Gold Chases The Money Supply Higher

Q: “Why is the Fed reluctant to let the boom-bust nature of markets play out?”
A: “Because it what’s they’ve always done [since the Fed was founded in 1913]…Once you’re in power, you’re going to do what you can to defend the system as it is”

The best official measure of the money supply created by the Fed was M3.  “Was” because the Fed under Helicopter Ben removed M3 from public view.  But the “effective” money supply is the currency printed plus the “spendable” currency created by debt issuance. Currency from a loan behaves like printed money until the loan is repaid.  But for the last 10 years the amount of the loans outstanding, and therefore the supply of “spendable” currency,  has risen at an increasing rate.

Gold can “smell” these reams of fiat paper currency being printed and then fractionalized and leveraged by the Central Bank. The “fractionalization,” of course, is the process by which loans (including repos) creates spendable currency.

SilverBullion invited me back onto its SBTV podcast to discuss the markets in the context of the QE4 and what it means for the gold, silver and mining stocks:


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3 thoughts on “Gold Chases The Money Supply Higher

  1. The Masters trying to convince us that gold is only going up because there was problem with Iran before and now with China only , otherwise everything is just fine. The markets are up and dollar is up. We going to see more and more fireworks this year.

  2. An idea for your shortseller jounal Dave. Take a punt on JPY assets and the currency itself and go short. Kyle Bass had that idea but he was years too early:

    1. I stick to stocks for my SSJ. Currencies are even more manipulated than stocks and precious metals. It takes a big player, like when
      Soros broke the pound sterling, to offset Central Bank intervention in currencies.

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