Central Banking Cartel Promises ZIRP Until At Least 2023

By Mike Gleason – Re-Blogged From Gold Eagle

Gold and silver investors who were hoping Wednesday’s FOMC meeting would be a catalyst for a major breakout move were largely disappointed.

The metals complex didn’t see an immediate boost from the Federal Reserve’s dovish policy meeting. Still, the central bank’s commitment to an accommodative monetary policy is set to play out not just over the course of a week, but of years to come.

On Wednesday, the Federal Reserve announced it would continue to hold its benchmark interest rate near zero. That came as no surprise.

However, the extent of the Fed’s commitment to avoid any rate hikes in the future raised the eyebrows of many veteran observers of monetary policy. Not only did members of the central banking cartel vow to keep rates down for the remainder of the year. They also signaled there would be no rate hikes in 2021.

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China Is Killing The Dollar

By Alasdair Macleod – Re-Blogged From GoldMoney

In the wake of the Fed’s promise of 23 March to print money without limit in order to rescue the covid-stricken US economy, China changed its policy of importing industrial materials to a more aggressive stance. In examining the rationale behind this move, this article concludes that while there are sound geopolitical reasons behind it the monetary effect will be to drive down the dollar’s purchasing power, and that this is already happening. More recently, a veiled threat has emerged that China could dump all her US Treasury and agency bonds if the relationship with America deteriorates further. This appears to be a cover for China to reduce her dollar exposure more aggressively. The consequences are a primal threat to the Fed’s policy of escalating monetary policy while maintaining the dollar’s status in the foreign exchanges.

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Overvalued Stocks Head Into The Bunker

By Michael Pento – Re-Blogged From Silver Phoenix

The overvaluation of stocks relative to the economy has placed them in such rarefied space that the market is subject to dramatic and sudden air pockets. Our Inflation Deflation and Economic Cycle model is built to identify both cyclical and secular bear markets and protect and profit from them.

However, what it cannot do, nor can anyone else, is anticipate every short-term selloff in stocks. While the IDEC strategy protects and profits from bear markets, it also tends to soften the blow from short-term selloffs and prevents us from panicking at the bottom of every brief correction. This was the case in the latest plunge that started on September 3rd and lasted just three brutal days.

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The Next Bubble Will Be In Gold

By AG Thorson – Re-Blogged From Gold Eagle

Asset bubbles are a repeating theme. In 2017, bitcoin entered a bubble driving prices from $1000 to $19,000. The recent Bubble in Tesla marked a rally from $70 (post-split price) to over $500 in less than 6-months. Our work supports a bubble in gold and precious metals later this decade. This article will explore the various aspects of a bubble and how one could prepare.

Below are the three ingredients often associated with bubbles.

US Share Plunge

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

The U.S. stock market plunged last week. Will gold follow suit?

Last week, the U.S. stock market has seen strong selling activity. The S&P 500 Index has declined about 7 percent from its peak, while the Nasdaq Composite Index plunged more than 10 percent (entering a correction territory), below 11,000, as the chart below shows. It was the tech sector’s worst drop since the end of March, if not the quickest correction ever.

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Inflation, Deflation And Other Fallacies

By Alasdair Macleod – Re-Blogged From Gold Eagle

There can be little doubt that macroeconomic policies are failing around the world. The fallacies being exposed are so entrenched that there are bound to be twists and turns yet to come.

This article explains the fallacies behind inflation, deflation, economic performance and interest rates. They arise from the modern states’ overriding determination to access the wealth of its electorate instead of being driven by a genuine and considered concern for its welfare. Monetary inflation, which has become runaway, transfers wealth to the state from producers and consumers, and is about to accelerate. Everything about macroeconomics is now with that single economically destructive objective in mind.

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Arrival Of The Epocalypse And The 2020 Stock Market Meltdowns

By David Haggith – Re-Blogged From Gold Eagle

I just finished with one of my readers, Bob Unger, and I thought Bob’s questions led to a well-rounded expression of how, over the past two years, our economy got to the collapse we are in now, how predictable the Federal Reserve’s policy changes and failures were, why economic recovery has stalled, and why the stock market was certain to crash twice this year, including why the second crash would likely hit around September.

I’ve found Bob’s interviews with others interesting, so I recommend checking out his YouTube page. I had no idea where the interview below would go, but it wound up encapsulating my main themes for the past two years:

MarketWatch

(Other interviews I’ve done are linked in the right side bar where I usually just let people stumble onto them on their own.)

