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And a Wobbly Social Order!

We have made the point many times that the US stock market is floating on the back of a loose money regime, money the Federal Reserve has been stove-piping to Wall Street.

Here is a 10-year chart of the S&P500 stock index.

Most of the left half of the chart shows the effect of Quantitative Easing money printing and the lift it provided the stock market.  

On the right-hand side in the area that reflects this year, 2020, you can see the sharp break in the market with the arrival of the pandemic shutdown. It crashed stocks by 35 percent seemingly overnight.

Since then, in a few short months, the Federal Reserve created some $3 trillion dollars out of thin air to drive stocks back up.

It has succeeded.  But at a price.

We want to show you another chart, one that puts these lofty stock heights in perspective.  This recent chart shows the total market capitalization of US stocks, the market value of stocks today, as a percent of total US productivity, or Gross Domestic Product (GDP).

Warren Buffett calls this ratio of market cap to GDP “probably the best single measure of where valuations stand at any given moment.”

Think about that.  The best indicator of stock valuations is at stratospheric heights compared to the actual productivity of the economy.  And we know that it is held aloft by Fed money printing.  

It’s okay to be cynical about all this.  Just the other day, Mary Daly, the head of the San Francisco Fed defended the Fed’s tender, loving care for Wall Street by saying it is all being done for the little people.  Speaking at a University of California, Irvine event, Daly said, “I am not willing to trade millions of jobs for people who need a ladder rung up in order to keep the stock market from going up for a few who have those holdings.” 

Oh?  But if the gusher of Fed liquidity for the past ten years is all being done for the little people, why does the wealth gap keep widening?

The answer is clear.  The wealthiest people, as she acknowledges (“the few who have those holdings”), own most of the stocks.  Monetary policies designed to lift stocks make the wealthy wealthier.  They widen the gap.  And they make the stock market vulnerable since it is held aloft by a monetary gimmick and not by real fundamental valuations.

But it’s not just stock markets that are wobbly.  The social situation in this country is wobbly as a well, thanks to the Fed’s cronyism.   The November election will very likely bring more of our national instability to the fore no matter who wins.

If you are looking for a safe haven from a wobbly stock market and during what could be one of the most divisive periods in US history since the Civil War, we would suggest a well-thought-out portfolio of gold and silver.

It’s all unfolding like a bad dream.  

I mean our financial and monetary future.

Maybe it is more like a “B” movie, one that is totally predictable.

Nations globally have spent $12 trillion they do not have on “stimulus” measures this year.  The US is more than $3 trillion of that.

But it is never enough.  US Federal Reserve chairman Jerome Powell wants more deficit spending.  At the International Monetary Fund annual meeting this week, Christine Lagarde, the head of the European Central Bank, is calling for more deficit spending too.

They all read from the same tired script.  We have seen it all before.

The theory that has guided US and global fiscal and monetary policy for almost a century, “Keynesian economics,” calls for deficit spending by governments during slowdowns.  Then, according to the theory, governments would run surpluses during recoveries, and pay off the debt.

It was balderdash to begin with, but even those that bought it must acknowledge that in practice the authorities ran deficits in both slowdowns and recoveries.

Stated differently, the US should not have had $23 trillion in debt when the pandemic hit.  Especially since we were more than ten years into our post-housing bust recovery, the longest recovery in our history.  

While the fiscal authorities have run the debt to the moon, the central bankers have flooded the world with digital “paper” money.  Here’s a chart from Bloomberg that shows what they have done since 2008.

A Bloomberg News story describes Lagarde and other central bankers now pushing for more deficit spending. 

“A parade of Federal Reserve officials led by Chair Jerome Powell lined up last week to make the same argument with regard to the U.S., where talks on the next dose of pandemic stimulus have been deadlocked for months in Congress. Fed officials said their own tools, such as another round of bond-buying, won’t be as effective as government spending.

“The message from the most powerful central banks is increasingly clear: there are limits to what monetary policy can do to help in the short run. Fiscal authorities -– who can borrow at rock-bottom interest rates and possess tools better-suited to deliver a rapid and targeted boost — will have to finish the job.”

We find the last phrase, “finish the job,” ironic.  The money printers are destroying the dollar, while the deficit spending is destroying US solvency.

Now we will watch the show unfold.  Those that have seen it before will watch from the sidelines, having protected their wealth with gold and silver.

Gold to Gain from Falling Dollar

The US dollar could fall by as much as 35 percent next year.  Thanks to the ending of its status as the world reserve currency.

That’s according to Stephen Roach.  He says the dollar is vulnerable to a sharp correction. A crash is looming, he says.

Roach is an economist at Yale University now.  Before that he was with Morgan Stanley, and with the Federal Reserve.

We wrote about Roach a couple of time last summer (see HERE and HERE) when he said that “US living standards are going to be squeezed like never before.”  

In a new article in the Financial Times, Roach writes that a shortfall in American domestic savings is going to exact a high toll.  Between 1960 and 2005, domestic savings average about 7 percent.  From 2011 to 2019, before the Covid-19 shutdown, it had fallen to 2.9 percent.  Now domestic savings has plunged into negative territory, just like it did in the mortgage and housing meltdown.

The dollar’s share of global currency reserves was 85 percent before the inflationary 1970s.  Now it is 61 percent.  And Roach says it will move lower suddenly.

Roach:

“With America’s position as the world’s dominant reserve currency slowly eroding since 2000, foreign lenders are likely to demand concessions on the terms for such massive external financing. This normally takes two forms — an interest rate and/or a currency adjustment. The Federal Reserve has recently shifted to a strategy that takes into account an average of inflation rather than a specific target, and promised to keep policy rates near zero for several more years. That means the interest rate channel has effectively been closed. As a result, more of the current account adjustment will now be forced through a weaker dollar.”

Stated differently, foreigners are not going to keep funding the US as if there is no alternative.  There are alternatives.  Shining brightly among them is gold.

Roach says that America has “squandered its exorbitant privilege.” That term, “exorbitant privilege,” refers to the dollar remaining the world reserve currency.  He’s right.  That’s why foreign central banks are replacing dollar reserves with gold.  

For our part, we will just warn that a sharp drop in the value of the dollar can happen in the wink of an eye.

That is why we urge our readers to establish their position in gold and silver for profit and protection without delay.

You know from our reports that some of the investment industry’s most conservative institutions are discovering gold.

See our commentary at the beginning of September New Faces in the Gold Spaces!  It described the Ohio Police & Fire Pension Fund decision to allocate five percent of its $15.65 billion portfolio to gold.  It also told of the University of Texas endowment fund which added a billion dollars of gold to its portfolio.

We spent more than a little digital ink of Warren Buffett’s surprising turn to gold (see HERE and HERE). 

We think this movement toward gold could soon turn into a stampede.  John Rubino agrees.  The title of this commentary Mainstream Investors About to Pile into Gold comes from an article he posted on his website DollarCollapse.com.

Rubino writes, “Money managers who don’t recommend gold to their clients are becoming the exception rather than the rule. This week saw a couple more big-name banks join the pro-gold parade.”

Rubino cites gold recommendations by leading banks UBS and Wells Fargo.  We keep a close eye on recommendations like that.  Some readers may even remember that we took special delight in Bank of America’s recent discovery that “the Fed can’t print gold like it can dollars!”

Rubino:

“Right now gold accounts for less than 1% of global investible capital. But as the above sentiment spreads throughout the mainstream investing community, typical portfolios for both individuals and institutions will contain increasing amounts of precious metals. To understand what a move from below 1% of total investable funds to, say, 5% over the next few years would mean, it’s helpful to compare the amount of capital in the world compared to the amount of gold.

“Estimates of how much gold exists above-ground are all over the place, but most cluster around an amount that yields a value of about $10 trillion at current prices.”

We recommend you see his arguments about the outsize impact of a shifting of global assets like stocks and bonds to gold can have, HERE.  

Rubino concludes his examination saying, “In a world where increasing political and financial instability makes traditional financial assets – including cash — seem unduly risky, and where gold is rising, both fear and greed might send considerably more than that into safe-haven assets.

Don’t wait for the stampede to develop.  Speak with a Republic Monetary Exchange gold and silver specialist today.

It is sometimes fun to check in on the rich and famous.  And to watch them learn about gold.  That’s because if they don’t learn about gold, they may not always be rich and famous.

Although Warren Buffett’s own father, who was a Nebraska congressman, was very wise about gold and its monetary merits, Warren himself has always eschewed gold.

Until last summer.

That’s when Buffett’s company, Berkshire Hathaway, began buying gold shares.  We wrote a piece about it then called Did Warren Buffett’s Dad Just Get a Whole Lot Smarter?    

At the same time, Buffett began reducing his exposure to banks.  He sold JPMorgan Chase and Goldman Sachs as he rotated to gold.

We think Buffet’s skepticism about banks is an important first step in coming to terms with today’s financial reality.  We wanted to share some of the thoughts that accompany the Oracle of Omaha’s changing outlook.

First, his observation about negative interest rates and debt:

If you can have negative interest rates and pour out money, and incur more and more debt relative to productive capacity, you’d think the world would have discovered it in the first couple of thousand years rather than just coming on it now. We will see.

It’s probably the most interesting question I’ve ever seen in economics.

Can you keep doing what we’re doing now? The world has been able to do it for now a dozen years or so [since 2008]. We may be facing a period where we’re testing that hypothesis that you can continue it with a lot more force than we’ve tested it before.

The testing of that hypothesis is drawing nearer.  It will be a painful period.  Popping financial bubbles are always painful.

Buffet modestly acknowledges that he’s been wrong about a couple of things:

“I’ve been wrong in thinking you could have the developments you’ve had without inflation taking hold.”

We’d say that Warren has been focused on looking for consumer price inflation and has not correctly identified the asset price bubble that has been the Federal Reserve’s primary objective. 

And:

“If the world turns into a world where you [governments] can issue more and more money and have negative interest rates over time — I’d have to see it to believe it, but I’ve seen a little bit of it. I’ve been surprised. I’ve been wrong so far.”

The operative words are “so far.”

And finally, these observations:

“The [US] debt isn’t going to be repaid; it’s going to be refunded.”

“You better own something other than debt.”

We observed last summer that Buffett apparently sees that central banks have lost control.  If he keeps his wits about him, Warren will soon realize that he should be buying physical gold.

Warren Buffett just turned 90 years old.  As they say, with age comes wisdom.

The Monetary Authorities Have Fixed Nothing, Learned Nothing

“As of the end of July, central banks had cut interest rates 164 times in 147 days and committed $8.5 trillion in stimulus.”

That is the word from a Bloomberg News story this week, “How Unconventional Monetary Policy Turned Conventional.”

The unconventional has become conventional, eh?  The account describes temporary emergency measures becoming long-lasting.

It’s not hard to read between the lines of this kind of stuff.  It means that the steps the authorities have taken to deal with a crisis didn’t work.  Nothing was cured, except that the patient became addicted to the medication.

Bloomberg:

“As this graphic from Bloomberg shows, most central banks are diving deeper into the unknown. The Fed is buying different types of bonds, the ECB is getting creative with negative interest rates, and Australia has adopted Japanese-style efforts to control bond yields.

“With the global recovery still uncertain and the virus set to leave scars on employers and employees, the likelihood is that monetary policy will stay ultra-loose for years to come — even if that means central banks artificially propping up markets or sparking a run-up in prices.”

The story goes on to describe additional steps central banks may take, “of formerly fringe notions gaining in prominence.”  It specifically mentions Modern Monetary Theory (MMT) among them.

We have described MMT many times including in April, MMT and Helicopter Money.  We wrote then that “MMT is all the rage.  Academics who should know better (and they would know better if they had studied historical schemes like John Law’s Mississippi Bubble debacle three hundred years ago) are climbing aboard.  And politicians, many of whom will subscribe to any scheme that allows them to promise to give things to people and get re-elected, are falling all over themselves to sign up.”

There are other acts of desperation afoot.  Just last week we wrote that “Fed economists and officials are hunched over their drawing boards designing different ways to insert freshly created digital money directly into citizens’ (and perhaps even non-citizens’) accounts.”

The US fiat monetary system is beginning to fail.  The people don’t yet notice it, although the authorities are turning to increasingly desperate ideas to keep it together. But acts of desperation are almost always ill-considered and seldom successful.

Eventually everyone will recognize these acts of desperation.  Those that do so now are investing in gold and silver.

You should consider contacting us if you are among them.

“Wealth cannot be created by creating debt and money.” – Ray Dalio

Federal Reserve Chairman Jerome Powell testifying in Washington, and other Fed officials running around the country, are of one voice calling for more Washington stimulus spending.

Spending of money which Washington doesn’t have, by the way.  But not to worry, the Fed will just print the money anyway.  

Makes you wonder why not cut out the middleman.  Either the Capitol Hill spenders should go and just let the Fed spend the money it prints, or the Fed should just go and let Washington print the money they spend as they go along.

Don’t laugh.  That’s the basis of Modern Monetary Theory that is quickly becoming de facto policy in Washington.  It even presumes taxes aren’t even really a necessity for revenue.  Taxation is to be used primarily for social engineering: driving people like cattle to do what the authorities want them to do.  

But as far as revenue goes, taxes aren’t key to MMT.  The theory holds that the government can just print whatever it needs.

Which is what they have been doing all year.  So we have arrived.

Meanwhile, Fed economists and officials are hunched over their drawing boards designing different way to insert freshly created digital money directly into citizens’ (and perhaps even non-citizens’) accounts.

One plan involves the creation of something called “recession insurance bonds.”  These could be deposited in people’s accounts in advance, whereupon, with the flip of a switch when the Fed deems it appropriate, they could all be activated.

Voila!

Instant deposits at the time and place of the Fed’s choosing.

Another scheme calls for every American to have a bank account at the Fed.

Cleveland Fed president Loretta Mester explains, “Legislation has proposed that each American have an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments.”

You can read more about such plans in the article from the website ZeroHedge.  

There is a madness afoot in the land.  Like some weird and very specific economic Alzheimer’s, those afflicted have totally forgotten that wealth in created by production, by goods and services.  So they dodder their way into the national debate thinking that they can create wealth with the wave a digital accounting wand.

As long as this malady persists, we recommend you buy gold and silver as fast as you reasonably can.  This dementia will ruin the dollar and America’s economic vitality along the way.

“Fasten your seatbelts!” 

“Please keep your hands and arms inside the monorail at all times.”

“Should the cabin lose pressure, oxygen masks will drop from the overhead area. Please place the mask over your own mouth and nose before assisting others.”

Okay, we’re just trying to set the tone for the next couple of months.  There’s some bad road between now and the end of the year.  That’s because the American divide is as sharp as ever.

• There will be a bruising battle over the Supreme Court vacancy, one that could very well make the confirmation of Justices Thomas and Kavanagh look tame.  Commentator Glenn Harlan Reynolds wrote in USA Today this week that “When your political system can be thrown into hysteria by something as predictable as the death of an octogenarian with advanced cancer, there’s something wrong with your political system.”

• Already hordes of lawyers, protestors and ruffians are lining up in precincts and states across the land to drag out the presidential election.  Those who remember the 2000 Bush-Gore contest know that the presidency isn’t necessarily decided on election day. To say that we could face a Constitutional crisis is to understate a grim outlook.

• We haven’t seen the end of the “mostly peaceful protests,” and uncontained street violence in our major cities, and expect them to continue for some time.  Postal workers in Chicago where mail carriers have been shot are threatening to stop mail deliveries.  “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds,”  but barbarians can even stop the mail.

• Battle lines have been drawn in the Covid lockdown divide, and at least in some places, things are about to come to blows. Notice for example that in England the military is being call in to help enforce lockdown restrictions.

And then there are the economic issues, unknowns about the recovery and knowns about the mushrooming debt and the rampaging Federal Reserve. 

Our point is this: troubled times makes gold more desirable.  They make the price go higher.

Watching the dollar bounce higher has created a correction in precious metals prices, and an opportunity to buy at prices from a few months back.  But the dollar bounce has done nothing alter the fundamentals of deficits and debt.  And it will not ease the social conditions that threaten us.  

We’ll leave you with a few recent price forecasts, none of which explicitly take into consideration highly volatile social conditions in the US.

Last week we told you about the forecast from a senior Bloomberg Intelligence Commodity Strategist who expect to see gold at $7,000 by 2020.

Mike McGlone says that gold in on an even more sound footing for higher prices that it was “at the onset of the 2001-11 and post-financial-crisis bull markets.”

As a friend reacted to the forecast. “That’s more than a thousand dollars a year” in gains.

That’s right.

Another observer, Yeoh Choo Guan, UBS head of Asean Global markets, sees gold trading between $1,850 and $2,100 next year.  Despite the perhaps intentionally understated forecast, Yeoh said on CNBC, “We are very bullish on gold. We think that the prices will go higher and what is interesting is we think it will stay higher for longer than expected.”

Finally a longer term and higher price projection.  Charlie Morris is an investment manager at UK-based Atlantic House Fund Management.  He sees a combination of interest rate and inflation factors driving gold to $7,345 by 2030, with a market performance similar to the inflationary 1970s. 

Nobody ever said economics is funny, but this was enough to make a dog laugh!

Because they can’t be serious, right?  

Right?

The Federal Reserve released a policy statement and economic projections Wednesday (9/16).

The Wall Street Journal captured the absurdity of it all in a headline: “Fed Signals Interest Rates to Stay Near Zero Through ​2023.”

Through 2023?  That’s more than three years.  

The Fed can’t project GDP right for the next quarter, and they’re telling us what they’ll do with interest rates for the next three years?

Are there people who believe this stuff?

During the last stagflation period, the Fed changed rates constantly—twenty-two times in 1973 alone, twenty-three times in 1978.  Who knows what kind of volatility awaits us in what we called in an earlier commentary “The New Stagflation Decade”?

The latest announcement is part of the Fed’s “forward guidance” policy, to goose the markets by telling them what it will be doing down the road.

WSJ:

“The latest Fed projections show that even by the end of 2023, most officials believe inflation will only have begun returning to 2% and that unemployment will begin nearing levels that prevailed before the crisis struck in March.”

This is its first meeting since the Fed raised its inflation targets.  In this case the Fed is doubling down on its commitment to a future of inflation.  It consists of:

1. The higher inflation targets that it announced last month, and;
2. Now the promise of this higher inflation for a longer period of time.

So that’s the monetary side of affairs.  What about fiscal policy?

Treasury Secretary Mnuchin’s piped up on CNBC a few days earlier advising the Fed and Congress that “now is not the time to worry about shrinking the deficit and the Federal Reserve’s balance sheet.”

Believe us, almost nobody in Washington on either side of the aisle is interested in “shrinking the deficit.”  

So, we are watching the marriage of extreme monetary and extreme fiscal policy; of prolonged negative real interest rates, and skyrocketing government debt.

Now, if you wanted to engineer higher gold and silver prices, much higher, you would have the Fed provide artificially low interest rates for a prolonged period and have Washington explode the debt.

I guess you see where this is going, right?

The US government isn’t going broke.  

The US government is already broke.

This is a little hard for most people to swallow.  After all, America is thought to be a rich country.  The government is huge.  We pay a lot of taxes.  How can the government be broke?

But it is broke nonetheless.

