Gary Christenson – Mon 28 Dec, 2015

Thoughts from our friend Gary Christianson

Gold & Silver or Meth & Madness

“Meth” or Methamphetamine is a common recreational drug used, according toWikipedia, to induce feelings of euphoria, increase sexual desire, and stimulate weight loss, among others.

QE or Quantitative Easing, injecting liquidity, bond monetization, and “printing money” are common Keynesian economic prescriptions used to inflate economies, enable deficit spending and boost financial profits, among others.  Some call it monetary madness.

There are many disturbing similarities and it is clear that excessive use of both Meth and QE are destructive.

Your brain on drugs, your economy on QE:

 

In low doses Meth can elevate mood and increase alertness and energy.  The FDA has approved a variation of Meth for attention deficit disorder and obesity in adults and children.  But Meth is heavily used for “recreational” purposes and is both addictive and highly profitable for the producers, whether legal or illegal.

“Printing money” in modest quantities appears to stimulate economic activity and creates the illusion of enhanced wealth.  In the late 1990s people were obsessed with stock prices, CNBC, the “money honey,” the latest dot-com IPO, and spending money like the cash supply would never cease.  Subjectively speaking, it felt like a drug induced “high” that we hoped would last forever.

In higher doses, Meth can produce psychosis, cerebral hemorrhage, mood swings, delusions and violence.  Meth addicts will do increasingly bizarre and violent things to obtain their addictive drug.

“Printing money” in large quantities, such as in Japan and the EU currently or the Fed’s $85 Billion per month of QE initially creates the delusion that the central bank is all-powerful, and that policies which have failed in the past will somehow produce wealth and economic benefits this time.  Fundamentals, such as supply and demand, seem less important in analysis of stocks, bonds, and commodities, and central bank policy becomes overwhelmingly important.  Financial leverage and risk increase, flash crashes occur, volatility soars, and everyone is obsessed with the latest Fed statement.

The final stages of Meth addiction can produce violence, paranoia, cerebral hemorrhage, and delusional behavior.  The crash after the euphoric stage can last months, the addict craves the drug, and increasingly risky behavior makes death from overdose, systemic failure, or physical violence more likely.

The final stages of “money printing” addiction can create a currency crisis, massive defaults, deflationary collapse, hyperinflationary price increases, and delusional beliefs such as “it can’t happen here” and “the Fed will fix it.”  The crash after the inflationary euphoria can last years or decades, and economic collapse and systemic failure are much more likely.

As I write, the world awaits the 16 December pronouncement from the Fed.  (Will she or won’t she – she did!)  As I write, Meth addicts around the world wait for their next fix, worry their supplier might raise the price of their drug, or worse, they need to find a new dealer.

CHOICES:  Cooking meth or cooking the books?  Drugs or QE?  Delusions and violence or all-powerful central banks?  Drug induced temporary euphoria or the madness of paper currencies and intentional inflation?

Say NO to drugs.  Say NO to QE, debt based fiat paper currencies, and central banks.

Okay, I admit, we all know that QE, fiat paper currencies, and central banks aren’t going away, so we should protect our purchasing power with physical gold and silver, preferably securely stored outside the banking system.

 

For projected silver prices in five years, read my book:  “Who Killed Doctor Silver Cartwheel?” – available at Amazon.

 

Gary Christenson

The Deviant Investor