This article examines two inflationary experiences in the past in an attempt to predict the likely outcome of today’s monetary policies. The German hyperinflation of 1923 demonstrated that it took surprisingly little monetary inflation to collapse the purchasing power of the paper mark. This is relevant to the fate of the “whatever it takes” inflationary policies of today’s governments and their central banks. The management of John Law’s Mississippi bubble, when he used paper money to rig the market is precisely what central bank policy is aimed at achieving today. By binding the fate of the currency to that of financial assets, as John Law proved, it is the currency that is destroyed.
GLOBAL ROYAL FAMILIES:
- Royal families have ruled Great Britain for centuries. They control massive wealth and exercise considerable influence in global affairs.
- The Dutch royal family is less visible.
- King Donald and Queen Melania are influential, but not royals.
- Prince William of Gates, Prince Jeffery of Amazonia, and Prince Elon of Teslovakia are new members of pretend royal families – “Tech Royalty.”
- Queen Hillary and King William of Clintonia are pretend royalty, but we aren’t going there…
- Other pretend royalty are Prince Barack and Princess Michelle from Obamanoya, and several Prince Georges from the Duchy of Bushington. Their days as pretend royalty are fading.
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.
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.
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.
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.
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.”)
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.
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.
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:
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.
We’ve been publishing updates recently after days when the silver price has spiked up. Now, after Tuesday’s trading action, silver trades over $26. Its price moved up over two bucks (about 8%).
[This morning – Aug 7 – Silver is trading around $28 per ounce. –Bob]
The long pattern since the peak price hit back in 2011 has been that a rise in price accompanies rising abundance. That is, more metal comes to market at higher prices. Supply and demand, and all that stuff they taught back in Econ 101.
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.
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.
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
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.
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.
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.
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.
Dollar-denominated financial markets appeared to suffer a dramatic change on or about the 23 March. This article examines the possibility that it marks the beginning of the end for the Fed’s dollar.
At this stage of an evolving economic and financial crisis, such thoughts are necessarily speculative. But an imminent banking crisis is now a near certainty, with most global systemically important banks in a weaker position than at the time of the Lehman crisis. US markets appear oblivious to this risk, though the ratings of G-SIBs in other jurisdictions do reflect specific banking risks rather than a systemic one at this stage.
A banking collapse will be a game-changer for financial markets, and we should then worry that the Fed has bound the dollar’s future to their fortunes.
The dollar could fail completely by the end of this year. Against that possibility a reset might be implemented, perhaps by reintroducing the greenback, which is not the same as the Fed’s dollar. Any reset is likely to fail unless the US Government desists from inflationary financing, which requires a radically changed mindset, even harder to imagine in a presidential election year.
Mike Gleason: It is my privilege now to welcome back Michael Pento president and founder of Pento Portfolio Services. Michael is a well-known money manager, market commentator, and author of the book, The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market. He’s been a regular guest with us over the years, and it’s always a pleasure to have him on with us.
Well, Michael, it’s been a few months since we’ve had you on last and just a little bit has been going on in the world. COVID-19 has hit the states to say the least and caused major disruptions in the economy. Governors have instituted stay-home orders. Tens of millions of people have filed for unemployment. Now we’re seeing major rioting and social unrest in many cities throughout the country over the police killing of a black man in Minnesota last week.
And in the face of all that, the markets are seemingly doing just fine. Stocks are still rallying and it doesn’t seem like Wall Street is all that concerned about any of this. So, let’s get your take on what’s going on there, Michael, because it’s pretty hard to connect the dots between Wall Street and Main Street these days. Help us out there.
Michael Pento: Yeah. So nothing is going on that much this year at all, right? It’s been pretty boring. </sarc> The divide between the rich and the poor, which was already humongous coming into this year has grown exponentially. And you have to ask yourself the question, gee, if GDP, according to the Atlanta Fed is going to drop in the second quarter by over 52%, that is a seasonally adjusted annual rate, Mike. GDP is going to be cut in more than half during the second quarter of 2020, how in God’s name could it be possible that stocks are close to all-time record highs? And by evaluation metric at all-time record highs. There are about over 150% of GDP.