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Inflation By Fiat

By Michael Pento – Re-Blogged From Silver Phoenix

The Fed has now officially changed its inflation target from 2%, to one that averages above 2% in order to compensate for the years where inflation was below its target. First off, the Fed has a horrific track record with meeting its first and primary mandate of stable prices. Then, in the wake of the Great Recession, it redefined stable prices as 2% inflation—even though that means the dollar’s purchasing power gets cut in half in 36 years. Now, following his latest Jackson Hole speech, Chair Powell has adopted a new definition of stable prices; one where its new mandate will be to bring inflation above 2% with the same degree and duration in which it has fallen short of its 2% target.

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China Unloads Dollars As Gold Price Tests Support

By Stefan Gleason – Re-Blogged From Gold Eagle

Since posting new record highs in early August, the gold market has consolidated above $1,900/oz support.

A close below the $1,900 level would carry bearish implications for the near term.

Alternatively, a move back above $2,000/oz would likely be followed through to the upside with a rally to fresh highs. Silver, in turn, could be expected to run to new multi-year highs above $30/oz.

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Inflation — Running Out Of Road

By Alasdair Macleod – Re-Blogged From Gold Eagle

If you think that price inflation runs at about 1.6% you have fallen for the BLS’s CPI myth. Two independent analysts using different methods — the Chapwood Index and Shadowstats.com — prove that prices are rising at a far faster rate, more like 10% annually and have been doing so since 2010.

This article discusses the consequences of price inflation suppression, particularly in the light of Jerome Powell’s Jackson Hole speech when he downgraded the importance of price inflation in the Fed’s policy objectives in favour of targeting employment.

It concludes that the reconciliation between the BLS CPI figure and the true rate of price inflation is inevitable and will be catastrophic for the Fed’s policy of suppressing interest rates, its maximisation of the “wealth effect” of inflated financial asset prices, and for the dollar itself.

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Stock Market’s Caged Bear About To Rattle Himself Loose!

By David Haggith – Re-Blogged From Silver Phoenix

I’ve been saying the stock market will take a turn for the worst sometime between mid-August and October. Numerous market metrics now show a market that looks ready to turn over. The bear may soon be back in charge.

The futility of trying to stop the stampeding herd and the Fed fallacy

When I pointed out last January that the market was more perilously overpriced than ever and imminently ready to crash, the stock market took one of its most spectacular dives in history just a month later. (See: “Stock Market More Overpriced and Perilous Than Anytime in History.”)

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Inflation Is Coming

By Egon von Greyerz – Re-Blogged From Gold Eagle

The buzz word of Central Bank Chiefs at Jackson Hole was INFLATION: “The Fed to tolerate higher inflation” says Powell, “ECB to inject more monetary stimulus to ensure inflation” says ECB Chief Economist, “Bank of England has ample fire power to support UK economy…… and not tighten monetary policy until inflation returns“ says Governor of BoE.

So here we have the Chiefs of three of the mightiest central banks in the world speaking with one voice and telling the world that the solution to the world’s financial woes is inflation. Kuroda, the Governor of the Bank of Japan would have said the same since they have been trying to get inflation above one percent for almost 30 years.

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Fed Embraces Higher Inflation

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

Fed adopts a new strategy that opens the door for higher inflation. The change is fundamentally positive for gold prices.

So, it happened! In line with market expectations, the Fed has changed its monetary policy framework into a more dovish one! This is something we warned our Readers in our last Fundamental Gold Report:

the Fed could change how it defines and achieves its inflation goal, trying, for example, to achieve its inflation target as an average over a longer time period rather than on an annual basis.

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Should you be Panicked About the Current Federal Deficit and Debt

[This article follows much of what most Americans think is true about Deficits, Debt, and Interest Rates – I don’t. Please be kind in your comments as you explain what you think the author’s misconceptions are.  –Bob]

 

The federal debt has touched an historical figure in 2020 after the Covid-19 outbreak. It is way more than what the country has tackled since the end of World War II. With the current GDP, the 17.9% federal deficit is also double of what the country had during the great recession in 2009.

 

Why is there a federal budget deficit?

