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Gold and Silver Current News Rundown

Three news stories that gold and silver investors need to know about!

1. Gold and Silver Prices Break Out!

now is the time to buy gold bars

Precious metals have made their biggest weekly gains of this year, with the gold price moving decisively back over $1,800.  Gold closed Friday (5/7) (CME) at $1,831.  That’s up from the March low of $1,673, and gold’s highest close in three months.

Silver closed Friday (5/7) (CME) at $27.48.   That’s up from its March low of $23.74.

2. The Dollar’s Global Dominance Continues to Slide!

As we have repeatedly warned, the most important trend on the global monetary front is the movement away from dollar reserves held by foreign central banks.  Now the International Monetary Fund reports that the dollar’s share of central bank reserves has fallen to 59 percent.

Twenty years ago, the dollar’s share of allocated reserves was over 70 percent.  

The IMF news release noted the obvious:  “Some analysts say this partly reflects the declining role of the US dollar in the global economy…”

We would be less interested if the trend was merely a movement away from one fiat currency like the dollar and into another fiat currency like the euro.  But central banks are adding to their gold reserves instead.

3. Government Raids Private Deposit Boxes

store gold in a private depository

In March, the FBI raided a private storage vault company in Beverly Hills.  But while its allegations were against the vault company itself, the government broke into the customer’s private storage boxes, taking all of their contents and personal possessions;

Here are a few details from an article in the Orange County Register:

Late last month, hundreds of people across Southern California woke up to a nightmare: their private security-deposit boxes had been raided by federal law enforcement. Customers of U.S. Private Vaults learned the FBI raided the Beverly Hills company after an indictment for federal crimes. More to their horror, those customers learned their precious valuables were being held at an undisclosed location and that they would need to identify themselves to the FBI to reclaim their property.

Those customers must have been gobsmacked. The government’s allegations were against U.S. Private Vaults, not them.  The indictment didn’t allege that U.S. Private Vaults customers had done anything wrong…  

But to listen to the feds, every one of the company’s customers is a potential criminal. The indictment points out that U.S. Private Vaults advertised the anonymity of its services, including the fact it wouldn’t force customers to divulge personal information. To the government, any individuals who may want anonymity cannot be “law-abiding citizens.”

So it’s little surprise that the government broke into every deposit box at U.S. Private Vaults, emptied them, and took all their contents. Now the FBI refuses to return any customer’s stuff until he or she comes forward, identifies him or herself as the box’s owner, and submits to an FBI “investigation.” In other words, people must prove their own innocence to secure their property’s return.

This might be a good time to cite the Fourth Amendment:  “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause….”

Here’s a link to the piece from the Institute for Justice.

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Six Degrees of Separation (from Financial Responsibility!)

The National Debt Ceiling!

So once upon a time long, long ago (we have heard) America had a political class that thought the country should be managed responsibly.  Many of the founders were vigilant about the new Republic and abhorred the idea of it being buried in debt.

But eventually less responsible people took over.  When it became clear the debt was burgeoning out of control, this new class thought they could create a mechanical solution to “save them from themselves.”  If they could not be trusted to craft financially responsible budgets, they would create a statute that would cap their irresponsible deficit spending for them.  This was called “the nation debt ceiling.”

But it did not take long for even more reckless politicians – if you can imagine such a thing – to drift even another degree further away from financial responsibility.  Having left behind their own duty to be accountable, they soon found it necessary to minimize the restraint of the statutory debt ceiling.  They found that they could simply “raise” the debt ceiling to accommodate their deficit spending.  

Now, it is true that raising the debt ceiling every year or two tended to shine a spotlight on the metastasizing debt and their recklessness.  Since they did not like that exposure, they came up with yet another degree of separation from responsibility.  

They decided to minimize the nuisance of frequent debt ceiling increases by simply “suspending” the debt ceiling entirely for prolonged periods.  During those periods there would be no restraint on their spending whatsoever.  Each time Washington spends more, the debt ceiling automatically increases.  In other words, there is no debt ceiling at all.

Now a new monetary fantasy is taking over.  Since the Federal Reserve is buying larger and larger shares of US debt issuance with made-up money created with nothing more than a digital keystroke on a computer, why not simply cut out the middleman?  Why should the US Treasury borrow money and issue debt instruments at all?  Why not simply let the Fed create as much money as the politicians want to spend?

That is the promise of Modern Monetary Theory, which is all the rage in Washington now.  And you cannot get more separated from financial reality and responsibility than that.

To bring the story up to date, Congress voted two years ago to suspend the national debt ceiling until July 31 this year.   

 Over the next 12 weeks you will hear a fair amount about the nation’s already unpayable debt and about the debt ceiling.  We hope this short tale will serve as a kind of playbook as you listen to the political debate.  It will make clear that the only way to have a financially responsible nation is to have responsible people making decisions.  All other measures are simply added degrees of separation from responsibility.

When the monetary and financial system has become this far removed from responsibility, it is, as the saying goes, “every man for himself.”  

In other words, you cannot trust the system to protect your money and your wealth.  You must do so for yourself.  The bitter lessons of history teach that that is best accomplished by acquiring gold and silver.

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Hyperinflation, Anyone?

Just a short message today to let you know that in establishment financial circles the term “hyperinflation” has popped up.  

In a post last week, Temporary Inflation, we pointed out that — unable to deny that prices are rising throughout the economy – the Fed and the Biden administration have begun using the talking point “transitory.” 

It is a meaningless term.  All inflation is transitory.  It always ends sometime.  It may end in the destruction of an entire nation and its economy as it has in so many times and places, but it always ends.

But now we have seen the ante raised by a major bank with the introduction of the term “transitory hyperinflation.”

Last week a Bank of America/Merrill Lynch analyst, took note of the huge spike in the use of the term “inflation” in earnings calls from S&P 500 companies (see chart).

The head of US Equity & Quantitative Strategy at BofA wrote that this points to “at the very least, “transitory” hyperinflation ahead.”

Hyperinflation is not a term tossed around lightly.  The term hyper comes from Greek, meaning over or above.  One might say someone is hyper-sensitive or hyper-active.  It is a mistake to try to pronounce that some fixed level or inflation rate is hyper-inflation.  It is an attempt to ape the physical sciences in which measurements have quantifiable meanings.  Like the temperature at which water freezes or boils.

But hyper-inflation is not a particular number.  It is a prevailing monetary condition.  You know it when you see it.  Double-digit US inflation in the 1970’s, as destructive as it was, was not considered hyper-inflation.  

Hyper-inflation ruins entire countries and destroys economies.  In hyperinflation, people catch on to what is being done to the money.  They become desperate to exchange the failing currency for anything tangible that has real value.  The financially sophisticated prey upon the naïve.  Nobody enters into transactions expecting to deal fairly; everyone is hoping to use superior knowledge or guile to exploit someone else.  

Hyper-inflations pave the way for even more criminal government, as can be seen in the experiences of Germany and France.  They usher in a war of all against all.

And they leave ruination in their wake.  

The best protection is owning gold and silver.

It is not a good thing that a major financial institution sees hyperinflation ahead.  Even if they try to soft-pedal it by calling it transient.

We urge you to find out more.  Speak with a gold and silver professional at Republic Monetary Exchange today.

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Six Trillion Dollars

That is what President Biden has spent or intends to spend to get a long-term lease on the White House and the Capitol.

Add it up yourself.  First there was $1.9 trillion in “stimmy” spending.

Then he followed up with his $2.3 trillion “infrastructure” boondoggles bill.

And then he announced the $1.8 trillion “families” initiative.

And that is just the first hundred Biden-Harris days.  There are 1,361 more Biden-Harris days left! 

Oh, they are buying a long-term lease on Washington, alright.  Never mind record debt and deficits, or government trust funds running dry.  It is what politicians have been doing for generations:  buying their offices by spending your money.  It is really a pretty good trick.

Biden may pull this flim-flam off, even as the country is already struggling under unpayable debt.  (If the debt were not already unpayable, the Fed would not have had to print trillions of funny money dollars to buy US Treasures and keep the debt funded).

Climbing out of the depths of the Covid shutdown, reminds us of the song about being down so long, everything looks like up.  And then there is the druggie high of all the stimmy money providing a rush of prosperity euphoria to the public.

Serving in a senior capacity with three presidents, Nixon, Ford, and Reagan, Pat Buchanan has seen these fights close-up.  With his practiced eye, he says it is likely the Biden-Harris people with get what they want:

“We are coming out of the economic free fall of 2020 and the pandemic that produced it.

“COVID-19 infections, hospitalizations and deaths are fractions of what they were at the height of the pandemic. Vaccinations, while tapering off, continue in the millions daily.

“And all those billions of federal dollars sloshing through the economy are going to make tens of millions of Americans feel better.

“While the TV audience for Biden’s address tilted Democratic, the 85% approval of his speech in one poll, along with the 75% who said it made them more optimistic about America, suggest that this is Biden’s moment.” 

Meanwhile the small, but once active coalition of congressmen who were thought of as deficit hawks, fiscal conservatives, a few from both parties, have been missing in action.  

There may still be enough resistance to trim Biden’s wish list a little, but not enough to turn back the socialist armies running America now.

David Stockman puts it like this: “The denizens of the once-and-former party of the old-time fiscal religion are waking up this morning to wonder what hit them.

“After all, how do you compete with free maternity leave, free childcare, free pre-school, free elementary and secondary education, free community college, nearly free university, virtually free ObamaCare, free elderly care and, to boot, after $3,600 per child tax credits, essentially no income taxes at all for upwards of 75% of adult Dem voters?

“That is, the Dems are going with universal free stuff for all while the going is good.”

Apparently, the economic lab experiments in the Soviet Union, North Korea, East German, Cuba, and Venezuela have not been enough.  The American people have not learned from all that bitter experience that socialism creates poverty and ruins nations.

Gold set its last high over 9 months ago.  We do not know the day or the hour when it will break out again, but we are staring right into the death-pocked face of prosperity and currency-killing policies.  Fortify your gold and silver positions now, because the longer the consolidation, the bigger the breakout.

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Temporary Inflation

The Federal Reserve Board held its regular two-day monetary policy meeting this week (4/27-28), after which it issued its regular post-meeting statement:

“Inflation has risen,” it read, “largely reflecting transitory factors.”

Transitory?  Where have we heard that before?

The Fed has created $3.6 trillion out of thin air since the January 2020.  All that money must go somewhere.  Monetarists like Milton Friedman have maintained that it could take many months for newly created money to work its way into prices in the consumer economy.  Initially it was seen levitating stock prices and suppressing interest rates.  Now we see it in the price of houses, groceries, and other commodities.  

By what theory can this be called temporary?  Typically, when consumer prices begin to rise, people and businesses begin to anticipate still higher prices ahead.  They change their spending habits and pricing policies accordingly.  Eventually prices begin to climb even faster than the rate of money printing.

The Fed decided to keep interest rates near zero.  And to making the “transitory” talking point even more absurd, it announced that it will continue purchasing bonds at the current rate of $120 billion a month.

Chairman Jerome Powell held the regular post-meeting press conference during which he insisted that ““an episode of one-time price increases as the economy re-opens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation.”

Okay.  This is the Fed that misses all the big turns in the economy and does not ever seem to recognize the bubbles it has inflated itself – until it is too late, and the damage has been done.  

Here, for example are quotes from interviews of former Fed Chairman Ben Bernanke.  Bernanke demonstrates complete cluelessness when asked about the housing bubble the Fed created:

July 2005

BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.

February 2007

BERNANKE:  Our assessment is that there’s not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy. And the lending side of that still seems to be healthy

But here is Powell’s outlook, press conference remarks that may haunt him in the years to come:

April 2021

POWELL:

Asset valuations appear “frothy,” admitted Powell, but he did not see any risks that may hurt the financial system; and “Leveraging the financial system is not an issue.”  

We shall see.  In the meantime, a $4 trillion explosion in money created by the Fed out of thin air should be warning enough to fortify your gold and silver positions for the days ahead.

The Fed Open Market Committee’s statement winds up with this: “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”

Yet inflation is not like a light switch that Fed officials can turn off with a flick of the wrist.  After an unparalleled money-printing spree, consumer prices are only beginning to show the effects.  Powell and Company have no idea what they have unleashed.

David Stockman reacted to the Fed and Powell this way: “These people are incorrigible. The Fed heads are driving the financial system to the very edge of monetary Terra Incognito, but they are still supremely sure that the inflation roaring up the supply chain is “transitory.”

Contact a Republic Monetary Exchange precious metals professional.  Fortify your gold and silver positions.

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Inflation is Here

Earlier this year we wrote in this space that if you visit the grocery store and discover food prices seem to be rising, contact a Republic Monetary Exchange professional right away and take steps to protect yourself with gold and silver.  

Because the value of the dollar is going down.

Now the news is coming in thick and fast.  Here is a CNBC story (4/27): 

February home prices see the biggest gain in 15 years, S&P Case-Shiller says.

Nationally, prices in February rose 12% year over year, up from 11.2% in January, according to the S&P CoreLogic Case-Shiller home price index….

The 10-city composite rose 11.7% annually, up from 10.9% in January.

The prices in the housing index are two months behind, but report prices still rising even as interest rates trended higher.  

The housing component of consumer prices shows just how far from reality the official Consumer Price Index numbers may be.  The Bureau of Labor Statistics does not count home prices in the CPI. It maintains that if one owns a home, it represents a capital good and not a consumption item.  But since shelter is a consumption item, it must include shelter in some form.  So, it has cooked up something it calls “Owner Equivalent Rent” instead. The BLS asks homeowners how much they think someone would pay to rent their home unfurnished and without utilities.  

How homeowners are supposed to know, it does not say.  It is using unfounded speculation and opinion from laymen to determine a major component of the CPI.  It is all very fanciful and reveals part of the reason why the government’s inflation numbers do not seem to match what people actually encounter. When it reported a 0.6 percent increase in consumer prices in March, the biggest monthly jump in more than nine years, it may have seriously understated real-life conditions.  Wolf Richter says using the Case-Shiller home price number would generate a year-over-year CPI not of the reported 2.6 percent, but of more than 5 percent.

However, it is in the government’s interest to keep the CPI numbers low.  Higher numbers reflect badly on the political classes and are used to index Social Security Cost of Living Increases (COLA) and other costly benefits.  

Enter Economist John Williams.  His consulting service and website ShadowStats offers an alternative to government inflation statistics.  He writes, “the ShadowStats Alternate CPI-U estimate restates current headline inflation so as to reverse the government’s inflation-reducing gimmicks of the last four decades, which were designed specifically to reduce/ understate COLAs.”  The ShadowStats alternate calculation finds that the year-over-year inflation rate in March was up a hair-raising 10.4 percent as compared to the 2.6 percent official BLS report.

Meanwhile, here is a Bloomberg News story from just a few days ago (4/23):

The Grocery Price Shock is Coming to a Store Near You!

This week, the Bloomberg agricultural spot index – which tracks key farm products – surged the most in almost nine years driven by a rally in crop futures….

Overall, global food costs have surged for 10 straight months, the longest rally in more than a decade…

When people notice they are being victimized by inflation, gold and silver prices begin to move higher, sometimes quite suddenly and dramatically.  So let us repeat our recommendation from earlier this year:  

If you visit the grocery store and discover food prices seem to be rising, contact a Republic Monetary Exchange professional right away and take steps to protect yourself with gold and silver. 

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Gold News and Nuggets: April 2021

INFLATION EXPERT SEES “MUCH MORE” HEADED OUR WAY!

“It’s as clear as the nose on your face!”  

That’s what Steve Hanke says about the inflation headed out way.  Hanke is a leading inflation expert, an economics professor at the Johns Hopkins University and the director of the Troubled Currencies Project at the Cato Institute.

“The dramatic growth in the U.S. money supply, when broadly measured, that began in March 2020 will do what increases in the money supply always do,” says Hanke.  

Hanke uses a monetarist model to estimate the lag between monetary creation and it’s appearance at the level of consumer prices.  “Money growth will lead in the first instance (1–9 months) to asset-price inflation. Then, a second stage will set in. Over a 6–18-month period after a monetary injection occurs, economic activity will pick up. Ultimately, the prices of goods and services will increase.”

“In response to the COVID-19 pandemic in March 2020, the growth rate in M4 [a measure of notes and coins in circulation plus bank accounts] began to skyrocket. By the end of 2020, it was growing at 28.9 percent per year, the highest year-end rate since 1943…. it should be obvious, even to the untrained eye, that the recent March year-over-year CPI inflation rate of 2.6 percent is simply a harbinger of what is coming in the future: more inflation.”

THE FRUITS OF INFLATION:  FROM ERNEST HEMINGWAY

Almost a hundred years ago, during the ruinous German inflation, Ernest Hemingway and his wife Hadley left Paris for a hiking and fishing tour in Germany’s Black Forest.  The summer trip was made affordable because at that point the exchange rate for the German mark was 605 to the dollar, down from 320 in the first half of the year.  By 1923 it would be much, much worse.

Years later Hemingway called upon the details of this 1922 trip for a passage in his famous story The Snows of Kilamanjaro:

There were birches along the stream and it was not big, but narrow, clear, and fast with pools where it had cut under the roots of the birches.  At the Hotel in Triberg the proprietor had a very fine season.  It was very pleasant and we were all great friends.  

The next year came the inflation and the money he had made the year before was not enough to buy supplies to open the hotel and he hanged himself.

MISH ON GOLD: “THIS IS ONE OF THOSE TIMES!”

Michael Shedlock, “Mish,” is one our favorite market commentators.  Here is a note from MishTalk.com just days ago:

“Long time readers know that I have never issued a sell recommendation on gold….  

“I have been [holding] gold since it was $300 or so. Occasionally I trade some for silver or even equities and have written about gold-to-silver swaps a couple of times.

“Although I have not said ‘sell’, on some occasions I do step up to the plate and suggest ‘now is a good time to buy gold’.

“This is one of those times.”

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They Bought Their Freedom with Gold

Maybe there is something to the idea of a national memory, the experiences of a people or a country that affect its outlook for a generation or more. Certainly, the Great Depression had a lasting impact on its own generation, and perhaps own their offspring who heard about the travails of those years so many times.

The memory of the brutally ruinous monetary inflation of Weimar Republic Germany a century ago, the calamity that paved the way for Naziism and Hitler, seems to persist in German’s nation memory.  Many have commented at the aversion policymakers in Germany have to monetary destruction.  And in the current environment even Germany has repatriated gold it had stored in London and New York, even as it has added gold to its central bank reserves.  Just last year Germans stood in line outside gold dealers to buy physical gold before the imposition of new bureaucratic regulations on gold buyers.

Here is another example.  After the communist takeover in Vietnam in 1975, a humanitarian refugee crisis developed that lasted more than a decade.  It is best remembered in the plight of “the boat people,” a mass exodus of perhaps 800,000 people on ships, boats, junks, and rafts, all fleeing the slaughter, torture, and “re-education camps” of the victors.  Altogether, twice that number of Vietnamese, 1.6 million eventually resettled outside the country.

Most just escaped by any means they could.  

Those that had gold were among the fortunate.  The new government sold exit permits to some, bribes that often had to be paid in gold.  

Hundreds of thousands of boat people died at sea.  Those that survived the rough open seas faced robbery, rape, and death at the hands of pirates.  The United States took in more than 400,000 of the boat people.

  While coinage in the form of round disc shapes is the “coin of the realm” for gold in the West, gold in other minted forms has been popular in Asia.

Vietnamese Tael

In the second half of the 1970s, after the exodus of the boat people and other Vietnamese refugees, many American gold dealers began to encounter Vietnamese “taels”.  These were slim wafers of pure gold that had served as a currency in Vietnam.  Generally wrapped in rice paper, one tael consisted of 37.8 grams of gold. 

Gold taels bought freedom for many Vietnamese.  Others were able to use taels to reestablish their households and livelihoods in their new homelands. 

The importance of gold in a crisis is remembered to this day in Vietnam.  Just this week, the World Gold Council reported that a new survey has found that 72 percent of investors in Vietnam own gold.  A full 81 percent of Vietnamese surveyed believe gold is an important safeguard and source of security in times of political and economic uncertainty.  

It’s a part of their national memory.

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Sketchy Government Accounting

As we write this commentary, the Treasury Department reports that the US national debt is $28.168 trillion.  

That’s a lot of wampum!

A year ago, it was $24.461 trillion.

A year earlier, in April 2019, in was $22.027 trillion.  

The debt has been growing fast, up by more than $6 trillion in two years!  If only that were the whole story.  

Sorry, but it is not the whole story.  The real debt is much, much larger.  The real national debt now exceeds $123 trillion, more than four times the officially reported number. 

And that works out to about $800,000 per taxpayer.

The non-profit organization Truth in Accounting (TIA) takes a dim view of sketchy government accounting.  That is because the government does not account for its promises and obligations in the same manner that federal law requires of public companies.  So, TIA looks at promises that government has made, promises upon which people depend, but which are not funded.  Things like Social Security and Medicare benefits and federal employee retirement provisions.

If you think that the US economy can keep functioning at today’s level if peoples’ Social Security benefits fail – benefits they count on to pay their mortgages, power bills, and for groceries – then read no further.

But in fact, 64 million people receive Social Security benefits.  All the people they do business with and all the people who do business with those who do business with them depend to one degree or another on those payments.  

It’s like the game Jenga where you pull out one block at a time until the whole thing topples over.  Truth in Accounting President Sheila Weinberg puts it into perspective with this anecdote paralleling the problem of politicians and unfunded government liabilities:

“For years you have hired people to do work around your house. Instead of paying them in full every year, you use the money to buy holiday gifts, so that you are popular with your friends. Each year you tell your household workers that your children will pay the balance you owe, when they grow up. 

“Have your budgets been truly balanced?”

The choices the government has to deal with its debt are painfully few.  Most are utterly inadequate.  In 2012 presidential candidate Mitt Romney thought he could make a dent in the problem by getting rid of public TV and Big Bird.  

There is really only one alternative:  painful, slow-motion debt repudiation through inflation.  Recipients will still get their Social Security automatic deposits… which they can spend on cat food.

Of course, none of this had to happen, but the political classes thought they could replace honest accounting with sketchy accounting, and real money with unbacked paper money.  

It fooled some of the people some of the time.  But you can’t fool all of the people all of the time.  

If you have had enough of them trying to fool you with fake accounting and fake money, speak to a Republic Monetary Exchange specialist about how to protect yourself with gold and silver.

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Gold: Behind the Curtain

The are some big things going on with gold.  Largely unnoticed developments that we would like our friends and clients to know about.

We have many times, and in many ways, explained that nations that are net acquirers of gold see their influence rise in the affairs of mankind rise.  Those that are dishoarders decline over time.

You may think that this points to China.  You are right.  We will get to that in a moment.  

But first, we want to make sure you saw a story we ran last month about Hungary adding to its gold reserves at breakneck speed!  In its latest announcement, Hungary reports its gold holding has grown from 31.5 tons to 94.5 tons Here is a link.

Although starting from a low level, Hungary has increased its gold reserves by 3,000 percent since 2018.  Because Hungary is a republic, a member of the EU, and of NATO, it can not be said that its move to hold its reserves in gold is driven by opposition to US hegemony, as might be said of Russia, which has unloaded US dollars in favor of gold. 

China gold bars

Or as might be said of China.  

There is more going on with respect to gold and China that meets the eye.  China has become the world’s largest gold producer and largest refiner of gold.  At the same time China’s official gold reserves have grown from 395 tons in 2000 to 1,948 tons in 2020.  

But that is not the whole story.  As we reported last week, noted gold economist Alasdair Macleod has learned from “quasi-intelligence sources” that China’s real gold holdings might be ten times that size, as much as 20,000 tons.  China, which has long been cagey about reporting its gold holdings, might be holding gold in accounts other than with the People’s Bank of China, including the communist party and army accounts.

Now, after having been on the sidelines during the pandemic, China has given the go-ahead to banks to resume importing billions of dollars of additional gold.  Reuters reports, “About 150 tons of gold worth $8.5 billion at current prices is likely to be shipped following the green light from Beijing, four sources said. Two said the gold would be shipped in April and two said it would arrive over April and May.”

We can say with confidence that these moves are a sign of things to come and will be reflected before long in the price of gold.  

Think of it as a word to the wise.

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Inflation Roundup

Between the (wholesale) Producer Price Index and the (retail) Consumer Price Index, inflation is the word of the day!

With the Federal Reserve printing trillions of dollars, most of which has long been levitating the stock market and now the housing market once again, it is evitable that it would also spill over into wholesale and retail prices.  Here is a sampling of headlines and observations about the surging of price inflation.

REUTERS (Washington, 4/13/21) – U.S. consumer prices rose by the most in more than 8-1/2 years in March…. The consumer price index jumped 0.6% last month, the largest gain since August 2012, after rising 0.4% in February.

REUTERS (Washington, 4/9/21) – U.S. producer prices increased more than expected in March, resulting in the largest annual gain in 9-1/2 years and likely marking the start of higher inflation as the economy reopens amid an improved public health environment and massive government aid….  In the 12 months through March, the PPI surged 4.2%. That was the biggest year-on-year rise since September 2011 and followed a 2.8% advance in February.

WOLF RICHTER (Wolf Street, 4/13/21) – The problem in the CPI is the homeownership component, the “Owners’ equivalent rent of residence,” which accounts for 24% of overall CPI. It is based on surveys of homeowners’ estimates of how much their home would rent for. And this CPI for “Owners’ equivalent rent of residence” in March rose just 2.0% year-over-year….

Had the homeownership component of CPI risen in line with the Case-Shiller index, the overall CPI would have jumped by 5.1% year-over-year – nearly double the published rate of 2.6%!

MICHAEL SHEDLOCK (TheStreet.com, 4/14/21) – U.S. import prices advanced 1.2 percent in March, 1.3 percent in February, and 1.4 percent in January.

The 4.1-percent increase from December to March was the largest 3-month rise for import prices since the index advanced 5.8 percent in May 2011. 

The price index for U.S. imports increased 6.9 percent from March 2020 to March 2021…

DAVID STOCKMAN (Contra Corner, 4/12/21) – There is no other way to say it. The Fed chairman and his demented band of money printers are so blindly, mechanistically and monomaniacally committed to the will-o-wisp of 2.00% inflation that they are willing to literally destroy the money and capital markets to achieve it.

ROBERT WENZEL (Economic Policy Journal, 4/9/21) – Rather than being a conservative steward of the U.S. dollar, Powell is like the drunk who wants to take one more drink before hitting the road. He sees no danger ahead only because he doesn’t seem capable of clearly seeing ahead at all.

Current Fed policy is one of the most reckless in the entire history of the Fed and there is not one member of the monetary policy-setting committee, the FOMC, raising any kind of significant concerns.

The Fed is going to be so slow reacting to the developing price inflation that the great danger is it could get way out of hand. 

Buckle your seat belts and hug your gold coins.

CLOSING NOTE:  We keep reading this week in stories about the death of swindler Bernie Madoff that he ran the biggest Ponzi scheme in history.

If a Ponzi scheme is – as defined – a fraud that requires ever new investments to pay off the promises of prior investments, we think the US Government should top the list.  The US is incapable of paying off today’s bondholders without selling new bonds tomorrow.  Faking $60 billion in account statements is quite a scam, but it falls far short of $28 trillion.

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What Does China’s New Digital Currency Mean for the Dollar?

Do they think we are stupid, or do US officials really mean what they say?

It’s really getting hard to tell whether they think we are just plain stupid…

OR…

… whether they are just so stupid that they believe what they say.

You be the judge.

Here is some of the background.  China is the world’s largest gold producer.  It is also the world’s largest gold refiner.  In addition to aggressively adding to its official central bank gold reserves, China is reported to have substantial additional reserves off the books, held in the name of the army, the communist party, and other institutions.

Now China has created a new cyber yuan, a government digital currency.  This is a major step toward independence from the US-controlled SWIFT global trade settlement system and away from the dollar’s global currency privilege.   As Bloomberg News writes, “The dollar’s current dominance in cross-border transactions gives the US Treasury the power to cut off much of a business or even a country’s access to the global financial system.”

The entire world has been chafing under US use of this leverage as a tool for imposing costly compliance with American foreign policy positions and sanctions.  A low-grade revolt is underway far and wide.  But the US does not seem to notice. According to the Bloomberg story, “US officials are reassured that China’s intentions aren’t to use the digital yuan to evade American sanctions, according to people familiar with the matter.”

Oh, really?  US official are “reassured”?   When China’s every move, from its gold policies, to its raft of bilateral and multilateral trade agreements that end-run the dollar, to this new digital yuan?  

Yet US officials are reassured that China is not aiming at evading American sanctions?

They whistle past the graveyard and want us to join in?  Do think we are stupid?  

Or are they too dumb to understand what is going on?

You be the judge.

For what it is worth, financial historian Naill Ferguson has concluded they just don’t get it.  He writes, “American monetary authorities [are] underestimating the threat posed to dollar dominance by China’s pioneering combination of digital currency and electronic payments.”

Whatever your verdict, when the dollar’s future is in hands like this, it is better to own gold and silver. 

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The Market News You Need to Know

Today’s key stories have to do with foreign nations aggressively adding to their gold holdings, while both the deficit and inflation are rising in the United States.


HUNGARY TRIPLES ITS GOLD RESERVES!

Hungary has added gold reserves at a record rate, tripling its central bank holdings in less than three years.

From the Magyar Nemzeti Bank’s (Hungarian Central Bank) official announcement:

“As it carries no credit or counterparty risks, gold facilitates reinforcing trust in a country in all economic environments, which still renders it one of the most crucial reserve assets worldwide…

“Taking into account the country’s long-term national and economic policy strategy objectives, the Magyar Nemzeti Bank decided to triple its gold reserves. Managing new risks arising from the coronavirus pandemic also played a key role in the decision. The appearance of global spikes in government debts or inflation concerns further increase the importance of gold in national strategy as a safe-haven asset and as a store of value. 

“As a result of this decision, the country’s gold reserves have been raised from 31.5 tons to 94.5 tons….”


THIRD LARGEST MONTHLY US DEFICIT IN HISTORY!

March was another blow-off month for the US deficit.  The Congressional Budget Office reports a $658 shortfall for the month.  

It is the third largest monthly deficit in US history, coming in behind the record COVID shutdown deficits in April and June last year.

For the first six months (October 2020 – March 2021) of the current fiscal year, the government ran a $1.7 trillion river of red ink.  

That is almost $1 trillion more than the same six months a year earlier.


INFLATION WATCH

We aren’t surprised by the big increase in producer prices in March.  We have been reporting on Fed activities and warning that inflation is making a big comeback. 

But establishment economists were apparently shocked when the producer price index for March came in twice as high as their forecasts.

The Bureau of Labor Statistics’ final demand index showed a 1.0 percent increase for the month of March. That compares to economists’ expectations as reported by Reuters of only 0.5 percent.

It was the biggest annual gain in 9 ½ years.  For the 12 months through March the PPI was up 4.2 percent.


CHINA’S HIDDEN GOLD RESERVES!

Comments by noted gold researcher Alasdair Macleod:

“America has promoted her dollar basically by demoting gold.  And yet we have the Chinese and Russians who have taken control of the physical markets, particularly China….

“They also have a lot of hidden reserves.  Not only has China become the largest miner, not only has she become the largest refiner of her own gold, but I reckon (and I have had some confirmation on this from quasi-intelligence sources), that China has stored something like 20,000 tons of gold, physical gold in various accounts.  They don’t appear in the central bank accounts, but we’re looking at the Communist Party accounts, the Army accounts, the young communist party’s accounts [the Communist Youth League].  It’s spread around. 

And I suspect that Russia is in a similar situation.”


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More on the Silver Shortage Situation

The reality on the ground for silver can be expressed in one word:  shortages.

The price of real, physical silver remains disconnected from the “spot,” or paper benchmark prices.  

It is a little like the old Soviet Union, where the posted prices in stores might have been low, but the shelves were all empty!

That is because those prices were not real.

Today there are shortages in both the gold and silver markets.  As we reported recently, even the US Mint has been affected by the divergence between the real physical gold and silver prices and the benchmark paper or “spot” prices.  The Mint has been unable to acquire enough bullion at benchmark or spot prices to meet investor demand for both metals (see US Mint Can’t Meet Demand for Gold and Silver).

While there are issues with both gold and silver paper markets, the silver shortages are the most pronounced.  

We believe that these industry-wide shortages will be resolved by much higher prices.  

Because Republic Monetary Exchange anticipates conditions like this, we still have physical gold and silver available for immediate delivery.  

You should know that the situation appears to be getting worse.  It is not limited to just the United States.  Just the other day we were alerted that Britain’s largest bullion dealer is running out of real silver for delivery.

The advice in the trades is for people to convert paper silver investment vehicles to real physical silver while you can.   

In the meantime, other dealers are unable to make delivery to their clients in a timely manner.  Many are asking their clients to pay them today for silver that will be delivered at some unspecified time in the future.

We strongly recommend against that.  At Republic Monetary Exchange, we subscribe to best practices for our client’s protection and profitability.  And that includes immediate delivery of gold and silver when you buy and immediate payment when you sell.

Speak with a Republic Monetary Exchange gold and silver specialist today.  Take steps to protect yourself and your family with real precious metals.

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When the Government Criminalized Gold Ownership

I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations….

Whoever willfully violates any provision of this Executive Order or of these regulations or of any rule, regulation or license issued thereunder may be fined not more than $10,000, or, if a natural person, may be imprisoned for not more than ten years, or both; and any officer, director, or agent of any corporation who knowingly participates in any such violation may be punished by a like fine, imprisonment, or both.

It was 88 years ago this week that the US government made it a criminal offense for American to own monetary gold.

Our thanks to Tho Bishop at the Mises Institute for reminding us of the infamous anniversary.  Bishop writes:

“The order was one of the several disastrous responses to the Great Depression that succeeded in escalating the financial crisis. Later in the year, the US Congress would pass a resolution retroactively supporting the legislation; however, it was the determined autocratic leadership of FDR that made way for these unprecedented measures. It would be a crime for Americans to hold gold for over forty years, until President Gerald Ford reversed the order in 1974. 

“This episode has several lessons for the current financial environment, particularly given the acceleration of tyranny-by-expert rule that has taken over much of the worst this past year.

Franklin Delano Roosevelt, 1933

“The underlying legislation that evoked by FDR’s executive order was the Trading with the Enemy Act of 1917—a by-product of World War I—despite the fact that the US was in no way in a period of war in 1932. Similarly, we have seen war on terror–inspired financial legislation increasingly used against American citizens. For example, in the name of “fighting terrorism” the US PATRIOT Act significantly increased know-your-customer laws, empowering federal regulators to use the traditional banking system to better track the economic behavior of American citizens.”

