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The Thunder Road Report : The End Game

January, 21 2013

Mylchreest is a believer in the Kondratieff, or Long Wave economic theory. Wikipedia describes this as sinusoidal-like cycles in the modern capitalist world economy. Averaging fifty and ranging from approximately forty to sixty years, the cycles consist of alternating periods between high sectoral growth and periods of relatively slow growth- see our presentation “Point Break : Long term cycles”). Unlike the short-term business cycle, the long wave of this theory is not accepted by current mainstream economics. However the theory does support the ‘supercycle’ idea which gained a certain amount of mainstream acceptance during the recent commodities boom.

There is no way we can cover this 75 page report in detail – however there are a number of very interesting – indeed worrying –pieces of research.

The end game is an inflationary/currency crisis, dislocation across credit and derivatives markets, and the transition to a new monetary system, with a new reserve currency replacing the dollar

  • Excessive monetary stimulus, coupled with low interest rates, creates financial bubbles. Central Banks are now creating the ultimate bubble – in Money – in an attempt to counter what he sees as the downward leg in most recent Long Wave cycle.
  • Gold will ultimately counter the loss in currency values caused by the kind of excessive money printing which we are seeing now. This will lead to an eventual victory for inflationary forces – over deflation – as currency crises erupt which makes physical gold (and silver hanging on its coattails) the best assets to hold in this scenario – but also perhaps that if deflation should win out over inflation, then gold is the best asset to hold in this scenario too.
  • We are now entering the fourth great inflation phase in history – and that the prior ones were brought on by factors which seem awfully familiar today: Excessive population growth putting increasing pressure on available resources; Governments – or rulers – running large deficits; and expansion of the money supply leading to currency debasement.
  • China is believed to be buying large quantities of gold to help give its own currency a better negotiating position in possibly participating in the most likely future reserve currency which is surmised to likely be an expanded version of the IMF’s Special Drawing Rights.
  • Investment wise this unconventional deflation implies that the purchasing power of currencies in the over-indebted, developed world must bear the brunt of this long wave resolution, hence  the accolade belongs to monetary metals (gold & silver),  second essential commodities (food & energy) and equities in third place.

The report may be available directly from London’s Seymour Pierce