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Alasdair Macleod: Bond worries and gold

Section: Daily Dispatches

By Alasdair Macleod, St. Helier, Jersey, Channel Islands
Thursday, December 26, 2019

There is evidence that U.S. Treasury bond yields may continue to rise, exposing the debt trap in which the U.S. government finds itself. Market participants don't realise it yet, but the dollar-based monetary system is spinning out of control. This will become obvious as the crisis stage of the credit cycle, which we now appear to be entering, becomes evident.

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The outlook for monetary inflation is dire. Not only will governments fund themselves through "quantitative easing," but central banks will be forced to inflate even more to pay for government deficits significantly greater than currently forecast. And when markets stop taking government statistics on inflation as the gospel truth, the interest cost of government funding will rise and rise, reflecting an increasing rate of time preference for fiat currencies that will be losing their purchasing power at an accelerating rate.

In a world where all fiat currencies will face enormous challenges, using yardsticks such as trade-weighted indices will be misleading. The best gauges of the slide in fiat currencies will be commodities, particularly commodity monies, gold and silver. ...

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