The gold miners’ stocks have had a wild ride this month, surging then plunging. After hitting new upleg highs, the leading gold-stock benchmark collapsed in a sharp drawdown. That gutted bullish sentiment, bringing back worried bearishness. But despite that big swing, the uptrend of gold stocks’ young upleg remains intact. This sector is still marching higher on balance with gold, a bullish omen for further gains.
Did the Federal Reserve just usher in the next phase of the U.S. dollar’s decline?
On Wednesday, the central bank recommitted to leaving its benchmark interest rate near zero for the foreseeable future.
Fed officials also vowed to keep pumping cash into financial markets.
When the market cap of equities reaches 183% of GDP and gov’t bonds yield near 0%, or even less overseas, the notion that one can just buy and hold a balanced portfolio is extremely dangerous. The minefield is not packed with IEDs, it is actually replete with tactical nukes.
One of those land mines would be the failure to keep government open and pass more stimulus. I have no special insight here except D.C. is famous for brinkmanship but always opts to spend more money in the end. Another problem would be the failure to have a peaceful transfer of power come Jan. 20th. Also, the failure of vaccines to prove to be safe, effective and long lasting would blow the whole recovery mantra sky high.
STORY AT A GLANCE – week ending November 27:
- Gold prices made a significant low during November or December in 8 of the last ten years. Gold prices are low and over-sold as of Nov. 27.
- The gold to S&P 500 ratio shows gold is inexpensive compared to the S&P over four decades of history.
- Gold and silver price lows are due now—which means between mid-November and late December. Now, or soon.
- The GDX to gold price ratio bottomed in 2016. Expect gold to rally and gold stocks to rise faster in the coming years.
- Stocks are making new highs. Craziness in politics and monetary policy are “off the charts.” Beware the consequences of both.
US stocks are behaving amazingly well given the political and economic near-chaos of the past few months. This is probably the first recession that inflated rather than popped financial asset bubbles.
Why? Because panicked governments and central banks are dumping trillions of play-money dollars into the system, a big part of which flow directly into the brokerage accounts of the 1%.
We’re caught in a trap
I can’t walk out Because I love you too much baby
Elvis Presley’s rendition of Suspicious Minds topped the record charts in 1969. The lyrics portray a romance that couldn’t work, but was also impossible to escape. That’s also a good way to describe our relationship with government debt. We know it can’t last, but we can’t walk out. We love government spending and its benefits (like Medicare, Social Security, and unemployment insurance) too much.
By David Haggith – Re-Blogged From The Great Recession Blog
I mentioned in a recent article that the weird thing about this recession is that it is the only one in which personal income has gone up during a recession. That, of course, is because of government assistance, which is making it so we don’t have to feel the pain of a recession that the government, itself, caused — through its massive debt, tax breaks for the 1%, reliance on the Fed to solve government’s problems, and most currently through its forced economic shutdown as a response to COVID-19 — something that even the WHO now says was failed policy that should never have happened — even though they helped make sure it did happen!
The current pullback in the precious metals sector is a buying opportunity. Since trading at a closing high of $2,064 an ounce on August 6, gold bullion has declined 8.34% as of this writing.1 Gold mining shares have followed suit, declining 9.26% since the August high. It is possible that gold and related mining shares could continue to chop sideways to lower until the U.S. presidential election results are known and even into yearend as the implications are sorted out. Whatever the electoral outcome, the path towards monetary debasement is bipartisan. It is crucial for investors to focus on the long-term trend and to avoid the distractions of short-term timing considerations.
They say that time travels are impossible. But we just went back to the 1960s! At least in the field of the monetary policy. And all because of a new Fed’s framework. So, please fasten your seat belts and come with me into the past and present of monetary policy – to determine the future of gold!
At the end of August 2020, the Fed has modified its Statement on Longer-Run Goals and Monetary Policy Strategy – for the first time since its creation in 2012. As a reminder, the Fed will now target not merely a 2 percent rate of inflation, but an average inflation rate of 2 percent, which allows overshooting after the periods of undershooting. So, the Fed will try to compensate for periods of low inflation with periods of high inflation . Hence, on average , we will see a more accessible monetary policy and higher inflation – Good news for the gold bulls.
Precious metals investors faced choppy market seas this week. Gold bobbed to a slight decline while silver essentially treaded water through Thursday’s close. Both are advancing strongly today.
Metals markets are being overshadowed by equities markets. The S&P 500 broke out to a 5-week high on Thursday. The rally comes on a rising tide of Federal Reserve liquidity coupled with on again, off again hopes for a stimulus deal in Washington.
More stimulus is definitely coming. The only question is how many trillions and whether they get dished out before or after the election.