 

Even before the fatal Covid-19, the federal budget deficit was large due to recession and the increase in the government’s spending. After Covid-19, the government launched stimulus packages to ease the financial pain of individuals, which meant more expenses. Congress had to spend more on the unemployment benefits, Medicaid, food stamps, etc. On the other hand, the reduced income of the working people, suspension of federal student loan payments, recession, and less tax revenue has led to overall lower government revenue.

The federal budget deficit is the difference between government spending and revenue. In the fiscal year 2019, the federal government’s overall revenue was $3.5 trillion on September 30, 2019. But, the government spent $4,4 trillion, which meant that the total deficit was $984 billion.

 

If these figures have already made you worried, then hold your heart with your hand for a second. There is a lot more to come. According to the Congressional Budget Office declaration in April 2020, the federal deficit for the fiscial year 2020 will be around $3.7 trillion or 17.9% of projected GDP. If Congress continues to launch more relief plans for the people, then only God knows how much will be the deficit.

 

The expected federal deficit in 2020 is very large. There is no doubt about it. In the last 50 years, the average deficit has been only 3% of GDP. Even in 2009, the year of the great recession, the federal deficit was 9.8% of GDP. But in 2020, the federal deficit is 17.9% of GDP, a historical figure in itself. The federal deficit was already high before Covid-19 due to the 2017 tax cut. But, the Covid-19 economic impact has stretched the federal deficit to an astronomical figure.

 

How about the federal debt?

 

The federal debt is all about how much the government owes to cover the deficit of the previous years. When the government continues to borrow money to cover its budget deficits, it’s debt burden also increases simultaneously. The federal government already owed $16.8 trillion to the foreign and domestic investors on September 30, 2019, including the US Treasury securities too. In June 2020, the same government owed around $20,3 trillion, which is huge.

 

Between 2007-2009, the federal debt was approximately 35% of GDP. Before the pandemic, the federal debt touched 80% of GDP. And, going by the way the government is borrowing money, it is expected that the federal debt will become 100% of GDP by September 30, 2020. Unless a massive change in the tax or spending policy is introduced, the federal debt is expected to grow and touch a gigantic figure.

 

Should you be worried about federal debt and deficit?

 

Honestly speaking, the government can hardly be blamed for the fiasco. The government had to introduce a liberal spending policy to reduce debt problems and consumer bankruptcy in the country. Job cuts, pay cuts, and hour cuts have pushed people into severe financial problems. People don’t even have money to pay off credit card debts or student loans. As such, the government had to bail out people in that sector too. Hence, it had to borrow money like never before.

 

Should you be worried about the current federal budget deficit and debt? As of now, there is no need to worry about it. The federal government is borrowing money at a super low-interest rate from global financial markets. There is not much competition from the private sectors on the borrowing front. It is not just the US, all countries are borrowing heavily to deal with COVID recession. The global interest rates are rock-bottom low. So, governments are still able to save money.

 

How much debt can the government handle? How much is too much for the economy? There is no clear answer to these questions. Top economists are also clueless about it. However, if the global interest rates remain this low, then the government can tackle more debts than you can imagine. Yes. The government is indeed borrowing heavily. The debt amount is gigantic. But this increase in the debt amount is mainly due to the abnormal economic situation created by the Covid-19. It is a temporary phase, not a long-run trajectory.

 

There was speculation that the enormous size of the debt amount would cripple the government’s flexibility if it faced a recession like that of 2009. Fortunately, the government could borrow money promptly during the pandemic. So, even if politicians are skeptical since a huge amount has been borrowed already, the government may continue to take out loans, especially to take advantage of the record low-interest rates. In June 2020, the U.S treasury borrowed money for ten years at an interest rate between 0.625% and 1%. From October 2019 to June 2020, the government’s overall outflow was 10.5% less than in the same period in the last year, even though the government has borrowed more now.

 

Conclusion

 

If the current economic policies are changed, then the federal debt and deficit are expected to increase as more people will qualify for Medicare and Social Security. It is projected that by 2030, the federal debt will become 118%. The current debt load is manageable. But it is equally true that healthcare costs are increasing at a faster rate than the national economy. The interest rates will also become normal in the future. So, the government will have to think about the steps to reduce federal debt and deficit in the future.

Author bio: Stacy B. Miller is a writer, blogger, and a content marketing enthusiast. Her blog vents out her opinions on debt, money and financial issues. Her articles have been published in various top-notch websites and she plans to write many more for her readers. You can connect with her on Facebook and Twitter.