The doyenne of MMT, Stephanie Kelton, has published a book this week explaining modern monetary theory. This article examines the foundations of MMT which Kelton explained in an earlier video released last year.
Macroeconomics has become so far removed from reality that its practitioners cannot understand what is happening in the real economy. Never has this been more obvious than today. While they claim to be economically literate, macroeconomists are in thrall to their paymasters; a combination of government, quasi-government and financial institutions with a vested interest in not looking too closely at the full consequences of government economic and monetary policies. From this neo-Keynesian macro world, the latest spinoff is modern monetary theory, which is little more than a logical extension of Keynesianism —justifying intervention by the state and the use of fiat currency being expanded limitlessly. MMT is the end of the line for arguments based on macroeconomic fallacies that have their origin in Keynes.
I’ve missed a few predictions along the way, but usually only in part. When I missed, it was because I took the bad too far. The bad has almost always happened exactly when I said it would but hasn’t always been as bad as I said it would be. Now, it has all arrived and is turning out to be fully as bad as I said it would be.
It took the kick of a virus to set everything in place, but all the parts are now falling where I said they would once the next recession began.
Conspiracy surrounding the Federal Reserve is a subject of much debate. A controversial topic, yes; one which stirs the imagination of some, fires the suspicion of others, and provokes the declamation of not too few detractors.
From G. Edward Griffin/The Creature From Jekyll Island…
“Back in 1910, Jekyll Island was completely privately owned by a small group of millionaires from New York. We’re talking about people such as J. P. Morgan, William Rockefeller and their associates. This was a social club and it was called “The Jekyll Island Club.”
It drives you absolutely mad to see a whole world living a lie. How can anyone believe that the fake world the Fed and their fellow central bankers have created has anything to do with reality. We have fake money, fake markets, fake companies, fake banks, fake interest rates, fake income, fake pensions, fake social security, fake wealth, fake bail outs, fake buildings, fake holidays, fake cars etc which create false lives for most of us especially in the West. All these fake material values have also created false moral and ethical values.
IT IS ALL AN ILLUSION
By Mike Gleason – Re-Blogged From Money Metals
Gold and silver markets are inching closer to achieving major upside breakouts.
On Thursday, gold rallied above a near-term consolidation pattern to close at $1,747 an ounce. That put the monetary metal about $30 away from making new highs for the year. As of this Friday recording, gold prices are marching higher again and come in at $1,761, up 2.5% for the week.
Turning to silver, the white metal gained nearly 3% yesterday to touch a major resistance line just above the $16 per ounce level and the momentum is carrying over into today. A strong weekly close above yesterday’s high could trigger a wave of technical buying that propels prices much higher in the days ahead – and it looks as though such a close is in fact going to happen.
“In short, the Fed is committed to rescue businesses from the greatest economic catastrophe since the great depression and probably even greater than that, to fund the US Government’s rocketing budget deficits, fund the maintenance of domestic consumption directly or indirectly through the US Treasury, while pumping up financial markets to achieve these objectives and preserve the illusion of national wealth.
“Clearly, we stand on the threshold of an unprecedented monetary expansion.”
April job report shows a terrible US labor market. Coronavirus destroyed 20.5 million jobs, pushing the unemployment rate to almost 15 percent. How far does the number reflect reality – and what does it actually mean for the gold market?
Apocalypse in the US Labor Market
14.7 percent. Remember this value well, as it will go down in history. This is the official US unemployment rate for April calculated by the Bureau of Labor Statistics. The unemployment rate soared from 3.5 percent in February and 4.4 percent in March. As the chart below shows, the spike is really historic, as such high level has not been seen in modern history.
Since the Great Recession hit in 2008, central banks have been in the business of keeping insolvent governments from defaulting through the process of pegging borrowing costs near zero. These money printers are now in the practice of propping up corporations–even those of the junk and zombie variety–by ensuring their cost of funds bears absolutely zero relationship to the credit quality of the issuer. To be clear, central banks have been falsifying public and now private bond prices to historic and monumental degrees just as the intensity of issuances and insolvency deepens.
