When the Pendulum Swings
Precious metals expert Michael Ballanger equates the position of the financial markets to that of a protagonist in a classic horror story and reflects on recent moves in the copper market.
One of the greatest pastimes I enjoyed as a youth was reading books, and until adolescence, when I began to focus on history, my favorite reading genre was horror. Mary Shelley’s “Frankenstein,” Bram Stoker’s “Dracula,” and “The Mummy” by Anne Rice were all books that resided in the bookshelf in our family room.
However, the author whose work always entranced me by the second or third chapter was Edgar Allen Poe, whose sense of the macabre was beyond any of the aforementioned authors. Tales and poems such as “The Fall of the House of Usher” and “The Raven” and “The Murders in the Rue Morgue” all went on to become magnificently campy Vincent Price venues, but the one book that used to captivate my morbid sense of obsession was “The Pit and the Pendulum,” with particular fascination with Poe’s description of the slowly descending path of the razor-sharp pendulum as it gradually approaches the captive’s throat.
In my opinion, the world of global finance is similar in scope, danger and outcome to that of the poor religious dissenter who found himself at the bottom of that convex pit in Poe’s masterpiece. The horrific levels of debt egregiously piled upon itself over and over and over again, whether to bail out the banking systems or to ensure an incumbent’s reelection or to reverse flawed fiscal policies, has the fragility of the world lying prone in the pit with the pendulum of insolvency slowly descending.
The irony is that the eventual meeting of pendulum to throat—aka sovereign insolvency—can only be postponed by hyperinflation, otherwise known as currency debasement. With all of the post-election analysis spinning a “Dow 20,000!” narrative, infrastructure build-out designed to juice the number of jobs and increase the Labor Participation Rate can only be achieved by more credit creation, which is the counterfeiting of the national currency.