The objective of Roosevelt’s gold grab was twofold: first, to devalue the dollar then and there, and then to get gold out of the way.  Gold’s role in the monetary system acted as a brake on the Fed expansion of money and credit and the endless growth of the State.  It was an impediment to deficit spending that had to go.  Gold had to go because it made the individual’s financial well-being dependent upon himself, instead of upon State benefactors and the decrees of the monetary authorities.  It was a bulwark against the erosion of property and individual rights.  Gold had to go.

Roosevelt’s action was a brazen affront to free American people and an assault on the Constitution itself.

To this day it reminds us that private ownership of gold is not just a means of protecting our individual wealth and prosperity.  It is an assertion of the liberty that the founders, great men like Washington, Franklin, Jefferson, and Madison, intended for the new American republic.

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Congressman Stands for Constitutional Money; Stands Against Money Printers

With a couple of currency management exceptions along the way, China has mostly encouraged its citizens to acquire gold.  The central bank of China has been busy stockpiling gold as well.  

China seems to understand the age-old lesson that nations that are net acquirers of gold rise in economic might.  Those that dishoard their gold lose their vitality. 

What a contrast China’s attitude is to the US where globalist government has squandered so much of the peoples’ gold.  Some it gave to the sketchy, crony International Monetary Fund.  Bad move.  More of the peoples’ gold the Treasury auctioned off in a failed attempt to suppress the gold price.  Another bad move.

Here is a rule of thumb that has stood up well throughout the ages: if the government doesn’t want you to own gold, its probably a good time to buy more.  

Issuers of fiat currencies are always hostile to gold and must suppress it at the first hint of a challenge.  After all, the money printing flim-flam works by the State appropriating some of the value of the currency.  If people are wise to the game and refuse to hold the State’s currency, there is no one to fleece.  

That is why tax policy is hostile to gold and silver.  They represent superior competitors to dollars that roll right off the digital printing press by the trillions with nothing more than a computer keystroke.  

As we are becoming fond of saying, they cannot print gold and silver!  

Now one congressman has decided to do something about the State’s financial engineering of individuals.  Just days ago, Representative Alex Mooney (R-WV) introduced legislation to remove all federal income taxation from gold and silver coins and bullion.

“My view, which is backed up by language in the US Constitution, is that gold and silver coins are money and are legal tender,” said Mooney.  If they are indeed U.S. money, it seems there should be no taxes on them at all. So, why are we taxing these coins as collectibles?”

Mooney’s bill, the Monetary Metals Tax Neutrality Act, states that “no gain or loss shall be recognized on the sale or exchange of (1) gold, silver, platinum, or palladium minted and issued by the Secretary at any time or (2), refined gold or silver bullion, coins, bars, rounds, or ingots which are valued primarily based on their metal content and not their form.”

The text of the H.R. 2284, the Monetary Metals Tax Neutrality Act can be found here.

We note that this is not the first measure that has attempted to address the issue. We have watched similar measure fail over the years, and in fact this is a re-introduction of the Monetary Metals Neutrality Act.  It has been assigned to the House Ways and Means Committee.  If the past, as is often said, is prologue, the measure will die there.

We will keep an eye on it.

The Eroding International Dollar

A Key Reason to Own Gold!

The US dollar’s share of global currency reserves continues to fall.

One financial blogger headlines the story with this question: “Central banks getting nervous about the Fed’s drunken Money Printing and the US Government’s gigantic debt?”  (WolfStreet.com)

Of course, they are getting nervous.  

The dollar’s share of global reserve functions has eroded from 85 percent in the 1970s.  It is now down to 59 percent, off seven percent since 2014.

Because we believe that the erosion of the dollar reserve function is one of the most decisive developments in the financial world, we have reported on it along the way.  

We tracked Russia’ almost total abandonment of its dollar reserves in favor of gold, writing in 2019 that “Russia, seeking to protect itself from a dollar crisis, continues to reduce its holdings of US Treasury bonds while beefing up its gold stock at an accelerated pace.  

“The Bank of Russia, the central bank, bought 8.8 million troy ounces of gold in 2018, increasing its total gold holdings by 14.9 percent.”  See Russia Adds Gold, Surpasses China… (For Now!) 

In 2919 we wrote, “Like Russia, China’s gold acquisitions can only be described as aggressive.  From 1,054 tons in June 2015, it now boasts reserves of 1,852.  

“In other words, China has grown its official gold holdings by 75 percent in 3½ years.”  See China Adds 10 Tons of Gold to Its Reserves in December.

More recently, we pointed out that the US foreign policy establishment is shooting the dollar in the foot with its promiscuous reliance on sanctions as a primary tool of foreign policy.  We cited a New York Times story that found increasing resistance to US sanctions and the development foreign account settlement options that bypass US control.  See Where Does the World Turn to as it “De-Dollarizes? 

Wolf Street writes, “The US dollar’s status as the dominant global reserve currency is a crucial enabler for the US government to keep ballooning its public debt, and for Corporate America’s relentless efforts to create the vast trade deficits by offshoring production to cheap countries, most prominently China and Mexico.

Talk to a Republic Monetary Exchange precious metals professional about the reasons why gold and silver are your best defense against the declining role of the dollar.

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Biden Goes for Broke

Biden intends to send federal spending to levels not seen since World War II.

He is doing so at a time that federal debt is already about 129 percent of gross domestic product.

Biden announced the $2.3 trillion dollar plan last Wednesday.  It is described as providing funding for bridges and roads, expanding access to high-speed internet, improving public transit, and encouraging the adoption of electric vehicles.   It is not described as a plan to stovepipe money to the politically correct and the politically connected.  

But it is.  It’s a politician’s fantasy come true.

There is still another shoe yet to drop.   The infrastructure measure is the first of a two-part plan that the administration will seek to move through Congress.  A second plan, to be revealed in April, focuses on remaking American life by escalating the State’s role in childcare, healthcare, and education.  It is not described as a means to stovepipe taxpayer money to a vast new social engineering scheme.

But it is.  It is collectivist’s fantasy come true.

Biden’s plan rests on raising corporate tax rates 21 to 28 percent.  This will make its way to price increases on the goods and services American corporations provide.  Fueling further price hikes at a time that there is widespread fear that inflation is beginning to reassert itself is particularly tone-deaf.

Accordingly, the people will pay more for the necessities of daily life.  State cronies will fill their pockets at the end of the Biden pipeline.

As the Biden plan advances you will hear like a constant drumbeat the talking point that the measure will so unleash America’s productive might that it will pay for itself.  That has been the ceaseless mythology of State for years: that we can spend our way to prosperity.  But if all the constantly rising state spending and intervention in the economy pays for itself as alleged, how has the national debt grown to $28 trillion?  

(See our posts on “the marginal productivity of debt,” Doom Loop, Part I and Doom Loop, Part II.)

The non-partisan Committee for a Responsible Federal Budget address this very issue:

“As the details come out, you’ll hear advocates claim these new investments will actually pay for themselves through new growth or that deficits don’t matter. That was not true during the 2017 tax cut debate and it certainly is not true now.

“Investing in reliable and resilient infrastructure can help the economy, but the research is clear that the return is fairly modest. In fact, analysis from the Congressional Budget Office and Penn Wharton Budget Model suggests that returns on debt-financed infrastructure investments could well be negative.

“Since the start of the crisis, we have taken on more than $5 trillion in debt to fight COVID, with much of it being justified. But we also borrowed nearly $5 trillion before the crisis for tax cuts and spending increases that were not justified. We are becoming dangerously numb to borrowing massive amounts of money.

“Strong nations borrow when necessary, not when it is politically convenient. It is important for the future health of the economy that we are willing to pay for our priorities.”

The US national debt is already unpayable.  As the government, boondoggles, crony capitalism, debt, spending, and money-printing all grow, gold and silver provide a time-tested means of withdrawing from the doom loop.  Speak with a Republic Monetary Exchange professional today.

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US Mint Can’t Meet Demand for Gold and Silver

Republic Monetary Exchange Continues to Provide Immediate Delivery!

The US Mint has been unable to meet strong demand for US gold and silver Eagle coins this year.

Numismatic News has learned that the US Mint has not been able to acquire enough gold and silver bullion at the widely quoted benchmark spot or “paper” gold prices to meet the market’s demand for the popular coins it produces.

That means the “spot” or “paper” prices do not accurately reflect actual supply and demand conditions for real physical gold and silver.  The prices of real precious metals and paper instruments have diverged.

According to Numismatic News, “The U.S. Mint thus far in 2021 has been unable to produce sufficient gold and silver American Eagles to meet continuing strong public demand. Retailers are now often quoting delivery days of as much as three to four weeks after payment or have often been forced to stop selling these coins altogether.

Gold American Eagle Bullion Coins US Mint

So, while the US Mint cannot meet demand, some dealers are taking money and promising delivery sometime, somewhere down the road.

They say pay them now, but it will be weeks before they can come up with your silver.  

We strongly advise against doing business on that basis.  At Republic Monetary Exchange we subscribe to best practices for our clients’ protection and profit.  We anticipate changing market conditions, so we have both gold and silver available for immediate delivery.  On the spot.

Numismatic News reports that the shortages for physical gold and silver “have been rampant for more than a year now.”

We believe that chronic shortages of actual physical gold and silver mean that higher prices are right around the corner.  This is especially so in the current environment with demand for both US gold and silver bullion coins surging.

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Silver and Gold Eagles from the US Mint

Numismatic News:

“In the year 2018, the U.S. Mint sold 245,500 ounces of gold among the four sizes of the bullion-issue gold American Eagles. In 2019, sales of these four coins fell to 152,000 ounces. With the surge in gold prices last year, sales rose to 844,000 ounces. Through Tuesday this week, the Mint’s year-to-date sales of these gold American Eagles were 387,500 ounces.

“The news was similar for the bullion-priced silver Eagle dollars. Mint sales in 2018 totaled 15,700,000, another 14,863,500 in 2019, jumped to 30,089,500 in 2020 and was at 10,288.500 in 2021 year-to-date as of Tuesday this week (March 16, 2021).”

Speak with a Republic Monetary Exchange professional today.   What do we mean by “best practices and policies for our clients?” It means immediate delivery of gold and silver on the spot.  No waiting.  No risk.  And when you need to liquidate, get immediate payment as well.

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Things Just Got Much Worse for the Global Dollar

Mark this moment as one when the fate of the global currency reserve dollar took a turn for the worse.  The Washington foreign policy establishment just drove its most important adversaries into a marriage of convenience with one another, binding them together in a defensive union against US global hegemony and hastening the end of the dollar’s special privilege.

No more slow-walking.  The dollar will now begin racing to its fate.  

Although they have been divided by a 2,600-mile border that has come close to erupting into open warfare in the past, today Russia and China have mutually agreed-upon boundaries and the countries are key trading partners.  (Vladivostok, the Russian port city on the Pacific may long be in contention; it is closer to Japan than to Moscow. But for now, it is a back-seat issue.)

Russia has always been on the frontline of the battle against Islamic terror and expansionism, a role that might have been exploited more wisely by the West over the last generation.  The irony is that it is the US foreign policy establishment that has sought to drive a wedge between Russia and the West, driving Russia into China’s arms, foolishly creating a new power-bloc.  China and Russia’s mutual cooperation is all the more notable today as US diplomatic influence around the world wanes.  

Now hard on the heels of the failed US-China summit in Anchorage, the foreign ministers of China and Russia, Wang Yi and Sergey Lavrov met.  No matter one’s viewpoint on foreign affairs, Lavrov must be regarded as one of the most skillful diplomats of our time:  well-informed and insightful, measured and unflappable, candid and well-spoken.  

Accordingly, it is important to take note of Lavrov’s remarks in which he clearly called for moving away from the dollar in international trade now:

“The United States has declared limiting the advance of technology in Russia and China as its goal. So, we must reduce our exposure to sanctions by strengthening our technological independence and switching to settlements in national and international currencies other than the dollar. We need to move away from using Western-controlled international payment systems.” (Emphasis added).

We are not positioned to make foreign policy.  Our job is to help our friends and clients protect themselves and profit from events beyond our control.  But it appears to us that what we are witnessing on the international stage is something out of Sun Tzu’s The Art of War: attack your enemy when he is weak.   Because of the weakness implicit in the metastasizing of US debt and the ballooning of trillions of unbacked Fed dollars, this explicit challenge to the dollar’s global reserve comes at a time of maximum impact.  

We have written about de-dollarization many times. In December, we noted a Financial Times piece on the history of world currency reserves. It wrote:

Before the U.S., only five powers had enjoyed the coveted “reserve currency” status, going back to the mid-1400s: Portugal, then Spain, the Netherlands, France and Britain. Those reigns lasted 94 years on average.” 

Now the dollar has had about a 100-year run as the go-to currency.  That is about as long as any reserve currency seems to last.  

But while national currencies come and go, gold endures.  

We invite you to speak with a Republic Monetary Exchange gold and silver specialist to find out why owning precious metals is your first line of defense against global de-dollarization.

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The Inflation Chickens are Coming Home to Roost

Big Changes are Coming to America

“The best way to destroy the capitalist system is to debauch the currency.”

Attributed to Lenin by J.M Keynes

Now that the currency is being debauched, get ready for the reshaping of America!  

From the New York Times:  

“[President Biden’s} advisers are preparing a set of proposals intended to reshape the U.S. economy and other parts of American life (emphasis added).  If they pass, they will almost certainly have a more lasting effect on people’s lives than the virus-relief bill that Biden signed two weeks ago. And while the proposals include measures on health care and taxes, they are broader — more diffuse, a critic might say — than the top priorities of other recent presidents.”

In addition to the infrastructure portion of the measure which is sold as mostly funding for highways, roads, bridges and government buildings, but is also windfalls for cronies, boondoggles for politicians, and above market pay for political constituencies, the New York Times says the Biden spending measures include funding for monthly payments to people who have children, “as well as a big expansion of paid family leave,” the expansion of Obamacare, making “pre-K universal for both 3- and 4-year-olds, through federal funding of local programs, and increasing funding for community colleges.”

And that is before all the log-rolling and vote-buying that goes on in what used to be called the world’s greatest deliberative body.

To sum up, the US has spent $6 trillion on boondoggle-laden stimulus/bailout measures since COVID-19 arrived on the scene.  And there is more of that kind of spending to come…

… further debauching the dollar.  From Thesaurus.com, here are a few synonyms for “debauch” that fit its application to a currency:  abuse, betray, bastardize, ruin, subvert, vitiate.  

And now the inflation chickens are coming home to roost:

From the Wall Street Journal:

“Lumber, one of the biggest costs in home-building after land and labor, has never been more expensive and is more than twice the typical price for this time of year. Crude oil, a starting point for paint, drainpipe, roof shingles and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout houses, costs about a third more than it did in the autumn.”

Today, instead of another chart of the spending, debt, and money printing, we’ll let a picture speak a thousand words.  The price of lumber, at an all-time high, is reported by the National Association of Homebuilders to be adding $24,000 to the price of a typical home.  

See for yourself:

When a wide spectrum of prices starts to climb, it is generally because the currency is being debauched.  When the currency fails, it threatens not just the economy, but the entire social order and the rule of law.  Informed people must take steps to protect themselves.

Own gold yet?

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This is “Bad Stuff” Says Steve Forbes

“Tighten your seat belt!”

That is the advice from publisher and one-time presidential contender Steve Forbes.  H is the editor-in-chief of the business magazine Forbes.

“This is bad stuff, this massive printing of money,” says Forbes.  

Forbes has always understood that gold needs to have a place in the monetary system.  Otherwise, the politicians are undiscipline and unrestrained.  

If they are not tied down to the earth, they go floating away into economic outer space.

Commenting on the Biden agenda on Newsmax TV earlier this year, Forbes warned that Washington is ignoring the real problem.  “The real danger is printing money,” Forbes said. “That’s going to lead to inflation. I’m surprised the markets haven’t woken up to that, but that’s going to mean higher interest rates, huge economic dislocations.”

“This is bad stuff, this massive printing of money…. They just don’t know when to stop.”

Forbes explained that wealth “come[s] from people creating real resources, not the government printing press.”

Forbes foresees Carter era economic stagnation, higher prices, and interest rates from today policies.  “This is really going to do damage to the economy.” 

“They don’t realize what’s coming. They think they can semi-socialize this economy, and they really believe we’re in an era where you can print money with no consequences.”

“The Fed is going to have a crisis on its hands,” Forbes said.  “They think a little bit inflation is good.

“They’re going to have a firestorm on their hands before the end of the year.”

If the government will not take steps to stabilize the dollar, you must take steps to stabilize your own portfolio.  Contact Republic Monetary Exchange today and let one of our gold and silver professionals show y0u how to meet your personal profit and protection needs with precious metals.

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Move Over COVID, Here Comes Inflation

A majority of money managers in a recent survey say the coronavirus is no longer their number one concern.  Now they have something else to worry about:  inflation!

It will be a relief to have COVID-19 off our minds.  But the inflation coming our way is a world-class wealth destroyer in its own right.

A Bank of America-commissioned monthly survey of asset managers shows that inflation has displaced the coronavirus as the most important risk for investors.  37 percent of the investors list inflation as their top concern.  

An Axios report says, “A net 93% of investors in the survey expect inflation to rise in the next 12 months, up 7 percentage points from last month and the highest reading in the history of the survey, which dates back to at least 1995.

“53% of fund managers expect above-trend inflation along with above-trend growth over the next year, the first time that has happened since March 2011 and the third time in the history of the survey. “

We see elsewhere that Google searches for “inflation” have jumped as well.  That only stands to reason, since the money supply has blown up 26 percent over the last 12 months.  All that new digitally “printed” money has to go somewhere.

Heightened concerns about reviving inflation provide a good reminder to take advantage of any breaks in the gold and silver price to add to your portfolio.  The correction in gold prices may not last much longer.  The Covid-19 economy and global lockdown slowed the rush of central banks to add gold to their reserves.  But now, with economic conditions beginning to free up, the move to add to official gold stocks may soon resume.

Poland’s central bank has just revealed that it has plans to make substantial additions to its gold to its reserves in the coming years.  In an interview last week (3/15) the bank’s governor, Adam Glapinski, said, “At the moment, we have 229 tons of gold.”

“Over the course of a few years we want to buy at least another 100 tons of gold and keep it in Poland as well.”

The growing holdings of central bank around the world are especially important to our friends and clients.  First, their purchases represent a major contributor to de-dollarization, removing support for the dollar’s exchange value.  Second, central banks buy gold for currency reserve in substantial quantities and hold their gold for the long-term.

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US Debt

Where Does the World Turn to as it “De-Dollarizes?”

Hint:  It is a precious metal, gold in color, one that been honest money for thousands of years.   Hmmm…

America’s European allies are fed up with being pushed around by Washington politicians.

We have been telling you that for years, but now even the New York Times has noticed.

De-dollarization is on display as central banks around the world move to add gold to their currency reserves.  (See our two-part posts Strange New Respect for Gold here and here.) 

They are turning to gold because of the rank recklessness of US debt and Federal Reserve money printing.  They know this debt will never be repaid and that much more legalized dollar counterfeiting is inevitable. 

But the monetary considerations are only part of the story.   

Resentment and push-back against US diplomatic bullying figures in as well.  

A New York Times piece, Europe Struggles to Defend Itself Against a Weaponized Dollar, (3/12/2021) provides details about this part of the story.

A brief excerpt:

“The American willingness to punish its European allies and impose sanctions on them in pursuit of foreign-policy goals continues to rankle.

“It is an underlying tension, a ready reminder of the asymmetric power of the United States. That is especially so when it comes to what are known as secondary sanctions. While Iran and Russia, for example, maybe the primary target of sanctions, the secondary sanctions punish other countries and companies — very often European — that do business with them as well.”

“Increasingly popular with Congress, secondary sanctions have been deployed to coerce allies to fall into line on any number of issues. In recent years, those have included the Nord Stream 2 natural gas pipeline, Iran’s nuclear program, and the socialist governments of Venezuela and Cuba. The great fear is that they would someday be used by the United States against China — or even vice versa — leaving Europe squeezed in the middle.”

The cost of US sanctions is taking a big bite out of the business of some big players. The NYTimes story reports US sanctions on Iran cost the French energy giant Total of $2 billion in lost business, “while Siemens lost a rail contract worth $1.5 billion and Airbus lost $19 billion.”

The US harms itself by hastening the end of the global dollar standard with this promiscuous use of sanctions.  In November we wrote that the SWIFT payments system, the leading international account settlement facility for world banks and commerce, is watching the US dollar share of its settlements decline. Since the US uses the SWIFT system as a tool of its foreign policy and sanctions enforcement, important new alternatives to bypass SWIFT are coming online.  

At a time the US needs all the foreign creditors it can get, it is making the dollar – and our country – an object of foreign resentment.  

It reminds us of Ron Paul’s observation about the growing resentment, that when the US does have a meaningful financial crisis and needs international support of one kind or another, we may experience more piling-on than support.

The take-away is that the movement away from the dollar will grow from today’s pace into a sudden stampede.  Take to heart the example of the foreign central banks that are moving their assets into gold.  

We can help you do the same with a sensible plan and portfolio designed for your personal needs.  It is what we do for our clients.

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Interest(ing) Facts

Why US dollar debt is beyond control!

Thomas Jefferson declared that public debt is “the greatest danger to be feared.” 

“I place economy among the first and most important republican virtues,” he declared. Perhaps Jefferson’s strongest admonition on the issue came in these wise words: 

“We must not let our rulers load us with perpetual debt,” he said. “We must make our election between economy and liberty or profusion and servitude.”

Oh, Tom!  That is so yesterday.  Now we have really visionary people running things.  People like Joe Biden, Janet Yellen, Nancy Pelosi, Chuck Schumer, and Jerome Powell.  Times have changed!

Okay, so the iron laws of interest rates and compounding have not really changed, and a country can be swallowed by debt just as completely as Jonah was said to have been swallowed by the apocryphal whale.

The Committee for a Responsible Federal Budget tends to see things more Jefferson’s way.  Interest rates may be low for the time being, but because the federal debt is humongous, interest expense is nearly 9 percent of revenue, or $2,400 per household.  

Then what happens, asks CRFB, when interest rates rise?  Good question, and they just might rise since we currently have the lowest interest rates in 4,000 years.  Here is what CRFB calculates will happen as interest rates normalize:

  • Each one percent rise in the interest rate would increase FY 2021 interest spending by roughly $225 billion at today’s debt levels. Growing debt levels not only add to the likelihood of such increases, but also the cost and risk associated with them.
  • The federal government is projected to spend just over $300 billion on net interest payments in fiscal year 2021. This amount is more than it will spend on food stamps and Social Security Disability Insurance combined. It is nearly twice what the federal government will spend on transportation infrastructure, over four times as much as it will spend on K-12 education, almost four times what it will spend on housing, and over eight times what it will spend on science, space, and technology.
  • If interest rates were one percent higher than projected for all of 2021, interest costs would total $530 billion — more than the cost of Medicaid. If rates were two percent higher, interest costs would total $750 billion, which is more than the federal governments spends on defense or Medicare. And at three percent higher, interest costs would total $975 billion — almost as much as is spent on Social Security benefits. On a per-household basis, a one percent increase in the interest rate would increase costs by $1,805, to $4,210. [emphasis added].

Figures in billions of dollars.

As we write, the 10 US 10-year Treasury yields about 1.5 percent.  That is almost 3 percent below the 10-year rate’s long-term average.  So, to make conceptualizing the problem easy, image if the interest rate on the entire US $28 trillion debt portfolio were five percent.  That would be annual interest of $1.4 trillion — instead of the $300 billion cost today.    

Q:  How does a terminally indebted country come up with another trillion dollars plus each year?

A:  By printing the money!

Here’s Jefferson again: “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

Gee, maybe old Tom was not so yesterday after all.

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$30 Trillion, Here We Come!

There is a lot of backslapping going on in the White House and on at least one side of the aisles in the House and Senate with the passing of President Biden’s $1.9 trillion “stimulus” bill.

There was more than backslapping on one of the cable news channel’s coverage of the bill’s passage.  They added finger-wagging and tongue-clucking.  They were completely indignant that anyone could have opposed a bill that “the majority of the people wanted.”

Okay.  We don’t often wade into the swamps of what passes for good government these days.  It’s too mucky.  We prefer to stay focused on helping our friends and clients protect themselves from what government is doing to them.  

But the question comes to mind, what is the point of having a deliberative body if it all comes down to what “the majority of the people want”?  If that is all it is about, we really didn’t need Washington, Franklin, Jefferson, Adams, or Madison.

But still, it is true that most of the people want a check from the government. 

Big surprise.  

One of these days very soon, there will be a straw that breaks the back of the government’s credit camel.  One day they will go to far, the market will decide that America’s bonds are as sketchy as an IOU from Bernie Madoff.  And then it won’t be possible for Washington to borrow any more… at least at interest rates that aren’t astronomical.    

And that day is fast approaching.  That’s why the farsighted are investing in gold and silver.

But judge for yourself.  The numbers just keep getting bigger and bigger!  Here are a few:

The first five months (October through February) of the fiscal year 2021 included:

  • record federal spending of $2,482,988,000,000. 
  • a record deficit, too, of $1,046,654,000,000.

CNSNews.com

It is the first time the deficit exceeded a trillion dollar in the first five months of a fiscal year.

In the meantime, the official on-the-books US national debt (which is really only part of the entire debt) just hit $28 trillion.  

And then the Biden stimulus bill was passed, the one that has Washington and the mainstream media celebrating.  So, we’re headed to a $30 trillion national debt.

Where is all that Biden stimulus spending going?  Most of it is pork.  Here are a couple of details from the Washington Examiner:

  • Less than 9% goes to combating COVID-19.
  • Twenty-seven percent (or more than $500 billion) goes to state and local governments.
  • Twenty-one percent (or approximately $400 billion) goes to policies that reduce private-sector employment.
  • $135 million for the National Endowment for the Arts.
  • $135 million for the National Endowment for the Humanities.
  • $200 million for the Institute of Museum and Library Services.
  • $12 billion for foreign aid.

So far, Washington’s stimulus bills cost $17,000 per taxpayer, or $69,000 per family. But we’re just getting started.  There is a lot more Biden spending coming our way.  For example, the Biden infrastructure proposal is now expected to come in as high as $4 trillion over ten years.

Things are beginning to spin out of control.  Why not make an appointment with one of our precious metals professionals and take steps to protect yourself and your family?

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Ron Paul: “Two Things You Need to Do”

There are two things you need to do:  Protect yourself from the coming crisis.  And help end the Fed and get the government under control.

That is the advice from former congressman and presidential candidate Ron Paul.

It will be a long time before anybody in congress knows as much about money and markets as Dr. Paul.  You should know that when he talks about protecting yourself and your family from a financial crisis, he means with gold and silver.

We will get to Dr. Paul’s own words in a moment.  But here is what is going on.  Federal debt is now over $28 trillion dollars.  The deficit just last year was $3.1 trillion.  The Fed had to print trillions of dollars to keep the government funded.

As Dr. Paul and the Congressional Budget Office note, this will be two years in a row that the federal debt exceeds the productivity of the entire country, the Gross Domestic Product.  

That is not good.

The CBO is now forecasting a $2.3 trillion deficit for this year.  But that does not begin to include everything Washington wants to spend money on.  The Biden “stimulus” package is almost $2 trillion dollars.  Then so-called “infrastructure” package could reach $4 trillion over ten years.  And there are all the demands of the big government, big spending constituents that Biden owes his election to.  They all want something.  Free something.

That is where the Federal Reserve comes in.  Chairman Powell recently said, “Well, so what we said about the bond-buying program is that it will continue at least at the current pace… [emphasis added].  

The Fed’s current pace is printing $120 billion a month.  Made up money.  Unbacked.  Digital bookkeeping entries.  Fiat money.  $120 billion a month is the current pace.

Here’s a link to Ron Paul’s most recent weekly column.  We think the last two paragraphs deserve to be featured by us:

“Unless the government changes course, America will experience a crisis greater than the Great Depression. The crisis will include a final rejection of the dollar’s world reserve currency status. There will also be much increased price inflation. At that point Congress will have no choice but to limit spending, although it will try to hide cuts in popular entitlement programs by ‘adjusting’ government measures of inflation. Congress could then blame the Fed for the reduction in value of government benefits.

“Those who know the truth have two responsibilities. First, ensure they and their families are protected when the crash comes. Second, redouble efforts to spread the ideas of liberty and grow the liberty movement so politicians are pressured to cut spending and debt and to end the Fed.”

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Money Pump!

 The Wall Street Journal headline said it all: “Powell Confirms Fed to Maintain Easy-Money Policies.”

The Drudge Report headline said the same thing, “Fed Vows More Pump as Inflation Fears Take Hold,” but it added a picture of Monopoly money. 

Nice touch.

“We expect that as the economy reopens and hopefully picks up, we will see inflation move up through base effects,” Powell said.  “That could create some upward pressure on prices.”

Jerome Powell

So, with the lockdown winding down and the economy starting to pick up from its deeply distressed COVID recession, interest rates are moving up.  They will do that coming out of a recession.  But even though there is evidence all around that price inflation is about to make an appearance, the Fed intends to keep printing money.

A scramble for general liquidity hits the gold market for a while (creating a buying opportunity in our view).  That is because gold is the most liquid of all commodities.  Wall Streeters and hedge funders sell it to raise cash when they get margin calls on their bond portfolios.  Then they buy it back later.

These guys are in and out and turn on a dime, buying in the morning and selling in the afternoon.  Parking money in one place on Monday and then somewhere else on Tuesday.  These are the same guys that had to sell gold in the mortgage meltdown for the same reasons – margin calls – just before gold skyrocketed to all-time highs!  These are the same guys who sold gold last year in the early stage of the pandemic pandemonium just before gold once again rocketed to even higher highs!

But for the rest of us, since we are not getting margin calls, it is just a lot of market noise.  Especially because the money pump is going to start running at levels never before seen.  

Consider:

The Biden $1.9 trillion stimulus bill pork bill is working its way through the Senate.  There is no way to fund it except by running the presses.  The Fed should be a cautionary voice about being cornered into printing even more than it already has, but contrary to all reason Treasury secretary Yellen, the former Fed chairman, and Powell, the Fed head now, are both cheerleading massive new deficit spending.  (Don’t they know they will take the blame when the currency breaks down?)  

Goldman Sachs believes that the new Biden infrastructure proposal pork proposal will total $2 trillion – “and potentially even double that,” writes one news source.  Same story:  no money to pay for it, except for freshly printed digital dollars.  

“Investors are having a ‘crisis of confidence in the Fed,” reads a Yahoo News headline.  

They ain’t seen nothing yet.

Thank goodness for gold and silver. 

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Watch Out for the Wealth Tax!

“If the wealth tax passes, go out and buy yourself some gold because people are going to rush to find ways of hiding their wealth.”

That’s the advice form Leon Coopeman,  It doesn’t matter to him that much if the government takes away rich people’s money, because he already has plans to give his fortune away.

But it matters to the country.  “I’m a better capital allocator than the U.S. government,” says Cooperman.

That’s true.  Investors are determined to find productive places to put their money.  They aren’t always successful, but they want to earn a return, so they need to find opportunities that generate more wealth.  

Politicians, on the other hand, are generally looking to buy votes.  The money they get their hands on goes straight to consumption. 

But production precedes consumption.  Consumption is totally dependent on somebody first producing something. 

C.ooperman is a billionaire hedge fund manager.  His fund, Omega Advisors, didn’t make money for its clients, or make Cooperman rich, by consuming the money they placed with Omega.  They had to find way to make it productive.

Individuals are always better allocators of wealth than governments.  

Now Elizabeth Warren and Bernie Sanders are pushing a new wealth tax that would levy a tax of two or three percent on the very biggest fortunes in the country.  

That’s how socialism gets a foot in the door.  It promotes policies designed to “get the rich.”  But they end up getting everybody.  Ever heard the phrase “bracket creep”?  It referred to the way that years of inflation pushed people into higher and higher tax brackets on phantom increases in their real income.  Soon the middle class were paying tax rates that were designed to get the rich.

Since a wealth tax taxes existing capital, not income, the subjects of a wealth tax would have to pay it out of their current income.  That means less total investment out of current income year after year; or if their current income is not sufficient to pay the wealth tax, it means the liquidation of some of their capital year after year to meet the tax bill.  In either case it means less investment capital.

Socialists love the smell of class warfare in the morning.  But their victims do not.  So, face it, many of the wealthy will just pack up and leave.  Taking their wealth with them.  Leaving America less well capitalized.  

Cooperman says, “We’ve got to decide whether we’re a capitalist nation or a socialist nation.”  Look at the people in the Biden administration.  Look at congress.  It is clear that we are headed down socialism’s desolation road.

We have described gold before as capital on strike.  Cooperman says, “If the wealth tax passes, go out and buy yourself some gold because people are going to rush to find ways of hiding their wealth.”

But it is not just the wealth tax.  The more socialism we get, the more people are going to buy gold to protect themselves and their hard-earned money.  

You shouldn’t wait for the wealth tax.

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The Fed Has Painted Itself Into a Corner

The Fed really has America’s monetary situation screwed up.  

Badly.

The last three Fed chairmen have printed money to beat the band:  Bernanke, Yellen, and Powell.

They have done the work of three men:  Larry, Moe, and Curly.

The Fed itself and the lapdog financial press call what the Fed has done under this hapless threesome many things:  Quantitative Easing, open market operations, yield curve control, debt monetization, liquidity operations, demand management, repurchase agreements, TARPing, deficit accommodation… and probably other names we can’t even remember.

But it is all money printing.  It will eventually destroy the dollar and bring the US economy crashing down with it.  That’s because money printing creates no new wealth.  It only debauches the value of the currency, while a dependable currency is a necessary condition for a strong, dynamic, prosperous economy.

Right now, the Fed is buying $120 billion a month with made-up money.  At the same time, Washington’s deficits are out of control, and yet it has another $1.9 trillion stimulus package on the drawing boards

We have shared the following chart before.  It shows Fed assets, the total amount of things like government bonds that the Fed purchased with money it just conjured electronically out of nothing.  We still call it money printing because that is how it was all done not so long ago.

 

On the day Bernanke was put in charge of the Federal Reserve, on February 1, 2006, its assets had been fairly stable, growing slowly.  They totaled $832 billion.   Think about that.   At that moment, the Fed had been in existence for 93 years, after all of which its assets were less than $900 billion.  Now, just 16 short years later, its assets have exploded to $7.590 trillion!  

Under Bernanke, Yellen, and Powell, the Fed’s assets have grown more than 800 percent.

That is a lot of money printing.

