Stocks And Precious Metals Charts - Axioms

By Jesse of Jesse's Cafe Americain

Thursday, August 21, 2025 5:58 PM EST

Stocks continued to wobble again, extending their declines ahead of the speech by Jay Powell tomorrow at Jackson Hole.

Bitcoin continued its decline from its recent all time high.

VIX popped up to its 50 DMA.

The Dollar rallied.

Gold was off a bit. Silver was hanging in despite stocks and the Dollar.

Economist in general are operating on two important axioms.

First, that Volcker has proved that you can beat even a serious, pernicious inflation with high short term interest rates.

I remember that period of time very well.There were some who made quite a good amount of future income by investing in interest rate sensitive assets such as dividend paying stocks and bonds and annuities, on the bet that 20% marked the peak of Volcker's gambit.

I can even recall a young engineer who took an ARM mortgage who interest rate fell in each subsequent year, so that merely by maintaining the same payment a 30 year mortgage was fully paid in 15.

The second axiom is that no matter how bad the crash, if the Fed floods the markets with liquidity is the right way then assets will return to their prior levels. This is the Greenspan gambit from 1987.

There is a third axiom.A supply shock of a key economic input, such as oil, can lead to a slump in activity as well as an increasing price spiral. This is the oil embargo of the 1970s. Economists don't think about this one very much, because they still don't know what to do about it from a policy standpoint, without plunging the economy into a depression.

There is a fourth axiom. It has not been fully formed as of yet.In our hubris, we do not yet even recognize it's possibility. It rests in existential matters of money.

We are well on our way to finding it. And therein lies our uncertainty.

Have a pleasant evening.

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