Repocalypse: The Little Crisis that Roared

That didn’t take long. I just published an article showing how the Fed had responded with a quarter of a trillion dollars to save the economy from what it claimed was a mere blip. Since then, the recession-causing Repocalypse I’ve warned of has roared around the world, forcing the Fed to amplify its response again.

The Fed’s planners just cannot outrun the little monster they created. It is growing as quickly as they increase their running speed. In the article I just alluded to, I also stated,

Peak Crazy!

By Mike Savage – Re-Blogged From Gold Eagle

In the unending blowing of the most epic financial market bubbles of all time, Germany may have just announced “peak crazy”. Overnight they issued 30-year bonds that had a NEGATIVE yield. With all of the financial shenanigans going on it is not even a surprise that they did it.

The real surprise is that the “authorities” were surprised when people didn’t line up for the honor of losing money financing their profligate debt. According to Zerohedge, the German government issued $2 billion of these bonds and the Bundesbank (German Central Bank) was forced to buy 58% of the offering.

What this really should tell everyone is that those who actually earn their money rather than conjure it up out of nowhere actually care what type of return they are going to get for the risk that is being taken. Of course, when money is conjured up out of nowhere and at virtually no cost to the “printers” any return of capital is more than they started with. There could also be a few hedge funds out there speculating that rates will go even lower and lead to a short-term profit. (If there are any buyers at an even more negative rate).

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The Yield “Curve” Knows

By Craig Hemke – Re-Blogged From Gold Eagle

As global interest plummets to historically negative levels—and as the U.S. bond market reveals a deeply inverted yield curve—it’s time again to assess what all of this means for the precious metals investor.

Just yesterday, a fellow on CNBC remarked that “no one had seen this coming”. By “this”, he meant a sharp rally in both gold and bonds. Oh really? We write these articles for Sprott Money each and every week.

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Socialism 2020?

By Stefan Gleason – Re-Blogged From Gold Eagle

The 2020 presidential election is already shaping up to be one of the most bitterly contested in history. The outcome could have enormous ramifications for all asset markets, including precious metals.

In the meantime, a lot can happen before November 2020 – especially with the Federal Reserve apparently set to turn dovish and cut interest rates this summer.

Some historical research into presidential election cycles suggests that the stock market tends to perform well heading into an election year. The incumbent administration tends to focus on padding economic statistics.

And during election years, Fed officials (who swear up and down they aren’t motivated by politics) tend to avoid making policy moves (such as rate hikes) that could make them vulnerable to political attacks.

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The Duality Of Money

By Keith Weiner – Re-Blogged From Gold Eagle

Last week, in Is Capital Creation Beating Capital Consumption, we asked an important question which is not asked nearly often enough. Perhaps that’s because few even acknowledge that capital is being consumed, and fewer tie it to the falling interest rate (perhaps that is because the fact of the falling interest rate is, itself, controversial). At any rate, we showed a graph of Marginal Productivity of Debt.

We said that this shows that consumption of capital is winning the race. And promised to introduce another new concept to explain why.

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Wall Street is Chasing Ghosts

By Michael Pento – Re-Blogged From Pento Portfolio Strategies

Wall Street’s absolute obsession with the soon to be announced most wonderful trade deal with China is mind-boggling. The cheerleaders that haunt main stream financial media don’t even care what kind of deal gets done. They don’t care if it hurts the already faltering condition of China’s economy or even if it does little to improve the chronically massive US trade deficits—just as long as both sides can spin it as a victory and return to the status quo all will be fine.

But let’s look at some facts that contradict this assumption. The problems with China are structural and have very little if anything to do with a trade war. To prove this let’s first look at the main stock market in China called the Shanghai Composite Index. This index peaked at over 5,100 in the summer of 2015. It began last year at 3,550. But today is trading at just 2,720. From its peak in 2015 to the day the trade war began on July 6th of 2018, the index fell by 47%. Therefore, it is silly to blame China’s issues on trade alone. The real issue with China is debt. In 2007 its debt was $7 trillion, and it has skyrocketed to $40 trillion today. It is the most unbalanced and unproductive pile of debt dung the world has ever seen, and it was built in record time by an edict from the communist state.

