Tag Archives: hyperinfaltion

They Call It A Commodity Super-Cycle, What Does That Even Mean?

They Call It A Commodity Super-Cycle, What Does It Mean?

So they have come up with a new name for inflation blowing out producer prices, a commodity super-cycle. This doesn’t have to be destructive as long as you are paying attention to our rapidly changing world. My chief concern in all of this is actually the government. I fear they will come in a wreck the entire economy and control what they don’t destroy.

Commodities have been suppressed for a long time and we have already begun to see the beginning fragments of the super surge. Energy prices recently went insane crush families and small businesses alike and the elite are telling us this was just a prequel of what is to come.

By Variant Perception

There are three big drivers of the commodity supercycle:

  • The long era of monetary-policy dominance is over, leading to a heightening of inflation risks not seen since the 1960s
  • Investors are deeply underweight and will need real assets such as commodities as a hedge against inflation
  • Commodities are generationally cheap, both compared to themselves and to other assets

It is rare in macro-forecasting when the stars align so perfectly. The combination of substantially different inflation risks, capital scarcity across several commodity sectors, and 50 years’ of underperformance compared to financial assets make commodities one of the most compelling long-term investment opportunities at the moment.

Commodity Super Cycle
Chart Source: Bloomberg, Macrobond and Variant Perception

Policy Drivers of Supercycle

The convergence of fiscal and monetary policy represents a profound change to the investment landscape.  Monetary policy, hitting up against zero rates and with central banks’ balance sheets already bloated, it is becoming ever more incumbent on more fiscal policy to boost economies and inflation.

But policymakers should be careful what they wish for.  Large government deficits financed by pliant central banks have preceded every high and hyper-inflationary episode of the 20th century, from Weimar Germany in the 1920s, to Hungary in the 1940s, to Argentina in the early 1990s.  QE has lulled people into a false sense security as it was not inflationary.  QE created a supply of dollars, and relied on the banking system to “transmit” those dollars.  But a private sector still licking its wounds from the financial crisis did not want to borrow, and banks did not want to lend, which meant borrowing and therefore inflation did not sustainably pick up.

Chart Source: Bloomberg, Macrobond and Variant Perception

The pandemic accelerated a trend that was already in place: the increasing impotency of QE.  Now we need QE combined with large government deficits, which is a very different beast to QE on its own as it creates supply of money and a simultaneous demand for that money.  History shows this has much greater inflationary potential.

Changing Inflation Regimes

We are shifting from the “Lake Regime” to the “Ocean Regime”.  In the Lake Regime of the last 20-30 years, cyclical moves in inflation were contained and containable as monetary policy on its own still had teeth.  But in the Ocean Regime, where we are today, the underlying risks to inflation have shifted, and garden-variety moves in inflation have a greater likelihood of becoming unanchored and disorderly.

Source: JMW Turner

This does not mean inflation is imminent, but it does mean any short-term rise in inflation could turn into something longer-lasting and persistent.  However, the nature of inflation is that it does so abruptly and with little warning.  It is just like how Ernest Hemmingway described how one goes bankrupt, “first slowly, and then suddenly”.

What Should You Do?

This is why action must be taken today to make portfolios more inflation-resilient.  Looking to the high-inflation 1970s, commodities were the only major asset class to deliver a positive real (ie inflation adjusted) return.

Chart Source: Bloomberg, Macrobond and Variant Perception

When we combine this structurally positive backdrop for commodities with a capital-cycle analysis the case for commodities becomes more compelling.  In short, sectors suffering from capital scarcity tend to outperform as lack of competition causes returns to fall below the cost of capital.

Source: Capital Returns

Based on our analysis, several sectors in the commodity space, such as gold and silver mining, integrated oil and gas, and copper are among the most capital-scarce sectors globally.  Underinvestment in supply means these sectors will not be able to respond to the strong recovery in demand we should see this year as the world emerges from the pandemic.

When demand meets excess supply of dollars meets an investment community severely underinvested in real assets such as commodities, the only thing that can respond is price.  This is what we have been seeing, with commodities up 43% since April last year.

Commodity Super-Cycle
Chart Source: Bloomberg, Macrobond and Variant Perception

The shorter-term gains may be behind us, but the potent structural backdrop for commodities and real assets we have outlined support a much longer-lasting commodities supercycle that is beginning.