 

Fed Chairman Powell Is Vowing to Wreck the Currency

By Mike Gleason – Re-Blogged From Gold Eagle

As the Federal Reserve embarks on a new campaign to raise inflation rates, markets may be in for a change in character.

On Wednesday, Fed Chairman Jerome Powell announced that the central bank would be targeting an inflation “average” of 2%. By the Fed’s measures, inflation has been running below 2% in recent years. So, getting to a 2% average in the years ahead will require above 2% inflation for a significant period.

Here’s Powell attempting to explain himself from central bankers’ virtual Jackson Hole conference:

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The Federal Reserve vs. Judy Shelton And Gold

By Kelsey Williams – Re-Blogged From Gold Eagle

Those in favor of Judy Shelton’s approval by Congress, pursuant to her nomination to the Federal Reserve Board Of Governors, should not be surprised by the torrent of criticism directed at her.

A letter published and signed by former Federal Reserve officials and staffers called on the Senate to reject her nomination, stating that “Ms. Shelton’s views are so extreme and ill-considered as to be an unnecessary distraction from the tasks at hand…”

Her “extreme” views were referred to in a general statement of condemnation:

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Space Oddity And Helicopter Money

By Egon von Greyerz – Re-Blogged From Gold Eagle

The Economy Needs More Than A Vaccine

By Michael Pento – Re-Blogged From Silver Phoenix

The hype and hope being promulgated by Wall Street and D.C. is that the imminent and well-advertised approval of vaccines will bring the economy back to what they characterize as its pre-pandemic state of health. However, even if these prophylactics are very efficient in controlling the pandemic and lead the economy back to “normal”, the state of the economy was anything but normal and healthy prior to the Wuhan outbreak.

The year over year change in GDP in the fourth quarter of 2020 from the trailing 12 months was just 2.3%. Admittedly, this wasn’t indicative of a terrible economy; but it also was very far from what many have portrayed as the best economy anyone has ever seen on the planet. Most importantly, to even get to that rather pedestrian level of just trend GDP growth for the year, the Fed had to slash interest rates three times in the five months prior to the start of 2020. And, please also remember that the Fed felt it necessary to return to Quantitative Easing (QE) in order to re-liquify the entire banking system and save the markets from crashing.

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Economic Data Suggests Reopening, not Recovery

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

Retail sales growth has slowed down. What does it mean for the U.S. economy and the gold market? Retail sales increased 1.2 percent in July. The growth was worse than expected, which hit the U.S. stock market. As the chart below shows, the number was also much weaker than in the two previous months (8.4 percent gain in June and 18.3 percent jump in May), when it seemed that the economy started to rebound.

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Denial Dominates the Dummies

One of my reasons I started this website years ago was to counter all the denial that I saw in the mainstream media about how long and deep the problems from the Great Financial Crisis would be and about how we were failing in every way to resolve the greed, decay and especially faulty thinking that would assure our next collapse would be even greater than the Great Recession.

Today, the same lame thinking still dominates, but not just in the media. It’s pervasive in the general public, too. Of course, it is particularly prevalent among high-flying stock investors, who actually think because stocks can float above it all, the world must be doing fine.

New Sound Money Caucus Launched On Capitol Hill

By JP Cortez – Re-Blogged From Gold Eagle

As the federal government continues to bailout the economy and markets by creating trillions of unbacked pieces of paper and electronic digits, a handful of Congressmen hope to shine a new spotlight on the devastating effects of this runaway financial profligacy.

Congressman Warren Davidson (R-OH) recently announced the creation of the Congressional Sound Money Caucus. According to Congressman Davidson’s office, the caucus exists to promote sound fiscal and monetary policy in the United States with the goal of preserving the purchasing power of the U.S. Federal Reserve Note.

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Five Post-Covid Trends

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

The disruptions caused by the pandemic of Covid-19 forced people, companies, governments, and organizations to challenge their basis assumptions about their ways of life and conduct. Some of them might be trivial such as more frequent and thorough hand-washing, but others are much more important, amongst them putting more emphasis on health that came suddenly under threat and social relationships that were so missing during the quarantine. So, the key question is when the epidemic is fully contained, what will be the “new normal” – and how it will affect the gold market?

The first characteristic feature of the post-pandemic world will be more people working and getting things done from home. The digital transformation has already started before the coronavirus jumped on human beings, but the Covid-19 epidemic has accelerated its pace, with further expansion in videoconferencing, online teaching, e-commerce, telemedicine, and fintech. After all these long years, it turned out that all these boring meetings really could have been e-mails or chats via Zoom, Skype or Teams. What does it mean for the economy and society?

