Stagflation: When The Fiat Nation Fails

1. From 2008 to 2020, America’s bankers and government could tell a lot of fabulous “mightiest fiat nation of all time” stories to the citizens, and the citizens believed most of these stories.
2. Please click here now. They believed the stories because Main Street inflation wasn’t a major problem.
3. Governments can borrow a lot of money when interest rates are negative, obviously.  Sadly, when rates rise, the “debt is good” mantra tends to fail, and when rates rise a lot, the mantra fails badly.
4. When an investor thinks about the above, it’s clear that if the problem is unlimited currency supply, the solution is currency with limited or fixed supply.
5. Click to enlarge.  Note how close gold is to bursting above the dotted red trendline on this weekly chart.  That trendline defines the right shoulder supply zone.
6. This is happening as major institutional analysts become more concerned about entrenched inflation.
7. Please click here now. American companies make a lot of their goods in China.  The danger is that what began as a scheme to create product deflation and director bonuses with low wages is suddenly morphing into a stagflationary nightmare.
8. Please click here now. Goldman is now forecasting multiple hikes every year, for years into the future.
9. This disturbing prediction is not based on “big growth” in “all-powerful America” but on… inflation becoming entrenched.
10. Please click here now. Double-click to enlarge. For the stock, bond, and mortgage markets, rate hikes are a death knell.
11. Most “newbie” gold bugs only have memories of gold rising when rates fall, but throughout history:
12. The biggest rushes to buy gold have always occurred when central bank tightening policy fails to slay the stagflationary dragon.
13. What about fears that gold stocks can tumble if the stock market falls?  Well, those fears are certainly valid in deflationary environments.
14. In the current inflationary environment, a stock market meltdown related to rate hikes…
15. That’s likely to create the biggest institutional and retail surge into the metals in the history of markets!
16. I’ve suggested that a stock market meltdown will begin around August of 2022, and that now fits with the Goldman scenario of the first hike in July 2022.
17. It’s hard to know when a stock market crash happens exactly, but it’s likely to coincide with a gold price surge towards $2000… and then $3000. 
18. Please click here now. Double-click to enlarge this 1966-1980 “American Gulag” chart.  Gold blasted higher with each stock market swoon.  Clearly, history looks set to roughly repeat again… and soon!
19. Traders can use my swing trade newsletter to fine tune the action (in both gold stocks and the stock market) as the day of reckoning approaches.
20. Please click here now. Double-click to enlarge this weekly gold chart.  Note how close the key 5,15 moving averages are to a crossover buy signal. 
21. Good things take time, and gold bugs may be about to reap rewards for their patience.
22. Next, please click here now. Double-click to enlarge.  This weekly GDXJ chart is exciting.  As noted, the drifting rectangle is arguably also a bull flag.
23. Please click here now. Double-click to enlarge this daily GDXJ chart.  The short-term inverse H&S pattern is in sync with the bullish set-up on the weekly chart… and with the ominous scenario of ongoing rate hikes that fail to stem the rise of stagflation.
24. Will current institutional concern turn to panic as more rate hikes fail to stem the stagflation?  I think so, and I’ll dare to suggest that many US citizens may soon be seen discarding the red and blue hats promoted by their fiat nation leaders… and donning magnificent hats that are coloured gold!

Stewart Thomson 

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