And now, the Fed is bailing out bankrupt consumers with helicopter money in the form of enhanced and extended unemployment, grants through the Payroll Protection Plan and direct UBI to consumers through the CARES Act Recovery Rebates clause. All together there has been about $2.8 trillion worth of deficit spending so far.
An unexpected destruction of fiat currency has been advanced by the monetary and fiscal response to the coronavirus. Financial markets have yet to discount the possibility of such an outcome, but in the coming months they are likely to awaken to this danger.
The question arises as to what will replace fiat currencies. In the past the answer has always been gold but today there are cryptocurrencies as well, whose enthusiasts are more aware than most of fiat money’s failings.
This article describes the basics about money, what it is and the role it plays in order to understand what will be required by the eventual replacement for fiat. It concludes that gold will return as the world’s medium of exchange, and secure cryptocurrencies, unable to provide the scalability and stability of value required of a medium of exchange will be priced in gold after the demise of fiat. But then the rationale for them will be gone, and with it their function as a store of value.
The destiny of the world is now in the hands of 6 central banks, Fed, ECB, BoE (England), PBOC (China), BoJ (Japan), SNB (Swiss). This in itself bodes extremely badly for the global financial system. This is like putting the villains in charge of the judicial system. For decades these central banks have totally abused their power and taken control of the world monetary system for the benefit of their banker friends and in some cases their private shareholders.
The central banks have totally corrupted and destroyed the financial system, by printing money and extending credit that doesn’t exist. Everyone knows that creating money out of thin air makes the money totally worthless. These bankers know, that if you stand next to the printing press and get the money first, it does have some value before it circulates. And this is exactly what they have done. Once the money reaches the people, it devalues rapidly. As Mayer Amschel Rothschild said over 200 years ago: “Permit me to issue and control the money of a nation, and I care not who makes its laws.”
This article asserts that infinite money-printing is set to destroy fiat currencies far quicker than might be generally thought. This final act of monetary destruction follows a 98% loss of purchasing power for dollars since the London gold pool failed. And now the Fed and other major central banks are committing to an accelerated, infinite monetary debasement to underwrite their entire private sectors and their governments’ spending, to prop up bond markets and therefore all financial asset prices.
It repeats the mistakes of John Law in France three hundred years ago almost to the letter, but this time on a global scale. History, economic theory and even common sense tell us governments and their central banks will rapidly destroy their currencies. So that we can see how to protect ourselves from this monetary madness, we dig into history for guidance to see who benefited from the Austrian and German hyperinflations of 1922-23, and how fortunes were made and lost.
Will the Coronavirus be the catalyst of not just a depression but also major reduction in global population? The growth in world population since the 1850s has been explosive. In the 1850s there were 1 billion people and today we are 7.8 billion. Although many “experts” have extrapolated the growth to 10 billion and more in coming decades, this has in my view not been based on sound reasoning. Instead, as I been writing about and discussed many times the spike in population that we have seen in the last 170 years will not end well.
Anyone who can read a chart knows that a spike on a major sample doesn’t continue straight up. And it doesn’t just correct sideways either. At some point, a spike up is always corrected by a major spike down. I talked about this in my article from April 2018. Below is an extract from this article:
The Four Horsemen of the Apocalypse bring pain and reset expectations. They are, according to some sources, pestilence, war, famine, and death.
Pestilence: News stories besiege us about the dangers of COVID-19, the pestilence released upon the world by (take your choice) bats, the United States, China, or a bioweapon lab. This pandemic is creating trauma for everyone. Confidence in governments and health agencies will decline. Trust in central banks will, hopefully, reset to much lower levels. Paper assets and fake money will be unmasked and understood for what they are. Real money will (someday) be appreciated as the only money without counter-party risk. But until that day… the paper derivative exchanges on COMEX “manage” prices.
The title of Leo Tolstoy’s massive tome, War and Peace, which many have heard of but few have read, implies a cyclical alternation between these conditions, which never ends, no matter how great the level of technological advance, because of the nature of men, which does not change.