The US has defaulted on its obligations before.  After World War II, the US persuaded the nations of the world to go on a dollar standard, to hold dollars in their own reserves, to issue their local currencies against their central bank dollar holdings, to settle international accounts and global commerce is dollars.

Part of the deal was that they could always exchange the dollars they held in this arrangement for gold at the rate of $35 an ounce.  

But the US printed ever more dollars, issuing dollars far beyond the amount of gold it had to back them up.  It was like writing checks without enough money in the account to cash them.

It didn’t take the rest of the world too long to figure out they were being flimflammed.  They lined up to get their gold, but in the summer of 1971, President Nixon defaulted and stopped redemptions entirely.  

The US government could not meet its obligations.  It defaulted, plain and simple.

It is happening again now, but in a different way.

The Congressional Budget Office says that US trust funds – including the Highway, Medicare, and Social Security Trust Funds – will run out of money sooner than anticipated.  

Way sooner.  The last time we wrote about it, in April 2019, the Social Security Old-Age and Survivors program’s insolvency date had just been advanced to 2035.  Now it has been moved all the way forward to 2031.

The Committee for a Responsible Federal Budget says, “These earlier depletion dates are driven by declining gas tax revenue as a result of reduced driving, declining payroll tax revenue as a result of higher unemployment and lower wages, lower interest rate payments on trust fund reserves, and more disability applications — all stemming from the current public health and economic crisis.”

All that evades the larger point:  There is no trust fund.  The money to fund those future Medicare and Social Security payments was never secured.  It was spent.  So those funds and their insolvency dates are an accounting fiction.  

By one account, the US has made $200 trillion in unfunded promises, including these unfunded “trust funds.”  That’s more than the State can ever hope to pay. It will default on those payment, just as it did in 1971.  

Printing money is a form of default.  It means not honoring the real value of debts, by faking the currency, devaluing it in a pretense of meeting its obligations.  It is dilution, just like someone watering down the whiskey, the wine, or the gasoline.  That is the most likely means of default the State will choose.  It will destroy the dollar. 

The price of gold is a referendum on the future value of a currency.  The dollar price of gold is a referendum on the future value of the dollar.  As US debt continues to mount, this referendum on the market value of the dollar is not good.  For the dollar.

It is very good for the price of gold.

People around the world – dollar holders who believed the dollar was as good as gold – suffered staggering losses when the US defaulted in 1971.  

Before the next US default becomes evident, we recommend you revisit your investment and retirement plans, with the objective of protecting yourself with gold and silver now.  Republic Monetary Exchange professional are standing by to show you how our best practices are designed to serve you and your objectives.

Reasons for Higher Gold, Echoes of the Last Stock Bubble, and China Stocking Up!

As gold continues to consolidate its remarkable 2020 gains and build a base for its next leg up, we’ve spotted three things that help provide a window on what’s ahead.

Number 1:

First, we’ll share the fundamental observations of a Bloomberg analyst who sees the possibility of gold reaching s high as $2,583 in 2021.  

Bloomberg Intelligence’s Eily Ong:

“Gold consumers’ adjustment to a higher price for the metal, along with greater investment demand, is a recipe for the precious metal’s potential price acceleration in 2021.  

“Market sentiment for gold is likely to strengthen on dollar wobbles amid rising geopolitical risks in a lower-for-longer interest rate environment. Central banks and investors may absorb the market surplus as they seek gold for portfolio diversification and possibly as a hedge if inflationary pressures return on the substantial stimulus measures injected amid the global health crisis. …”

We speak “analyst,” so let us translate.  Basically she is saying a weak dollar in a dangerous world, and prolonged interest rate repression by money-printers and central banks moving to gold to protect themselves from inflation and continued money-printing are reasons for higher gold prices next year.

That’s right, as far as it goes.  

She might have thought to mention, as another analyst did, that “a globally synchronized currency devaluation is coming.”

Number 2:

In our last post, we mentioned Stanley Druckenmiller’s comments on CNBC this week in which he said he expects the annual inflation rate to rise to as high as 10 percent in the years ahead.  

One more thing from his comments that we’d like to get on the record.  He took aim at the Fed and Chairman Powell and their massive money creation driving the current stock market bubble, by reminding viewers of the previous bubble, the housing bubble engineered by Alan Greenspan: 

“And I just want all you guys cheering him on to remember the Maestro in 2005, and how that worked out.”

“Look, everybody loves a party, but inevitably, after a big party, there’s a hangover, and right now we are in an absolutely raging mania.” 

Number 3:

And finally, you know how Communist regimes love their five-year plans.  Lenin and Stalin made them a daily part of the failed Soviet economic life.

Now we have a peek at China’s next five-year plan, beginning in 2021.  It calls for China to stockpile commodities in amounts sufficient for any crippling supply disruptions.

The plan calls for building its reserves of oil, agricultural commodities, and strategic metals.  

China’s interest in amassing gold reserves is already well-known.

The commodities boom that began in 2000 was primarily driven by China, along with other BRIC nations.  

It was a powerful component of the bull market that lifted gold and silver prices to all-time highs in 2011.  

Here we go again. 

You might very well have had a conversation like this recently:

“How can the stock market be at an all time high when the economy is in the tank?  With all this unemployment?  All these people out of work?  All these unpaid mortgages and commercial leases?  With all these bankruptcies?”

“How can the economy be in a depression and stocks are at an all-time high?  It doesn’t make any sense.”

We think you are right.  It doesn’t make any sense.  Except in one very specific and dangerous way.

It only makes sense if the stock market has been ignoring the real economy and is relying instead on endless money-printing support and interest rate manipulation by the Federal Reserve to keep the indices high.

Only then does it compute.  But if that is the answer, then it is obvious the Fed is the towel boy of Wall Street.  

And the hell with the Main Street economy.

But ultimately, the stock market cannot be decoupled from Main Street.  Now there are unmistakable rumblings in the stock market that reality may be about to assert itself.

CNBC summed up the action:  “Stocks fell sharply on Tuesday as another massive drop in tech put the Nasdaq Composite in correction territory and led to the S&P 500’s worst three-day stretch in months.”

Amid the wreckage was Tesla, falling 21 percent on Tuesday.  S&P declined to add the upstart automaker to its S&P 500 index.

Despite the bounceback that followed, is Nasdaq’s ten percent decline a warning that the Fed’s bubble machine is breaking down?  

The legendary hedge fund manager Stanley Druckenmiller says that “the merging of the Fed and the Treasury, which is effectively what’s happening during Covid, sets a precedent that we’ve never seen since the Fed got its independence.  It’s obviously creating a massive, massive mania in financial assets.”  

It will end badly, he says, forecasting inflation rates of 5 – 10 percent in the years ahead.

Druckenmiller is among the Wall Street “smart money” we wrote about back in May who had been buying gold. That turned out to be a good move then.

And it’s a good move now.   That’s because Fed officials, including Chicago Fed President Charles Evans, are signaling that more monetary easing is coming.  That will fulfill Druckenmiller’s forecast.  The more they do to levitate the stock market, the higher gold will go.

Why not avoid the rush?  Contact your Republic Monetary Exchange professional now.

Silver Has Outperformed Everything!

The latest results are in.  Through the month of August silver remains the top performing major financial asset for the year 2020!

Not only is silver ahead for the entire year, it outperformed other assets once again in the month of August.  That makes two months in a row that silver has been the top performer.

Deutsche Bank tracks the total return performance of major global financial assets.  Its report for August show silvers with a 15.4 percent gain for the month.  

Silver outperformed second-place finisher Nasdaq by more than 50 percent.

For the entire year 2020, silver posted an increase of 57.6 percent.  

After surging to a new all-time high over $2,000 at the beginning of August, gold corrected slightly as the month went on, moving -0.4% lower.  Even so, gold continues trading above its previous all-time high of $1,923 set in 2011.

The US dollar fell to a two-year low in August.  That’s five consecutive months of dollar losses.

For added perspective on the bull market underway, here are five-year price charts for both silver and gold.

We’ve Spotted a New and Important Trend!

We commented last month about gold skeptic Warren Buffett’s turn toward gold (see HERE and HERE).  It was a surprise move, but one we found very telling.

Now there is another face in the gold space, one that we find equally significant.  Last week the Ohio Police & Fire Pension Fund decided to allocate five percent of its $15.65 billion portfolio to gold.  

It’s the early evidence of a trend.  

Public pension funds are not thought of as pioneers.  They are generally conservative, traditional stock and bond investors.  

But apparently their advisors and board members are, like Buffett’s Berkshire Hathaway, reading the signs of these financially trouble times.  

That’s why they have turned to gold. 

College endowment funds are much like public pension funds.  But some years ago, the University of Texas took the plunge.  The University of Texas Investment Management Corporation, one if the nation’s largest college endowment funds invested a billion dollars in gold bullion.  It bought 6,643 gold bars, storing them in some underground depository in New York.

Good move.  There average price was much lower than today’s price.  

Texas legislators wondered why Texans’ gold should be held in New York. It’s the same thing that foreign nation gold owners like Germany had begun wondering.  They started having their gold shipped home from places like the US and London.  Everyone was too polite to say it was a matter of trust, but they brought their gold home anyway.

So, without saying anything about trust either, the Texas legislature decided to build a depository in Texas.  Now the Texas Bullion Depository is open, with a gold capacity of more than $100 billion and security said to rival that of Fort Knox.

It’s a trend.  Gold is becoming much more important to people everywhere as well as to foreign governments.  They all wisely want it in their own possession.  Gold is becoming much more important to central banks as we have reported on repeatedly.  

So now its Berkshire Hathaway.  And public pension funds.  It’s a sign of the times.  More and more people are recognizing that the US is actually facing solvency issues.  For the time being, the Fed has been able to fill the budget gap with money-printing.  But there is a cost to that kind of legal counterfeiting, too.  

It will show up before long in the value of the dollar and a reluctance by foreign nations to keep funding US debt.

If you have not yet investigated the reasons for this new move to gold, we invite you to contact us at Republic Monetary Exchange.  One of our gold and silver professionals with be happy to spend time with you, describe what is behind this new trend, and answer all your questions.

Spectacularly Bad Fed Timing… As Usual!

They’re going to put the pedal to the metal on the money printing presses.

Federal Reserve Chairman Jerome Powell has broken the silence – it wasn’t very good silence; everybody knew it was coming.  The cronies always know what the Fed is going to do in advance, anyway – and announced that is not going to be bound by its long-standing two percent inflation target.

The Fed’s Open Market Committee has unanimously agreed to suspend the old target.  It will be replaced by something called flexible Average Inflation Targeting (AIT).

Basically, the Fed intends to let inflation run hot.

It’s another textbook case of spectacularly bad timing.  You may remember Alan Greenspan’s Fed and their serial rate cuts that fueled the housing bubble.  Even when the signs were abundant that a bubble was building, they kept at it.  

Now Powell’s Fed wants to crank up inflation at the precise time that consumer prices are already headed higher. Core consumer prices in July showed their biggest increase since January of 1991.  

Consumer price inflation typically lags the Fed’s new money printing – at least at first.  And it has engaged in world record money printing.  Now before the results of its past actions are assimilated, the Fed is going double-down.  

You may wonder who exactly wants higher prices.  Especially now.  Many families are just squeaking by.  

Americans have $21 billion in unpaid rent.  27 percent of Americans didn’t make their rent or mortgage payments last month.  Bankruptcies are at a ten year high, and more are anticipated.  

And the Fed wants higher prices?  That’s right.  Time to beef up your gold and silver holdings!

The Fed has long wanted out from the two percent policy.  It has long wanted much higher inflation.  Now we’re going to get it.  

Good and hard.

Warren Buffet didn’t just move toward gold.  Warren Buffett moved away from banks.  

Good moves both.

As we reported last week, (Did Warren Buffett’s Dad Just Get a Whole Lot Smarter?), Buffett’s Berkshire Hathaway has purchased $563 million in shares of Barrick Gold, the world’s second-largest gold miner.  

It’s a start.

Next, maybe the ghost of Warren’s father will whisper in his ear something about counter-party risk.  Then Warren will start buying physical gold.

That could be next, because Warren is growing skeptical about banks.  

But in the meantime it’s a step in the right direction. 

Berkshire Hathaway sold billions of dollars of JPMorgan Chase stock in the second quarter, liquidating 35.5 million shares of the largest American bank.

The company likely took a loss on its JPM holdings according to Wall Street on Parade.

Buffett, who had also dumped 84 percent of his stock in investment banker Goldman Sachs, sold the rest of his shares, 1.8 million, in the second quarter.  

What would prompt “the Oracle of Omaha” to slash his bank holdings, even taking a loss on them, while adding a large precious metals component to his portfolio?  It is an important question.  Particularly because nothing characterizes Buffett’s philosophy more than “buy and hold.”

We think the answer can be found in Buffett’s own words: “When the tide goes out you find out who’s been swimming naked.”

Well, the tide is out.

With people unemployed, unable to pay their rent and mortgages, businesses shuttering and unable to pay their leases, developers and real estate tycoons unable to pay their loans, someone, somewhere will be left holding the bag.  We think that if you trace the cascading defaults upline, it is financial institution, banks, and pension funds that will eat the losses.

Wall Street on Parade:

“One of the things that could be spooking Buffett when it comes to JPMorgan Chase is the unquantifiable risk in its derivatives book. This is, after all, the bank that famously lost $6.2 billion of its bank depositors’ money in its London Whale derivatives scandal of 2012. Buffett has previously dubbed derivatives ‘financial weapons of mass destruction.’

“According to the regulator of national banks, the Office of the Comptroller of the Currency, as of March 31, 2020, JPMorgan Chase had the largest exposure of any U.S. bank to derivatives. Its notional exposure (face amount) was $59 trillion. The bank with the second largest exposure was the Goldman Sachs bank holding company, at $47.7 trillion.”

Now, doesn’t a move out of naked financial institutions and into gold make sense?

Billionaires are Profiting During the Pandemic

We learn from Forbes that the pandemic lockdown has been very, very good for Warren Buffett’s fortunes.  

On March 18, 2020 his net worth was $68 billion.  Now its $80 billion.  40 percent of Americans may be out of work, and 100,000 business have disappeared forever, but with $3.2 trillion of Coronavirus bailouts having washed under the bridge, Warren Buffett is up $12 billion.

And he is not the only one.  Warren is only number four on the list of wealthiest billionaires these days.  Above him are Bill Gates, he’s up $16 billion during these dark times; Mark Zuckerberg, who has put on $42 billion; and Jeff Bezos, at the top of the hill.  For all the suffering the country has been through, all the trillions in new spending and trillions more in money printing, Jeff Bezos’ net worth has increased by $76 billion during this time of sorrow.  He is now worth $189 billion.

How did it happen that the government stepped in supposedly to help the regular people out, and they got poorer, while the ultra-rich got richer?

We’ll only tease you with the short answer, which is that fiat money is fat for the cronies.  Always has been, always will be.  And the central bank is the delivery system, the very heart that pumps the money their way.

Now, it is true that all of this will eventually bankrupt the country, but the vampire squid cronies are too busy jamming their blood funnels into anything that smells like money to much care about what happens next.

The Genius of Warren Buffet 

Buffett is a brilliant investor.  But he is also a crony capitalist.  His political devotion is to the functionaries that put money in his pocket.  In the Great Recession, his company might have suffered staggering losses in its holdings of Goldman Sachs, Wells Fargo, Bank of America, and General Electric, but Uncle Sam helped them out, even as 10 million Americans lost their homes.  Were it not for the Bernanke-Bush Bailouts, Buffett said, he wouldn’t have bought into the troubled Goldman Sachs.  

Now, something new seems to have dawned on the Oracle of Omaha.  He has apparently taken notice of the corner into which the Federal Reserve has painted itself.  The Fed has long taken on the role of the guarantor of the stock market and the net worth of billionaire cronies.  But it can’t keep printing money to support stocks with low rates without eventually tanking the dollar.

This is not a mystery.  Most of the people who buy gold know perfectly well that money printing does not create more wealth.  Money printing eventually cannibalizes itself, eating away at the value of the currency.  

So, for all his past hostility to gold, Buffett’s Berkshire Hathaway has purchased $563 million in shares of Barrick Gold, the world’s second-largest gold miner.

The Foresight of Howard Buffett

Warren Buffett’s father, Howard Buffett, was a congressman from Omaha in the 40s and 50s.  He was the kind of elected official we desperately need today.  He understood the centrality of gold to a free and prosperous people.  He knew how paper money experiments end.  He was outspoken about it.  He knew the importance of people owning physical gold.

Howard Buffett passed away in 1964.  

Warren Buffett is 89 years old.  He’ll be 90 at the end of this month.  He apparently sees that central banks have lost control.  If he keeps his wits about him, Warren will soon realize that he should be buying physical gold.

It’s funny how the older Warren gets, the smarter his old dad appears.

Gold has reached new highs in nominal terms but it’s still below its inflation-adjusted record

How can you compare today’s gold and silver prices with their prices years ago?

It is not as easy as comparing today’s price with the price on any given day in the past.  The reason why goes right to the root of many of our financial problems.  It is because the measuring unit, the US dollar, is inconstant.   It is like a yardstick on a rubber band.  It is like the butcher’s thumb on the scale.  Such measurements are unreliable.

Last week we wrote about this problem in comparing today’s silver price with silver’s past performance.  

Saying that silver is headed to about $50 where it was in 1980 and in 2011 does not provide a clear picture, thanks to the incredible shrinking purchasing power of the dollar.  It would take $153 dollars today to equal the purchasing power of $50 in 1980.  So, today silver would have to reach $153 to equal its 1980 high. 

Similarly, silver would have to rise to $57 today to equal the high of $50 it touched in 2011.  That is because the US dollar is losing value all the time.

Let us apply the same “constant dollar” analysis to the price of gold.

Gold would need to rise to $2,850 in today’s dollars to equal its 1980 high of $850.  In 2011 gold came close to $1,900.  In todays dollars, the would be the equivalent of $2,222.

The Word Gold Council has provided us a chart of that shows the history of the gold price in both nominal dollars (the grey line) and in constant dollars (the green line).

If we were on a gold standard today, the gold dollar would be a reliable unit of value.  In fact, the dollar would be exactly what they used to say about it, “as good as gold.”  It would be a safe way to store wealth, not just for a short period, but for generations.  There would be no guessing games about foreign exchange rates with other countries on a gold standard. The dollar wouldn’t have to be “managed,” that is manipulated in a way that favors the crony banks that created to Federal Reserve to do that managing kfor them.  

A return to gold would do a lot to restore honestly in public life and civility in society.  That’s because it’s been said that the gold standard is like a country where a man’s word is his bond; fiat money systems are like a country where no one tells the truth.

A return to gold would increase our prosperity, too.  But all that is too much to take on in the present age, with its social, legal, and monetary breakdown.  

The best you can do is seek to protect yourself and profit as the monetary breakdown proceeds all around us.  A Republic Monetary Exchange professional can help you with that.

Three More Important Things for People Interested in Gold

But first a reminder.  The price of gold had a sharp correction in the middle of March with the COVID-19 lockdown,

It proved to be a great buying opportunity, but it lasted only two weeks.  We think any pullbacks in the gold and silver prices should be seen as a buying opportunity.

Now, on to our stories:

CONSUMER PRICES MOVING UP!

What did you think would happen when the printed all that money?

