Does Gold Really Care Whether Coronavirus Brings Us Deflation Or Inflation?

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

One of the many bothering issues about the coronavirus crisis, is whether it will turn out to be inflationary or deflationary. What do both of these scenarios mean for gold ahead?

US Inflation Rate Declines in March

Many people are afraid that the coronavirus crisis will spur inflation. After all, the increased demand for food and hygiene products raised the prices of these goods. Moreover, the supply-side disruptions can reduce the availability of many goods, contributing to their increasing prices.

On the other hand, the current crisis results not only from a negative supply shock, but also from a negative demand shock. As a result of uncertainty, people cling to cash and forego unnecessary expenses. In addition, social distancing means reduced household spending on many goods and services, which exerts deflationary pressure. The most prominent example is crude oil, whose price has temporarily dropped to just $20 a barrel (although this was partly due to the lack of agreement between OPEC and Russia). Lower fuel prices will translate into lower CPI inflation rate. Entrepreneurs, especially those with large stocks of goods, will probably lower prices to encourage shopping. Moreover, the appreciation of the US dollar means lower prices of imported goods.

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The Global Debt Bubble Enters Its Blow-Off Stage

People have been talking about a “debt bubble” for some years now. They’ve been right, of course, based on the combination of surging borrowing and plunging rates. But the bubble hasn’t stopped inflating, and recently it entered what certainsly looks like a terminal blow-off stage. Some highlights:

Though July, China’s total debt rose by $2 trillion, a year-over-year increase of 26%. And this month the Chinese government cut bank reserve requirements in an attempt to further rev up lending.

In Japan, the junk bond market is being constrained by banks so desperate for yield that they’re lending directly to companies previously considered too risky. See Japan Junk Bond Market Hopes Crushed by Banks Hungry to Lend.

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I Know Usury When I See It

By Keith Weiner – Re-Blogged From Gold Eagle

This phrase was first used by U.S. Supreme Court Justice Potter Stewart, in a case of obscenity. Instead of defining it—we would think that this would be a requirement for a law, which is of course backed by threat of imprisonment—he resorted to what might be called Begging Common Sense. It’s just common sense, it’s easy-peasy, there’s no need to define the term…

This is not a satisfactory approach. Leaving aside concerns with undefined terms as the basis of sending someone to jail, it is an admission that one cannot define the term. As Richard Feynman once said:

“I couldn’t reduce it to the freshman level. That means we really don’t understand it.”

Obscenity has an analog in monetary economics: usury. Most people think usury is a bad thing, like obscenity. But they can’t define it.

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Is Lending The Root Of All Evil

By Keith Weiner – Re-Blogged From Gold Eagle

Ayn Rand famously defended money. In Atlas Shrugged, Francisco D’Anconia says:

“So you think that money is the root of all evil? . . . Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?”

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Central Planning Is More than Just Friction

By Keith Weiner – Re-Blogged From Gold Eagle

It is easy to think of government interference into the economy like a kind of friction. If producers and traders were fully free, then they could improve our quality of life—with new technologies, better products, and lower prices—at a rate of X. But the more that the government does, the more it burdens them. So instead of X rate of progress, we get the same end result but 10% slower or 20% slower.

Some would go so far as to say, “The free market finds ways to work even through government restrictions, taxes, and regulations.” We won’t address cardboard straws emerging where plastic straws are banned. Or gangs selling illegal drugs on the black market, when they are prohibited by law.

As usual, we want to talk about the most important kind of government intervention. And it happens to be the one kind of government intervention that is accepted by nearly everyone. The intervention supported by the otherwise-free-marketers.

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Federal Reserve’s Balance-Sheet Unwind is Unwinding Recovery

By David Haggith – Re-Blogged From Great Recession Blog

We are in the end time of an unprecedented era of financial expansion — the greatest expansion of the world’s money supply ever attempted, expansion of the Federal Reserve’s vast and unchecked powers far beyond what the Fed could do before the financial crisis, and super-sizing expansion of banks that were already way too big to fail.