It is the same with the great economic cycles which alternate between boom and bust. Once a parasitic overclass gain absolute power and a society is riven with corruption, decadence, graft and nepotism then its downfall is assured and is only a matter of time – and what empowers the parasitic overclass more than anything else is a fiat money system, which enables them to award themselves unlimited funds the better to live off the backs of the labor of everyone else, and no entity on the planet provides a more graphic example of this than the US Federal Reserve.
Gold investment demand is soaring in the wake of the COVID-19 stock panic! Investors are rushing back into gold to diversify after seeing mind-boggling central-bank money printing and government spending. Since that epic monetary inflation won’t be unwound, and investors were radically underinvested in gold before the panic, this trend is likely to persist for years. It will catapult gold and its miners’ stocks far higher.
The most comprehensive look into global gold investment demand is published quarterly by the World Gold Council. Its experts have been deeply studying the gold markets for decades, which shows in their outstanding Gold Demand Trends reports. These must-read analyses are released about a month after calendar quarters end. But while that data is invaluable, in fast-moving markets like these it simply isn’t enough.
Can the U.S. economy actually be turned on and off like a light switch? What are the implications for investors if it can’t?
The shutdown of much of the American economy in response to the COVID-19 pandemic has already created what is by far the single largest increase in unemployment in U.S. history in such a short period of time.
We are experiencing two quite distinct but interrelated forms of supply shortages that may just be in their early stages. One is the combined result of the collective (and very short-sighted) decision to make much of the world’s supply chain dependent on one nation, that of communist China, even while slashing the supply of inventory down to “just in time” levels, with no room for error.
A Hyperinflationary Depression has always been the inevitable end to the biggest financial bubble in history. And this time it will be global. Hyperinflation will spread from country to country like Coronavirus. It could start anywhere but the most likely first countries are the US and the EU or ED (European Disunion) They will quickly be followed by many more like Japan and most developing countries. Like CV it will quickly jump from country to country with very few being spared.
CURRENT INTEREST RATES ARE A FALSE INDICATOR
Ever since the last interest cycle peaked in 1981, there has been a 39 year downtrend in US and global rates from almost 20% to 0%. Since in a free market interest rates are a function of the demand for credit, this long downtrend points to a severe recession in the US and the rest of the world. The simple rules of supply and demand tell us that when the price of money is zero, nobody wants it. But instead debt has grown exponentially without putting any upside pressure on rates. The reason is simple. Central and commercial banks have created limitless amounts of credit out of thin air. In a fractional banking system banks can lend the same money 10 to 50 times. And central banks can just print infinite amounts.
By Jp Cortez – Re-Blogged From Headline Wealth
Two weeks ago, during a March 17 address to the nation in response to the COVID-19 outbreak, President Donald Trump asked that Americans work from home, postpone unnecessary travel, and limit social gatherings to no more than 10 people.
And last week, on March 27, Trump signed a stimulus package of over $2 trillion dollars to provide relief to an economy on the precipice of collapse.
The aid package includes handouts and loans to individuals, small businesses, and other distressed industries.
Despite Trump’s “having created the greatest Economy in the history of our Country,” when the markets tanked, massive and immediate government intervention was the only thing left to forestall a total collapse.
Silver is real money, not a debt-based fiat currency that will eventually fail. Silver bullion production requires capital and effort to mine and refine. We use it for solar panels, iPhones, cruise missiles and thousands of other items. Silver is monetary sanity.
Prices for silver rise as currency units are devalued. Silver sold for $1.29 in the 1960s. Today’s COMEX price is around $16.00 because dollars buy less. Prices for physical silver are much higher. The continual devaluation benefits the political and financial elite who own most paper assets – stocks and bonds. The bottom 90% pay higher prices for necessities plus interest on their debts. Savings in silver coins will offset devaluation and loss of purchasing power.
So, the stock market has dropped. Every government in the world has responded to the coronavirus with drastic, if not unprecedented, violations of the rights of the people. Not to mention, extremely aggressive monetary policy. And, they are about to unleash massive fiscal stimulus as well (for example, the United States government is about to dole out over $2 trillion worth of loot).