Today the Fed is purchasing $120 billion of bonds a month (by printing the money, needless to say).  This is intended to keep interest rates down.  

But it is not working.  Interest rates are moving up.  Last August the yield on the US 10 year treasury was 0.52 percent.  A week ago, it reached 1.54 percent.  It climbed a full percent in six months.  How much more money-printing, asset purchases must the Fed implement to keep interest rates from rising?

No one knows.  But the Fed can’t let rates rise for long.  The cost of a two percent increase on outstanding US debt, now $28 trillion, is $56o billion a year.  

Besides the inescapable fact is that the more money the Fed prints, the higher rates will eventually go.  Because eventually investors will demand an interest rate premium over the rate of inflation.  So, the more the Fed prints to keep rates down, the less the dollar will be worth.  And the higher rates will go, compounding the debt beyond comprehension.

All of this is implicit and inevitable in what these Fed chairmen have done.  Imagine, all that expensive education, graduate schooling, and fancy degrees, and they know less than nothing about what they have done.

Buy gold and get the heck out of the way of Larry, Moe, and Curly’s train wreck.

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The Fed Heads to a Crypto Dollar

Do you have assets that are off the grid?

Developing a digital currency is a “high priority project for us,” Federal Reserve Chairman Jerome Powell told congress last week.

“We are committed to solving the technology problems, and consulting very broadly with the public and very transparently with all interested constituencies as to whether we should do this,” Powell said.

Sure.  As we reported to you on this development last year, a Fed crypto-currency dollar “is as good a reason as any to protect your wealth with gold.”

“The Fed’s new digital currency is a variation – although a much more threatening one – on old-fashioned money printing: the issuance of currency unbacked by anything real.  Money-printing governments at least have the logistics of paper and ink to slow their emission of evermore fresh fiat currency.  State digital crypto-currency issuers will have no such complications to slow their currency creation.”

China is way down the road on a crypto-digital currency.  That is what you would expect for a totalist surveillance state.  It fits right in with China’s “social credit” goals:  as it watches what its people do, it awards them merits or demerits.  Voice opinions or engage in behavior the state does not like and the poor citizen finds he cannot fly, travel, buy property, have credit, or get a job.  

Such a social credit system is a much more efficient means of exercising total control than trying to put a bullet in the heads of each of millions of people.  China has already tested its digital crypto currency in three cities.  

The American version of a social credit system is not quite as far along.  But statist opportunists are taking steps down that road, proposing forbidding air travel or restaurant dining by people who can’t produce their vaccine records.  

It’s a start.

There are plenty of good reasons for people to use cash.  They may be concerned about banks closing or the power grid failing.  They may want to protect their privacy in an age of identity theft and widespread digital account hacking.

A war on cash rhymes with a war on gold.  As the old Swiss saying had it, “good money is coined freedom.”  And there is no better coinage than gold.

Isn’t it time to make sure you have money out of the government’s destructive control and off the government’s grid, since you know where that is headed?

We recommend that you use this correction in precious metals prices to provide yourself and your family a safety net of assets that are off the grid.

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The Money Boom

Here is an illustration from a Wall Street Journal opinion piece by John Greenwood and Steve H. Hanke (2/21/21) called “The Money Boom Is Already Here.”

It shows Washington pumping a lot of money into the canyons of Wall Street.  The sub-headline reads, “Since February 2020, the M2 supply has increased 26%—the largest one-year jump since 1943.”

We are glad the nation’s largest financial paper finally took notice of the money bubble.  We have been writing about the growth of the money supply pretty much continuously, including:  

A GIFT TO INVESTORS 2021-2-20

GOLD ALWAYS WINS IN THE END!  2021-2-9 

23.6 PERCENT OF ALL US DOLLARS WERE CREATED IN THE LAST YEAR!  2020-10-18

THE NEW STAGFLATION DECADE!  2020-9-13

There have been many others.  Here is a chart we published earlier this month showing the way gold tracks the increasing money supply.

We commented, “If appears now that gold has some catching up to do.”

Greenwood and Hanke write, “Speculative manias are in the air, as evidenced by the recent price surges for bitcoin, a digital asset with a fundamental value of zero, and GameStop, a declining retailer. Along with the other economic trends—a strong recovery, surging commodity prices and an uptick in inflation—those asset bubbles have a clear cause: the massive expansion of money and credit.

“Yet America’s fiscal and monetary masters are turning a blind eye…

“The looming danger for the economy isn’t only that the monetary printing presses have been in overdrive since the pandemic began, but also that they are already set for the same in 2021. A monetary surge for this year is locked in…

So we already know that the money supply will likely increase by at least another $2.3 trillion over the current year. In other words, even without any new lending or further purchases of securities by banks, the M2 money supply will grow by nearly 12% this year. That’s twice as fast as its average growth rate from 2000-19. It’s a rate that spells trouble—inflation trouble.”

The great economist Ludwig von Mises had an evocative name for the end stages of what Greenwood and Hanke call “the money boom.”

He called it ‘The Crack-Up Boom.”

“But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against ‘real’ goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

“It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German Mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.”

Do not wait for the Crack-Up Boom to appear to start buying gold and silver.  Take steps to protect yourself and your hard-earned wealth today before it is too late.

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Is the Dollar the New Big Short?

Michael Burry, made famous in the movie about the bursting of the mortgage bubble The Big Short, has gone on a tweetstorm warning about looming US inflation.

Burry, who was played by Christian Bale in the movie, made himself and the investors in his fund hundreds of millions of dollars by shorting mortgage credit instruments.  In his new warnings about inflation, Burry is not talking about just a little inflation.  Between Modern Monetary Theory policies, unconstrained debt, and money supply growth, Burry is citing the precedent of the historic Weimar Republic hyper-inflation the brought Germany low a hundred years ago.

The evidence for the return of inflation is all about us.  Just days ago, we reported on the big jump in the Producer Price Index and that food prices climbed 3.9 percent higher last year.  

We also reported recently on the rising prices of building supplies here.

We have written repeatedly about Stephen Roach’s crucial warning of the collapse of the dollar’s value.

But now other news on the price inflation front is coming so fast and from so many places that it will soon be hard to keep up.

Shipping and trucking rates are soaring.  New and used vehicle prices are climbing. Gas prices are up almost 25 percent in just the last few months.  (Biden will eventually pay a political price for halting construction of the Keystone XL oil pipeline.)

Import prices are reflecting the dollar’s weakness.  Import prices rose 1 percent in December and 1.4 percent in January.  

This week a Wall Street Journal piece confronted the fact that the Federal Reserve’s inflation metrics underreport asset inflation and housing inflation.  

For example, the following graphic shows the “owner’s equivalent rent” metric that is used in calculating the housing component of the Consumer Price Index, compared to the Case-Shiller index of national home prices, which has turned sharply higher.

We think Michael Burry is right again.  Each new federal budget, each deficit dollar spent, each act of liquidity injection and stimulus by the Fed is another step in the devaluation of the dollar.  The US dollar is “the big short” of our age.

Let us help you protect yourself and profit from looming price inflation.  Owning gold (and silver) is the easiest and safest way that we know of being short the dollar.

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A Gift for Investors

Gold on sale, just as inflation returns!

It is like a gift from the gods, a smile and a nod from the fates, or maybe just a fortunate coincidence.  Whatever you call it, gold is on sale at the least likely time – just when inflation is starting to rear its ugly head.

Let us start with inflation.

The evidence in coming in from far and wide that price inflation is beginning to leak out into the consumer economy.  It probably did not come as a big surprise to whoever does the grocery shopping in your household, but food prices rose 3.9 percent last year, close to twice the Federal Reserve’s targeted inflation rate.

But we are just getting started.   

On Wednesday, the Bureau of Labor Statistics reported that the Producer Price Index jumped 1.3 percent for the month of January.  (Try annualizing that!)

 It was the biggest monthly increase since December 2009, with the hike led by its wholesale energy component in which prices surged 5.1 percent.  Americans working from home may be driving less, but everything they buy depends on transportation, so rising energy prices soon show up elsewhere.  

By the way, the consensus of economist for the PPI was that it would show an increase of only 0.4 percent, less than a third of the final number.

Meanwhile we cannot resist showing you the explosive rise in the US Money Supply once again.

M2 has risen by more than 25 percent over the last 12 months!  As someone said, “All that money has to go somewhere!”
And it appears that it is about to go everywhere!   
Vehicles, homes, even interest rates are rising to reflect the diminishing value of the dollar.  While there is ample additional evidence of prices beginning to rise rapidly, one of the most historically sensitive indicators of rising price inflation is copper.  Copper has almost doubled since its March low.
When prices rise across the economy it is an indication that the currency is failing as a store of value.  That should be no surprise.  It is the Federal Reserve’s explicit policy intent for the dollar to fail as a store of value.  When the rate of its failure suddenly increases or rises above a threshold that is considered a nuisance, people begin to trade their dollars for a superior store of value.
Gold!
That is why we are grateful that the market has conspired to give us a break in gold prices – short-lived though it may be – just as prices across the consumer economy are beginning to rise.  Or as we have said, as inflation begins to rear its ugly head.
Here is a chart of the gold bull market that began by some estimations two and a half years ago, in August 2018.

As you can see the bull market has paused several times along its powerful climb to catch its breath, including in both the spring and fall of 2019; with the COVID panic in the spring of 2020; and again, now when generalized price inflation is returning.  

Because reversing the fundamentals of rising debt and reckless money printing is not even a subject of conversation in Washington or at the Fed, we think this juncture presents gold buyers an attractive acquisition opportunity.

For more information, contact your Republic Monetary Exchange gold and silver professional.

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Real Silver

If there was not a problem with paper money, there would be no reason to own gold and silver.

If paper money was as good as gold and silver, then all the paper currencies that have failed throughout history would still be around.  

Still around like gold and silver.

Once again, we are experiencing some troubling conditions in the precious metals markets.  It is not the first time.  Once again, many dealers find themselves without supplies to deliver to their clients.  

We saw the same kind of conditions last year at the beginning of the COVID-19 pandemic.  

And it will not be the last time.  We will see problems like this again.  That is because they reflect real problems in the economy.

So, what is going on?  Once again, we are seeing shortages of real silver.

Shortages of physical silver products, coins and bullion, are a replay of the shortages that occurred last year.  

The United States Mint said just weeks ago that it was unable to meet surging demand for its gold and silver bullion coins due partly to pandemic-driven demand and plant capacity issues.

The price of real silver and paper silver substitutes have diverged.  The paper price is one thing, but you cannot get real silver at that paper silver price.  

You can only get paper promises, while the premiums on real silver have risen.

So, while the US Mint cannot meet demand, some dealers are taking money and promising delivery sometime, somewhere down the road.

They say pay them now, but it will be weeks before they can come up with your silver.  

That is a bad idea!  Do not do that!

Once again at Republic Monetary Exchange, we have foreseen this situation.  

We have real silver for immediate delivery.  On the spot.  

If paper money held its value like gold and silver, we would not be having these problems.  That is why we recommend you take today’s market conditions as a warning to make sure you have an adequate position in precious metals.

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Food Inflation

Q:  What’s that on the horizon?

A:  It sure looks like consumer price inflation.  But go to the grocery store and have a look for yourself.

Here is the lead paragraph from a Bloomberg News story this week (2/16): “There are signs that the food inflation that’s gripped the world over the past year, raising prices of everything from shredded cheese to peanut butter, is about to get worse.”

We have spent more time than we should explaining that inflation describes a behavior by the monetary authorities that debauches the value of currency over time.  Just last week we commented on it this way:

“But just because the price of bread is not going through the roof today, don’t let the mainstream media or politicians tell you that there is no inflation or that the currency isn’t suffering devaluation.  That is because sustained price increases in any of those other places throughout the economy [dot com stocks in the 90s, housing prices in the early years of the 2000s, and stock and bond prices today] reflect state meddling or corruption of the supply of money and credit.” 

“… Eventually the debauching of the money will show up in the price of bread… and in the price of everything else.”  (See Gold Always Wins in the End!)

We didn’t have to wait long to see rising food prices hit the news.  The Bloomberg headline shouts, “The World Will Pay More for Meat as Food Inflation Deepens!”

It explains, “Now farmers — especially ones raising cattle, hogs and poultry — are getting squeezed by the highest corn and soybean prices in seven years. It’s lifted the costs of feeding their herds by 30% or more. To stay profitable, producers including Tyson Foods Inc. are increasing prices, which will ripple through supply chains and show up in the coming months as higher price tags for beef, pork and chicken around the world.”

It is really time to start making a paradigm shift in our thinking and language.  Buckminster Fuller thought it would make a big change in our understanding of things if, as we watched the breaking of dawn in the morning, we would realize that the rotation of the earth on its axis is actually turning the spot on which we stand toward the sun.

We don’t actually know what the impact of Fuller’s suggestion would have on people’s thinking about things, but we do know it would be true.  By the same token, people should realize that as the price of gold goes up, they are actually seeing the purchasing power of the dollar go down.

If people began to think in that way, they would soon realize that governments far and wide, and throughout time destroy their currencies.  That is why people who know this turn to gold and silver for protection.

The politicians can’t print precious metals.

If you visit the grocery store and discover food prices seem to be rising, contact a Republic Monetary Exchange professional right away and take steps to protect yourself with gold and silver.  

Because the value of the dollar is going down.

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The Silver Institute: “Silver Headed Higher”

Forecasting higher demand, The Silver Institute, a trade association, says the outlook for silver in 2021 is “bright.”

“The outlook for the silver price in 2021 remains exceptionally encouraging, with the annual average price projected to rise by 46 percent to a seven-year high of $30.00,” according to the Institute’s just released analysis.

Silver’s average price in 2019 was 16.19 in 2019.  Last year saw a 27 percent increase, with an average annual price of $20.52.  For 2021, the Institute expects an average annual price of $30.00.  That represents a 46 percent increase over 2020.

The report is calling for 2021’s silver demand to reach an eight-year high of 1.025 billion ounces, led by increasing industrial and physical investment demand.  “Industrial demand is projected to post a four-year high in 2021 of 510 million ounces, a 9 percent increase over 2020 figures,” according to the report.  

Physical silver for investment, coins, and bars, is forecast to reach 257 million ounces, a six-year high.  

stacked silver bars

The photovoltaic sector bounced back from the pandemic slowdown in the second half of 2020 and is forecast to reach 105 million ounces in 2021.

The Silver Institute also expects some recovery in global jewelry demand.  The 174-million-ounce forecast is still below pre-COVID-19 levels

“Silver mine production output should recover and rise from the pandemic-affected 2020 level, achieving a double-digit gain this year to 866 million ounces, which would be the highest total since 2016. Most mines affected by COVID restrictions have re-started, with the recovery also benefiting from the re-opening of key mines affected by strike actions. Growth will also be driven by higher output from primary silver mines and by new projects in Mexico and Australia,” it reports.

“Silver scrap supply is expected to rise for the fifth consecutive year, due in part to the strength in gold and silver prices, which will encourage industrial recycling. Jewelry and silverware recycling are also forecast to rise this year.” 

The precious metals professionals at Republic Monetary Exchange can help you design a silver and gold portfolio that meets your needs.

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When the Government Pays for Everything…

…Gold Goes Up!

We have been asking our friends and clients recently if they have invested for the Biden presidency.  In our new radio commercials, we point out that Biden and his supporters want the government to pay for everything.

Everything!

Now, we don’t want you to think we are exaggerating, so here’s the latest:  Senate Majority Leader Chuck Schumer and congresswoman Alexandria Ocasio-Cortez have announced a federal package to fund funeral benefits for those who die with or of COVID-19.  

$267 million will go to New Yorkers alone.

People die from a lot of causes.  Some have even died from the effects of the government’s lockdown.  Schumer and AOC have not moved to pay for their funeral expenses.

But let us be clear.  The government is not paying for those funerals.  Biden and his team are reaching into some people’s pockets to give money to other people, and then acting like the government is paying for it all.  But of course, the government has no money of its own.  Everything it spends it must first take from someone.

When people become convinced by politicians like Biden, Schumer, and AOC that they can have something for nothing, their demands become endless.

So, the politicians have money printed and the currency destroyed to further the illusion that they themselves are giving free stuff to everybody.

That is why we are asking if you have invested for the Biden years.  Free stuff for everybody, even free funerals, is the name of the game.

The Fed printed three trillion dollars last year.  That was under Trump, a conservative.

Imagine what it will do now under Biden.

Gold was up about 25 percent last year under Trump.  Imagine what it can do under Biden.

Silver was up 48 percent last year.

Imagine what it can do in the Biden-Harris years.

If you have not yet invested for the “free stuff for everybody” Biden years, , speak with us today.  We help people protect themselves and profit with gold and silver.

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Gold Will Always Win in the End

The Labor Department reported Wednesday (2/10) that in the 12 months through January the Consumer Price Index rose 1.4 percent.  For the month of January, the CPI was up 0.3 percent.

The mainstream media, whose personnel do not really know much about these things, chose to report this as news that inflation was “benign.”  We know from long experience that lawmakers and policymakers view it the same way:

“Inflation means rising consumer prices. If consumer prices aren’t rising, there is no inflation.”

It is too bad they think this way.  Their thinking is a source of confusion and policy error.  

The economists of an earlier age were not so easily fooled.  The defined inflation as an increase in the supply of money and credit.  If money and credit were expanding, it was called inflation; if money and credit were contracting, it was called deflation.

Individual prices rise and fall for many reasons, as they understood.  They knew that a rising price is not inflation.  It is simply a rising price.  

If the price of oranges goes up because of a freeze in Florida, that is not inflation.

If recent technological advances make new electronic miracles, like flat-screen HDTVs, more affordable, that is not deflation.  It is a drop in prices in one sector.

This chart should be an eye-opener.  It shows M2, a widely used measure of the US money supply over the last five years (the green line).  As you can see it has exploded to the upside.  M2 has increase 26 percent over the last 12 months.  

Nothing about that is “benign.”

In the words of market commentator John Rubino, “All that extra money has to go somewhere.”  If the monetary authorities increase the supply of money and credit, prices will rise somewhere.  Exactly where it shows up first depends on many factors.  The inflation could show up in dot-com stocks (the late 90s); it could show up in housing prices (in the first decade of the 2000s); it could show up in financial assets like the stock and bond markets (now). 

We have included the price of gold in this chart.  Because gold is a monetary commodity and reflects the destruction of the dollar’s purchasing power, over time growth in the money supply pulls gold along with it.  If appears now that gold has some catching up to do.

But just because the price of bread is not going through the roof today, don’t let the mainstream media or politicians tell you that there is no inflation or that the currency isn’t suffering devaluation.  That is because sustained price increases in any of those other places throughout the economy reflect state meddling or corruption of the supply of money and credit.  

Governments engage in these practices for several reasons.  They may wish to spend more and hide the increased taxation of the people by simply printing the money.  They may wish to devalue unpayable government debt by devaluing the unit of account of that debt and pay it down with cheaper money.  Or they may wish to subsidize powerful financial interests and cronies with an inside line on monetary interventions.

Sometimes they may wish to do all those things at once.  But eventually the debauching of the money will show up in the price of bread… and in the price of everything else.  

This discussion explains why governments hate gold.  They cannot print more gold or wave a policy wand and double the amount of gold in government warehouses.  Gold provides financial discipline on states and politicians.  

In a showdown between corruptible government money and gold, gold always wins.

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Did You Know?

Did you know…

That there have been no discoveries with more than two million ounces of minable gold since 2017? 

That while the rate of growth changes along the way, Russia and China have been aggressively increasing their central bank gold holdings for years?  Russia’s central bank holds 2,299  tons of gold, China holds 1,948 tons. India, Turkey, and Mexico are among the emerging market nations that are adding to their gold positions as well.

That the United States still leads the world in official gold reserves with 8,133.5 tons, or 261 million troy ounces?

That more than 10,000 tons of private US gold was nationalized by President Franklin Roosevelt?

That Stephanie Kelton, the leading proponent of Modern Monetary Theory – the money printing maniacs – thinks that the $1.9 trillion Biden stimulus plan passed by the Senate should have been $3 trillion?  Because we have a printing press.

That murder rates in dozens of American cities rocketed last year, up 30 percent over 2019, according to the Council on Criminal Justice? 

That President Biden has officially withdrawn the nomination of Judy Shelton to join the Federal Reserve Board?   Shelton set entrenched Washington’s teeth on edge by talking about the merits of the gold standard.

That Hawaii and Nevada have the highest unemployment rates in the country, 9.3 and 9,2 percent respectively?  That is according the December BLS numbers.  The lowest rates were in South Dakota and Nebraska, both at 3 percent.

That the Dow Jones Industrial Average is a poor indicator for those interested in wealth preservation?  As we wrote recently, “DJIA’s composition has changed dozens of times over the years.  Companies that were once mainstays of American industry, companies that have longs since failed and disappeared have been dropped from the average and replaced over the years.  For example, long-standing DJIA heavyweight General Motors is missing in action from the index today, while Apple, a company that didn’t even exist 50 years ago, is today an important component of the Dow.”

That Republic Monetary Exchange makes immediate delivery of gold and silver to its clients upon payment?  And that when you need to sell, we make immediate payment, too!

That your Republic Monetary Exchange executive is an experienced precious metals consultant?  He is prepared to answer all your questions about using gold and silver for profit and protection in the Biden years.

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U.S. Mint Struggling To Meet Demand for Gold and Silver Coins

Republic Monetary Exchange “Best Practices” Mean Immediate Delivery!

A Reuters news story sums it all up this way: “The United States Mint said on Tuesday (2/2/21) it was unable to meet surging demand for its gold and silver bullion coins in 2020 and through January, due partly to pandemic-driven demand and plant capacity issues.”

us mint coins

As the US government’s spending plans go unchecked and as the Federal Reserve continues to pump unbacked money into the economy at a frenzied pace, more Americans are seeking the protection gold and silver offer.  Last year sales of US gold bullion coins rose an astonishing 258 percent.  US silver bullion coin sales climbed 28 percent in 2020.

The blistering pace continues in 2021.  In January, American G0ld Eagle sales were 290 percent higher than the same month a year earlier.  

Heavy buying – what the Mint calls “continued exceptional market demand” – is only one part of the Mint’s difficulty.  Covid-19 restrictions have impeded supply chains as well.  

US Mint

The Mint is also redesigning US bullion coins for release this summer.  Its intent to have supplies of the new coins for the launch will also impinge on the production of bullion coins between now and then.

Shortages of physical silver products, coins and bullion, are a replay of the shortages that occurred last year with the COVID-19 shutdown.  Once again, many dealers find themselves without supplies to deliver to their clients.  

Just as Republic Monetary Exchange distinguished itself last year by continuing to make immediate delivery while others could only offer long delays, we again continue to make immediate delivery of precious metals to our clients despite the Mint’s struggles and even in the face of the potential silver squeeze the developed in conjunction with the Redditt/GameStop saga.

Here at Republic Monetary Exchange, we always recommend best practices for our clients.  We do not think clients should be sending money to boiler room operators far away who cannot make immediate delivery.  Avoid the needless risk of placing and paying for orders elsewhere with dealers that are asking for advance payment and then promising delivery at some uncertain date in the future.  

We have gold and silver in inventory.   

You can buy today and take delivery today!  Isn’t that the way business should be done?  Protect your wealth in these times of economic upheaval.  Contact us today!

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Inflation in the Banana Republics

“At some point someone is going to make the obvious observation, which is that income inequality, which is making our country unstable, is being driven from one main source.  And that is the Federal Reserve, which is shoveling money to Wall Street, excluding most people from that payoff, and hurting a lot of people like savers in the process.

“Maybe we’ll have that conversation at some point.  Hopefully soon.”

We couldn’t have said it better ourselves, although we have said the same thing many times.  But those were the words of Fox News host Tucker Carlson on his show Monday evening (2/1/21). Carlson was wrapping up a segment on the GameStop Saga in which he commented on the concentration of wealth in this country, something that is inherently unstable in any country, and could not happen but for the monetary distortions authored by the central bank.

It is not the first time in recent weeks that Carlson has pointed to the Federal Reserve behind the curtain of American economic disarray.  We hope he continues, and we hereby entitle him to use the reporting and analysis on our blog in his research.

Hedge fund billionaire Paul Singer commented on the Fed’s role in America’s growing inequality, recently as well, referring especially after its massive monetary intervention in the mortgage meltdown:

“I think the central banks came to enjoy their role of being Samson holding up the global financial system and economy. And they weren’t punished by consumer price inflation, they didn’t understand that this asset price inflation, which had a secondary or tertiary positive effect on growth and employment. But they didn’t understand that was a form of inflation, that that’s where the free money and the money printing went. And so they didn’t at all take into account that they were exacerbating the inequality that became a populist political theme.”

Speaking of income inequality, here’s a peek at what the leading banana republics are doing these days.  Venezuela leads the pack in currency destruction, with an annual rate of 1,945 percent.  

How do the money printing policies of banana republic central banks differ from our own?   The answer to that question is a persuasive reason to protect yourself and your family with gold and silver.  

A Republic Monetary Exchange professional can provide you with valuable guidance.

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Explaining the Silver Squeeze: Jim Clark Interview with James T Harris

Listen to the audio from the interview recorded live on 2/1/21. Jim explains the current silver short squeeze as well as the recent Gamestop manipulation. Recorded live on the “Conservative Circus with James T. Harris”, KFYI Phoenix, Monday February 1, 2021.

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Talk About Wealth Preservation, Part 2

In our last commentary, Talk About Wealth Preservation!  Part I, we made the point that wealth preservation, even for a single century, cannot be trusted to paper currency.  On the contrary, paper money’s track record for preserving value is beyond dismal.  Gold’s performance is superior.  

Gold stands the test of time.

Perhaps someone will object, insisting that a hundred-year investment in premium stocks denominated in dollars is an even better means of wealth preservation.  That is a popular idea, endlessly promoted by stock brokerage houses.  

We object to that nonsense by simply pointing out that the best-known index of the stock market’s performance, the Dow Jones Industrial Average, has been around for 125 years.  It was originally an average of 12 stocks but was adjusted to an average of 30 stocks 93 years ago.  Yet too often unnoted is that the DJIA’s composition has changed dozens of times over the years.  Companies that were once mainstays of American industry, companies that have longs since failed and disappeared have been dropped from the average and replaced over the years.  For example, long-standing DJIA heavyweight General Motors is missing in action from the index today, while Apple, a company that didn’t even exist 50 years ago, is today an important component of the Dow.  

Gold IRA with physical gold

The point is that while the DJIA may be a useful indicator of something about the US economy, it is not a useful measure of long-term wealth preservation.

On the other hand, gold is the world’s premier tool of wealth preservation.  And not just for a century, as we described in our prior post, but for thousands of years.

Gold is one of the least reactive chemical elements.  Of the noble metals (differentiated from the base metals), it is the noblest, resisting corrosion and oxidation like silver and platinum. So resistant to corrosion is it that when pirated treasures are recovered from the ocean floor after hundreds of years, the gold coins retain the shine and luster they had the day they slipped into the watery depths.

We think gold’s durability and incorruptibility are in some way analogous with its performance as money. 

 Just months ago, an archaeologist with the help of a local priest uncovered a medieval treasure of 6,500 gold rings, silver ingots, and silver coins in a Polish cornfield.  The 900-year-old hoard intact, although it was simply wrapped in linen in a basket inside a ceramic vessel.  All that ancient wealth was completely preserved through the centuries.

The Polish “zlotny” is the official currency of that part of the world today.  We simply cannot bother to track how many iterations of the zlotny there have been, even in modern times.  In any case, like the US dollar, it has not been a good means of wealth preservation.

Unlike precious metals, which are the incorruptible enduring money of the ages.  We hope these commentaries about wealth preservation will encourage you to preserve wealth for yourself and your family during these increasingly risky times.

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Talk About Wealth Preservation, Part 1

Suppose a hundred years ago some far-sighted benefactor, someone a few generations back, wanted to leave some wealth for their descendants – including you.  Would you be better off if they left you $10,000 cash in bills or $10,000 in gold?

A hundred years ago American money was gold. Americans commonly carried and conducted commerce in $20 gold pieces.  They were the coins of the realm.  But if you thought carrying them around – especially in great quantities – was inconvenient, you could use paper money.  A US $20 note issued by the Treasury was just a claim check, or a warehouse receipt for gold.  If you wanted to, you could walk into any bank or go to the Treasury and exchange that paper $20 note for real gold.  No questions asked.

So your benefactor would have had a choice.  Which would you have wanted then to leave, paper or gold?

You probably don’t have to think about it too hard.  The US dollar has lost about 95 percent of its purchasing power since 1921.  (Someone naïve argued about that with us once.  “That’s impossible,” he said.  But figure it out for yourself.  If inflation reduces the purchasing power of the dollar by just two percent this year, and three percent the year before… add in more than a few years of double-digit inflation along the way, and soon you will find that the loss of purchasing power really adds up!)

As for the $20 gold piece, it contained just a little less than an ounce of gold, .9675 ounces to be exact.  Based on a recent gold price of $1,840, just the gold content of a $20 gold piece would be $1,780 ($1,840 x .9675 = $1,780).

So the price of gold has increased 89 times!  Think about that in percentage terms.  Your gold has increased 8,900 percent!  An average of 89 percent a year!

(The story is even better than that because, thanks to their rarity, desirability, and for other reasons, investors and collectors prize those beautiful coins beyond just their gold content.  Ask your Republic Monetary Exchange gold and silver professional about this.)

As for the paper money?  Well, it lost most of its purchasing power.  That is the common fate of unbacked paper money throughout time.

So by now, even if you had never thought about our question before, you will have doubtlessly concluded that you would have wanted your would-be benefactor a hundred years ago to leave you real gold instead of paper money.  

Our story says something about real money and wealth preservation in this day and age. 

But it is only part of the story of wealth preservation.  In our next post we will fill in the rest of the story with details about the durability of gold and silver through long ages.  And we will tell you a story about the recent discovery of a treasure of gold and silver from 900 years ago. 

Don’t miss TALK ABOUT WEALTH PRESERVATION!  Part II.

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The Road to Financial Perdition

“We’re in the throes of the greatest monetary inflation in U.S. history. Things have come home to roost – we just haven’t realized it yet. Fed liquidity is masking deep structural impairment, while Trillions necessary to stabilize a fragile Bubble Economy only push the runaway financial Bubble to more precarious extremes.”

Doug Noland, Credit Bubble Bulletin

We have pointed out more than once that the Federal Reserve has painted itself into a corner. 

It is much more dangerous than the metaphor suggests about some oaf not realizing that he has himself surrounded by wet paint.  

The Fed has taken on the role of the guarantor of the stock market and the net worth of billionaire cronies.  If it lets interest rates rise, it will tank the stock market at the same time rising rates will make servicing US debt virtually impossible.  But it cannot keep printing money to support stocks with low rates without eventually tanking the dollar.

It is apparent that the choices before the Fed are both unacceptable.  Most people have not realized it yet, but it is beginning to make knowledgeable people squirm.  

Hedge fund billionaire Paul Singer said in a recent interview that we are in for a big surprise on the inflation front.  

But let us be clear about the point he is making: rising inflation means cheaper dollars, dollars that will not buy as much of anything, be it groceries or gold.

Singer:

“I think there’s a really good chance, given the determination to spend trillions and trillions more on COVID relief, and stimulus, whatever you want to call it, to guarantee, quote, unquote, which is ridiculous, these super low interest rates for the next three years, and to keep verbally boxing themselves in. I think there is a really good chance of a tremendous surprise and a surprise in the relatively near future. What would that surprise be? Some combination of actual consumer price inflation bursting out and keeping on going. That would be a stunning development to central bankers.”

Let us state it differently.  The Fed is willing to do anything – anything – to keep a lid on interest rates.  In just the last six months the Fed has purchased $400 billion dollars’ worth of US treasury instruments – notes and bonds – with money in conjured out of thin air, in its desperate and not particularly successful attempt to keep interest rates down. 

It will print more to achieve its ends.  At the same time, the Fed is being forced to fund more and more of the US government’s debt.  Wall Street on Parade reports that at about this time last year, the Fed was the owner of 14.6 percent of all outstanding US treasury debt.

That was last year.  Now the Fed owns 22.6 percent of all US treasury debt.  

The Fed has painted itself into a corner.  If it insists that interest rates cannot rise, it must depreciate the dollar with money printing.  If it steps back from funding US debt, the Treasury will have to offer far higher interest rates to attract buyers.  And those higher rates will make it impossible to service the debt… without more money-printing.

What does all this mean?   It means that after decades of monetary mismanagement, the dollar is on the road to perdition.  It is a road of no return.  

It means that gold and silver are your safest alternatives for wealth protection and profit.

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Buy Silver Now!

Is Silver the New Oil?

Silver was up 48 percent last year.  

Now leading refineries and banks in Switzerland are telling their clients to expect even greater silver price increases by the end of 2021.

Perhaps they are expecting four years of the most financially irresponsible administration in US history.

That is just one of the reasons we are recommending you buy silver now, too.  

But there is another reason.  Some people have begun calling silver “the new oil.”

It is not hard to understand why.  Silver is a vital component of the burgeoning solar energy industry.  

silver set to soar in 2018

With the government tilting toward renewable energy with more stimulus spending and tax credits, demand for silver will grow stronger than ever.

Citing growing green energy demand, Saxo Bank, the Danish investment bank, is predicting silver will climb to $50 this year: “Turbocharging the rise in the silver price in 2021 is the rapidly rising demand for silver in industrial applications, especially use in photovoltaic cells used in solar panel production. In fact, a real silver supply crunch is in the cards in 2021, and it frustrates the full-throttle political support for solar energy investments under a Biden presidency, the European Green Deal, and China’s 2060 carbon-neutral goal, among other initiatives.”   

Silver American Eagle Coin

Others in Europe calling for the sharply higher silver prices this year include the major Swiss precious metals refinery and fabricator MKS PAMP Group, which expects silver to reach $40 an ounce this year, and the German bank group Degussa.  It is calling for silver to rocket to $47 an ounce this year.

Would you like to know more about silver for wealth preservation in times of governmental financial recklessness?  Are you interested in profit opportunities in silver with the growing demand for solar energy?  If so, contact a Republic Monetary Exchange precious metals professional today.

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Janet Yellen

The “Doom-Loopers” Take Over Washington

Poor Joe Biden.  Democrats in control of both Houses of Congress.  Janet Yellen at the Treasury Department.  Jerome Powell at the head of the Federal Reserve.

Biden has a retinue of “doom-loopers”.  And he doesn’t even know it.  

Doom-looper Yellen testified at her confirmation hearing this week (1/19) that low-interest rates make Biden’s big spending plans affordable.  Along the way, Yellen made a perfunctory comment about the need for federal debt to be put on a “sustainable” path – eventually.  They all say that: “Eventually.”  But of course, like “someday,” “eventually,” never comes.