In early June, we covered a Wall Street Journal story that reported “Fastest-Rising Food Prices in Decades.”

It described food prices increasing 5.8 percent between March 1 and May 30, compared with the same time a year ago.

Now we have learned that for July, the headline Consumer Price Index rose 0.6 percent over the June number.  That was twice as much as was widely expected.

Food and medical categories led the CPI increase.  

BILLIONAIRE BOND INVESTOR SEES GOLD MUCH HEADED MUCH HIGHER!

Remains “unequivocally bullish!”

Jeffrey Gundlach is the CEO of $135 billion DoubleLine Capital.  We’ve included him in writing about “the smart money” that has been buying gold.  

Gundlach turned bullish on gold in the summer of 2018.

Gundlach was not surprised by the gold correction on Tuesday (8/11), but the exploding US deficit remains a major component of Gundlach’s analysis.  

“If we are going to continue that type of a pace, we’d be looking at over 50 percent of GDP in terms of the budget deficit, which is getting almost surreal in terms of what’s happening.”

“Gold will ultimately go much higher because I think the dollar’s going to go much lower,” he said.

Why Fed Bugs Really, Really Hate Gold!

Well, if there are “gold bugs,” there must be “Fed bugs!”

“Fed bugs are people with a faith-based belief in the power of central banks (and central bankers) to engineer economic growth using “monetary policy,” despite decades of history and current evidence to the contrary. They believe tinkering with inputs and rates and velocity and flows somehow makes us richer in terms of productivity, goods, and services. They believe in financial alchemy, as economist Nomi Prins puts it, rather than precious metals. They believe paper has value so long as government issues it and legislates its use. Most of all, they believe in technocratic control over money in the economy.”

So writes the always brilliant Jeff Deist, president of the Mises Institute.  

“They hate gold because it never goes away and never goes to zero. It holds monetary value intrinsically, without the imprimatur of a sovereign or government. Gold does not need the state or its bankers to operate as money, because individuals choose it as money on the market century after century.”  

More from Deist on the Fed bugs HERE.

One of America’s leading banks now says silver could be headed to $50!

It’s not the forecast itself that surprises us.  After all, silver has been at $50 twice, in 1980 and again in 2011.

We don’t think silver at $50 is a stretch at all.  We think that it is a rather modest forecast.  After all, since the dollar is losing value all the time, like a ruler of 12 inches last year, 10 inches this year, and eight next year, we have to ask what is today’s equivalent purchasing power of $50 in 1980.

It’s more than $153!

In other words, a forecast for silver to reach $50 soon is still less than a third it’s real all-time high.

But we want to make sure the record is straight and not misleading.  Silver reached a high of $50 in 1980 under very special circumstances.  That was when the billionaire Hunt brothers, along with some other international players, we’re trying to corner the silver market.  

That drove silver higher than it might have otherwise gone, so we want to give you a better comparison.

Silver came close to $50 again nine years ago.  So, in real purchasing power, or what economist call “constant dollars,” silver would have to reach $57 today to equal its 2011 high.

Now Bank of America, the nation’s second largest bank, writes that silver could rise to $35 next year, and rally to $50 in the medium turn.

Bank of America has been surprising the markets with its acknowledgement of the precious metals bull market.  In April BofA, the nation’s second largest bank, raised its target price for gold from $2,000 to $3,000.   It said then, “As central banks and governments double their balance sheets and fiscal deficits respectively, we have also decided to up our 18-month gold target from $2,000 to $3,000 an ounce….”

“Another important point to remember,” according to the report, “is that, just as central banks are socializing risk in financial markets, governments are increasing their spending like never before during peacetime. Fiscal spending plans across developed economies are nothing short of breathtaking whether we look at them in dollar terms or as a percentage of each nation’s GDP.”

The Federal Reserve can’t just print gold like it can dollars, Bank of America concluded.  We couldn’t have said it much better.

The bank’s call for higher silver prices rests not just fiscal and monetary grounds.  Its analysis takes note of so-called “green” initiatives in Washington which could drive new industrial silver demand, especially for solar power applications.  BofA writes, “The last time this happened between 2006 and 2011, the precious metal rallied to $50 an ounce, a price level we would see within reach this time around as well.”

Records Fall Like Dominos as Precious Metals Keep Marching Higher and Government Spends More, Prints More!

Last week gold hit a new all-time high.  This week it roared right through the $2,000 an ounce psychological barrier.  Gold gained more than $50 per ounce on the COMEX market on Tuesday, racing to $2037 an ounce finish.  

And silver was on fire as well.  Last week silver made one of its biggest one-day moves in history.  Tuesday gained 7 ½ percent, to finish on the COMEX at $26.25.

With the new all-time high in gold prices last week that had everyone talking, we said the real question is, “What’s next?”  

We answered our own question this way:  “Higher prices!  Much higher!”

Let us sample some observations from others:

THE TELEGRAPH:

“Gold hit $2,000 an ounce for the first time on Tuesday following a record-breaking rally driven by fears over the impact of the coronavirus pandemic on the global economy. 

“The yellow metal, seen as a safe-haven asset, has been on a steady upwards trajectory over recent months….

“On Tuesday investors remained concerned over whether the US will pass another spending measure to support the world’s largest economy. A new stimulus bill could add extra liquidity to markets and weigh on rates, which would support the precious metal further.:

MARKETWATCH:

“Gold futures powered higher Tuesday, gathering momentum late in the session to finish at a fresh record as government bond yields headed lower and as the U.S. dollar’s recent rebound receded somewhat, allowing the precious metal to make an assault on a record close above the $2,000 threshold.

“The sustained rally in gold has come as governments across the world have flooded their economies with financial aid to combat the COVID-19 pandemic.  And investors are betting that the uptrend for the yellow metal continues as the dollar weakens and interest rates remain around 0% in many parts of the world….

“Silver, meanwhile, mounted its own charge higher.”

THE STREET:

“Gold Hits $2,000 For the First Time In History As Dollar Extends Declines.

“Gold prices hit an all-time of $2,000 per ounce Tuesday, extending a year-to-date gain that has driven a rally in bullion and prompted the largest inflows into gold ETFs in history…”

“Gold’s rise has largely paralleled an historic decline in the U.S. dollar, which has fallen nearly 10% against a basket of its global peers since mid-March, when the Federal Reserve first said it will buy an unlimited amount of government debt, as well as corporate and municipal bonds, in the biggest expansion of its balance sheet in history, which now stands at more than $7 trillion.”

We’ll finish with a comment from one of out favorite analysts, Michael Shedlock from Mish’s Global Economic Trend Forecast.  

Mish says, “There is plenty of fuel for a short squeeze too.”

And that would propel gold much higher.

US Productivity Collapse

The US has paid a steep price for the COVID-19 shutdown.  US productivity has fallen by a third.  

The Bureau of Economic Analysis’ reports that, for the April-May-June quarter, US annualized quarter over quarter Gross National Product has fallen 32.9 percent. 

That is worse than a Depression era collapse.  Does Washington have a switch it can flip that will restore the economy?

No.  

All it has is the printing press.  Which brings to mind the expression that when you’re holding a hammer, everything looks like a nail.

By the way, the financial news media isn’t saying a lot about how much capital has been destroyed along the way, but it is over the cliff.

Every family that saved for years to open a small business, perhaps a restaurant or a retail store, that will now never re-open, has lost capital that has been years or even a lifetime in the making.

Putting the Gold Price in Perspective

Even though gold has reached a new all-time high, it’s nowhere near its old highs!

That’s because the value of the dollar has been diluted by the Fed along the way.  It is a dishonest unit of measurement, just like a ruler of 12 inches one year, 10 inches the year after, and 8 inches the next.

The World Gold Council point out that in constant (not shrinking) dollars, the nominal price of gold, even at our present record highs, is about $200 below its 2011 high, while matching gold’s prior record high in January,1980 would require a price of about $2,800  in today’s dollars.       

The gold price more than doubled from about $900 during the mortgage meltdown in 2008 to its 2011 high, while it is up only about 30 percent since the beginning of the COVID-19 pandemic struck.

China Suppressing Gold Buying… But for How Long?

Several Chinese national financial institutions have taken steps to limit domestic gold and precious metals complex purchases, according to a report from Reuters:

“Industrial and Commercial Bank of China (ICBC), the country’s biggest lender, said on Wednesday it would bar its clients from opening new trading positions for platinum, palladium and index products linked to precious metal from Friday. That directive, according to the lender’s customer service department, was in response to ‘violent price volatility’ and ‘the need to control risks.’

“Agricultural Bank of China said it had recently suspended new businesses related to gold, while Bank of China said it halted new account openings for platinum and palladium trading.”

One hidden motive may be to support China’s stock markets by preventing investors from moving funds from stocks to gold.  Most important for our friends and client is to note that unleashed, Chinese gold buyers can drive prices to unimaginable levels.

The financial site ZeroHedge writes, “It is neither in China’s, nor any other government’s interest, to see gold prices soaring as they likely would if tens of millions of Chinese speculators rushed to bid up the precious metal.”

  ZeroHedge tweeted, “All gold needs to hit 2,500 is for China’s momentum maniacs or the Robinhooders to start chasing it.”

Spending Our Way to Riches?

We just read a New York Times columnist—where do they get these people?—who advises the US  government to “spend our way toward a better tomorrow.”

In case you find that as incredible as we do, here’s a link to the piece called, “America Looks Hopelessly Broke. It Isn’t.”

Okay.  And that’s why we’re in this predicament.

Thanks, New York Times.  Now can the adults enter the conversation?

This week the price of gold set the all-time and seems ready to continue to break it’s own each day. Meanwhile, silver made one of its biggest moves in history.

It has everyone talking.

But the real question is what’s next?

We think the answer is higher prices.  

Much higher.

Already major banks and forecasters are raising their target prices for gold and silver.  They have to.  Many of their old targets have already been smashed.  

We’ve practically made a career here of telling our friends and clients what the Fed is doing with the printing press in the basement of the Marriner Eccles Building in Washington.  

It has been wholly unprecedented.  And we don’t mind telling you we have tried to raise an alarm about it.

Likewise, we have tracked and graphed, and explained and reported the explosive growth of government deficits and debt until our charts have run out of room.  That growth, too, is wholly unprecedented.  

We don’t just mean that as a figure of speech.  We mean the debt is growing faster than ever before in history.

To reiterate some of what we have been reporting, Washington has increased federal debt by 14 percent since January 1.  The Fed has increased its asset base – the stuff it buys with made up money – by two-thirds since the beginning of the year.  

Explosive.  Unprecedented.

We want to illustrate things one more way.  The following is a chart of the money supply (M2, a measure of cash and cash-like liquidity such as checking deposits, savings accounts, and money market funds)

Since the first of the year, M2 has grown by 20 percent.  We have been watching these things for a very long time and have never seen anything like it.  Not even in Quantitative Easing.  Not even in the double-digit inflation of the 1970s.

Explosive.  Unprecedented.  

One more thing.  We have been clear that the most important megatrend in the financial world is the move away from the US dollar as the reserve currency of the world.  We haven’t shied away from the subject even when people we respect have downplayed the prospect.  But we know what we have seen.  We have watched central banks like Russia and China add gold to their reserves at a steaming pace and have concluded something important is going on.

Now we add the recent observation of Goldman Sachs to what we have said, citing Goldman strategists including Jeffrey Currie:

“Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows.” 

There are, they write, “real concerns around the longevity of the U.S. dollar as a reserve currency.”

So again, what happens next?

We think the answer is higher prices.  

Much higher.

We love reading what the financial press says about the rip-roaring gold and silver bull market.  

Sometimes they miss the mark, sometimes they stumble into the truth. Let’s look at two this week and give out some grades for their bull market coverage…

FX Empire

Here is some snippets from an FX Empire piece we saw on Yahoo! News: 

“The relationship between the world’s biggest economies has worsened, as the U.S State department ordered the closure of China’s consulate in Texas, growing concerns that tension between the U.S and China could escalate further….”

“While the precious metal continues to fly higher after recent headlines on global Covid-19 caseloads reached 15 million, gold could hit the $2,000 price level within few weeks, as more stimulus hits global financial markets.”

Grade: B-
Basically correct.

Marketwatch

MarketWatch cites someone saying, “In reality, virtually everything is going gold’s way—record debt, epic increase in money supply, silver catching up, negative real yields, and even a dollar correction.” 

Grade: A
We’ll give that an A because it is a little more comprehensive.

We won’t grade Michael Shedlock (Mish) from TheStreet.com because he’s not really part of the financial press:

“Tensions of all sorts are on the rise in the US , EU, and globally: Covid, employment, fiscal stimulus China (military and economic), and massive increases in money supply by the central banks, especially the Fed.”

Although we know from reading him over the years that he has a good handle on the whole thing, he forgot to mention debt.

But Mish concludes with a question about the Federal Reserve:

“If you currently have any faith that Central Banks have things under control, then please explain where you got that notion.

“It should be obvious that the Fed is boosting financial assets but that is not going to create jobs or cure covid. 

“In short, the Fed is blowing bubbles, many believe on purpose, and gold has responded to the stress. 

“I do not see a reversal in Fed policy. Do you?”

And finally, if the authorities can create wealth with paper, why don’t they create more of it and solve all our problems?

Read this new parable called Paper is Paper; Money is Money by Senator Rand Paul.  

It begins with these words: “The time came when the emperor decreed: ‘The people are in need; a plague is upon the land. I will give them money.’”

It is a tale for our times!

Leading Bank Forecasts 50% Move!

Here at Republic Monetary Exchange, we have been unrelenting silver bulls.  

At the end of last year we explained in detail how underpriced silver was:  

“About 40 years ago, at the beginning of 1980, silver was $50 an ounce.  

“In today’s dollars – because the Federal Reserve has sharply eroded the purchasing power of the dollar – that would be more than $156.00!

“At today’s prices, silver would have to triple to reach $50 an ounce.  But to reach the purchasing value in today’s dollar that silver had in 1980, it will have to increase more than nine times!

“Another way of putting it is that silver today is only a third what it sold for 4o year ago.  

“And it is only about 11 percent of the dollar value it had in 1980.

“Oh, and by the way, silver came close to $50 again eight years ago.  It reached $49.80 in 2011.

“We think silver is really underpriced today.”  

In March, Wall Street COVID-19 margin call selling briefly pushed silver below $12 an ounce, but by May it had recovered convincingly to over $18.00. 

Meanwhile, in April we cited a research report for the Silver Institute calling for silver to reach $19 this year.  We commented at the time that we viewed that as excessively conservative, “substantially understating the upside for silver this year.  Our view is colored by our long experience of watching silver dramatically out-perform gold in bull markets gone by.”

With silver priced at less that a third its prior all-time highs, we found it hard to take our eyes off the great profit opportunity silver represented.

At the end of May we alerted our friends and clients to the stirring of the silver market. 

Using our radio messages and our blog to highlight the opportunity, we said, “In a precious metals bull market like this, it usually takes silver a while to wake up! 

“We like to alert you to great profit opportunities.  Gold goes first.  It leads the way.  But when silver starts moving, it really rips!  

“Well, silver has started moving!”

It has proven to be a good call.  

Now silver is fully awake and ripping!

On Monday (7/20) Citigroup, Inc., one of the nation’s largest investment banks called for silver to reach $25, with a potential for $30.

While that would be a 50 percent move from the time they made the call, more telling than their price target is that the institution has had to acknowledge silver at all.  That’s because mainstream institutions and journalists talk about “silver’s surprising strength.”

To us, there is nothing surprising about it at all!

We remain unrelenting silver bulls. Speak with a Republic Monetary Exchange professional today and discover how to use silver for profit and protection.

This week we noted with great interest the accounts of the rich and famous being hacked.  Joe Biden, Barack Obama, Kanye West, Bill Gates and Elon Musk all had their Twitter accounts hacked.

It could have been the work of a state actor, like North Korea.  In that case, speculated one “senior American intelligence official,” the intent would have been something like destabilizing the stock market.

But instead it was believed to have been the work of an induvial or a band of hackers in what the New York Times called “a show of force.”

Twitter said, ““We’re looking into what other malicious activity they may have conducted or information they may have accessed.”

The incident reveals once again how easily our private information can be compromised.  Yahoo!, Veeam, Exactis, and Equifax are just some of the big digital data firms that have been hacked with billions of records stolen.

But instead of supporting means for people to protect their privacy, the government accelerates measures to make us more vulnerable.

The war on cash is a good example.  Cash is anonymous.  So Washington doesn’t like it.  In fact, you may have noticed that Washington wants full access to everything you do, while it wants everything it does to be secret.

Which raises the question:  Who is in charge here?  Is the state our creation and does it serve us?  Or does it see things the other way around?

Last year we wrote about reasons to want to be off the grid  (Good Old Fashioned Profits, 6/8/19):

“Some people buy gold just to get off the grid.  They would like to keep their financial affairs private.  Since the banks have become snoops for the government, reporting what you do, and since big corporations try to follow you in everything you do and anything you buy, just the peace of mind of having a little privacy is a very good reason to own gold.  

“There are other reasons to want to get off the grid.  You may remember how a lot of things were shut down after 9/11.  Have you ever wondered what would happen if the increasingly stressed national electricity grid went down, or if solar flares screwed up satellite functions and digital communications?

“What would you do if ATM machines stopped spitting out cash?”

It is only sensible to want to protect your privacy in this digital age.  Gold and silver are the single best means of getting your wealth of the grid and away from hackers, identity thieves, and other prying eyes.

We think protecting your privacy has never been more important.  Big changes are in the works.

Everything going on the country is a reason for more Washington money-printing and more Washington spending (at least according to Washington!)

And that means higher gold and silver prices.

Here are a few examples.

Washington, Where $1 Trillion Is Never Enough

“Speaker Nancy Pelosi on Thursday rejected the Trump administration’s calls to limit the next coronavirus relief package to $1 trillion, arguing that Congress will need to approve at least double that amount amid a surge in cases.

“‘A trillion dollars is OK, that’s an interesting starting point. But that doesn’t come anywhere near,’ Pelosi said at her news conference….

“But a $1 trillion-or-less package is a nonstarter for House Democrats who passed their own $3 trillion package in mid-May. The GOP-led Senate had ignored that package for weeks.

“‘Oh, it can only be a trillion dollars,’ Pelosi said Thursday, scoffing at the GOP’s proposed price tag and laying out her own demands. ‘No, we need a trillion dollars for state and local. We need another trillion dollars for unemployment insurance, and direct payments.’”

—Politico.com

Do You Even Want to See What Else is Headed Our Way?

Mohamed El-Erian is chief economic adviser at Allianz, the corporate parent of PIMCO. He says the financial stress from COVID-19 “is far from over.”

Stock investors must not be paying attention, but El-Erian says “there are already plenty of warning signs”:

• a record-breaking pace for corporate bankruptcies;
• job losses moving from small and medium-sized firms to larger ones;
• lengthening delays in commercial real estate payments;
• more households falling behind on rents and continuing to defer credit card payments;
• and a handful of developing countries delaying debt payments.

—ZeroHedge

Will the Federal Reserve Cause the Next Riots?

In his latest commentary former presidential candidate and congressman Ron Paul reviews some of the activities of the Federal Reserve that are familiar to those that read these Republic Monetary Exchange commentaries.

