Gold has gone on sale this Black Friday, that new US
import to boost consumption and fight deflation...
FOUR HUNDRED years after
the first Thanksgiving feast, writes
Adrian Ash at BullionVault
in London, the Pilgrims' descendants have sent back to
England a gift called Black Friday.
Thank you, America. Really, you shouldn't
have.
While British shoppers are new to this
"tradition", today's orgy of shopping does in fact celebrate the
Pilgrims' love of thrift and hard work.
Sales staff must work hard...even calling the police
to fight off
the mob...as shoppers work flat out to snap up the best bargain deals.
And in pursuing their own self-interest, everyone is working for the good of
the community. Or at least, a very global, very 21st century version of it.
Because consumers must keep consuming...dumping stuf
into landfill as they "upgrade" their baubles...or the whole world
risks tipping into depression.
This battle looked lost back in 2008-2009. Many
analysts think the war will be lost in the end anyway. Deflation is our
future, says the debt mountain which has only grown worse since the financial
crisis. So does the world's ageing population, according to forecasters such as Harry Dent.
Old people spend less and save more. And with the
"baby boom echo" now reaching its 40s, lower consumption will over
the coming decades turn us all into Japan...epicentre of the global
deflationary slump.
Plunging oil prices, for instance, aren't just the
result of a glut in supply. Demand growth is weak, warning of a deeper depression in
the global economy, led perhaps by China's long overdue credit bubble now
leaking air.
The world's second-largest economy...now home to its
second largest stockmarket by value...has home-grown
deflationist worry-warts too. Two state-employed economists said this week
that $6.8 trillion invested over the last 5 years is now worth zero, "wasted" on over-capacity. They over-state the
case, perhaps. But a lot of concrete poured in China since 2009's huge
stimulus package will sprout weeds long before it finds real use. Just look
at Japan.
In deflation, of course, the value of money actually
rises, rewarding cash savers and hurting all debtors (and then their
creditors when they go bust) as the price of everything falls.
So what would such a gloomy outlook mean for gold
and silver?
If deflation stages a quick victory, it will take no
prisoners. Look to 2008 for an example. Silver, being an industrial metal,
sank along with stock markets, corporate bonds, real estate and all other
commodities. But gold found its floor much sooner, and rose quickly, as
demand surged for that credit-free store of value.
A long, soft deflation in contrast would likely be
bad for both gold and silver, or so most analysts think. Cash and most of all
the US Dollar will reign supreme. Not paying a rate of interest, precious
metals will get crushed by a rising...and positive...real rate of interest on
bank deposits after you account for that negative rate of inflation.
Well, maybe. But long-term "secular stagnation" will not be given the
field anyway. Because like the marketing teams at Amazon, Wal-Mart, M&S
and all the rest, central banks are doing their best to push us consumer
troops "over the top" once more.
Zero rates and QE money printing aim to force you
out of the trenches, over the top to fight against deflation by not saving
but borrowing instead. The fact they haven't worked to reverse the underlying
drop in consumer-price inflation so far doesn't seem to matter.
"That's going to be government activism of some
form." And that, says Napier...and even though he thinks deflation is
bad for gold prices...means that "even in the world of deflation, it's
likely the gold price would go up."
Well, maybe again. But gold prices could get
"something else" from governments or central banks much sooner. The
European Central Bank has started talking about buying gold as part of its QE
money printing plans. And in a world of deflation, where savers flourish at
first but debtors then struggle, the savers may find a lump or rare,
indestructible metal used to store wealth for 5,000 years starts to appeal.
Physical gold, unlike a bank deposit account or
fixed-income bond, cannot go bust. A long, soft deflation which central
bankers fail to hold back will quickly over-run savers as a deflationary crash.
Gold will then look a useful weapon for savers wanting to save rather than
suffer default.
For Black Friday 2014, meantime, gold has now gone
on sale, discounted 3% in Dollar terms from last week's price and now 35%
below its peak of 2011.