More needs to be said about this.  Those low-interest rates that Yellen says excuse Poor Joe’s astonishing spending plans, come at the expense of more money printing, which, as a former Fed head herself, Yellen knows so well.  As the doom-loopers use low rates as an excuse for more debt, the debt level swells to the point that it becomes completely unmanageable when interest rates do rise.

In other words, the doom-loopers will eventually discover that interest rates cannot be allowed to rise.  Their doom-loop is a trap of their own making.  They must try to keep a lid on rates in perpetuity, else the government will crack up on the reefs of bankruptcy when rates do normalize.

But keeping a lid on rates requires ever-new levels of money-printing.  Which in turn erodes the future value of the dollar.  This means lenders will require a premium on interest rates to offset the ongoing devaluation caused by money printing.  

And of course, to complete our description of the doom-loop, servicing that premium will require still more money printing.  Which further devalues… well, you get it.  There is no way out.

That’s why Yellen should be the iconic face of the doom-loopers.  

David Stockman describes the tenure that earned Yellen $2.3 million in speaking fees from places like Citibank:  

 “Yellen’s turn at the helm of the Fed between January 2014 and January 2018 resulted in an especially egregious descent into negative real money market rates and therefore a bonanza for Wall Street speculators and carry-traders. That’s because her four-year term occurred during month #55 through month # 103 of the longest business expansion in history.”

“That interval is by all reckoning the sweet spot of the business cycle, meaning that if there was ever a time to dispense with heavy-handed monetary “stimulus” and allow honest price discovery to operate on Wall Street and interest rates to normalize, that was the time.”

Yet what did Yellen do given that opportunity of prolonged growth?  Did she take steps to tame the money-printing impulse?

Stockman:

 “She did not. Unaccountably, the Yellen Fed marched in just the opposite direction. Upon taking office in January 2014, the Fed’s balance sheet stood at $4.071 trillion, but Yellen kept the printing presses running red hot, driving the Fed’s balance sheet to $4.5 trillion by June 2015….

“That’s right. By month #103 of the longest business expansion in American history, this Keynesian deus ex Machina had expanded the Fed’s balance sheet by another 9% from massively bloated level Bernanke had left behind.”

Somebody once said that gold is capital on strike.  This is the moment to choose not to be victimized by the doom-loopers in charge of our economic future.  All we can say is get out of the way of their destructive policies!

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Big, Bigger, Biggest

Ready for the New Breed of Spenders?

Washington has seen its share of big spenders.  Bush and Obama were among them.  Trump was an even bigger spender.  

But now, Washington is home to the biggest spenders of them all.

Even before Biden’s inauguration, his Treasury secretary nominee appeared before the Senate for confirmation.  Janet Yellen uttered these words:

“Go big.”

The people on Capitol Hill who should be keeping a brake on government spending have been missing in action for years.  So now, when the biggest spenders ever show up muttering “go big,” the brakes are off entirely.  

Before the current fiscal year got under way, the Congressional Budget Office estimated that the deficit would total $1.8 trillion.  That was in September.  Now, just a few months later the Committee for a Responsible Federal Budget estimates that it will total $2.3 trillion.  

But the new bunch still intends to “go big.”

Going big means that even that $2.3 trillion guesstimate is low.  We think the river of red ink will overflow the banks of last year’s $3.1 trillion deficit.  

That means the national debt will be well over $30 trillion dollars.  And that will happen just as foreigners are backing away from funding Uncle Sam’s debt habit.

Consider:  After seven years of negotiations, China and the European Union have just announced a new “comprehensive” agreement on investment.  The deal comes just as China has become the EU’s largest trading partner, surpassing EU trade with the US.  

One thing is clear, with increasing EU-China trade and investment, there will be less demand for the US dollar as a middleman.  That redundancy will strike right at the heart of the dollar’s reserve currency role.  And that means a lower dollar and higher gold. 

Still, no matter the dollar’s fate, the Biden-Harris bunch plan to be the biggest spenders ever.  How will they manage to do so?  By turning to the crackpot Modern Monetary Theory being pushed by persons of considerable influence with the Biden-Harris bunch.  (We’re looking at you Alexandria Ocasio-Cortez and Elizabeth Warren.) 

We’ve written about MMT before (see MMT and Helicopter Money) and are afraid that now, as it becomes a fact of our economic life, we’ll be writing about it again soon.

But for now, buy gold and silver to protect yourself from the madness of the biggest spenders ever.  

And go big!

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Mid-January Investor News Round-Up

In times of crisis, informed people turn to gold and silver.  

This is such a time.  It is a classic descent into chaos.   

Today we’d like to share a few news stories.  None of them take much reading between the lines, so we will be sparse in our comments.

The first one is from Reuters (1/15/21):

“Policymakers worldwide should embrace more spending to help revive their stuttering economies, the head of the International Monetary Fund said on Friday at Russia’s annual Gaidar economic forum.

“Managing Director Kristalina Georgieva did not give any specific economic forecasts, but made clear her desire for governments to up their spending and that a synchronised approach internationally was best for growth.

“In 2020, the IMF provided support to 83 countries, she said.

“In terms of policies for right now, very unusual for the IMF, starting in March I would go out and I would say: ‘please spend’. Spend as much as you can and then spend a little bit more,” Georgieva said.”

Okay, so the IMF should spend more.  Global government debt appears to be closing in on $300 trillion, and the multinational geniuses want more?

Almost 25 percent of the IMF’s funding comes from the US.   When the IMF says it provided support to 83 countries, it is saying that US taxpayers are providing support to 83 countries.  There is a lot of cronyism at work in the IMF and the other so-called multinational institutions that the US supports.  Sometimes that IMF funding is awarded to countries to enable them to pay back reckless loans made to them by crony banksters.  So instead of lending money to productive people who will in-turn create more wealth (which always entails some risk) the banks make risk-free loans to foreign governments and are back-stopped by the taxpayers.

The US has given trillions of dollar and US gold to the IMF over the years.  No wonder the US is on destitutions doorstep.  It is too bad for you, but it has been great for the Deep State’s cronies.

Here’s the latest on the Fed from the Wall Street Journal (1/15/21):

“Federal Reserve Chairman Jerome Powell warned the U.S. is still a long way from a strong job market, an indication that the central bank’s easy-money policies will remain in place for the foreseeable future. 

“The Fed has pushed short-term interest rates to near zero and signaled it expects to keep them there for years. It also has been buying $80 billion in Treasury securities and $40 billion in mortgages bonds, net of redemptions, every month since June and committed to continue doing that until it sees “substantial further progress” in the job market…”

Ho-hum.  More of the same from the Fed:  money printing and bond-buying as far as the eye can see.  Never mind that 24 percent of all US dollars were created last year.  It is never, never enough!

And finally, this one that we missed when it ran on Reuters late last year.  Let’s start with the headline:

Vaccine rollout could cause U.S. dollar to fall 20% in 2021!

“The widespread distribution of vaccines to combat the coronavirus pandemic and ongoing monetary easing could cause the U.S. dollar to weaken as much as 20 percent next year [2021}, Citibank said…

“ ‘When viable, widely distributed vaccines hit the market, we believe that this will catalyze the next leg lower in the structural USD downtrend we expect,’ the U.S. bank said in a research note.

“ ‘Given this set-up, there is the potential for the dollar’s losses to be front-loaded, with the USD potentially falling by as much as 20% in 2021….’

“Citi’s bearish dollar view is also premised on bets that the U.S. central bank will continue to keep policy settings easy even if inflation expectations rise….”

For more on the dollar’s fate this year see our posts HERE and HERE on Stephen Roach’s warning that the dollar is liable to fall 35 percent by the end of this year.  The American people are going to be hurt badly, says Roach.    

Rising tensions, a divided country, widespread distrust of the government, a nation in lockdown, unpayable debt and an economy in trouble.  

Gold… Throughout history it is the first choice for financial protection in a crisis! 

Don’t be swept away by events.  Protect yourself.  Protect your family.

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Inflation Raises Its Ugly Head

Did the authorities really think they could throw $3 trillion more into the US monetary mix without causing price increases?

No, they didn’t think that.  Mostly they didn’t think at all.  They just did it.  And because they are preparing to do even more of the same, you can expect 2021 to be the year that consumer price inflation raised its ugly head.

Here is just some of the evidence:

Prices are climbing fast at the level of raw commodities.  Corn, soybeans, and wheat are at the highest prices in years:

And now prices are beginning to climb at the retail food level:

Food prices climbed 3.9 percent in 2020.  That is twice as fast that the Fed’s nonsensical inflation target.  But take heart: higher food prices will only hurt people who eat.

If you don’t eat, you won’t notice a thing.

But it is not just food.  Cotton prices are at highs that have not been seen in several years.  Major appliances were up about 17 percent last year; used cars and trucks up 10 percent; the cost of elder care rose 7.5 percent.

The Federal Reserve’s latest “Beige Book,” a regularly scheduled report on economic conditions in the Fed’s 12 regions of the country. was released Wednesday (1/13).  Upon review, economist Robert Wenzel says “there is a strong current of increasing prices” across the country.

Sure, airfare, hotel rates, and the cost of business attire are all lower.  But only because the lockdown has decimated the customers for each.

But be aware that more stimulus spending is coming, which will further raise prices.

Meanwhile, Fed officials far and wide and starting to talk about raising their inflation targets.  They are bound to lose control along the way.  A number of observers are pointing out the Fed “may not be able to control how fast the dollar inflates, so we could jump from inflation to hyperinflation overnight.”   That is correct; a thin line divides the two.  The Fed is always behind the curve.  Long before the results of one round of money-printing have worked their way into consumer prices, the Fed will have already launched another round.

We recommend you review your portfolio today with a Republic Monetary Exchange precious metals professional.  You will be glad you did.

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Gold Bull Market Coming

The Rush to Gold Will Be a Global Phenomenon

So far, the gold and silver bull market that began by our reckoning in August 2018 has been fairly typical.   

Don’t misunderstand!  We’re saying it has been typical for a powerful bull market!  The move so far has been most impressive.  Gold is up almost $700 an ounce since the bull started running.  In fact, gold appreciated almost 25 percent last year.  Silver did even better, racing up 48 percent in 2020, outperforming US stocks by three times.

It will continue to march much higher with every turn of the Fed’s printing press and every new federal budget.

But eventually, at some time in the not too far-off future, the price of gold (and silver) will go parabolic.  The gold chart will resemble a hockey stick.  It will hit an inflection point and turn straight up. 

That will be the end-game for the dollar in its present incarnation.  It will be game over for unbacked paper or digital government money issued without restraint by anyone, anywhere.  What the authorities will do to attempt to prolong the game or replace it remains to be seen.  But the prices of gold and silver – and other real things – will reflect the valuelessness of the paper money.

This calamity will be world-wide.  There has never been an event like this on a global scale.  When dollar inflation reached double-digits in the late 1970’s it was costly for other countries that held dollar reserves.  The dollar was, as Nixon’s Treasury secretary John Connelly said to foreign finance ministers back in the day, “The dollar is our currency, but it’s your problem.”

But remember, that back then China and Russia were not even in the game.  China was a closed economy, Russia was as well, although less so.  The euro did not even exist back then.  If the dollar was being debauched, there were other currencies that were not.  Although the Swiss franc had gotten into bed with the dollar with the Bretton Woods agreement in 1945, it maintained a statuary tie to gold until 1999.

That is not the case today.  All the major currency nations are printing money, just like the Fed.  This chart from Bloomberg News illustrates how much money the US, Japan, Great Britain, and Europe are printing compared to their GDP.  Over the last year, their assets – financial instruments they purcased with money they conjured out of nothing —  have grown to more than half of their productivity.

When the dollar breaks down, when foreigners quit funding US government debt, no one will find refuge in euros, pounds, or yen.  Or in yuan.

The rush to gold that ensues will be reflected in the hockey stick gold chart.

By then it will be too late for most people to do anything about it.  The window of opportunity that is open today will have closed.

By the way, that day is approaching quickly.  Sometime in the days to come we will write about the signs that inflation has now begun rearing its ugly head.  And that the line between low and nuisance levels of inflation and crippling inflation is a very thin one indeed.

In the meantime, let a Republic Monetary Exchange gold and silver professional advise you about steps to take to protect yourself.

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sinking dollar

The Diving Dollar

Have you seen what has been going on with the US Dollar?  It looks like it is diving off a cliff. 

Here is a one-year chart of the US Dollar Index.  You can see the appearance of the COVID-19 shutdown early in 2020 and the confusion in the currency markets.  The dollar fell, bounced back up, and headed back down for the rest of the year.

The dollar fell almost seven percent altogether last year.  One leading economist, Stephen Roach at Yale, says it will fall 35 percent by the end of this year.  

We’ve been calling your attention to his warnings since June.  See for example the commentary DOLLAR BREAKDOWN AHEAD! that we wrote on June 9.  

You can see form the chart that most of the dollar’s 2020 losses took place after we published that and other warnings last summer.

None of this is especially complicated.  The Fed has been printing a lot of US dollars.  They are not backed by anything – certainly they are not backed by gold as they once were.  Since they are not backed by anything real, since the Fed creates them out of thin air, they are worth less and less with each turn of the printing press.

The venerable American Institute for Economic Research published the following chart last week, pointing out that “the Federal Reserve System has indirectly increased the money supply (the M1 version) by a whopping 75 percent over the past year.”

That’s a lot of money printing.  No wonder the dollar looks like it is cliff diving!

AIER explains:

“The money was created for the primary purpose of buying up Treasury securities that were issued to finance the massive federal budget deficits of late (more than $3 trillion for fiscal year 2020; probably higher next year). The Fed soaked up about $2.3 trillion of the new debt, bringing its total portfolio of Treasuries to about $4.7 trillion. In addition, it added about three quarters of a trillion to its holdings of mortgage-backed securities, boosting those holdings to over $2 trillion. This was done to suppress longer-term interest rates that it does not directly control.

“Is your head spinning yet? Who can grasp a trillion of anything? It may help if we divide these numbers by 128 million, the total number of U.S. households:

ItemTotalPer household
2020 Federal deficit$3 trillion$23,437
Federal debt, net of inter-agency holdings$21 trillion$164,000
One-year M1 money supply increase$2.8 trillion$21,875
Fed holdings of Treasury securities,one-year increase$2.3 trillion$17,968
Fed holdings of mortgage-backed securities, one-year increase$0.75 trillion$5,859

According to AIER, the basic message from all this is, “We’re in trouble.”

It concludes, “Those who understand that the piper will be paid must protect themselves and their families first, then do what they can to understand and promote sound economics.”

We agree.  You must protect yourself and your family first.  The gold and silver professionals here at Republic Monetary Exchange can help.  Why not contact us today?

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The Bubble Expert

Calling Jeremy Grantham an expert on stock market bubbles is justified by the evidence.  

Wikipedia describes Grantham, whose firm has some $64 billion under management, this way:

[Grantham] is a British investor and co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo (GMO), a Boston-based asset management firm. Grantham is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles. He has been a vocal critic of various governmental responses to the Global Financial Crisis from 2007 to 2010. Grantham started one of the world’s first index funds in the early 1970s….

Grantham has built much of his investing reputation over his long career by claiming to identify speculative market “bubbles” as they were unfolding. Grantham claims to have mostly avoided investing in Japanese equities and real estate in the late eighties, as well as technology stocks during the Internet bubble in the late nineties.

Jeremy Grantham

For our friends and clients with exposure to the stock market during this period driven by unprecedented money-printing and deficit-financed government spending, we offer a few key observations from Grantham’s January 5 client letter “WAITING FOR THE LAST DANCE”:

“The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.

“These great bubbles are where fortunes are made and lost… every fault of individual human psychology will work toward sucking investors in.

“But this bubble will burst in due time, no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios. Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives….

“The single most dependable feature of the late stages of the great bubbles of history has been really crazy investor behavior, especially on the part of individuals. For the first 10 years of this bull market, which is the longest in history, we lacked such wild speculation. But now we have it. In record amounts…. As a Model 3 owner, my personal favorite Tesla tidbit is that its market cap, now over $600 billion, amounts to over $1.25 million per car sold each year versus $9,000 per car for GM. What has 1929 got to equal that? Any of these tidbits could perhaps be dismissed as isolated cases (trust me: they are not), but big-picture metrics look even worse.”

Grantham’s observation that “this bubble will burst in due time, no matter how hard the Fed tries to support it” reminds us of the old market aphorism that “nobody is bigger than the market.”  That includes the Fed, as the popping of its bubbles again and again attest.  

It there was ever a time to realize gains in the stock market and move them to the safety of gold and silver, now, with the government in complete disarray, with the American people divided in a way not seen in a century, and with monetary and fiscal policy stretched beyond belief, is such a time.

Speak with a Republic Monetary Exchange gold and silver professional today and learn how to protect your wealth, your retirement, and your family with precious metals.

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US Gold and Silver Coin Sales Surge

The US Mint reports that sales of its gold and silver coins surged in 2020.  

Despite mint shutdowns and slowdowns in 2020 – and perhaps because of the economic shutdown and the monetary policies that followed – US mint bullion coin sales rose to the highest levels in years.

Sales of American Eagle silver coins jumped to 30,089,500 ounces in 2020.  That is more than double 2019’s total when Silver Eagles sales reached 14,863,500 ounces.

American Eagles gold coin sales experienced an impressive surge in the year gone by as well.  The 2020 total was more than five times higher than the year before.  Total sales of the American Eagle gold series coins — 1 ounce; 1/2 ounce; 1/4 ounces; and 1/10 oz. coins – reached 844,000 ounces.  In 2019 sales totaled only 152,000 ounces, the lowest annual total since the American Eagle coinage began in 1986.

American Buffalo gold coins were introduced in 2006.  2020 Buffalo sales of 242,000 showed an increase of almost four times over the 2019 total of 61,500 ounces.  

With the Coronavirus shutdowns beginning in March, gold mines around the world stopped operations as did refineries in Switzerland.  The San Francisco US Mint closed in February.  Then the US Mint at West Point, a key production facility for US bullion coins, shut down temporarily in April.

Around the world and across the US, just as demand was peaking, many gold and silver dealers found themselves unable to make delivery to their clients at any price.  Some dealers asked buyers wait 8 – 12 weeks to get their hands on real gold and silver.  

Under these conditions, the Wall Street Journal even coined a new term for gold, calling in “unobtanium.”  

But that description did not apply to Republic Monetary Exchange.  Even as the economy went into free-fall, when mines stopped mining and mints stopped minting, we continued to make immediate delivery to our clients.  

Avoid the needless risk of placing and paying for orders elsewhere with dealers that are asking for advance payment and then promising delivery at some uncertain date in the future.  

Republic Monetary Exchange subscribes to best practices to meet your gold and silver needs today, providing immediate delivery.  

Learn more about American Eagle Gold coins from Republic Monetary Exchange HERE, and about American Eagle Silver Coins HERE.

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gold bar on grains

This is What They Said About Gold!

More things said about gold, silver and sound economics worth remembering in 2021!

Gold is a hedge on government authorities making poor economic choices. Inflation is usually the result of those poor decisions, but people confuse cause and effect here. Gold is a hedge on policy makers screwing up, and there has been a lot of screwing up in the last 20 years.

-Jared Dillian

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

— Ernest Hemmingway

 Notes on the Next War: A Serious Topical Letter

I think there is a question mark over the durability of any power that relies as heavily as the United States on importing capital and borrowing from abroad.

—Niall Ferguson  

Fiat money will be a passing fad in the long-term history of money.

— Jim Reid

Deutsche Bank

Governments lie; bankers lie; even auditors sometimes lie. Gold tells the truth. 

— Lord Rees Mogg

We live in a technological golden age but in a monetary and fiscal dark age. While physicists discover the so-called God particle, governments print and borrow by the trillions. Science and technology may hurtle forward, but money and banking race backward.

You can’t keep printing trillions of dollars without getting serious inflation. There’s no getting around it

The people making these decisions know that perfectly well. But thats the secret: They want inflation. In fact, they need inflation. Why? Because they’ve gotten rich from debt. That’s the real economy. Leverage is their entire business model. So for the finance class, inflation is the only way out of all that debt. When money is worthless, you owe less. Meanwhile, hard assets — like upscale real estate on Martha’s Vineyard — will be worth more.

So inflation may crush you, but it will make the people making the decisions richer. Everyone else — regular wage earners, people living on fixed income, every middle-class retiree in the country,  anyone who bothered to live like a responsible person and save money —  will be in serious trouble when inflation arrives. 

That’s not speculation. It’s coming, and anyone who’s paying attention knows it’s coming.

  • Tucker Carlson

Fox News

The Golden Rule: He who has the gold makes the rules. 

– Attributed to a 1967 Wizard of Id comic strip

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing. I now deny their power of making paper money or anything else a legal tender. I know that to pay all proper expenses within the year, would, in case of war, be hard on us. But not so hard as ten wars instead of one.

 

– Thomas Jefferson

Letter to John Taylor

Good money is coined freedom.

—Swiss proverb

The Fed took a dollar and eliminated 98% of its purchasing power and they’re doing that more rapidly than ever but it just hasn’t been fully discounted. When it is, gold is going to be much, much higher.

—Ron Paul

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2021 Predictions

Ten Things That Won’t Happen in 2021!

Below are out predictions for the New Year.  Read all ten 2021 predictions and at the end you’ll discover a little surprise about our list!

10. 
The Federal Reserve won’t stop managing the monetary system to benefit the banks that created it to serve their interests in the first place.

9. 
Foreign central banks won’t increase their dollar holdings, although they will increase their gold holdings.

8. 
Congress won’t reduce federal spending; it won’t stop creating trillion-dollar deficits; and it won’t make a serious attempt to reduce the $27.5 trillion debt.

7.  
The Washington establishment won’t hold most of its members to the same legal standards that it applies to the ordinary people.

6. 
Washington Republicans and Democrats won’t stop trying to divide the people to win elections.  They will, however, concentrate their attention on smaller divisive issues while the fundamental issues of America’s freedom and prosperity go unaddressed.  

5. 
The establishment’s lapdog press won’t bother to report accurately on the fate of the dollar.  Nor will their reporting on gold be accurate.

4. 
The establishment lapdog press won’t blame the nation’s monetary problems on the Federal Reserve and the nation’s money manipulators.  It will blame the people instead.   

3. 
While Washington may commission a study, launch a new bureau, or even appoint a bureaucrat, nothing meaningful will be done about the declining lifespan of the American people. 

2. 
Monetary and fiscal policy won’t stop shrinking the American middle class.

1. 
In a crisis, you won’t see people standing in line to exchange their gold for paper money like dollars.  It’s always the other way around.


Now here is the surprise…. 

These are the exact same predictions we made last year, at the beginning of 2020.  And the year before that, at the beginning of 2019!  

Well, actually, they aren’t exactly the same.  We have to make a change every year to number 8.  We had to change the national debt to $27.5  trillion.  Last year it was $23 trillion.  This proves the point of the prediction, that Washington won’t stop creating trillion-dollar deficits!

Because these predictions have worked out so well, we dusted them off to re-issue them for 2021.  How accurate do you think these predications will be when we look back on them next year?  

In the meantime, all we can say is to own gold, and have a Happy and Prosperous New Year!

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Things Worth Remembering About Gold and Silver

Here are a few observations about gold and silver that we have been collecting to share with our friends and clients!

Gold and silver, like other commodities, have an intrinsic value, which is not arbitrary but is dependent on their scarcity, the quantity of labor bestowed in procuring them, and the value of the capital employed in the mines which produce them.

  • David Ricardo, British political economist (1772-1823)

A U.S. dollar is an I.O.U. from the Federal Reserve Bank. It’s not backed by gold or silver. It’s a promissory note that doesn’t actually promise anything. 

— P.J. O’Rourke

Ask anyone in Germany what they associate with gold and, more often than not, they will say that it is synonymous with enduring value and economic prosperity. Ask us at the Bundesbank what our gold holdings mean for us and we will tell you that, first and foremost, they make up a very large share of Germany’s reserve assets … [and they] are a major anchor underpinning confidence in the intrinsic value of the Bundesbank’s balance sheet.”

  • Jens Wiedmann, President, Bundesbank

I grew up in a purely urban family. We had no relatives in the country. I’m born in 1944. When I was a baby, my mother could only buy food because she still had some gold coins. Without gold, I would have starved. She always told me that. Therefore, this generation already has a certain gold affinity. In extreme times of crisis, this is one of the few things left to be accepted. Gold was the only thing left to the people of the city at that time. Before the silver cutlery was also traded at the farmer.

  • Ewald Nowotny, Former European Central Bank governor

The gold standard makes the determination of money’s purchasing power independent of the changing ambitions and doctrines of political parties and pressure groups. This is not a defect of the gold standard; it is its main excellence.

  • Ludwig von Mises

With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.

—F. A. Hayek

Gold still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody. Gold is always accepted.

  • Alan Greenspan

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasury. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship. The average age of the world’s great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage.

– Alexander Tyler, 18th century historian and jurist

And finally, one more chart about 2020:

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This Special Time of Year

This time of year, many of our thoughts center on family.    

For wealth protection, from generation to generation, nothing endures like gold.  In fact, someone called gold and silver “the superheroes of wealth preservation.”

Gold is one of the least reactive chemical elements;  it does not tarnish or rust.  It is handy to think of that as a metaphor for the fact the gold’s core value is impervious to corruption by the actions of its issuer.  The value of an ounce of gold is not dependent on whose picture or name is inscribed on it.  Nor does it depend on any government; governments come and go, but the value of gold persists.

If you had your choice of putting some government’s paper money in a box under the Christmas tree, or gold, to pass along to your children and grandchildren, you would be wise to choose gold.  

Gold ownership has traditionally been prized as a means of passing wealth along in families, in discreet, private ways.  

It is the only financial asset that is not someone else’s liability, not dependent on someone else’s promises.  

Gold’s special virtues has been recognized around the world and throughout the centuries.  So honored is gold that the wise men who followed a star made it among their gifts to a child born in a stable more than 2,000 years ago.

So this time of year, while so many of our thoughts center on family, choose to protect your family and all that you’ve worked for.  Find out why gold is the money of the ages, and why it makes a perfect gift for family members and loved ones.  

Speak with an RME Gold specialist right away.

And Merry Christmas from all of us at Republic Monetary Exchange!

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Nixon Closes the Gold Standard

Since We Left the Gold Standard

America’s Wealth Gap Grows…

A new Time magazine story (do they still really publish an actual magazine?) is getting a lot of play.  It is a story about the wealth gap, the growing disparity between the rich and uber-rich and everybody else.  The headline reads:

“The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90%—And That’s Made the U.S. Less Secure” 

Time tells us that extreme income inequality, the upward redistribution of income, has cost American workers “a staggering $50 trillion” over the past several decades.  “Half of all full-time workers (those at or below the median income of $50,000 a year) now earn less than half what they would have had incomes across the distribution continued to keep pace with economic growth.”

Time and its sources find that “the median male worker needed 30 weeks of income in 1985 to pay for housing, healthcare, transportation, and education for his family. By 2018, that “Cost of Thriving Index” had increased to 53 weeks (more weeks than in an actual year). But the counterfactual reveals an even starker picture: In 2018, the combined income of married households with two full-time workers was barely more than what the income of a single-earner household would have earned had inequality held constant. Two-income families are now working twice the hours to maintain a shrinking share of the pie, while struggling to pay housing, healthcare, education, childcare, and transportations costs that have grown at two to three times the rate of inflation.”

Of course, Time’s basic story is true, at least the part about the wealth gap.  But knowing Time as we do, we expected it to be a thinly disguised call for more socialism and government wealth redistribution.  We quickly scanned to the end to see if our expectation was met.  It was.  But we could have just saved ourselves the trouble by word-searching the article for the word gold.

gold bars

We eventually did, and of course gold doesn’t show up anywhere.  But today’s wealth gap is a product of the abandonment of the gold standard.

Since the Federal Reserve and the dollar was freed from the discipline of gold in 1971, a growing wealth gap has been unavoidable.  It is easy enough to understand why.  With the Fed serving as the towel boy of Wall Street interests (David Stockman call it “the handmaiden” of Wall Street), its primary objective has been to stovepipe money their way and inflate stock prices – blathering continually about “the wealth effect” all the while.  But since stocks are owned primarily by the wealthy, the wealthy get wealthier, while other are left behind. 

Pew Research:

“The share of American adults who live in middle-income households has decreased from 61% in 1971 to 51% in 2019. This downsizing has proceeded slowly but surely since 1971, with each decade thereafter typically ending with a smaller share of adults living in middle-income households than at the beginning of the decade.”

Things have gotten worse with the lockdown.  A Washington Post story says, “Nearly 8 million Americans have fallen into poverty since the summer.”  Although as the following graphic illustrates, the nation’s leading billionaires have done quite well.

This country’s founders, having lived under princes and potentates, created a government and monetary system that could not be corrupted by a king or a central bank to enrich either the nobility or the crony classes at the people’s expense.  But over time, the gold and silver monetary system gave way to the Fed and the made-up, unbacked dollar.

Instead of the government and the Constitution protecting your prosperity with a sound money system, it is up to you to protect your own wealth with gold and silver.

The statists and socialists have exploited our growing wealth divide for their own purposes.  And they have been successful.  They have a lot of open field and running room ahead.

We urge you to speak with a Republic Monetary Exchange precious metals professional and take steps to protect yourself.  

Do it today, before it is too late.

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Fed to Keep Doing What it Has Been Doing

The Federal Reserve has held its 2020 year-end meeting, promising to keep on doing what it has been doing.

Which reminds us of the old saying that if you keep doing what you have been doing, you are going to keep getting what you have been getting.

In this case, the Fed intends to keep buying financial assets in the afternoon with money that did not even exist in the morning.  

This is exactly what the Fed has been doing that drove gold to new all-time highs in US dollar terms and in virtually all the other currencies in the world in 2020!

At the conclusion of its two-day December meeting on Wednesday (12/16), the Fed Open Market Committee announced that it planned to continue buying $80 billion a month of US treasury bonds and $40 billion a month in mortgage-backed securities.

The committee vote, to keep purchases at the rate of $1.44 trillion a year with money conjured up out of nothing more than a digital keystroke, was unanimous.  It is a continuation of the money-printing rate that the Fed launched in June, following a even bigger two-month spree in March and April.  The Fed bought $1.5 trillion in Treasuries during that period, effectively funding the entire US deficit during that period.  

Altogether, monetary policies drove the price of gold to an all-time high over $2,000 an ounce in August.  

In a follow-up press conference, Fed chairman Jerome Powell said the Fed would increase its purchases if the recovery slows.  “If progress toward our goals were to slow, the guidance would convey our intention to increase policy accommodation through a lower expected path of the federal funds rate, and a higher expected path of the balance sheet,” said Powell.

The Fed’s news release including this statement: “These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.”

The Fed also agreed to maintain the Fed funds interest rate at a target level of 0 to 0.25 percent.

The Fed has a tiger by the tail.  It has learned that it cannot stop inflating conditions of money and credit without tanking the stock market.  Yet it can’t keep doing what it has been doing without driving the growing global de-dollarization movement.

Either path, higher inflation, or a collapsing stock market with drive gold prices higher.

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Took the Words Right Out of…

  • What is our government’s solution to the disaster they created? Well, more money from the Federal Reserve, printed out of nowhere and backed by nothing.
  • You can’t keep printing trillions of dollars without getting serious inflation. There’s no getting around it.
  • Inflation may crush you, but it will make the people making the decisions richer. 
  • That’s not speculation. It’s coming, and anyone who’s paying attention knows it’s coming.

We are always glad to hear someone speak the truth.  To help awaken the people to the monetary calamity the governing classes have prepared for them.  We especially like it when someone highly placed in the national media is willing to talk about the Federal Reserve and inflation, because – believe me – it doesn’t happen often.

So, today we’re going to sit back, put our feet up on the desk, and let Tucker Carlson say what we might say if we were on national television ourselves.  The following remarks are adapted from Tucker Carlson’s opening monologue during the December 11, 2020 edition of “Tucker Carlson Tonight.”

The year 2020 has been a tough one for a lot of Americans, but it’s been especially difficult for the experts who claim to analyze data for a living. A lot of these people (pollsters, public health experts) have been exposed as frauds.

If you still don’t know that dishonest people can easily manipulate data to tell you any story they want to tell you, consider the condition of our economy. The numbers out of Washington suggest it’s in great shape. Stock prices, 401(k)s and upscale home sales have all risen dramatically. There are a lot more billionaires than there ever have been in this country. In fact, billionaires as a group have increased their wealth by 30% overall this year. At the same time, the unemployment rate is falling, so it’s all good, right? 

Well, that is one way to look at it, but it’s not the whole story. America has a very different economy now from the economy we had even just last year. People at the very top are thriving, but many other Americans are withering away. 

Tens of thousands of independent businesses have been shut down for good, entire sectors of the economy have been wiped off the map. That’s a lot of people out of work. So where are they? Why does the federal government tell us the unemployment rate is down?

Here’s the simple answer: The official unemployment numbers don’t count unemployed people who have stopped looking for jobs, and there are a lot of those. Last month alone, another 500,000 working-age Americans who want a job quit trying to find a job. That’s not surprising. There are 10 million fewer jobs available in this country than there were in February, when politicians decided to destroy countless small businesses in the name of slowing the spread.

As a result of that, according to the Labor Department, long term unemployment has hit record levels. Last month, 385,000 more Americans reported being unemployed for longer than 27 weeks since September. That number has increased by more than 1.5 million.

So Trillions of new dollars spent to fix a problem they created, and more on the way soon. Keep in mind, this is stimulus money, designed to help those hurt by the lockdowns. In many cases, it did help and it will help.

But in many other cases, the money has gone to people with the right political connections. A voter registration nonprofit run by Rev. Raphael Warnock, now running for Senate in Georgia, raked in $482,000 in coronavirus bailout money. How did he do that? Don’t ask. A firm that happens to be co-owned by Ilhan Omar’s husband got half a million dollars in tax money. Planned Parenthood hoovered up $80 million. (More abortions for everyone!) The Kennedy Center in Washington, home to the local opera, got $25 million and then laid off employees, anyway. 

That’s all our money, but the good news is that pretty soon it won’t be worth much. You can’t keep printing trillions of dollars without getting serious inflation. There’s no getting around it.

The people making these decisions know that perfectly well. But thats the secret: They want inflation. In fact, they need inflation. Why? Because they’ve gotten rich from debt. That’s the real economy. Leverage is their entire business model. So for the finance class, inflation is the only way out of all that debt. When money is worthless, you owe less. Meanwhile, hard assets — like upscale real estate on Martha’s Vineyard — will be worth more.

