AS THE WORLD TURNS
As the end of the Australian Financial Year looms ever closer, we wonder how important the final two trading days of FY 2019/20 are going to be.
One might have gone into the weekend feeling positive, based on the Friday close for Aussie stock indexes (plus almost 2%), but for Friday night overseas action, minus 2%!!
To make it easier to understand the potential market fragility, we invite you to take a look at this “fragile” shaped chart below. Time for more “trillions”?
Although the above chart is US centric, most investors understand that what happens in the US still matters, despite the appearance of accelerating decline.
And as the new Corona world turns, well-run profitable businesses continue to be well-managed, with prudent fiscal management.
However, a feature of this new and “modern” world, is poorly run businesses, even strait out frauds, get more money and bail outs to do more of the same.
Facilitating transition to this “New Monetary World” are the world’s largest asset “managers” of last resort – Central Banks.
The Swiss and Japanese National banks have been beta testing the outer limits of Central Banking for many years now.
And needless to say, these Swiss and Japanese experiments have been a resounding success, simply by the fact that they have not completely failed.
By acting as massive “Hedge Funds” for the last 10 or so years, with no real sign of inflationary blowback, we know that no asset purchases will be off limits for the US Fed in the future.
However, we’re not so sure about the “without consequence” conclusion of what a grand scale acceleration of these policies may deliver.
In the near future, Central Planners may become challenged by a force of nature known to serial money printers as: Inflation.
The chorus of discussion surrounding this potentiality is at the core of frontline independent economic dialogue across the globe.
Central Bankers themselves, of course, offer nothing in the way of inflation fear.
So much so that when the magic 2% inflation numbers appears, Central Bankers will celebrate its emergence and encourage its existence.
It’s at this point we should remember Ernest Hemingway’s explanation regarding the onset of bankruptcy, when asked, “how does it happen”?
“Slowly”, he said, “then all of a sudden”!
Such has been the case throughout history with inflation.
Most investors are wondering where hell this inflation thing is and what all the fuss is about, because at the moment there is quite frankly – nothing to see. So, see above Hemingway reference.
The big difference between the last 10 years of “no inflation” (asset prices not withstanding) and today’s current (global!) climate, is that now fiscal and monetary policy, of all OECD members, is chasing after the same thing. Inflation.
Universal Basic Income and “New” Green Deal, both now guaranteed in this political environment will be some tasty icing on a freshly baked cake.
In a possibly unrelated inflation story on the gold front, we’ve noticed, since mid-March, not a single 1kg gold bar has been available for sale through the Perth Mint. Unless you like “pooled” gold, of course!
Unofficially, of course, most know the kilo bars have one destination, New York.
After the delivery debacle of early March, is it any wonder the chart below looks like this:
We’re not even going to start on silver other than to say, please let us know if you can find any for sale, at less than a 100% premium to spot.
Anyway, we have no idea what this continued “shortage” of Precious Metals means.
We do, however understand this:
There is currently no plan B for the financial system as it stands today.
This is why its quite easy to understand why, at any point in time stock markets go down, a Central Bank talking head appears to talk calmness and liquidity provision to markets.
And for good measure, this below is probably nothing.
If you got this far, some fun charts for you to finish on.
Acceleration.
Don’t have to look like this guy to do what he’s doing!
