The Crack-Up Boom and Gold and Silver

The comments below are an edited and abridged synopsis of an article by Daryl Robert Schoon

Monetary edema: A phenomenon occurring in late-stage capitalist economies when repeated attempts to restore economic growth causes excess money to be trapped in financial markets. Asset prices then rise to record levels in a crack-up boom, which ends with a “flight into real values [gold and silver], and the whole monetary system founders.”

The Crack-Up Boom and Gold and Silver | BullionBuzz
Several cast and minted gold bars and silver cast bars isolated on white background.

After 2008, the Fed provided over $4 trillion to financial markets through QE and ZIRP. This was necessary to replace rapidly disappearing liquidity in financial markets caused by powerful deflationary forces unleashed by the collapse of the massive subprime property bubble.

Prior to the 2008 crisis, the cash balance in the US Treasury General Account was $5 trillion. After the crisis, the Treasury General Account rose to over $400 trillion, due to a corresponding imbalance in bank reserves on deposit at the Fed.

After 2008, the Fed used QE and ZIRP to quickly replace the trillions of dollars disappearing from the economy, but in September 2019, a crisis in the overnight repo market forced the Fed to intervene in the repo market again.

Since its intervention in September 2019, the Fed has been forced to provide an ever-increasing flow of liquidity—to date, over a quarter trillion dollars—to the repo markets.

The quarter-trillion dollars, however, won’t be enough. The Fed has badly underestimated how much and how quickly liquidity is now disappearing.

Unless the Fed bails out today’s over-leveraged hedge funds, the bankers’ house of cards will collapse sooner rather than later.

Here is Schoon’s crack-up boom trading strategy: Stocks, bonds, commodities, and real estate are all at crack-up boom prices. The trading strategy for these is to short them.

Gold and silver are price suppressed. The trading strategy for these is to go long.

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