We introduced the first chartbook from Incrementum Liechtenstein in the fall of last year. It showed the debt bear market in 50 amazing charts. In their second chartbook, Ronald Stoeferle and Mark Valek from Incrementum Liechtenstein analyzed in great detail the raging war between inflation and deflation, as well as gold’s role in it.

The authors introduce the term “monetary tectonics” as a metaphor for this war. Similar to tectonic plates under a volcano, monetary inflation and deflation is currently working against each other:

• Monetary inflation  is the result of a parabolically rising monetary base M0 driven by the central bank monetary easing policy.
• Monetary deflation is the result of shrinking monetary aggregates M2 and M3 because of credit deleveraging.

The following chart clearly shows that 2013 was a pivot year in which the monetary base M0 grew exponentially while net M2 (expressed on the chart line as M2 minus M0) declined significantly.

The chartbook shows several trend which confirm the deflationary monetary pressure:

• Total credit market debt as a % of US GDP has been shrinking since 2007 (“debt deleveraging”).
• US bank credit of all commercial banks is stagnating (close to negative growth), similar to the period 2007/2008. See first chart below.
• Money supply growth in the US and the Eurozone is trending lower. See second chart below.
• Personal consumption expenditures are exhibiting disinflation .
• The gold/silver-Ratio is declining. Gold tends to outperform silver during disinflationary and/or deflationary periods.
• The gold to Treasury ratio is declining. See third chart below.
• The Continuous Commodity Index (CCI) has been in a steep decline since the fall of 2011.

….continue reading and viewing more of these incredible charts HERE