The World Gold Council reports that gold bar and coin demand for the 2021 April-May-June quarter grew by 56 percent over the same quarter a year earlier.
For the quarter demand measured 243.8 tons.
Altogether bar and coin demand in the first half of this year was the strongest since 2013, at 594 tons. In terms of total dollar value, it is the highest gold demand total since 2013.
The second quarter saw gold demand from central banks reach 200 tons. WGC cites large-scale purchases by Hungary, Thailand, and Brazil. For the first half of 2021, central bank gold buying was 39 percent higher than the five-year average for the years’ first half and 29 percent higher than the ten-year first-half average.
Gold demand for both jewelry and technological applications continues to recover from slower COVID lockdown levels. For the second quarter, WGC reports:
Jewelry demand (390.7t) continued to rebound from 2020’s COVID-hit weakness, although remained well below typical pre-pandemic levels, partly due to weaker Indian demand growth. Demand for H1, at 873.7 tons, was 17 percent below the 2015-2019 average…
Gold used in technology continued to recover from the 2020 lows: Q2 demand was 18 percent higher y-o-y at 80 tons – in line with average Q2 demand from 2015-2019 of 81.8 tons. H1 demand (161t) was fractionally above that of H1 2019 (160.6 tons).
Gold outflows ETFs from the prior two quarters reversed to show modest inflows in the second quarter. The price of gold ended the second quarter of this year higher than its January 2020 price in the dollar, euro, yen, yuan, and rupee.
China is still gobbling up much of the world’s gold.
China is the world’s largest gold producer, with more than twice the annual gold production of the US. It is also the largest gold refiner.
Much of China’s gold position is kept under wraps. It reports its gold reserves occasionally but will go for years without providing any updates.
China’s official gold reserves have grown from 395 tons in 2000 to 1,948 tons in 2020.
But even official reports don’t tell the whole story. We wrote recently (See GOLD: Behind the Curtain) that China’s actual gold holdings may be secreted away in separate accounts, including army and communist party accounts. So, it may be sitting on more than ten times the officially acknowledged gold reserves.
Now Reuters reports that China’s gold imports through Hong Kong jumped nearly 42 percent in June. For the month it imported 30.88 tons. That compares with May imports through Hong Kong of 21.78 tons.
It means that China moved aggressively to take advantage of the correction in gold from over $1,900 in late-May, seen in the chart below.
We believe that is a wise move. We recommended buying the dips – particularly with the return of US inflation – earlier this year,
Reuters notes that “the Hong Kong data do not provide a complete picture of Chinese purchasing as gold is also imported via Shanghai and Beijing.”
Meanwhile, other central banks are climbing aboard the d-dollarization express, diversifying their reserves into gold. In June, Brazil, grew its gold reserves by 52 percent, purchasing an additional 41.8 tons.
We recommend you add to your personal gold reserve as well.
He proved it when he was a member of Congress, representing a district in Michigan. When Ronald Reagan was preparing for his presidential campaign debates, someone had the wisdom to ask Stockman to play the part of John Anderson during that three-way race.
He wowed ‘em. The next thing you knew, Stockman was Reagan’s Budget Director. In that role, he fought the good fight. And much of what he described as the runaway government to come has proven accurate.
Now Stockman has had a chance to say a few words about gold. USA Watchdog’s Gregg Hunter gave Stockman that opportunity the other day.
“The only asset that has held its value over time is gold,” said Stockman, recommending that everyone hold some gold as insurance against the coming “reset.”
The reset, he says, is the inevitable bursting of the Federal Reserve is the Wall Street bubble. “This is not the time to be invested in the [stock] markets . . . . A reset is just a pleasant name or a clinical name for a crash of epic proportions, which we will have because the markets are so inflated. There are trillions of dollars that are at risk. To put a dimension on this thing or a way of sizing this, is we have a $60 trillion bubble on the balance sheets of 130 million people in American society, but especially in the top 5% to 10% that own a huge share of the assets. . . . I have no thought about how big the correction will be, but if it were just back to the norm . . . it would be a $60 trillion correction, and that is a pretty big hole in the bucket. If $60 trillion disappears (out of the U.S. economy), it changes everything. It turns the financial system and economic reality upside down.”
Stockman doesn’t pull any punches about the Deep State Money Manipulators responsible for this precarious state of affairs. “When central banks start to inflate like crazy, you first inflate financial assets. It eventually works its way into goods and services, and that’s where we are now. You get the second stage of inflation as well. There has never been a small group of government officials, unelected at that, who have done more damage, more wanton harm to the economy and to the lives of ordinary people than (Fed Head) Powell and his merry band of mad money printers. This is really an outrage. I say these people are damn near criminally incompetent given what they say about the world, which is totally wrong, given what they’re doing, this massive money printing, which is totally unjustified. . .”
“This is the last moment in time to be greedy or aggressive or to be overly optimistic about the future. The future is being driven by the policymakers . . . . The whole system is being run by Washington. The Federal Reserve totally dominates the financial markets. . . . The Fed has printed $6.5 billion a day for the past 688 days. . . . They have printed more money in the last 688 days than the Fed did in the first century of its existence.”
“Preserve your assets,” advises the former Reagan budget director.
Good advice! Let a Republic Monetary Exchange gold and silver professional help you design a precious metals portfolio that meets your individual needs.
Throughout history thousands of paper currencies and have come and gone, all failures eventually. It is the common fate of fiat money, money that is decreed to have value by the state, the king, the central bank, or some other institution.
Nobody ever has to decree that gold has value. Its value is intrinsic. That is why gold is the world’s go-to money in a crisis. Politicians come and go. Monetary bureaucrats change places. Governments rise and fall.
But the value of gold and silver endures.
As for the dollar’s long-term prospects, Gundlach, says “I don’t want to be overly dramatic, but I will use the word ‘doomed.’”
In a recent CNBC appearance, Gundlach pointed out that the Fed’s promise that inflation was only “transitory,” has been disproven. Originally, Fed officials suggested “transitory” meant one or two months. ‘Now,” says Gundlach, “transitory is six to nine months.”
“Jay Powell is still wishing, hoping, praying that this [inflation thing] goes way,” Gundlach said.
If Powell wants inflation to go away, all he has to do is stop the digital-dollar printing presses. Just stop inflating. But it still has the pedal to the metal. The Fed is currently printing $120 billion a month, more than $1.4 trillion a year.
Because the Fed doesn’t create any actual wealth – it doesn’t build any houses, bake any bread, or perform any labor – all the new dollars it creates can only take on value by depreciating the value of the dollars we have already. Dollars of less value mean higher prices.
And that, dear readers, is inflation.
Instead of wishing, hoping, and praying that inflation goes away, Chairman Powell should speak to us and learn how to protect himself and his wealth from the results of his own destructive policies.
Meanwhile, with every turn of the Fed’s printing press, the dollar gets closer to its sell-by date.
Three Financial Bubbles at Once is Playing with Fire!
Jeremy Grantham has appeared in these comments several times over the years. He is a co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo (GMO), a Boston-based investment firm with some $62 billion under management.
Much of Grantham’s reputation and success rests on his track record of identifying speculative financial bubbles, among them Japan’s stock market bubble of the 1980s, the dot com bubble, and the housing bubble.
In letters to GMO clients, Grantham has often wondered how such bubbles are missed. “I described it as being like watching a train wreck in very slow motion…. It’s more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored…”
We wrote about Grantham’s latest bubble-spotting just last week. Featured on the PBS Frontline documentary “The Power of the Fed,” Grantham said, “They [the Fed] havethe housing market, the stock market and the bond market all overpriced at the same time, and they will not be able to prevent, sooner or later, the asset prices coming back down. So, we are playing with fire because we have the three great asset classes moving into bubble territory simultaneously.”
Now, thanks to a Reuters interview this month, we can share more of his insights about today’s precarious stock market bubble. This, he says, “could well be the most important event of your investing lives.”
When Do They Pop?:
“Bubbles are unbelievably easy to see; it’s knowing when the bust will come that is trickier. You see it when the markets are on the front pages instead of the financial pages when the news is full of stories of people getting cheated when new coins are being created every month. The scale of these things is so much bigger than in 1929 or in 2000.”
Today’s Stock Market Valuations:
“Looking at most measures, the market is more expensive than in 2000, which was more expensive than anything that preceded it.
“My favorite metric is price-to-sales: What you find is that even the cheapest parts of the market are way more expensive than in 2000.”
What Pops the Bubble?
“Markets peak when you are as happy as you can get, and a near-perfect economy is extrapolated into the indefinite future. But around the corner are lurking serious issues like interest rates, inflation, labor and commodity prices. All of those are beginning to look less optimistic than they did just a week or two ago….
“What pricks the bubble could be a virus problem, it could be an inflation problem, or it could be the most important category of all, which is everything else that is unexpected. One of 20 different things that you haven’t even thought of will come out of the woodwork, and you had no idea it was even there.”
What Will It Look Like When the Bubble Pops?
“There will be an enormous negative wealth effect, broader than it has ever been, compared to any other previous bubble breaking. It’s the first time we have bubbled in so many different areas – interest rates, stocks, housing, non-energy commodities. On the way up, it gave us all a positive wealth effect, and on the way down it will retract, painfully….
“But this bubble is the real thing, and everyone can see it. It’s as obvious as the nose on your face.”
Isn’t it time to get some of your wealth off the bubble grid? When the bubble pops there will be a stampede to the safe-havens of gold and silver. We recommend you take advantage of today’s prices and beat the rush.
But what does that mean? Well, it does not really say.
Month after month now inflation has been running hotter than expected. Some of our friends and clients may remember Fed chairman Powell’s telling a Senate committee in February that inflation would not be a problem.
But when the evidence of higher prices became impossible to ignore, the Fed tried a new dodge: inflation is only transitory.