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An Unexpected Systemic Crisis Is For Sure

Alasdair Macleod – Re-Blogged From Gold Eagle

Downturns in bank credit expansion always lead to systemic problems. We are on the edge of such a downturn, which thanks to everyone’s focus on the coronavirus, is unexpected.

We can now identify 23 March as the date when markets stopped worrying about deflation and realised that monetary inflation is the certain outlook. That day, the Fed promised unlimited monetary stimulus for both consumers and businesses, and the dollar began to fall.

The commercial banks everywhere are massively leveraged and their exposure to bad debts and a cyclical banking crisis is now certain to wipe many of them out. In this article we look at the global systemically important banks — the G-SIBs — as proxy for all commercial banks and identify the ones most at risk on a market-based analysis.

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Silver Purchasing Power Or Perverse Incentives?

By Keith Weiner – Re-Blogged From Silver Phoenix

On Monday, the price of silver continued its epic skyrocket. We say this without hyperbole, this kind of price action does not happen every day. Or every year. It occurs perhaps once a decade. And the same can be said for Monetary Metals writing so many articles about silver in the span of a week!

So we wrote yet another article, showing that the fundamentals are keeping up, even though the price was rising (the hallmark of the last decade has been that rising abundance occurs with rising price—price brings more metal out of private hoards).

But before it could go live (it was written Monday night), the price was already moving down. And, holy cow, did it move down!

From $29, it dropped to under $25. About -14%.

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How Does The Yellow Metal Fit The Corona World?

For a long time, pundits talked excitedly about the rapid, V-shaped recovery. I never shared this view, finding it too optimistic and without basis in reality. Like Jeff Goldblum in Jurassic Park, I hate being right all the time, but it really seems that I was right about this issue. According to the July World Flash report by IHS Markit, we can read that “the new wave of infections has reduced the probability of a V-shaped cycle (…) and increased the risk of a double-dip recession (W-shaped cycle).

The problem is the rising number of Covid-19 infections in large economies such as Brazil, India, or the United States, as the chart below shows (there is also the resurgence in cases in other countries, such as Australia or Japan, although the absolute numbers of infections are smaller).

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Has The Fed Let The Inflation Genie Out Of The Bottle?

By Stefan Gleason – Re-Blogged From Gold Eagle

The dramatic ascent of precious metals markets this summer reflects what could be just the start of a longer-term decline and fall in the Federal Reserve Note’s value and status.

With gold prices surpassing $2,000/oz recently, the monetary metal has now made new all-time highs versus all the world’s major fiat currencies. Gold is, as former Federal Reserve chairman Alan Greenspan has acknowledged, the “ultimate money.”

The Fed, by contrast, is the ultimate inflator.

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How Long Can Fed Cancel Gravity?

By Rick Ackerman – Re-Blogged From Silver Phoenix

True enough, statistically speaking. But the hardships of being jobless will be more easily borne by millions of Americans to the extent they are cushioned by generous checks from The Government. The handouts have in fact been so unstinting that two-thirds of those laid off due to the pandemic are eligible for benefits that exceed what they made working .

Look Ma, No Taxes!

Ordinarily, we might infer that it is deflationary for unemployment checks to be used to retire debt. But because no taxes have been levied to pay for the benefits, and because the benefits will decrease the burden of debt for millions of down-and-out workers, the net economic result is neither inflationary nor deflationary, at least for now. Factor in the bullish effect stimulus has had on the stock market, and inflation wins out, just as the Fed had intended. How long can the central bank continue to cancel gravity? It’s impossible to say, although we do know that the felicitous effects of helicopter money cannot last indefinitely.

We also know that every penny of it will have to be paid by someone at some point. Hyperinflation or deflation are the only conceivable avenues to achieve this, but it would be overly optimistic to assume we will have a choice. Politicians will always opt for the former, but they should have noticed by now that the trillions they have shot at the problem so far have inflated only stock prices. Judging from the headlines, one might infer that most of these pandering fools actually believe that Fed alchemy is an actual example of free lunch and that the bull market will continue indefinitely. The alternative is too scary to ponder — not just for politicians, but for all of us.

