By Gus Demos of Perpetual Assets
A long long time ago, in a republic far far away, we encountered double digit interest rates, what in monetary terms we refer to as the “Volker Years”. This by no coincidence ended the bull runs in Gold & Silver of the 70s and also was able to finally end the runaway inflation of that decade.
The reason is very simple, people, instead of speculating on certain asset classes to hedge against inflation, ran and simply deposited their money or got government bonds at that guaranteed high rate. This strengthened the USD, and weakened Gold & Silver. There were obviously other downside consequences to the move as well which I’ll avoid going into in detail such as skyrocketing mortgage rates, broad asset class deflation, etc. But, desperate times call for desperate measures.