We are not sure that is working now. Last week Powell returned to the Senate and confessed that the Fed does not understand the prevailing inflation.
After months of higher-than-expected inflation, we will tell you what is transitory: the Fed’s credibility.
It is not just we who say so. Here are a few snippets of comments from members of the Senate Banking Committee during Powell’s latest appearance:
Senator Bill Hagerty (Tennessee):
“I’m very worried that the Fed’s continued level of asset purchases and balance sheet expansion is facilitating this runaway spending that the Democrats are imposing upon us, and adding to the inflationary pressures that these trillions of additional dollars are going to continue to add to our economy and continue to add to the debt that our children are going to continue to bear…”
Senator Thom Tillis (North Carolina):
“I’ve got to beat the inflation drum for just a minute here. The FOMC members insist inflation is transitory, but it hasn’t inspired a lot of confidence in me.”
Senator Pat Toomey (Pennsylvania):
“The Fed’s policy is especially troubling because the warning siren for problematic inflation is getting louder. Inflation is here, and it’s more severe than most, including the Fed itself, expected….
“For the third month in a row, the Consumer Price Index was higher than expectations. Core CPI… was up 4.5% in June; the highest reading in almost 30 years….
“Now, the Fed assures us that this inflation is transitory, but its inflation projections over the last year have not inspired confidence. Last June, the Fed projected that PCE… would be 1.6% for the 12 months ending 2021. Then in December, the Fed raised that figure up to 1.8%. And how the Fed’s most recent PCE forecast for 2021 year-end is 3.4%.”
As we have explained many times, like all unbacked, irredeemable fiat currencies, the US dollar is a confidence game. When confidence begins to fail, the currency loses value, slowly at first and then accelerating.
Confidence in the Fed’s policies is cracking like thin ice on a pond. It is losing confidence not simply domestically among members of the political classes and the public, but internationally, too.
Confidence is won by performance, honesty, and reliability. For thousands of years and around the globe, no monetary unit has inspired more confidence than gold. Unlike paper money, real gold is not corrupted by governments, central bankers, or politicians.
No wonder that when confidence in the paper money begins to crack, gold represents the best possible alternative for wealth protection and profit.
In our last post we called your attention to a PBS Frontline documentary called “The Power of the Fed” that premiered on Tuesday, 7/13/2021.
We had no expectation that the program would provide a satisfactory critique of the Federal Reserve’s destructive activities. For example, we did not hear a word about the Fed’s destruction of the dollar’s purchasing power. Nor a word about gold, the money system upon which our free Republic was founded, the monetary system that would have precluded the Fed’s follies in the first place.
So great are these oversights in the context of an examination of the Fed’s power, that we thought we may have missed something. So, we pulled up the transcript and searched.
We had missed nothing.
The program’s focus was limited to the Fed’s tender affection for Wall Street and its undisguisable cronyism, run quite out of control with quantitative easing.
Still, as we expressed in Part 1 of this commentary, we had no expectation of a thorough indictment of the Fed. We thought instead that the program’s significance was that the Fed’s mal performance should be addressed at all on government television (remember that the Corporation for Public Broadcasting is a creature of Washington and survives on your tax dollars).
So near are we to a reckoning for the Fed’s wanton money-printing and cronyism, that this show and other developments have us wondering whether “some of [the Fed’s] usual supporters may be scurrying away to avoid blame for the coming calamity.”
With that said, HERE is a link for you to view the entire program.
Before we leave the topic, we thought it would be valuable to provide you with a Viewers’ Guide to “The Power of the Fed,” by briefly identifying two of the commentators you will see in the film.
Neel Kashkari is the President and CEO of the Minneapolis Fed and is the Fed’s primary defender, Chairman Powell apparently being unwilling to appear.
Kashkari misses the mark badly. He is truly an idiot and we do not say that not lightly, but on good evidence. He is incapable of seeing any link between the Fed’s interest rate manipulations that allow companies to borrow money for what amounts to not much more than a rounding error, and the explosion of corporate stock buybacks that the documentary finds so damning.
Kashkari, working for Treasury secretary Hank Paulson, both from Goldman Sachs, oversaw the $700 billion Bush bailouts. How did he arrive at that figure, $700 billion? Kashkari pulled it out of the air. He did the math right on his BlackBerry. “We have $11 trillion residential mortgages, $3 trillion commercial mortgages. Total $14 trillion. Five percent of that is $700 billion. A nice round number.”
A nice round number? And that is what passes for intellectual rigor at the Fed.
No wonder people are scurrying away from the Fed.
Kashkari does not mind at all that Fed policies are driving a wealth gap heretofore unseen. If the One Percent, the very richest, are getting richer, says Kashkari, it is only a side effect of the Fed’s being so attentive to everybody else and their jobs.
But consider: The Fed does not create any real wealth itself. It does not bake any pies. So, if Wall Streeters and banksters are getting richer, getting greater and greater slices of the wealth pie, it means that the rest are left with a smaller slice of the pie, a smaller share of real wealth.
And indeed, this is true. The economic pie isn’t getting bigger at the rate it did before the Fed became today’s economic leviathan. The more interventionist the Fed since leaving the gold standard, the more US GDP growth shrinks, decade after decade.
Certainly, the wisest voice in the program is that of legendary investor Jeremy Grantham who sums up cronyism and distortion the Fed has wreaked on the economy this way:
“In my career in America, the percentage of GDP that goes to finance has gone from 3 1/2 to 8 ½. We’re—in a way we’re like a giant bloodsucker and we have more than doubled in size and sucking more than twice the blood out of the rest of the economy. And we do not generate any widgets. We do not generate any real increase in income. We are just a cost….
“They [the Fed] have the housing market, the stock market, and the bond market all overpriced at the same time, and they will not be able to prevent, sooner or later, the asset prices coming back down. So, we are playing with fire because we have the three great asset classes moving into bubble territory simultaneously.
All in all, it appears that we are awfully close to a meltdown from the Fed’s frenzied money-printing. There is no bailout waiting in the wings for you when this happens. You must take steps to protect yourself from a nuclear-scale monetary event. Speak with a Republic Monetary Exchange gold and silver specialist about a protection portfolio for your wealth.
“Invest in inflation,” advised Will Rogers. “It’s the only thing that’s going up!”
That advice has never been better. One of the great scandals of American monetary policy is the extremes the authorities have gone to in an effort to conceal the speed with which the money is losing value.
When the index they use shows prices rising too fast, they are quick to reconfigure it. If skyrocketing food and energy prices make the political classes look bad, their servitors come up with “core” inflation that excludes food and energy.
If you would like to investigate this class of flimflammery for yourself, look to the component of the Consumer Price Indices called “owners’ equivalent rent.” It accounts for 24 percent of the CPI, but it is quite a sleight of hand, one that helps conceal the real cost of living.
Even so, CPI numbers are rising at an alarming rate. In May, consumer prices rose 0.6 percent. Now the June report is out showing prices for the month having risen 0.9 percent. That is the biggest one-month jump since 2008. June’s numbers annualized would yield double-digit inflation.
Other June numbers:
The food index rose 0.8 percent.
The energy index rose 1.5 percent.
The used car and truck index climbed 1o.5 percent.
Meanwhile, according to a Wall Street Journal survey of economists, Americans need to “brace themselves” for several years of higher inflation rates than they have experienced in decades.
But what does that mean, brace themselves? It is a phrase that people use often. Merriam-Webster says it is “said to warn someone to be prepared for something.” So, to brace yourself means to prepare for some additional stress or difficulty.
But it not just mentally anticipating something, gritting your teeth in advance. A brace is something that provides added support or strengthens a position or structure.
How do people brace themselves for years of renewed inflation thanks to years of rapid money printing? More than just resigning themselves to a falling standard of living, how do people prepare for their money losing value?
We are glad you asked because that is what we do. We help people prepare. We are specialists in real money, gold, and silver.
You can close your eyes and think, “Oh, no! Another monetary crisis! Here it comes.” But that does no real good.
Instead, you can really brace yourself and strengthen your portfolio, your wealth, and your retirement by diversifying into the world’s most prized and enduring form of money.
We have been champions of common-sense Constitutional policies for a very long time: sound money, limited government, responsible budgets.
Along the way, we have often felt lonely pointing to the Federal Reserve’s role in enabling the opposite: fraudulent, unreliable money, gargantuan government, and uncontrolled spending. For a brief shining moment after the mortgage meltdown and the housing bust, with millions losing their homes and jobs, it looked like Americans might be noting the hidden hand of the Fed behind the destruction and the egregious bailout of the Fed’s banking cronies. The best evidence was the thousands of voters that greeted the Ron Paul presidential campaign across America with signs and chants calling for the end of the Fed.
But it didn’t last. The media didn’t like it and went to some bizarre lengths to limit the movement’s exposure. For example, when Ron Paul easily won the Fox News poll after one of the Republican debates, one of the network’s leading hosts quickly disavowed its own poll.
We would like to make clear that we are not some Ahab obsessed with the Fed white whale for personal or for no good reasons. The Fed’s operations are a mystery to most people and therefore few understand its reach into every nook and cranny of American life. We have described its economic distortions and damage many times in many ways in these comments. But for today we will reduce it to its bare essential: Since money is half of every financial transaction, and the Fed regulates the conditions of money and credit, the Fed has a hand in everything.
But now the Fed may have gone to far. Because inflation is surging and it has the economy at the breaking point, even some of its usual supporters may be scurrying away to avoid blame for the coming calamity.
The latest and most unexpected example is a Frontline documentary that aired Tuesday night (7.13.21) on PBS. Since PBS is government television (the Corporation for Public Broadcast receives hundreds of millions of US taxpayer dollars every year), we were a little surprised to see its recent documentary, “The Power of the Fed.”