So inflation may crush you, but it will make the people making the decisions richer. Everyone else — regular wage earners, people living on fixed income, every middle-class retiree in the country,  anyone who bothered to live like a responsible person and save money —  will be in serious trouble when inflation arrives. That’s not speculation. It’s coming, and anyone who’s paying attention knows it’s coming.

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Deficits, Inflation, and De-Dollarization

DEFICITS RACING AHEAD

For the first two months of the 2021 government budget year, October and November, the federal deficit ran just over 25 percent higher than the same period a year earlier, before the pandemic.

Associated Press:

“The Treasury Department reported Thursday that with two months gone in the budget year, the deficit totaled $429.3 billion, up from $343.3 billion in last year’s October-November period.

“The deficit — the shortfall between what the government collects in taxes and what it spends — reflected an 8.9% jump in outlays, to $886.6 billion, and a 2.9% decline in tax revenues, to $457.3 billion.”

CONSUMER, PRODUCER PRICES INCHING BACK UP

The price inflation numbers are in for the month of November.  After a drop into negative rates with the beginning of the COVID lockdown, the Bureau of Labor Standards  reports that the overall Consumer Price Index is up 0.2 percent for the month.  That outpaces the consensus expectation of 0.1 percent.

The so-called “core” inflation rate, all items less food and energy, increased 0.2 percent in November as well.  The November Producer Price Index rose 0.8 percent, the steepest increase since the early days of the pandemic in February.

One other number we think important to keep an eye on, the 12-month food price index, rose 3.7 percent.

DE-DOLLARIZATION

After a slowdown during after the pandemic got under way, central bank gold buying appears to have resumed climbing.  

World Gold Council:

“Following two consecutive months of net sales, central banks resumed buying in October: global official gold reserves rose by 22.8 tons on a net basis. Levels of buying remained consistent with the previous two months, but selling activity was far reduced.” 

As we have underscored many times, central bank gold buying is part of a growing worldwide de-dollarization movement.

With many countries abandoning the gold standard during World War I, the still gold- backed US dollar became the world’s de facto reserve currency.  That status was formalized after World War II.  

Altogether, the Financial Times reminds us in a recent piece, the dollar has had about a 100 year run as the go-to currency.  That is about as long as any reserve currency seems to last, it says:  

Before the U.S., only five powers had enjoyed the coveted “reserve currency” status, going back to the mid-1400s: Portugal, then Spain, the Netherlands, France and Britain. Those reigns lasted 94 years on average.” 

We invite you to speak with a Republic Monetary Exchange gold and silver specialist to find out why owning precious metals is your first line of defense against deficit spending, rising prices, and global de-dollarization.

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Not Liquidity – Solvency!

We have written repeatedly that we are fast approaching a crisis of not just liquidity, but of national solvency.

Liquidity has to do with somehow – by means wise or foolish – meeting obligations that come due today.

Solvency has to do with ongoing financial viability, about long-term viability of affairs as presently structured.

Bankruptcy is a term used when a court declares an entity insolvent.

While we don’t mind being in a distinct minority saying something if it is true, we are glad to see the Bank for International Settlements (BIS) in Basel, Switzerland has joined us in seeing that today’s risks are not just of liquidity, but of solvency.

To review a few of our prior comments on the subject, here’s one from June 2019 in a piece called The Way the World Works, in which we observed that media figures weren’t bothering to ask candidates vying for the office of President about our financial outlook:

“You would think that with $22 trillion in unpayable national debt (and unknown trillions more in promises the government has made to pay people for things in the future), candidates and news moderators would be deeply concerned about the ways and means of our national solvency and survival.  But not so!”

Note that back then, although only a year and a half ago, the national debt was “only” $22 trillion, $5 trillion less than it is today. 

We commented again that season on solvency in a piece called THE DEBT CEILING AND THE TICKING TIME BOMB:  

“The nation’s solvency takes a back seat to the real issue politicians care about on both sides of the aisle:  REELECTION!

“The net effect of another suspension or of a protracted fight ‘solved’ with new spending initiatives that are unpaid for, will be serious questions about US solvency in financial centers around the world.  Already foreign central banks are moving away from the dollar and to gold.

“New questions about US solvency cannot be comfortably answered.  In fact, the only real answer to how debt that comes due today can possibly be paid is by issuance new debt tomorrow.

“Or by printing more money of no intrinsic value.  

“That is why gold marches up in lockstep with the rising debt ceiling.”  

Earlier this year (New Faces in the Gold Spaces!), we noted that the Fed can meet immediate liquidity issues with money printing.  But that does nothing about solvency:

“More and more people are recognizing that the US is actually facing solvency issues.  For the time being, the Fed has been able to fill the budget gap with money-printing.  But there is a cost to that kind of legal counterfeiting, too.  

“It will show up before long in the value of the dollar and a reluctance by foreign nations to keep funding US debt.”

We have written as well recently of the same liquidity/solvency issues in large corporations, so-called “zombie companies,” that only survive thanks to creditors who are willing to let them increase and roll their debt forward, but that are not able to improve their prospects for survival.

It is a definition that fits the US government.  The Fed provides endless liquidity for now, but there is an end point to such money-printing.  When foreigners are no longer willing to fund our debt at current levels, interest rates will explode and the global dollar system as presently constituted will come to an end.

Now, in conjunction with its latest quarterly report, senior BIS official Claudio Borio announced, “”We are moving from the liquidity to the solvency phase of the crisis.” 

ZeeroHedge offers this translation of Borio’s remarks:  “It’s about to get much worse, only because central banks will ignore all the warnings, they will double down on the same failed policies, pushing leverage to even record-er highs, yields to even record-er lows, and sparking a propagation of zombies the likes of which have never before been seen.”

We can’t answer the question of why governments keep engaging in these Groundhog Day monetary policies generation after generation, or why people never seem to learn.  But we can say this:  As before, the key to protecting yourself in times like these is gold.

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Central Bank Digital Currencies

They have stepped on the gas!  The pedal is to the metal!  Central banks everywhere are scrambling to introduce their own digital currencies.

Oh, the power they’ll have to corral every financial transaction into major institutions.  To watch everything you do.  To instantly impose policies without debate.  To cram negative interest rates down your throat.  

By the way, negative interest rates don’t mean that you can borrow for less than zero.  They mean that you pay to keep your money in the bank.  And you can have no money that is not in a bank.

That’s what negative interest rates mean.

We have written a lot lately about central bank digital currencies, “the full-tilt crypto boogie,” calling it “an ominous development and one of our leading reasons to own gold and silver and get off the Fed’s confiscation and monetary devaluation grid.”  See more here, and here.

Now an article published by the Mises Institute take a closer look at this war on cash as it is being advanced by the Bank of International Settlements (usually described as “the central bankers’ central bank), and by the European Central Bank.

Kristoffer Mousten Hansen from the Institute for Economic Policy in  Leipzig, Germany writes in “Central Bank Digital Currencies and the War on (Physical) Cash,” that the new digital currencies “may arrive as early as next year.” 

He makes the point that while there is clear consumer demand for inexpensive and convenient digital transactions, “such services are plentifully provided by companies such as Visa, Mastercard, Paypal, banks, and so on and so forth. There is no reason to believe that central banks need to provide this service nor that they could do it better than private companies and banks, and it is simply a mistake to equate demand for such services with demand for a [central bank fiat digital] money.”

Hansen concludes that “helicopter money, restrictions on cash holding, and negative interest rates are all part of the bundle of desirable policies that can only—or most easily—be achieved with digital currencies fully controlled by the issuing central banks.”

“At the end of the day, central bank digital currencies are all about control, not meeting consumer demand,” he says.

The bottom line is this:  central bank digital currencies are not your friend.  They are designed to advantage of the state at the expense of the people.  They necessarily limit human freedom and choice.  As such they will retard economic growth and prosperity.

And they will drive people seeking an alternative to gold and silver.

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Currency Games and Paper Money Shenanigans!

As you know from our repeated comments, the Federal Reserve is moving headlong toward the issuance of its own crypto-currency dollar.  This is as good a reason as any to protect your wealth with gold.

The Fed’s new digital currency is a variation – although a much more threatening one – on old-fashioned money printing: the issuance of currency unbacked by anything real.  Money-printing governments at least have the logistics of paper and ink to slow their emission of evermore fresh fiat currency.  State digital crypto-currency issuers will have no such complications to slow their currency creation.

This comes to mind with the recent news that Venezuela – the socialist catastrophe that is a case study in wealth destruction and currency ruination – has ordered up additional, new banknote paper.

Bloomberg News reported that the country ordered 71 tons of banknote security paper from an Italian provider as it prepares for a gusher of new 100,000 bolivar notes.  It was expected that the new bills would have a value of $0.23.  

But of course, that value would be fleeting.  Afterall, inflation in Venezuela ran 2,400 percent last year.

Getting a new paper currency stock from abroad is only one of Venezuela’s problems.  Its mint has the same problems keeping the presses functioning that its energy sector has keeping its oil wells working, thanks to the parts shortages that plague socialist States everywhere.  And like everything else in Venezuela – soap, toilet paper, food – shortages are even a problem with the ink the mint uses.  

But think how fast inflation could run in Venezuela if the country went all-digital currency, as the US Fed envisions.  Going all digital has the added advantage of enabling an authoritarian state to surveille every single financial transaction.  We are not surprised the regimes like Maduro’s want to spy on everything that its people do, but there are still Americans who don’t yet understand that the US government wants its citizens’ private affairs under constant state scrutiny.

For those that would like some privacy in their financial affairs, and to get off the grid before it breaks down, we suggest gold and silver.  Their importance in privacy and wealth preservation will grow with each advance in the Fed’s new digital money schemes.

A Republic Monetary Exchange gold and silver professional is standing by to help you protect you family and wealth from paper and digital currency shenanigans.

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Silver Heading to $30 in the Coming Months

Solar Demand Figures Large in Goldman Sachs Outlook

Goldman Sachs has renewed its call for silver to reach $30 an ounce in the next few months.  

That target represents a 25 percent near-term gain in the silver price.

Earlier this year Goldman set a price target of $30 for silver.  Silver touched $29.91 on August 7.  With the price having corrected to the $24 range, the investment bank has renewed the call, writing,  “Now, with silver at $24 per ounce, and a few potential upward solar surprises in the coming months, we reopen the trade.” 

Analyst Mikhail Sprogis, a Goldman Sachs vice president explains, “with global infrastructure stimulus tilting towards renewables, and solar in particular, silver stands out in the metals space as the obvious beneficiary. Solar investment accounts for around 18% of silver industrial demand or 10% of silver total demand.”

In a piece about green energy equities outperforming legacy energy equities, ZeroHedge responded Goldman Sachs with a headline that read, “Is Joe Biden About To Send Silver Soaring?”

Over the next three years, Goldman expects industrial demand for silver to climb by somewhere between two percent in its base case, to an impressive nine percent in its best case.

Details:

“Our Equity analysts’ base case is that global solar installations will increase by 50% between 2019 and 2023 as the greenification trend accelerates. Importantly, there are potential upsides even to this ambitious target. Former US Vice President Biden has proposed a plan which involves installing 500 million solar panels in the US alone over the next 5 years. Our Equity analysts estimate that this could boost installation of US capacity from 15 GW per year to 30 GW. This represents a boost of almost 15% to global solar installations. Importantly, our Chinese clean energy team see potential upside to Chinese solar panel installations in the new 5-year plan. In their view, Chinese installation could reach 93 GW per year vs the current figure of 50 GW. This would represent a 40% boost to global installations.”

Goldman acknowledges the investment demand remains in the driver’s seat for silver prices, which in our view will intensify in the Biden administration, along with government indebtedness and reckless monetary policies.  Nevertheless, we some merit in the observation we cited last month, that “silver is the new oil.”

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More on Global Debt

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

Ernest Hemingway, The Sun Also Rises.

 The world is awash in debt.  Zombie corporations borrowing just enough to stay alive, but never earning enough to survive without borrowing more.  Entire countries trying to print their way through the next fiscal year.  The US itself issues bonds that cannot ever be redeemed without the issuance of new bonds to take their place.  

At least 20 states have borrowed billions just to pay unemployment claims.  Households and individuals so deeply in debt that a bump in interest rates will wipe them out.  Consider that even before COVID-19, 60 percent of the people had less than $400 in savings.

As we reported recently (World Debt Goes Stratospheric), global debt is expected to reach $277 trillion by the end of this year.

A few additional details from the Wall Street Journal: 

  • Companies and governments have issued a record $9.7 trillion of bonds and other debt this year.
  • American companies with investment-grade credit ratings have issued more than $1.4 trillion of debt this year, up 54% over the same period in 2019.
  • Among riskier borrowers, U.S. junk-bond issuance has soared 70% to $337 billion.
  • Emerging government debt has risen nearly 10 percentage points to 61% of GDP this year, its largest one-year increase since the late 1980s.

What is a wise investor to do in this environment of unstable debt?  There is really only one refuge from cascading waves of default:  

Precious metals.

Gold and silver are the only monetary assets that are not someone else’s liability.  They are not dependent on someone else’s solvency, promises to perform, or honesty.  Their value does not depend on the endorsement, propriety, or honesty of any state or institution.  They have no counterparty risk, no risk of rule changes, nonpayment, default, or bankruptcy by individuals, companies, financial exchanges, institutions, and banks – quite apart from being insulated from the risks of the Fed’s fiat dollar as well.

We are in a debt bubble that will end badly.  Use this opportunity to speak with a Republic Monetary Exchange professional about steps to protect yourself and your family from the biggest debt bubble of all time.

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Student Loan Debt and Other Gold News and Nuggets

STUDENT LOAN DEBT

Commenting about student loan debt almost two years ago, we wrote, “Everything about student loan debt is bad economics.  All the easy money flowing the way of colleges and universities has led to a doubling of the cost of higher education over the past 20 years.  It has made the schools rich.  They’ve become palatial in some places, top-heavy with administrators and bureaucrats everywhere, although nobody insists that their graduates are better educated.”

Student Loan Defaults

Now the Wall Street Journal reports that the government is starting to figure out it created another mess like the subprime mortgage mess.

from the Wall Street Journal:

“The Education Department, with the help of two private consultants, looked at $1.37 trillion in student loans held by the government at the start of the year. Their conclusion: Borrowers will pay back $935 billion in principal and interest. That would leave taxpayers on the hook for $435 billion. The losses are far steeper than prior government projections and show that after decades of no-questions-asked lending, the government is realizing that it has a pile of toxic debt on its books.”

A CENTRAL BANKER SPEAKS ON GOLD

Central banks have been net gold buyers since 2010.  We have called this one of the most important financial megatrends of our time.  Here are comments about gold that must be seen as very bullish from Róbert Rékási, head of foreign exchange reserves management at the Central Bank of Hungary.

CentralBanking.com:

“Gold remains an attractive asset class for reserve managers. Amid the uncertainties created by COVID-19, gold is acting as a ‘safe-haven asset’, which is reflected in higher gold prices. The other important consideration is the opportunity cost. Because of the crisis, central banks eased policies further and fiscal policies followed suit. In this context, the opportunity cost of holding gold has decreased further….

“Recent surveys have revealed central banks are still willing to increase their gold exposures. Second, the drivers boosting the gold price are very powerful. The low and negative sovereign yield environment is very supportive. Geopolitical and global trade tensions also boost the gold price. For example, growing competition between China and the US is a long-term factor that will not go away after the pandemic or with a new US administration. Third, central banks in different regions look at gold in a different way than before the financial crisis.”

MORE ON DE-DOLLARIZATION  

The SWIFT payments system is the leading international account settlement facility for world banks and commerce.  The US has used the SWIFT system as a tool of its foreign policy, refusing access to it to countries in diplomatic contests.  Eventually, this will drive the development of alternatives to SWIFT.  

But for now, we note that the US dollar’s share of SWIFT settlements is in decline.  

Bloomberg:

“The euro was the most used currency for global payments last month, the first time it has outpaced the dollar since February 2013.

“Data from the Society for Worldwide Interbank Financial Telecommunications, which handles cross-border payment messages for more than 11,000 financial institutions in 200 countries, showed the European Union’s single currency and the greenback were followed by the British pound and the Japanese yen. The Canadian dollar overtook China’s yuan for the fifth spot, Swift said.”

Newsletter writer Chuck Butler observes that “the Fed now owns more Treasuries (their value) than all foreigners combined… Now tell me how this doesn’t end in a trail of tears!”

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An Economic Lesson from the Pilgrims

We hope that you can count the health and safety of your loved ones as among your greatest blessings of this difficult year.  Our heart goes out to all of those that have encountered this pandemic.

We are grateful that 2020 has been such a good year for gold and silver and helping our friends and clients protect their wealth and profit.  We think next year will be just as profitable, if not more so.  

Among our Thanksgiving traditions, right along with turkey, family, and even football, is a story we like to tell each year, a story of our founding with moral that we hope is able to remain a part of national character, one remembered each Thanksgiving. 

It comes from the history of the Pilgrims, who arrived on the Mayflower and settled at Plymouth in 1620 in pursuit of religious freedom. 

But within five months of landing, half the company had died of sickness and starvation. 

The sponsors of the enterprise had insisted that for the first seven years the colony would have “all things in common.” This communal organization, socialism by another name, exacerbated the settlement’s woes. 

The pilgrim’s governor, William Bradford, wrote that men complained about working for other men’s wives and children without being compensated while the wives thought it a form of slavery “to be commanded to do service for other men, as dressing their meat, washing their clothes, etc.; they deemed it a kind of slavery, neither could many husbands well brook it.” 

Altogether the experience of communal property “was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort.”

Eventually it was decided, wrote Bradford, that each family would be assigned its own parcel of land so “that they should set corn every man for his own particular, and in that regard trust to themselves.” 

The success of the new arrangement was predictable. 

After one year Bradford reported,

“This had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been. . . . The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.”

The Pilgrims had their religious freedom, but prosperity wasn’t part of their experience until they had economic freedom as well.  In experimenting with collectivized economic organization, they discovered what everybody owns, nobody owns. 

It’s a lesson that mankind has had to learn and relearn after many bitter experiences, from the “starving times” of the pilgrims, to the millions of deaths from Stalin’s terror famine in the Ukraine, to many millions more deaths from the collectivized farming  under Mao Tse-tung in China.  

The result of an enforced collective ownership, socialized or what is often called public ownership, is waste, neglect, and overuse.  

What everybody owns, nobody owns. 

Here’s to a free and prosperous America!  And a happy Thanksgiving!

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Gold and silver

Gold and Silver Roundup

As we near the end of the year we’ve been watching price forecasts for gold in 2021.  It is hard for anyone to overlook the fundamentals that we have been talking about:  unpayable and still climbing national debt and unprecedented Federal Reserve money printing. 

It is clear that these conditions are accelerating, so we expect accelerating bull market prices in 2021.  

Citi analysts now have a call for $2,500 gold next year, with another possible target of $2,700.  We recommend as well referring to our piece How High Silver?in which we wrote about Citi’s call for a silver to reach $40 next year, a 60 percent increase, “for starters,” they say.  

The bank goes on to calls a forecast of $50 a “very realistic target,” and $100 an ounce “possible.”  Bank of America also has a $50 “medium term” forecast for silver.

BofA is equally bullish on gold.  Last April it published a forecast for gold to reach $3,000 over 18 months.

Inflation worries will fuel demand for gold in 2021, according to a recent note from Goldman Sachs.  Goldman sees gold breaking out of its present consolidation range and climbing to new highs of $2,300.

A view of gold’s price future that spoke volumes about the future value of the dollar was offered by a Bloomberg commodities analyst that we reported in a piece we called Debt Out the Wazoo!  That forecast gold to reach $7,000 by 2025.

The world’s major central banks intend to let inflation “run hot.”  And you know that in January, if not before, Congress will pass another deficit-funded stimulus package.

As Bob Dylan sang in Subterranean Homesick Blues, “You don’t need a weatherman to know which way the wind blows.”

And you don’t need to be a bank analyst to see higher precious metals prices in our future.

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Silver Shining Bright in 2020

What a year it has been for silver!

Both gold and silver continue their year-over-year bull market runs, but as we have explained, silver likes to magnify the moves!

Over the last 12 months (11/19/19 – 11/19/20) silver has gained an impressive 40 percent.  

And that is after a 2o percent correction from its August high.

Americans are renewing their love affair with silver this year.  The Silver Institute, an international trade organization, issued a report last week concluding that silver demand can be expected to surge to a 5-year high:

“Physical investment is expected to surge by 27 percent to 236.8 million ounces in 2020, which would be a 5-year high. The largest retail market for bars and coins, the US, will lead the way with a projected 62 percent gain. This reflects the impact of increased price volatility and healthy price expectations. The second largest market, India, however, has experienced a markedly weaker second half, with outright liquidations, resulting in an estimated 20 percent decline for the full year total.”

On the supply side, the Institute also reports that COVID-19 and lockdowns will result in a 6.3 percent fall off in silver production this year.

One more silver note:  FXStreet.com published an analysis last week that calls silver “the new oil.”  That is an interesting way to frame silver’s role in the production of renewable energy and its growing importance to energy independence.  

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A Muted Warning

You may have noticed increasing talk of a confrontation with Iran.  While economic warfare with Iran has been US policy for some time, there have been reports of new White House conversations about a possible strike on the Iranian nuclear site at Natanz.  Often leaks of that sort are simply part of diplomatic maneuvers.  But we have warned of the risk of an accident or incident in the Persian Gulf.  False flag provocations are always possible.  

We are not specifically predicting a skirmish or something more in the coming weeks but will refer you to our 2019 commentary Temperature Rising in the Persian Gulf for a suggestion of what could happen around the Strait of Hormuz and how it would affect precious metal prices.

This is something we are continuing to keep an eye on, and we think investors should as well.

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World Debt Goes Stratospheric

Meanwhile, Interest Rates are the Lowest in History

The debt splurge continues.

Reuters reports that global debt is expected to reach $277 trillion by the end of this year.  That’s up from $257 trillion last year, with government debt accounting for more than half of the increase so far in 2020.

Citing a new report from the Institute of International Finance (IIF), Reuters writes that “Total U.S. debt is on track to hit $80 trillion in 2020.”  That is a gain from $71 trillion last year.  

Reuters:

“Developed markets’ overall debt jumped to 432 percent of GDP in the third quarter, from a ratio of about 380 percent at the end of 2019. Emerging market debt-to-GDP hit nearly 250 percent in the third quarter, with China reaching 335 percent, and for the year the ratio is expected to reach about 365 percent of global GDP.”

We can illustrate in alarming detail just how wobbly the debt structure is with an account from Bloomberg News about zombie companies.  

Zombie companies – among them Boeing, Carnival, Delta Air Lines, Exxon Mobil and Macy’s – “get their nickname because of their tendency to limp along,” writes Bloomberg, “unable to earn enough to dig out from under their obligations, but still with sufficient access to credit to roll over their debts. They’re a drag on the economy because they keep assets tied up in companies that can’t afford to invest and build their businesses.”

Bloomberg’s analysis reveal that more than 500 of the companies in the Russell 3000 index are not making enough to meet their interest payments.

How does the world get out from under this this debt burden?  The IIF answers in with carefully hedged institutional/bureaucratic language:  “There is significant uncertainty about how the global economy can deleverage in the future without significant adverse implications for economic activity.”

That’s one way to put it.  

The other is that the central baks will try to print their way out, destroying currency values so that debts can be paid in cheap, cheaper, cheapest money.  

That is why you must own gold to preserve your wealth.

Incidentally, we note with interest that China has been able to sell bonds denominated in euros at negative interest rates.  Five-year bonds, as part of a larger bond offering totaling $4.74 billion, were sold with a negative yield, minus 0.152 percent.

Altogether, there is almost $17 trillion of negative yielding bonds in the global market.  

Which leads to the question we have asked repeatedly:  How long can the lowest interest rates in history co-exist with the lowest interest rates in history?

If you devote an hour to thinking about that, you will probably decide to buy gold sometime in the first five minutes.  At Republic Monetary Exchange, we’ll be waiting to hear from you.  

We can help.

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Strange New Respect, Part II

One way to track the growing de-dollarization of the global economy is by the “Strange New Respect” gold keeps getting.

That’s what we called it in a piece over a year ago when we reported that central bank gold buying was setting new records.  The mainstream media were missing it (of course!), but the world’s central bank have clearly been taking gold very seriously.  

The latest news on that front is from Russia, where legislation to allow the country’s ’s $167.6 billion sovereign National Wealth Fund to invest in precious metals is now under consideration.  The fund holds pension assets and revenue from Russia’s oil exports.

Finance Minister Anton Siluanov is already on record supporting the move, observing correctly that gold is more sustainable in the long term than other financial assets.

As we have often observed, central bank gold buying is a megatrend for a reason.  The prognosis for the dollar is negative.

More strange new respect for gold can be found in the major financial institutions and investment figures, especially those that have long eschewed gold, now looking at it more favorably.  Warren Buffett is among them as we have chronicled HERE and HERE, while major banks with new gold recommendations and higher price targets included UBS, Wells Fargo, and Bank of America.   Pension and endowment funds are showing a strange new respect for gold, too.

That is what happens when the State has mismanaged its currency and painted itself into a corner of unpayable debt.  Oh, and on that front we note that the new fiscal year has gotten off on a bad foot.  The deficit for the first month of Fiscal Year 2021, was a record-setter for any October of $284.1 billion.  That’s a deficit more than twice as large as the prior October.

Already our $27 trillion national debt is producing lower investment and growth.  If the debt continues to grow by $2 – 3 trillion a year, it will double by 2030.  The US will be looking at a national debt of $55 – $60 trillion.  We shudder to think what that will mean.

All around the world people who know money best are developing a strange new respect for gold.  For more reasons why they are moving to gold, speak with a Republic Monetary Exchange gold and silver professional.  

Do it now, before the movement turns into a stampede.

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Gold Notes and Nuggets for November 2020

Silver Demand Indicator

Sales of US Silver Eagles by the US mint have totaled 27.2 million ounces so far in 2020.  That compares to the 2019 total of 14.8 million ounces

More Debt, Less Production

“Simply put, there is a fundamental inconsistency over the long run between an ever-rising share of US debt in world markets and an ever-falling share of US output in the global economy.”  Kenneth Rogoff, Harvard.

More Spending, Less Revenue

See for yourself!

More Spending, Higher Gold

See for yourself!

More on the Full-Tilt Crypto-Boogie

That’s the unfortunate name we have given to the otherwise unnamed plan now on the Federal Reserve’s drawing boards to bring every commercial transaction in the US under the watchful eye of the national surveillance state with its own digital-crypto-central-bank-block-chain-wallet-Fed-coin-currency.  

This is an ominous development and one of our leading reasons to own gold and silver and get off the Fed’s confiscation and monetary devaluation grid.

The latest is from across the Atlantic.  If the Federal Reserve is Tweedledum, the European Central Bank is Tweedledumber.  They are headed into the full-tilt boogie, too.  Policy makers there intend to make a go/no-go decision on their block chain currency by the middle of 2021.  ECB president Christine Lagarde said this week that, “If it’s going to contribute to a better monetary sovereignty, a better autonomy for the euro area, I think we should explore it.”

Monetary sovereignty?  Perhaps.  Personal sovereignty?  Au revoir.

RME Reminder

You know the holidays always crowd everything else off the table this time of year, but while you can, before you get any busier, why not prepare for whatever instability 2021 brings… and do it now?

Contact Republic Monetary Exchange today and speak with one of our knowledgeable professionals, before the New Year arrives.

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A Take on the Times, the Debt, and the Full-Tilt Crypto-Boogie

We could not have said it better, so we will let him speak for himself.  Doug Noland from Credit Bubble Bulletin has a long record of chronicling the birth of bubbles and the destruction of their popping.  

Here’s his recent take on the times:

“I have never been more concerned. Having watched ‘money’ and Credit run increasingly amuck over recent decades, I have long harbored fears of an inescapable future of calamitous financial, economic, social, political and geopolitical instability.

“That future is now unfolding.”

The establishment press has a long history of turning a blind eye to fiscal crises in development.  But now establishment journal Foreign Policy says, “Start Preparing for the Coming Debt Crisis.”

A couple of snippets:

“The next U.S. administration will likely face a global debt crisis that could dwarf what the world experienced in 2008-2009.”

“A surge in spending to mitigate the health and economic impacts of the pandemic has brought the total public debt in the United States to over 100 percent of GDP—its highest level since 1946 and a hurdle that will create a considerable drag on future economic growth. Other types of debt—household, auto, and student loans, as well as credit card debt—have seen similar surges.”

“Almost 20 percent of U.S. corporations have become zombie companies that are unable to generate enough cash flow to service even the interest on their debt, and only survive thanks to continued loans and bailouts.”

“Central banks’ balance sheets are stretched from the policies they have followed since the 2008 financial crisis and expanded in the course of the pandemic. Piling debt on top of debt seems to have reached a dead end.”

And finally, a few weeks ago we began warning about one of the craziest monetary schemes on the Federal Reserve’s drawing boards.  There’s no name for it, so we just dubbed it what it is:  The Full-Tilt Crypto-Boogie.  It will be some form of the Fed’s own digital-crypto-central-bank-block-chain-wallet-Fed-coin-currency.  

More evidence for it can be found in a passing mention in the Foreign Policy piece, a reference to a new funny money that is even funnier than our present funny money:  “A growing number of economists and policymakers are beginning to talk about the need to shift to a new, possibly digital monetary regime whose contours remain unclear.”

It’s coming! Have gold?

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Wall Street Traders, Speculators Put Gold on Sale

We’re Always Grateful When They Do This

We are heading into the homestretch of 2020.  Soon will be the holidays and then 2021, which looks to be another dynamic year for precious metals.  Through last week gold gained more than 27 percent in 2020.  That is after a strong year in 2019 as well, one in which gold gained more than 18 percent.

Silver’s 2020 performance has been stellar as well, up more than 45 percent through Friday.   

Post-election news that Pfizer, the pharmaceutical giant, has produced a COVID vaccine with a reported 90 effectiveness rate in trials bounced the stock market sharply higher on Monday (11/9), driving Wall Street players to sell gold and other investment vehicles to jump on the stock market train.  

In doing so, they provided an opportunity to buy precious metals at “sale” prices.  In a year in which gold reached all-time highs in virtually every currency in the world, Wall Street provided a welcome bargain in gold.

Such opportunities do not usually last long.  You will remember that the COVID-19 panic in March had Wall Street traders and speculators selling gold to raise margin call cash as the stock market tumbled.  The impact on gold was brief, less than two weeks.  In no time it was higher than when the sell-off began.  

Monday’s gold drop of about $100 was followed by a quick recovery of $22 on Tuesday.  Chartists will note that this is the third time since September that the gold price has tested lows in the $1,850 range, providing good technical evidence of a floor and three months of base-building.

Meanwhile the Lombard Letter writes that surging coin sales make a compelling case for much higher prices:

Year-to-date, until around mid-October 2020, the U.S. Mint sold 678,000 ounces of gold in American Eagle coins. (Source: “Bullion Sales,” U.S. Mint, last accessed October 15, 2020.)

How significant is this? In the entire year of 2019, the U.S. Mint sold just 152,000 ounce of gold in American Eagle coins. In other words: gold demand is running 346% higher this year than last year.

Lombardi describes corroborating high demand at Australia’s Perth Mint.  It is evidence that, it its words, “there’s a gold rush happening at the moment, and it’s getting bigger.”

We recommend you get positioned now for 2021.  This is an opportune moment to speak with a Republic Monetary Exchange gold and silver professional and take steps to add to your existing precious metals holdings.

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Gold Goes Up Either Way

Gold does not care who controls the White House.  It goes up either way!

That is the conclusion of a review of half a century of gold price action.  The World Gold Council points out correctly that gold goes up no matter which party controls the White House!

Let us give you some recent examples.

The price of gold roared to a new all-time high under Barack Obama.  It was about $850 when Obama moved into the White House.  In less than three years it had climbed 126 percent, reaching a new all-time high.

Donald Trump was inaugurated in January 2017.  The price of gold was just over $1,200 at the time.  But it climbed 74 percent to another new, all-time high of $2,089 by August this year.  

Here’s the WGC’s historical perspective:

“Looking back, gold’s performance has not significantly differed based on the party controlling the White House. Since 1971, gold returns were 11% on average per year during Democratic presidencies and 10% during Republican ones. Similarly, gold returns were only slightly higher in the year following a challenger party’s victory relative to an incumbent party’s victory (7.9% versus 6.5% respectively).

“Gold is a global market; it is purchased by consumers and investors around the world for a myriad of reasons, but primarily as a means to preserve capital and diversify risk. The US is the third largest gold consumer market, accounting for approximately 7% of global physical gold demand in the form of jewelry, technology, bar and coin, and ETFs…. There is still a large portion of physical gold demand that is influenced by global dynamics well beyond the US election.”

Other major financial institutions make the same point.  That’s because gold reflects real global economic conditions, including government debt and like the Fed’s funny-money policies.  And it is a referendum on the global assessmentsof the future value of the world’s reserve currency:  the US dollar.

You may already understand about the dollar’s future, about unpayable government debt and Federal Reserve money printing.  But now you need to act.

Take steps now to protect yourself and your family with gold and silver.  Talk to the professionals at Republic Monetary Exchange today!

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When the Election Dust Settles

Gold After the Election

Let’s sample some informed opinions about what will happen once the election is (more or less) settled:

According to the Royal Bank of Canada, once the dust settles, gold will resume its march higher.  

According to The Union Journal, George Gero, the managing director of RBC Wealth Management, believes traders will begin looking to “stimulus legislation, inflationary prices [and] large debts,  so gold can resume the upward trend towards $2,000.”

The Swiss-based investment banking powerhouse Credit Suisse, says, “Big picture, we continue to look for $2300.”

The bank’s strategists observe that “gold extends its consolidation from our $2075 target hit in August and we maintain our core view this is a temporary and corrective pause in the broader uptrend. Indeed, price action is beginning to increasingly look like a bullish ‘wedge’ continuation pattern, adding weight to our view.” 

In a CNBC interview, James Rasteh, CIO of Coast Capital, said that US fiscal and monetary policies will remain much the same no matter who claims final victory.  

This is a view we have expressed many times ourselves, most recently two weeks ago when we took a look Behind the Curtain where the Great and Powerful Monetary Oz twists the dials that set our economic course, push buttons that boom and bust the economy, and work the levers to determine the value of our money.

“We would be printing trillions of dollars more and all of that ultimately has extraordinarily positive repercussions for gold,” said Rasteh, pointing to a sizeable stimulus program without regard to the election outcome.”