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Modern Monetary Theory: A Cargo Cult

By Keith Weiner – Re-Blogged From Gold Eagle

Newly elected Representative Alexandria Ocasio-Cortez recently said that Modern Monetary Theory (MMT) absolutely needed to be “a larger part of our conversation.” Her comment shines a spotlight on MMT. So what is it? According to Wikipedia, it is:

“a macroeconomic theory that describes the currency as a public monopoly and unemployment as the evidence that a currency monopolist is restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.”

It is uncontroversial to say that the Federal Reserve has a monopoly on the dollar. So let’s look at the second proposition. Unemployment, MMT holds, is evidence that the supply of dollars is restricted.

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The Prodigal Parent

By Keith Weiner – Re-Blogged From Gold Eagle

The Baby Boom generation may be the first generation to leave less to their children than they inherited. Or to leave nothing at all. We hear lots—often from Baby Boomers—about the propensities of their children’s generation. The millennials don’t have good jobs, don’t save, don’t buy houses in the same proportions as their parents, etc.

We have no doubt that attitudes have changed. That the millennials’ financial decision-making process is different. And that millennials don’t see things like their parents (if you’ve ever seen pictures of Woodstock, you may think that’s not a bad thing). However, we believe that the monetary system plays a role in savings and employment. And the elephant that is trumpeting in the monetary room is: the falling interest rate. Interest has been falling since 1981. That’s when the first millennial was born.

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How “Free Money” Helped Create Sizzling Housing And REIT Gains In Recent Years

By Dan Amerman – Re-Blogged From Silver Phoenix

Housing prices and the associated REIT returns have worked very differently in the United States since the recession of 2001. The increasing financialization of the real estate markets by Wall Street, and the aggressive and unconventional interventions by the Federal Reserve over that time, have combined in multiplicative fashion to produce new and volatile sources of housing profits and losses.

One such change has been the creation of an extremely powerful profit engine for housing, that most real estate investors have not been taking into account. Indeed, there is a strong mathematical case to be made that “yield curve spread compression” has supported and enabled the substantial majority of housing price gains for homeowners and investors on a national average basis since the beginning of 2014.

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Why Are Wages So Low

By Keith Weiner – Re-Blogged From Gold Eagle

Last week, we talked about the capital consumed by Netflix—$8 billion to produce 700 shows. They’re spending more than two thirds of their gross revenue generating content. And this content has so little value, that a quarter of their audience would stop watching if Netflix adds ads (sorry, we couldn’t resist a little fun with the English language).

So it is with wry amusement that, this week, Keith heard an ad for an exclusive-to-Pandora series. The symptoms of falling-interest-disease are ubiquitous.

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Optimist Or Pessimist On Silver?

By Gary Christenson – Re-Blogged From http://www.Silver-Phoenix500.com

Here are their exposure rules you should know

hdvideopro.com

DEMAND: Silver demand increases every year and will push prices higher. Our modern world depends upon electronics, computers, missiles, fighter jets, cruise missiles, technology, communication devices and more. Each new application adds to silver demand. Medical applications, electric cars and photovoltaic solar panels need more silver and will boost demand.

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Bigger Deficits = Higher Interest Rates =…Many Bad Things

By John Rubino – Re-Blogged From http://www.Gold-Eagle.com

Mainstream economics uses a fairly simple equation when it comes to public policy: More government spending equals more growth, which is just about always a good thing.

The problem is with the “just about always” part. At the bottom of recessions, tax cuts and higher government spending can indeed stop the shrinkage and get things going again. And fiscal stimulus might be relatively harmless when an economy has minimal debt and can therefore handle a bit of deficit spending without negative side effects.

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Is The Yellen Fed Planning To Sabotage Trump’s Presidency?

By Stefan Gleason – Re-Blogged From http://www.Silver-Phoenix500.com

The Federal Reserve can make or break a president.

