As Strategic Investment has analyzed in the months since Trump’s election, markets have seemingly hailed Trump as a superman who can revive vigorous growth as it could not be ignited during Obama’s reign. But don’t be fooled. The Trump reflation trade is a mirage.
To the extent it proves to be real, it will be self-limiting. If Trump does manage to eke more growth from the collapsing system, the dollar will rally.
A stronger dollar automatically tightens global monetary conditions. Monetary tightening in a slow- or no-growth world can only accelerate debt liquidation. As debt liquidation gathers speed, it will raise the attraction of holding gold.
I expect the market price for gold to begin to rally in anticipation of a hyperdeflationary resolution of history’s greatest orgy of debt.
Remember, the debt overhang compounded through seven decades of inflation promises a deeper contraction in hyperdeflation than anything seen in the past.
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