Despite the ongoing counting, gold is bullish no matter which candidate wins

Let’s look at a historical perspective from the World Gold Council.  Juan Carlos Artigas, the Executive Director and Head of Research points out that gold goes up no matter which party controls the White House [emphasis added].  

“Looking back, gold’s performance has not significantly differed based on the party controlling the White House. Since 1971, gold returns were 11 percent on average per year during Democratic presidencies and 10 percent during Republican ones. Similarly, gold returns were only slightly higher in the year following a challenger party’s victory relative to an incumbent party’s victory (7.9 percent versus 6.5 percent respectively).”

We recommend that you keep your wealth in real money that cannot be corrupted by politicians and central banks.  And we recommend that you make the move now, while you can.

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China Won’t Fund U.S. Forever (But the Fed Will!)

It’s a good thing we have two eyes.  For good and sufficient reasons most people have been keeping a close watch on domestic affairs.  It’s a good thing to do, especially in the political season.

But we have also been keeping an eye of global affairs where something important is happening.  Most of the media misses it because they do not understand how important it is.  But it affects everything, the value of our money, the cost of living, and our long-term prosperity.  In other words it affects the American Dream.  

It is the most important financial megatrend of our time.

America’s creditor base is decaying.  

Here is the latest.  As US debt has mushroomed, China has been a major creditor.  In the fall of 2013 its holdings of US Treasury debt reached $1.3o5 trillion.  

Now, it is shedding its holding of US government debt.  It’s down to $1.06 trillion.  

Ten years ago, Russia held $180 in Treasury debt.  But as we reported in May, “[Russia’s] dollar holdings have fallen so low they are reported down in the asterisks in US Treasury listings, below the holdings of countries like Iraq and Vietnam.”

Of course you know that in the both the case of China and Russia, de-dollarization goes hand in hand with a determined move to fortify their bank reserves with gold.  

In a commentary on May 20, we wrote that the primary impact of this move to gold is threefold:

  • Central bank gold purchases are a harbinger of growing “de-dollarization,” the waning role for the dollar as the world’s reserve currency.  As such they also signal a long-term decay in the dollar’s purchasing power.
  • The addition of gold to central bank reserves makes those nations less susceptible to US  foreign policy hegemony.  It is no secret that the rest of the world, including long-time US allies, are bristling at what they see as the heavy hand of US trade restrictions and sanctions that directly impact their economies.
  • The sheer quantity of central bank buying power has an unmistakable impact on gold’s trajectory.  Furthermore, gold in central bank reserves is gold in strong hands and is less likely to be sold.

Meanwhile, in a report on China’s waning dollar holdings, CNBC cites an analyst saying, ““The key question then is: who will finance the heavy issuance associated with very large budget deficit.”

We know the answer to that.  US debt will have to be financed by Federal Reserve money printing.

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All Money Printing, All the Time!

Just like in Alice in Wonderland, the Federal Reserve has to run faster and faster just to stay in the same place.  

The Fed has had to buy a growing share of US government debt instruments to keep interest rates low and to keep Washington afloat.  

Here are recent remarks from Federal Reserve Vice Chair for Supervision Randal Quarles:

“It may be that there is a simple macro fact that the Treasury market being so much larger than it was even a few years ago, much larger than it was a decade ago and now really much larger than it was even a few years ago, that the sheer volume there may have outpaced the ability of the private market infrastructure to support stress of any sort there.”

Let me translate this from Fed-speak.  The US debt is now so great that it may be more than the market can absorb, which would mean the Fed would have to keep printing money at accelerated rates forever to fund Washington.

The chart above represents the ratio of Fed Treasury holdings, now at a record 22 percent.  But it doesn’t reflect the explosion in Treasury debt issuance itself.  So the Fed’s holdings reflect a rising percentage of a rising debt problem.

In an opinion piece on Bloomberg.com, writer Brian Chappatta says, “It’s not so much that the concept [Quarles’ mention of an ‘indefinite need’ to support the Treasury market] is at all surprising to bond traders, but rather saying so in a public setting shines a light on the Fed’s thinking about just how much of a role it needs to play in the world’s biggest bond market to prevent breakdowns in the financial system [emphasis added]….

“Put it all together, and it sure sounds like infinite QE.  Just don’t expect many more Fed officials to say it.”

Let me simplify the entire discussion.  It’s all about money-printing.  Only the manner and rate are at issue.

We imagine these same issues – manner and rate — were the subject of deep discussions in Weimar Germany in the 1920s, as well as all the other economies that have been destroyed by money printing.  

Manner and rate.

How many people in how many countries wished in retrospect that they had moved their wealth to precious metals at the time the monetary authorities were reduced to talking about just how, and just how fast, to print money?

Take steps at this critical juncture to protect yourself, preserve your wealth, and profit with gold and silver.  Speak to a Republic Monetary Exchange professional today.

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The Most Perilous Time in American History

The Left and Right Agree About Only One Thing: Printing More Money!

Today’s commentary is drawn from observations by hedge funder David Einhorn of Greenlight Capital.

In a rather dramatic announcement, Einhorn says that we have seen the top of the stock market.  It has been a bubble, one drivne by technology stocks, and that bubble has burst, he says.

You may have heard the story about Joe Kennedy who decided it was time to get out of the market when he got a stock tip from a shoeshine boy.  Einhorn shares a similar anecdote.  He says he recently received a job application from a 13-year-old who wrote, “I’m young, but good at investments.”

Here’s a link to a story describing some of Einhorn’s more substantive reasons for calling a top in the market.

We’re not surprised by his identification of a market top.  We put out our own warning two weeks ago, describing the stock market and the social order as equally wobbly:

“But it’s not just stock markets that are wobbly.  The social situation in this country is wobbly as a well, thanks to the Fed’s cronyism.   The November election will very likely bring more of our national instability to the fore no matter who wins.”

So while we find Einhorn’s argument about the stock market persuasive, it is his other comments – mostly overlooked – that we deem even more important

Between the pandemic, the social divide, and civil violence, Einhorn writes, “This may rank among the most perilous times, absent war, in modern American history.”

“It isn’t difficult to envision this tempest exploding after the election, no matter which side wins,” he says.  “According to Politico, 44 percent of Republicans and 41 percent of Democrats believe there would be at least ‘a little’ justification for violence if the other party’s nominee wins the election. A poll by Rasmussen Reports found that 34 percent of likely voters believe a civil war is likely in the next five years. While this is probably too pessimistic, it likely reflects a rising tail risk.”

As the poet Yeats wrote, “Things fall apart; the center cannot hold.”  

Einhorn agrees.  “The only common ground between the two parties seems to be money-printing. Over $3.3 trillion has been printed year-to-date, which represents nearly 22 percent of all U.S. dollars in existence at the end of 2019.”

And with that, Einhorn concludes, “Unsurprisingly, gold is outperforming. Investors who have argued against gold for decades are now buying some.”

Yeats’ poem continued: “Mere anarchy is loosed upon the world; The blood-

dimmed tide is loosed.”

We think this is an exceptionally important time to speak with one of Republic Monetary Exchange’s gold and silver specialists and get some sound, actionable advise on protecting yourself in these times with gold and silver. 

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The Full-Tilt Crypto-Boogie

We promised you last week that we would keep an eye on the Federal Reserve and let you know what it is up to.  That is because there is always a plan afoot to manipulate the currency and destroy its value.  Today we want to warn you about the latest.  

There is no name for it, so we will just call it The Full-Tilt Crypto-Boogie.

The stories of government money printing are legion.  Real-life stories about all the printing presses, the ink, and the paper that have been used to destroy currencies.  

About 50 years ago Milton Friedman talked about the Fed distributing freshly printed money from helicopters to the unwashed masses below.

Not long ago, Fed chairman Ben Bernanke re-popularized the term to explain that when the Fed is serious about devaluing the dollar, that is how it can be done.  

By just dropping dollars from the air.  

But that is so yesterday!  

We will probably keep using the term “printing money” to describe currency inflation because it evokes a clear image of the actual policy, even though we know perfectly well that in our digital age, it is way behind the times.

Even “helicopter money” is hopelessly outdated because the Fed has new ways of doing things on its drawing boards. 

A month ago we described a plan under consideration at the Fed of something called “recession insurance bonds.”  The Fed would deposit these in people’s accounts in advance, then, when the Fed decided, it would flip of a switch to activate them.  

Another scheme calls for every American to have a bank account at the Fed, allowing it to make instant deposits (and withdrawals, although they aren’t really talking about that part!) at any time and place of its choosing.

What is the point of these schemes?  What’s wrong with them making midnight deposits in our accounts?

Since there is no such thing as a free lunch, we must look more closely for the reasons for these free-money policies.  First, they will demand that all Americans be herded and corralled into keeping all their money institutionalized.  It is designed in part to help the State surveille your every move, so it means the end of cash, too. This will help the Fed implement a negative interest rate regime.  After all, most people will never be willing to pay the bank to hold their money.  So, they must not have any choice in the matter.  

These monetary schemes will allow the Fed’s cronies to conduct currency wars to their benefit and at the expense of the people.  Oh, and since its “just monetary policy,” it is an attempt to evade Congress and the people’s representatives.

These schemes are also designed to allow the authorities to instantly transmit to every account in the land, and automatically implement, policy changes like tax initiatives and rate changes.

And finally, the Fed must create a lot of inflation to devalue $27 trillion in debt.  Piddly little inflation rates of two and three percent are not up to the job.  It will take much more than that.

So now the Fed seems to be settling on a favorite plan to create a lot more inflation.  

It’s The Full-Tilt Crypto-Boogie.

It’s the Fed’s own digital-crypto-central-bank-block-chain-wallet-Fed-coin-currency.  You can read more about it here at the website ZeroHedge.

We will be writing more about The Full-Tilt Crypto-Boogie in the future.  But for now, it’s about the best damn reason that we have ever seen to buy more gold and silver!

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Jim’s 2020 Vote Guide

Dear Fellow Patriots!

Below is a list of conservative candidates I am recommending for almost all offices on the ballot. You can view below or click here for the printable version to take with you to the polls.

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Let’s keep Arizona Red and Make America Great Again!

President and Vice President

  • Donald Trump and Michael Pence

U.S. Senate

  • Martha McSally

U.S. Congress

  • Tiffany Shield, CD1
  • Brandon Martin, CD 2
  • Daniel Wood, CD 3
  • Paul Gosar, CD 4
  • Andy Biggs, CD 5
  • David Schweikart, CD 6
  • Debbie Lasko, CD 8

Corporation Commission

  • Eric Sloan
  • Jim O’Connor

Maricopa County

  • County Recorder: Stephen Richer
  • County Attorney: Allister Adel
  • Sheriff: Jerry Sheridan
  • Board of Supervisors, District 2: Steve Chucri
  • Board of Supervisors, District 3: Bill Gates
  • MCCC District Board, At Large: Shelly Boggs
  • MCCC District Board, District 1: Laurin Hendrix
  • MCCC District Board, District 3: Susan Bitter Smith

Mayor

  • Phoenix: Merissa Hamilton
  • Scottsdale: Lisa Borowsky
  • Gilbert: Matt Nielsen

State Legislative Races

  • Judy Burges, LD 1 House
  • Quang Nguyen, LD 1 House
  • Deborah McEwen, LD 2 House
  • Travis Angry, LD 4 Senate
  • Joel John, LD 4 House
  • Regina Cobb, LD 5 House
  • Leo Biasuicci, LD 5 House
  • Walt Blackman, LD 6 House
  • Brenda Barton, LD 6 House
  • David Peelman, LD 7 House
  • Bret Roberts, LD 11 House
  • Vince Leach, LD 11 Senate
  • Mark Finchem, LD 11 House
  • Warren Petersen, LD 12 Senate
  • Travis Grantham, LD 12 House
  • Jake Hoffman, LD 12 House
  • Sine Kerr, LD 13 Senate
  • Tim Dunn, LD 13 House
  • David Gowan, LD 14 Senate
  • Gail Griffin, LD 14 House
  • Becky Nutt, LD 14 House
  • Nancy Barto, LD 15 Senate
  • Steve Kaiser, LD 15 House
  • Justin Wilmeth, LD 15 House
  • Kelly Townsend, LD 16 House
  • Jacqueline Parker, LD 16 House
  • JD Mesnard, LD 17 Senate
  • Liz Harris, LD 17 House
  • Suzanne Sharer, LD 18 Senate
  • Paul Boyer, LD 20 Senate
  • Anthony Kern, LD 20 House
  • Shawnna Bolick, LD 20 House
  • Rick Gray, LD 21 Senate
  • Kevin Payne, LD 21 House
  • Beverly Pingerelli, LD 21 House
  • David Livingston, LD 22 Senate
  • Ben Toma, LD 22 House
  • Frank Carroll, LD 22 House
  • Michelle Ugenti-Rita, LD 23 Senate
  • John Kavanagh, LD 23 House
  • Joseph Chaplik, LD 23 House
  • Tyler Pace, LD 25 Senate
  • Rusty Bowers, LD 25 House
  • Tatiana Pena, LD 27 House
  • Jana Jackson, LD 28 House

PRINTABLE VERSION

How High Will Silver Go?

$40? $50? $100?

How much higher do you think silver will go?  

One of the world’s largest investment banks agrees with us that it will go higher.  

Much higher.

Twice in less than 50 years, silver has raced to the $50 an ounce neighborhood.  The last time was in 2011.  Before that, it was in 1980.

Maybe wise king Solomon was right, that “what has happened before will happen again. What has been done before will be done again.”

But you don’t need to be a philosopher to foresee much higher silver prices.  You just need to look at the dismal debt picture and the currency devaluation that unpayable debt will demand.

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Silver Morgan Dollar

The resource team at Citigroup has looked at those factors, as well as expected natural resource demand, and the technical picture as well, to make a case for $100 silver.

Forbes contributor Tim Treadgold described Citi’s case for a 60 percent price rise “for starters.”  Citi analysts have tipped their clients that silver will rise to $40 an ounce over the next 12 months.  

Says Treadgold, “Citi’s case for silver is based on growing demand from investors who see silver as a cheap entry point into the world of precious metals dominated by gold, with a bonus of strong industrial demand.”

But the Citi outlook doesn’t stop at $40 an ounce.  “It also argues that there is a technical case for silver doubling to $50 an ounce, and potentially rising four-fold to $100 per ounce.”   

According to Citi’s analysts, “We expect that investor demand for precious metals exposure will remain high during 2021 as pressure on governments to devalue currencies, concerns about vaccine efficacy and take-up rates and questions over equity and bond valuations and rising global debt remain in most scenarios,” Citi said.

The bank calls its forecast of $50 a “very realistic target,” and $100 an ounce “possible.”

In August we reported that Bank of America has a $50 silver target:  “The bank’s call for higher silver prices rests not just fiscal and monetary grounds.  Its analysis takes note of so-called ‘green’ initiatives in Washington which could drive new industrial silver demand, especially for solar power applications.” 

The nation’s second largest bank, writes that silver could rise to $35 next year, and rally to $50 in the medium turn.

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Behind the Curtain

We think gold and silver will go up if Donald Trump is re-elected president.

We think gold and silver will go up if Joe Biden is elected president.

I’m sure you’d like us to explain since we have a two-party system and candidates that differ on the issues and on how the government should be run.  

How could the same results follow the election of either man?

We think it is time to realize that the monetary policies in this country do not flow out of the White House.  

Nor do they come from Congress.

The monetary policies of the United States, the decisions that boom and bust the economy, that determine the future value of the US dollar, are made by a group of mostly nameless, faceless bureaucrats.  Functionaries that no one voted for, no one elected, and few people can name.

We think it is fine to be focused on the election.  We think it is important, too.

But you can never – never – take your attention off The Great and Powerful Oz operating behind the curtain.  That is where the dials are twisted that set our economic course.  That is where the buttons that are pushed boom and bust the economy.  That is where the levers are pulled that determine the value of our money.

It is quite clear that these people prefer to operate in the dark.  At the pinnacle of his career, Alan Greenspan, the longest-serving Fed chairman in history once told an audience, “If I’ve made myself too clear, you must have misunderstood me.”  A remark like that is just what we have come to expect in this age of deceit and confusion.

This is the Fed that desperately fought to keep you from learning what exactly they were up to with their dollar portfolio during the mortgage meltdown.  It took years of legal action to finally discover which cronies got Fed lifelines in a $1.2 trillion dollar operation.

And legendary are the Fed’s efforts to fight off being audited.

Last month current chairman Jerome Powell admitted to “crossing red lines” in its policy actions, but said, “We’ll figure it out later.”

Not a lot of foresight there.

So, we’re just saying that we’re interested in the election, too.  And we think it matters.

But while nobody was paying much attention earlier this year, the Fed printed up more than $3 trillion dollars.  Out of thin air.  

That money printing drove gold to an all time high this year.  

Not only were we watching, we told you what was happening.  We want you to know that while we’re all watching the election shenanigans, we’ll also be keeping an eye on the operations behind the curtain.  

We’ll let you know what The Great and Powerful Oz is doing every step of the way.  And help you protect yourself, your family, and your wealth.

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What We’re Up Against, Part II

Mercifully, the US government accounting year, Fiscal Year 2020, ended a few weeks ago.  It was one for the books.

The record books.

We’ll get to the numbers in a moment.  But we must tell you that in some ways this a repeat of a commentary we posted two years ago, with the ending of FY2018.  And we could have run it again last year, at the end of FY2019.  But we don’t like to repeat ourselves that often.

The problem is that there are a lot of things fishy about the way the government operates.  But nothing is fishier than government accounting.

That’s a problem for us all, because government accounting helps determine what people consider the prospects for the US dollar to be.

So, with the ending of FY2020, the financial news outlets have been filled with stories about the US budget deficit.  They report the deficit $3.1 trillion.  That’s nothing to sneeze at, but it is way short of reality.  

Here’s the way the Wall Street Journal reported the news:

“WASHINGTON—The U.S. budget deficit tripled to a record $3.1 trillion in the fiscal year that ended Sept. 30…. 

“As a share of economic output, the budget gap in fiscal year 2020 hit roughly 16.1%, the largest since 1945, the Treasury Department said Friday, when the country was financing massive military operations to help end World War II.

“Federal debt totaled 102% of gross domestic product, the first time it has exceeded the size of the economy for the full fiscal year in more than 70 years, according to estimates from the Committee for a Responsible Federal Budget.”

Okay.  $3.1 trillion.  That’s big.  It’s a triple from last year.  But it’s not right.

Here’s what really happened.  At the end of FY2019, the gross federal debt was $22.798 trillion.  At the end of FY2020 the gross federal debt was $27.026 trillion.  

That means the debt actually rose by $4.228 trillion.  

There’s a big difference between the $3.1 trillion deficit the government news release and the media report, and the $4.2 trillion I am describing.  The difference is $1.1 trillion.  And that’s real money!

Who’s right?  If the picture of the nation’s finances the government provides is correct, you should go your merry way.  

But if the picture I provide is correct, you will want to make sure you are substantially protected with precious metals.

Let me show you how to find out for yourself who is telling you the truth.  The US Treasury maintains a site that reports the federal debt “to the penny” each business day.  Here is the link.

Call up the national debt at the end of September this year, FY2020.  It was $27.026 trillion.  Now, look up the national debt one year earlier, at the end of September 2019.  You will see that FY2019 finished with a national debt of $22.798 trillion.

The difference is the increase in the national debt in a year.  It represents a deficit, a gap between what the government took in and what it spent.  

It is not $3.1 trillion billion.  It is more than $4.2 trillion.

Even the $27.026 trillion national debt figure – as mind-boggling as it is – is another product of government accounting.  As we wrote about the practice two years ago, an honest measure of its indebtedness should include promises the government has made to pay for things.  That’s how we reckon debts in the real world.  

Among the promises the government has made that people rely upon are things like Social Security and Medicare.  These unfunded liabilities are debts of the country, no less than any other government promises to pay.  

Accordingly, the real national debt should be measured in the hundreds of trillions of dollars!

Government accounting is also what has allowed the Federal Reserve to destroy 97 percent of the dollar’s purchasing power, even at it is charged with maintaining price stability.

If private businesses operated with the flim-flammery of government accounting, people would be locked up in jail.

There is really only one broad-spectrum protection against government accounting and the destructive practices in enables.  

It is gold.

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23.6% of All US Dollars Were created in the Last Year!

A look at the Greatest Money Supply Surge in History

The headline above is borrowed from Michael Shedlock’s blog, Global Economic Trend Analysis, at TheStreet.com.

Although we have tracked the Federal Reserve’s massive dollar creation for you, we think the headline frames the frenzy in a dramatic way.  Almost a quarter of the US money supply is new, freshly “printed,” and conjured into existence just this year.

Having grown by $3 trillion just since March, it is, as Shedlock points out, the greatest money supply surge in history.

One question that occurs to us is this.  Who exactly in the government, at the Treasury department, or at the Federal Reserve, is telling you what the impact of this unprecedent monetary surge will be?

Exactly nobody.

A few may know what it will do to the economy.  They aren’t talking.  Most don’t know.  Fed chairman Powell says they’ll figure it out later.   

Shoot first.  Ask questions later.

To be bullish on gold and silver is simply to acknowledge that what the Fed has already done necessarily will have consequences.

Here are the numbers for M2 money supply.  In the middle of October 2019 M2 was $15.1169 trillion.  On October 5, 2020, it was $18.6993 trillion.   That is an increase of $3.5824 trillion in one year.

Here is a five-year chart showing the explosion in the money supply and the accompanying rise in the price of gold.  The money supply has grown so fast, it looks like gold has some catching up to do.

Now, the Federal Reserve, even with hundreds of economists on staff and others receiving Fed dollars, won’t bother to tell you what all this furious money printing means for the dollar, for gold, and for you.  But even if they won’t tell you, we will.  We have written about these policies and their impact in detail for years.  We invite you to spend some time searching hundreds of posts on our blog.  

When the Fed won’t tell you about the destructive impact of their policies, we will.  We invite you to speak with a Republic Monetary Exchange gold and silver specialist today. 

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Stock Market Warning!

And a Wobbly Social Order!

We have made the point many times that the US stock market is floating on the back of a loose money regime, money the Federal Reserve has been stove-piping to Wall Street.

Here is a 10-year chart of the S&P500 stock index.

Most of the left half of the chart shows the effect of Quantitative Easing money printing and the lift it provided the stock market.  

On the right-hand side in the area that reflects this year, 2020, you can see the sharp break in the market with the arrival of the pandemic shutdown. It crashed stocks by 35 percent seemingly overnight.

Since then, in a few short months, the Federal Reserve created some $3 trillion dollars out of thin air to drive stocks back up.

It has succeeded.  But at a price.

We want to show you another chart, one that puts these lofty stock heights in perspective.  This recent chart shows the total market capitalization of US stocks, the market value of stocks today, as a percent of total US productivity, or Gross Domestic Product (GDP).

Warren Buffett calls this ratio of market cap to GDP “probably the best single measure of where valuations stand at any given moment.”

Think about that.  The best indicator of stock valuations is at stratospheric heights compared to the actual productivity of the economy.  And we know that it is held aloft by Fed money printing.  

It’s okay to be cynical about all this.  Just the other day, Mary Daly, the head of the San Francisco Fed defended the Fed’s tender, loving care for Wall Street by saying it is all being done for the little people.  Speaking at a University of California, Irvine event, Daly said, “I am not willing to trade millions of jobs for people who need a ladder rung up in order to keep the stock market from going up for a few who have those holdings.” 

Oh?  But if the gusher of Fed liquidity for the past ten years is all being done for the little people, why does the wealth gap keep widening?

The answer is clear.  The wealthiest people, as she acknowledges (“the few who have those holdings”), own most of the stocks.  Monetary policies designed to lift stocks make the wealthy wealthier.  They widen the gap.  And they make the stock market vulnerable since it is held aloft by a monetary gimmick and not by real fundamental valuations.

But it’s not just stock markets that are wobbly.  The social situation in this country is wobbly as a well, thanks to the Fed’s cronyism.   The November election will very likely bring more of our national instability to the fore no matter who wins.

If you are looking for a safe haven from a wobbly stock market and during what could be one of the most divisive periods in US history since the Civil War, we would suggest a well-thought-out portfolio of gold and silver.

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Spending Our Way to Prosperity

It’s all unfolding like a bad dream.  

I mean our financial and monetary future.

Maybe it is more like a “B” movie, one that is totally predictable.

Nations globally have spent $12 trillion they do not have on “stimulus” measures this year.  The US is more than $3 trillion of that.

But it is never enough.  US Federal Reserve chairman Jerome Powell wants more deficit spending.  At the International Monetary Fund annual meeting this week, Christine Lagarde, the head of the European Central Bank, is calling for more deficit spending too.

They all read from the same tired script.  We have seen it all before.

The theory that has guided US and global fiscal and monetary policy for almost a century, “Keynesian economics,” calls for deficit spending by governments during slowdowns.  Then, according to the theory, governments would run surpluses during recoveries, and pay off the debt.

It was balderdash to begin with, but even those that bought it must acknowledge that in practice the authorities ran deficits in both slowdowns and recoveries.

Stated differently, the US should not have had $23 trillion in debt when the pandemic hit.  Especially since we were more than ten years into our post-housing bust recovery, the longest recovery in our history.  

While the fiscal authorities have run the debt to the moon, the central bankers have flooded the world with digital “paper” money.  Here’s a chart from Bloomberg that shows what they have done since 2008.

A Bloomberg News story describes Lagarde and other central bankers now pushing for more deficit spending. 

“A parade of Federal Reserve officials led by Chair Jerome Powell lined up last week to make the same argument with regard to the U.S., where talks on the next dose of pandemic stimulus have been deadlocked for months in Congress. Fed officials said their own tools, such as another round of bond-buying, won’t be as effective as government spending.

“The message from the most powerful central banks is increasingly clear: there are limits to what monetary policy can do to help in the short run. Fiscal authorities -– who can borrow at rock-bottom interest rates and possess tools better-suited to deliver a rapid and targeted boost — will have to finish the job.”

We find the last phrase, “finish the job,” ironic.  The money printers are destroying the dollar, while the deficit spending is destroying US solvency.

Now we will watch the show unfold.  Those that have seen it before will watch from the sidelines, having protected their wealth with gold and silver.

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The Billionaire’s First Time

Leon Cooperman Discovers Gold at the Age of 77!

Like so many of the superrich these days, Leon Cooperman has discovered gold!

The 77 year-old billionaire, senior Goldman Sachs investment veteran, and now chairman and CEO of the New York-based investment firm Omega Advisors, did just a few days ago what he had never before done in a long and successful career in finance.

“I bought gold for the first time in my life a week ago,” said Cooperman.

It was a frank assessment of today’s financial reality that brought the hedge fund billionaire around to gold.  

First of all, Cooperman seems to have spied the bubble that is the stock market.  “We were just starting to knock on the door of euphoria before the virus hit. In some respects, we’re knocking on the door of euphoria again now,” he says.

“I have a very conservative view about the market presently, because I’m worried about who pays for the party when the party is over”

The last time we wrote about Cooperman was last year, before the Corona virus hit.  He fired a shot at the Federal Reserve then, asking why the Fed was cutting interest rates and “screwing savers,” despite the US economy being in a record-long economic expansion.  

Now Coopeman is concerned about the compounding US debt, saying “Nobody’s worrying about the debt that’s being created.” 

He picked a good time to comment about the debt.  Just days ago, it ticked up past $27 trillion dollars.  Which just means that future taxpayers – maybe even your own kids and grandkids – just got a lot more debt shoved down their throats.

Actually, we’re very concerned about the unpayable US debt here at Republic Monetary Exchange.  You should be, too!  When government officials tell this isn’t time to worry about the debt, it’s time to worry about the debt!

We do our daily best to educate people about the impact of increases in the US debt.  We have reached an inflection point in which additions to the debt are being paid by central bank money creation.  

Which means higher gold prices.

“I understand the case for gold,” said Cooperman. “We’re on the way to some banana republic situation.”

We congratulate Leon Cooperman for discovering gold and welcome him among us.  Even billionaires hate to see their wealth inflated away by dishonest monetary policies.    

But remember, it’s even more important to protect yourself and your family with gold if you’re not a billionaire!   After all, if dollar devaluation strips away 99 percent of a billionaire’s net worth, he still has $10 million in purchasing power remaining.  He may not like it, but he will probably manage to get by.  But if you have $1 million, and the government destroys 99 percent of the dollar’s value, you are left with only $10,000 in purchasing power.

And $10,000 ain’t what it used to be!

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Watch Out Below!

Gold to Gain from Falling Dollar

The US dollar could fall by as much as 35 percent next year.  Thanks to the ending of its status as the world reserve currency.

That’s according to Stephen Roach.  He says the dollar is vulnerable to a sharp correction. A crash is looming, he says.

Roach is an economist at Yale University now.  Before that he was with Morgan Stanley, and with the Federal Reserve.

We wrote about Roach a couple of time last summer (see HERE and HERE) when he said that “US living standards are going to be squeezed like never before.”  

In a new article in the Financial Times, Roach writes that a shortfall in American domestic savings is going to exact a high toll.  Between 1960 and 2005, domestic savings average about 7 percent.  From 2011 to 2019, before the Covid-19 shutdown, it had fallen to 2.9 percent.  Now domestic savings has plunged into negative territory, just like it did in the mortgage and housing meltdown.

The dollar’s share of global currency reserves was 85 percent before the inflationary 1970s.  Now it is 61 percent.  And Roach says it will move lower suddenly.

Roach:

“With America’s position as the world’s dominant reserve currency slowly eroding since 2000, foreign lenders are likely to demand concessions on the terms for such massive external financing. This normally takes two forms — an interest rate and/or a currency adjustment. The Federal Reserve has recently shifted to a strategy that takes into account an average of inflation rather than a specific target, and promised to keep policy rates near zero for several more years. That means the interest rate channel has effectively been closed. As a result, more of the current account adjustment will now be forced through a weaker dollar.”

Stated differently, foreigners are not going to keep funding the US as if there is no alternative.  There are alternatives.  Shining brightly among them is gold.

Roach says that America has “squandered its exorbitant privilege.” That term, “exorbitant privilege,” refers to the dollar remaining the world reserve currency.  He’s right.  That’s why foreign central banks are replacing dollar reserves with gold.  

For our part, we will just warn that a sharp drop in the value of the dollar can happen in the wink of an eye.

That is why we urge our readers to establish their position in gold and silver for profit and protection without delay.

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Mainstream Investors are About to Pile into Gold

You know from our reports that some of the investment industry’s most conservative institutions are discovering gold.

See our commentary at the beginning of September New Faces in the Gold Spaces!  It described the Ohio Police & Fire Pension Fund decision to allocate five percent of its $15.65 billion portfolio to gold.  It also told of the University of Texas endowment fund which added a billion dollars of gold to its portfolio.

We spent more than a little digital ink of Warren Buffett’s surprising turn to gold (see HERE and HERE). 

We think this movement toward gold could soon turn into a stampede.  John Rubino agrees.  The title of this commentary Mainstream Investors About to Pile into Gold comes from an article he posted on his website DollarCollapse.com.

Rubino writes, “Money managers who don’t recommend gold to their clients are becoming the exception rather than the rule. This week saw a couple more big-name banks join the pro-gold parade.”

Rubino cites gold recommendations by leading banks UBS and Wells Fargo.  We keep a close eye on recommendations like that.  Some readers may even remember that we took special delight in Bank of America’s recent discovery that “the Fed can’t print gold like it can dollars!”

Rubino:

“Right now gold accounts for less than 1% of global investible capital. But as the above sentiment spreads throughout the mainstream investing community, typical portfolios for both individuals and institutions will contain increasing amounts of precious metals. To understand what a move from below 1% of total investable funds to, say, 5% over the next few years would mean, it’s helpful to compare the amount of capital in the world compared to the amount of gold.

“Estimates of how much gold exists above-ground are all over the place, but most cluster around an amount that yields a value of about $10 trillion at current prices.”

We recommend you see his arguments about the outsize impact of a shifting of global assets like stocks and bonds to gold can have, HERE.  

Rubino concludes his examination saying, “In a world where increasing political and financial instability makes traditional financial assets – including cash — seem unduly risky, and where gold is rising, both fear and greed might send considerably more than that into safe-haven assets.

Don’t wait for the stampede to develop.  Speak with a Republic Monetary Exchange gold and silver specialist today.

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Discovering Gold

More and more people are discovering gold, but we don’t mean discovering gold like prospectors and miners do.  What we mean is that more and more people are beginning to understand that Washington’s debt and money printing are signs of trouble, spending two dollars for every dollar in taxes and printing trillions to cover the difference. When people realize these things and look around, they soon discover that there is a safe haven for profit and wealth protections in times like these…

Gold and silver.  

A growing number of people now understand gold.  They get it.

Others just haven’t given these things much thought.  We don’t fault them.  They have work, jobs, businesses, and families to take care of.  

Frankly, the monetary system should be honest.  It should be sound, reliable.  That’s the way the founders set things up, with a gold and silver monetary system.  It would have allowed people to be able to concentrate on their work and families,

a miner shows off a gold nugget
No, this isn’t the discovery we are talking about.

But we’re in different times.  The founder’s vision for America’s gold and silver monetary system was betrayed by politicians along the way.

So here’s an open-ended invitation for you.  It’s an invitation we’re sharing on our radio messages this week as well.

If you know people who want to know more about what Washington is doing to the money, if you have friends or colleagues who need to know about gold and silver, bring them by for a conversation.  

No obligation.  Just information.

We’ll explain why owning gold is more important now than ever.  And we’ll answer all their questions, too.

We’ve helped many people discover gold and silver over the years.

We are available to help your friends and colleagues and family members, too, so bring them in or have them call to get started with complimentary consultation and portfolio evaluation.

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Warren Buffett Rotating to Gold

It is sometimes fun to check in on the rich and famous.  And to watch them learn about gold.  That’s because if they don’t learn about gold, they may not always be rich and famous.

Although Warren Buffett’s own father, who was a Nebraska congressman, was very wise about gold and its monetary merits, Warren himself has always eschewed gold.

Until last summer.

That’s when Buffett’s company, Berkshire Hathaway, began buying gold shares.  We wrote a piece about it then called Did Warren Buffett’s Dad Just Get a Whole Lot Smarter?    

At the same time, Buffett began reducing his exposure to banks.  He sold JPMorgan Chase and Goldman Sachs as he rotated to gold.

We think Buffet’s skepticism about banks is an important first step in coming to terms with today’s financial reality.  We wanted to share some of the thoughts that accompany the Oracle of Omaha’s changing outlook.

First, his observation about negative interest rates and debt:

If you can have negative interest rates and pour out money, and incur more and more debt relative to productive capacity, you’d think the world would have discovered it in the first couple of thousand years rather than just coming on it now. We will see.

