Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench

A Macro View of T Bonds, Gold and Money Supply

IMG Auteur
Published : November 24th, 2012
801 words - Reading time : 2 - 3 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

 

 

 

 

While charting a potential bullish scenario for commodities in NFTRH 213, I became distracted by thoughts of the deflationary mindset that has been cooked up since 'Bond King' Bill Gross tugged on Superman's cape in the spring of 2011 by announcing his short positions against long-term US Treasury bonds, which was in essence a bet that the monthly EMA 100 boundary (red line, chart below) that had been in force for decades would be broken this time.


Sorry Bill, the inflation cycle into that time frame blew out right on your signal.


For reference, here is our favorite big picture chart once again; the 'Continuum' AKA the monthly view of the 30 year T bond yield.




As the 100 month exponential moving average was approached once again in spring of 2011, the inflationary noise became hysterical. Commodities topped out, the Euro crisis kicked off and European and US policy makers came into play in intense fashion.


Unfortunately for inflation boosters, policy came with an ingenious sanitization aspect to it, with the US Fed discriminating between T bond durations in its buys and sells. Europe's ECB even tried some sanitizing of its own. There is no inflation! Ha ha ha... For reference, the chart above shows the spread between 30 and 2 year T bond yields (shaded areas) AKA the Yield Curve that has been held in check, thereby holding gold in check as well.


Since we're using favorite macro charts in this post, let's pop up another one.




Gold follows the yield curve and the yield curve has been managed by Operation Twist. End of story.


But what is important now? Anyone? Beuller? Yes... what is important now is where we are going, not where we have been. Thus, on the subject of inflation and inflationary signals, here is the 'interlude' that popped up in the middle NFTRH 213...



Macro Geek Interlude (NFTRH 213 excerpt)


The market is getting dangerous ("getting dangerous" Gary? We thought it got dangerous in 2001, or 2007 at least) because the Fed is heavily in play now. Asset markets and the economy are sending signals that the inflation to date is not taking hold. Not in jobs, not in the US stock market (which has stopped going up), not in commodities and not in... precious metals.


So we are back again to Operation Twist and the yield curve. If not for this inflation signal dampening manipulation NFTRH would be going full frontal deflationist now because the inflationary signals are just not there and have not been there since the yield curve operation began. That is not because assets are not going up, but because money supply is not going up. That's a deflationary backdrop folks. Except that money supply is not going up (at least in large part) because the Fed - as it has repeatedly and officially announced - is sanitizing its long-term T bond purchases with sales of equal amounts of short-term bonds. Otherwise, money supply would be going up.




Now we consider that Twist is scheduled to end next month, whether by official decision or a due to a lack of supply of short-term bonds to sell. My guess is it is both. Some think that officials conveniently wanted gold to be held in check through the election. I do not disagree with them.


So if the Fed is going to let Twist terminate, and if they are going to continue to purchase T bonds, and if they are going to maintain ZIRP until 2015, and if they are going to continue MBS purchases, the adjusted money supply is likely to rise.


We will only know if a real deflation is fomenting if they stop meddling with the yield curve, flat out inflate and still the money supply does not rise. Then everybody out of the toxic pool - and I mean out of everything other than physical gold as suits individual needs - and sit happily in cash as we await Prechter's amazing buying opportunity, which would come at pennies on today's dollar.


Until then, deflation has not proven a thing because the appearance of deflationary signals has thus far come with the aid of yield curve and money supply suppression.


Post Script:


Why do some people think the Fed has to try to inflate (to infinity)? Well for one, this chart of the cyclical metal with the Ph.D. in economics vs. the barbarous relic (Cu-Au) shows that if gold has done poorly since Bill Gross inadvertently announced that T Bond yields were about to decline, then copper has done worse. Indeed, the previously inflation-boosted economy has been in trouble since 2006. This is a terrible picture for the economy.




So is the Fed likely to continue trying to dampen inflation expectations or... promote them going forward? Do they have a choice?



 

 

Companies Mentionned : Continuum | Metals X | Signal |
<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
First Report since April, 2014
05 FebAndy_K1
Jason, One of your articles written way back is one of the reasons I started paying attention to silver and shortly thereafter started to ...
Something has Changed in Gold St...
06 Febneville
No nothing strange has happened in GOLD stocks....absolutely nothing.....The fact of the matter is that you byrne have been playing the man and...
The Revisionist Theory and Histo...
05 Febovertheedge
"The key is in the hand of the U.S. government. It is the same key that was used to lockthe U.S. Mint to silver in 1873, and to gold sixty years la...
First Report since April, 2014
05 FebS W.1
Here I was just 2 days ago thinking whatever happened to that evangelical silver guy. Low and behold up he springs, like some spirit from the g...
LBMA Silver “Price”: A Perfect S...
03 FebS W.
There is no doubt that the Comex can be used as a casino for those who want to trade Silver up/or down or maybe some just wish to take a small punt...
LBMA Silver “Price”: A Perfect S...
30 JanOzSILV1
Bron refuses to EVER admit this market is a Casino and the disconnect between Paper and Physical is a big clue to this
LBMA Silver “Price”: A Perfect S...
30 JanS W.
Usually I enjoy Bron's take on things,but to be perfectly honest, I can't understand 95% of what he his on about here. I get the feeling that h...
ANOTHER NAIL IN THE U.S. EMPIRE ...
30 JanDemosthenes0
Very naive and pretentious article! The author thinks he knows everything and yet knows next to nothing. Shale gas producers are neither stupid n...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Lara Expl.(Cu-Zn-Au)LRA.V
Revised Resource Estimate Report Filed for Maravaia Copper Gold Deposit
CA$ 0.34+1.47%Trend Power :
Corporate news
Black HillsBKH
Black Hills reports 4Q loss
US$ 50.90-0.59%Trend Power :
Corporate news
Kinder Morgan(Oil)KMP
Midstream Companies Were above the 20-Day Moving Averages
US$ 102.03+1.98%Trend Power :
Corporate news
Kinder Morgan(Oil)KMP
Midstream Companies Were above the 20-Day Moving Averages
US$ 102.03+1.98%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
Gasoline Inventories Rose Last Week despite Fall in Production
US$ 23.68-4.71%Trend Power :
Corporate news
United States Steel(Fe-Sn)X
U.S. Steel (X) States Ratification of Labor Agreements
US$ 7.77-2.14%Trend Power :
Corporate news
Black HillsBKH
4:34 pm Black Hills Corp beats by $0.04, misses on revs; guides FY16 EPS below consensus
US$ 50.90-0.59%Trend Power :
Corporate news
Black HillsBKH
Black Hills Corp. Reports 2015 Fourth Quarter and Full Year Results
US$ 50.90-0.59%Trend Power :
Corporate news
Transcanada PipelinesTRP.TO
TransCanada to Sign Substantial Agreement to Benefit Québec Economy
CA$ 48.65+0.16%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
4Q15 Crude Oil Prices: Fallout for the Energy Sector and SPY
US$ 23.68-4.71%Trend Power :
Corporate news
Comments closed