, where it’s useless ( very probable) So you can indeed expect to hear more and more examples of how crypto’s are being used against the United States and it is now a National threat to security.
On the other hand, not a week goes by that we don’t hear about a central bank digital coin. The “Fedcoin” so to speak. Everyone from Janet Yellen to Powell himself has said they’re looking into a digital dollar. Are they going to let something like bitcoin compete against their digital control mechanism? NOT A CHANCE.
Which brings me full circle to Gold and silver. We know we have roaring inflation and our dollars are falling in value by the minute. In the past, people would flock to gold to stave off the horrid effects of inflation, but we know that some amount of people have looked to bitcoin to protect them instead.
So, gold has historically been a shelter from roaring inflation. Check. Some people have been buying crypto’s to 1) be private ( it isn’t) and to get out of dollars. Check. There seems to be a new pushback against bitcoin (Musk) Check.
What happens if I’m right and they pull some draconian rule changes about crypto and everyone flees back to gold and silver? I think it goes up and goes up substantially. We’ve got the perfect recipe. Roaring inflation, and people dumping crypto’s for physical metal that they can actually hold in their hands.
Obviously my point behind all this, is that I think the metals are more attractive right now, than they have been for the last couple years. I just sense a push is on, to get people ready for when they pull the plug on crypto’s, and some percentage of those folks will buy gold and silver.
Think of it like this. Let’s say you’re one of the many that got in bitcoin at say 3K, 5K, or 10K. You’ve got some big profits working here. Now, if they do come out and either ban it ( they won’t) or regulate it into oblivion ( they will) what are those with 40K’s or 100,000 dollars going to do with it? Just leave it in dollar bills to erode to nothing?
I think they buy metals. So, while I’ve been a gold bug since 2000 and a silver bug since 2007, in my mind, I think this is one of the last times left where you’ll get gold under 2K or silver under 30. A perfect storm is brewing. Let’s see if I’m right.