Russell Napier Explains How The Decline Of The Yuan Destroys Belief In Central Banking

If you had not noticed, 2016 has begun with gold and the USD rising simultaneously. This is different and important. This is very positive for gold and very bad for the world.

The rise of both together may signal that we have just entered that period when this inert non-yielding substance is preferred to those assets that promise a yield but where the scale of future payments is subject to considerable doubt. Also positive for gold, the advent of deflation, following the failure of the easy reflationary solutions promised by non-elected central bankers, will enfranchise aggressive acts of reflation by our elected representatives. When the tough get going then the going will really get tough- at least if you’re an owner of capital.

Any political fiat, when monetary fiat fails, will be tantamount, in some way or other, to an attempt to directly control the allocation of capital/savings. History shows that this commences a giant game of hide-and-seek, and while gold may shine brightly it is also moved freely in briefcases and is easily hidden. Paper assets are easily tracked, discovered, conscripted and ultimately denuded in value. For gold to rise while the USD also rises signals that investors are beginning to see through the terrible burden on the price of the shiny stuff from ever-rising real rates of interest extant since 2011. Real rates have further to rise but a few more days of a strong USD and a strong gold price means gold has probably entered a bull market that should last for decades rather than years; its value boosted initially by its ability to avoid conscription, but underpinned by the authorities’ mass mobilization of resources to ultimately generate inflation.

Russell Napier Explains How The Decline Of The Yuan Destroys Belief In Central Banking