Precious Metals - The
Wheels are
Turning and You Can't Slow Down
By Dr. Jeffrey Lewis
We are aboard a speeding train that cannot
speed up - neither can it slow down - due to fiat, default, and what will be
remembered as the greatest credit fiasco in history. And the road is ending just
up ahead.
You can't go back and you can't stand still...
Speed is a 1994 American
action-thriller movie directed by Jan de Bont. The film stars Keanu Reeves,
Dennis Hopper, Sandra Bullock and Jeff Daniels. The movie hinges on a bus rigged
with explosives that will be armed if the bus exceeds 50 miles per hour. The
explosives will detonate if the bus falls below that speed or if an attempt is
made to offload the passengers.
In many ways, this is a parallel to the
financial system.
Absent real or natural (non-inflationary)
growth, the financial elite are following a bastardized form of Keynesian
economics, in which stimulus (more debt) can lead to growth. What we've actually
seen is very little growth in the wake of unprecedented balance sheet expansion
or outright money printing.
While the mechanisms (quantitative easing)
seem complex, we should never mistake complexity for confidence or a euphemism
for reality (or in this case, money printing).
If they listened to the loudest cheerleaders,
we would have careened out of control or triggered the inflationary bomb sooner.
Whether it came from Chinese dumping or higher
interest rates pushing banks back into the private lending market does not
matter. They are tied together anyway.
More and more debt-based fiat is needed to
keep the system alive. Any slowing will crash markets while increasing the
current rate of stimulus, which will very likely trigger the confidence
end-game.
Lehman 2.0
It is important to separate the economy from
the financial system. Nonetheless, they are fatally intertwined. Academia and
most modern economic analysis are unable to perceive this flaw, given the
massive expansion of finance and credit over the last few decades.
Solvency now depends largely on the stock and
flow of credit and good collateral underlying. Without the fuel from collateral
(a promise) rates rise, credit slows, and the risk of derivative melt-down
increases.
However, if the fuel is removed too quickly,
detonation occurs among artificially inflated assets. This situation potentially
further distorts growth and chokes off any remaining tax revenue. At this point,
the Fed would be called in with fire hoses to keep the government running;
thereby blow up all asset prices as a result.
Non-linear system
Unfortunately, it is even more precarious
because the systems that depend on the flow of free money are exponentially tied
once triggered in either direction.
As the Fed continues to compete for REPO
market collateral through its ongoing bond-buying spree, short-terms rates will
rise. This will result in a significant slowdown in credit.
A credit freeze would trigger defaults along a
daisy chain of over-the-counter, unregulated derivative transactions that break
the back of whatever confidence is left in the system.
Economies are living systems
However distorted by finance, the basic
foundation of commerce is a natural phenomenon which makes it nearly impossible
to control.
If you are not growing or evolving, you are
dying.
The time to prepare is not only now, but
always. Same applies.
Preparation is accumulation, and while you
cannot "eat" precious metals, the basic premise is easy enough to understand.
Those lucky enough to experience the physical weight of wealth and its
responsibility understand the broader, more abstract implications.
For more articles like this, including
thoughtful precious metals analysis beyond the mainstream propaganda and
basically everything you need to know about silver short of outlandish price
predictions, check out
http://www.silver-coin-investor.com