Here’s how Dr. Paul thinks the building crisis is likely to play out:

“A coming crisis will likely be triggered by a collapse in the dollar’s value and a rejection of the dollar’s world reserve currency status. The economic collapse will be worse than the Great Depression. This will result in widespread violence along with government crackdowns on liberties, accelerating the US slide into authoritarianism. The only way to avoid this is for Congress to make drastic cuts in spending — starting with defunding the military-industrial complex — and to audit then end the Fed.”

—Ron Paul

What are your investment objectives?  Near term profit?  Long term wealth protection?  Let Republic Monetary Exchange show how to use gold and silver to achieve your aims as the government thrashes about from failed fiscal policy to reckless monetary policy.  Call or stop by.  

We’re here to help.

1. The World Is Starting to Notice Gold!

“Gold prices ticked past $1,800 an ounce this week, and are now not far from the all-time highs reached in 2011, in the bleak aftermath of the financial crisis. New records could be ahead.”

That is the lead from a story about gold in the Wall Street Journal Thursday morning (7/9/2020).

The dominant news media, including the mainline financial press such as the WSJ and the financial cable networks, have always had a difficult time reporting on gold.  Serving as the lapdog press of the financial establishment, Wall Street, the Federal Reserve, they don’t much like gold.  So their reporting about it is often wrong and almost always clumsy.  

Take for example the way the WSJ concludes its Thursday story: “… it isn’t unreasonable to believe it will reach new highs in the months ahead.”   

Wouldn’t your high school English teacher have called that a double negative, or unnecessarily wordy, or something?  Mine would have said “write what you mean”:  

It’s reasonable to believe gold will reach new highs in the months ahead.

2. The US Budget Train Wreck

The end of June marks nine months of the governments accounting year, Fiscal Year 2020. To no one’s surprise, it’s a calamity.

The government ran a deficit of $863 billion just for the month of June.  The nine-month deficit is $2.7 trillion, which is more than three time the first nine months the year before.  

In June 2019, unemployment insurance spending totaled $2 billion.  This June is was $116 billion.  

All we can say is, “It’s reasonable to believe gold will reach new highs in the months ahead.”

3. Could the Fed Become the Socialist Branch Bank for the Poor?

Former Vice President Joe Biden and Vermont Senator Bernie Sanders have come up with a 110-page joint policy paper as part of an effort to get Bernie Bros. and other socialists on the Biden bandwagon.  

Bob Wenzel, Economic Policy Journal, writes, “Most alarming in the paper is a recommendation that bank accounts be made available at the Federal Reserve for low- and middle-income families.”

“This would be a shocking expansion of the government role in the banking sector.

“Specifically, the statement says:

‘One in four American households are either unbanked or underbanked, putting them at risk of losing money due to exorbitant fees or usurious interest rates. Democrats will support and encourage Congressional efforts to guarantee affordable, transparent, trustworthy banking services for low- and middle-income families, including bank accounts and real-time payment systems through the Federal Reserve and easily accessible service locations, including postal banking.’ “

Well, why not risk-free, no fee, subsidized interest rates, guaranteed accounts for everyone?  They’re printing money for everything else under the sun!

And people wonder why gold is going up!

This chart will explain!

We would like our friends and clients to spend a few minutes thinking about what this chart means.  We have chosen it because we think it explains today’s powerful gold bull market.

Even more, we think it makes clear that gold is headed higher.  

But for as dramatic as this chart is, it doesn’t tell the whole story.

We’ll explain.

This chart overlays the gold price (in gold) with US federal debt as a percentage of US Gross National Product (in red) going back to the beginning of 2000.

It is from the Federal Reserve’s data and was produced from the Fed’s chart service on Wednesday (7/8/2020).  At the beginning of this period federal debt was less than 60 percent of the nation’s total productivity.

The price of gold was less than $400 an ounce.

Now it shows that federal debt is more than the entire productivity of the nation, about 107 percent.  And it is pulling the price of gold, now over $1,800, along with it.

Let us be clear why this should be so:  The price of gold is a referendum on the future value of a currency.  The dollar price of gold is a referendum on the future value of the dollar.  As US debt continues to mount, this referendum on the market value of the dollar is not good.

There is more to the story, a couple of limitations with this chart.  The Fed chart reflects the debt as of the first quarter of 2020.  We are now in the third quarter and the debt is trillions of dollars higher.  

It reflects the nation’s productivity as of the first quarter as well.  But since then, productivity has collapsed.

Even though this reflects the latest numbers from the Fed, the conditions are today much more grim.

One other thing.  Please note that the chart reflects total US government “public debt.”

The public debt is $20.56 trillion.  But there is another part of the debt not shown, the so-called intragovernmental holdings.  That is money the government has borrowed from the Social Security “Trust Fund,” Medicare, and other obligations of the government.  That adds $5.9 trillion to the total government debt.  

The total government debt is $26.46 trillion

That means that real ratio of debt to GDP—before the COVID-19 shutdown—is more like 137 percent of GDP. 

Because US debt is so high, the US government is becoming a credit risk in the eyes of the world.  The world knows that the government will resort to simply printing money to pay its creditors.  Paying them with dollars of diminishing value.  It knows this because that is what the US government is already doing.

The dollar price of gold is a referendum on the future value of the dollar.  No wonder gold is in a primary bull market and headed higher.

Some may breathe a sigh of relief that 2020 is now half over.  It has been a challenging year on many fronts.  But it should be of some comfort for our clients and friends to know that, as forecast, gold is the big winner.  

Here’s a brief 2020 halftime report along with charts of gold and silver in the first six months.

Gold outperformed just about everything in the first half of the year by climbing about 17 percent.

Stocks?  Not so great.  They are still down for the year, although extraordinary liquidity operations pumped stocks up in the second quarter. 

But the second quarter was another strong one for gold, which gained 9.5 percent.  Silver gained 25 percent. 

What do we expect for precious metals in the second half of 2020?  It seems very clear: there’s more of the same ahead.  That’s because the gold price is a referendum on the quantity and quality of the US dollar.

Apply this examination to other things.  Suppose there is a bumper crop of oranges this year, much more than in the years before.  Of course, the price of oranges will fall with the increased supply or quantity.

Or suppose that the orange harvest is the same as in recent years, but the quality is really poor.  They may be pulpy or just not sweet, but the oranges are simply not good.  In such a case, buyers will find substitutes and the price will drop.

Now, suppose both that the orange crop is huge and that the oranges are crummy.  That’s the worst of both worlds for orange prices, which will fall even more.

As we have made clear repeatedly this year, at the hands of the Federal Reserve the quantity of US dollars has simply run through the roof.

Sharply rising US debt, coupled with the collapse in US productivity, are reflected in the declining quality of the dollar.

Protect yourself and profit with gold and silver as the dollar’s quantity keeps climbing and its quality keeps falling in the second half of 2020.

Contact Republic Monetary Exchange today and speak with one of our experienced precious metals professionals.

Federal Reserve chairman Jerome Powell has proclaimed the future “extraordinarily uncertain.”

It is one of the few times that he has spoken that we find ourselves nodding in agreement.

Here are some uncertainties that spring to mind:  Will people ever go back to movie theaters in the numbers they did before?  Or will they stay at home and watch Netflix? Will more and more companies discover they can cut commercial real estate expenses with employees working from home?  How will travel and hospitality recover?  What happens when the number of people defaulting on their rent climbs?  What replaces all the capital, the product of years of savings, when small businesses close and lose everything?  What happens to car sales if fewer people stop commuting?  What happens to tax revenue with depressed economic activity and million unemployed?  What happens to social welfare spending? 

What happens when—as shown in the following chart—almost half the adult population doesn’t have a job?

What happens?  Powell is right.  The future is extraordinarily uncertain.  

Or at least part of it is uncertain.

So instead of making wild stabs at guessing what the future will look like, let’s look at what we know for certain.

The US government has met the challenges of this year with unprecedented deficit spending.  It added $3.12 trillion to its national debt in just the first six months of this year.  That brings the unpayable national debt to $26.31 trillion.  

The Federal Reserve has made up, conjured up, printed into existence $3 trillion that it did not have on New Years’ Eve 2019.

And with the made-up money, it has purchased the corporate debt of private companies: Wal-Mart, Berkshire Hathaway, Phillip Morris.  It has purchased government securities, agency securities, and junk bonds.  

In other words, Washington’s bubble makers are blowing up bigger bubbles in government debt, in corporate debt, in agency debt.  They are doing so the way they always do it, with Fed money printing.   

From Reuters:

“The Fed has cut rates to near-zero, bought trillions of dollars of bonds and rolled out nearly a dozen credit backstopping programs to boost the economy and steady markets. The Fed has also pledged that it will use the ‘full range of tools’ to support the U.S. economy.”

Using the full range of its tools is how they blew up the mega-housing bubble and the huge dot com bubble: by the artificial creation of money and credit.

The Dow Jones Industrial Average is down 3.5 percent this year.  We get that.  We don’t think a shut-down economy, smashed-up businesses, and broken-down employment is good for stocks, either.

But the one thing we know for certain is that every problem will be met by Washington with more deficit spending, and by the Fed with more money printing.

Every problem.  Of that we can be certain.

They are one-trick ponies.  That’s all they have.  They make the bubbles bigger, the economy less resilient, and the eventual meltdown more painful.

And they make gold go up.

No wonder, then, that gold is already up about 17 percent this year.  Gold is up almost 18 percent in terms of the euro and 25 percent in the British pound.

Gold has climbed 28 percent higher over the last 12 months, while silver has climbed 18 percent.

We’re just getting started.

The Writing on the Wall?

Trump administration economist are bailing out right and left.  Some of that is the normal ebb and flow of politics as many try to burnish their credentials a bit by serving in the administration and then wish to return to private life.  

But economist Bob Wenzel at Economic Policy Journal looks at the numbers and suspects something else is going on.  Kevin Hassett, a top Trump advisor has announced his departure.  Wenzel says Trump has counted on Hassett and that “it is an odd time for him to leave with the economy a mess as a result of the lockdowns.”

Thomas Philipson, acting chairman of the White House Council of Economic Advisers, is leaving at the end of the month.  Others leaving include “Andrew Olmem, special assistant to the president for economic policy and deputy director of the White House National Economic Council; Eric Ueland, who served as the White House director of legislative affairs and played a key role in negotiations with Congress over the stimulus; and Joe Grogan, director of the White House Domestic Policy Council.”  

Wenzel says, “I will allow readers to make their own guess as to what is going on but it doesn’t look good.

“Hug your gold coins.”

Point made, Bob.  

Thanks.

IMF Downgrades Its Ridiculous Growth Forecast

The International Monetary Fund has slashed its forecasts for GDP growth for both the US and the global economy.

In April, the IMF was forecasting US GDP to shrink by 5.9 percent this year.  It is now calling for an 8 percent contraction in 2020.

In April the IMF forecast the global economy would contract by 3 percent.  It now expects global GDP to fall by 4.9 percent.

That would be the worst collapse since the Great Depression.

We thought the earlier IMF forecasts were way off base.  30 million Americans lost their paychecks in April.   That’s an awfully big hit for a workforce of 165 million people.  By the time its all added up total US job losses may have reached 40 million.

Dead People Cash In

Did you get your $1,200 check from the government?  Well, you are not alone. 

1.1 million “economic stimulus” checks amounting to $1.4 billion were sent to recently deceased people.  

The government couldn’t be expected to exercise too much care.  After all, it was in a big hurry to get the economy moving again.

And that’s a line we’ve heard before.  

You may remember that the US Federal Reserve sent $12 billion in cash to Iraq in 2007. Shrink-wrapped, washing machine-sized palettes of freshly printed $100 bills.

And it all disappeared.  Without records.  Without accounting.  It went into gym bags and hidey holes.  It went into the trunks of cars and into the private safes of Iraqi officials.  

It just went.  

$12 billion.

Said Paul Bremer, the American in charge of stuff in Iraq, “Our top priority was to get the economy moving again. The first step was to get money into the hands of the Iraqi people as quickly as possible.”

We want to share a few charts today, first to illustrate this powerful gold bull market, and then to show some of the financial machinations going on behind the scenes that we believe will drive gold much higher. 

By some interpretations, the gold bull market was confirmed, if not born, in August 2018 with the low of $1,167.

Before the year was over, gold moved decisively above its 200-day moving average.  It has stayed above that trend line ever since, except for a quick drop in March.  That drop appears to have been a Wall Street phenomenon, with traders and hedge funds faced with massive margin calls in the COVID-19 lockdown stock market collapse.  They turned to gold for the liquidity they needed in the moment, but it was a brief affair and they wasted no time reestablishing their gold holdings.

That liquidity is a primary virtue of gold.  It is the world’s most liquid commodity, even in a crisis.

The next chart is a dramatic portrayal of the Federal Reserve in action.  Covering the same period as the gold bull market beginning in August 2018, it shows both the explosive growth of the money supply, MZM (in red) and Federal Reserve assets (in black).

Both are “hockey stick” charts, sudden turning straight up.  MZM, a broad measure of money supply, has grown about 35 percent over the period, to about $21 trillion.  

Fed assets, represents financial instruments, corporate and government bonds, stocks, funds, mortgage securities that the Federal Reserve has purchased out of money it created out of thin air, or more accurately by making a computer entry in an account somewhere.  

Fed assets have increased about 66 percent over the period to $7.1 trillion.  That outpaces gold’s gain of 52 percent from trough to peak.

The growth of both of these measures should leave even old and grizzled market veterans gasping for air.  The straight-up climb of both is relentless and unprecedented, even as the driving force behind a bull market.

The Federal Reserve has taken this country’s economy into very dangerous territory.  It is not enough for us to say that we don’t believe the Federal Reserve has any idea what it has done with these policies.  It is better that you should know that the Fed itself admits it doesn’t know what it has done.

We will simply leave you with the words of Fed chairman Jerome Powell just a few days ago:

“We’re not even thinking about thinking about the consequences of our actions.”

We think these charts makes that evident.

We have reported to you recently about the Wall Street “smart money” buying gold.  Names like Dalio, Druckenmiller, Tudor Jones, Zell, Gundlach, Singer, Klarman, Einhorn, Mobius, Hendry, Zell…  See All the Smart Money is Buying Gold, and More About the Smart Money.

There are two more smart guys we want to mention.  We think it is important to share their views because they are both alarmed by what is going on in the stock market.

The first is Jeremy Grantham.  He’s the co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo, a major asset management firm.  Grantham is best known for spotting speculative bubbles in the markets, including Japan’s stock market bubble in the 80s, the dot com bubble, and the housing bubble.

Grantham is “amazed” that the stock market could be so high.  That’s because the price/earnings ratio is in the top 10 percent in its history, while the underlying economy is in the worst 10 percent in its history.  The market and the economy have never been more disconnected, he says

Grantham calls it “one of the most impressive mismatches in history.”

“This will end badly,” says Grantham.  “it’s becoming the fourth real McCoy bubble of my career.”

There are a lot of other smart guys, but one of the smartest ones we know is David Stockman.  He was President Reagan’s budget director and a true financial whiz kid in his youth.  Now after a long career on Wall Street, he’s not only still smart, he’s also wise.    

Commenting on the current state of the economy and hopes for a recovery, Stockman says, “I think this will be a long, deep ‘L’ shaped bottom…. We went through a month in which 30 million people suddenly found themselves with no paycheck, in April, and the stock market had the best month in 52 years.”  

“Now what kind of sense does that make?”

We agree.  Not much.

“I do think we are near the end of the line of this whole phony Keynesian central banking regime,” says Stockman.  “Once confidence finally evaporates, there will be a massive stampede into real money.”

Emphasis ours.  Real money.

We urge our friends and clients to avoid the stock market bubble, so clearly driven by Fed policies and not by economic growth and dynamism.

And we would like to help you beat the coming stampede into real money.  Contact Republic Monetary Exchange today and speak with one of our gold and silver specialists about protecting your family and your wealth.

The dollar will crash under the staggering weight of its debt!

In fact, “The dollar is going to fall very, very sharply.”  That’s what Steven Roach says.  He’s very concerned.

We wrote about Roach last week (Dollar Breakdown Ahead!), calling him “a pretty sensible guy.” That was when he told Bloomberg News that “US living standards are about to be squeezed as never before.”

Well, that’s what happens when your currency crashes.  

Now Roach has taken the message to CNBC, where he said his forecast calls for as much as a 35 percent drop against other currencies.

If Roach is right, the price of gold will skyrocket!

“The U.S. economy has been afflicted with some significant macro imbalances for a long time, namely a very low domestic savings rate and a chronic current account deficit,” said Roach, a Yale professor and former chairman of Morgan Stanley Asia.  

““These problems are going from bad to worse as we blow out the fiscal deficit in the years ahead,” he says.  He points to the Stagflation Decade of the 1970s as a model for what to expect:  weak or negative economic growth combined with rising prices.  

That’s the worst of both worlds!

The following chart shows the collapsing purchasing power of the dollar over 300 years by comparing it to gold.  You can see a bad crash of the dollar during the Civil War era, one from which it recovered when gold was restored to the monetary system.

The next dollar crash came with FDR’s gold grab in the 1930s.  That was followed by the crash when Nixon abandoned the gold standard in 1971.

There isn’t much that lawmakers and Washington can do about the new dollar crash, says Roach.  

But you can do something for yourself. Take steps to protect yourself and your family with gold and silver.  Speak with a Republic Monetary Exchange precious metals consultant today

The authorities cannot print trillions of dollars, money unbacked by anything and conjured out of nothing, without impacting prices.

And that is probably the best reason today to buy gold.  Because the Federal Reserve has been printing money like there is no tomorrow.  

Last year at this time, in the middle of June, the Fed carried $3.8 trillion of assets on its book. That’s $3.8 trillion dollars worth of financial instruments, mortgage bonds, debt securities, government bonds.  

Now, twelve months later its assets have climbed to $7.1 trillion.  That means that in the last twelve months the Fed has purchased $3.3 trillion more.  It has printed $3.3 trillion in the last year.  Most of it in the last three or four months.

All that new money blows the stock market bubble back up for now.  That’s why they do it.  As David Stockman said, the Fed is the vassal of Wall Street and the banking cartel that created it in the first place.   Bubble after bubble.  The Fed “dances with them that brung ‘em.”

Sometimes a Fed money printing spree blows consumer prices higher.  Look back to the 1970s and double-digit consumer price increases.  

Sometimes the money printing inflates dot com stocks.  Another time it is housing prices.  The next time it’s the stock or the bond market.

This time it could very well be consumer prices that take off.  A hat tip to economist Robert Wenzel at Economic Policy Journal for pointing out news from the Wall Street Journal that we might have missed, the “Fastest-Rising Food Prices in Decades.”

Food prices increased 5.8 percent between March 1 and May 30, compared with the same time a year ago.

The Consumer Price Index reports that steaks, ribs and pork roasts are up 10 percent.  Just the April 2.6 percent increase in grocery prices is the biggest monthly increase since the inflationary 1970s.  

It would be fair to blame some of it on the coronavirus pandemic.  It certainly hit the meat industry hard.  But no matter what sector of the economy forms the biggest bubble, as Wenzel says, “It is only the beginning folks.

“Mad Jay Powell is pumping trillions of dollars into the economy that will be bidding for the goods and services out there.”

