QE5 arrives amid chaos – Why this is different to the Great Depression.

Yet another night of ‘sell everything’ as panic sets in and the US Fed’s emergency rate cut to zero and announcement of a $500b Treasury and $200b MBS (mortgage backed security) quantitative easing (QE = money printing) program does nothing to stop it.  US shares were down over 12% breaking through critical support. 

Yesterday at home the ASX had its worst day in 33 years, down nearly 10% and our AUD hit 61c. 

Overnight gold dipped as low as US$1447 and silver got slammed to hit a US$11 handle for the first time in 11 years and taking the GSR to an all time record 117.  To say we were slammed with silver orders on the webshop last night would be an understatement.

We are already seeing the disconnect between the ‘paper’ price of gold and silver and the price to buy physical as refiners need to increase prices to get hold of the metal amidst unprecedented demand. Supplies are already under immense pressure as everyone tries to secure their hard asset at these crazy ‘liquidity squeeze’ prices.

History tells us such a disconnect between what you need pay to secure metal and what the paper spot price is won’t last.

In past articles we have warned time and again of the danger in the corporate bond market with many an expert predicting that would be the undoing of the total credit markets.  Exacerbated by the energy bonds after Putin’s strategic hit to the US shale industry, non US Treasury bonds are tanking and yields accordingly spiking at an unprecedented rate.

The VIX (volatility index) also hit an all time high last night.  Once the dust settles and the Fed is in full tilt printing and debasing the USD everyone has piled into, they will inevitably look to what is the real money to store wealth.  

While everyone is comparing now to the Great Depression it is worth remembering the Great Depression was a deflationary event amidst austerity measures.  The actions of the Fed, BoE, BoJ, ECB and our own RBA make it clear our central banks are going to print money and introduce zero and negative rates to ‘fix’ this.  That is the opposite to the Great Depression and introduces enormous inflationary and even hyper inflationary risks to this mix.  That is music to gold and silver’s ears.