murphy metal monday

Gold and silver prices have multiple tailwinds, some of which include:

  • Shortage of supply at the retail AND wholesale levels
  • Strong demand from central banks AND wealthy “family offices” worldwide
  • Rising debt and money supply
  • Pervasive political/economic/social instability
  • A clear move away from using the US dollar in trade by many of the world’s biggest economies, including China and Russia.

But maybe the one tailwind that encompasses all of these factors is inflation. And what better way to gage present and future inflation than the exploding futures prices of copper, zinc, iron ore, gas, lead, hogs, soybeans and last but not least, lumber…

One thing is for sure: Inflation is on the rise and has a long way to go. Not only is it becoming widely acknowledged that actual inflation is three-to-four times higher than the government reported rate, but the Fed has made it very clear they want even higher inflation. Physical gold and silver are the one true hedge against the coming dollar devaluation and higher cost of living. And that, you can take to the bank! Or much better yet, take to your bullion dealer!

And it must be mentioned that in regard to the only real headwind for gold (besides rising interest rates, which ultimately is NOT going to dampen precious metals), the bullion bank paper shorting of gold and silver might be nearing an end. As per Alasdair Macleod, metals expert out of London, the “open interest” in gold and silver is low enough now that it precludes any further aggressive paper selling. Plus, Ted Butler of Butler Research says the biggest bullion bank of all is going to benefit handsomely as gold and silver resume their bull markets, “While JP Morgan has hammered the price lower with paper (not real gold) contracts they have amassed a staggering BILLION ounces of silver for themselves and over 25 MILLION ounces of gold. The central banks have also bought 2200 TONS of gold in the past 3 years.”

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Now, a few words from Peter Schiff who recently appeared on Tucker Carlson’s show to talk about inflation:

We’re told inflation isn’t a problem. But a quick trip out to the grocery store or to fill up your car with gas tells you otherwise. Prices are going up. He said the price of everything is going up and the value of everything is going down. It’s clear that prices are rising. Peter said it’s going to get even worse:

You have to remember that inflation really is nothing more than a tax. Now, when the government spends money, they need to get money. The public has to pay for it. Normally, the government would raise taxes, and then the taxpayers send money to the government, the government spends it. But we just passed a $1.9 trillion stimulus bill. Nobody’s taxes got raised. But we don’t get all this government for free.

So, how is the government paying for this massive stimulus spending?[1]

The Federal Reserve prints the money and then the government spends it into circulation. But when that happens, the value of all the money that’s already out there goes down and now the price of everything that you want to buy goes up. And that added price is basically the inflation tax.

The Federal Reserve is printing money at an unprecedented rate. We’ve had 11 straight months of historically high money creation. The money supply expanded at a record rate[2] yet again in February. Tucker pointed out that this seems intentional – that the government is trying to pay for all of the spending – making it less costly by devaluing the dollar. Peter agreed, but also said the government has no plan to pay off the debt. And the real problem is the amount of money they are going to have to spend just to finance all their current commitments.

This is a massive amount of money printing. It’s unprecedented inflation because it’s the money supply that is being inflated. And as a result, everything costs more, because we’re not producing more. It’s actually the opposite. Americans are at home. They’re not producing goods and services. Yet, we’re creating more money to buy the goods and services that fewer people are producing. More money, fewer goods. Prices are just going to keep going up and it’s not going to stop.

Tucker pointed out that this looks pretty crazy from an outsider’s perspective. Peter said he doesn’t know how it looks to an outsider.

But I think to everybody that lives in the United States, it’s not going to look pretty. And the real problem is the Fed. The Fed pretends that it’s transitory. But when they have to admit that it’s not transitory the inflation rate will be far too high for the Fed to do anything about it. Because if the Fed actually raises rates to fight inflation, they’ll create a much bigger financial crisis than 2008 and the US government will be forced into insolvency.