The Men Who Stare At Charts: Decades Of Disinflation And 7 Years Post-Op Twist

I was going to look around to see if I could find a media article out there (complete with a TA trying to sound really important) that would be appropriate to be made fun of in our little Men Who Stare at Charts series. But then I decided to create my own chart, stare at it a little, post it and talk about it (hopefully not too self-importantly).

Introducing an all too busy long-term (monthly) view of the Gold/Silver ratio, along with some key nominal markets.

The Continuum in the lower panel symbolizes the deflationary backbone that has been in place for decades. I maintain that this is a firm marker against which the Fed inflates money supplies, manipulates bonds and by extension manipulates inflation signals. We have been on a theme that like Jerome Powell or hate him, he knows exactly what he is doing because to do otherwise (promote ongoing bubbles on top of bubbles) would, in essence, end the Fed’s racket, as symbolized by a real breakout in long-term yields.

gold/silver ratio

 

The blue shaded zone is a view of the most recent post-inflationary period after Ben Bernanke killed macro inflation signals in 2011 as commodities (and silver) blew out and the ultimate in genius-like bond market manipulation, Operation Twist*, was inflicted on the macro. Voila! No inflation. It is, by the way, no coincidence whatsoever that there is a red arrow directly on top of that blow out in H1 2011. That was when the herd thought “silver to 100!” and Bill Gross shorted the long bond in anticipation of runaway inflation. No, Bernanke could not have that.

Instead, we had a long phase of mostly Goldilocks style stock appreciation in the US while the Gold/Silver ratio rose in line with tight global liquidity and global markets underperformed while commodities and precious metals got clobbered.

Last year, amid the now distant clarion calls of “BOND BEAR!!!” the yield broke above the continuum’s limiter (EMA 100) and it was no wonder at all (to us, anyway) why Powell was so stern. Ref. Treasury Bonds and the Fed from October 21, when long-term bond yields were still in breakout mode.

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