Perspectives On Gold’s “Parabolic” Catch-Up Phase
Lee Quaintance and Paul Brodsky
Since 2007 our analysis has suggested the likelihood of economic outcomes that most have considered unlikely: significant and ongoing monetary inflation, policy-administered currency devaluation, substantial global price inflation, and an eventual change in how the forty year old global monetary system is structured. Most observers have viewed such outlooks as tail events – highly unlikely, unworthy of serious consideration or a long way off. We remain resolute, and believe last week’s movements in Frankfurt and Washington towards perpetual quantitative easing confirmed and accelerated the validity of our outlook. A summary reiteration seems in order.
We all know QE began a few years ago in the US and UK with the first rounds of base money creation. This debt monetization came on the heels of Treasury’s 2008 TARP bailout, ironically the broad recognition of a tail event – a credit crisis that had been quietly building for years. Since then, global central banks have been taking turns diluting their currencies through repeated base money issuance, devaluing one at a time against the others. While prices of goods and services bought on credit have since been soft, declining or rising only mildly to reflect the natural demand for credit; monetary inflation has pressured prices of unlevered items with inelastic global demand properties higher, most notably precious metals and natural resources.