Monetary policy influences all financial markets as well as the cycles in the economy. No president wants to have to run for re-election when the stock market and economy are turning down.

Recall that President George H.W. Bush was sitting on sky-high job approval numbers in 1991 and was expected to coast to victory in his 1992 re-election bid. But then the economy swooned toward recession, giving Bill Clinton the opening he needed.

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China’s Belt And Road To Nowhere

By Michael Pento – Re-Blogged From http://www.Gold-Eagle.com

Moody’s Investors Service downgraded China’s credit rating recently to A1 from Aa3. The rational being that it expects the financial strength of the economy to erode, as GDP growth slows and debt levels continue to pile up. What is Beijing’s response to the slowing economy and intractable debt accumulation that was just underscored by Moody’s: issue a mountain of new debt in order to pave over 60 countries around the globe?

China’s One Belt One Road (OBOR) Initiative seeks to answer the age-old question of what a maniacal communist country does when they have exhausted the building of unproductive assets at home. The answer: China hits the road and attempts to rebuild the ancient trade routes once called the Silk Road; but in a much bigger way. With 52 million new homes built over the last few years that have a 10% occupancy rate, China has truly become masters of the “road to nowhere.”

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The Bargain Of The Century

By Egon von Greyerz – Re-Blogged From http://www.Gold-Eagle.com

Buy high and sell low is the mantra of many stock market investors. When a stock or a market reaches a new high, the average investor turns even more bullish. That is also the point when the media talk about it and it becomes headline news. This is now the situation for many stock markets worldwide. US, UK, and many European markets are now at all-time highs. But the picture is not rosy everywhere. The Chinese market is 40% lower than the 2015 highs and the French, Italian and Spanish markets are around 20% below the 2015 levels. Yet, few investors in the West worry about these peripheral markets but instead focus on the US and the main European indices.

There are times when there is still upside potential in markets which are making new highs. But a market which has been rising incessantly for almost seven years and which is grossly overvalued on any criteria is certainly not a low risk investment.

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Ireland’s Biggest Bank Charging Depositors Negative Interest Rate Madness

By Mark O’Byrne – Re-Blogged From http://www.Gold-Eagle.com

Deposits at Bank of Ireland are soon to face charges in the form of negative interest rates after it emerged on Friday that the bank is set to become the first Irish bank to charge customers for placing their cash on deposit with the bank.

This radical move was expected as the European Central Bank began charging large corporates and financial institutions 0.4% in March for depositing cash with them overnight.

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Unsound Banking: Why Most of the World’s Banks Are Headed for Collapse

By Doug Casey – Re-Blogged From International Man

Unsound Banking: Why Most of the World’s Banks Are Headed for Collapse

You’re likely thinking that a discussion of “sound banking” will be a bit boring. Well, banking should be boring. And we’re sure officials at central banks all over the world today—many of whom have trouble sleeping—wish it were.

This brief article will explain why the world’s banking system is unsound, and what differentiates a sound from an unsound bank. I suspect not one person in 1,000 actually understands the difference. As a result, the world’s economy is now based upon unsound banks dealing in unsound currencies. Both have degenerated considerably from their origins.

Modern banking emerged from the goldsmithing trade of the Middle Ages. Being a goldsmith required a working inventory of precious metal, and managing that inventory profitably required expertise in buying and selling metal and storing it securely. Those capacities segued easily into the business of lending and borrowing gold, which is to say the business of lending and borrowing money.

Most people today are only dimly aware that until the early 1930s, gold coins were used in everyday commerce by the general public. In addition, gold backed most national currencies at a fixed rate of convertibility. Banks were just another business—nothing special. They were distinguished from other enterprises only by the fact they stored, lent, and borrowed gold coins, not as a sideline but as a primary business. Bankers had become goldsmiths without the hammers.