The best thing you can do is protect yourself with precious metals.  We know a thing or two about periods like this because we’ve lived them before.  Call or visit Republic Monetary Exchange today.

“U.S. living standards are about to be squeezed as never before.”

Oh, great!  Exploding federal budget deficits are catching up with us.  The chickens are coming home to roost and a crash in the dollar is headed our way.

That’s according to a piece on Bloomberg News the other day, A Crash in the Dollar Is Coming.  It’s by Stephen Roach, an economist at Yale University now, before that with Morgan Stanley, and with the Fed.

We have followed Roach for a long time.  He writes a lot and is a pretty sensible guy.

Roach says, “The seeds of this problem were sown by a profound shortfall in domestic U.S. savings that was glaringly apparent before the pandemic.”  

Unemployed and panicked American’s quit spending with the onset of the pandemic, so the US savings rate did turn up sharply.  But it hasn’t been enough to offset the exploding federal deficit.  

The coming dollar downturn will be inflationary, according to Roach.  Couple that with the slowdown effect of the pandemic measures, and you have the worst of two worlds:  stagflation.  Rising prices and little or no economic growth.  

Oh, great.

And that’s not all.  According to Roach, the growing trade war will mean that much of what Americans buy will be diverted from low-cost to higher-cost producers.  That’s another tax on consumers.  And who will fund our deficits, buy US Treasury securities? Take China out of that picture as well.  Fewer buyers mean higher interest rates.

Oh, great.  But as Roach says, the privilege we’ve had with the dollar shouldn’t have been taken for granted.  And now a collapse of the dollar is headed our way.

Oh, well.  But what can you do?  

There is something you can do instead of sitting around muttering “oh, great,” and bemoaning the inevitable.  Take the vital steps needed to protect yourself and profit with gold and silver.  

You can do that!  

To get started actually doing something, call and speak with a Republic Monetary Exchange precious metals specialist today.

The policy responses to the COVID-19 virus continue driving investors and institutions around the world to protect themselves with gold.  Riots and looting will drive more people to gold.

They are watching governmental failure.  They are seeing deficit-funded spending soar.  They are watching digital money printing at speeds unthinkable only last year.

The latest numbers from the World Gold Council show that through the first 5 months of 2020 (through May), gold ETFs have added more gold than in all twelve months of the biggest growth year ever, 2009.

Over the past 12 months, assets in global gold ETFs have nearly doubled.

We repeat here a crucial point about ETFs we made in May (If It’s Paper It’s Not Gold):

“One of real gold’s primary virtues is that it is not somebody else’s liability.  Real gold that you own is not dependent on someone else’s promises, performance or solvency.  

“Not so with paper gold or other vehicles that purport to represent or to be based on the ownership of gold at some indeterminate place, time, and form.  This applies to futures, options, ETF’s, shares, forward contracts, and IOUs of all kinds.

“If you want the protection that gold offers, you want real gold.  Not paper.  Paper is not gold.”

We also recommend you review the events that began in March when the pandemic lockdown created shortages and the inability of other dealers to make timely delivery of gold and silver to their clients.  

ETFs were at the center of the disconnect between world gold prices, index prices and the other prices of gold that you may read about in the newspaper, and the real price for physical gold and silver you can take home and put in your safe.  

The Wall Street Journal coined a new term for gold because of this decoupling:  “unobtanium.” 

Republic Monetary Exchange was unlike many dealers.  Right through the period, we were still able to make immediate delivery to all our clients, just as we continue to do every day!

But we think the episode highlights the pitfalls of trying to replicate the value of real gold with ETFs and other paper representations about gold.  

As we have written before, one of the most important reasons to own gold and silver is to avoid major risks common to stocks, bonds, banks, and other financial assets and transactions:  the risk of insolvency and default.

All these financial markets and institutions carry a risk of insolvency and default.  That goes for ETFs, too.  Institutional risks throughout the world economy appear to be growing daily.    

But gold and silver are monetary commodities in their own right.  They are not claims to something else somewhere else down the road.  The value of an ounce of gold or silver is utterly indifferent to the issuer’s total debt, or the wisdom of its political leaders.   An ounce of gold is an ounce of gold no matter whose image or national motto is engraved on it.  

Its value is not contingent on someone else’s integrity.

The growth of gold ETFs shows a fast-spreading concern with the solvency of governments and the reliability of their money.

But only real gold and real silver will perform in a crisis.

Find out more about the importance of owning gold by speaking with a Republic Monetary Exchange precious metals specialist.  They are here to answer your questions and help you achieve your personal financial objectives.

Wonder why gold is headed higher?

Take a look at how much money the Federal Reserve is printing.  And how it pulls gold right along with it!

This chart above tracks the growing money supply (in black), using a broad measure of liquidity called Money of Zero Maturity.  It consists of cash, and cash-like instruments such as checking deposits, money market accounts, and small-denomination time deposits.

After having grown by less than a trillion dollars a year for the previous five years, suddenly Money Supply has grown by $4 trillion in less than six months!

That’s quite a magical money machine you have there, Mr. Powell!

Don’t count on China helping fund much more of America’s growing mountain of debt.  Better to wonder how long it will continue holding all the US Treasury debt it currently has.

That’s because things are escalating between the US and China.  It has gotten to the point of official name-calling.

China holds $1.08 trillion of US Treasury debt.  Stated differently, China’s government is a creditor of the US government.  It has loaned the US more than a trillion dollars.  The only other country that loans Uncle Sam that kind of money in Japan.  It has loaned the US—the world’s biggest debtor–$1.27 trillion.

Right now, the US needs all the creditors it can find.  That’s because its borrowing appetite is off the charts, gorging on $4 trillion or more in fresh borrowing this year alone.  And when you need to fund a $27 trillion dollar national debt, you need all the lenders you can get to stay afloat.  

About $7 trillion of the US national debt comes from foreigners.  Including China.  Those countries don’t lend us that money just because they like us so much.  They do so because it meets their needs to have dollar reserves for settling cross-border commerce and debt obligations and to provide some underpinning for their own currencies.

But China could probably lighten up its Treasury holdings considerably.  Russia, until recently a major US creditor, dumped most of its dollars.  And put the money in gold instead.

So, here’s what’s on the agenda:  Trouble over Hong Kong.  More trade conflict.  Claims against China for COVID-19.  Congress has passed a human rights sanctions measure against China, now in the President’s hands.  Huawei.  China’s talk of retaliating against the Huawei ban with its eye on Boeing, Tesla, and Apple.  A growing pushback against Chinese students studying in the US.  Claims and counter-claims in the South China Sea’s shipping lanes.  Plus China’s considerable debt problem of its own.

Financial warfare is about to break wide open.

It’s not hard to imagine a sea lanes incident or accident that leads to hot warfare.  Especially in an election year.  When the tinder is ample and dry, it doesn’t take much to spark a conflagration.  (Look up the assassination of Archduke Ferdinand as an example.) 

Today there is more dry tinder in Sino-American relations that there was in the Balkans in 1914.  

Just as it’s a safe bet that gold prices will be higher next year, it’s a safe bet that China won’t still hold $1.08 trillion in US Treasury debt next year.  And that will mean more Fed money printing to fill the gap.

And that will make the higher gold price part of the bet a sure thing, too.

It’s not all that complicated.  

For example, if the government spends like crazy and comes up with the money by just printing it, you should be suspicious of the long-term prospects of that money.

It’s not all that complicated.

We’ve tried to do a good job making fiscal and monetary policies simple.  Another example:  See out post on fiscal policy from early May that asked Is a US Debt Calamity Dead Ahead?  We reported that the US deficit for Fiscal Year 2020 was  going to explode.  It had been expected to run about a trillion dollars.  Then, suddenly that changed to $4.5 trillion.  That’s a lot of red ink.  It’s more than the five prior years’ deficits combined. 

Since the US was already unable to pay its debts, but has to keep borrowing more and printing more to keep the game going, of course a calamity is dead ahead.  If you doubt it, try the same kind of budget management at home.  

Calamity.  Not that complicated.  

Or take our recent commentary about monetary policy, What Hit Us?  We tried to show you how fast the Federal Reserve is printing money.  Pretty damn fast, to tell you the truth.  Fed officials like Kashkari and Powell have been quite outspoken about how they can print forever.  They sound proud of it, like accomplished counterfeiters might be proud of their handiwork.  Or maybe they know what a jam we’re in and they are putting on their brave faces.  But do dollars rolling off the Fed’s printing presses by the trillions make the dollars you’ve saved worth more or less?

Less.  Not that complicated

One of our favorite market commentators, Michael “Mish” Shedlock from Global Economic Trend Analysis, usually cuts through any fog and confusion, too.  And now he’s pointed out something that we, in the rush of domestic news, have not adequately reported.  Just how much of these same reckless fiscal and monetary policies are other leading economies engaged in?

Quite a lot.  Here’s a quick synopsis from Mish:

Japan:

Japan is considering a fresh stimulus package worth over $929 billion…. The package, to be funded by a second extra budget for the current fiscal year beginning in April, would follow a record $1.1 trillion spending plan deployed last month.  

China:

China will increase it’s budget fiscal deficit to a record 3.6% of gross domestic product this year, up from 2.8% in 2019.  This is the first time the ratio has exceeded 3% – a red line for decades.

European Union:

On April 23, the EU leaders announced ‘Unprecedented’ Stimulus Against Pandemic.  In addition, the EU is engaged in a stimulation policy of negative interest rates.  At the same time, the breakup of the EU is looking more likely.

Mish says, “given all this competitive currency debasement, I have a question: Got Gold?”

See?  It’s not that complicated.

The world’s central banks continued their diversification into gold with new acquisitions in the first quarter of 2020 (January – March).  The World Gold Council reports net new central bank gold purchases of 145 metric tons in the period.

We feature news about central bank gold buying because we believe it represents one of the most important global megatrends of our time.  Its primary impact is threefold:

• Central bank gold purchases are a harbinger of growing “de-dollarization,” the waning role for the dollar as the world’s reserve currency.  As such they also signal a long-term decay in the dollar’s purchasing power.

• The addition of gold to central bank reserves makes those nations less susceptible to US  foreign policy hegemony.  It is no secret that the rest of the world, including long-time US allies, are bristling at what they see as the heavy hand of US trade restrictions and sanctions that directly impact their economies.

• The sheer quantity of central bank buying power has an unmistakable impact on gold’s trajectory.  Furthermore, gold in central bank reserves is gold in strong hands and is less likely to be sold. 

Although central bank purchases in the first quarter were nine percent above the five-year quarterly purchase average, they were eight percent lower than during the same quarter in 2019.

Russia announced that it suspended its gold buying program as of April 1.  The Central Bank of Russia has been the largest of the national gold buyers since 2005.  The World Gold Council says that “the bank gave no reason for the move.” However, petroleum and natural gas are Russia’s leading “cash crops,” so sharply lower energy prices this year have unquestionably impacted the country’s foreign currency earnings.

The Gold Council reported earlier that global investment demand for gold (bullion, coins, ETFs) in the first quarter of 2020 was 80 percent higher than the same quarter in 2019

The Fed is doing what it did in reaction to the Panic of 2008.  The very measures that ran gold to stratospheric new highs in a few short years.

Only they’re doing much more of it.

But don’t just take it from us.  

Now you have it directly from Lawrence Powell, the chairman of the Federal Reserve.

And the gold market is responding the way it did last time.  By heading much higher.

Sunday night (5/17/20) on the CBS news show 60 Minutes, Powell confessed the whole money-printing scheme.  Here’s the exchange with anchorman Scott Pelley.

Pelley: “In terms of size, Mr. Chairman, how does what the Fed is doing right now compare to the unprecedented action it took in 2008?”

Fed Chairman: “So the things we’re doing now are substantially larger. The asset purchases that we’re doing are a multiple of the programs that were done during the last crisis. . .”

During that money-printing spree, after the collapse of Bear Stearns and Lehmann Brothers and as the housing market melted down, gold ran up almost $1,200 hundred dollars an ounce, from about $700 to $1900.  Silver rocketed from below $9 an ounce to almost $50.

Only this time, the Fed is creating even more money out of nothing than before and doing it much faster. (The Fed just prints it, said Powell, “We print it digitally.”)

As the interview continued, Chairman Powell assured Pelley that the Fed hasn’t done all it can do.  Despite the fact that the Fed has created $3 trillion out of nothing since the first of October, Powell says it can still do much more.

Fed Chairman:  Well, there’s a lot more we can do.  We’ve done what we can as we go. But I will say that we’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have. So there’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.

Pelley: What would the Fed’s next steps be, potentially?

Fed Chairman: Well, to begin, the one thing we can certainly do is we can enlarge our existing lending programs. We can start new lending programs if need be. We can do that. There are things we can do in monetary policy. There are a number of dimensions where we can move to make policy even more accommodative. Through forward guidance, we can change our asset purchase strategy. There are just a lot of things that we can do.

Pelley: What would the Fed’s next steps be, potentially?

Fed Chairman: Well, to begin, the one thing we can certainly do is we can enlarge our existing lending programs. We can start new lending programs if need be. We can do that. There are things we can do in monetary policy. There are a number of dimensions where we can move to make policy even more accommodative. Through forward guidance, we can change our asset purchase strategy. There are just a lot of things that we can do.

Two things:

First, buckle up.  The Fed money-printing machine is going to shake this country to its foundations.

And two, contact your Republic Monetary Exchange gold and silver professional today.

As we reach the midway of the month, here are some recent developments and news stories we don’t think our friends and clients should miss!

Food prices are starting to climb.

Here’s the headline from CNBC:  US grocery costs jump the most in 46 years, led by rising prices for meat and eggs.

“The Labor Department reported Tuesday that prices U.S. consumers paid for groceries jumped 2.6 percent in April, the largest one-month pop since February 1974.

“The price of the meats, poultry, fish and eggs category rose 4.3 percent, fruits and vegetables climbed 1.5 percent, and cereals and bakery products advanced 2.9 percent.”

It’s not illiquidity… It’s insolvency!

The problem on America’s financial landscaped is not something the Fed can fixed by just printing more money.  It’s not a problem of liquidity.  It’s a problem of insolvency.

That’s the view of Stanley Druckenmiller, the legendary hedge fund manager. 

“The consensus seems to be don’t worry, the Fed has your back,” Druckenmiller said recently. “There’s one problem with that.  Our analysis says it’s not true.”

Trillions in stimulus programs equal plenty of liquidity, but it doesn’t insure growth.  Stated differently, you can lower rates and pump money into the economy, but is it going to make people comfortable flying or make businesses want to expand capacity in the face of weak demand, or make people want to book cruises?  The stimulus programs aren’t enough to make the economy bounce back.  “It was basically a combination of transfer payments to individuals, basically paying them more not to work than to work. And in addition to that, it was a bunch of payments to zombie companies to keep them alive.”

Bloomberg characterized Druckenmiller’s views as “among the strongest comments yet by a Wall Street heavyweight on the bleak outlook facing the U.S.”

We’ve referred to Druckenmiller in these comments recently as among “the smart money” Wall Street figures who are buying gold.

—

If people don’t buy something, does the price go up or down?  If people don’t drive does gasoline go up or down?  If people don’t fly, do airfares go up or down?

Looping back to rising food prices for a moment.  The Consumer Price Index for April, released this week, was down 0.08 percent.  According to the Bureau of Labor Statistics, that’s the biggest monthly decline since December 2008.

But hold the phone a second!

Economist Robert Wenzel points out that the drop was in things that nobody is buying.  

But people still eat:

“A 20.6-percent decline in the gasoline index was the largest contributor to the monthly decrease. The indexes for apparel, motor vehicle insurance, airline fares, and lodging away from home all fell sharply as well.

“On the other hand,  food indexes rose in April, with the index for food at home posting its largest monthly increase since February 1974. The prices for food at home increased in the month by 3.5% and the prices for food away from home increased by 4.21%.

“The index for meats, poultry, fish, and eggs increased the most, rising 4.3 percent as the index for eggs increased 16.1 percent. The index for cereals and bakery products rose 2.9 percent in April, its largest monthly increase ever…. 

“Within a month or so, I expect the travel related price indexes to flatten out and then you are going to start to see major across the board indexes showing price increases given the money the Federal Reserve is pumping into the system.”

—

Republic Monetary Exchange  — Take delivery of your gold and silver today!

We are continuing to hear reports of other dealerships facing difficulty making delivery of gold and silver to their clients.  

Here at Republic Monetary Exchange we always recommend best practices and despite the difficulties others may have, we still have gold and silver in inventory.  

You can buy today and take delivery today!

Like Jeopardy!, today’s post comes in the form of a question.

How long?

It’s getting close, but how long?  

How long before gold makes a new all-time high?

We’re not trying to be tricky, since gold is already making new all-time highs all around the world. 

Gold has recently set new record highs in major currencies like the Australian and Canadian dollars, the Swiss franc, the euro, China’s yuan, the Russian ruble, the Korean won, the Swedish krona, the Indian rupee.

It has made new highs in lesser currencies as well, including the monetary units of – in  alphabetical order – Afghanistan, Argentina, Brazil, Chile, Columbia, the Czech Republic… and right on through to Vietnam, Vanuatu (that a South Pacific island nation, in case you’re prepping for a future Jeopardy! appearance), Yemen, and Zambia.  

But how long before gold makes a new all-time high in US dollars?

Gold traded as high as $1,900 in September 2011.  That means that with gold trading around $1,700 as we write, it will need to climb almost 12 percent to reach its all-time high.

That doesn’t appear to be a daunting task in this bull market.  After all, gold is up more than $650 an ounce since it low in 2016.  That a gain of 62 percent.

Twelve months ago, last May, gold traded at its low for the year of $1267.  It has appreciated more than 34 percent in a year.

As we identified long ago, gold is in a primary bull market.  

Whatever your feeling about the response of Washington and the Federal Reserve to COVID-19, the policies that have been implemented do not represent a change from those that have driven gold to its gains of the last few years.

They are a continuation of those liquidity and deficit spending policies.  We aren’t taking bets on when gold crashes through its old highs to new records.  It’s not a contest.  But it looks like it will be sooner rather than later.

To position yourself for profit and protection in the gold bull market, speak with an Republic Monetary Exchange professional today.  They are prepared to help you make gold and silver a part of your portfolio in a safe and secure way that will provide you with peace of mind.

The exploding US debt and the frenzy of Federal Reserve money printing is a reminder that the whole enterprise of public finance is not something you want to look at too closely… unless you are prepared for some really ugly stuff.

You will come face to face with deceit, theft, cronyism, hypocrisy, waste beyond measure, string pulling and influence peddling, the raw exercise of political power for private gain, and enormous riches for the few and impoverishment for the many.

Estimates are that COVID-19 will add $8 trillion to the government’s debt load over ten years.  There’s a lot of room in $8 trillion dollars for the kind of corruption we described above.

The $2 trillion CARES Act stovepiped hundreds of billions of dollars to large corporations.  Companies that were perfectly capable of setting aside capital to protect themselves from predictable cyclical and other business challenges used their earnings for stock buybacks instead.  Then, having enriched their senior management with swollen values for their stock options, they turned to the taxpayers to bail them out. 

In other words, their profits are privatized while their losses are socialized. 

