Thursday, March 5, 2020
The Fed in a coordinated effort with the Idiot in Chief has cut another 50 basis points while proclaiming the US economy to be very strong. So why cut?
Against what, is unexplained. As one hedge fund manager observed: "I doubt a rate cut will inspire people to leave their death beds,to crawl to the mall to buy useless crap."
Meanwhile Trump is urging those infected to "go in to work and lead a normal life, you'll probably get better faster that way." Great advise if he wants to see a full blown depression. And contradictory to all that his own CDC is saying.
A) the Administration's penchant for sewing confusion in a time of crisis is good for only one thing: gold, since gold thrives on a loss of confidence.
B) The latest rate cut (after three unnecessary previous rates cuts to appease the idiot in chief) has left the Fed with exactly 1 percent of room if and when we do have a recession. Not much bang for your buck there. The Fed has said it won't go negative. We'll see. But QE forever - forever meaning until the economic dislocations and imbalances fostered by this insanity tips the economy back into 2008 like crisis - is assured.
C) It doesn't matter how many people die of Carona virus. It only matters that is is assuredly going to keep people from congregating and thus crush consumer spending at a time when 2 years of idiotic and useless trade war has already crushed corporate spending and decimated global manufacturing.
These are the conditions the foster massive gold bull markets. This one is just at the beginning.
Saturday, February 22, 2020
Probably anyone reading this is well aware the gold has finally woken from a multi year slumber as last week it crossed out of the top end of a multi year trading range and is rising in every currency.
The reasons for this go way beyond the immediate catalyst of the corona virus.
1) The US and Europe have been in a manufacturing recession for over a year thanks in no small part to Trump's global trade war.
2) The Us and Europe have been in a coroporate capital expenditures recession for over a year thanks in no small part to Trump's trade war.
3) In spite of record Government Deficit Spending, Record Corporate tax cuts, and Three completely unnecessary Fed "Insurance Cuts" prompted by White House pressure, The US is growing at onl 2 percent - and that's only possible with the cooperation of Government Accounting Tricks that grossly under-represent Real Inflation.
4) The Vaunted Consumer who had been "Holding Up Admirably" had done so by taking on record debt loads - as wages have been stagnant under the Trump regime. Consumer, Government and Corporate debt are at record highs.
5) And - Most Important - The Fed has embarked on a major Quantitative Easing program - called Repo Assisstance Operations - (Or Not QE-QE) which has majorly expanded their balance sheet, while the ECB has been engaged in a massive balance sheet expansion for several years in Europe.
NOW ENTER THE CARONA VIRUS: As the gobal economy hits stall speed (Despite Governmnet and Big Bank shills constantly seeing invisible "Green Shoots" everywhere) we are suffering the first Exogenous shock in about 10 years.
What are the possible fiscal and monetary policy reponses to this shock?
Well, since the US shot its load goosing the economy over the last 2 years we are functionally out of bullets at the time we need them most. The Trade War yeilded a "Deal" that is now functionally dead. The Rate Cuts have left the Fed with a week arsenal. The tax cuts yeilded no additional growth while blowing a hole in the budget. And the massive spending spree has also yielded no additional growth.
The only real policy repsonse left is to lower rates to Zero and then below - while engaging in QE QE QE QE to Infinity.
QE is by definition a massive destruction of the value of the currency.
The one alternate currency employed by the Central Banks of all the world that benefits from this is GOLD.
Thursday, October 31, 2019
Gold is here to stay. Block Chain currencies though in it's infancy is also here to stay
But they serve completely diametrically opposite functions.
Bitcoin is a gambling vehicle. It is more akin to Fantasy Football or Black Jack than it is to gold.
The thing about gambling is that it is a completely unproductive use of capital.
Someone gets rich Someone gets poor. Zero Sum. There is no multiplier
effect. Money gets transferred. Those who get rich just turn the money over
back into the gambling complex. Because gambling is an addictive illness.
Gamblers use profits to Gamble.
This is highly deflationary as productive capital is sucked out of the economy.
Gold on the other hand is like stored energy. It is a stable store of money that is not likely
to make many people rich but over time it holds its value as Gambling Instruments become
overvalued and crash.
Crashes come periodically. The last one was only 12 years ago. It was bailed out in the most
temporary fashion by transferring trillions from tax payers to the banks,
It seems unlikely the Government will be able to do that again without a vicious
After a crash the capital stored in gold, can be reconverted and employed back in the
When the economy crashes Block Chain currencies can easily be shutdown.
Just pull the plug.
Gold can aslo be outlawed. But if it's hidden in a hole in your yard it's not likely
anyone will be able to take it away from you.
When order is restored it's unlikely anyone will want to. There will be other priorities.