The website Wall Street on Parade headlined its preview of the program this way: The Federal Reserve Has Radically Changed from a Central Bank to a Bailout Kingpin. Americans Just Haven’t Paid Attention – Until Tonight.
Here is its preview:
“The Fed’s radical makeover of itself began in December of 2007 when the Fed decided, on its own, that it had the authority to secretly pump out trillions of dollars in cumulative loans to prop up the mega banks on Wall Street, as well as to the foreign banks that were on the other side of Wall Street’s hundreds of trillions of dollars in derivative trades. The Fed secretly ran that program through at least July of 2010 according to the eventual audit that was conducted by the Government Accountability Office….
“The Fed’s latest massive bailout operation began on September 17, 2019, months before there was a case of COVID-19 anywhere in the world. The full scope of this operation and other bailout programs remain a dark secret at the Fed, casting a pall over investors’ confidence in the transparency and stability of the U.S. financial system.
“Frontline writers and producers James Jacoby and Anya Bourg… will now become part of a rarefied group of individuals who have mustered the determination to cut through the Fed’s insidiously cultivated armor of Fed-speak and the preposterous structure that allows it to create trillions of dollars of money electronically out of thin air for bailouts, with only feigned oversight by Congress.”
The program does not get everything right; its producers are not students of monetary history and of prior episodes much like today. Of course, it doesn’t mention that Constitutional money, gold, and silver, were meant to preclude exactly what the Fed has done. Or that now that it has done what it has done, that you can still protect yourself from its paper and digital money folly.
But it does give some of an idea of how close the Fed’s grandiose risk-taking has us to the brink of tragedy.
In our next post we will cite just a few specific things in the program that miss the mark and others where its aim is true.
We read today that well-positioned Washington lobbyists say that Biden’s tax hikes are dead. We hope our friends and clients know us well enough to know that we are no friends of tax hikes.
Even so, we note that when revenue targets will not be hit, spending plans should be curtailed.
But in today’s Beltway, that never happens. Never mind the party in charge.
So, when the financial crimes that are bringing America low are finally reckoned, ever-growing government spending and debt will have to be at the top of the list.
“But,” complain the elected classes, “if we do not give people free stuff to buy their votes, how are we going to get reelected?”
And after all, the normal laws of accounting are widely believed to have been repealed by the Federal Reserve. This board of mostly nameless, faceless bureaucrats is gifted with alchemical magic that allows it to turn debt into money.
The gullible think it is quite a trick! Their magic will be tested in a big way this year, since the US deficit is tracking to hit $3 trillion this year (13.4 percent of the nation’s productivity), while the national debt is already $28.5 trillion.
You might think that someone would notice that decades of exploding debt have been accompanied by a precipitous drop in America’s growth rate. And indeed, former Reagan budget director David Stock has noted, as follows:
Real GDP Growth Rates, 1951-2020
Post-war Golden Era, 1951-1970: 3.72% per annum;
Initial Fiat Money era, 1970-1987: 3.24% per annum;
Greenspan Money-Pumping Era, 1987-2007: 3.08% per annum;
Post-crisis fiat credit explosion, 2007-2020: 1.28% per annum.
“That’s right. Real GDP growth has slowed to barely one-third its golden era rate despite the evolution of Fed policy toward increasingly massive money-printing (i.e., real balance sheet growth) on an increasingly continuous basis.”
So, no, do not let any whack job politicians tell you we will grow our way out of this debt problem. Debt has crippled our growth!
But it does drive gold higher, as this chart suggests:
We think the above chart suggests that gold has some catching up to do. That is likely to happen when the next Black Swan hits- when another “unexpected” event triggers a financial calamity.
What might such an event be? We do not know. Persistent inflation rocketing higher even as the Fed insists inflation is transient and under control? An armed conflict breaking out in the Black Sea or the South China Sea?
We do not know; any more than people knew when their Florida condo tower would collapse. But spiraling US debt and falling productivity is evidence that, like the Surfside tower, vital maintenance of US financial affairs has been deferred.
You do not have to be victimized by the inevitable discovery that the Fed cannot really create money of lasting value out of debt.
Speak with a Republic Monetary Exchange gold and silver professional today. Check your own portfolio’s ability to withstand a systemic breakdown.
“Long term, gold is the most significant guardian and guarantor of protection against inflationary and other forms of financial risks.”
We have said that sort of thing many times. But this time it is a quote from a European government. The more we hear foreign heads of state and central bankers talking like this, the more clear it is that the paper money illusion that gripped the world after World War II is beginning to fade.
The assessment of gold’s significance comes from the president of Serbia, Aleksander Vucic, as he announced that the National Bank of Serbia is ramping up its gold holdings from 36.3 to 50 tons. That is an increase of 440,00 troy ounces. Serbia has a population of fewer than 7 million people.
Much of the attention on foreign gold buying as protection from the US dollar in recent years has been focused on larger nation-states, with Russia and China leading the way. But now, other smaller countries are lining up to add gold to their national reserves.
Last month we reported that the Hungarian central bank announced it had tripled its gold reserves with a purchase of 63 metric tons of gold in March. Thailand is reported to have purchased 9o tons of gold in April and May.
The first half of 2021 also saw the announcement from Russia that henceforth its sovereign wealth fund – the entity that collects profits from Russian-state oil production – will no longer hold US dollars. Gold represents a part of the fund’s diversification plans.
The coronavirus pandemic slowed global economic conditions and accordingly the ability of central banks to maintain higher rates of gold acquisition. Now plans are being reinstituted.
“Central banks from Serbia to Thailand have been adding to gold holdings and Ghana recently announced plans for purchases, as the specter of accelerating inflation looms and a recovery in global trade provides the firepower to make purchases.”
Higher oil prices “are also boosting bullion purchases by oil exporters, including Kazakhstan,” according to a Bloomberg source.
A World Gold Council survey finds that 1 in five central banks intends to add to their gold reserves over the next year.
We recommend that our friends and clients do the same.
“Stagflation” is one of those made-up words. Like “rockumentary,” a documentary about rock music, or “brunch,” combining breakfast and lunch. Stagflation describes an economic malady so well that it has become widely used for a period of weak or stagnant economic growth accompanied by inflation.
The 1970s are often referred to as the stagflation decade, a period in which both gold and silver soared.
Now, if economist Nouriel Roubini is right, we are entering another period of stagflation. The famed NYU professor insists a “slow-motion train wreck looks unavoidable.”
Indeed, much higher debt ratios today threaten to make conditions much worse than in the 70s, according to Roubini. Debt ratios are three times higher than in the stagflation decade. It sets the stage “for the mother of stagflationary debt crises over the next few years.”
As we have written repeatedly, the Federal Reserve has painted itself into a corner. Roubini describes it this way:
“Making matters worse, central banks have effectively lost their independence because they have been given little choice but to monetize massive fiscal deficits to forestall a debt crisis. With both public and private debts having soared, they are in a debt trap. As inflation rises over the next few years, central banks will face a dilemma. If they start phasing out unconventional policies and raising policy rates to fight inflation, they will risk triggering a massive debt crisis and severe recession; but if they maintain a loose monetary policy, they will risk double-digit inflation – and deep stagflation when the next negative supply shocks emerge.”
For the monetary system itself, there is really no way out, except straight through the crisis itself. The inevitable attempts to forestall a reckoning will only make the crisis bigger. But while there is no systemic fix, individuals can protect themselves and their wealth in a time-proven way – with gold and silver.
“The stagflation of the 1970s will soon meet the debt crises of the post-2008 period,” says Roubini. “The question is not if but when.”
Contact us today. Take steps to protect yourself now, before the “unavoidable” train wreck.
As we celebrate America, our independence, and the birth of our Republic, remember that the Founders specifically wrote into the Constitution itself a gold and silver based monetary system for the new nation.
First of all, they gave the Congress the power to coin money. From Article I, Section 8, “Congress shall have Power…to coin Money.”
Not print. Coin.
It is hard to believe that proponents of today’s irredeemable, unbacked printing-press money schemes can get away with conflating printed money with coined money.
The Founders certainly knew the difference between the two. They had experienced the collapse of the irredeemable paper currencies of the colonies and that of the Continental Congress. The Continental paper dollar was such a failure that it gave rise to a popular expression, “not worth a Continental.” It was an all-purpose description of complete worthlessness.
In Section 10 they addressed the monetary system again without ambiguity: “No state…shall make any Thing but gold and silver Coin a Tender in Payment of Debts.”
Why did the Founders incorporate these provisions into the Constitution? First of all, they were learned men, well-read in the historical precedents of paper money failures, base-money inflations, and spendthrift governments.
Secondly, just as they intended to set up a government that would protect our rights, they wanted the new government to protect our wealth as well.
But our politicians had other ideas. They stripped away the protection gold and silver provide to a monetary system, first in the Civil War era with the “greenback dollar,” and then again later with the Federal Reserve system and the final break with a gold-backed monetary system in 1971.
Although we endured a brazen act of unconstitutionality from 1933 to 1974 when the government made it illegal for Americans to own monetary gold, today you can own gold.
So today, our politicians have failed to do what the Founders wished, and instead of a sound monetary system that protects your wealth, you have to protect your own wealth.
And that’s exactly why we are here at Republic Monetary Exchange.
Have a happy Fourth of July! Spend some time thinking about the blessings of liberty this week. And when you or someone you know needs help protecting their wealth, call or stop by Republic Monetary Exchange and find out why the Founders trusted gold and silver.
Today’s governing classes have abandoned the Founders’ intent to erect the new Republic on the sound monetary basis of gold and silver. The result has been an ever-growing polarization of wealth, an endless gusher of paper money, and a mountain of unpayable national debt
Here is a collection of the Founders’ thoughts about monetary matters. As you celebrate Independence Day with friends and family, spend a few minutes thinking about which of these observations is relevant to our situation today.