Perhaps an account of the CARES Act appropriations that we already reported encapsulates the nature of public finance.  While restaurant workers and store clerks and drivers and others – Americans 30 million strong – lost their jobs, right off the top the emergency spending bill provided $25 million for additional House of Representative salaries!

According to the Manhattan Institute, with the pandemic “stimulus” measures total federal spending will surpass $49,000 per household.  Since median household annual income in the US is $61,937, the government is taking the lion’s share of it… some in today’s taxes, some in tomorrow’s, some by means of currency destruction.

So far, we’ve been writing about the fiscal side of the picture, Washington’s borrowing and spending.  We’ll let Ron Paul speak to the monetary side of the picture:

“Each of the Federal Reserve’s responses to the coronavirus shutdown increases the distortions of the market caused by the Federal Reserve’s meddling with the money supply and interest rates,” says Dr. Paul.  “These increased distortions guarantee the inevitable crash will be much more severe than the current downturn. The one upside is that the next meltdown will likely lead to the end of the fiat money system and thus the end of the welfare-warfare state.”

Where will the buck stop for all this fiscal and monetary excess?  With the US dollar, of course.  It will have to be massively devalued along the way. 

But there is something you can do.  You can protect yourself and even profit from this destruction with sensible investments in gold and silver.  Your Republic Monetary Exchange professional can advise you on the steps to take.

Tell us something we didn’t know!

In big, bold type the scare headline on the Drudge Report reads, “TREASURY BORROWS TRILLIONS MORE.”

And that links to a Wall Street Journal scare headline that reads, “U.S. Treasury Expects to Borrow $4.5 Trillion in Fiscal Year as Stimulus Spending Soars.”

Here’s the story. 

During the current April – June 2020 quarter, the Treasury expects to borrow $2.999 trillion.  (Think how hard they must have worked the numbers to keep from going over $3 trillion!)  

That means that during the current quarter, the Treasury will borrow more than it did in the entire previous five years combined!

And that is scary.  But because you read these posts, you’ve seen in coming.

Two months ago (Charts and the Stampede to Gold), we wrote, “With businesses slowing down due to the Covid-19 pandemic, tax revenue will fall.  It will fall further still if a payroll tax cut is implemented.

“At the same time, government spending will rise at a relentless rate with new spending on health-related measures.  

“That means the red line (gross Federal debt) will turn steeply higher.”   

In fact, it’s $1.5 trillion dollars higher today!  Just four weeks later!

Actually, we have been telling you for a very long time that the US monetary system – having abandoned the discipline of gold – will wind up in a steaming pile of collapsing debt.  

It’s not as though this hasn’t happened to governments over and over again throughout history.  

But for some reasons our political classes and monetary authorities think this time it will be different.  But it is never different.

Oh, sure, they’ll come up with something to try to paper it over.  They are very clever.  A new dollar perhaps?  An International Monetary Fund scheme?  A currency represented as being backed by gold but that really isn’t?  

Who knows what they’ll come up with? 

But the smart money knows a flim-flam when it sees one.  We wrote about the “smart money” the other day.  (See our recent post All the Smart Money is Buying Gold.)

We’d like to include Jim Rogers in the smart money category.  He’s watching the money printing like we are and is buying precious metals again for the first time in years.  Rogers currently prefers silver, saying, “The gold-silver price ratio is near its record high and so I prefer silver to gold because it is cheaper [on a relative basis].”

Remember that the only gold and silver that will matter is gold and silver that you can hold in your hands.  Not precious metals stocks or ETFs or a paper gold promises.  

Make Republic Monetary Exchange your go-to advisors to protect yourself and your family with real money, gold, and silver, that you take delivery of.

read now: All the Smart Money is Buying Gold

The Gold-Silver Ratio Reaches Unprecedented Highs During Shutdown!

The Silver Institute, a trade association has released its annual report on silver, the World Silver Survey.

The report, produced for the Institute by a private research firm, forecasts the silver price to reach $19 this year.  That represents an increase of 20 percent over the next 8 months.  

We think that factoring in off-the-charts spending and money printing by the government, that forecast is conservative, substantially understating the upside for silver this year.  Our view is colored by our long experience of watching silver dramatically out-perform gold in bull markets gone by.

The challenges for the 2020 Silver Institute report was incorporating unknowns about the effects of the COVID-19 pandemics into its forecasts.

Factoring in what is known about virus-driven mine shutdowns, along with other projections, it concludes that new mine silver production will fall by 5 percent this year, with overall global supply falling by 4 percent. 

In then looks to the shutdown’s impact on end-users, including silverware and jewelry.  Not surprisingly, it expects industrial fabrication to fall by 7 percent, “as a result of lower visitors to retail stores and the appetite for discretionary spending taking a hit.”

The offset is “strong interest in silver from retail investors.”  The report forecasts a significant 16 percent increase in investor demand for silver bars and coins.  

Strong demand from institutional investors will contribute to higher silver prices this year, as well.  The report cites stimulus measures (that would be deficit spending by governments and central bank money printing), negative interest rates, and the other global macroeconomic concerns that will drive institutional silver buying.  

The report also notes the historically high gold-silver ratio, which suggests that on a historical basis silver is hugely undervalued compared to gold.  The ratio as we write this is about 113 to one, meaning that silver is so inexpensive that it takes 113 ounces to equal one ounce of gold.

A gold-silver ratio is this stratospheric range is simply unprecedented in all history.  As you can see from the five-year chart above, the ratio catapulted in this range with the pandemic shutdown, and even briefly touched 125 to one in March.  

The World Silver Survey takes note of this anomaly, which will prompt additional investor inflow into silver.  Stated differently, “silver should also benefit from bargain hunting, on the back of its historically low relative value compared to gold.”

Finally, one commentator, echoing the call by Bank of America earlier this month for much higher gold prices, notes drily, “They can’t print silver, either!”

Speak with your Republic Monetary Exchange professional today about silver’s place in your portfolio for both profit and protection.

What is the smart money doing?  

For once it’s pretty clear.

They’re buying gold.

But don’t take it from us.

Fred Hickey writes a newsletter called The High Tech Strategist.  He’s been at it since 1987.  

Here’s a recent tweet from Hickey;

“ALL the smart money: Dalio, Druckenmiller, Tudor Jones, Zell, Gundlach, Singer, Klarman, Einhorn, Mobius (and some who I know are loading up but are doing it quietly) are long gold and understand the simple concept Hugh Hendry explains here. The question is: What are YOU waiting for?”

Hendry is a former fund manager who was asked in 2010 interview about the Greek sovereign debt crisis.  He answered succinctly (and correctly), “I recommend you panic.” The explanation from Hendry about gold that Hickey refers to is equally succinct:  In trying to debase the dollar to help the economy, the Fed will “definitely” help gold.  

The day before his comment about the smart money, Hickey tweeted this:

“With ink not yet dry on latest half trillion $ spending bill, this story of another planned spending splurge should scare the devil out of anyone concerned about deficits, national debt & unlimited QE (to “pay” for all this). Gold protects against such craziness.”

Hickey says that despite the sell-off, the stock market is still in a bubble, just like it was in 2000 and 2007.  In a recent interview, he said, “Just look at market cap-to-GDP which is supposedly one of Warren Buffett’s favorite indicators. It’s currently at 130%, a level that has only been seen twice: Today obviously, and in 2000. That means we’re still at bubble levels.”

In fact, Hickey says, we’re looking at the greatest downturn since the Great Depression.”

It is very likely that once gold runs through its all time high of just over $1,900 an ounce, more people will take notice and quickly propel gold much higher

We recommend beating the rush and buying now at these still advantageous levels.  Contact your Republic Monetary Exchange professional today.

“Things fall apart; the center cannot hold.” –W.B. Yeats

Here’s the headline: “The US is suffering the fastest deterioration in operating conditions for over 11 years.”

The economy is turning down even faster than anytime during the Great Recession.   

How could it not?  Is anyone surprised that with restaurants and gyms, barber and beauty shops, and so-called non-essential businesses shuttered, while doctors can’t treat their patients or perform elective surgeries, and dentists are furloughing their staffs, and schools and travel mostly shut down, and movie theaters and ball parks are closed…

… that 26 million people have filed for unemployment in the last five weeks?

The chief economist for one of the big bank holding companies just observed that “it would take a miracle to keep this from turning into the Great Depression II.”

But there will be no miracles.  The politicians and PhDs running policy are the exact same one who had the country $24 trillion in debt and the Federal Reserve holding trillions in assets it paid for by monetary fraud to begin with.  Before the coronavirus shutdown.

Oh, it was legal monetary fraud, but it was fraud nonetheless.  Why do you think the Fed so strenuously hides what it is doing?  Why do you think it is terrified of being audited?

So, the ones who sold us the map that marched us into this swamp are being hired as guides to march us out.  

So they come up with more spending.  And more money printing.

Sure, more debt will make us economically stronger.  And more legal counterfeiting will make America more resilient.

And here’s how deep the problem runs:  The governing classes are almost unanimous about these “remedies.”  

Having never gotten anything right yet, they are sure… absolutely sure… that ruining the dollar and burying the people in more debt is the exact right thing to do.

As Yeats said,” The best lack all conviction, while the worst are full of passionate intensity.”

So, here’s a quick update.  Today, as I write this, the national debt is $24.609 trillion.  

That’s up $1. 308 trillion just since January 1.  

In the same days, the Fed has purchased an additional $2.4 trillion of debt instruments including junk bonds  with money it just made up!

How could gold not keep marching higher?

Bloomberg:  “Gold to Reach $3,000—50% Above Its Record, Bank of America Says”

You’ve probably seen it in black and white movies.  Movies set in the old days when everyone read newspapers. 

Upon discovering the most unexpected and shocking news, uncovering a major corruption scandal, a plot, or crime, the intrepid reporter bursts into the newspaper building shouting, “Stop the presses!”

We have such a moment now!

The nation’s second largest bank has discovered that the Fed can’t just print gold like it can dollars!  

Stop the presses!

Bank of America has issued a new report raising its gold price target by 50 percent, from $2,000 to $3,000 an ounce.

The report is titled, “The Fed can’t print gold.”  

Here’s the payoff line: “As central banks and governments double their balance sheets and fiscal deficits respectively, we have also decided to up our 18 month gold target from $2,000 to $3,000 an ounce.”

“With the Fed committing to do whatever it takes to prevent widespread bankruptcies across the US, Congress injecting a $2tn fiscal stimulus plan, and economic growth on standstill until there is a cure or a vaccine, inflation could rise even if GDP does not, says
BofA.  “This backdrop should prove very positive for gold, in our view….”

“Another important point to remember,” according to the report, “is that, just as central banks are socializing risk in financial markets, governments are increasing their spending like never before during peacetime. Fiscal spending plans across developed economies are nothing short of breathtaking whether we look at them in dollar terms or as a percentage of each nation’s GDP.”

We’re glad to see others taking note of the unprecedented money printing and spending, but don’t mind noting that others (ourselves included, by the way) saw this period coming.  More than six months ago gold expert Ron Paul made an uncommon prediction.  Dr. Paul said that he expected gold prices to reach $3,000 by the end of this year, 2020, a year earlier than the BofA target.

In any case, we wonder what will happen to gold prices as more people wake up and a critical mass of the public starts to notice this new, hyper-overdrive, rocket-booster fueled, proton-pill juiced, steroidal-speed freak phase of Washington’s spending and Fed money printing.  

That will be a real stop the presses moment!

No Wonder Gold is Headed Higher!

The Federal Reserve is printing money like crazy!  

That’s not just an expression.  The Fed is unhinged!

The following charts say it all.  What it shows is completely unprecedented!  

It is a chart of Fed assets.  It represents what the Fed carries on its books, anything it has paid money for.  That includes government bonds, mortgage and other securities.  And now, as we have reported, even junk bonds.   

How does the Fed pay for the assets it buys?  It creates the money out of nothing.  It creates it out of thin air.  It buys assets in the afternoon with money that didn’t exist in the morning!

Perhaps not one person in a thousand understands this flim-flam.  We call it “printing money,” although it’s really done on computers.

On the left side of the chart you can see that Fed assets, which had been flat at about $800 billion dollars for a long time, suddenly started climbing.  This was the Fed’s response to the Mortgage Meltdown in 2008.

Eventually it printed enough to get Fed assets up to about $4.5 trillion, mostly buying trash from the big banks to bail them out.  

Of course, in diluting the value of the dollar by printing more of them, the Fed ran the price of gold to all-time highs.

Now, in response to the coronavirus shutdown, the Fed is printing money again.  Look at the right of the chart.  

The line has turned straight up!  

In a matter of a few days, the Fed has printed close to $2 trillion!

This is diluting, cheapening, the value of the dollar, much faster than anything the Fed has ever done before.  It is hard to comprehend how much money the Fed is printing in such a short period.  It took about three years last time to do what it has now done in weeks.

As we say, it is completely unprecedented.  It is train wreck for the purchasing power of the dollar.

But it will drive gold – and silver, too – much, much higher.

Speak with your Republic Monetary Exchange gold and silver professional today about the train wreck ahead of us.  Find out how to avoid the financial carnage and profit from this recklessness.

D.C. Doesn’t Care About the Dollar or Debt

A lot of timely questions and second thought about the coronavirus and the lockdown are appearing in the news right now.  We think it is always wise to question everything government does, but as we’ve said many times, we are neither virologists nor epidemiologists.

Our expertise in money.  And we can see what is going on in Washington in this moment of our national crisis.  

It is not good.

We view it as hard evidence that the US debt problem will not be solved.  It will end in a tragic bankruptcy and the destruction of the dollar.  It will cause people to flee to gold and silver.  

But we’re getting ahead of our short story.

At the end of March, Congress passed and the President signed into law the CARES Act.  It is a $2.3 trillion emergency spending measure aimed at tackling the US economic shutdown and the coronavirus pandemic.

$2.3 trillion is a lot of money.  It is the largest relief bill in history.   Trillion-dollar deficits are new enough that they are still shocking to most thinking people.  But with the CARES Act, what was going to be a trillion-dollar deficit has exploded.  

The 2020 deficit now is on track to be more than $3.8 trillion!

But it is a crisis, right?  Who cares about the price tak if all that spending is necessary, right?  These are emergency appropriations, right?

Well, apparently not.  Former Reagan administration Budget Director David Stockman has gone through the 880 page bill.  We’ll pass along some of what he found in his own words:

$25,000,000 for additional salary for House of Representatives (blows your mind, right off the bat!)

$100,000,000 to NASA (because, who knows why?)

$20,000,000,000 to the USPS (because, why the hell not?)

$300,000,000 to the Endowment for the Arts (Ah, screw it – let’s do it! They’ll never know)

$300,000,000 for the Endowment for the Humanities (because, not that many people even knew that was a thing?)

$15,000,000 for Veterans Employment Training (for when the GI Bill isn’t enough)

$435,000,000 for mental health support (Man, oh man, that’s a lot of suicide hotlines)

$30,000,000,000 for the Department of Education stabilization fund (Whoa, that’s a big one! Wonder how much goes to the NEA?)

$200,000,000 to Safe Schools Emergency Response to Violence Program (I guess the virus is kind of violent)

$300,000,000 to Public Broadcasting (NPR has to be bought and paid for by somebody. That somebody is you.)

$500,000,000 to Museums and Libraries (Who the hell knows how we are going to use it?)

$720,000,000 to Social Security Admin (But get this – of this, only $200,000,000 is to benefit people. The rest is for admin costs.)

$25,000,000 for Cleaning supplies for the Capitol Building (Seriously, it’s on page 136)

$7,500,000 to the Smithsonian for additional salaries (Wait a minute, what about the virus?)

$35,000,000 to the JFK Center for performing Arts (See above)

$3,000,000,000 upgrade to the IT department at the VA (I guess $3 billion ought to cover it.)

$315,000,000 for State Department Diplomatic Programs (What the hell does this mean?)

$95,000,000 for the Agency of International Development (What is this? Let’s keep the money here and clean up the streets of S.F. and L.A.)

There’s much more like that, but we’ll stop there because you get the point.  The national debt was unpayable before this bill, but even that is not enough for the scoundrels in Washington.  They will even use a deadly crisis to fund their pet projects and to spend money that benefits their crony constituents.

They are not capable of acting statesmanlike, not even in a crisis.  They will not deal with our fiscal problems.  They will not address the debt.

They will tank the US dollar.

Buy gold and silver now.

Gold took a big jump on Thursday (4/9) when the Federal Reserve announced its latest monetary outrage.  

The Fed is ramping its money printing to manic levels so that it can even buy junk bonds!  

Junk bonds.  Bonds that aren’t even rated investment grade.    

The Fed is stepping off the financial precipice.

It’s a long ways down for the dollar.  

The CNBC story said that gold jumped $50 “on the view that the Fed initiatives could be inflationary.”

Could be?

Could be?

For all of its other excesses, the Fed now comes up with a new $2.3 trillion dollar plan that includes buying junk bond ETFs.  Even as the economy is crashing.  

What will the Fed do next?  Start buying stock in individual companies?  We’re getting close to that.  You think we’re in a pork fest now?  That will be Washington cronies going hog wild at the special interest trough!  

It’ll be Mussolini time in America.

Now more than ever, you need to and pay attention to your portfolio and contact Republic Monetary Exchange.  If the Fed is adding junk to its portfolio, you need to do the opposite and add the most enduring and valued money of the ages to yours:  gold and silver.

We advise you to act now!  Do not delay!  But take the following warnings to heart:

WARNING:  Our competitors are out of inventory.  Some are promising to deliver gold and silver to their clients at some unknown, unspecified date far off in the future.  

WARNING:  If you pay them now, they say, they will try to get you gold and silver in six or eight weeks or some other time down the road and deliver it to you then.

WARNNG:  We strongly advise you against doing that.  Especially in these volatile times.  And especially when Republic Monetary Exchange has inventory on hand for immediate delivery!

While other gold dealers are unable to make deliveries., Republic Monetary Exchange still has inventory.  

But it is going fast!  

It’s first come, first served!

So, what are you going to do with your coronavirus stimulus money – otherwise known as the economic impact payment?  

Its money headed your way as early as mid-April, part of the $2 trillion bill Congress passed, and President Trump signed last month.

The economic impact payments amount to $1,200 for individuals, $2,400 for married couples and $500 for each qualifying child.

Robert Kiyosaki has some great advice for that money.  Use it to buy silver.

Not many people can claim to have had an impact on the public’s financial conversation of Robert Kiyosaki.  

Kiyosaki is the author of the author of Rich Dad Poor Dad, the best-selling personal finance book of all time.  He has taught tens of millions of people around the world to think about money and financial independence differently.  

His reach has been extraordinary.  Robert has authored 28 books which have sold more than 40 million copies.  But he does more than that, having created board games and software games to teach financial literacy both children and adults.  And then there is are speeches, interviews, articles, seminars…

Robert Kiyosaki understands paper money and the Federal Reserve.  And he loves silver!  He thinks it is among the best of all possible investments, especially in times like these.  “Silver is the most undervalued, lowest-risk, best investment of all asset classes,” he says.

Now he suggests that if the government gives you free money, you should use it wisely.  Don’t save dollars, says Kiyosaki.  Why save dollars when “Fed counterfeiting is printing trillions of fake dollars?”  

One of the things he recommends doing with your stimulus payment is buying silver.  “It’s the best buy for future security!”

