where is the inflation hiding?

As the major correlate of the POG, inflation and the fear of inflation have been the most recent drivers of the $1900+ price we saw in the POG in 2011.

But since then the fears of inflation have all but disappeared and the POG has experienced a slow decline to the present.

This, despite the fact that $85 billion per month has been pouring out of the Federal Reserve.

So where is the inflation? What explains its absence?

It is with this question that I started and ended up understanding that the inflation or the signa of it are actually hidden in plain sight.

1. The money pouring out of the Fed is not reaching the pocket of the citizen. It's ending up sequestered in the member banks who are putting the money on ice back with the Reserve.

2. The money is buying up dead assets on toxic lending books which have little to no value in the real world. This money is simply filling voids in banks ledgers and absolving them of their bad debts. The money effectively fills in the craters at the member banks and never makes it out to the citizen. It's being used like a get out of gaol card for the member banks. This money is illusory.

So the money isn't making it out to the citizen so that's why we don't see blatant inflation in the real world. But are there hints or signs of it lurking around?

Yes. The zero interest rate policy is a manifestation of the inflation going on within the banking system itself. There's so much money within the banking network that if they could earn high real rates of intest by putting money on deposit with each other then the game would be up.

The zero interest rate we see is simply a sign of excessive amounts of money competing for a yield.

Remember that when Australia first hit an official rate of 3% in 2008, Wayne Swan was quick to point out this was an "EMERGENCY RATE" that would be short term.

And yet a few months ago when we sank down to 3% no words to that effect were forthcoming. Not a single one. And now we are below that!

But that game is ending too and in a year or two we'll join the others with close to zero rates as the amount of money chasing low risk yields starts choking us too.

That is the end game. When the money that is building up within the banking systems can no longer be held back, the dam will burst so to speak and we'll see the money seeking better returns as virtually free low interest loans to everyone with a pulse.

The central banks will even entertain negative rates to try and get this money out and working. Zero interest rates are the endgame though and that genie is already out of the bottle.

Government bonds are the last piece of the puzzle here. At some point, the excess money will become so worthless within the banking system that it will buy government bonds with zero coupon rates just in the hope of staying afloat, never mind getting a return.

And that's game over. When a worthless fiat note is exchanged for a worthless bond then the illusion of any value in fiat money disappears.

Gold the eternal silent witness to all of the world's monetary shenanigans will again emerge as the true account of what is and what is not. The value of gold approaches infinity as the value of fiat approaches zero.

The stage is set for the most stupendous accounting in all of earths history in the coming years. The inflation we will eventually witness will be worldwide and legendary. There is not a single currency on earth at the moment that is not fiat. When you think on it, the trillions upon trillions of illusory value out there and what it will become accounted (measured) by; a 30x30 metre cube of extant gold, then the true value of gold should be or will become apparent.

Got gold?