The tangible nature of gold though viewed as antiquated by block chain
enthusiasts, is exactly what protects it in a crash.
Tuesday, September 10, 2019
Debt owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis to $246.6 trillion at the beginning of March, according to the Institute of International Finance, an association of global financial firms. And the high debt levels are weighing heavily on economies
The consumer is holding up though!! How so:
For the month of July, consumer credit increased at a seasonally adjusted annual rate of 6.75%. Revolving credit, which are credit cards increased at an annual rate of 11.25% while non-revolving credit increased at an annual rate of 5.25%.
That’s over 11% increase in July from June in credit card debt….
Therefor: Rates must continue to fall, negative yielding debt continues to grow, which means the global economy continues to stall
The Unstoppable Surge in Negative
Yields Reaches $17 Trillion
By John Ainger
August 30, 2019
The global stock of negative-yielding debt is now in excess of $17 trillion as rising market volatility lends extra force to this year’s unprecedented bond rally.
Thirty percent of all investment-grade securities now bear sub-zero yields, meaning that investors who acquire the debt and hold it to maturity are guaranteed to make a loss. Yet buyers are still piling in, seeking to benefit from further increases in bond prices and favorable cross-currency hedging rates—or at least to avoid greater losses elsewhere.
Monday, August 26, 2019
The Gold versus bitcoin debate is absurd. There are no similarities.
Bitcoin is a risk asset that exists in virtual reality.
Gold is a hard asset that exists in the real world.
Bitcoin is a gambling tool
Gold is a hedge against gambling tools.
Suggesting that bitcoin could replace gold is like suggesting
a computer program of a sprawling palace could replace the apartment
or house that you live in.
It may seam to have advantages, like it appears bigger and grander and needs
no upkeep. But you can't actually live in it because it doesn't exist outside
People may even begin flipping their virtual houses and make tons of money -
temporarily they may make more money than people buying and selling real
houses. But you still can't live in them.
The fact that gold really exists in the natural world may seem quaint and
antiquated to some young people. But the thing they forget is that they
too exist in the natural world.
And everything that does not exist in the natural world is by the very definition
of the word: SPECULATIVE.
Something that is speculative can never be a hedge against speculation.
That should be obvious. Yet somehow it's not anymore.
Sunday, August 18, 2019
THE foundation of all economy is trust. When accepting any form
of money as payment we must trust that the parties involved in the
next transaction will also trust that form of money. To do so we must
have ultimate trust in either the intrinsic value of the money, or in the ability of
the issuing institution to provide a safe and stable and enforceable
environment for the continued value and acceptance of the money.
It is becoming increasingly difficult for many citizens to trust their own
governments. It is difficult to trust Governments run by officials who
clearly have only their own personal interests at heart.
It is difficult to place trust in a form of money that charges prohibitive
fees for the use of the money - such as money that doesn't
provide interest to offset decaying value from over-issuance or actually
charges the user in absolute terms through negative interest rates.
This is institutionalized theft, which doesn't foster trust.
Some citizens prefer to place their trust in anonymous issuers using
mathematical " guarantees" for their money such are bitcoin type currencies.
This is a sort of blind trust in technology, which is only possible as
trust in humans erodes.
This brings us back to the idea of "Intrinsic Value," which may be argued
is a form of mass delusion over time - but the delusion is academic.
It's mass acceptance over long periods of time that comprises
the intrinsic value. Old master paintings. Real Estate in popular locations.
Artifacts related to historically important figures like Julius Caesar
or Alexander the Great or George Washington, for example.
These things all hold value over time. But they
are not divisible so are difficult to use in transactions as money.
This brings us back to gold, which has held its value for over five thousand years.
There is no need for trust in an issuing authority except as a guarantee of
weight and purity - which can be easily verified independently.
And it is divisible into any desired quantity. Perfect as a store of value.
Perfect for transactions, even if it means an intermediary step of
conversion into a local currency.
As trust erodes, gold rises.
Tuesday, August 13, 2019
GOLD THRIVES ON INSTABILITY, TRUMP IS INSTABILITY PERSONIFIED.
THINGS GOLD LOVES THAT TRUMP IS PUSHING:
1) GLOBAL COMPETITIVE DEVALUATION OF CURRENCY.
2) NEGATIVE RATE ENVIRONMENT. (there is 15 trillion dollars of negative yielding debt )
3) INTERNATIONAL STRIFE SUCH AS TRADE WARS
4) LOSS OF CONFIDENCE IN GOVERNMENT
AND 5 - gold's stealth weapon - (as though it needed anything else) -
A GLOBAL PUSH FOR DEDOLARIZATION - which is untethering gold to it's anti-dollar role, and encouraging governments to increase their gold reserves.