Showdown in the Metals Markets: Let's Get Ready to Rumble

Silver is likely to lead the way higher from here, with gold following.

The suppression of the metals by the central banks since 1971 will not fall apart in a moment. But if there is a time to which people will later point and say, 'this was the turning point,' it is likely to be in the intital breakout of silver above twenty and of gold from its big cup and handle formation. To borrow an analogy from wartime, this was their Stalingrad, prelude to Kursk.

And the final turn and the beginning of the long retreat of the Central Bankers may lie ahead on the horizon. And what comes next, no one can say for certain, when the mighty are fallen.

“So farewell, farewell to the little good you bear me.
Farewell! a long farewell, to all my greatness!
This is the state of man: to-day he puts forth
The tender leaves of hopes; to-morrow blossoms,
And bears his blushing honours thick upon him;
The third day comes a frost, a killing frost,
And, when he thinks, good easy man, full surely
His greatness is a-ripening, nips his root,
And then he falls, as I do..."

Wm. Shakespeare, Henry the Eighth, Wolsey, Act 3 Sc 2

SP 500 and NDX March Futures Daily Charts

Gold Daily and Silver Weekly Charts

Updated Money Supply Figures: Dude, Still No Deflation

For comments see the original post from August 2010, US Money Supply Figures

My forecast remains for a severe stagflation with the continuing devaluation of the dollar relative to real goods, in a Potemkin economy masked by newspeak and distorted metrics designed to make looting appear to be recovery, crime as sensible compromise, torture as benevolence, tyranny as stewardship, and hell as heaven. 

Despite a drop in aggregate demand the monetization that the Fed is performing will do its work. However, this liquidity's diversion into the banking and health sectors to the relative exclusion of productive investment will create a third world economy with large pockets of wealth amongst generally reduced living standards.  One cannot stimulate a failed economy into vitality while the corruption that caused the collapse still remains.

The solution is to go back to the 1980's when the median wage began to stagnate and see what changed, and begin constructing the remedies from there.  I doubt this will occur as the American middle class has been almost as thoroughly indoctrinated to its own destruction as any people had been in the first half of the twentieth century, without even realizing it.   Edward Bernays would have been proud. 

“Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal – that there is no human relation between master and slave.” Leo Tolstoy

Note: I see in the news that the NYSE and the Deutsche Boerse are in merger talks. One ring to rule them all...

“Independently of its misdeeds, the mere power, the bare existence of such a power, is a thing irreconcilable with the nature and spirit of our institutions.” Nicolas Trist, secretary to Andrew Jackson, writing on the privately owned Second Bank of the United States (Schlesinger, The Age of Jackson, p.102)

M2

M2 Year Over Year Growth

MZM

MZM Year Over Year Growth

True Money Supply (TMS) from Mises