Huge topic, but what I really want input on is how the current efforts to stimulate the economy will, or will not, drive inflation in the future.
I’ve been thinking about the stimulus, the expansion of money in circulation, as almost certainly leading to significant future inflation, but now I don’t think so.
A portion of the stimulus, a highly visible portion, has been the spraying of cash out onto the great unwashed masses. Many here have benefited from these payments, Amazon and Netflix have indirectly benefited much more, and since there isn’t a way to pull this money back it is a permanent expansion and will have an inflationary effect.
However, at the same time the federal reserve has been backing trillions of dollars in corporate debt, quantitative easing, which also expands the money supply and is inflationary, but can be reversed.
My thinking is that when we start to see inflation the federal reserve will begin to sell. This quiet contraction of the money supply will trickle through the economy and reduce inflation. It’s actually an easy lever for them to pull and the effect is both well understood, they’ve done this before, and easily projected.
Do you think that runaway inflation can be stopped like this, and if so is it time to unload PMs?
The assumption this is based on seems to be the Jim Cramer mentality that the dollar is the unit of valuation which is the stable factor and wealth should be valued against this. When people challenge this, the response is uniformly "this is the way it has always been... we don't measure wealth in anything else.... the dollar is KING and this is a reliable pattern." I can't mention this without pointing out that this whole fable is based on a second (more foundational) false assumption, which is that of the proper role of the state in money generation. The two are of one cloth, though this may not be obvious to all on initial observation. Uou and everyone on this board know I have utter contempt for keynesian monetary theory, on which the whole idea of federal intervention in the monetary supply is based. Almost all the entire systemic assumptions above are based on the idea that the "normal" job of the federal government is to manage the ratio of currency to economic activity, and that this is a job which can be done, or at least hopefully can be done, if we have smart and ethical people in positions of decision making.
Anyway, this provides the basis for the "law" that when things tend to revert to the norm, they will go back to the dollar unit of valuation being the norm. Again this is illustrated by Warren Buffet (... excuse me... not the NEW Warren Buffet with the purchase of gold stocks, but the old one who assumed the financial basis of our monetary system.... banking....., was the keeper. One should keep in mind that a normalcy bias for the dollar because "It has been stable my entire life" is like betting your entire wad on a dead cat bounce in Enron... because it has such a great track record till now. It is based on a pattern which is in fact less than 100 years old, which is a momentary blip in monetary history. The fact is that the dollar has an extremely checkered past and has always been subject to manipulation and inflation. The ONLY periods of dollar stability were after we killed the national bank (Jackson) and after WW2 wrecked the rest of the world's economy..... and even then, for most of those periods the dollar was tied to something tangible. The post Nixon (1971) dollar which is untethered to anything other than the restraint (HA HA HA HA HA HA) of the Federal Reserve is an EXTREMELY limited historical example of a currency's stability. Again, this is like betting the farm on a two dollar uptick in Countrywide in 2007. I am all for normalcy bias and a return to the regression curve and all, but the key question there is how big is the curve? If you are using a limited data set that is a recipe for disaster (ask me how I know!
). Making decisions based on wrong data sets will lose money in a disastrous fashion. I believe this is the monstrous lie which is going to absolutely destroy most of the wealth in America... that value is and should be measured against the dollar. One of the fundamental requirements for stable money is that it must be RARE. It is why we don't use dirt for money, for example.
Maybe you buy into all that, and you are just asking a scalping question. If so, that is certainly fine (not that you need my approval to do whatever you like. I get that as well!). I have snatched a few quarters off train tracks in front of a coming locomotive, and if you are good at it, it can be lucrative. My advice though is DO NOT ASSUME you can dump a PM position and then just nonchalantly buy back in by logging in to APMEX and giving your VISA. We have not even seen a true monetary crisis, and I have seen times where you simply COULD NOT BUY... ANYWHERE..... any gold OR silver. Crap, we saw one of those just recently in March. No supply anywhere at any price. I have chased a few trains out of the station (usually to cover shorts), and you just don't want to sprint all the way to Orlando to catch it. You will die of exhaustion first. You might have a potful of worthless paper slips with Andrew Jackson on it but that will be a sorry consolation prize.
My advice is to familiarize yourself with The Sound Money School monetary policy. I wound up going there as a result of Ron Paul. The only coherent school of thought on the matter imo is SIMPLE at its core. Mises.org has a literal SLEW of educational tools which has been very helpful to me in "opening my eyes" to the lies about the dollar, the fed, and Keynes. Once someone buys into THAT, the questions about "when to sell the precious metals" literally goes away.
Here are a few introductory articles:
Good luck
https://mises.org/wire/debt-inflation-spiral-driving-demand-gold
https://mises.org/library/worst-all-monetary-policies
https://mises.org/library/monetary-and-fiscal-policy
https://mises.org/library/monetary-policy-free-america
https://mises.org/wire/monetary-policys-unsustainable-conceit
https://mises.org/wire/monetary-policy-and-depressions
https://mises.org/wire/mainstream-wisdom-monetary-policy-and-asset-bubbles