We think that makes sense, too.  Afterall, the government is already $24 trillion dollars in the red.  When it passes a new spending bill, it has to borrow or print the money to fund it.  

Kiyosaki says he won’t stop buying silver until it hits $40 an ounce.

Talk to a Republic Monetary Exchange professional today to learn more about investing in silver.

To protect their wealth, many Americans are reacting to unsettling conditions in prudent and time-tested ways.

They are trying to protect their wealth with precious metals.  

The US Mint reports record-shattering gold and silver coin sales for the month of March!

According to the latest numbers from Coin News, the Mint sold 142,000 ounces of American Eagle gold coins in March.  That’s up from 7,000 ounces the prior month.  It represents an increase of 1,135 percent over March 2019.

The silver sales reflect an even greater demand.  American Eagle silver coins sales totaled 4,832,500 ounces in March.  That’s up from 650,000 ounces in February.  It is an increase of 469 percent versus last March.

Coin News points to silver supply shortages from the US Mint in February and March.  “Silver Eagle sales in February 2019 were stunted when the coins temporarily sold out. However, the coins also temporarily sold out earlier this month (March) and were subsequently rationed.)”

Even with the blistering pace of US Mint sales, many dealers around the country are not able to make timely deliveries to their clients.

However, unlike others, Republic Monetary Exchange still has inventory and provides its clients with immediate delivery of gold and silver.  

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 and can meet your gold and silver needs today, providing immediate delivery.  

Protect your wealth in these times of economic upheaval.  Republic Monetary Exchange Can Help. Contact us today!

Goldman Sachs – “Time to buy the Currency of Last Resort”

Goldman Sachs gets it.  “We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policymakers act to accommodate shocks such as the one being experienced now,” said the investment banking giant this week.

The company cited the 2008 precedent when the Federal Reserve announced its Quantitative Easing liquidity operations.  Over the next three years, gold surged to all-time highs.  

Similarly, in the current pandemic environment, the Fed has announced that it will use “its full range of tools” in liquidity operations.

Money Printers Gone Wild!  A Trillion Here, a Trillion There!

The coronavirus and bailout package in Washington could amount to more than a quarter of America’s Gross Domestic Product.   

Altogether the package could total $6 trillion!  

At the White House coronavirus task force briefing on Tuesday, Larry Kudlow, the President’s economic advisor, said measures would include $4 trillion in lending power for the Federal Reserve as well as the $2 trillion aid package.

“This package will be the single largest main street assistance program in the history of the United States,” Kudlow said.

US Output Drops at Fastest Rate in a Decade

The Purchasing Managers Index reports on the expected contraction of the US economy.  It’s business output index shows a sharp decline in March, following a decline in February.

“The service sector signaled an especially steep downturn in business activity, while manufacturers registered the sharpest drop in output since August 2009.

“Companies also reported the first contraction of new business since data collection began. The marked decrease in new orders stemmed from sharp falls in client demand following the outbreak of COVID-19, according to panel members.”

Republic Monetary Exchange Continues to Meet Client Needs!

While many – if not most – of our competitors across the country have found themselves unable to meet the needs of clients anxious to acquire gold and silver, Republic Monetary Exchange continues to provide its customers with the popular gold and silver products they seek.

Many of our competitors are out of gold and silver.  Either sold out, or without the inventory, market connections, and experience we have.  In any case, they are not able to deliver gold and silver.

Many dealers ask to be paid today for gold and silver that may be delivered at some indeterminate time in the future.  We recommend strongly against that.

We urge you to contact Republic Monetary Exchange today.  Speak with one of our precious metals experts and prepare now for conditions to come.  

Do not wait for more Washington red ink and trillions in printing press money to drive gold and silver prices to new highs.  Contact us today!

ONE ADDITIONAL NOTE:  We know that events have squeezed many people’s personal finances and that some may need to sell gold and silver.  Perhaps you’ve heard our advertising over the years, that in addition to offering the best prices to buyers of precious metals, because we operate a continuous two-way market, buying and selling, we are able to pay the most for gold and silver when you wish to sell.  

Let us help you, even if you didn’t buy your gold and silver from us.

Don’t Get Quarantined in Dollars!

You do not want to risk being locked down in an incurable paper money economy.  One with no escape.  You need to be aware of just how grim the prognosis is for the Fed’s dollar.  

So today we share an observation from Tom Dyson, who writes a newsletter called Postcards from the Fringe.  Dyson is himself a veteran of the “repo” desk at Citigroup.

“The Federal Reserve’s balance sheet is about to EXPLODE higher,” he notes.  

Here’s why:

Dyson believes that between existing spending and the trillion-dollar deficit it is already running, a parade of stimulus schemers, and plunging tax revenue from a stalled economy, the Treasury is going to have to borrow another $10 trillion on top of the $23.5 trillion it already owes.  

But stand back and ask who is going to fund that debt?  Who is going to buy trillions of more treasury bonds?

Not China, says Dyson.  He’s correct.  China is up to its eyeballs in its own problems and not just the Coronavirus.  It’s a debt problem, staggering, to begin with, it grows with the health crisis and the slowdown.

Not the oil-exporting nations.  Not at these petroleum prices, for some below the cost of production.

Not emerging markets says Dyson.  They are having to dump their treasuries to support their plummeting currencies.

And not Wall Street.  “Asset managers are dumping their Treasury holdings to meet redemption requests and margin calls,” he writes.

So who does that leave?  It will be left to the Fed to “monetize the debt.”  That means magically turn the debt into money.  It must print money to buy US government bonds.  The Fed is not even making a secret of its willingness to print money until the cows come home.

“And that’s why the Fed’s balance sheet has started to hyperinflate,” says Dyson.  “It’s at $4.5 trillion now. If I’m right about the hole the government finds itself in right now, the Fed’s balance sheet will pass $10 trillion later this year… and then pass $20 trillion or $30 trillion in the next few years.”

If you don’t own gold and silver, then face it: your portfolio is quarantined in dollars.

And that is not a good place to be. 

Especially now!

We know that even if you are unable to go to work, practicing social distancing, or even quarantined, that you still can’t read everything.  So here is a sampling for you of observations and insights from people we turn to from time to time.

Bretton Woods Research writes that we are only in the third inning of this process of Federal Reserve actions, falling oil, shutdowns, and adjustments.  It foresees a lot more downside for the stock market: “Depending on the length of the shutdown, it’s possible to see a downside scenario where the S&P 500 reaches 1750 almost 50% below the 2020 peak.”

That’s almost another 30 percent lower than we are today.

Veteran gold and silver analyst Jim Sinclair’s associate Bill Holter doesn’t pull any punches.  He says global bankruptcy will result from the world’s most over-leveraged shutting down for a month or more.  

“It is over folks,” says Holter.  “The system is coming apart at the seams and the ‘promises’ the world ran so smoothly on for so long are being laid bare. You might ask, which promises? The answer is ALL promises.

Holter points out that precious metals prices on the exchanges are for paper representations of the metals and are quite different from the actual prices for real gold and silver that you can hold in your hands.  “In the metals arena, you see paper pricing extremely weak. However, the real world shows something very different. The US Mint is out of both gold and silver eagles. Other sovereign mints are also running out of supply or already out.”

Conditions have been changing fast.   Be sure to check in with your Republic Monetary Exchange gold professional for current conditions and product availability.

David Stockman is keeping an eye on the growing roll of bailout-ees:  “They are talking about Bailouts for Everybody—airlines, shale producers, Boeing, corporate America, the banks, hotels, restaurants, cruise lines, casinos, small business, medium business, every business and some or all of the households of America in the form of helicopter money from Washington.”

We ask you to bear in mind that when Washington and the Fed bailout everybody when they pass out $1,000 check to everybody, everybody pays.  They really bail out nobody, because the burden is borne by the recipients.  By everybody.  The cost is hidden in the falling purchasing power of the paper money.

And that is extremely bullish for gold.

Even more unhinged, and more bullish for gold is the belief that we – Washington, the Fed, the US taxpayers – can bail out everybody.  Even so, the Fed announced its decision on Thursday (3/9) to make dollar loans to a slew of foreign central banks for the next six months.

ZeroHedge:

“How much dollars will be available? As per the release, the Fed will release up to $60 billion each for the Reserve Bank of Australia, the Banco Central do Brasil, the Bank of Korea, the Banco de Mexico, the Monetary Authority of Singapore, and the Sveriges Riksbank and $30 billion each for the Danmarks Nationalbank, the Norges Bank, and the Reserve Bank of New Zealand.”

We will end today’s discussion by looping back around to our own comments recently about the Plunge Protection Team, here.  Yesterday (3/18), White House economic advisor Larry Kudlow floated the idea of a sovereign wealth fund, that the Federal Reserve print money to buy stock.  Kudlow war purportedly limiting the idea to companies the seek government aid in the COVID-19 episode.  

But that kind of limitation will fall quickly.  We’ve seen these kinds of things before and we’ve seen this particular idea coming.  It is a reflection of the unmatched influence of the government’s Wall Street cronies.  Taken to its logical extreme, they basically want to empower the Fed to buy stocks and guarantee their stock market profits.  This proposal is advancing quietly, but quickly.  

As we said, “If it is allowed to do this, say goodbye to American prosperity.  Cronyism and influence peddling will run rampant in a carnival of corruption as state bureaucrats and officials decide which stocks to buy and at what prices.  As money flows to the influential and the well-connected, honest pricing, innovation and free-market competition will grind to a halt, product inferiority will rule the day and the living standard of the American people will fall hard.

“It will be Mussolini time in America.  

“Buy gold.  And if the government starts buying stocks, buy more gold.”

It could have been one of many other things, but the Coronavirus is the pin that popped the stock market bubble.  

Now the Federal Reserve has started another aggressive round of Quantitative Easing.  It does so under the general behavioral rule that when you’re holding a hammer, everything looks like a nail. 

Printing money is the Fed’s hammer.  It uses that tool for every crisis.  In the original QE program, the Fed created almost $4 trillion dollars.  In response, gold marched higher over the next three years, from just above $700 an ounce in 2008 to its all-time high of $1900 in 2011. 

Having already launched its new money printing binge last fall, before the Coronavirus, the Fed is now stomping on the accelerator.  As the red arrow points out, the Fed’s balance sheet, having leveled off somewhat at the end of last year, turned virtually straight up at the end of February.  And it will climb much higher from here.  Indeed, it is already on track for a new all-time high, past $4.5 trillion and headed quickly to $5 trillion.

What does that mean?  It means a heck of a lot of new money printing.  And that’s early in the crisis.  New inflation-funded spending initiatives are coming faster than anyone can track.

But the stock market sell-off and the business shutdowns in place and to come are so devastating, that nothing that could be considered “normal,” even on the scale of the prior liquidity easing will be effective.  

Doug Noland of Credit Bubble Bulletin puts it this way:  

“I do doubt fiscal and monetary stimulus will resuscitate the Bubble in global leveraged speculation. Illiquidity and market dysfunction have been exposed. Huge losses have been suffered and ‘money’ will flee popular (and overcrowded) leveraged strategies (i.e. risk parity). I also suspect confidence in derivatives has also likely been shaken. Liquidity risk will be a persistent feature of global markets.” 

Warren Buffett described times like these in a more folksy way:  “When the tide goes out you see who’s been swimming naked.”

Make no mistake.  The tide has gone out.

Now we must hold our breath while we watch to see the financial trouble that will be exposed, in banks, funds, brokers, companies, pension plans, insurance companies, and investment products like annuities.  The criminal recklessness on display will extend to all levels of government.  

This is not an age of fiscal prudence or honest stewardship.  The politicians and government have established the standards of our age, with its fraudulent representations.  It taught generations of Americans that they, like the government itself, could spend their way to prosperity.  It taught that it could make up money out of thin air, that deficit doesn’t matter, that debt doesn’t matter either because we somehow owe it to ourselves.  They taught the people that they can all live at someone else’s expense.  And they even taught that honest accounting doesn’t matter and that something as routine and sensible as an audit was beneath the dignity of the world’s largest money manipulator, the Federal Reserve System.

Now all these lessons have to be unlearned.  After so many years of delusion, there is pain involved in confronting reality.  But reality always asserts itself in the end.

Now is the time to buy gold.  That is because gold is the only financial/monetary asset that is not someone else’s liability.  It is not a hopelessly indebted company or government.  It is not dependent on someone else’s honesty, prudence, or accounting practices.  It is not dependent on the pictures engraved on it, or on the country that minted it.  It is not a promise of performance that may or may not be met in the future.  

As J.P. Morgan said in congressional testimony over a hundred years ago, “Gold is money.  Everything else is credit”

We are compelled to take our attention off the spreading of the Coronavirus for this post, simply to remind you of the presidential race.  It’s become something of a bidding war as the Democratic candidates outbid one another for what the intend to give the American people –  guaranteed jobs, national rent control, and free housing, free health care, free college, free daycare, yada, yada, yada.  

Next Tuesday, March 3, is Super Tuesday, with Democratic primaries in 14 states.  More than a third of the Democratic National Convention delegates will be awarded on Super Tuesday.  

Right now Bernie Sanders is the odds-on favorite to snatch the Democratic nomination according to all the betting markets.  Real Clear Politics places Sanders’ average among the markets at 55 percent.  

Michael Bloomberg is way behind at 21 percent.

How is the rise of Bernie Sanders affecting the outlook for the markets?  Frankly, it’s not good for stocks.  It is very good for gold.  

Goldman Sachs, which had an earlier target for gold to reach $1600 later this year, has raised its forecast.  The firm now calls for gold to climb to $1700 over the next three months, and to $1750 in six months.

The investment bank identifies three factors in its projection:

1) Fear-driven investment demand based on the coronavirus;

2) Large global savings glut, while gold has a better outlook for appreciation than bonds in the next recession; 

3) The rise of Bernie Sanders, with a policy of large tax hikes that can slam stocks, and a proposed wealth tax that makes gold especially inviting for high net worth individuals.

Jeffrey Gundlach, the man known as “the Bond King, and the CEO of DoubleLine Capital, also views Sanders as a threat to the stock market.  In an email to CNBC on Wednesday (2/26) Gundlach wrote, “If this stock market reversal is due exclusively to the virus, then why is United Healthcare down far more than (the S&P 500)? Why is healthcare as a sector broadly not outperforming? Answer to these questions: The market is digesting a better than 50 percent chance of Bernie getting the nomination.”

Senator Sanders’ plan to overhaul the economy runs up to at least $50 trillion.   He says the Medicare For All part of his plan would cost $30 trillion over ten years, but this week was only able to offer the means to fund $17.5 trillion of it.  That $17.5 trillion is necessarily the result of new taxes, and Sanders is just getting started.  

It reminds of Margaret Thatcher’s pithy observation that the problem with socialism “is that pretty soon you run out of other people’s money.”  

Of Sanders boosting investment demand for gold, Goldman Sachs says his “proposed wealth tax could incentivize high net worth individuals to buy physical gold bars and store them in a vault, where it is more difficult for governments to reach them.”

A lot of things aren’t yet clear about COVID-19.  But one lesson is clear:  Buy gold to protect yourself in a crisis!

People around the world get the flu every year.  Some people die from it.   The important public health question is just how lethal any spreading strain is.  

We don’t know the answer about this coronavirus.    

Estimates in the press range from 0.04 percent mortality to 2 percent. 

The difference is a factor of 50.  It matters a lot.

Two percent of the US population is 6,540,000.  That is a wartime level of magnitude.  0.04 percent is 130,800.  That’s more than twice the number of Americans that died in the Vietnam war.

Fortunately, those numbers must be adjusted by the percent of people who would actually fall victim to the coronavirus.  It is estimated that about ten percent of the US population get the flu in any given year.  In a particularly bad strain, that may rise to 25 – 30 percent.  

We’ve taken the time to look at these numbers to show just how little is known about this disease.  The range of possible consequences is simply immense.

But we do know that in a crisis, the world turns to gold.

That was evident on Monday (2/25) when both South Korea and Italy raised the alarm about the spread of the virus in those countries.  So much for the hope it would be mostly “contained” to China.  The Dow Industrials fell more than a thousand points.  It was the worst day single day in two years for both the Dow and the S&P 500.  Gold raced toward the $1,7o0 mark.  On the spot (physical cash markets) gold hit a high Monday of $1,688, a seven year high, before settling back a little to close at $1,671. 

In reviewing what we have written about the coronavirus so far, we would like to repeat our advice: to use this outbreak as time to pivot to caution with stock and bond holdings.  In January we looked down the road and wrote that from what we could see, the coronavirus “looks very worrisome indeed.  It may be much bigger than anything the world has experienced since the Spanish flu epidemic that claimed hundreds of thousands of American lives just over 100 years ago.”  (The Coronavirus, Black Plagues, and Black Swans)

On February 9 (In a Crisis), we wrote, “Some of our readers will recall all the things that were shut down after 9/11, especially air travel.  Today’s epidemic has us wondering how long these grids can function if whole cities and workers are quarantined.  We may learn from China’s experience.  In any case, we wonder what would happen if the increasingly stressed national electricity grid went down, or if transportation were broadly encumbered.  

“What would you do if a power grid interruption meant ATM machines stop spitting out cash?  Or if emergency health measures mean that banks and other business can’t open for some time?

“Tragedies can provide us valuable reminders.  When the questions have to do with the monetary system, the answer is that in a crisis you would be very happy to own gold and silver, the world’s most liquid commodities. Precious metals have weathered the storms and saved fortunes and even lives for people throughout the ages and around the world.”

As we write in the middle of the trading day on Tuesday (2/25) everything on our screens is red.  That means down.  The Dow is off more than 900 points.  And gold has given back some of its Monday gains.  We are grateful for that, because it means a more favorable buying price (for now!) as this crisis continues to unfold.

The eventual impact of COVID-19 is unknown.  But the centrality of gold in a global crisis is very well known.

If you have not reduced your exposure to stock and bond markets and spoken to a Republic Monetary Exchange gold and silver specialist about protecting yourself and your family with gold, we urge you to do so at once.

We don’t know who first said that the stock market is a bubble in search of a pin, but it’s an image that is both vivid and true.

It would be easy to excuse missing the current stock market bubble, if we hadn’t already suffered the popping of the dot.com bubble and the housing bubble in just the last 20 years.  When the dot.com bubble burst the Nasdaq lost 80 percent of its value.  When the housing bubble found its pin, millions of Americans lost their homes.

The current stock market bubble is sustained by the following beliefs:

• The coronavirus doesn’t matter.
• An economic slowdown in unlikely.
• Deficits don’t matter.
• The national debt doesn’t matter.
• The Federal can really control interest rates.

Yet any one of those things can be the pin the bubble is in search of.   

Indeed, there are more pins than those.  In a new article, the popular economist Nouriel Roubini identifies geopolitical pins among the others.  

He writes that the markets are “blissfully in denial of the many predictable global crises that could come to a head this year.”  

“For starters, the United States is locked in an escalating strategic rivalry with at least four implicitly aligned revisionist powers: China, Russia, Iran, and North Korea.”

“As of early 2020,” says Roubini, “this is where we stand: the US and Iran have already had a military confrontation that will likely soon escalate; China is in the grip of a viral outbreak that could become a global pandemic; cyberwarfare is ongoing; major holders of US Treasuries are pursuing diversification strategies; the Democratic presidential primary is exposing rifts in the opposition to Trump and already casting doubt on vote-counting processes; rivalries between the US and four revisionist powers are escalating.”