“Specie [gold and silver coin] is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war.”
— Thomas Jefferson
“The refusal of King George III to allow the colonies to operate an honest money system which freed the ordinary men from the clutches of the money manipulators was probably the prime cause of the revolution.”
— Benjamin Franklin
“The power to make any thing but gold and silver a tender in payment of debts, is withdrawn from the States, on the same principle with that of issuing a paper currency. Bills of attainder, ex-post-facto laws, and laws impairing the obligation of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation.”
— Federalist Papers, #44
“The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals… it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted.”
— Thomas Jefferson
“To emit an unfunded paper as the sign of value ought not to continue a formal part of the Constitution, nor ever hereafter to be employed; being, in its nature, pregnant with abuses, and liable to be made the engine of imposition and fraud; holding out temptations equally pernicious to the integrity of government and to the morals of the people.”
— Alexander Hamilton
“Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.”
— George Washington
“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.”
2021 is half over, so with this post we look at where we are heading into the second half of what we can call the year of inflation’s return.
We suspect that our technically oriented readers will find it significant that gold bounced off lows around $1,678 twice this year, in both March and April. One would expect gold to find strong support at those levels going forward.
Gold closed on June 30 at $1,771.60.
Silver finished the first half of 2021 with a June 30 close of $26.19. Silver touched a low of $23.76 at the end of March.
US government debt finished the first half of 2021 at $28.3 trillion, up $600 billion in the six months.
Of course, the big story of 2021 so far is inflation’s return, a story easily captured in the financial news headlines: “Gas Prices Surge to 7-Year High Ahead of Independence Day Weekend!” Another: “Home prices in March saw highest growth in over 15 years!”
One more: “And Now Prices Are Really Soaring: June Rent Jump Is Biggest On Record”’
Bank of America analysts warned us in May of “transitory hyper-inflation” ahead. Now it looks like the “transitory” part is on its way out. Indeed, soaring prices may last for a long time. That is according to the latest from BofA Chief Investment Strategist Michael Hartnett, who writes now that, far from transitory, soaring US prices may last up to 4 years.
Harnett says it is “fascinating so many deem inflation as transitory when stimulus, economic growth, asset/commodity/housing inflations (are) deemed permanent.”
Meanwhile, the inflation numbers keep inching higher and higher. The latest Consumer Price Index shows a 5 percent increase in consumer prices over the past 12 months. The increases over the past two reported months, April and May, would produce an annual inflation rate of more than 8 percent. In any case, it is the largest 12-month increase in inflation since August 2008.
Deutsche Bank has observed that with its inflationary policies and its misunderstanding of monetary conditions, the US Federal Reserve will lead to a “chain of financial distress around the world.”
And finally, news flying in below the radar in the first half of this year of what we have called one of the most important and revealing financial megatrends of all: central banks de-dollarizing and moving their reserves to gold.
The Hungarian central bank announced that it had purchased 63 metric tons of gold in March, tripling its gold reserves. But that was not the largest gold purchase of the year. Sources report that Thailand purchased 9o tons of gold in April and May.
The first half of 2021 also saw the announcement from Russia that henceforth its sovereign wealth fund – the entity that collects profits from Russian-state oil production – will no longer hold US dollars. The Russian National Wealth Fund is estimated to hold $119 billion in liquid assets of which $41.5 billion is in US dollars. But the fund will abandon the dollar at once and henceforth be diversified among other currencies and a 20 percent gold allocation.
We think de-dollarization at this time of inflation’s return is sound advice for our friends and clients. Take steps now to prepare for growing turbulence in the second half of 2021. Speak with a Republic Monetary Exchange gold and silver professional without delay.
It is everywhere he looks. Inflation, that is. We have written about Kyle Bass before. The last time was just two weeks ago. The official Consumer Price Index reports that prices have risen five percent over the past 12 months.
But Bass says the actual inflation rate is probably about 12 percent. He sees evidence of inflation everywhere.
Bass is the founder and chief investment officer of Hayman Capital Management. We follow him because his analysis of the housing bubble was spot on. He made a half a billion dollars disregarding government economists like Alan Greenspan and Ben Bernanke.
We may see a short interlude of slightly lower inflation, he says. That is because the huge burst of inflation that hit in the last few months was enormous. If reported inflation rates ease off from those sudden climbs, it may make inflation look transitory as the Fed has insisted.
But Bass says to keep your eye on the ball, the burgeoning money supply:
“When you look at the money supply, the broad money in the US system from 1980 to 2010, it vacillated between 50 and 60 percent of GDP. Post the global financial crisis it moved up from roughly 60 to 68 or 69 percent GDP. Now we’re approaching 90 percent.
“In the one-year period, one-and-a-half-year period since COVID started, we have introduced 34 percent more broad money in our system in the shortest time period in the history United States.
“So, we’re going to see prices stay high, and move higher over time if the Fed continues to expand its balance sheet.”
And of course, the Fed has taken no step to halt the expansion of its balance sheet, now growing at a rate of almost $1.5 trillion a year.
The answer for investors, says Bass, is hard assets. That is a topic he knows something about. Bass is a member of the University of Texas endowment board. He was instrumental in having the endowment invest in a billion dollars’ worth of gold. Why? Because, he said, the Fed cannot print more gold!
A new survey from Deutsche Bank has the answer. Not surprisingly, the Federal Reserve figures in two out of three of their biggest worries.
First on the list is inflation. Thank the Fed for that.
Second on the list is a new COVID variant.
Third is fear of a central bank policy error. We’re talking about you again, Fed!
The realization that the Fed is the biggest source of investor fear – 0ccupyig both the first and third places – undermines its claim that it promotes the effective functioning of the US economy.
The United States used to be on a gold standard. Now, says Jim Grant, we are on a Ph.D. standard.
Gold has proven to be more reliable.
Ron Paul Says…
“The road to authoritarianism is paved with fiat currency.” So says the former congressman, presidential candidate, and monetary expert.
In his latest newsletter, Dr. Paul writes, “Germany’s Deutsche Bank recently released a paper warning about the Federal Reserve continuing to disregard the inflation risk caused by easy money policies designed to “stimulate” the economy and facilitate massive government spending. Germans have reason to be sensitive to the consequences of inflation, including hyperinflation. Out-of-control inflation played a major role in the collapse of the German economy in the 1920s, which led to the rise of the National Socialists.
“This pattern could repeat itself in America where we have already witnessed the rise of authoritarian movements. Last summer, groups exploited legitimate concerns about police misconduct to ferment violence across the country. Can anyone doubt that an economic crisis that leads to mass unemployment, foreclosures, and maybe even shortages will result in large-scale violence? Or that the violence will be exploited by power-hungry politicians? Or that many people will once again fall for the big lie that preserving safety requires giving up their liberty?
“… We may still have time to prevent collapse in America, or at least to make sure the collapse leads to a transition to a free society. The key to success is spreading the ideas of liberty until we have the ability to force the politicians to dismantle the welfare-warfare state and the fiat money system that is the lifeblood of authoritarian government.”
Need a Laugh?
The Cleveland Federal Reserve has produced a series of three animated Lego videos explaining inflation. We won’t spoil the hilarity by telling you exactly what they say, but to at least give you a taste, the second one ends with this teaser: “So, who helps keep inflation under control? The Federal Reserve!”
The third episode tells us “that with the help of the Federal Reserve, there is just the right amount of inflation!”
All we can say is “God help the poor propagandized American people!” Here’s the link to the Cleveland Fed so you can watch for yourself.
A Republic Monetary Exchange precious metals professional can help you create a gold and silver portfolio that will meet your personal wealth protection needs and prepare you for the financial dislocations ahead.
Things We Think Our Friends and Clients Should Know
In news that is important for gold and silver investors, we reported in March about an FBI raid on a private storage vault company in Beverly Hills. While the indictments were against the vault company itself, and there were no allegations against the company’s clients, the government broke into the customer’s individual and private storage boxes, taking all their contents and personal possessions.
The Orange County Register reported, “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.”
“In other words,” the Register wrote, “people must prove their own innocence to secure their property’s return.”
The Institute for Justice, the national law firm that litigates for individual rights and liberty, has now taken the case, launching a class action suit claiming the FBI exceeded its warrant when it took possession of the contents of 800 safe deposit boxes.
From an IJ press release:
“The FBI’s warrant for the raid did not include permission to do a criminal seizure or search of the contents of the rented boxes – only U.S. Private Vaults’ own business property. The government promised it would only look into the boxes to identify ownership, but it immediately broke its word. Once in the location, agents opened hundreds of boxes, ran any currency in front of drug sniffing dogs, and made copies of records in peoples’ boxes.
“Now the government is forcing people to submit to an investigation to show they owned their property legally before it is returned. The lawsuit, filed in U.S. District Court for the Central District of California, alleges that the government’s shocking behavior violates the Fourth and Fifth Amendment rights of Jennifer and Paul Snitko, Joseph Ruiz, Tyler Gothier, and all others who rented boxes at U.S. Private Vaults.
“ ‘The government’s dragnet search of innocent peoples’ private security boxes is the most outrageous Fourth Amendment abuse that the Institute for Justice has ever seen,’ said IJ Senior Attorney Robert Frommer. ‘It is like the government breaking into every apartment in a building because the landlord was dealing drugs in the lobby.’ “
“Jennifer and Paul Snitko never thought they would need to worry about the federal government seizing the items they placed in the box they rented from U.S. Private Vaults. They stored possessions valuable mainly to them: Paul’s father’s will, backup hard drives, old family watches and Paul’s flight log. The Snitkos filed a claim form with the FBI, but when they asked an agent what the process was to get their property returned, the agent replied that she did not know. And when they asked when they would get their property back, the agent conveyed that there wasn’t any time frame.