Read https://silverreportuncut.com/prices-paid-surging-historic-copper-shortage-inflation-indicators-are-firing-on-all-cylinders

The inevitability of a Dollar Collapse

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From it’s beginning The powers that control the world banking cartel knew the extreme profit and control that can be generated from a freely floating fiat monetary system. The Federal reserve was never meant to bring prosperity or to stabilize the United States. It’s purpose is subjugation and extraction of goods from citizens under such a system. With an increase or decrease of the money supply and the ability for governments to operate in debt They are no longer bound to normal rules of economics.

The system has a flaw It was known by those who sought to institute it. After the Second World War, a system similar to a gold standard and sometimes described as a “gold exchange standard” was established by the Bretton Woods Agreements. Under this system, many countries fixed their exchange rates relative to the U.S. dollar and central banks could exchange dollar holdings into gold at the official exchange rate of $35 per ounce; this option was not available to firms or individuals. All currencies pegged to the dollar thereby had a fixed value in terms of gold.

Starting in the 1959–1969 administration of President Charles de Gaulle and continuing until 1970, France reduced its dollar reserves, exchanging them for gold at the official exchange rate, reducing US economic influence. This, along with the fiscal strain of federal expenditures for the Vietnam War and persistent balance of payments deficits, led U.S. President Richard Nixon to end international convertibility of the U.S. dollar to gold on August 15, 1971 (the “Nixon Shock”).

That says it right there. Seeing the benefit of the German government’s ability to create currency without backing and it’s ability to sustain the war was astounding and gave those in control of the printing press great power. Also holding the Gold most of Europe was afraid to lose during the War The united states found quickly they were unable to sustain the economy if the European nations extracted their gold. A devious plot was hatched to disconnect the dollar from Gold and Offer to the European nations More paper dollars which all of these countries we’re now using for gold exchange. For a very brief time this had benefits but it is an unsustainable system. By the end of the war German citizens we’re using their currency to keep their houses warm. It was worthless.

This was meant to be a temporary measure, with the gold price of the dollar and the official rate of exchanges remaining constant. Revaluing currencies was the main purpose of this plan. No official revaluation or redemption occurred. The dollar subsequently floated. In December 1971, the “Smithsonian Agreement” was reached. In this agreement, the dollar was devalued from $35 per troy ounce of gold to $38. Other countries’ currencies appreciated. However, gold convertibility did not resume. In October 1973, the price was raised to $42.22. Once again, the devaluation was insufficient. Within two weeks of the second devaluation the dollar was left to float. The $42.22 par value was made official in September 1973, long after it had been abandoned in practice. In October 1976, the government officially changed the definition of the dollar; references to gold were removed from statutes. From this point, the international monetary system was made of pure fiat money.

Now as of this post Gold is valued at $1,246.20 it is a slow bleeding of the purchasing power of the U.S. Dollar And the certain consequences of this system is always a currency collapse, in this case the pain will be felt around the World. Silver and Gold as then is the only way to preserve purchasing power and it’s rise will continue until the dollar no longer is valid

Inflation Guarantees A Rising Silver Price


When You look back since the departure from the U.S. Gold standard The purchasing power of the U.S. Dollar has decreased by 96% The issue we face coming to this debt ceiling is not that we have a decision to make.  It is that we have a flawed money system.  Reagan knew this.  He began issuing silver and Gold Coin through the U.S. mint in the 80’s.  The

Reagan knew this.  He began issuing silver and Gold Coin through the U.S. mint in the 80’s.  The monetary system being switched over to a freely floating fiat system has been destined for debt.  It is destined for a fall.

Gold and silver an their true value most of our society are oblivious to.  That is largely because through the great recession most of the millennials don’t have a dollar to spare.  let alone put any thought to investing or preservation of wealth.  Almost everyone who has money has precious metals.  Most of our society is mainly trying to get high or survive week to week.  crushed under student loan debt.  why would they know?  But those who have extra money to spare should be aware of the certainty of our currency will continue to devalue and the result will be loss of wealth held in the U.S. Dollar Gold and Silver is the only viable alternative.