Financial Repression & Everything Bubble
Temporary or permanent?
It should surprise no one that we do not believe inflation is a short-term problem. For the first time in decades, inflationary forces prevail. The Corona crisis represents the event that needed the barrel to overflow. This is accompanied by a shift from monetary to fiscal dominance. In general, everyone is aware that we are near the end of the current cycle. The only question is what event will burst the bubble at the end. Nothing can be discounted here and a geopolitical event such as a war cannot be discounted either. As long as interest rates are seen to be as distorted as they are at present, it is hard to say when this party will end.
Can we step on the brakes?
Another big question is whether the Federal Reserve will reduce QE in the near future. There is also the question of whether this is realistic at all, or whether it would lead to a bursting of the “everything bubble”. In Europe this discussion is not even taking place, here it is still full throttle ahead. It must be pointed out that this is symptom control and not a solution to the problem.
Can we stop inflation?
Traditionally, inflation is fought by raising interest rates. However, this is almost impossible due to the current debt situation. Real interest rates will therefore remain negative for the next few years. This represents a very good environment for Silver and Gold. Moreover, we are not heading for hyperinflation at the moment. Instead, there will be more financial repression. Gold can only be bought in certain quantities or not at all. This could make it more difficult to own alternative investments. Another step would be the prohibition or restriction of cash.
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