MARKET NEWS / MCALVANY RECAP

The Importance of Balance

MARKET NEWS / MCALVANY RECAP
McAlvany Recap • Apr 01 2024
The Importance of Balance
MPM Posted on April 1, 2024

Recent entries in this blog have focused on the centralization vs. decentralization struggle. Both conditions have advantages and disadvantages, and one of the key insights of the past few millennia has been that a combination of the two is best. Like gravitational pull and centrifugal force in a solar system, they must be in balance in order for stability to prevail.

However, in the US, where the form of government that combined these two concepts best was established, the combination has been forever defamed. By linking it with the buying and selling of human beings—which is a spurious association based on coincidence rather than inherence—confederation has been made a dirty word, and the “baby” of balancing centralization with decentralization has been thrown out with the “bathwater” of the word.

Established memes have such power over the popular mind that no defense of the word will be made here. Even though our readers are typically capable of high-level critical thinking, someone would inevitably misunderstand and think we’re defending a hated institution. But the concept of balance is extremely valuable. That, we’ll defend.

This lengthy introduction, necessary because of the political minefield surrounding the matter, is provided as background to the main point: that excessive centralization is deadly. Like a black hole, where gravity overwhelms every other force and pulls even light into its deadly embrace, all substance is sucked into the center.

A salient characteristic of centralized systems is the emphasis on uniformity. Not coincidentally, uniformed persons (or persons with suits and badges) proliferate in such a system, and they enforce uniformity among the rest of the population. Stasi, KGB, Schutzstaffel (SS), and many other organizations are proof of the point.

Short of the secret police, however, the increasing uniformity of thought and action forced on the populace is evident. No criticism of the Great Leader, the system, or anything that goes against the party line is permitted. Sanctions against offenders are severe.

This process is already evident in America. If you spoke against the shutdown, masking, social distancing, or the vaccine during the Covid era, you were cancelled, fired, defamed, or otherwise destroyed to the extent the government or its sycophants could accomplish. The same thing happens to you now if you oppose woke initiatives or memes.

In contrast, in a healthy environment, civil disagreement and debate are not only permitted but encouraged. Modern science was built on this concept, as were the university and representative government. Freedom has it as a central element. Without it, slavery finds the environment in which it is truly inherent.

In an overly centralized system, people become not independently thinking and functioning beings, but cogs in the wheel. They are required to deal with matters both routine and exceptional by following procedures that disallow critical thinking and initiative. They increasingly form organizations that protect them from competition and defend them for following procedure, even when procedure produces mediocre results or can’t prevent catastrophe or tragedy.

This brings up our second point: even in a police state, there are independent thinkers. The US is at least halfway along the road toward total centralization, if not significantly more. Yet there are still voices of reason that focus on reality, empiricism, logic, objective truth, and facts.

When the state says our economy is healthy and strong, these voices say we’re in debt up to our eyeballs, our currency is becoming worthless, our stock markets are artificially inflated, our government watchdogs are part of the problem, our institutions are being destroyed, our laws are being flouted, and our economy is in a bubble.

However, these voices are not mere nattering nabobs of negativism. They offer positive suggestions for these national problems, and, more significantly since independent thinkers are not welcome or heeded in centralized states, positive steps you can take to avoid being sucked into the black hole—especially with regard to your finances.

So take this opportunity—and the opportunity every week—to read or listen to the publications below. They are islands of rational thought in a sea of irrational conformity.

Key Takeaways:

  • Fed responds to money oversupply with more money
  • Command economies are not grand economies
  • When is monetary tightening a lot like monetary loosening?

The McAlvany Weekly Commentary: David and Kevin begin the Commentary this week with a discussion of the Fed and its intended interest rate reductions this year. In the midst of an ocean of liquidity from various sources, the Fed has declared that it has dried up the mess sufficiently and intends to bring on the monsoon rains by lowering interest rates. Of course, floods of monetary liquidity are highly inflationary, but the Fed has apparently decided that high inflation is a lesser evil than recession. The hosts examine the official storytelling that accompanies these actions, as well as the psychology that underlies the stories. The focus of discussion then widens from the dollar to other currencies, examining one of the weakest alongside one of the strongest. All are losing ground to gold. And as gold appears poised to enter a powerful bull market, opportunists arise to take advantage of the unwary. David has always been reluctant to publicly compare 53-year-old McAlvany Precious Metals with its me-too competitors, but the exigencies of the moment make it advisable. You’ll find in this podcast a highly informative contrast of MPM with other sellers of precious metals.

Credit Bubble Bulletin: Doug begins his weekly wrap-up with a numerical summary of an astounding first quarter this year. Key sectors, indexes, and bourses shot the moon during the quarter, and the numbers are staggering. You’d never know the US economic picture is anything less than rosy. But a key quotation from Kevin Warsh, a highly regarded Fed governor who is considered by some as a possible future Fed Chair, tells a more complete story: “The rest of the world, especially our allies and adversaries, look at us, and maybe they’re impressed by GDP growth. Maybe they’re impressed by the stock market. But I wouldn’t say they’re overly impressed by the U.S. economic engine.” At least the US can look at Japan and China and feel better. They’re in even worse shape. Doug gives the details, and they’re sobering.

Hard Asset Insights: Morgan was traveling over the holiday weekend, so sent holiday wishes and key prices for us this week.

Golden Rule Radio: Miles provides some extremely interesting historical information on gold up-moves from the past. Such historical moves can be instructive for our present situation, and also provide an opportunity to make a key point regarding overbought moments in the market. It’s commonly thought that only a significant down-move in the price can correct such a situation, but Miles shows that another possibility exists. Rob and Tory join Miles to discuss the Fed’s apparent course of monetary loosening, both present and future. Though the Fed is reducing its balance sheet, it is providing a great deal of liquidity to banks to keep them solvent and our national debt is increasing by a trillion dollars every 100 days. The bottom line, as Rob observes, is that, “the direction of things is inflationary, period.” This is behind gold’s strong bull leanings, though interest rates remain comparatively high for recent history.

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