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Rising Gold = Higher Future Bond Yields

By Mark J Lundeen – Re-Blogged From Gold Eagle

The Dow Jones continues in an annoyingly tedious manner, where it refuses to go up or down as it hugs on to its BEV -10% line for dear life in the BEV chart below.  It’s been this way for over a month.  So we continue watching the Dow Jones’ BEV -5% and -15% lines, to see which the Dow Jones crosses through first.

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Precious Metals Landmine…

By Michael Ballanger – Re-Blogged From Gold Eagle

The US Dollar Wants YOU!

Before I begin this weekly missive (which is being penned on a Wednesday due to my impending cruise to the northern habitats of Georgian Bay), I need to present one quote that for me summarizes everything there is to know about risk management in the capital markets universe:

It Ain’t What You Don’t Know That Gets You Into Trouble.

It’s What You Know for Sure That Just Ain’t So (Mark Twain)

“Government Sachs” Is Worried About the Federal Reserve Note

By Mike Gleason – Re-Blogged From Gold Eagle

As July comes to a close, the gold price is up better than 9% for the month and has advanced nearly 30% for the year.

Gold’s record-setting rise has been driven by Federal Reserve stimulus, dollar weakness, and strong safe-haven investment demand. Even the Wall Street-centric financial media is taking note:

Financial News Anchor #1: Gold is shining once again, this morning. The spot price is touching all-time highs, as the dollar index sits around a two-year low.

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Explaining The Credit Cycle

By Alasdair Macleod – Re-Blogged From GoldMoney

This article summarises why the credit cycle leads to alternate booms and slumps. It is only with this in mind that they can be properly understood as current economic conditions evolve.

The reader is taken through three monetary models: a fixed money economy, one governed by changes in bank credit, and finally the consequences of central bank intervention.

Classical economics provided the basis for an understanding of the effects of bank credit expansion. The theory, embodied in the division of labour, eluded Keynes, who was determined to justify an interventionist role in the economy for the state.

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You Could Get Mad as Hell and Just Not Take This Anymore!

It’s time to show you’re Fed up! Get mad as hell! Don’t take this any more! Scorch the earth with your rage! Yell from the rooftops! Stick your head out the window and scream! Fight the economic injustice that serves the rich! Kick political asses, and kick them hard! Don’t just whine, do something about it!

Ten commandments to show you’re Fed up!

1) End manipulated markets by taking away the Fed’s mandate to create sound employment, The addition of this mandate gave the Federal Reserve way too much economic power! Denude the Federal Reserve back to its one original mandate — maintaining a stable money supply.

The Express Train To Insolvency

By GE Christenson – Re-Blogged From Gold Eagle

·     Gold reached $1,800, close to its all-time high of $1,923.

·     Silver reached $19, a long way from its high of $50.

·     The NASDAQ hit another new high.

·     Tesla closed on July 10 at $1,544, a new high. Tesla looked outrageously high at $1,200.

Now  the bubble has blown even larger.

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Goldman’s Stacks of Gold

Goldman Sachs, JPMorgan, and BlackRock Financial Management are stacking up wealth like never before, thanks to the Great Recession 2.0, a.k.a. the Second Great Depression. Yet, the Fed maintains its recovery plans do not create wealth disparity.

Fed-hawk Ron Paul wrote this week,

Federal Reserve Chair Jerome Powell and San Francisco Fed President Mary Daly both recently denied that the Federal Reserve’s policies create economic inequality. Unfortunately for Powell, Daly, and other Fed promoters, a cursory look at the Fed’s operations shows that the central bank is the leading cause of economic inequality….

The Pound’s Future In A Dollar Collapse

By Alasdair Macleod – Re-Blogged From GoldMoney

In recent articles for Goldmoney I have pointed out the dollar’s vulnerability to a final collapse in its purchasing power. This article focuses on the factors that will determine the future for sterling.

Sterling is exceptionally vulnerable to a systemic banking crisis, with European banks being the most highly geared of the GSIBs. The UK Government, in opting to side with America and cut ties with China, has probably thrown away the one significant chance it has of not seeing sterling collapse with the dollar.

A possible salvation might be to hang onto Germany’s coattails if it leaves a sinking euro to form a hard currency bloc of its own, given her substantial gold reserves. But for now, that has to be a long shot.

And lastly, in common with the Fed and ECB, the Bank of England has taken for itself more power in monetary matters than the politicians are truly aware of, being generally clueless about money.

