Inflation Is Raging – If You Know Where To Look
John Rubino writes:
Clearly, inflation is raging. But because so much of society’s wealth is flowing to the top 1% — who after all can only drive one car at a time and tend to eat no more than the rest of us – inflation isn’t showing up in food, suburban houses or other mass-market products. Instead, trillions of disposable dollars are pouring into real assets that are then hoarded in mansions and high-end storage facilities. This is a truly startling asset grab when you think about it.
The one unique thing about this episode is that past migrations of capital from financial to tangible assets have included precious metals, which tend to be in demand when paper currencies are being mismanaged. That gold and silver aren’t participating is the strongest proof yet that they’re being manipulated to hide the impact of rising debt and excessive currency creation. After all, if you’re going to spend $100 million on art, your financial adviser will almost certainly tell you to diversify into farmland, oil wells and gold bars.
That this hasn’t happened doesn’t mean it won’t. Picture a chart tracking the tangible asset classes of the super-rich: art, jewelry, high-end London and Manhattan apartments, beachfront property, gold bullion, etc., the things that are exist in limited supply and continue to exist no matter what the S&P 500 or 10-year Treasuries are doing. Virtually all the lines on that chart would would be looking parabolic right about now – except precious metals. A billionaire, trying to figure out where to move his next hundred mil would look at this chart and see one outlier, one thing that hasn’t yet gone through the roof, and make the obvious choice. That day is coming.
But looked at another way – in terms of the amount of paper currency being used to buy them – you could say that gold and silver are by far the most popular tangible assets in the world. China, India, and Russia between them have snapped up about 4,000 tons of gold this year, worth about $153 billion at the current price. That’s a lot more than was spent on art. It’s just that these purchases, massive though they are, aren’t moving the price.
But they are moving something: the gold reserves of the western central banks that are sending their gold eastward. They’re moving those down, at an unsustainable rate. So Western central banks face a tough choice: keep sending their gold to Asia until it’s gone, or let the super-rich bid it into the stratosphere in line with art and diamonds. Sooner or later, they’ll have to choose door number two.