Facts and Speculations for the Next Decade

Miles Franklin sponsored this article by Gary Christenson. The opinions are his.

Breaking news: The impeachment circus is entertaining, the trade deal is both off and on, tweets move the market, S&P 500 Index hit a new high (thanks to central bank liquidity), and more of the same nonsense will unfortunately create more of the same.

WHAT HAPPENS TO PRICES NEXT DECADE—IN FIVE TO TEN YEARS?

What we know, think we know and speculation:

WHAT WE KNOW THAT HAS BEEN TRUE FOR MANY DECADES:

1. The banking cartel devalues dollars, increases debt more rapidly than the economy grows, and consumers pay higher prices.
2. Devalued dollars buy less. Prices increase for beer, postage, trucks, the S&P 500 Index, silver, food, political payoffs and more.
3. The sum of the S&P 500 Index plus price of gold has risen since 1974 at 3 – 4% per year. In 2019 gold is inexpensive and the S&P is too high. They will reverse next decade.
4. Inflate or die! Currency in circulation and prices increase.
5. The Fed’s plan to solve an excessive debt problem with more debt has failed. (But the top 1% became wealthier.)
6. Liquidity injections, QE and “not-QE” will not solve structural problems (underfunded pensions, entitlements, debt financing, warfare and welfare, health care expenses) in western economies.
7. Gold is real money. Dollars (euros, pounds, yen) are debt-based currency units that buy less every year.
8. Russia, China, India, other countries and central banks hoard gold to back their governments and currencies. The west creates more debt. Which approach has more probability of success by the end of next decade?
9. The U.S. financial system transfers wealth from pensions, savings, individuals and businesses to the political and financial elite. Deficit spending, massive debt, consumer price inflation and the Federal Reserve enable wealth transfer.
10. The official national debt increased by 8.8% per year since 1913. The rate has been the same since 1971. $23 trillion in 2019 at 8.8% per year grows to over $50 trillion by the end of next decade, and well over $100 trillion by 2040.
11. Inflate or die will lead to a reset. If something can’t continue forever, it won’t.

From Wolf Street: “My ‘Pickup Truck Price Index’”

WHAT WE THINK WE KNOW:

Sven Henrich: “System Failure”

“Because 2019 has revealed a fundamental truth: Central banks can’t extract themselves from the monstrosity they have created and made markets dependent upon.”

Martin Armstrong: “Custodial Risk in New York City”

“…the negative-yielding bonds are going to crash like something not witnessed since 1931. While a complete default is not likely prior to 2025/2026, we are going to witness the start of the collapse in 2020.”

James Rickards “The Fast Track From No Inflation To Runaway Inflation”

“Fiat money can work but only if money issuance is rule-based and designed to maintain confidence. Today’s Fed has no rules and is on its way to destroying confidence. Based on present policy, a complete loss of confidence in the dollar and a global currency crisis is just a matter of time.”

“I’m on record predicting that gold will go to $10,000 an ounce… the number is not made up… It’s the implied non-deflationary price of gold.” [Looks sensible…]

Jim Sinclair:

“Gold price predicted, many months ago, to start mid November 2019 break of $1400, even if intraday, to $50,000 in second quarter of 2025.” [He is a brilliant man. Don’t dismiss the possibility of hyperinflation and outrageous gold prices.]

SPECULATION ON PRICES 2025 – 2030:

December 2019 (now):

Gold:                                     $1,480

S&P 500 Index:                     3,168

Food cost per month:            $900 (family of 4)

Gasoline:                              $2.50 per gallon

Political payoff:                     $25,000 (just guessing)

Speculations for 2025 to 2030: Gold priced at $3,000, $10,000 and $50,000.

Gold:                                     $3,000       (modest inflation)

S&P 500:                              3,500

Food cost per month:            $1,300

Gasoline:                              $4.00 – $6.00

Political payoff:                     $50,000

or

Gold:                                     $10,000 (more severe inflation – likely)

S&P 500:                              8,000

Food cost per month:            $3,000

Gasoline:                              $9.00 – $12.00

Political payoff:                     $100,000

or

Gold:                                     $50,000 (hyperinflation)

S&P 500:                              25,000

Food cost per month:            $10,000

Gasoline:                              $35.00 – $50.00

Political payoff:                     $300,000

But… gold at $50,000 is outrageous! Many will say this can’t happen in our advanced western society when central banks are managing the economy. Really? Consider:

• Central banks created $20 trillion since the financial crisis—from “thin air.” This was insane and unhealthy, except it benefited governments and the financial elite. Why not $200 trillion and hyperinflation?

• The Fed will pump nearly $500 billion (from thin air) into the repo market in 30 days. They claim economic strength and employment are great… I doubt it. Link here.

• Over $15 trillion in sovereign debt “pays” negative interest. Expect more debt, lots more debt. Central banks have distorted the financial system and believe negative interest rates are necessary.

• Many countries in the past century “printed” themselves into hyperinflation. Argentina dropped 13 zeros from their peso since WWII. Hyperinflation is not unusual in unbacked fiat currency systems.

• Official national debt increased $2.5 trillion in the last two years. Presidential and congressional candidates want to borrow and spend more. The military will spend, spend, spend. Government will expand spending each year, regardless of tax income.

• Guaranteed Basic Income, Medicare for all, student loan defaults, state and local pension bailouts, a larger war in the middle east, and more will be funded with debt. Is there no end to this fiscal and monetary nonsense?

Jim Sinclair has made shocking and accurate predictions for the price of gold over five decades. He calculated $800+ gold when it sold for $40. Over a decade prior to the 2011 runup in gold and silver prices, he predicted $1,650 gold in 2011.  He thinks gold at $50,000 is possible because of runaway debt, crazy currency creation and insane inflation. We should hope not!

A world in which gold sells for $50,000, the S&P has reached 25,000 and it costs $10,000 per month to feed a family of four is a world where social unrest, government controls, wars, famine and financial engineering are dangerous and out of control. Individuals and countries will adapt, but if hyperinflation trashes fiat currencies, expect trauma.

CONCLUSIONS:

• Inflate or die! It is likely that runaway inflation or a deflationary depression are in our future—maybe both. I expect massive inflation followed by a deflationary collapse. That fits the “DNA” and “printing” inclinations of central banks. We shall see.

• Deficit spending, debt creation, fiscal and monetary craziness, and political nonsense are dominant. They will self-destruct to the detriment of many people.

• Prices for gold, S&P 500, food and gasoline will be much higher in 5—10 years. Individuals will express their displeasure at the ballot box and in the streets. Think Paris and other cities.

• Gold and silver have preserved wealth for centuries. Can we say the same for pounds, dollars, or sovereign debt?

Miles Franklin will exchange digital and paper currency units for real money—gold and silver. You can’t buy groceries (in 2019) with silver coins, but you can preserve wealth and protect your savings and retirement from the predations of central bankers, politicians, and out-of-control deficit spending.

Gary Christenson

The Deviant Investor