The question on everyone’s mind is what will be the consequences?
The standard analysis is that governments will print massive amounts of money. And, this will, of course, cause massive inflation (i.e., skyrocketing consumer prices). There’s just one problem with this analysis.
The unilateral response from governments to the coronavirus is to helicopter money to people and their businesses in unlimited quantities. Their priority is to keep the debt-driven Keynesian show on the road, and policy makers are approaching the task with unseemly gusto.
There was evidence that the credit cycle was already on the turn with the global economy entering its regular period of financial and economic crisis even before the coronavirus hit. Thinking it is only a matter of dealing with the pandemic before returning to normal is therefore a common and fatal mistake. The combination of current events is leading to an infinite problem: central banks, and the Fed in particular, are trying to backstop everything and they will undoubtedly fail.
The central issue is the dawning inability of the Fed, in charge of the world’s reserve currency, to keep financial markets under control. The quantities of money required to rescue the US economy and dollar-centric supply chains abroad are potentially far greater than anyone realises and will destroy not just the dollar, but the whole fiat money system of rigged financial markets upon which debt financing depends. The EU is in a similar but more parochial fix with the addition of a banking system visibly on the verge of collapse.
The timescale for the demise of unsound fiat currencies is likely to be very short, by the end of 2020 – exactly three centuries since a similar fiat currency experiment failed in John Law’s Mississippi bubble.
Re-Blogged From Headline Wealth
[As I recall, this originally was an Obama idea. –Bob]
Is America headed the way of Zimbabwe — an economically wrecked country that notoriously began issuing currency in trillion-dollar denominations?
A proposal by a U.S. Congresswoman would have the Treasury Department mint $1 trillion platinum coins.
As reported by the Washington Examiner:
Rep. Rashida Tlaib has proposed sending everyone in the United States $2,000 immediately and then $1,000 per month to counter the economic fallout of the coronavirus pandemic.
You can only be so dead, and that’s just “plain dead.” But there is also Feddy Krueger dead. The kind of dead that keeps on happening like a demonic death that won’t stay dead. It is in that nightmarish Elm St. light that I’m going to review the Federal Reserve’s death.
It’s happened via face-plant failures over past month that I’m going to lay out to show how savagely the Fed is dying a perpetual-motion death.
Let me pause to assure you, I’m not saying Feddy Krueger is down for the count and will not rise again. He always revives by inventing powers over market death never seen before. Feddy will return with extraordinary and permanent powers beyond those he once used to bring counterfeit salvation from the Great Recession. Feddy gets more empowered by scared government politicians each time the economy crashes. You can’t get rid of Feddy. At least, it seems.
We got hate mail after publishing Silver Backwardation Returns, Gold And Silver Market . It seems that someone thought backwardation means silver is a backward idea, or a bad bet. “You are a *&%#! idiot,” cursed he. “Silver is the most underpriced asset on the planet,” he offered as his sole supporting evidence. He doesn’t know that backwardation means scarcity, not that a commodity’s price is too high.
Since we wrote that on March 2 (our Reports are always based on the prior Friday’s close, in this case February 28), the price of gold and most especially silver has dropped. Silver was $16.67, and now it is $14.75. This is a drop of 11.5%. It is all the more scary when you realize that this drop occurred entirely over two days: Thursday and Friday this week.
The price action in gold was less dramatic, though its price did drop from $1,586 to $1,530, or -3.5%. Also on those same two days.
“Next five years is not about winning but surviving.” This is the headline of an article I wrote in early August 2019. At that point I was primarily thinking of economic survival. But now the world is facing multiple threats and multiple failures. As I have already stated, the Coronavirus is not the cause of global market crashes but the catalyst.
But even if I have been totally certain that the world will see an economic collapse greater than any crisis for 100s of years, this is the worst catalyst that anyone could have expected. Yes, a global virus was always one of the potential risks but of all triggers, this one was certainly the most unwelcome and horrible.