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Star Wars Economics

By Tho Bihop – Re-Blogged From http://www.lewrockwell.com

Blowing Up the Death Star Didn’t Destroy Economy, Building It Did

A paper written by Zachary Feinstein discussing the economic consequences of blowing up the Death Star has been making the rounds on social media. While I’m a fan of using Star Wars to teach economics, Feinstein makes a very basic economic mistake in his focus on the Death Star’s destruction.

The paper actually starts out strong. Feinstein notes that, “Economics and finance, much like the Force as explained by Jedi Master Obi-Wan Kenobi, is ‘created by all living things. It surrounds us and penetrates us; it binds the galaxy together.’” Unfortunately, the author shifts from looking at the organic economy towards the dark side of economic models and aggregates – in this case Gross Galactic Product. The paper goes on to outline the quintillions that would be spent in the construction of the Death Star, the estimated size of the galactic banking system and the bailout that would be needed to restore financial confidence after the collapse of the Empire.

While some of the points made are interesting, the paper overlooks that the real economic problem with the Death Star is that a genocidal government built it at all.

I would point both Feinstein (and Emperor Palpatine) to Henry Hazlitt’s Economic in One Lesson. In the words of Hazlitt:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

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A Common Currency Is NOT A Cause Of Economic Problems!

By Steve Saville – Re-Blogged From http://www.Silver-Phoenix500.com

A popular view these days is that the euro is a failed experiment because economically and/or politically disparate countries cannot share a currency without eventually bringing on a major crisis. Another way of expressing this conventional wisdom is: a monetary union (a common currency) cannot work without a fiscal union (a common government). This is unadulterated hogwash. Many different countries in completely different parts of the world were able to successfully share the same money for centuries. The money was called gold.

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Investing’s Great Struggle

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The great endeavor of investing can be distilled down into four simple words, buy low sell high.  They are so basic, so resoundingly clear, that even a child can understand this principle.  Yet still the great majority of investors never achieve significant success.  Even while full-well knowing the core idea of investing, they end up buying high and selling low.  That treacherous struggle of investing must be overcome.

It’s funny, as life is full of simple ideas that are incredibly challenging to put into practice.  Investing is certainly not unique in this regard.  Americans’ expanding waistlines are a great example.  The only way to lean up is some combination of eating less and exercising more.  We all know this basic truth, we all know what we ought to be doing on both fronts, yet it’s still really hard to execute.  Emotions are the reason.

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Switzerland: Ultimate Safe Haven For Liberty, Wealth And Gold

Re-Blogged From Gold Silver Worlds

I am often asked what we would do if, for example, the US comes out with a confiscation order. My reply is: We would do nothing whatsoever! Why? Quite simply, because no one in Switzerland has the political power to execute such an order! Even if Swiss politicians would support such a confiscation order, the Swiss people would likely have the final vote. I am confident that any such confiscation order wouldn’t have any chance to reach a majority in Switzerland, especially when it concerns assets held outside the banking system such as physical precious metals. Even in the unlikely case that it would be accepted, the vote would take at least twelve months, thereby giving the persons affected enough time to move their assets. In my view, this is the main advantage of a direct democracy, it assures that the people and not the politicians in power have sovereignty. The federalist structure of Switzerland additionally guarantees that political power is reduced to a minimum. “Confederation Helvetica” might be the old name for Switzerland, but it is just as valid today as it was in the past.

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Thinking Differently About Purchasing Power

By Keith Weiner – Re-Blogged From http://www.Gold-Eagle.com

The dollar is always losing value. To measure the decline, people turn to the Consumer Price Index (CPI), or various alternative measures such as Shadow Stats or Billion Prices Project. They measure a basket of goods, and we can see how it changes every year.

However, companies are constantly cutting costs. If we see nominal—i.e. dollar—prices rising, it’s despite this relentless increase in efficiency.

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An Austrian Take On inflation

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

We know that today’s macroeconomists are very confused about inflation, if only because despite all experience they think they can print money and increase bank credit with a view to generating price inflation at a controlled 2% rate.

Admittedly, most of them will acknowledge there is more hope than reality about the controlled bit. Economic policy should be based on more than just hope.

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