Peak To Peak To Peak Inflation, The New “Transitory”

Gold provides certainty in uncertain times

China feels the pressure of loaning good money to bad bets

Central Banks losing credibility fast

Peak To Peak To Peak Inflation, The New “Transitory”

July 19, 2022

“They are losing the last vestiges of credibility, and somehow think that projecting an image is sufficient to carry the day. If you say it, therefore it becomes reality. It brings me back to a significant reason to own gold in any period of time. That is stupidity insurance because here you have a recreation, a regeneration of Plato’s cave sequence, where you’ve got shadows cast against the wall and that is supposed to be reality.” — David McAlvany

Kevin: Welcome to the McAlvany Weekly commentary. I’m Kevin Orrick along with David McAlvany. 

I think all of us sometimes wonder if we’re going to just wake up from a very long dream, like we’ve been missing something. We have certain things in our life where it’s like, “This is too good to be true.” We’ve talked about this for 10, 12 years. How is it that America, the United States, could just print trillions and trillions of dollars? In all these years, we really didn’t experience inflation. We scratched our heads, but strangely enough, you had the Berlin Wall falling. You had the communist countries like China that were producing goods for much, much less. We should have been experiencing falling prices. We didn’t, but are we waking up from a dream where we were getting something we didn’t deserve, and now we’re finding out what it costs?

David: Isn’t it funny how we internalize those things and normalize them?

Kevin: Yeah.

David: This must have something to do with us and our exceptionalism that we can do something that’s never been done in the history of the world, but that’s because we are who we are.

Kevin: Yeah. We’re Americans. We’re here to help.

David: Yeah, and so it is curious to see the monetary policy experimentation, the fiscal policy experimentation. Books have been written about this, deficits without tears. We run the deficits without tears. Of course, Jacques Rueff’s point was that ultimately there are significant prices to pay, emphasis on the word ultimately, because nothing is free in life. Although, that’s what we’ve internalized and normalized is this world of easy money and free access.

Kevin: Now we’re facing double-digit inflation. But here’s the strange thing. Here in America, we’re feeling the inflation, eggs and butter and rent. Everything’s going up. But if you were from any other country in the world, the dollar’s going up, gold’s going up. We’re getting sort of an altered reality as we look at it right now.

David: Yeah. Often, our colleague Doug Noland will look at trading dynamics that seem healthy, but are actually an expression of another dynamic once removed, somewhere else in the system, which is anything but healthy. Perhaps the dollar trading to multi-decade highs is an example. When an asset at the core of the financial universe trades well, like the U.S. dollar has in recent weeks, of course it can be on its own merits, or it can be on the demerits of an asset at the periphery, somewhere else. Frontier and emerging market stress has, in recent weeks and months, intensified. The dollar has moved into higher gear, moving into territory un-trod so far this millennium. As frontier and emerging markets have calmed down here in the last day or two, lo and behold, the dollar has come off the boil a bit as well, so maybe it’s not the merits of the dollar driving it higher.

Kevin: Okay. The pound’s lost its prime minister. We’re already looking at the English, seeing a weakness. The yen, they’re trying to keep anything from happening with the yen, and it’s just— the currency is crumbling relative to the dollar.