By Alasdair MacLeod – Re-Blogged From GoldMoney
This article explains the effect of monetary inflation on GDP. Nominal GDP is directly inflated by additional money and credit, so GDP growth is simply a reflection of additional money in the economy. It gives no clue as to the underlying economic situation. Whether the monetary planners know it or not, targeting GDP growth with monetary expansion is a tautology. They only succeed in covering up a deeper recession, the cost of which will become apparent subsequently as the currency’s purchasing power declines. And despite the wealth destruction being wrought by currency debasement,
in the coming months we will see monetary expansion deployed more aggressively. An inflationary solution cannot succeed; but future GDP numbers will be artificially increased, encouraging policy makers to claim some success. But we should understand the simple relationship between increased quantities of money and the gains they impart to GDP, which will mislead macroeconomic analysts into thinking the economy is more resilient than it actually is.
Precious metals markets are advancing this week as a massive new stimulus bill makes its way through Congress.
On Thursday evening the House of Representatives passed a $2.2 trillion coronavirus relief bill on a party line vote.
It’s a big deal whenever Congress commits to spending that kind of cash, especially when it’s money that has to be borrowed into existence. These days, though, it’s not that unusual for Washington to dole out trillions of dollars at a time.
For the week ending September 25, 2020:
- Gold (COMEX) was down $95 to $1,858.
- Silver was down $4.03 to $23.09. Yikes!
- The DOW was down 483 to 27,174.
- Tesla stock was down $34 to $407. Its all-time high was $502.
- John Mauldin expects $50 trillion in national debt by 2030.
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.
By Associated Press – Re-Blogged From Headline Wealth
The market for newly constructed homes in the U.S. continued its upward climb in August, despite the ongoing pandemic and lingering worries about the future of the U.S. economy.
The Commerce Department said sales new homes rose by a very strong 4.8% in August to a seasonally-adjusted annual rate of 1.01 million units. That’s on top of the massive jump in new home sales that happened in July, climbing that month by 13.9%.
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.
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.
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.
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.
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.
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:
(Other interviews I’ve done are linked in the right side bar where I usually just let people stumble onto them on their own.)
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.
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.”)
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.
[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.
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.
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 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.
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.
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?
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.
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%.
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.
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.
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.
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.
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.
Both gold and silver surged dramatically higher this past week, propelled by torrents of investment capital deluging in. The resulting major new highs are really exciting, unleashing widespread fear-of-missing-out buying. But the precious metals’ blistering jumps have left them very overbought. They have come so far so fast they are at and above technical extremes that have proven unsustainable. So caution is in order here.
Gold and silver are powering higher on balance in secular bull markets that have been running for years. And their fundamental underpinnings are stronger than ever. The Fed’s astoundingly-epic money printing since mid-March’s stock panic has catapulted stock markets to dangerous bubble valuations. And the vast majority of investors have yet to diversify their stock-heavy portfolios with counter-moving precious metals.
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….
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.
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).
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.
I had excellent timing for my vacation, with not much happening until this week; and what happened this week? On Monday’s close the Dow Jones came within 7% of its last all-time high (BEV Zero). What could go wrong and prevent the Dow Jones from making a historic new all-time high sometime in the coming weeks? Only Mr Bear, who in the next three days began clawing back market valuation with relish.
On Thursday the venerable Dow Jones began upchucking dollars, coughing up 1,862 of them in a single NYSE trading session, taking the Dow Jones all the way back down to its BEV -15% line in the chart below. Last Monday, it appeared the BEV -17.5% line was no longer a technically important level. The question in my mind now is will the Dow Jones once again advance into single digits in the BEV chart below, or find itself closing below its BEV -17.5% line?
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.
Gold investment demand remains strong, buoying the yellow metal and its miners’ stocks. Investors have continued actively diversifying into gold despite soaring stock markets and weaker summer seasonals. The Fed’s extreme money printing fueling these precarious stock-market heights is perilously inflationary, making upping gold portfolio allocations essential. This ongoing capital shift is likely to keep pushing gold higher.
The dominant driver of gold’s major price trends is investment demand. While it isn’t the largest demand category, it varies greatly depending on global-financial-market conditions. The best global gold supply-and-demand data is only published quarterly by the venerable World Gold Council, in its must-read Gold Demand Trends reports. They highlight the big volatility inherent in gold investment demand in recent years.
If Americans thought the U.S. Government would be in serious trouble as its ability to service its ballooning debt would become unmanageable, guess again. After the U.S. Government added nearly $3 trillion more debt in just the past eight months (fiscal year), the interest paid on the public debt actually declined versus last year.
According to TreasuryDirect.gov, the U.S. public debt increased from $22.8 trillion to $25.7 trillion during fiscal 2020 (October to May). Thus, total U.S. federal debt has increased by nearly $3 trillion in eight months compared to $1.2 trillion last year… for the entire year!! So, with $3 trillion more debt on the U.S. Government’s balance sheet, you would think the interest expense would have also increased.
NOPE… the U.S. Government paid $337 billion of interest expense so far this year (Oct-May) compared to $354 billion during the same period last year: