Russia and the Saudis are driving up oil and diesel prices. But these moves are likely to undermine the rouble more than they undermine the dollar, euro, and other major currencies. Therefore, higher energy prices will rebound on the Russians this winter: if they shiver in Germany, they will freeze in Russia. If the dollar is king of the fiats, the rouble is just a lowly serf.
There is little doubt that Putin and his advisers are aware of this problem. Plan A was to introduce a new gold-backed BRICS currency which might be expected to weaken the dollar and euro relative to the rouble. Plan B was more drastic: to back the rouble itself with gold. This is the financial equivalent of dropping a hydrogen bomb on the dollar and the global fiat currency system upon which it is based.
A commenter on the SchiffGold Facebook page recently asserted that silver coins are “junk.” Why? Because as he put it, “silver is not rare,” and, “The silver/gold ratio investment premise is obsolete in this industrial, computerized and AI world.”
What should we make of these assertions?
About that disinflation…
It was transitory.
As we predicted, a jump in gasoline prices helped drive the August Consumer Price Index (CPI) higher, throwing cold water on the disinflation narrative.
The Federal Reserve is losing money.
That means the American taxpayer is losing money.
In most instances, a business bleeding red ink has a big problem and could ultimately go under. Not so for the Fed. In fact, losing money isn’t a problem for the central bank at all. But it is a big problem for the US government.
As the world descends into a much-heralded recession, the surprise will be that interest rates will continue to rise as economic activity contracts. This is not what the economic establishment expects.
This article puts the outlook in the context of classical economic theory, when it was the principles behind the division of labour which went unchallenged. Adopting the theme of Say’s law, this article permits a forecast with a high degree of certainty that far from a recession leading to lower prices, lower interest rates, and therefore investor heaven, it will lead to higher prices, higher interest rates, budget deficits soaring out of control, and liquidation of the dollar by over-exposed foreign holders.
Falling energy prices were a significant factor in the big decline in the Consumer Price Index (CPI) earlier this year.
Bad news: energy prices are now heading up. That means the CPI relief was almost certainly transitory.
As evidence mounts that the major Western economies are heading into a banking and monetary crisis due to contracting credit, we face the consequences of unsound money. The era of fiat is drawing to a close and its death will be painful for the highly indebted advanced economies in North America, Europe, and Japan. History and legal precedent tell us that fiat will die and gold will return to provide an anchor to credit system values.
Labor Day is coming up. That means we will hear a lot about the plight of American workers. And we will undoubtedly hear calls for new policies to help make their lives better. But we don’t really need more government policies to help workers.
We need better money.
There is a growing consensus that the Federal Reserve can slay price inflation while guiding the economy to a “soft landing.” In fact, Fed economists now project the US economy will not spin into a recession. Other mainstream pundits and prognosticators have taken up this narrative. But there are plenty of reasons to doubt it.
Gov. Ron DeSantis issued a state of emergency for 33 Florida counties on Saturday in anticipation of Hurricane Idalia, thus activating one of the most misguided and counterproductive economic policies imaginable.
Yes, with the sweep of his pen, DeSantis banned “price gouging.”