It’s probably the most interesting question I’ve ever seen in economics.

Can you keep doing what we’re doing now? The world has been able to do it for now a dozen years or so [since 2008]. We may be facing a period where we’re testing that hypothesis that you can continue it with a lot more force than we’ve tested it before.

The testing of that hypothesis is drawing nearer.  It will be a painful period.  Popping financial bubbles are always painful.

Buffet modestly acknowledges that he’s been wrong about a couple of things:

“I’ve been wrong in thinking you could have the developments you’ve had without inflation taking hold.”

We’d say that Warren has been focused on looking for consumer price inflation and has not correctly identified the asset price bubble that has been the Federal Reserve’s primary objective. 

And:

“If the world turns into a world where you [governments] can issue more and more money and have negative interest rates over time — I’d have to see it to believe it, but I’ve seen a little bit of it. I’ve been surprised. I’ve been wrong so far.”

The operative words are “so far.”

And finally, these observations:

“The [US] debt isn’t going to be repaid; it’s going to be refunded.”

“You better own something other than debt.”

We observed last summer that Buffett apparently sees that central banks have lost control.  If he keeps his wits about him, Warren will soon realize that he should be buying physical gold.

Warren Buffett just turned 90 years old.  As they say, with age comes wisdom.

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Acts of Desperation

The Monetary Authorities Have Fixed Nothing, Learned Nothing

“As of the end of July, central banks had cut interest rates 164 times in 147 days and committed $8.5 trillion in stimulus.”

That is the word from a Bloomberg News story this week, “How Unconventional Monetary Policy Turned Conventional.”

The unconventional has become conventional, eh?  The account describes temporary emergency measures becoming long-lasting.

It’s not hard to read between the lines of this kind of stuff.  It means that the steps the authorities have taken to deal with a crisis didn’t work.  Nothing was cured, except that the patient became addicted to the medication.

Bloomberg:

“As this graphic from Bloomberg shows, most central banks are diving deeper into the unknown. The Fed is buying different types of bonds, the ECB is getting creative with negative interest rates, and Australia has adopted Japanese-style efforts to control bond yields.

“With the global recovery still uncertain and the virus set to leave scars on employers and employees, the likelihood is that monetary policy will stay ultra-loose for years to come — even if that means central banks artificially propping up markets or sparking a run-up in prices.”

The story goes on to describe additional steps central banks may take, “of formerly fringe notions gaining in prominence.”  It specifically mentions Modern Monetary Theory (MMT) among them.

We have described MMT many times including in April, MMT and Helicopter Money.  We wrote then that “MMT is all the rage.  Academics who should know better (and they would know better if they had studied historical schemes like John Law’s Mississippi Bubble debacle three hundred years ago) are climbing aboard.  And politicians, many of whom will subscribe to any scheme that allows them to promise to give things to people and get re-elected, are falling all over themselves to sign up.”

There are other acts of desperation afoot.  Just last week we wrote that “Fed economists and officials are hunched over their drawing boards designing different ways to insert freshly created digital money directly into citizens’ (and perhaps even non-citizens’) accounts.”

The US fiat monetary system is beginning to fail.  The people don’t yet notice it, although the authorities are turning to increasingly desperate ideas to keep it together. But acts of desperation are almost always ill-considered and seldom successful.

Eventually everyone will recognize these acts of desperation.  Those that do so now are investing in gold and silver.

You should consider contacting us if you are among them.

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You Can See What’s Coming!

Secure your Wealth with Gold and Silver

Take a look down the road.

Financial… political… social instability.  

You can see what’s coming.  It’s much easier to see how thing come apart than how they get put back together.  

We have a bruising fight over a Supreme Court vacancy, a battle that may well be uglier than any we have seen so far – and they have been brutal.

Somewhere around half the people are going to be very unhappy with the outcome of the presidential election.  Battalions of litigators are gathering to challenge the outcome of a November election, almost assuring the outcome won’t be settled for weeks if not months.

Many of America’s major cities are governed by people who believe that looting and arson are part of “mostly peaceful protests.”  These “anarchist jurisdictions” are governed by people who want to defund the police.

The productive classes that pay the taxes are fleeing New York, Los Angeles, San Francisco, and other cities.  And it is not just the rich.  Look at U-Haul rental rates for people who move themselves.  The demand is so great to leave California that it costs ten times more to rent a truck to go from Los Angeles to Phoenix than from Phoenix to LA.

The departure of the wealthy and the middle class will exacerbate gaping budget deficits in the cities they leave behind.  That means less revenue to placate tax-consumers.  

Which means more urban disorder.

We spend a lot of time writing about the fraying of our economy and monetary system, but the economy and the monetary system don’t decay in isolation.  Their decay reflects the same state of mind – characterized by a rejection of the achievements of Western civilization and personal responsibility – that is behind our social unraveling.  

“Triage” is the medical term for sorting out the patients in an emergency for the urgency of their conditions and need for treatment.  Our national emergency is not a medical one (yet), but we are each in triage situation nonetheless, one in which we must prioritize our needs for the rough road ahead.  

Here at Republic Monetary Exchange, we believe protecting your wealth is of the highest priority.  It is a priority because many other needs are utterly dependent on the wealth it takes to secure them.  If you are reading the signs of the times, you know you need gold and silver to secure your wealth.  

The writing is on the wall.  It’s time to invest in gold.

Stop by Republic Monetary Exchange today or call and speak with one of our gold and silver professionals.

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More Funny Money

“Wealth cannot be created by creating debt and money.” – Ray Dalio

Federal Reserve Chairman Jerome Powell testifying in Washington, and other Fed officials running around the country, are of one voice calling for more Washington stimulus spending.

Spending of money which Washington doesn’t have, by the way.  But not to worry, the Fed will just print the money anyway.  

Makes you wonder why not cut out the middleman.  Either the Capitol Hill spenders should go and just let the Fed spend the money it prints, or the Fed should just go and let Washington print the money they spend as they go along.

Don’t laugh.  That’s the basis of Modern Monetary Theory that is quickly becoming de facto policy in Washington.  It even presumes taxes aren’t even really a necessity for revenue.  Taxation is to be used primarily for social engineering: driving people like cattle to do what the authorities want them to do.  

But as far as revenue goes, taxes aren’t key to MMT.  The theory holds that the government can just print whatever it needs.

Which is what they have been doing all year.  So we have arrived.

Meanwhile, Fed economists and officials are hunched over their drawing boards designing different way to insert freshly created digital money directly into citizens’ (and perhaps even non-citizens’) accounts.

One plan involves the creation of something called “recession insurance bonds.”  These could be deposited in people’s accounts in advance, whereupon, with the flip of a switch when the Fed deems it appropriate, they could all be activated.

Voila!

Instant deposits at the time and place of the Fed’s choosing.

Another scheme calls for every American to have a bank account at the Fed.

Cleveland Fed president Loretta Mester explains, “Legislation has proposed that each American have an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments.”

You can read more about such plans in the article from the website ZeroHedge.  

There is a madness afoot in the land.  Like some weird and very specific economic Alzheimer’s, those afflicted have totally forgotten that wealth in created by production, by goods and services.  So they dodder their way into the national debate thinking that they can create wealth with the wave a digital accounting wand.

As long as this malady persists, we recommend you buy gold and silver as fast as you reasonably can.  This dementia will ruin the dollar and America’s economic vitality along the way.

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The Days Ahead

“Fasten your seatbelts!” 

“Please keep your hands and arms inside the monorail at all times.”

“Should the cabin lose pressure, oxygen masks will drop from the overhead area. Please place the mask over your own mouth and nose before assisting others.”

Okay, we’re just trying to set the tone for the next couple of months.  There’s some bad road between now and the end of the year.  That’s because the American divide is as sharp as ever.

  • There will be a bruising battle over the Supreme Court vacancy, one that could very well make the confirmation of Justices Thomas and Kavanagh look tame.  Commentator Glenn Harlan Reynolds wrote in USA Today this week that “When your political system can be thrown into hysteria by something as predictable as the death of an octogenarian with advanced cancer, there’s something wrong with your political system.”
  • Already hordes of lawyers, protestors and ruffians are lining up in precincts and states across the land to drag out the presidential election.  Those who remember the 2000 Bush-Gore contest know that the presidency isn’t necessarily decided on election day. To say that we could face a Constitutional crisis is to understate a grim outlook.
  • We haven’t seen the end of the “mostly peaceful protests,” and uncontained street violence in our major cities, and expect them to continue for some time.  Postal workers in Chicago where mail carriers have been shot are threatening to stop mail deliveries.  “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds,”  but barbarians can even stop the mail.
  • Battle lines have been drawn in the Covid lockdown divide, and at least in some places, things are about to come to blows. Notice for example that in England the military is being call in to help enforce lockdown restrictions.

And then there are the economic issues, unknowns about the recovery and knowns about the mushrooming debt and the rampaging Federal Reserve. 

Our point is this: troubled times makes gold more desirable.  They make the price go higher.

Watching the dollar bounce higher has created a correction in precious metals prices, and an opportunity to buy at prices from a few months back.  But the dollar bounce has done nothing alter the fundamentals of deficits and debt.  And it will not ease the social conditions that threaten us.  

We’ll leave you with a few recent price forecasts, none of which explicitly take into consideration highly volatile social conditions in the US.

Last week we told you about the forecast from a senior Bloomberg Intelligence Commodity Strategist who expect to see gold at $7,000 by 2020.

Mike McGlone says that gold in on an even more sound footing for higher prices that it was “at the onset of the 2001-11 and post-financial-crisis bull markets.”

As a friend reacted to the forecast. “That’s more than a thousand dollars a year” in gains.

That’s right.

Another observer, Yeoh Choo Guan, UBS head of Asean Global markets, sees gold trading between $1,850 and $2,100 next year.  Despite the perhaps intentionally understated forecast, Yeoh said on CNBC, “We are very bullish on gold. We think that the prices will go higher and what is interesting is we think it will stay higher for longer than expected.”

Finally a longer term and higher price projection.  Charlie Morris is an investment manager at UK-based Atlantic House Fund Management.  He sees a combination of interest rate and inflation factors driving gold to $7,345 by 2030, with a market performance similar to the inflationary 1970s. 

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Debt Out the Wazoo=$7000 Gold?

From a dizzying array of news and information at our fingertips, we have ch0sen the following as among the most important and interesting for our friends and clients.

$7000 GOLD BY 2025

Senior Bloomberg Intelligence Commodity Strategist Mike McGlone makes the case for $7,000 gold not too far down the road.  

In a series of tweets, McGlone says that the fundamentals for gold are even better now than in the powerful bull market run from 2001 – 2011.

Here are some of the analyst’s recent tweets about gold:

9/4:  “The conundrum of monetary and fiscal stimulus lifting most assets may be nearing an inflection point, where the increasing certainty of QE and budget deficits firm gold’s foundation more.”

9/14:  “Rising gold prices, despite declining managed-money net-longs and an advancing dollar, are a sign of the strengthening foundation under the metal. Less speculation vs. more organic demand forces are at play for the store of value, which indicates a healthy bull market.”

9/15:  “Gold Set for $7,000 in 2025 If Trends Stay Friendly Like 2001-11: Gold is on sounder footings than at the onset of the 2001-11 and post-financial-crisis bull markets, warranting a rhyming rally, in our view.”

DEBT OUT THE WAZOO!

Take a good look at this chart of the spiking US debt from WolfStreet.com.  

Now closing in on $27 trillion, the debt grew by $3.3 trillion under six months of the COVID-19 lockdown.  

Besides the trajectory of the debt itself, take note of the periods that government spending was under a statutory debt ceiling.  The debt ceiling is popular with the people, but in practice it is nothing but more political bunkum.  Over and over agian, Washington has made the debt ceiling simply a brief interruption in its ever-growing spending, a ceiling quickly suspended and quickly surpassed.

DAVID STOCKMAN SPEAKS

“Washington has become disconnected from any semblance of fidelity to sound money and fiscal rectitude, while Wall Street has turned into an outright casino, valuing stocks based on endless Fed liquidity injections and the delusion that momentum chasing is an investment strategy.

David Stockman

“With respect to the rampant folly in the Imperial City, Treasury Secretary Stevie Mnuchin has always reminded us of Alfred E. Neuman of ‘Me Worry?’ fame at Mad Magazine. But recently he more than earned that moniker when in the context of the current monetary and fiscal lunacy he proclaimed that, ‘Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet.’…

Wall Street is beguiled, says Stockman, by “stimulus” and “hopium,”  Hence, “nosebleed stock prices.”

His advice?

“Buy gold and either forget or (if you are courageous) short the rest.”

$1 BILLION-PLUS RIOT DAMAGE MOST EXPENSIVE IN HISTORY

The news site Axios reports, “The vandalism and looting following the death of George Floyd at the hands of the Minneapolis police will cost the insurance industry more than any other violent demonstrations in recent history.”

Property Claim Services, that tracks insurance claims classifies anything over $25 million in insured losses as a “catastrophe.”

We’re confused.  How could what the media told us were “mostly peaceful protests” end up doing $2 billion or more in damage?

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Fed Policies Bullish for Gold

Nobody ever said economics is funny, but this was enough to make a dog laugh!

Because they can’t be serious, right?  

Right?

The Federal Reserve released a policy statement and economic projections Wednesday (9/16).

The Wall Street Journal captured the absurdity of it all in a headline: “Fed Signals Interest Rates to Stay Near Zero Through ​2023.”

Through 2023?  That’s more than three years.  

The Fed can’t project GDP right for the next quarter, and they’re telling us what they’ll do with interest rates for the next three years?

Are there people who believe this stuff?

During the last stagflation period, the Fed changed rates constantly—twenty-two times in 1973 alone, twenty-three times in 1978.  Who knows what kind of volatility awaits us in what we called in an earlier commentary “The New Stagflation Decade”?

The latest announcement is part of the Fed’s “forward guidance” policy, to goose the markets by telling them what it will be doing down the road.

WSJ:

“The latest Fed projections show that even by the end of 2023, most officials believe inflation will only have begun returning to 2% and that unemployment will begin nearing levels that prevailed before the crisis struck in March.”

This is its first meeting since the Fed raised its inflation targets.  In this case the Fed is doubling down on its commitment to a future of inflation.  It consists of:

  1. The higher inflation targets that it announced last month, and;
  2. Now the promise of this higher inflation for a longer period of time.

So that’s the monetary side of affairs.  What about fiscal policy?

Treasury Secretary Mnuchin’s piped up on CNBC a few days earlier advising the Fed and Congress that “now is not the time to worry about shrinking the deficit and the Federal Reserve’s balance sheet.”

Believe us, almost nobody in Washington on either side of the aisle is interested in “shrinking the deficit.”  

So, we are watching the marriage of extreme monetary and extreme fiscal policy; of prolonged negative real interest rates, and skyrocketing government debt.

Now, if you wanted to engineer higher gold and silver prices, much higher, you would have the Fed provide artificially low interest rates for a prolonged period and have Washington explode the debt.

I guess you see where this is going, right?

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The Government is Already Broke!

The US government isn’t going broke.  

The US government is already broke.

This is a little hard for most people to swallow.  After all, America is thought to be a rich country.  The government is huge.  We pay a lot of taxes.  How can the government be broke?

But it is broke nonetheless.

The US has defaulted on its obligations before.  After World War II, the US persuaded the nations of the world to go on a dollar standard, to hold dollars in their own reserves, to issue their local currencies against their central bank dollar holdings, to settle international accounts and global commerce is dollars.

Part of the deal was that they could always exchange the dollars they held in this arrangement for gold at the rate of $35 an ounce.  

But the US printed ever more dollars, issuing dollars far beyond the amount of gold it had to back them up.  It was like writing checks without enough money in the account to cash them.

It didn’t take the rest of the world too long to figure out they were being flimflammed.  They lined up to get their gold, but in the summer of 1971, President Nixon defaulted and stopped redemptions entirely.  

The US government could not meet its obligations.  It defaulted, plain and simple.

It is happening again now, but in a different way.

The Congressional Budget Office says that US trust funds – including the Highway, Medicare, and Social Security Trust Funds – will run out of money sooner than anticipated.  

Way sooner.  The last time we wrote about it, in April 2019, the Social Security Old-Age and Survivors program’s insolvency date had just been advanced to 2035.  Now it has been moved all the way forward to 2031.

The Committee for a Responsible Federal Budget says, “These earlier depletion dates are driven by declining gas tax revenue as a result of reduced driving, declining payroll tax revenue as a result of higher unemployment and lower wages, lower interest rate payments on trust fund reserves, and more disability applications — all stemming from the current public health and economic crisis.”

All that evades the larger point:  There is no trust fund.  The money to fund those future Medicare and Social Security payments was never secured.  It was spent.  So those funds and their insolvency dates are an accounting fiction.  

By one account, the US has made $200 trillion in unfunded promises, including these unfunded “trust funds.”  That’s more than the State can ever hope to pay. It will default on those payment, just as it did in 1971.  

Printing money is a form of default.  It means not honoring the real value of debts, by faking the currency, devaluing it in a pretense of meeting its obligations.  It is dilution, just like someone watering down the whiskey, the wine, or the gasoline.  That is the most likely means of default the State will choose.  It will destroy the dollar. 

The price of gold is a referendum on the future value of a currency.  The dollar price of gold is a referendum on the future value of the dollar.  As US debt continues to mount, this referendum on the market value of the dollar is not good.  For the dollar.

It is very good for the price of gold.

People around the world – dollar holders who believed the dollar was as good as gold – suffered staggering losses when the US defaulted in 1971.  

Before the next US default becomes evident, we recommend you revisit your investment and retirement plans, with the objective of protecting yourself with gold and silver now.  Republic Monetary Exchange professional are standing by to show you how our best practices are designed to serve you and your objectives.

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The New Stagflation Decade

If you’re old enough to remember the 1970s, then you remember the Stagflation Decade.

If you’re not old enough, ask your parent or grandparents about it.  

“Stagflation” is one of those made-up words, a portmanteau, as they are called, that combine two different words together to express something new.  Like “Brexit” to describe Britain exiting the European Union.  Or “sheeple,” combining sheep and people.

So stagflation married two descriptive terms for the economy together:  stagnation, referring to stagnant, low- or no-growth economic conditions; and inflation, used to describe a period of rising or even runaway price increases.

The funny thing is that they had to make up a word to describe those conditions together when they appeared in the 1970s.  There was no such word at the time because the big government economists of the day, the Keynesian spend-our-way-to-prosperity economist who were everywhere, believed that stagnation and inflation together was an economic impossibility.  

If the economy was stagnating, they believed, then the central bank would just print gobs of new money and – presto! – full employment.

So that’s what they did in the 1970s.  They printed money.  Boy, howdy, did they print money!  Prices took off.  And the economy stood still.  And began to shrink.

Despite the fact that inflation reached 12.3 percent in 1974, economic growth was negative that year and the next, while unemployment rose to 8.2 percent. 

“That’s impossible!” screamed the Keynesian big government economist.  “Print more money!”

And they did.

By 1979, the inflation rate was 13.3 percent.  

And a world-changing gold and silver market was the result.

Now, this may seem like ancient history for anyone who was too young to remember or wasn’t yet born.  But we aren’t here to discuss periods in history at random.  Our assignment is to help our friends and clients protect themselves, their families, and their wealth.

That’s why we want you to be on the lookout for the growing signs that this will be a new and much more severe stagflation decade.

And that means much higher gold and silver prices.

Here’s a chart that helps illustrate our point.  It covers the last 15 years, showing the growth in the money supply (M2) in green, and the growth in Federal Reserve assets.  That represents the total amount of things like bonds that the Fed has purchased with made-up, unbacked, freshly “printed” digital money.

In the above chart, you can see that the money supply (in green) has grown from about $7 trillion to more than $18 trillion over the period.  Fed assets have risen from less than a trillion dollars to $7 trillion.  

One more thing.  The shaded areas represent recessions, periods when the nation experienced negative economic growth.  The first shaded area is the Great Recession in the housing bubble calamity of the 2007-2009 period.  

The second shaded area is the depression we are in right now.

Despite our bankruptcies, businesses closing, unemployment, delinquent mortgages, and other payments that are in arrears – in other words, despite our stagnation – all that money-printing and money supply growth are driving consumer prices higher.  

And now the Fed has decided to raise its commitment to more inflation, just as prices have already started climbing.  The consumer price index increased 0.4% last month.  That’s after increase of 0.6% in both June and July.

And they said it couldn’t happen!   But it sure looks like we could be in a brand, new stagflation decade.  One much bigger than the one your grandparents remember.

That means that this gold and silver bull market will be much bigger as well.

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Three Things Every Gold Investor Needs to Know

Reasons for Higher Gold, Echoes of the Last Stock Bubble, and China Stocking Up!

As gold continues to consolidate its remarkable 2020 gains and build a base for its next leg up, we’ve spotted three things that help provide a window on what’s ahead.

Number 1:

First, we’ll share the fundamental observations of a Bloomberg analyst who sees the possibility of gold reaching s high as $2,583 in 2021.  

Bloomberg Intelligence’s Eily Ong:

“Gold consumers’ adjustment to a higher price for the metal, along with greater investment demand, is a recipe for the precious metal’s potential price acceleration in 2021.  

“Market sentiment for gold is likely to strengthen on dollar wobbles amid rising geopolitical risks in a lower-for-longer interest rate environment. Central banks and investors may absorb the market surplus as they seek gold for portfolio diversification and possibly as a hedge if inflationary pressures return on the substantial stimulus measures injected amid the global health crisis. …”

We speak “analyst,” so let us translate.  Basically she is saying a weak dollar in a dangerous world, and prolonged interest rate repression by money-printers and central banks moving to gold to protect themselves from inflation and continued money-printing are reasons for higher gold prices next year.

That’s right, as far as it goes.  

She might have thought to mention, as another analyst did, that “a globally synchronized currency devaluation is coming.”

Number 2:

In our last post, we mentioned Stanley Druckenmiller’s comments on CNBC this week in which he said he expects the annual inflation rate to rise to as high as 10 percent in the years ahead.  

One more thing from his comments that we’d like to get on the record.  He took aim at the Fed and Chairman Powell and their massive money creation driving the current stock market bubble, by reminding viewers of the previous bubble, the housing bubble engineered by Alan Greenspan: 

“And I just want all you guys cheering him on to remember the Maestro in 2005, and how that worked out.”

“Look, everybody loves a party, but inevitably, after a big party, there’s a hangover, and right now we are in an absolutely raging mania.” 

Number 3:

And finally, you know how Communist regimes love their five-year plans.  Lenin and Stalin made them a daily part of the failed Soviet economic life.

Now we have a peek at China’s next five-year plan, beginning in 2021.  It calls for China to stockpile commodities in amounts sufficient for any crippling supply disruptions.

The plan calls for building its reserves of oil, agricultural commodities, and strategic metals.  

China’s interest in amassing gold reserves is already well-known.

The commodities boom that began in 2000 was primarily driven by China, along with other BRIC nations.  

It was a powerful component of the bull market that lifted gold and silver prices to all-time highs in 2011.  

Here we go again. 

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Something Does Not Compute

You might very well have had a conversation like this recently:

“How can the stock market be at an all time high when the economy is in the tank?  With all this unemployment?  All these people out of work?  All these unpaid mortgages and commercial leases?  With all these bankruptcies?”

“How can the economy be in a depression and stocks are at an all-time high?  It doesn’t make any sense.”

We think you are right.  It doesn’t make any sense.  Except in one very specific and dangerous way.

It only makes sense if the stock market has been ignoring the real economy and is relying instead on endless money-printing support and interest rate manipulation by the Federal Reserve to keep the indices high.

Only then does it compute.  But if that is the answer, then it is obvious the Fed is the towel boy of Wall Street.  

And the hell with the Main Street economy.

But ultimately, the stock market cannot be decoupled from Main Street.  Now there are unmistakable rumblings in the stock market that reality may be about to assert itself.

CNBC summed up the action:  “Stocks fell sharply on Tuesday as another massive drop in tech put the Nasdaq Composite in correction territory and led to the S&P 500’s worst three-day stretch in months.”

Amid the wreckage was Tesla, falling 21 percent on Tuesday.  S&P declined to add the upstart automaker to its S&P 500 index.

Despite the bounceback that followed, is Nasdaq’s ten percent decline a warning that the Fed’s bubble machine is breaking down?  

The legendary hedge fund manager Stanley Druckenmiller says that “the merging of the Fed and the Treasury, which is effectively what’s happening during Covid, sets a precedent that we’ve never seen since the Fed got its independence.  It’s obviously creating a massive, massive mania in financial assets.”  

It will end badly, he says, forecasting inflation rates of 5 – 10 percent in the years ahead.

Druckenmiller is among the Wall Street “smart money” we wrote about back in May who had been buying gold. That turned out to be a good move then.

And it’s a good move now.   That’s because Fed officials, including Chicago Fed President Charles Evans, are signaling that more monetary easing is coming.  That will fulfill Druckenmiller’s forecast.  The more they do to levitate the stock market, the higher gold will go.

Why not avoid the rush?  Contact your Republic Monetary Exchange professional now.

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Is a COVID Food Crisis Next?

Maybe the Fed could arrange to jack up prices while so many American families are already just squeaking by!

The Fed wants to raise the cost of living.

We called your attention last month to the decision by the Federal Reserve to run inflation hotter.  See Fed: More Inflation Please! and Gold Just Became an Even Better Investment.

You’ve probably heard the expression from the Napoleonic era in France, “It was worse than a crime – it was a blunder.”

The Fed’s decision is likely to go down in history as worse than either.

A Bloomberg story reports that the COVID shutdown already has million of Americans in a food crisis, one that it says will now draw in additional millions: 

“The ranks of Americans fighting hunger are projected to swell some 45 percent this year to more than 50 million.”

“Lockdowns have snarled supply chains, and food inflation is projected to rise at the fastest pace in almost a decade.”

Yet the Fed want consumer prices to go up?

Maybe someone on his bloated staff, someone among the hundreds of economic bureaucrats the Fed employs, should tell Chairman Powell that food prices are starting to race higher.   In July, core consumer prices took their biggest jump in almost 30 years.  Now, the UN’s Food and Agriculture Organization has just reported that world food prices rose for the third consecutive month in August.  The price hikes were led by increases in coarse grains, vegetable oils, and sugar.  

But of course, the Fed misses everything, just like it missed the housing bubble.  So they’ll go ahead and print more money, and make the dollar worth less.

By the way, ever higher food prices will be just one of the consequences of the Fed’s inflation policy.

Another will be a growing unwillingness of foreign governments to fund America’s debt.

Reuters is covering an account in the Global Times, a Chinese government backed paper, that predicts China will step up its de-dollarization.  Trade issues and military shoulder-bumping between the US and China in the South China Sea are important considerations for the prediction. 

But the solvency of the US is another concern.

Reuters:

“Another reason the state newspaper cited was the potential default risk in the United States as the debt of the world’s largest economy has surged sharply to about the same size of its gross domestic product, a level not seen since the end of the World War Two and well above the internationally recognized safety line of 60 percent.”

China is one of America’s leading creditors.  It owns $1.074 trillion in US Treasury debt instruments.  A loss of a creditor of that size, or even a significant drawdown, will result in the Fed having to step in to fill the gap with printed money.  

And that means more inflation than Powell envisions.  As we have said before, the Fed has painted itself in a corner.  It has contradictory objectives.  It has to keep interest rates low to support Wall Street.  But it has to keep foreigners funding US debt.  

Those are both hard to do when it says it is going to let inflation run hot.

Isn’t it time to invest in gold?

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Silver Does it Again

Silver Has Outperformed Everything!

The latest results are in.  Through the month of August silver remains the top performing major financial asset for the year 2020!

Not only is silver ahead for the entire year, it outperformed other assets once again in the month of August.  That makes two months in a row that silver has been the top performer.

Deutsche Bank tracks the total return performance of major global financial assets.  Its report for August show silvers with a 15.4 percent gain for the month.  

Silver outperformed second-place finisher Nasdaq by more than 50 percent.

For the entire year 2020, silver posted an increase of 57.6 percent.  

After surging to a new all-time high over $2,000 at the beginning of August, gold corrected slightly as the month went on, moving -0.4% lower.  Even so, gold continues trading above its previous all-time high of $1,923 set in 2011.

The US dollar fell to a two-year low in August.  That’s five consecutive months of dollar losses.

For added perspective on the bull market underway, here are five-year price charts for both silver and gold.

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New Faces in Gold Spaces

We’ve Spotted a New and Important Trend!

We commented last month about gold skeptic Warren Buffett’s turn toward gold (see HERE and HERE).  It was a surprise move, but one we found very telling.

Now there is another face in the gold space, one that we find equally significant.  Last week the Ohio Police & Fire Pension Fund decided to allocate five percent of its $15.65 billion portfolio to gold.  

It’s the early evidence of a trend.  

Public pension funds are not thought of as pioneers.  They are generally conservative, traditional stock and bond investors.  

But apparently their advisors and board members are, like Buffett’s Berkshire Hathaway, reading the signs of these financially trouble times.  

That’s why they have turned to gold. 

College endowment funds are much like public pension funds.  But some years ago, the University of Texas took the plunge.  The University of Texas Investment Management Corporation, one if the nation’s largest college endowment funds invested a billion dollars in gold bullion.  It bought 6,643 gold bars, storing them in some underground depository in New York.

Good move.  There average price was much lower than today’s price.  

Texas legislators wondered why Texans’ gold should be held in New York. It’s the same thing that foreign nation gold owners like Germany had begun wondering.  They started having their gold shipped home from places like the US and London.  Everyone was too polite to say it was a matter of trust, but they brought their gold home anyway.

So, without saying anything about trust either, the Texas legislature decided to build a depository in Texas.  Now the Texas Bullion Depository is open, with a gold capacity of more than $100 billion and security said to rival that of Fort Knox.

It’s a trend.  Gold is becoming much more important to people everywhere as well as to foreign governments.  They all wisely want it in their own possession.  Gold is becoming much more important to central banks as we have reported on repeatedly.  

So now its Berkshire Hathaway.  And public pension funds.  It’s a sign of the times.  More and more people are recognizing that the US is actually facing solvency issues.  For the time being, the Fed has been able to fill the budget gap with money-printing.  But there is a cost to that kind of legal counterfeiting, too.  

It will show up before long in the value of the dollar and a reluctance by foreign nations to keep funding US debt.

If you have not yet investigated the reasons for this new move to gold, we invite you to contact us at Republic Monetary Exchange.  One of our gold and silver professionals with be happy to spend time with you, describe what is behind this new trend, and answer all your questions.

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how to invest in gold silver

Gold Just Became an Even Better Investment

You Can Thank the Federal Reserve!

Gold, alluring enough in the age of a $27 trillion federal debt, just became even more important for people seeking to prosper and protect their wealth from the breakdown all around them.

Inflation in the US is going to run hot.  Not as an accident.  Not by surprise.  

As we wrote the other day, the Federal Reserve actually intends to let inflation run hot.  

Fed Chairman Jerome Powell made in official last week at the central bankers big (virtual) Jackson Hole, Wyoming conclave.   

The Fed wants more inflation.  It’s a unanimous decision.  

Let’s see now… The Fed arbitrarily selected a two percent annual inflation rate way back in 2012.  It’s a target the Fed couldn’t hit for years.

So now it has raised its sights.  No wonder gold took a big jump.  

One analyst responded to the Fed’s new policy with a headline that says, “This Has To Be A Joke, Because If It’s Not…” 

But it’s not a joke.  Jeffrey Snider, Alhambra Investments, writes:

If you aren’t distracted by the shiny wrapping, you realize what Powell’s saying is that after failing to hit the inflation target for over a decade he’s now going to let inflation run over the target none of them could hit because for more than a decade no one could hit their own target.

Another described the Fed move as being like “an awful echo of the end-days of the former Soviet Union.”

Michael Every of Rabobank explains:

There were some planet-sized brains among the apparatchiks running that place. The problem was that the entire system didn’t work, and any tinkering with it could never achieve anything: the political-economy had to change, or nothing did. As a result, time after time, committee after committee of technocrat PhDs would meet, debate…offer up more agitprop jargon, and decide to build a new statue of Marx or Lenin.

Another headline reads, “Fed’s New Policy Will Compound Its Errors.”

That’s the view of Michael Shedlock at Global Economic Trend Analysis:

Inflation is under two percent because the Fed ignores housing prices, employer health care costs, education, and stock market bubbles.

The idea that one can offset errors by further errors in the other direction is pure nonsense.

It’s as if a doctor said, “For the last three months we gave you too little medicine so for the next three months we will give you too much.”

Our own observation the other day was that this is another case of spectacularly bad Fed timing, since core consumer prices in July already showed their biggest increase since 1991.  

Just how bad is the timing?  A couple more items in addition to those in our last post:

  • Americans are already hurting for cash. The Wall Street Journal reports that grocery shoppers are cutting back on their spending.
  • The FHA insures 8 million mortgages.  In July, 17% were delinquent in July.  That is the highest rate in FHA history.
  • Since the middle of March, more than 58 million Americans have filed new unemployment claims.  

And now the Fed wants higher prices?  It intends to keep interest rates low to generate higher inflation.  But higher inflation is the entrée to higher interest rates.

They have really painted themselves into a corner.  

The single best thing you can do is to buy gold and avoid this comedy of errors.  Speak with a Republic Monetary Exchange precious metals professional today.

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Fed: More Inflation Please!

Spectacularly Bad Fed Timing… As Usual!

They’re going to put the pedal to the metal on the money printing presses.

Federal Reserve Chairman Jerome Powell has broken the silence – it wasn’t very good silence; everybody knew it was coming.  The cronies always know what the Fed is going to do in advance, anyway – and announced that is not going to be bound by its long-standing two percent inflation target.

Jerome Powell

The Fed’s Open Market Committee has unanimously agreed to suspend the old target.  It will be replaced by something called flexible Average Inflation Targeting (AIT).

Basically, the Fed intends to let inflation run hot.

It’s another textbook case of spectacularly bad timing.  You may remember Alan Greenspan’s Fed and their serial rate cuts that fueled the housing bubble.  Even when the signs were abundant that a bubble was building, they kept at it.  

Now Powell’s Fed wants to crank up inflation at the precise time that consumer prices are already headed higher. Core consumer prices in July showed their biggest increase since January of 1991.  

Consumer price inflation typically lags the Fed’s new money printing – at least at first.  And it has engaged in world record money printing.  Now before the results of its past actions are assimilated, the Fed is going double-down.  

inflation pushing down what the dollar buys

You may wonder who exactly wants higher prices.  Especially now.  Many families are just squeaking by.  