“Privacy and property are essential rights of all Americans,” said IJ Senior Attorney Rob Johnson. “The government treats box holders as somehow suspicious just because they held their property in a private and secure facility. But privacy is a constitutional right, not a ground for suspicion. If the government can get away with this here, we all will be at risk of similar intrusion in our own private space.”
We will continue to track this case for Republic Monetary Exchange’s friends and clients.
It is always a good time to cite the Fourth Amendment, as we did in March: “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….”
Having acknowledged in our last post (Fake Money, Fake News) our gratitude to the Fed for providing us a chance to acquire gold and silver at lower prices, in this post we would like to shed a little more light on the forces behind the current price drop.
Let us start with the Fed’s policy meeting and announcement on Wednesday (6/18), at which it decided to continue its money-pumping at the current rate. That means it will continue buying Treasury securities by at least $80 billion a month and purchasing mortgagebacked securities by at least $40 billion per month. That means money-printing at a $1.44 trillion annual rate.
Nothing new there.
The only thing new in the Fed statement was an opinion poll of when voting members think the central bank will raise rates. In other words, the markets were spooked by a shadow, not substance: what Open Market Committee members think the Fed may decide to do in a year and a half.
Idle conjecture over what the Fed may do by-and-by down the road appears to have eclipsed the fact that the Fed voted unanimously to keep its highly inflationary policies in place.
Although current conditions forced the Fed to forecast inflation a full-percentage point higher than it did at its last meeting, it still insisted that it would only be a transitory phenomenon.
We recommend our friends and clients focus on substance. The Fed is simply terrified at the thought of what will happen if it stops Quantitative Easing, pumping made-up money into the economy, even in the face of sharply rising consumer prices. Wall Street and the money center banks, which created the Fed to serve their interests in the first place, know that stock prices are floating on a sea of Fed liquidity, and sternly signaled their displeasure that the Fed is even “thinking about thinking about” higher rates down the road.
In any case we think there are others to thank for the opportunity to buy gold at lower prices, even in the face of inflation running hotter than it has in more than a generation.
There are several places to look, but here is one. As we have pointed out, the entire commodities complex has climbed higher under the Biden spending initiatives and the Fed’s liquidity pumping. Copper, a widely recognized leader in signaling higher inflation, was among the biggest gainers, followed by other commodities.
But even as the Fed was deciding that it would continue its $120 billion in monthly money-pumping and maintain its interest rate targets, China announced that it would dump some copper, aluminum, and zinc stockpiles to counter high prices (notably it is not selling its gold).
We have seen the same sort of thing many times in the past. Sales of petroleum from the strategic reserves have had more to do with presidents seeking to drive prices down in time for the election than with long-term conditions of supply and demand or with the value of the dollar. The US Treasury and the International Monetary Fund auctioned off millions of ounces of gold in the 1970s trying to force gold prices down. The price of gold went up anyway.
A flight from commodities on China’s decision to sell some stockpiles to counter high prices is one component of the sell-off in gold. But it, too, is more shadow than substance. That is because China’s stockpiles are small compared to its annual demand for those same commodities.
Or to borrow a term from the Fed, its impact will prove to be transitory. And it will do nothing to stop the destruction of the dollar’s purchasing power.
Whipsawing markets and volatility are like the winds that foretell the approach of a violent thunderstorm. The paper gold and silver prices on Wall Street can be buffeted about a bit, but real gold and silver offer shelter from the storm.
The Federal Reserve has faked out the gold market with fake news… and provided us all a chance to buy gold at bargain prices!
It seems funny to thank the Fed for anything, after the damage it has done to the US economy and the dollar all these years. But whatever the reason, we are glad to have a chance to buy more gold and silver for less money!
Here’s the story in a nutshell. Last March, Fed chairman Powell said he could foresee no increases in interest rates before 2024.
Then, in the face of rising price inflation, the Fed signaled on Wednesday (6/16) that it could raise interest rates by the end of 2013.
The Fed is a notoriously bad economic forecaster. Its guesses about what the GDP would do over the years have been so wide of the mark that if the Fed predicted that the sun will rise in the morning, for the first time in human history, you might not want to bet on it.
Now the Fed is predicting what it will do by the end of 2023.
Not the end of this year. Or the end of next yesr.
At the end of the year after that!
Even Powell said the Fed’s projections “should be taken with a grain of salt.”
Chuck Butler, who writes The Daily Pfennig, shares our view about what the Fed might do down the road:
“The key here is they are saying 2023… if I’m not blind, and can see a calendar, that’s 1 1/2 years from now… There’s a whole lot of good and bad that can happen between now and 2023… So, why were the markets so moved to push all these asset classes to lower levels? Well, for one, they were surprised by the statement… And they got their panties all in a wad, when Powell sounded so hawkish…
“… The Fed admitted that prices are rising faster than they forecast 3 months ago… So, if their forecast for prices is wrong, then their forecast for rate hikes is probably going to be wrong too…
“I know what the Fed is thinking here folks… That inflation is rising faster than they expected, and their hands are tied for now to combat it, so they’ll try to jawbone inflation down with talk of rate hikes 1 1/2 years from now…
“And in the end… What they have done is give every procrastinator a buying opportunity… When was the last time you could get Gold below $1,800 or Silver below $27?”
So even though the Fed intends to leave its fake money pumping at a rate of $120 billion a month, $1.44 trillion a year, suggesting that it will pull forward any rate increases spooked some people on Wall Street, creating a buying opportunity for savvy investors.
If you are putting money in the bank, you are probably taking a real beating.
“People who have money in the bank, in their savings, are losing 5 to 12 percent of their purchasing power annually.” So says investment guru Kyle Bass. He’s one of the guys who saw what was going on and made a fortune when the housing bubble burst.
Bass is the founder and chief investment officer of Hayman Capital Management. While the official Consumer Price Inflation report say that prices have risen at a 5 percent rate over the last year, Bass says the actual inflation rate is probably about 12 percent.
Appearing on CNBC recently, Bass said that investors and retirees need to start thinking about how to preserve their purchasing power. “We think it [inflation] is running about 12 percent, and with short term interest rates still at zero, that means people who have money in the bank, in their savings, are losing 5 to 12 percent of their purchasing power annually.
“We have 34 percent more money in the US system than we did 14 months ago.
“Of course, we’re going to have inflation and it’s going to be significant.”
Bass is right to be skeptical about the government’s inflation numbers. In fact, we think one also must be skeptical about everything said in the mainstream financial media.
Here is an example. It is from a piece headlined “Why everything is costing you more money,” by someone called the editor-at-large and anchor at Yahoo Finance:
“If everything seems like it’s costing you more money right now that’s probably because it is — the saving grace being that perhaps things get a bit cheaper in the fall.
“But it’s important to understand as an investor— and consumer —why inflation has picked up. Indeed it has major implications on everything from monthly budgeting of one’s finances to investment portfolio construction.”
The author goes on for six hundred words or so, quoting people from Goldman Sachs and JPMorgan, about this and that behind isolated higher prices. But his account, like so many we have perused over the last couple of months, make no mention at all of monetary policy. It says nothing about the Federal Reserve. Call it the elephant in the living room, if you like. And that’s a good metaphor, since the Fed has jacked the money supply up to elephantine proportions.
Or call it the crazy aunt in the basement, something that people know is there, but studiously avoid mentioning. Since money is half of every transaction, it is simply unfathomable that an “editor-at-large and anchor” should try to explain why prices are rising without talking about money. Professional economists must be aware of what the Federal Reserve has been doing to the dollar.
It is just apparent that many of them do not want to talk about it.
You simply cannot rely on the government’s inflation numbers either, especially since the record is clear that the formulae for calculating inflation have been adjusted many times over the years in response to political pressures. And, because when the mainstream press tries to explain why costs are rising without reference to the $28 trillion national debt or a word about the $4.2 trillion dollars the Fed has manufactured out of thin air to fund that debt, you simply cannot rely on them as honest or knowledgeable brokers of financial information.
Inflation, it has been said, is like a country where no one tells the truth. But gold is different. Gold is not the money of states, central banks, or politicians. It cannot be manufactured out of thin air or created by decree. An ounce of gold is an ounce of gold whether it is minted in country A, B, or C.
Gold seeks no political advantage. It neither lies nor conceals the truth. It answers to no cronies and is indifferent to the latest trendy economic theories. That is why people have made gold the enduring and most trusted monetary asset of all time.
When the wheels come off the money-printing bus, when a real financial reckoning asserts itself in a crisis, when the truth, as it always does, wins out in the end, you will be glad to own gold.
If the teacher called you to the chalkboard to do some basic math, you might be asked to solve a problem about the real rate of return.
Here is the story problem. The interest rate on US ten-year treasuries (as we write this post) is 1.46 percent. Meanwhile prices are rising at a 5 percent annual rate (according to the CPI for the last 12 months.) Given these conditions, If John invests in those treasuries, what it his real rate of return?
1.46 percent (Treasury Rate)
– 5.0 percent (Inflation Rate)
– 3.54 percent Real Rate of Return
The inflation rate is the rate at which John’s (and everyone else’s) dollars are losing purchasing power. Because the dollar is losing value at 5 percent rate, John’s investment yield of 1.46 percent is not enough is not enough to keep up. He may look at the paperwork from his stockbroker and see it shows a profit, but that is just a “nominal” profit, unadjusted for what is really happening to his money.
The ten-year treasury rate has been even lower than our example for most of the last year and a half. As for the inflation rate, it is headed higher than in our example. For the last 3 months, March, April, and May, the CPI is up 2 percent (which annualized is 8 percent inflation). The dollar has lost more value in the last three months than the full year treasury return.
John’s real rate of return is negative. His is being decapitalized by the explicit policy of the Federal Reserve.