I am calling this time in which we are now unwinding this monetary expansion the Great Recovery Rewind because I believe this attempt by the Federal Reserve and other central banks of the world to move us away from crisis banking is taking us right back into economic crisis. That is why this was the top peril listed in my Premier Post, “2019 Economic Headwinds Look Like Storm of the Century.” It is more potent in possible perils than all the trade tariffs in the world.

The Failure Of A Gold Refinery

By Keith Weiner – Re-Blogged From Gold Eagle

So this happened: Republic Metals, a gold refiner, filed bankruptcy on November 2. The company had found a discrepancy in its inventory of around $90 million, while preparing its financial statements.

We are not going to point the Finger of Blame at Republic or its management, as we do not know if this was honest error or theft. If it was theft, then we would not expect it to be a simple matter of employees or management walking out the door with the gold. $90 million is about 2.6 tons. Unless it happened very slowly, over many years, that seems like a lot of gold to disappear. And if it occurred over years, why didn’t regular audits and other internal controls catch the discrepancy until now?

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Australia’s Banking System May Go BOOM!

By Nick Hubble – Re-Blogged From Silver Phoenix

We’re edging ever closer to the financial crisis I’ve been investigating since 2012. I moved to four different cities in Australia to conduct my research, interviewing mortgage brokers and former bankers over four years.

Over the last few months, a Royal Commission has exposed what my research did back then. But the campaigner who first exposed the issue going back to the early 2000s continues to discover even more extraordinary facts.

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The “Productivity Of Debt” Myth

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

Page 4 in Hoisington Investment Management’s latest Quarterly Review and Outlook contains a discussion about the falling productivity of debt problem. According to Hoisington and many other analysts, the problem is encapsulated by the falling trend in the amount of GDP generated by each additional dollar of debt, or, looking from a different angle, by the rising trend in the amount of additional debt required to generate an additional unit of GDP. However, there are some serious flaws in the “Productivity of Debt” concept.

There are three big problems with the whole “it takes X$ of debt to generate Y$ of GDP” concept, the first being that GDP is not a good indicator of the economy’s size or progress.

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Central Bankers Consider Dictating Climate Policy to Private Businesses

By Eric Worrall – Re-Blogged From http://www.WattsUpWithThat.com

What is the difference between a centrally planned Communist economy, and an economy where Central bankers punish businesses which defy their investment directives?

Global Warming Is a Central Bank Issue

Ferdinando Giugliano, 13 April 2018, 3:30 PM

Last week, central bank governors from the U.K., France and the Netherlands met in Amsterdam to discuss how to adapt regulation to the risks posed by climate change. Together with five other institutions (from China, Germany, Mexico, Singapore and Sweden), these central banks have formed the “Network for Greening the Financial System” (NGFS). This group has two objectives: sharing and identifying best practices in the supervision of climate-related risks, and enhancing the role of the financial sector in mobilizing “green” financing.

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Pensions And Debt Time Bomb

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

£1 trillion crisis looms as pensions deficit and consumer loans snowball out of control
– UK pensions deficit soared by £100B to £710B, last month
– £200B unsecured consumer credit “time bomb” warn FCA
– 8.3 million people in UK with debt problems
– 2.2 million people in UK are in financial distress
– ‘President Trump land’ there is a savings gap of $70 trillion
– Global problem as pensions gap of developed countries growing by $28B per day

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Did The Sub-Prime 2.0 Bubble Just Burst?

By Graham Summers – Re-Blogged From http://www.Gold-Eagle.com

We’ve been tracking the sub-prime auto-loan industry closely.

Our view is that this industry represents the worst of the worst excesses of our current credit bubble, much as the subprime mortgage industry represented the worst of the worst in excess for the Housing Bubble.

For this reason, we refer to sub-prime auto-loans as Subprime 2.0.