Conclusion: the pound is unlikely to survive a dollar collapse, which for any serious student of money, is becoming a certainty.

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Think Deficits Are Bad Now? You Ain’t Seen Nothin’ Yet

The U.S. government was on track for a $1 trillion deficit this fiscal year, even before coronavirus. That’s the kind of budget deficits one would expect to see during a major economic downturn. The federal government has only run deficits over $1 trillion in four fiscal years, all during the Great Recession. The U.S. was on that path before the recent coronavirus economic upheaval even while Trump called “the greatest economy in the history of America.”

And now it looks like the U.S. is on the cusp of a legitimate economic crisis.

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Fiscal Cliffs and the Self-Destructing Treasury

We can all be very confident that there will be no change to monetary policy for a very, very long time. But there is a fiscal cliff coming—and indeed has already begun.

It is clear that Mr. Powell is all-in on his unlimited QE and ZIRP. And, that he is “not even thinking about thinking about raising interest rates.” Therefore, the stock market does not have to worry about a contraction in the rate of money printing any time soon. However, equities could soon plunge due to the crash in the amount of fiscal support offered to the economy.

  • Last month, the auto-loan and credit-card forbearance period ended
  • On July 1, state and local government budget cuts kicked into high gear, as the $330 billion in aid already dispensed has been wasted

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The Economic Death March Has Come To Town!

By David Haggith – Re-Blogged From Silver Phoenix

The coronavirus pandemic inflicted a “swift and massive shock” that has caused the broadest collapse of the global economy since 1870 despite unprecedented government support, the World Bank said.

“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions Ceyla Pazarbasioglu….

The depth of the crisis will drive 70 to 100 million people into extreme poverty.

How Deep Is Your Depression?

By David Haggith – Re-Blogged From Gold Eagle

We are nearing that mid-point in July when I said we would start to see the news turn from euphoria-inducing reopening positives to depression-developing realism.

Speaking of stock-market bulls who are stampeding uphill on the euphoria side, I wrote,

Right now the farce is with them — reopening has arrived! And these stupid people will believe that means they were right about the “V,” virtually assuring they continue to bet the market up for a little while…. The reopening means economic statistics will improve rapidly. That will give a lot of stupid people many reasons to believe they were right to think the obliterated economy would experience a V-shaped recovery.

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The New Deal Is A Bad Old Deal

By Alasdair Macleod – Re-Blogged From Gold Eagle

So far, the current economic situation, together with the response by major governments, compares with the run-in to the depression of the 1930s. Yet to come in the repetitious credit cycle is the collapse in financial asset values and a banking crisis.

When the scale of the banking crisis is known the scale of monetary inflation involved will become more obvious. But in the politics of it, Trump is being set up as the equivalent of Herbert Hoover, and presumably Joe Biden, if he is well advised, will soon campaign as a latter-day Roosevelt. In Britain, Boris Johnson has already called for a modern “new deal”, and in his “Hundred Days” his Chancellor is delivering it.

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The Bizarre Mathematics Of How Negative Interest Rates Create Stratospheric Profits

[This is a very different article from what I usually post. If you think, as I do, that negative interest rates are coming to the US, this article can show you how to make ‘Windfall Profits” from that abomination. Please take the extra effort to understand what the author is telling you.  –Bob]
Daniel R. Amerman, CFA – Re-Blogged From Gold Eagle

There is an increasingly good chance that the United States could end up following Europe and Japan, and that the Federal Reserve could use its vast powers of monetary creation to force a move to negative interest rates.

If that deeply unnatural event happens, it will invert and distort the very foundations of investment pricing, in ways that are little understood by most investors today.

It will also – for a time – create an unnatural source of profits that most investors have no idea about, because it has never happened before in the United States (and is still in the early stages in the United Kingdom).

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Prices Are Going To Rise…And Fast!

With stockmarkets barely ruffled, few are thinking beyond the very short-term and they are mostly guessing anyway. Other than possibly the very short-term as we emerge from lockdowns, the economic situation is actually dire, and any hope of a V-shaped recovery is wishful thinking or just brokers’ propaganda. But for now, monetary policy is to buy off all reality by printing money without limit and almost no one is thinking about the consequences.

Transmitting money into the real economy is proving difficult, with banks wanting to reduce their balance sheets, and very reluctant to expand credit. Furthermore, banks are weaker today than ahead of the last credit crisis, and payment failures on the June quarter-day just passed could trigger a systemic crisis before this month is out.

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Trampoline Cliff Diving

By Michael Pento – Re-Blogged From Pentoport

We start this week’s commentary with some rather depressing news from Reuters:

The ratio of downgrades to upgrades in the credit ratings of leveraged loans has spiked to a record level, five times above that hit during the last global financial crisis, reflecting the unprecedented stress in risky assets due to the coronavirus pandemic. Leveraged loans, which are loans taken out by companies that have very high levels of debt, usually with non-investment grade credit ratings–tend to be used by private equity firms as a way to fund acquisitions of such companies. The U.S. leveraged lending market has grown to more than $2 trillion, up 80% since the early 2010s, according to credit rating agency Moody’s Investors Service.

Add in the $1.2 trillion junk bond market and the $3.2 trillion in BBB debt, which is just barely above the junk category, and you end up with nearly six and a half-trillion dollars’ worth of corporate debt that is primed for varying degrees of default. The catalyst for this default is the worst economy since the Great Depression.

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How The Fed Gets Away With Ripping Off Ordinary Americans

By Clint Siegner – Re-Blogged From Gold Eagle

The Federal Reserve has printed trillions of dollars without generating runaway price inflation through the use of a neat trick.

The privately owned bank cartel shovels the bulk of the money to Wall Street banks and not to the public at large. Instead of millions of Americans rushing out to bid up prices on consumer goods, a relative handful of bankers is using the free money to bid up asset prices and then pay themselves huge performance bonuses.

A Collapsing Dollar And China’s Monetary Strategy

Alasdair Macleod – Re-Blogged From Gold Eagle

This article describes how China can escape the fate of a dollar collapse by tying the yuan to gold. There is little doubt she has access to sufficient gold. Currently, her interest is to preserve the dollar, not destroy it, because it is the principal means of Chinese foreign interests being secured .

Furthermore, a return to sound money requires China to reverse its interventionism under Xi, returning to Deng Xiaoping’s original vision. Sound money can only last if the relationship between the state and the wider economy is properly addressed.

Of all the major economies, China’s is best placed to implement a sound money solution. At the moment it seems unlikely the necessary reforms will be forthcoming; but a general collapse of the global fiat currency regime presents the opportunity for reassessment and change.

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Decline of the U.S. Dollar Could Happen at ‘Warp Speed’

Stephen Roach, a Yale University senior fellow and former Morgan Stanley Asia chairman, tells MarketWatch that his forecast for a sharp deterioration of the U.S. dollar could be a very near-term phenomenon, not an event that looms off in the distance.

“I do think it’s something that happens sooner rather than later,” the economist told MarketWatch during a Monday-afternoon interview.

His comments come as the financial expert has been warning for weeks of an epic downturn of the buck that could signal the end of the hegemony of the greenback as a reserve currency — an event that would ripple through global financial markets.

Stephen Roach

IMF Downgrades Outlook for Global Economy

[The Recession was caused partly by the COVID Pandemic, partly from the lockdowns put in place in over 40 US States, and partly by the economic troubles starting before that (eg. the REPO Rate crisis). These IMF forecasts likely are too optimistic.  –Bob]

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2020 Economic Predictions: This Series of Unfortunate Events Guarantees the Epocalypse

Look at the plethora of problems in my list of 2020 economic predictions, which are so severe and so likely to get even worse that it’s more difficult to imagine they won’t get worse than to believe they will. Some are so bad that just a few of them would plunge us into an abyss of social and financial catastrophes.

Here are my economic predictions for the remainder of 2020

This list of economic predictions is not hard to come up with. It is, however, the fact that it is so easy to predict these things this year that makes this year’s list so important.

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Gold, Copper And Silver Are Must-Own Metals

Gold surged on Monday after a spike in coronavirus cases worldwide dashed hopes of a quick economic recovery. Within 24-hours the number of infections globally rose 183,020, a new record, the World Health Organization reported, Reuters said the US saw a 25% increase in new COVID-19 cases over the week ending June 21st.

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A Can Too Big For The Fed And ECB

There are lies, damned lies, and economists. Whether these economists work for the government or a bank, they spend all their time on the computer extrapolating current trends with minor adjustments.

If you want to understand the future, don’t spend your life preparing and constantly revising an Excel sheet with masses of economic data. Collective human behaviour is extremely predictable. But not by spreadsheet analysis but by studying history.

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