John is getting killed. And so are many Americans. Even older people, who should be managing their golden years conservatively, have been forced by the Fed’s interest rate manipulation to make increasingly risky investments to earn the normal returns they need to sustain them in retirement. By the way, we think the next great tragedy in American financial lives will be the staggering losses suffered by those who have ventured so far out on the risk curve. There is a tragedy among seniors in the making, courtesy of chairmen Powell, Yellen, Bernanke, and Greenspan.
The last time we saw negative real rates of return like today’s was in the 1970s. You may have heard how gold prices exploded to new highs in the 1970s when people began to realize what was happening to their money.
So far only the few realize what is happening to their money. Only the few have taken prudent steps to protect their wealth, their retirement, and their families. When the great mass of the people awaken, gold and silver prices will explode again, and people will wait in lines that go down the street and around the corner to exchange their progressively devaluing dollars for real money: gold and silver.
Our advice is for you to beat the rush. Do not wait for higher prices.
“..that our Keynesian central bankers think inflation is good for everyday Americans and therefore relentlessly strive to generate more of it is one of the great follies of the present era.“
A lot of mainstream financial journalist could have taken some time off. (In fact, we think the public would be better informed if a lot of them took a very long time off!)
When the Consumer Price Index numbers were reported last month many of them told us that “inflation is running hotter than expected.”
Now, with new numbers just out from the Bureau of Labor Statistics, they can just re-run their old stories while they enjoy time in Cape Cod or the Hamptons. Because once again, “inflation is running hotter than expected.”
Our question is this: Who is setting their expectations? After all, the CPI has it has been trending up every month since January.
They might have considered the Fed’s topsy-turvy policy of keeping interest rates below the inflation rate. Have financial journalism’s Keynesian blinders kept them from noticing?
And if that is not enough of a clue, maybe they should have noticed the little, old $4 trillion in Fed money printing since late 2019. Do they think that the authorities can print all that money without consequences?
Here is the latest “unexpected” CPI news. In May, consumer prices rose 0.6 percent. That is after a 0.8 percent increase in April.
It amounts to a 5 percent increase in consumer prices over the past 12 months. The increases over the past two month would produce an annual rate of more than 8 percent. In any case, it is the largest 12-month increase since August 2008.
It was only weeks after that surge in consumer prices that gold and silver exploded to the upside. Accordingly, we think this would be a good time to update your gold and silver portfolio.
Because after all, what is headed our way shouldn’t be unexpected.
Have you noticed that nobody much is talking about the US debt these days? We scour the news and especially the financial media pretty carefully and it seems that most are hauntingly silent about the debt these days.
It is a little bit like the Sherlock Holmes story about the dog that didn’t bark. Maybe no one much cares about the debt these days because they know that the Federal Reserve will just print the money to cover it.
Last month we pointed out that Congress voted two years ago to suspend the national debt ceiling until July 31 this year. We wrote, “Over the next 12 weeks you will hear a fair amount about the nation’s already unpayable debt and about the debt ceiling.”
We were wrong. We have been listening for the debate to begin, and so far, it is just crickets.
Oh, sure, if you hunt you can find a couple of little things. A handful of congressmen began pushing a measure last month to eliminate the national debt ceiling entirely. The big-spenders do that all the time. Another headline crawled by that said something about the US being one of only two countries with a national debt ceiling. We didn’t read it because it seemed to fall under the category of “so what?” Are we to be ashamed to have measure in place to limit our debt—even if politicians try to make it ineffective—just because others don’t?
Maybe it is so quiet because everyone knows that the national debt is unpayable and we are holding our breath to see how long until the endgame.
Economist Keith Weiner has been thinking about the endgame, too. He writes, “That the debt is unpayable may be obvious, but the endgame is not obvious at all. At first glance, it looks like the government will default. However, as the issuer of its own currency—and the world’s reserve currency at that—there is no reason to default.
“The government can always get as many dollars as it needs. It can always sell more bonds.”
Well, it can sell more bonds to the Fed anyway, which will finally only make the endgame more destructive.
The only real solution is for individuals to buy gold and silver so the aren’t taken down with the collapsing debt.
May was the eighth month of the current fiscal year. So, in just two-thirds of FY2021 on the books, Washington has managed to blow up this year’s debt by an astonishing $2.1 trillion. That’s $184 billion more than the first eight months of the year before.
Still the debt ceiling looms ahead. But since we know that the debt will continue to climb, pulling our gold along with it, we will just relax and listen to the Washington crickets.
This is how inflation works: some persons get more purchasing power; some others get less. An examination of today’s wealth disparity growth in America makes clear that those who get more are the already wealthy. Those who get less are not.
Social Security beneficiaries are an example of how this works. The cost of living they received for 2021 rose 1.3 percent. But according to the Consumer Price Index, prices in the first quarter of this year are rising at a 7.5 percent annual rate. The adjustment retirees received this year are for an inflation rate that is already behind us. They may get an increase next year, but they are paying higher prices today.
As long as the Federal Reserve has been in existence it has served the needs of the banking cartel that created it in the first place. The banking cartel is among the government and central bank cronies that get the newly created money first.
Economists call this the Cantillon Effect. Almost 300 years ago economist Richard Cantillon noted that the standard of living of the early recipients of newly created money rises. But it is at the cost of a lower standard of living for others.
Therefore, there are always proponents of inflation and of deficit-financed government.
But seniors and retirees are not the only ones swindled by inflation. Anyone who holds US dollars, an asset that is depreciated by design, is victimized.
The great economist Ludwig von Mises explains what happens when the government inflates to engage in policy X, Y, or Z:
“…people to whom the money comes first now have a higher income, and they can still buy many commodities and services at prices which correspond to the previous state of the market, to the condition that existed on the eve of inflation. Therefore, they are in a very favorable position. And thus, inflation continues step by step, from one group of the population to another. And all those to whom the additional money comes at the early state of inflation are benefited because they are buying some things at prices still corresponding to the previous stage of the exchange ratio between money and commodities.
“But there are other groups in the population to whom this additional money comes much, much later. These people are in an unfavorable position. Before the additional money comes to them, they are forced to pay higher prices than they paid before for some — or for practically all — of the commodities they wanted to purchase, while their income has remained the same, or has not increased proportionately with prices…
“The government does not care, at first, that some people will be losers, it does not care that prices will go up. The legislators say, ‘This is a wonderful system!’ But this wonderful system has one fundamental weakness: it cannot last. If inflation could go on forever, there would be no point in telling governments they should not inflate. But the certain fact about inflation is that, sooner or later, it must come to an end. It is a policy that cannot last.”
As long as there is a central bank that has the power to inflate the money supply, the currency will be corrupted. Although its effects are only just coming into view, the expansion of the US money supply has reached epic proportions.
We believe that those who do not protect their wealth now with gold and silver (which, we find ourselves saying often, the authorities cannot print) will suffer grievous losses.
Mises is right: “In the long run, inflation comes to an end with the breakdown of the currency.”
Germany Set their own record for annual gold purchases in 2020
Recently we wrote that due to the brutally destructive German inflation of a hundred years ago, Germans to this day retain a suspicion of money printing. Now we learn from a World Gold Council blog post that Google searches for “inflation” in Germany have been trending higher since October. No wonder. German inflation expectations reached a five year high in March. The post notes that “Germans bought more gold bars and coins in 2020 than in any previous year, by some margin. And so far in 2021, they have maintained a pace of investing that far outstrips the historical average…”
Last year we reported that Germans lined up outside bullion dealers’ offices to buy physical gold before the imposition of new bureaucratic regulations on gold purchases.
64 percent of inflation-wary Germans believe that gold is a good safeguard against inflation and currency fluctuations. The WGC says the German gold investing is likely to remain elevated the rest of this year.
Russia Dumping US Dollars
But there is even more evidence that overseas gold buying will be strong in the months ahead, thanks to more de-dollarization. Russia has announced that its sovereign wealth fund – the entity that collects profits from Russian-state oil production – will cease to hold US dollars.
The Russian National Wealth Fund is estimated to hold $119 billion in liquid assets of which $41.5 billion is in US dollars. But the fund will abandon the dollar at once and henceforth be diversified among euros (40 percent), yuan (30 percent), and gold (20 percent).
Global de-dollarization moves are a growing phenomenon among sovereign nations that seek to protect themselves from both US sanctions and from promiscuous US monetary policies.
A Kremlin spokesman said that “”the de-dollarization process is constant. It is, in fact, now visible to the naked eye.”
De-dollarization will continue and will certainly pick up steam as US inflation numbers rise.
We recommend our friends and client get ahead of the curve by taking steps to de-dollarizing with a portfolio of gold and silver that meets their wealth protection objectives. Your Republic Monetary Exchange precious metals professional is ready to help.
Are you ready for the “Incredible Shrinking Candy Bar”?
As inflation runs hot and destroys the purchasing power of the currency, product manufacturers and markets find inventive ways to conceal price increases. The most common means of hiding price increases is by reducing the size of the packages you are used to buying. For example, you might be used to buying a five-pound package of sugar for one price, when suddenly it becomes a four-pound package for the same price.
They hope you do not notice. Cereal manufacturers will package their products in boxes that seen from the front are the same dimension as always. But the box is narrower and holds less/
So, get ready for the incredible shrinking candy bar.
There are other ways of hiding prices increases. Materials may get cheaper. Furniture that was once made of solid wood begins to be manufactured in particle board. If installation of a purchase was free, now it becomes an extra charge. Did you used to get a two-year warranty? It may be only a year next time.
A recent Washington Post story cited a typical example of “shrinkflation” packaging: “Walmart’s Great Value paper towels, for example, went from 168 2-ply sheets per roll to 120. The price, at $14.97, remained the same for a dozen rolls despite the nearly 30 percent drop in the product.”
Here’s another: “Tillamook County Creamery Association, a farmer-owned cooperative in Oregon, reduced its family-size containers of ice cream from 56 ounces to 48 ounces earlier this year, bringing it on par with its competitors. The price, though, remained the same at about $6.”
