Hyperinflation, market crash and rising gold prices are natural outcomes of money printing. But the U.S. as been under a money-printing barrage since George W. Bush famously claimed, “I’ve abandoned free market principles to save the free market system,” and Ben “Helicopter” Bernanke unleashed a torrent of Quantitative Easing on the market to prop up the banksters, yet we’ve not seen hyperinflation, a market crash nor an enormous rise in gold price. So what gives?
Writing for Zerohedge.com, J.P. Koning opines that QE suffered from “monetary impotence.” In other words, a large enough quantity of deposits was created that the market no longer placed any value on the additional money, making monetary services a free good without monetary value. Koning posits that quantity theory has been outlawed.
Jim Sinclair has a different take. Sinclair, a precious metals specialist and commodities and foreign currency trader, chairman of a gold mine and longtime expert commenter on gold and finance, says monetary theory has not been outlawed, just suspended by the machinations of the banking elite. Here is his column, written in response to reader Bill’s question:
I am not sure this (see below) is correct, what do you think?
Why QE Didn’t Send Gold Up To $20,000
March 6, 2018
Guest post by JP Koning, submitted by BullionStar.com
Why didn’t quantitative easing, which created trillions of dollars of new money, lead to a massive spike in the gold price?
100 Trillion Dollar Notes are not yet required to purchase gold. Why hasn’t the increased money supply significantly increased the gold price?
The Quantity Theory of Money
The intuition that an increase in the money supply should lead to a rise in prices, including the price of gold, comes from a very old theory of money—the quantity theory of money—going back to at least the philosopher David Hume. Hume asked his readers to imagine a situation in which everyone in Great Britain suddenly had “five pounds slipt into his pocket in one night.” Hume reasoned that this sudden increase in the money supply would “only serve to increase the prices of every thing, without any farther consequence.”
To put it quite simply, that was at the time of major increase in money supply all directed to fill a huge dark hole created by OTC (over-the-counter) derivative [a derivative is a contract with a price that is connected to — derives from — the value of real goods, assets, rates, indices or events.failures, used in speculation and as a hedge. –BL] The increase in money supply never got to see the light of day as it went into the losers on the OTC derivatives to pay the winners on the OTC derivatives who hoarded the funds as the tattered banking industry does.On the next move, the rich got richer. The derivative losers remain optically solvent due to a FASB (Financial Accounting Standards Board) change in accounting rules for derivative valuation. Today, personal interest overcomes the interest in the growth of institutions. Therefore, the bonuses went through the roof at financial institutions as did the salaries. This is pure financial interest, and does not in any way see the blue collar consumers. This money funds special interest, special people and gave birth to the 1% seeing their net worth move towards the trillions market. It funded a worldwide stock and bond market bubble but did nothing much inflationary where good are concerned. The increase in the money supply did not go into the pocket of consumers but rather just filled black holes in the OTC derivative losers balance sheets. This was named “Sterilization”, to make it look acceptable as an economic event. The money went to the losers on OTC derivative for fake working capital. Therefore, this produced an end to the optics of the OTC derivative crisis, but not appreciation in anything but financial bubbles.
Now it is different. The economic recovery, although not strong, is moving sideways. The playing field has become optically somewhat even. Changes in accounting has produced the optical of a level banking field. Insolvent banks continue to move forward on the back of FASB’s capitulation to the dark state who order a change in the mark to market computation of derivatives. FASB, therefore, stretching Hume’ s formula in time but in no way is it cancelled other than in snow flake economist minds.
A group of 15 or so trillionaires and a huge amount of millionaires were created everywhere in finance. This phenomena took place only in the world of finance and nowhere else, all on the back of the phony money transfer from the losers to winners on derivatives. This process is what gave rise to the false claim on two years of major international banks trading desks never one day losing money. That was the profit side of the derivative paying out in bonus, salary and bank stock prices plus buy backs in that industry via the trading department recognition of the OTC derivative winnings funded by the government, you and I Hume is not wrong. He was delayed by the treachery of FASB.
Now things have turned. The dollar is banished for its own many other reasons.
Now I predict the formula which was never cancelled but only delayed becomes more relevant.
Velocity of money depends heavily on confidence in the reserve currency, which few take into account.
Add that to Hume’s formula Trump’s immediate desire for fiscal stimulation, thereby locking and loading the formula to explode. Stimulation is now going fiscal and therefore, headed for Main Street. The Fed cannot shrink their balance sheet for quality of paper holdings and interest rate reasons Hyper inflation is always primarily a currency event, not an economic event.
Hume has not been outlawed by the Snow Flake B school fops, but will be the key to the reinstitution of the Austrian / Chicago school of economics based on the laws of nature.
MOPE [Management of Perspective Economics, Sinclair’s theory that governments, particularly the U.S. government, creates false memes by lying about economic data and manipulating markets to “rationalize” it –BL] will be trashed never to return in the lives of the Snow flakes. This is now, a clear and present as the fact of what is happening out there.
To get down to w here the goats graze, hyperinflation is coming, not because the economy may be good or bad, but because of the Fed’s own money creation, and there’s nothing the Fed can do to stop it. Worse, the money was used to pad bank balance sheets (it was never lent out) and for corporations to borrow at near-zero interest and buy back their own shares, causing artificial demand and an artificial spike in stock prices. A market crash is inevitable. It will be the end result of a decade-long, Fed-sponsored and corporate-legal pump-and-dump scheme. Gold will shoot to the moon because it is valued inherently and separately from fiat money. The laws of nature cannot be overturned.
There will be a great awaking among the masses that Keynesian economics has failed them. I hope you’re prepared. If you have not done so already, please visit this page for a complete guide to currency collapse, withdrawing your money wisely, and buying and holding physical gold and silver.