After posting an article on stagflation yesterday, I noticed that many were in disagreement on what inflation actually amounted to in the real world. Further, many were unaware of what digital gold actually was. I fear they may have been confused by the term "digital". Thus, today we will review the rampant inflation that we are encountering the US (and world-wide) and the effects that it is having on digital gold. But first, let's be clear on nomenclature and semantics, through a glossary of sorts...
- Click the "redeem" button on your phone, tablet or computer
- Provide a shipping address
- Pay for the shipping. You can use USD (or any other fiat, converted to USD) or any other digital metal you may have in your account.
This can be done immediately after you buy the metals (just like a traditional purchase) or next month, next year, in three years, etc. Unlike traditional dealers, you can buy and sell fractional units of gold, as little as $0.40 (forty cents) worth, and transfer that small amount for as little as 4 cents. Properly constructed tokenized gold is literally title to the physical gold, deliverable on demand. It can also be held in bearer form, and freely transferred to others within seconds.
You can also easily send and/or receive your gold tokens to anyone with an Internet connection, in any amount, within seconds and for mere pennies.
These tokens that are digitally sent or received can also be redeemed for physical gold, upon demand, simply by following the steps above (after KYC, of course). This represents a colossal evolution in how physical gold is bought, sold, sent, received and traded.
Find out more about VeGold here.
- The economic world has been upended during the popping of the 2007 bubble.
- In 2009, the Fed has doubled in balance sheet through quantitative easing, thereafter increasing it by ~700% more through today. It has added more than 30% to its balance sheet in just the last two months.
- The broad money supply has jumped 49% in the last 6 months.Monetary inflation is at its highest level, ever, and half of the annualized inflation rate of Zimbabwe.
- US borrowing has increased by 300% over the largest period of borrowing in the modern history of this country. There has never been a period where the US has borrowed more, or borrowed as fast.
- Gold has tracked this monetary debasement (inflation) closely, now near an all-time high
This is the chart,blown up to focus on just the COVID-19 period.
- Comparing the amount of US government borrowing since October ($1,226,672,000,000) to the increase in the amount of US treasuries holdings on the Fed's balance sheet ($1,795,938,000,000), you'd find that the Fed has not only:
- been the buyer of all of those treasuries issued by the US (debt monetization), and
- has also been soaking up excess treasuries from the (real) secondary markets in order to synthetically give the impression of naturally lower interest rates (the Fed has bought more treasuries than the US has issued.. Two guesses where the money to buy $1.8 trillion of US borrowings came from....
You guessed correctly, the printing of US currency. The monetary base in the US has increased by $1,592,133,000,000, or a whopping 49% - in less than 6 months! That doesn't even tell the whole story. You see, the Fed has been busy buying a lot more than just treasuries. It has bought ETF shares, mortgage backed securities, swapsi issued, etc. It's total asset side of its balance sheet has grown $2,636,106,000,000, again, over a period of less than six months. Money needs to be printed to fund that additional $1.8T worth of "other stuff" the Fed has been stuffing into it's knapsack.
What does this mean for gold when priced in rapidly inflating dollars? Well, over that same 6 month period, gold has climbed 16%, and the money debasement/inflation is literally just getting started.
Look at the correlation between these government activities and he price of gold
Let's look at the price of VeGold (tokenized gold) in various sovereign fiat and crypto currencies.
Learn more about VeGold here. Read our indepth report on the truly stable purchasing power of VeGold across all currencies here. Purchase your own VeGold here (find the product you want, then clock "open").
U.S. Department of the Treasury. Fiscal Service, Means of Financing: Borrowing from the Public [MTSMFBP133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MTSMFBP133FMS, May 20, 2020.
Board of Governors of the Federal Reserve System (US), Assets: Total Assets: Total Assets (Less Eliminations From Consolidation): Wednesday Level [WALCL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/WALCL, May 20, 2020.
Board of Governors of the Federal Reserve System (US), Assets: Securities Held Outright: U.S. Treasury Securities: All: Wednesday Level [TREAST], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TREAST, May 20, 2020.
Board of Governors of the Federal Reserve System (US), Monetary Base; Total [BOGMBASE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/BOGMBASE, May 20, 2020.
Release: LBMA Gold Price: Daily Prices
H.3 Aggregate Reserves of Depository Institutions and the Monetary Base
- Monthly, Not Seasonally Adjusted
- H.4.1 Factors Affecting Reserve Balances
- Table 2. Maturity Distribution of Securities, Loans, and Selected Other Assets and Liabilities
- Table 4. Consolidated Statement of Condition of All Federal Reserve Banks
LBMA Gold Price: Daily Prices