The practices are partly an effort to fool their customers, and partly a necessary means of staying profitable. It is too bad companies feel they must go to such lengths but rising prices across the economy are not their fault.
They know that consumers do not understand that rising prices reflect the currency being debauched by the monetary authorities. So as prices continue to rise, consumers may even stage protests against ranchers and farmers and grocery stores, while the real culprits in Washington escape like a thief in the night.
You cannot stop the destruction of the currency. It is a fait accompli. The $28 trillion national debt is a result of money that has already been spent. The new money has already been printed; the number of dollars has increased by 33 in the last 17 months.
You can, however, protect your wealth with precious metals. Gold and silver quietly rose about 8 percent in May, signaling inflation’s comeback.
No matter how it is “packaged” – in bars or coins of various sizes and from differing issuers, an ounce of gold is an ounce of gold.
Speak with a Republic Monetary Exchange professional today. Let them help you create a portfolio of gold and silver that will protect you from inflation.
The White House has released President Biden’s budget for his first full fiscal year. FY2022 begins on October 1, 2022 and runs through September 30, 2023.
You will note the budget was released on Friday ahead of the long Memorial Day holiday weekend, a strategy to keep publicity and scrutiny to a minimum.
Federal debt is already greater than the entire productivity of the US economy. Nevertheless, it is a $6 trillion Biden blowout budget, and like all Washington federal budgets, it is built on a foundation of utter nonsense.
For example, it assumes there will be no recession for the next nine years, although recessions appear on average about every five years.
There are other “Rosie Scenario” assumptions is the budget. It assumes higher revenue from retroactive tax hikes than those predicted by the bi-partisan Congressional Budget Office.
Biden assumes that inflation won’t surpass 2.1 percent this year. It also makes the transparently absurd assumption that inflation won’t surpass 2.3 percent for the next ten years, although the Consumer Price Index for the January – March quarter this year shows prices rising at a 7.5 percent annual rate.
Probably the biggest fib of all is the White House insistence that the new spending “will pay for itself.” We hear that every year, yet it never does pay for itself. If it did, the national debt wouldn’t be more than $28 trillion. In fact, we propose that the “pay for itself” lie be allowed to retire now along the other leading lies of all-time including “Your check is in the mail,” and the other big ones.
With his proposal Biden seeks to normalize the huge growth of government experienced with the emergency appropriations during the Covid pandemic shutdown.
Despite commerce and other conditions returning to normal, Biden’s proposal is 36 percent higher than the $4.4 trillion pre-Covid FY2019 budget.
Other provisions include an increase in corporate tax rates from 21 percent to 28 percent. It also includes a provision to fund increased IRS enforcement.
In short, Biden’s budget is big, punitive, and dishonest. No wonder gold closed over $1,900 an ounce. Both gold and silver both rose about 8 percent in May.
Time to add more gold and silver to your portfolio?
We go to great lengths at Republic Monetary Exchange to make sure our friends and clients are well-informed about financial and monetary affairs.
The truth is the more people learn about the short fuse burning on the US debt bomb and the unhinged policies of the Deep State Money Manipulators, the more they understand the importance of owning gold and silver.
But our efforts are not entirely commercial. The looming debt and monetary calamities are only the financial symptoms of so much more that has gone off the rails in the American Republic. A return to the principles of the Constitution will require an informed citizenry, and we wish to do our part in our area of expertise.
So, we use our radio messages and sponsorships to alert you to things going on in the economy and government.
For some, out Gold Market Discussion shows up each week in your inbox, while our blogs provide you with a deep archive of informed commentary and the stories behind the economic stories that drive the markets.
And you will find Republic Monetary Exchange’s team of gold and silver professionals to be experienced and knowledgeable. They are willing to take time to answer your questions and unravel the mysteries of the failing US monetary system so that you can protect your wealth, yourself, and your family.
And now, we are working on more ways to make sure you are prepared for the monetary crisis ahead.
The United States will spend over $300 billion on interest expense this fiscal year. And that is with record low interest rates.
That represents nine percent of all federal tax revenue. It is about $2,400 per household.
Those are just a few of the troubling details from a new report from the Committee for a Responsible Federal Budget.
Here are more:
Interest rates are climbing. In early March 2020 and again in August 2020, the ten-year US Treasury was 0.5 percent. Now it has bounced higher, to about 1.6 percent.
Thanks to the pandemic lows in rates, interest on the national debt will drop from $375 billion in Fiscal Year (FY) 2019 to roughly $300 billion this year.
While the passing interest rate drop provided a brief respite to the debt service load, the US added nearly $7 trillion of new debt.
If interest rates rise as the Congressional Budget Office projects, the cost of debt service will more than double by 2029.
We think interest rates are almost certain to rise much fast than CBO and CRFB projections, especially with inflation running hot. In the first quarter of this year consumer prices were climbing at a 7.5 percent annual rate. It stands to reason that if the dollar is losing value at such rates, lenders – buyers of US Treasury debt – will demand much higher interest rates as an inflation premium.
As former Reagan budget director David Stockman remarks, “from the year 2000 to 2020 alone, interest expense rose by only 41 percent, even as the publicly held debt soared by 535 percent.”
The CRFB report acknowledges that possibility rates will climb faster than projections with this statement:
“The interest rate on ten-year Treasury bonds is already more than half a percentage point higher than projected. If all rates end up being 50 basis points above projections, interest costs would increase by $1.7 trillion. Interest spending would increase by $3.6 trillion if rates were one percentage point higher than projected [emphasis added].
What has this to do with gold and silver? The Fed has purchased around half of the US debt issued in about the last year. Where did it get the money to do that? It printed it!
Clearly, it will have to purchase even more debt as interest rates rise, a prospect made certain by rising inflation. That means more printing, which means still higher rates, which means more debt, which means…
The Fed is in a box of the Fed’s own making and the best way to protect yourself from the consequences is with gold and silver, the enduring money of the ages. Speak with a Republic Monetary Exchange gold and silver specialist today to learn more.
The bullish fundamentals for silver are very much intact. Just the other day The Silver Institute, a Washington-based trade association, reported that silver demand for printed and flexible electronics is forecast to increase from 48 million ounces this year to 74 million ounces in 2030. That is a 54 percent increase.
The Institute describes some of the reason that this application will consume 615 million ounces of silver over the ten-year period: “Printed and flexible electronics are vital to the evolution of electronic technologies as they are mainstays in a wide range of products, including sensors for temperature, pressure, motion, lighting, moisture/relative humidity, radar, heart rate, and carbon monoxide. Other applications include their use in internet-connected devices, medical and wearable electronics, displays for appliances, mobile phones, computers and tablets, medical devices, automotive, and consumer electronics.”
Meanwhile, a noted silver analyst says the bullish case for silver at over $25 in 2021 is even more compelling than when silver was $5 in 1995.
Andrew Hecht has been a major player in the silver markets and a trader with the major international bullion dealers since the 1980s.
Here are the three leading reasons he is calling for a silver move “that could be extraordinary”:
INFLATION: Hecht says inflation will become rampant, citing “the tidal wave of central bank liquidity and tsunami of government stimulus…”
2. THE GREEN REVOLUTION: Silver is critical for solar energy applications, but Hecht suggests that silver demand in an era of green politics could be much higher than current forecasts.
3. A SHORT SQUEEZE: The GameStop crowd’s interest in silver may be only the first attempt at triggering a short squeeze in silver.
Hecht writes that today’s silver price consolidation may be a prelude to a new high above $50 an ounce. His entire article is available at Seeking Alpha.
Speak with a Republic Monetary Exchange precious metals expert today about silver for wealth protection and profit.
Because we are in the business of helping people protect themselves and their wealth, we have written often about the consequences of inflation: the destruction of the purchasing power of the currency.
Long experience shows that owning gold and silver are the best means of personal protection from currency destruction.
Digital money printing by the Federal Reserve has escalated to a magnitude that it is now measured in the trillions of dollars. And now the consequences are becoming evident even in government price indices.
With this post, we wanted to provide you the clearest possible explanation of what causes inflation and how it can be cured. So, we turned to an old piece by Henry Hazlitt. Hazlitt was a celebrated economics writer, once an editorialist for the New York Times and a Newsweek columnist. He is also the author of the perennial bestseller Economics in One Lesson.
Henry Hazlitt passed away in 1993. What follows is his six-point description of the cause of and cure for inflation:
1. Inflation is an increase in the quantity of money and credit. Its chief consequence is soaring prices. Therefore inflation—if we misuse the term to mean the rising prices themselves—is caused solely by printing more money. For this, the government’s monetary policies are entirely responsible.
2. The most frequent reason for printing more money is the existence of an unbalanced budget. Unbalanced budgets are caused by extravagant expenditures which the government is unwilling or unable to pay for by raising corresponding tax revenues. The excessive expenditures are mainly the result of government efforts to redistribute wealth and income—in short, to force the productive to support the unproductive. This erodes the working incentives of both the productive and the unproductive.
3.The causes of inflation are not, as so often said, “multiple and complex,” but simply the result of printing too much money. There is no such thing as “cost-push” inflation. If, without an increase in the stock of money, wage or other costs are forced up, and producers try to pass these costs along by raising their selling prices, most of them will merely sell fewer goods. The result will be reduced output and loss of jobs. Higher costs can only be passed along in higher selling prices when consumers have more money to pay the higher prices.
4. Price controls cannot stop or slow down inflation. They always do harm. Price controls simply squeeze or wipe out profit margins, disrupt production, and lead to bottlenecks and shortages. All government price and wage control, or even “monitoring,” is merely an attempt by the politicians to shift the blame for inflation on to producers and sellers instead of their own monetary policies.