Americans have $21 billion in unpaid rent.  27 percent of Americans didn’t make their rent or mortgage payments last month.  Bankruptcies are at a ten year high, and more are anticipated.  

And the Fed wants higher prices?  That’s right.  Time to beef up your gold and silver holdings!

The Fed has long wanted out from the two percent policy.  It has long wanted much higher inflation.  Now we’re going to get it.  

Good and hard.

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Warren Buffett is Running from the Banks

Warren Buffet didn’t just move toward gold.  Warren Buffett moved away from banks.  

Good moves both.

As we reported last week, (Did Warren Buffett’s Dad Just Get a Whole Lot Smarter?), Buffett’s Berkshire Hathaway has purchased $563 million in shares of Barrick Gold, the world’s second-largest gold miner.  

It’s a start.

Next, maybe the ghost of Warren’s father will whisper in his ear something about counter-party risk.  Then Warren will start buying physical gold.

That could be next, because Warren is growing skeptical about banks.  

But in the meantime it’s a step in the right direction. 

Berkshire Hathaway sold billions of dollars of JPMorgan Chase stock in the second quarter, liquidating 35.5 million shares of the largest American bank.

The company likely took a loss on its JPM holdings according to Wall Street on Parade.

Buffett, who had also dumped 84 percent of his stock in investment banker Goldman Sachs, sold the rest of his shares, 1.8 million, in the second quarter.  

What would prompt “the Oracle of Omaha” to slash his bank holdings, even taking a loss on them, while adding a large precious metals component to his portfolio?  It is an important question.  Particularly because nothing characterizes Buffett’s philosophy more than “buy and hold.”

We think the answer can be found in Buffett’s own words: “When the tide goes out you find out who’s been swimming naked.”

Well, the tide is out.

With people unemployed, unable to pay their rent and mortgages, businesses shuttering and unable to pay their leases, developers and real estate tycoons unable to pay their loans, someone, somewhere will be left holding the bag.  We think that if you trace the cascading defaults upline, it is financial institution, banks, and pension funds that will eat the losses.

Wall Street on Parade:

“One of the things that could be spooking Buffett when it comes to JPMorgan Chase is the unquantifiable risk in its derivatives book. This is, after all, the bank that famously lost $6.2 billion of its bank depositors’ money in its London Whale derivatives scandal of 2012. Buffett has previously dubbed derivatives ‘financial weapons of mass destruction.’

“According to the regulator of national banks, the Office of the Comptroller of the Currency, as of March 31, 2020, JPMorgan Chase had the largest exposure of any U.S. bank to derivatives. Its notional exposure (face amount) was $59 trillion. The bank with the second largest exposure was the Goldman Sachs bank holding company, at $47.7 trillion.”

Now, doesn’t a move out of naked financial institutions and into gold make sense?

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More Breakdown

We have been pointing out that the breakdown that is taking place in American life is also at work crashing our monetary system.

The signs of civic breakdown are all too visible.  Some of it, but by no means all, shows up on TV.  More can be seen on the Internet:  thugs and mobs assaulting, beating, and killing innocent people, burning cities, smashing plated glass storefronts, and swarming in to steal everything in sight.  

Some of this lawlessness and decay in action you have to be quick to see before the social media big brothers take it down.

Even with their overt concealment of the facts, it is clear streets in America’s major cities have turned into encampments for addicts and the homeless, and looting and arson have taken the place of law and order.

Murder rates have skyrocketed in large cities.  No wonder there is an exodus from California’s once magnificent cities San Francisco, Los Angeles, and San Diego.  So many people are leaving New York that overloaded moving companies are turning away business.

But our point is that while much of this social breakdown is visible, the same destructive something-for-nothing and spend-your-way-to-prosperity policies are like termites eating away at our monetary system.  

And why not?  The same interventionist, big government philosophy is at work in our civic and our financial lives.  There the major signs are to be found in exploding federal debt and the crazed Federal Reserve money printing.  There are additional symptoms wherever you look.

Items:

Wall Street Journal:   Ending a series of weekly declines, new applications for unemployment benefits unexpectedly rose by 135,000 in the week ended Aug. 15, one of a number of signals that the economy isn’t close to being out of the woods. 

Michael Shedlock, TheStreet.com:  Serious mortgage delinquencies soar to a 10-year high.  Some 376K homeowners became 90 or more days past due in July. Serious delinquencies were up 20% from June and are now the highest they’ve been since early 2010. In total, serious delinquencies are now 1.8M over pre-pandemic levels.

John Cox, Real Clear Policy:  Californians pay an average of 55.8 percent more for their residential electricity than other Americans, thanks to a politically mandated shift to higher priced, less reliable forms of energy.  Not only have ratepayers had to endure artificially high electricity bills, but while sheltering in place amid triple-digit temperatures, they’ve also had to endure a recent plague of blackouts.

RTTNews:  U.S. consumer price growth exceeds estimates In July.  Core consumer prices showed their biggest increase since January of 1991, partly reflecting another jump in prices for motor vehicle insurance, which skyrocketed by 9.3 percent in July after spiking by 5.1 percent in June.

Wall Street Journal:  The stock market and economy appear increasingly disconnected. Part of the reason for the divide: The share of Americans who own stock, either directly or through retirement or mutual funds, is falling, and stock ownership is increasingly concentrated among a sliver of the population. The top 10% of Americans by wealth owned 87% of all stock outstanding in the first quarter, according to data from the Federal Reserve. That share has grown over the past decade, from 82.4% in 2009.

Paul Krugman New York Times:  The first thing to note is that the real economy, as opposed to the financial markets, is still in terrible shape. The Federal Reserve Bank of New York’s weekly economic index suggests that the economy, although off its low point a few months ago, is still more deeply depressed than it was at any point during the recession that followed the 2008 financial crisis…. So everything suggests that even if the pandemic subsides — which is by no means guaranteed — we’re about to see a huge surge in national misery.

When the cities break down, those who can call moving companies to get them out.  Others pack up the U-Haul.  But our financial structure and monetary system are breaking down like everything else and you may not be able to move lock, stock, and barrel out of a toppling economic environment.  But Republic Monetary Exchange can help you pack up and get some of your assets out of the way of a crumbling monetary system with gold and silver.

Contact us right away.  Thing are already getting out of hand.

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Setbacks, Buying Opportunities, and Higher Gold Prices

Swiss Bank Sees “Buying Opportunity”

After trading above and below and above $2,000 an ounce this month, the price of gold ran into a setback on Wednesday (8/19).  

But Suisse Bank says, ““We see plenty of upside on the gold price and view the correction as a buying opportunity,”

As we’ve detailed (See Raising Targets), Goldman Sachs now sees gold headed to $3,000 in higher inflation rate environments,  Bank of America has targets from “over $3,000,” to $3,400.  

And now Credit Suisse has raised its gold price target.

The Swiss bank’s analysts point to US fiscal policy to explain their new higher target.  The expect it to stay loose until we have much lower unemployment.

Their forecast also envisions a bounce back in gold demand in the jewelry sector, which fell 46 percent in the first half of the year.   

Credit Suisse also expects a resurgence of central bank gold buying which fell with the pandemic in the first half of the year.

“We think central bank buying will increase sharply,” say the analysts.

In additional technical commentary, the Swiss bank says there is room for some consolidation before a move higher, although it does not expect the lengthier consolidation periods that were characteristic of the 2001 – 2011 gold bull market.  

Credit Suisse expects gold to rise to $2,700 – $2,720 “over the longer term.”

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Did Warren Buffett’s Dad Just Get a Whole Lot Smarter?

Billionaires are Profiting During the Pandemic

We learn from Forbes that the pandemic lockdown has been very, very good for Warren Buffett’s fortunes.  

On March 18, 2020 his net worth was $68 billion.  Now its $80 billion.  40 percent of Americans may be out of work, and 100,000 business have disappeared forever, but with $3.2 trillion of Coronavirus bailouts having washed under the bridge, Warren Buffett is up $12 billion.

And he is not the only one.  Warren is only number four on the list of wealthiest billionaires these days.  Above him are Bill Gates, he’s up $16 billion during these dark times; Mark Zuckerberg, who has put on $42 billion; and Jeff Bezos, at the top of the hill.  For all the suffering the country has been through, all the trillions in new spending and trillions more in money printing, Jeff Bezos’ net worth has increased by $76 billion during this time of sorrow.  He is now worth $189 billion.

How did it happen that the government stepped in supposedly to help the regular people out, and they got poorer, while the ultra-rich got richer?

We’ll only tease you with the short answer, which is that fiat money is fat for the cronies.  Always has been, always will be.  And the central bank is the delivery system, the very heart that pumps the money their way.

Now, it is true that all of this will eventually bankrupt the country, but the vampire squid cronies are too busy jamming their blood funnels into anything that smells like money to much care about what happens next.

The Genius of Warren Buffet 

Warren Buffett is up $12 billion

Buffett is a brilliant investor.  But he is also a crony capitalist.  His political devotion is to the functionaries that put money in his pocket.  In the Great Recession, his company might have suffered staggering losses in its holdings of Goldman Sachs, Wells Fargo, Bank of America, and General Electric, but Uncle Sam helped them out, even as 10 million Americans lost their homes.  Were it not for the Bernanke-Bush Bailouts, Buffett said, he wouldn’t have bought into the troubled Goldman Sachs.  

Now, something new seems to have dawned on the Oracle of Omaha.  He has apparently taken notice of the corner into which the Federal Reserve has painted itself.  The Fed has long taken on the role of the guarantor of the stock market and the net worth of billionaire cronies.  But it can’t keep printing money to support stocks with low rates without eventually tanking the dollar.

This is not a mystery.  Most of the people who buy gold know perfectly well that money printing does not create more wealth.  Money printing eventually cannibalizes itself, eating away at the value of the currency.  

So, for all his past hostility to gold, Buffett’s Berkshire Hathaway has purchased $563 million in shares of Barrick Gold, the world’s second-largest gold miner.

The Foresight of Howard Buffett

Howard Buffett, 1903-1964

Warren Buffett’s father, Howard Buffett, was a congressman from Omaha in the 40s and 50s.  He was the kind of elected official we desperately need today.  He understood the centrality of gold to a free and prosperous people.  He knew how paper money experiments end.  He was outspoken about it.  He knew the importance of people owning physical gold.

Howard Buffett passed away in 1964.  

Warren Buffett is 89 years old.  He’ll be 90 at the end of this month.  He apparently sees that central banks have lost control.  If he keeps his wits about him, Warren will soon realize that he should be buying physical gold.

It’s funny how the older Warren gets, the smarter his old dad appears.

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Breakdown

We’re not trying to predict an unknown future in this commentary.

We’re just pointing out that the signs of a breakdown are everywhere. 

The streets of many of our most beautiful major cities have been turned into encampments for addicts and the homeless and dumping grounds for human waste and drug paraphernalia.

Day after endless day, from the east coast to the west, we watch orchestrated mobs of masked criminals, committing acts of looting and arson where there used to be law and order.

It is clearly a sign of civil and legal breakdown.

These conditions have not arisen against the will of the political authorities.  Much of this breakdown is ignored if not actively encouraged by the political authorities.

Students of history looking for parallels have cited the Russian Revolution and the French Reign of Terror.

To us it most closely resembles China’s Cultural Revolution.  Rebel groups, violent and ignorant, were encouraged by Chairman Mao and his henchmen to roam the streets lawlessly.  Children and students were made managers of schools, farms and factories, their former managers forced to grovel in public humiliation sessions, confess their sins, and perform menial labor.  The accomplished were shamed for their achievements.  The learned were lectured by the ignorant.  Legal restraints on violence were lifted and acts of terror became common.  

As we watch windows being smashed and statues being pulled down here in America, we remember accounts of the destruction of churches, temples, and monasteries in China, and the book burnings of their Cultural Revolution.

Eventually massacres and even cannibalism ensued in China.  Today’s protestors carry signs bearing the motto “Eat the Rich!’’ as a totem of their wealth envy.  But in the depths of the Cultural Revolution, cannibalism was not metaphorical.  

How far along are we in our own cultural revolution?  There are a lot of familiar patterns being re-enacted beside by the violent mobs on the streets.  We have public humiliation sessions in our biggest companies and educational institutions in which blameless individuals are blamed, belittled, and shamed for the deeds of others.  We are now told by this vanguard of the revolution that things like mathematics, grammar, industriousness, and punctuality are nothing but the tools of a racist society’s oppression.  

Perhaps there is a more apt precedent for what is underway in the US today than China’s Cultural Revolution.  We can’t say for sure.  It is not our specialty.

Our field is money.  We are students of monetary history.  We have some familiarity with the breakdown for paper money economies in other times and places.

So, one thing we can say for sure is that the breakdown that is taking place all around us in our civil life and in the social order in also taking place in our monetary system. 

Unlike mobs smashing plate glass windows, torching buildings, and assaulting elderly people, the failing monetary system does not show up on the evening news.  Graphs of the compounding federal debt and the frenzied of money printing of the Fed are no competition for images of cities on fire. 

But the breakdown of the monetary system is very real.  Already banks are anticipating a tsunami of bankruptcies and defaults by businesses large and small, and on mortgages and consumer loans.  But that’s only the beginning, because the resources to paper over these bankruptcies have been consumed.  The money-printing is about to backfire as each round of money printing demands another.  The confrontations and political battles are becoming more pitched because, unlike in our more prosperous past, the stakes are higher than ever because the resources are dwindling.  Our politics are beginning to look like bands or pirates killing each other as they fight over their plunder.

Indeed, we can’t imagine that the November election—no matter who wins—will usher in a new era of peace and prosperity.  It will usher in increased polarization and a much more heated public debate.  No matter who wins.  It will accelerate the breakdown because the losers will not go quietly.  

The consequences of our monetary breakdown will be just as destructive as a city burning to the ground.  That’s why you need to own gold and silver.  Because the monetary system is breaking down like everything else.

Find out more.  We can’t stop the new American Cultural Revolution.  But we can help you protect yourself and your wealth from the monetary breakdown.

Speak with a Republic Monetary Exchange gold and silver specialist today.

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Gold Prices in Constant Dollars

Gold has reached new highs in nominal terms but it’s still below its inflation-adjusted record

How can you compare today’s gold and silver prices with their prices years ago?

It is not as easy as comparing today’s price with the price on any given day in the past.  The reason why goes right to the root of many of our financial problems.  It is because the measuring unit, the US dollar, is inconstant.   It is like a yardstick on a rubber band.  It is like the butcher’s thumb on the scale.  Such measurements are unreliable.

Last week we wrote about this problem in comparing today’s silver price with silver’s past performance.  

Saying that silver is headed to about $50 where it was in 1980 and in 2011 does not provide a clear picture, thanks to the incredible shrinking purchasing power of the dollar.  It would take $153 dollars today to equal the purchasing power of $50 in 1980.  So, today silver would have to reach $153 to equal its 1980 high. 

Similarly, silver would have to rise to $57 today to equal the high of $50 it touched in 2011.  That is because the US dollar is losing value all the time.

Let us apply the same “constant dollar” analysis to the price of gold.

Gold would need to rise to $2,850 in today’s dollars to equal its 1980 high of $850.  In 2011 gold came close to $1,900.  In todays dollars, the would be the equivalent of $2,222.

The Word Gold Council has provided us a chart of that shows the history of the gold price in both nominal dollars (the grey line) and in constant dollars (the green line).

If we were on a gold standard today, the gold dollar would be a reliable unit of value.  In fact, the dollar would be exactly what they used to say about it, “as good as gold.”  It would be a safe way to store wealth, not just for a short period, but for generations.  There would be no guessing games about foreign exchange rates with other countries on a gold standard. The dollar wouldn’t have to be “managed,” that is manipulated in a way that favors the crony banks that created to Federal Reserve to do that managing kfor them.  

A return to gold would do a lot to restore honestly in public life and civility in society.  That’s because it’s been said that the gold standard is like a country where a man’s word is his bond; fiat money systems are like a country where no one tells the truth.

A return to gold would increase our prosperity, too.  But all that is too much to take on in the present age, with its social, legal, and monetary breakdown.  

The best you can do is seek to protect yourself and profit as the monetary breakdown proceeds all around us.  A Republic Monetary Exchange professional can help you with that.

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Three More Important Things…

Three More Important Things for People Interested in Gold

But first a reminder.  The price of gold had a sharp correction in the middle of March with the COVID-19 lockdown,

It proved to be a great buying opportunity, but it lasted only two weeks.  We think any pullbacks in the gold and silver prices should be seen as a buying opportunity.

Now, on to our stories:

CONSUMER PRICES MOVING UP!

What did you think would happen when the printed all that money?

In early June, we covered a Wall Street Journal story that reported “Fastest-Rising Food Prices in Decades.”

It described food prices increasing 5.8 percent between March 1 and May 30, compared with the same time a year ago.

Now we have learned that for July, the headline Consumer Price Index rose 0.6 percent over the June number.  That was twice as much as was widely expected.

Food and medical categories led the CPI increase.  

BILLIONAIRE BOND INVESTOR SEES GOLD MUCH HEADED MUCH HIGHER!

Remains “unequivocally bullish!”

Jeffrey Gundlach is the CEO of $135 billion DoubleLine Capital.  We’ve included him in writing about “the smart money” that has been buying gold.  

Gundlach turned bullish on gold in the summer of 2018.

Gundlach was not surprised by the gold correction on Tuesday (8/11), but the exploding US deficit remains a major component of Gundlach’s analysis.  

“If we are going to continue that type of a pace, we’d be looking at over 50 percent of GDP in terms of the budget deficit, which is getting almost surreal in terms of what’s happening.”

“Gold will ultimately go much higher because I think the dollar’s going to go much lower,” he said.

Why Fed Bugs Really, Really Hate Gold!

Well, if there are “gold bugs,” there must be “Fed bugs!”

“Fed bugs are people with a faith-based belief in the power of central banks (and central bankers) to engineer economic growth using “monetary policy,” despite decades of history and current evidence to the contrary. They believe tinkering with inputs and rates and velocity and flows somehow makes us richer in terms of productivity, goods, and services. They believe in financial alchemy, as economist Nomi Prins puts it, rather than precious metals. They believe paper has value so long as government issues it and legislates its use. Most of all, they believe in technocratic control over money in the economy.”

So writes the always brilliant Jeff Deist, president of the Mises Institute.  

“They hate gold because it never goes away and never goes to zero. It holds monetary value intrinsically, without the imprimatur of a sovereign or government. Gold does not need the state or its bankers to operate as money, because individuals choose it as money on the market century after century.”  

More from Deist on the Fed bugs HERE.

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Raising Targets

The biggest banks are raising their target prices for gold.  That is because we have already passed their old targets.  

We are seeing headlines in the financial press that read, “Stunned by gold’s record rise? There’s more to come, analysts say,” and “Gold Barrels Past $2,000 With Stage Set to Rally Further.”

Goldman Sachs now sees gold headed to $3,000 if the inflation rate were to run at 3.5 percent, or even if it just bounced to an interim 4.5 percent. 

That is less a prescient market call than it is simply stating the obvious.  A real call from a real gold expert with a real track record is that of former congressman and presidential candidate Ron Paul.  Dr. Paul said last year at about this time that we could see $3,000 gold by the end of this year.

Gee, financial conditions would have to be serious for that to happen.  

And they are serious.  

Paul noted back then that we are in a period of a disintegrating monetary system.  “Warning signs are all around us!”  he said.

Bank of America now says prices could hit $3,000 within 18 months, while a portfolio manager from Van Eck believes “a price over $3,000 per ounce is reasonable,” and that “$3,400 may be the target.”

There are many calls for much higher gold prices that that, but we have just spotlighted a few from establishment institutions.  

As for silver, forecasts for $50 an ounce are all about.  

For our part, we think many of these forecasts may prove to be modest.  That is because we prefer to keep our eye on the root causes.  Prices are an effect, the result of fiscal and monetary mismanagement.  No matter how high gold and silver go, if the underlying causes of higher prices remain in place, price will continue to climb.

As for today, and any reasonably likely future, the causes remain not only in place, but we would say locked in place.

Consider:  As you can see from this CNBC chart, US money supply (M2) is up 23 percent over this time last year.

That’s a new world indoor record for US money supply growth!

At the same time, Federal Reserve officials are lobbying for trillions in new spending.  The Democrats are now pushing an additional $3.4 trillion stimulus plan.  The Republican are pushing one that costs $1 trillion.

America’s Gross National Product has seen a depression-like collapse.  The monetary and fiscal authorities are attempting to paper it over with more unpayable debt and legalized counterfeiting.  As a result, the dollar’s role in the global economy is under fire.  

This is the culmination of years of reckless policies.  It is not readily reversible.

It is serious.

At Republic Monetary Exchange, our job is to help our friends and clients protect themselves and their wealth with gold and silver.  Real money that can’t be printed and that you can hold in your hands.

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Bank of America Predicts $50 Silver

One of America’s leading banks now says silver could be headed to $50!

It’s not the forecast itself that surprises us.  After all, silver has been at $50 twice, in 1980 and again in 2011.

We don’t think silver at $50 is a stretch at all.  We think that it is a rather modest forecast.  After all, since the dollar is losing value all the time, like a ruler of 12 inches last year, 10 inches this year, and eight next year, we have to ask what is today’s equivalent purchasing power of $50 in 1980.

It’s more than $153!

In other words, a forecast for silver to reach $50 soon is still less than a third it’s real all-time high.

But we want to make sure the record is straight and not misleading.  Silver reached a high of $50 in 1980 under very special circumstances.  That was when the billionaire Hunt brothers, along with some other international players, we’re trying to corner the silver market.  

That drove silver higher than it might have otherwise gone, so we want to give you a better comparison.

Silver came close to $50 again nine years ago.  So, in real purchasing power, or what economist call “constant dollars,” silver would have to reach $57 today to equal its 2011 high.

Now Bank of America, the nation’s second largest bank, writes that silver could rise to $35 next year, and rally to $50 in the medium turn.

Bank of America has been surprising the markets with its acknowledgement of the precious metals bull market.  In April BofA, the nation’s second largest bank, raised its target price for gold from $2,000 to $3,000.   It said then, “As central banks and governments double their balance sheets and fiscal deficits respectively, we have also decided to up our 18-month gold target from $2,000 to $3,000 an ounce….”

“Another important point to remember,” according to the report, “is that, just as central banks are socializing risk in financial markets, governments are increasing their spending like never before during peacetime. Fiscal spending plans across developed economies are nothing short of breathtaking whether we look at them in dollar terms or as a percentage of each nation’s GDP.”

The Federal Reserve can’t just print gold like it can dollars, Bank of America concluded.  We couldn’t have said it much better.

The bank’s call for higher silver prices rests not just fiscal and monetary grounds.  Its analysis takes note of so-called “green” initiatives in Washington which could drive new industrial silver demand, especially for solar power applications.  BofA writes, “The last time this happened between 2006 and 2011, the precious metal rallied to $50 an ounce, a price level we would see within reach this time around as well.”

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Amazing Gold! Astounding Silver!

Records Fall Like Dominos as Precious Metals Keep Marching Higher and Government Spends More, Prints More!

Last week gold hit a new all-time high.  This week it roared right through the $2,000 an ounce psychological barrier.  Gold gained more than $50 per ounce on the COMEX market on Tuesday, racing to $2037 an ounce finish.  

And silver was on fire as well.  Last week silver made one of its biggest one-day moves in history.  Tuesday gained 7 ½ percent, to finish on the COMEX at $26.25.

With the new all-time high in gold prices last week that had everyone talking, we said the real question is, “What’s next?”  

We answered our own question this way:  “Higher prices!  Much higher!”

Let us sample some observations from others:

THE TELEGRAPH:

“Gold hit $2,000 an ounce for the first time on Tuesday following a record-breaking rally driven by fears over the impact of the coronavirus pandemic on the global economy. 

“The yellow metal, seen as a safe-haven asset, has been on a steady upwards trajectory over recent months….

“On Tuesday investors remained concerned over whether the US will pass another spending measure to support the world’s largest economy. A new stimulus bill could add extra liquidity to markets and weigh on rates, which would support the precious metal further.:

MARKETWATCH:

“Gold futures powered higher Tuesday, gathering momentum late in the session to finish at a fresh record as government bond yields headed lower and as the U.S. dollar’s recent rebound receded somewhat, allowing the precious metal to make an assault on a record close above the $2,000 threshold.

“The sustained rally in gold has come as governments across the world have flooded their economies with financial aid to combat the COVID-19 pandemic.  And investors are betting that the uptrend for the yellow metal continues as the dollar weakens and interest rates remain around 0% in many parts of the world….

“Silver, meanwhile, mounted its own charge higher.”

THE STREET:

“Gold Hits $2,000 For the First Time In History As Dollar Extends Declines.

“Gold prices hit an all-time of $2,000 per ounce Tuesday, extending a year-to-date gain that has driven a rally in bullion and prompted the largest inflows into gold ETFs in history…”

“Gold’s rise has largely paralleled an historic decline in the U.S. dollar, which has fallen nearly 10% against a basket of its global peers since mid-March, when the Federal Reserve first said it will buy an unlimited amount of government debt, as well as corporate and municipal bonds, in the biggest expansion of its balance sheet in history, which now stands at more than $7 trillion.”

We’ll finish with a comment from one of out favorite analysts, Michael Shedlock from Mish’s Global Economic Trend Forecast.  

Mish says, “There is plenty of fuel for a short squeeze too.”

And that would propel gold much higher.

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Predictable

t’s all been predictable.  Gold hits all-time highs.  Silver surging.

That’s why we’ve spent so much time predicting it.

Perhaps you remember Federal Reserve chairman Jerome Powell’s appearance on CBS 60 Minutes back in May.

Here’s a partial transcript:

Reporter: “Fair to say you simply flooded the system with money?”

Powell: “Yes. We did. That’s another way to think about it. We did.”

Reporter: “Where does it come from? Do you just print it?”

Powell: “We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.”

Powell: “In terms of size, Mr. Chairman, how does what the Fed is doing right now compare to the unprecedented action it took in 2008?”

Fed Chairman: “So the things we’re doing now are substantially larger. The asset purchases that we’re doing are a multiple of the programs that were done during the last crisis. . .”

After watching the Powell interview, we wrote, “The Fed is doing what it did in reaction to the Panic of 2008.  The very measures that ran gold to stratospheric new highs in a few short years.

“Only they’re doing much more of it.”  (See The Fed ‘Fesses Up, 5/19/2020)

So we really don’t take a lot of credit for predicting things like new all-time high gold prices.  That’s because the monetary authorities have told us exactly what they are going to do.  

And then they’ve done it.  A lot of it.

It’s not hard to draw a line between massive money-printing and higher gold and silver prices.  If we get credit for anything, it is for drawing that line for our friends and clients.  Over and over.

If you’ve been reading our commentaries or listening to us on the radio, you know that Washington spending and money printing are unhinged!  

They can’t get it under control.  It’s beyond the point of no return.  

Bottom line:  Higher gold and silver prices ahead.  It’s still predictable.

So here is what we wrote in May:  

“First, buckle up.  The Fed money-printing machine is going to shake this country to its foundations.

“And two, contact your Republic Monetary Exchange gold and silver professional today.”

All we would add to that is don’t wait!

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Gold Bars and Nuggets

Important News Nuggets From the Gold Bull Market

US Productivity Collapse

The US has paid a steep price for the COVID-19 shutdown.  US productivity has fallen by a third.  

The Bureau of Economic Analysis’ reports that, for the April-May-June quarter, US annualized quarter over quarter Gross National Product has fallen 32.9 percent

That is worse than a Depression era collapse.  Does Washington have a switch it can flip that will restore the economy?

No.  

All it has is the printing press.  Which brings to mind the expression that when you’re holding a hammer, everything looks like a nail.

By the way, the financial news media isn’t saying a lot about how much capital has been destroyed along the way, but it is over the cliff.

Every family that saved for years to open a small business, perhaps a restaurant or a retail store, that will now never re-open, has lost capital that has been years or even a lifetime in the making.

Putting the Gold Price in Perspective

Even though gold has reached a new all-time high, it’s nowhere near its old highs!

That’s because the value of the dollar has been diluted by the Fed along the way.  It is a dishonest unit of measurement, just like a ruler of 12 inches one year, 10 inches the year after, and 8 inches the next.

The World Gold Council point out that in constant (not shrinking) dollars, the nominal price of gold, even at our present record highs, is about $200 below its 2011 high, while matching gold’s prior record high in January,1980 would require a price of about $2,800  in today’s dollars.       

The gold price more than doubled from about $900 during the mortgage meltdown in 2008 to its 2011 high, while it is up only about 30 percent since the beginning of the COVID-19 pandemic struck.

China Suppressing Gold Buying… But for How Long?

Several Chinese national financial institutions have taken steps to limit domestic gold and precious metals complex purchases, according to a report from Reuters:

“Industrial and Commercial Bank of China (ICBC), the country’s biggest lender, said on Wednesday it would bar its clients from opening new trading positions for platinum, palladium and index products linked to precious metal from Friday. That directive, according to the lender’s customer service department, was in response to ‘violent price volatility’ and ‘the need to control risks.’

“Agricultural Bank of China said it had recently suspended new businesses related to gold, while Bank of China said it halted new account openings for platinum and palladium trading.”

One hidden motive may be to support China’s stock markets by preventing investors from moving funds from stocks to gold.  Most important for our friends and client is to note that unleashed, Chinese gold buyers can drive prices to unimaginable levels.

The financial site ZeroHedge writes, “It is neither in China’s, nor any other government’s interest, to see gold prices soaring as they likely would if tens of millions of Chinese speculators rushed to bid up the precious metal.”

  ZeroHedge tweeted, “All gold needs to hit 2,500 is for China’s momentum maniacs or the Robinhooders to start chasing it.”

Spending Our Way to Riches?

We just read a New York Times columnist—where do they get these people?—who advises the US  government to “spend our way toward a better tomorrow.”

In case you find that as incredible as we do, here’s a link to the piece called, “America Looks Hopelessly Broke. It Isn’t.”

Okay.  And that’s why we’re in this predicament.

Thanks, New York Times.  Now can the adults enter the conversation?

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gold and silver portfolio

Gold Sets All-Time High, So What’s Next?

This week the price of gold set the all-time and seems ready to continue to break it’s own each day. Meanwhile, silver made one of its biggest moves in history.

It has everyone talking.

But the real question is what’s next?

We think the answer is higher prices.  

Much higher.

Already major banks and forecasters are raising their target prices for gold and silver.  They have to.  Many of their old targets have already been smashed.  

We’ve practically made a career here of telling our friends and clients what the Fed is doing with the printing press in the basement of the Marriner Eccles Building in Washington.  

It has been wholly unprecedented.  And we don’t mind telling you we have tried to raise an alarm about it.

Likewise, we have tracked and graphed, and explained and reported the explosive growth of government deficits and debt until our charts have run out of room.  That growth, too, is wholly unprecedented.  

We don’t just mean that as a figure of speech.  We mean the debt is growing faster than ever before in history.

To reiterate some of what we have been reporting, Washington has increased federal debt by 14 percent since January 1.  The Fed has increased its asset base – the stuff it buys with made up money – by two-thirds since the beginning of the year.  

Explosive.  Unprecedented.

We want to illustrate things one more way.  The following is a chart of the money supply (M2, a measure of cash and cash-like liquidity such as checking deposits, savings accounts, and money market funds)

Since the first of the year, M2 has grown by 20 percent.  We have been watching these things for a very long time and have never seen anything like it.  Not even in Quantitative Easing.  Not even in the double-digit inflation of the 1970s.

Explosive.  Unprecedented.  

One more thing.  We have been clear that the most important megatrend in the financial world is the move away from the US dollar as the reserve currency of the world.  We haven’t shied away from the subject even when people we respect have downplayed the prospect.  But we know what we have seen.  We have watched central banks like Russia and China add gold to their reserves at a steaming pace and have concluded something important is going on.

Now we add the recent observation of Goldman Sachs to what we have said, citing Goldman strategists including Jeffrey Currie:

“Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows.” 

There are, they write, “real concerns around the longevity of the U.S. dollar as a reserve currency.”

So again, what happens next?

We think the answer is higher prices.  

Much higher.

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Civil Disorder

It is time to face up the widespread civil disorder on the streets of America’s cities and towns.  

Nobody likes talking about civil unrest.  We don’t like to either.  

But we are seeing a fair amount of it now and between Washington’s spending and the economic shutdown, it’s as close to a sure thing as you get in life that a major economic crisis is on the way.  

In fact, we think it has already arrived.  It is visible in the shutdown businesses that will never reopen.  It is visible in the ranks of the unemployed.  It’s visible in all the capital that has been destroyed by the shutdown, families that saved for years to open small businesses that have now lost everything.   The destruction of capital is seen in big businesses like airlines and motion picture studios and sports leagues.

It is visible in the mounting debt, unpayable, and the legalized counterfeiting of the central banks.  The size of the bubbles always tells you about the size of the bust.  Unfortunately, the debt and funny money bubbles have never been bigger. 

It is visible in the escalation of political divisions as the factions fight over dwindling resources.

The approach of the crisis is seen in the rising prices of gold and silver.

What’s next?  Bankruptcies.  Evictions.  Layoffs.  Foreclosures.  Punitive new taxes and wealth transfer policies.  Homelessness.  Crime.  State wealth confiscation.  

The economic crisis will make the civil violence worse.  

Weeks ago we speculated about what kinds of disruptions are likely.  Here’s our short list:

  • Civil Curfews
  • No-go zones
  • Banks and businesses closed because of riots, plunder, looting
  • Pandemic shutdowns
  • Urban fires
  • Failure of public utilities during periods of lawlessness
  • Failure of the power grid due to mismanagement or sabotage
  • Empty store shelves 

We will just refer you to our commentary from the beginning of June called “Preparing for the Seen and Unseen” and end today’s commentary the way we ended that one:

“We are not interested in being alarmist, but we are watching the same news you are watching.  So we want to be realistic about what can happen. There are places in our country that the fabric of social order has already been shredded, where civil order has come to an end….

“Are you prepared for a time when the ATMs no longer spit out cash on demand?  When banks aren’t open to cash checks?  When medical centers close because of violence?  When cyber-criminals attack the financial nodes of the digital world?  When deliveries to your gas station stop?  When a credit card is useless?  When you need to go somewhere else suddenly?  When you call the police and they don’t come?

“Real money can come in mighty handy in times of crises.

“Don’t get us wrong.  We do not think precious metals can fix everything.  But it is like the old saying that money doesn’t buy happiness… But it can buy you a better class of problems!

“We think this is a good time to add silver to your portfolio.  For everyday monetary needs in a crisis.” 

Don’t wait any longer.  Call or stop by Republic Monetary Exchange and speak with one of our gold and silver professionals.

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