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INFLATIONARY DEFLATION: creating a new bubble inmoney
Excessive monetary stimulus and low interest rates create financialbubbles.
Central banks are creating the ultimate bubble in MONEYitself
, as they fight the downward leg in this Long Wave cycle.
First it was NASDAQ, then it was real estate and securitised debt, now it’s money
Jeff Kubina / Foter / CC BY-ND (and for front cover)
This is the biggest debt bubble in history. Each time DEFLATIONARYforces re-assert themselves, offsetting INFLATIONARY forces (monetarystimulus in some form) have to be correspondingly more aggressive tokeep systemic failure at bay. The
avoidance of a typical deflationaryresolution of this Long Wave is incubating a coming wave of inflation
.This will not be the conventional “demand pull” inflation understood bymost economists.The
end game is an inflationary/currency crisis, dislocation acrosscredit and derivative markets, and the transition to a new monetarysystem
, with a new reserve currency replacing the dollar. This makes goldand silver the “go-to” assets for capital preservation.
Strategically, we are far more bullish on equities versus bonds.
Tactically, equities face a volatile period - buffeted by alternating cycles ofdeflationary and re-flationary forces until they overcome bonds as theinflationary endgame unfolds.
In that scenario, equity investmentsshould (over time) be aligned with the growing share of realdisposable income directed towards essential expenditures, includingenergy, food/agriculture, personal & household care, mobiletelephony and defence (for governments).
The “Inflationary Deflation” paradox refers to the rise in price of almost everything in conventional money and simultaneous fall in terms of gold.
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