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so You'll Thrive and Profit, In Spite of It... "

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Charts For A Crazy World: Hot Money Spawns Weird Trends

This is a time of almost supernaturally-easy money. US financial conditions, in fact, have never been this accommodative, which is why junk bonds, CLOs, NTFs, cryptos, and meme stocks have been able to attract so much hot money.

US financial conditions hot money

But the velocity of money – i.e., how often a given dollar is spent in a given span of time – has cratered. Consumers, it seems, aren’t nearly as enthusiastic as speculators.

velocity of money hot money

This raises (at least) two questions:

1) Can the government force its citizens to spend money even when they’re terrified and/or depressed?

2) What happens if the velocity of money starts to rise, i.e., if economic behavior returns to normal? Won’t all that recently-created money careeing around the financial system be wildly inflationary and force the Fed to tighten way more aggressively than anyone now expects? If so, are we risking an inflation spike followed by an epic taper tantrum?

This could already be happening. Used cars are suddenly behaving like cryptocurrencies…

used vehicle prices hot money
… as are houses …

home prices hot money
Cars and houses are two of the least likely things to spike in a recession. Yet they did, right through the pandememic lockdowns and mass-layoffs.

This is, without question, inflation, but is it broad-based enough for normal people to start noticing? Yes and no. It’s definitely spreading from stocks and bonds to cars and food. But a lot of it is still hidden by governments and companies that don’t want to acknowledge it. One way this is accomplished is via “shrinkflation” in which prices stay the same but portions shrink or quality declines. The next chart shows that the process was already under way in the candy market before the pandemic.

candy shrinkflation hot money

By definitiion, shrinkflation can’t go on forever (or your Snickers bar will simply disappear). But quality can deteriorate for a long, long time, so it’s not clear when most people will conclude that inflation is real. Someday, though, they’ll have to.

Which brings us to gold and silver, the things that normally spike when inflation starts to run wild. Here, to take the most extreme possible example, is what gold did during Weimar Germany’s early-20th century hyperinflation.

If you think you know volatility, just wait.

gold Weimar hot money

Lately, a growing number of people have begun to wonder if all these strange financial trends (along with UFOs and lab-engineered viruses) are designed to achieve some broader, as yet unannounced goal. They may be right.

Guess we’ll just have to see what the man and his dog want from us next.

man dog sheep hot money

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27 thoughts on "Charts For A Crazy World: Hot Money Spawns Weird Trends"

  1. Pingback: In The News Today
  2. This is the first mention of Shrinkflation I have ever found. I’ve been warning people for years about shrinking packages. I’d just wanted to add some of my own observations: Watch for Reece’s Cups TV ads. The word Reece’s is partially off the screen. This is subliminal advertising in order to fool the brain into thinking the product is bigger than it is.

    Go to Walmart and look at the end cab where the soft drink aisle begins. You should see Coca-Cola mini cans. They’re cute little cans and they are the future. Walk the cracker aisle. You’ll see the usual like Club and Townhouse and Ritz. If you look carefully, you’ll see many flavor choices. This is done in order to help the grocer face their shelves. As the product shrinks, more choices need to be on a stores floorplan otherwise, the Shrinkflation would be too obvious.

    The question that I’ve been pondering for some years is when do they reach the point where they can no longer hide it? If Lays chips came in 13.4 ounce bags seven years ago and now they are about 9 ounces, are they shrinking one ounce per year? It’s like ice cream; they flip flop between Metric and SAE container sizes. We must break out of our conditioned, so-called education and teach ourselves how to Think. We must question everything and we have to set aside distractions like video games and Fantasy Football and give ourselves a chance to just think about things.

  3. Great read John. I loved the last pick with the dog, man and his sheep, it is so on the money. It put a smile on my face and made me laugh. The sad thing is that the mob is just like the general population and the wise sheep on his own is similar to the extremely few individuals that can see otherwise. We need great caution moving forward and solid educated advice which I have found with you and Adam. Hence I am a subscriber of yours and Wealthion. Inflation is running wild here in Australia but the sad thing no one is talking about it here except for the likes of John Adams. The non alcoholic beer I drink has risen from $7.50 a six pack to $11.50 in the past 12 months and that is only one example. I am awake but it seems I have been walking amongst the dead over here as the majority have their heads in the sand and choose to do nothing or just do not care. I am so glad I have only just found your website and look forward to reading all going forward from here. Just to inform you I found your site by following Mike Maloney from Gold Silver.com , then discovered Adam on that site which then led me to yours. Keep up the great educational content, thankyou.
    Regards
    Chris

  4. John,

    Just a great chart on the volatility of Gold on the way up. Getting myself ready to meet and exceed the volatility all the way to the very end. Want to be “strong hands”.

    Thank you,
    Dave

  5. I patiently await the day when most humans will stop believing that government is a good idea being done poorly, and realize that government is an evil idea being done thoroughly.

  6. Great charts – not for the faint of heart though ! Readers might want to check out farmfolio.net if hard assets are of interest. Part of my career was marketing real estate investments but farmfolio structure is the best I’ve ever seen – wish it had been available when I was still working.

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