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American Economics

By Andy Sutton – Re-Blogged From http://www.Silver-Phoenix500.com

Over the years, we have written multiple times about the system of Keynesian economics, its dysfunction…and the fact that it is a pure lie. This has all been well-documented from studies, observations, right down to remarks made by Keynes himself regarding the long-term viability of his new faux economics.

However, from Keynesian economics, there has morphed another type of economics. A more ignorant and destructive type of scarce resource allocation – which is what economics really is after all – and this type is no respecter of persons, intellect, position, or influence. We could easily call it the economics of entitlement, but that would be misleading because when most think of entitlements, they think about Social Security, Medicare, and other government programs. No, that’s not where the sense of American (and global) entitlement ends. It ends with the average working stiff who is paying 20% on a $40,000 / 7 -year truck loan with a balloon payment because his buddies told him he wasn’t cool if he didn’t have such a truck.

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Developing Countries Turn Citizens Into Debt Slaves

By John Rubino – Re-Blogged From Dollar Collapse

One of the big advantages of being a Latin American or Asian country used to be — somewhat counter-intuitively — the lack of credit available to most citizens. The banking system in, say Brazil or Thailand simply wasn’t “advanced” enough to offer credit card, auto, or mortgage loans on a scale sufficient to turn the locals into US-style debt slaves.

But that, alas, is changing as those countries adopt their rich cousins’ worst habits.

Brazil, for instance, was once seen as a Latin American success story and future world power. But then it ramped up government spending and started encouraging its people to become “consumers.” And the rest is familiar, if depressing, history.

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On Being A FOMC Member

By Alasdai Macleod – Re-Bogged From http://www.Silver-Phoenix500.com

It’s easy to criticise the Fed for its failures, because its successes have been only one in number: kicking the can down the road. But we should spare a thought for the difficulties policy-makers now face. So what would you do if you were on the Federal Open Markets Committee?

Repeatedly kicking that can has so far succeeded. However, economic conditions are changing all the time, throwing up new challenges. The next chart dramatically exposes the one issue that historically would have determined interest rate policy in advance, but is being widely ignored, even by the FOMC.

Simply subtracting M2 money from M1 money gives a running indication of bank lending. And as the chart shows, it has been growing above trend since mid-January, followed by a sudden spurt timed from early July. This requires, on the face of it, an immediate normalisation of interest rates to bring the expansion of bank credit back towards its established trend.

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Saving The Monetary System

By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com

We are told Monetary Policy is all about staving off recession and stimulating economic growth. However, not only is monetary debasement in any form counterproductive and destroys the personal wealth of the masses, but the economists who devised today’s monetarism have completely lost their way.

This article addresses the confusion surrounding this subject, and concludes the real reason for today’s global monetary policies is an ultimately futile attempt to prevent a systemic and economic crisis.

Wrong Tools For Wrong Targets

Central banks set themselves targets, such as unemployment that is deemed to be “full” – i.e. the optimal low rate that will not lead to a pick-up in price inflation. CPI is the second target, typically set at 2% per annum. The hope is that these targets will lead to sustainable growth in GDP.

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In Praise of Usury

Re-Blogged From The Economist (from 2007)

In DANTE’S “Divine Comedy”, usurers are consigned to a flaming desert of sand within the seventh circle of hell. Attitudes have since softened a bit. Microcreditors, who offer small loans to self-employed poor people, enjoy hallowed reputations. One has even ascended to the rank of a Nobel laureate. But lending to the poor is still considered distasteful whenever it is pricey, short-term and profitable. In America, for example, many activists are quick to damn “payday” lenders, who may charge high fees for offering cash advances on a worker’s next pay cheque.

Why this hostility? To profit from lending to the poor, critics say, is to prey on the most vulnerable, at their most vulnerable moment. Faced with desperate customers, loan sharks can charge well over the odds, even when the risk of default is slight. The money they proffer is often squandered on spurious consumption, critics say, rather than productive investments that would help the borrower repay his debts. Easy credit thus tempts people into a damaging spiral of indebtedness.

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