5. Prolonged inflation never “stimulates” the economy. On the contrary, it unbalances, disrupts, and misdirects production and employment. Unemployment is mainly caused by excessive wage rates in some industries, brought about either by extortionate union demands, by minimum wage laws (which keep teenagers and the unskilled out of jobs), or by prolonged and over-generous unemployment insurance.
6. To avoid irreparable damage, the budget must be balanced at the earliest possible moment, and not in some sweet by-and-by. Balance must be brought about by slashing reckless spending, and not by increasing a tax burden that is already undermining incentives and production.
April’s big jumps in prices are not going to mean changes in the Federal Reserve’s near-zero interest rate policies, according to gold expert and former Congressman Ron Paul.
The Consumer Price Index rose 0.8 percent in April. Over the last 12 months, the CPI is up 4.2 percent. Wholesale prices rose 0.6 percent in April.
According to Dr. Paul, Fed chairman Powell “does not want to admit that the real reason the Fed will continue to keep rates low is that increasing rates will cause the federal government’s interest payments to rise to unsustainable levels.”
“One way the Fed increases the money supply — and thus lowers interest rates — is by purchasing US Treasury securities,” writes Dr. Paul in his latest weekly column. “These purchases increase demand for US government debt, keeping government’s borrowing costs low. An expansionary monetary policy thus enables increased federal spending and deficits. Since the lockdowns, the Fed has worked overtime to monetize federal debt, doubling its holdings of Treasury securities.”
It is an important point. The normalization of interest rates would make the US government’s $28 trillion debt virtually unpayable. A mere two percent increase in rates across its debt portfolio will add well over a half-trillion dollars to federal interest rate expense alone.
Dr. Paul’s warnings are the same messages we have been sharing with our friends and clients in this space. He writes, “The refusal of Congress to cut spending means the Fed will keep increasing its balance sheet in an effort to monetize skyrocketing debt. Eventually, the increasing debt and inflation will lead to a major economic meltdown. The meltdown will likely include a rejection of the dollar’s world reserve currency status.”
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.
Last year we cited these remarks from Paul:
“The dollar’s value goes down. It never keeps up. There are more dollars around. The purchasing power goes down. Real wages go down.”
“Big government always undermines personal liberties and encourages wars.
“The issue is liberty, and liberty cannot be preserved without sound money.”
Dr. Paul is the author of Gold, Peace, and Prosperity, End the Fed, and The Case for Gold.
A New York Times headline the other day read, “Inflation Is Here. What Now?”
It is almost funny the lengths the writer went to in order to avoid talking about the Federal Reserve’s massive money-printing experiments.
We even word-searched the article to make sure we did not miss it. He came closest to saying something about it with this line: “Low-interest rate policies from the Fed have made financing cheap.”
But we expect nothing better from the New York Times
Well, what now?
At least a similar article in the Wall Street Journal included this: “… it is true that gold, historically, has performed well when inflation is high, holding on to its value even in countries where inflation soared into double-digits….”
In tracking the news coverage of the jumps in the consumer and producer price indices, we note with no surprise of our own that Fed officials and news writers repeatedly referred the news as “surprising.”
Well, as our readers will no doubt be aware, it was not surprising to us. That is because we watched Fed assets (digitally printed money of no tangible value) swell by $4 trillion dollars over a year and a half. And we reported on it as grew.
All that money must go somewhere.
Our own answer to “now what?” is to warn our friends and clients about stock valuations that are already in the nosebleed section. We are old enough to remember what happened with stock in the last inflation decade, the 1970s.
We are not the only ones noting eerie pre-figurations of the stagflation decade. That is because the inflation numbers were not the only economic news. The April jobs numbers were a calamity, too, coming in at a mere fraction of expectations. Columnist Pat Buchanan, an advisor to three presidents, writes, “April’s combination of inflation and near-stagnant job growth recalls the ‘stagflation’ of the Jimmy Carter years, which led to the Democratic rout of 1980 at the hands of Ronald Reagan.”
“And while we may not be suffering from stagflation just yet, the present symptoms in the U.S. economy are certainly consistent with it.”
History may not repeat, but it rhymes. If this decade is going to sound a lot like the stagflation decade, you will want to remember that the big winners in the 1970s were gold and silver.
That is what happens when the currency is being debauched. We advise you to speak with a Republic Monetary Exchange gold and silver professional and make sure you are protected from America’s repeat of monetary policies that have failed over and over throughout history.
By now you probably know that price inflation is running hot.
The government’s Consumer Price Index rose 0.8 percent in April. Over the last 12 months it is up 4.2 percent.
For the three-month period February-March-April, consumer prices are up 7.0 percent. And climbing.
Wholesale prices rose 0.6 percent in April. For the last 12 months wholesale prices are up 6.2 percent.
Now, since we do not pussyfoot around about things, let us state clearly what these numbers mean:
The dollar’s purchasing power is falling. It is falling faster than it has in years.
As you have no doubt heard in news reports about these government indices, the media goes to great lengths to state it differently. For example, here is a verbatim report from the Wall Street Journal:
Consumers are seeing many prices jump for a variety of reasons as the U.S. economic recovery gains momentum. Used-car prices have surged as global chip shortage has reduced production of new cars. Many companies are passing on the higher costs they are facing for crops, oil and truckers’ wages. Airfares and hotel-room rates are climbing as consumers start traveling again after a year of restraint during the pandemic. More broadly, rising prices reflect strong consumer demand fueled by widespread Covid-19 vaccinations, easing business restrictions, trillions of dollars in federal pandemic-relief programs and ample consumer savings.
You will note that the fact that the Federal Reserve has printed 4 trillion dollars of no objective value since late 2019 does note figure in the “variety of reasons” the nation’s leading financial journal gives for rising prices.
Reviewing these blog posts, their description of the monetary policies at work, and their impact, it turns out that we have been a better source for financial clarity than the major US media. We are more embarrassed for them than we are proud to keep scooping them. But what matters most is that it is not good for the American people to be confused, and unprepared for what is coming.
In any case, we are grateful that we have been able to provide crucial financial information to our friends and clients. We do not copyright these commentaries because we want you to feel free to share them with your colleagues, friends, and family.
And we always welcome your referrals and are glad to take time with people who need to learn more about the coming monetary calamity and how to protect themselves with gold and silver.
So said legendary hedge fund manager Stanley Druckenmiller in a Wall Street Journal editorial the other day.
We first dropped Druckenmiller’s name in this space over a year ago in a piece about Wall Street’s big money players who were buying gold.
We have identified the pandemic period as the introduction of Modern Monetary Theory to American policy, a development in which the lines between fiscal and monetary operations are erased. So, we shared Druckenmiller’s thoughts again last Fall when he ratified our observation, saying, “the merging of the Fed and the Treasury, which is effectively what is 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.”
Given that policy, Druckenmiller had no trouble seeing price inflation of 5 – 10 percent ahead.
That was in September. With the Federal Reserve’s continuation of a money-printing spree that has taken the US into uncharted financial territory, we wanted to pass along a few of Druckenmiller’s latest observations.
“Excesses of fiscal policy are already visible,” he and a colleague wrote in the WSJ (5/10). “Consumers are spending like never before, construction is booming, and labor shortages are ubiquitous, thanks to direct government transfers. Two-thirds of all relief checks were sent after the vaccines were proved effective and the recovery was accelerating. Opportunistic politicians didn’t let the pandemic go to waste. Especially after the Trump years, Congress has decided to satisfy its long list of unmet desires.
“Isn’t the Fed’s independence supposed to act as a counterbalance to these political whims?” he asked.
In a follow-up interview on CNBC, Druckenmiller said, ““I can’t find any period in history where monetary and fiscal policy were this out of step with the economic circumstances.”
“If they want to do all this and risk our reserve currency status, risk an asset bubble blowing up, so be it. But I think we ought to at least have a conversation about it,” Druckenmiller said.
The world’s central banks are already issuing their verdict on the dollar, as they move their reserves into gold.
“The problem has been clearly identified. It’s [Fed chairman] Jerome Powell and the rest of the world’s central bankers,” he said. “There’s a lack of trust.”
Druckenmiller is right. And when trust in paper currency erodes, gold moves up.
Speaking last year about the housing bubble, Druckenmiller said, “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.”
No wonder Stanley Druckenmiller likes owning gold!
Three news stories that gold and silver investors need to know about!
1. Gold and Silver Prices Break Out!
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
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.
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.
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.
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.
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:
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.
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:
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.
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.
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’.
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.
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.
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.
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.
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.
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.
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…
… 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.
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.
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.”
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.
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.
“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.
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.
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.
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.
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?
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.
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.
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.
“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.
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.
“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.
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.
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.
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 Goldhere 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.
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.
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.
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.
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?
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.”
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.
“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.”
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.
The Biden $1.9 trillion stimulus billpork 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 proposalpork 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.
“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.
The Fed really has America’s monetary situation screwed up.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.”
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.
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!
“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.
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.
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.
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.
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.
“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.
“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.
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.
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.”
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.
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?
“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!
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:
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.
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.
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.
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.
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!
“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:
2020 Federal deficit
Federal debt, net of inter-agency holdings
One-year M1 money supply increase
Fed holdings of Treasury securities,one-year increase
Fed holdings of mortgage-backed securities, one-year increase
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?
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.
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.
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.
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.
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.
Fiat money will be a passing fad in the long-term history of money.
— Jim Reid
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.
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.
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.
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!
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.
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
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!
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.
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.
“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.
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.
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.
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.
“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.
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.
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.
“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 theGold 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.
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.
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.
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.
“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.”
“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:
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.
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.”
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.
“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.
“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!”
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!
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.
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.
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.
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.
“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.
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.
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.
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.
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.”
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.
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!
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.
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.
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.
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.
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.
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!
One of the world’s largest investment banks agrees with us that it will go 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.
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.
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.
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.
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?
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.