Another observer, Charles Hugh Smith, addresses the topic of bubbles on his Of Two Minds blog.  His post The Fed Has Created a Monster Bubble It Can No Longer Ignore is worth reading.  

We’ll share two important points Smith makes:

“History has never recorded a bubble which settled magically onto a ‘permanently high plateau’ and stayed there for months or years.  So the Fed has finally reached the point of no return: either it accepts a painful bursting of the monster moral-hazard bubble it has created or it lets the monster lead the stampede over the cliff to a financial collapse that the Fed can’t rescue with the usual tools of lowering interest rates and bailing out banks.”

And:

“The problem is that bubbles always pop, and they pop regardless of what central banks do. This is contrary to the popular opinion that if only the Fed had saved Lehman Brothers, the Global Financial Meltdown of 2008 would never have happened.”

If you’d like a little more detail about the Fed’s role in creating bubbles, see our post Do You Really Think This Can End Well?  In it we wrote, “What we are saying is simply this:  The stock market is a bubble of enormous proportions.  The Fed will try to keep it inflated, but eventually it will fail.  Eventually rates will rise.”

“And as always, the bigger the bubble, the bigger the bust.

“That’s just one reason why you should own gold.”

Contact Republic Monetary Exchange today to learn how to protect yourself and your wealth before the bubble finds its pin.

Today’s comments come from former Congressman and presidential candidate Ron Paul.

“The only way to avoid economic disaster,” says Dr. Paul, “is to cut spending and audit, then end, the Federal Reserve.”

Dr. Paul is a well-known gold authority with a great track record for predicting the calamities that result from economic irresponsibility.  His warnings given before the 2008 mortgage meltdown, an unnecessary tragedy that cost millions of Americans their homes, should be studied by everyone – Fed officials in particular – who insist that financial bubbles can’t be identified in advance.  

For years, as a member of the House Banking Committee, Paul would hold Federal Reserve chairmen’s feet to the fire in their official congressional appearances.

At one such hearing, Congressman Paul asked Fed chief Ben Bernanke if gold was money.

“No,” said Bernanke.

“Then why do central banks hold it?” asked Dr. Paul.

Paul’s latest warnings about economic disaster come from his February 17 column about the administration’s new fiscal year 2021 budget proposal.  He writes:

“President Trump deserves credit for proposing an 11.6 billion dollars cut in funding for the Department of State and the US Agency for International Development (USAID). Foreign aid does little to help impoverished people overseas. Instead, it benefits foreign government officials willing to do the US government’s bidding. The State Department and USAID are extensively involved in US intervention abroad, including efforts to overthrow governments….

“Even if Congress agrees to all of President Trump’s cuts, federal deficits will still be over one trillion dollars for the next several years. However, President Trump claims the budget will balance in 15 years. In order to show a balanced budget by 2035, the administration assumes three percent economic growth for most of the next decade. This level of growth is unlikely to come to pass. Instead, the current boom will likely end soon, and the economy will experience another major recession. Signs that we are on the verge of a downturn include rising homelessness and the Federal Reserve’s bailout of the repurchasing market.”

Dr. Paul observes that if Fed interest policies remain unchanged, it will inevitably lead to a dollar crisis.  If on the other hand, the Fed lets rates normalize, the debt bubble will burst.  

As we have said in these discussions, the Fed has put itself into a box.

Read Dr. Paul’s latest column HERE.

It’s time to review the latest numbers.  We hear from Washington that the economy is stronger than ever.  Perhaps.  But that doesn’t mean the American middle class is in good shape.  

So here are the disturbing facts:

Americans are so financially stressed that 32 percent of them run out of money between paychecks.  The percentages of those who run dry between paydays are worse among the poorest workers, but the problem of living from paycheck to paycheck is not limited to them alone.  For example, 31 percent of workers earning $100,000 to $129,999 suffer from the same syndrome: running out of money between paydays.

Americans are deeper in debt than ever before.  US household debt has passed $14 trillion dollars.  That’s $1.5 trillion more than late in 2008, when the economy cratered and millions of American lost their homes.  Meanwhile, and although the economy is in an record expansion now going on 127 months, credit card debt is at record highs.  Just in the last quarter alone balances rose 5 percent to $930 billion, while delinquencies are at an 18-month high.  Half of student loans are non-performing, in some state of deferral, grace period, or default.

Yet in a prolonged expansion and what is touted as the strongest economy ever, the chairman of the Federal Reserve had to lecture congress about its deficits.  Powell made the obvious point that the current deficit and debt trajectory is unsustainable.  

On Monday, President Trump proposed a federal budget for fiscal year 2021, one that comes with another trillion-dollar deficit.  And never mind that the proposal is claimed to put the government on track for a balanced budget in 15 years.  We are old enough hands that we have heard that sort of thing before.  In fact we have heard it more times than we can count.  

Here’s a reality check: the only budget that ever counts in Washington is the one for the current year.

And we don’t rely it in very much.

We don’t put much faith in anything that comes out of Washington.  As we said, we’ve are students of history and have ourselves been around for a long time.  

That’s why we put our trust in gold.

Shouldn’t you do the same?

Here are just a few observations about the markets from others, some new comments worth being shared.

The first is about the stock market from analyst David Rosenberg, founder of Rosenberg Research and Associates:

“While I cannot pick the date, I can tell you that this turbocharged debt cycle will end miserably, not unlike 2008 and 2001. Don’t try to time the inevitable mean-reversion trade…. In nearly 11 years the S&P 500 has soared nearly fivefold to multiples (on earnings, sales and book value — take your pick) we have only seen twice in recent history.”

“… there really is no reason to wait for the herd to head for the exits.”

David Rosenberg

The next is from an account by the editor of the Strategic Trader newsletter, E.B. Tucker.  We think the headline on the story says it all:

“Investing In Gold: The Biggest Upside With the Smallest Risk.”

As we have commented frequently, long past is any likelihood of the US government getting its financial house in order.  The rubber band of federal debt will be stretched until it snaps.  And if the government needs to print money and shove it out helicopter doors when it can no longer borrow– an updated version of the German inflation of the1920’s – it will do so.  

Société Générale analyst Albert Edwards looks as the debt “spiraling out of control” and has a few words on the subject worth reading:

“Does anyone seriously believe that any democratically elected government would be willing to raise taxes or cut government spending and future pension/health benefits in a bid to delay the fiscal time bomb? Of course they wouldn’t! And any government that attempts to do so will be hounded from office by an indignant public armed with pitchforks and much else besides.”

And finally, we’re not saying it is exactly like the seven Biblical plagues, but blogger Michael Snyder rounds up a few of the things going on all at the same time that could pass as curses:

“Global weather patterns have gone completely nuts, large earthquakes are popping off like firecrackers, it looks like the plague of locusts in Africa could soon develop into the worst in modern history, and a massive plague of bats is severely terrorizing parts of Australia.  On top of all that, African Swine Fever is wiping out millions upon millions of pigs around the globe, the H1N1 Swine Flu is killing people in Taiwan, there have been H5N1 Bird Flu outbreaks in China and in India, and the H5N8 Bird Flu has made an appearance at a poultry facility in Saudi Arabia.  Of course the coronavirus outbreak which is causing people to literally drop dead in the streets in China is making more headlines than anything that I have mentioned so far.”

The numbers are in for global central bank gold buying in 2019.  The World Gold Council reports, “Central banks were net buyers for a 10th consecutive year: global reserves grew by 650.3 tons, the second highest annual total for 50 years.”  

As you know, we believe central bank gold buying is among the most important megatrends of today’s financial world.  It eclipses in importance any other supply-demand fundamentals.  

The WGC also notes that the central bank buying trend is widespread, with at least 15 central banks acquiring a ton of gold or more last year.  Here is the chart from the report:

The Cost of the Coronavirus

Goldman Sachs is estimating that the coronavirus outbreak cost to China and the spillover effects on the rest of the world will reduce global GDP growth by two percent in the current quarter.

The firm expects that impact will be contained in the first quarter, writing, “Aggressive response from the authorities in China and elsewhere will bring the rate of new infections down sharply by the end of Q1.”

That’s the hope, anyway.

Is This a Hospital?  Or a Place Coronavirus Victims Go to Die?

Here’s a link to a Bloomberg News story that ran February 5 headlined, “China Sacrifices a Province to Save the World From Coronavirus.”

Hubei province has a population of 60 million.  Its capital is Wuhan, the epicenter of the coronavirus.  At the time the story was written, Hubei had 67 percent of all patients and had experienced 97 percent of all deaths from the coronavirus.

But amid all the reports and statistics, a photo in the Bloomberg story caught our attention for graphically portraying the possible scope of the outbreak.

Stocks didn’t act on Tuesday (2/4) like the Coronavirus outbreak was an extinction-level event.  

But as usual, there’s more to the story than immediately meets the eye.

UBS customers were told that China’s stock sell-off “is an opportunity to buy that country’s stocks.”   

One headline said, “Stock Market Rally Soars as Coronavirus Fears Fade.”   Another read, “Coronavirus?  What Coronavirus?”

The Dow Jones Industrial Average, which lost 600 points on Friday, gained back 144 on Monday and 400 more on Tuesday, while gold sold off both days, down almost $27 on Tuesday.

It seems like there are a lot of virologists, epidemiologists, and public health experts working as stock analysts and running investment portfolios, because these voices are acting like they know a lot more than the rest of us about the still spreading virus.

But did anybody who really knows blow the all-clear whistle?

No.  In fact, as we have gone to great lengths to explain in these discussions, the only thing that lifts stocks these days is the gushing of liquidity from central banks.  So, to understand the market action of the last couple of days, we need only look for the money spigots being turned on full force.  That’s what gets the algorithm traders excited.

And if fact the world’s central banks are opening the floodgates.  The People’s Bank of China mainlined $174 billion into the markets on Monday.  The Federal Reserve and the European Central Bank are onboard as well.

This is what the central banks do:  They print money.  That’s it.  It’s their only tool.  It’s the hammer in the hands of central bankers who see every problem as a nail.

You could call it counterfeiting, since it is all just made up money; but unfortunately, it’s legalized counterfeiting.   (And of course, it’s actually digital money, but we use the expression “printing money” as a short-hand.)  

A writer at CNBC on Monday described the syndrome we’re discussing about as well as anybody in the mainstream media ever.  He wrote, “Central banks like the PBOC and its counterparts around the world — notably the U.S. Federal Reserve and the European Central Bank – have been bailing out economies and financial markets since the 2008 financial crisis. Trillions in digital money printing along with bargain-basement interest rates have been the main weapons of choice to combat recurring episodes of slowness.”

Of course, doing the same thing over and over without solving the underlying problem could be clinically diagnosed as a derangement.  Meanwhile, the real problem, financial bubbles of gargantuan proportion that will eventually pop, go unaddressed by the central bank bureaucrats.  

In any case, Wall Street follows the central bankers’ lead.  If they are going to print a lot of money to offset the slowdown from the Coronavirus outbreak, then the stock markets will go up.  At least for a couple of day.  And even hedge funds guys that understand the long-term effects are nimble and will sell gold even if just a trade for a day or two, for the liquidity they need to leverage up in front of the new, aggressive money pumping.

That’s about as concisely as we can describe the action of the past couple of days.  If the Coronavirus has the deadly punch that many fear, its financial impact on the stock markets will be devastating and gold will rocket higher.  If Coronavirus proves to be less than a pandemic-level catastrophe, the central banks’ additional money printing will send gold higher as well.

The central banks are in a box of their own creation.  

The risk to stocks is extraordinarily high.  Gold is the only safe haven.  We recommend our friends and clients take advantage of this break in the gold price.  It isn’t likely to last for long.

Another reason gold goes up? More free stuff from the government!

It was no surprise around here, but the Congressional Budget Office just announced that the 2020 deficit will break $1 trillion.  For that reason, among others, gold will move higher.  

But what will the presidential election bring?

John Stossel has been following the campaign promises and tallied up the additional spending proposals of the remaining presidential candidates.  

Here is the breakdown of each candidate along with their proposed spending increases:

• Donald Trump $267 billion
• Joe Biden $532 billion
• Pete Buttigieg $752 billion
• Elizabeth Warren $2.8 trillion
• Bernie Sanders $4.9 trillion

By the way, and not that it matters, but before she dropped out of the race Kamala Harris was the big-spending champion.  If you had a hangnail or a crack in a flowerpot, Harris would offer a federal program to fix it.  

We say not that it matters, because the Federal government is already bankrupt, and facing default.  It can’t sustain any more deficit financing without its creditors and the world’s dollar holders going on strike.  The Fed’s rescue of the repo markets is just one sign that we are ending the game-over phase.

But if y0u do like to keep score, that’s the breakdown for now.  “In the race to spend money, Bernie Sanders is the ‘winner.’  And you,” says Stossel, “are the loser.”

And that’s why you need to own gold and silver!

Click HERE to watch John Stossel’s report, MORE FREE STUFF 2020.

THE CORONAVIRUS, BLACK PLAGUE, AND BLACK SWANS

We are not epidemiologists.  

It is because we are dealers in precious metals and not epidemiologists, that we will leave it to others to speculate on the long-term outlook for the coronavirus, its strands, and mutations.  We are innately suspicious of all government reports and news releases, to begin with, and that certainly includes whatever information about the coronavirus that comes out of Beijing! 

But we don’t mind commenting on the outlook for gold.

For now, we only wish to point out that the coronavirus outbreak is a classic “Black Swan” event. A Black Swan is an unexpected event that has an outsized impact. 

 9/11 was a Black Swan event.

Black Swan events are almost always destructive to the established order.  That would be things like government finances, trade, state currencies, and stock markets.  

They are almost always bullish for gold.

The initial reactions of the markets confirm this.  The Dow Industrials quickly gave up a thousand points as the coronavirus story began to spread.  Gold moved up.

That is easy to understand.  Stock markets and paper money schemes display fragility in the face of the unknown.  Gold is robust, as its history of millennia shows.

The Black Plague decimated trade, emptied cities, produced starvation, and slammed shut the door on economic growth.  It produced periods of high inflation and other economic disruptions.  

Meanwhile, back in this century, here is the lead from a Wall Street Journal story, “Coronavirus Tests Market’s Faith in Global Economy,” this week:  

“Investors who began the year feeling largely sanguine about the stock market are struggling to make sense of whether a growing coronavirus outbreak could upend their bets on a global economic recovery.”

From Bloomberg came this headline, “Safe Havens Shine as Spreading Virus Spurs Rush to Buy Gold.”  From the story:

“ ‘News flow on the virus is pushing safe-haven buying,’ Gnanasekar Thiagarajan, director at Commtrendz Risk Management Services, said by phone from Mumbai. ‘In this kind of an environment, stock markets could tank and that fear is further adding to the risk-averse sentiment. The outlook is bullish for gold, targeting $1,610 in the near term.’ “

The coronavirus story is moving fast.  It may be no more deadly that was swine flu or sars.  On the other hand, what we know of it looks very worrisome indeed.  It may be much bigger than anything the world has experienced since the Spanish flu epidemic that claimed hundreds of thousands of American lives just over 100 years ago.

We urge you to take the appearance of the coronavirus into account and take steps to protect your wealth.  Use it to focus for a few moments, considering all the other so-called Black Swans events that can occur at any time:  tsunamis and earthquakes, nuclear accidents, wars, and terrorist events, illnesses, and famines.

Consider as well just a few of the things that January 2020 has brought along with it:

• The deadly raging fires in Australia.  
• Substantial earthquakes in Jamaica (7.7), Turkey (6.7), and the Solomon Islands (6.3).
• The assassination of Iranian major general Qasem Soleimani.   
• The impeachment trial of President Trump.
• Flash floods in Jakarta, Indonesia,
• A major shakeup at the top of the Russian government.
• The coronavirus.

We think the coronavirus and its unknown impact, and all these other things are ample reasons to review your financial situation and take steps to preserve and protect your wealth with gold.

We’ve spilled more than a little digital ink here recently sharing the views of well-positioned people about how high the price of gold will go this year.  

A quick review:

Author Jim Rickards, says if the authorities let a debt crisis materialize, we can “watch gold soar to $14,000 per ounce or higher, not because they wanted it to but because the system is out of control.”  

A British fund manager has a new call, saying that “a bullish target for $7,166 is both logical and plausible.”  (The Gold Bull is Off and Running!)

One of our favorite forecasts is from Congressman Ron Paul.  Dr. Paul was long the leading gold authority on Capitol Hill.  But we especially note his forecast since it is very unusual for Dr. Paul to make any kind of price forecast.  Congressman Ron Paul thinks gold will double, reaching $3,000 by the end of 2020.  Furthermore, says Dr. Paul, when the big crisis hits, it is conceivable that his prediction of $3,000 gold will prove to be far too modest.  ($3,000 Gold at the End of Next Year!)  

More recently, we’ve shared the forecasts from people at the world’s largest hedge fund, Bridgewater Associates.  Greg Jensen, the $160 billion dollar fund’s Co-Chief Investment Officer told the Financial Times that gold could gain 30 percent this year, as global political uncertainties increase.   That forecast would put gold at $2,000 per ounce.  (The World’s Largest Hedge Fund Says “Gold to Surge!”)

We also commented on Bridgewater founder Ray Dalio’s observation that gold would be their top investment “for years to come.”   (Ray Dalio Warns “Cash is Trash” at World Economic Forum)

A lot of informed people are expecting gold to move much higher this year.  A McKinsey & Company consultant expressed the view shared by many of those cited above that ongoing global de-dollarization would be “good for gold.”  Veteran market analyst David Rosenberg said the other day that “gold is the place you want to be.”  Rosenberg said, “There is no such thing as a no-brainer, but this is close!”

Below is a one-year gold chart.  It paints a picture of a market poised to move higher.  You can see that gold broke out last summer (the birth of the bull market).  After consolidation at the end of last year, it has surged higher still.  For those technically minded, gold has broken convincingly over both its long-term (red line) and short-term (blue line) moving average trend lines.

The price movement traced in the chart is a response to objective economic and financial conditions:  De-dollarization.  A new generation of Quantitative Easing.  Unconstrained federal budgets.  Unfunded liabilities.  Trillion-dollar deficits.  Spending crazed politicians.  Monetary flapdoodle like Keynesianism and Modern Monetary Theory.  Negative interest rates.  Spend a few minutes pondering Washington’s behavior, the Federal Reserve’s folly, and fast-changing global financial realities, and we think Rosenberg is right:  Gold is the place to be.  

It’s as close to a no-brainer as we’ll ever see.

We’ll Let Billionaires Say It For Us!

Every now and then something worthwhile slips out at the World Economic Forum in Davos, Switzerland, an annual meeting of the world’s wealthy.  We weren’t surprised that this year that it came from billionaire investor Ray Dalio since we ourselves have cited Dalio a few times here in these comments.  

Dalio is the founder of the world’s largest hedge fund, Bridgewater Associates.

Tuesday during an on-location CNBC interview at the World Economic Forum, Dalio warned “Get out of cash,” and “Cash is trash.”  

Once again, Dalio urged investors to own gold, just as he has done before.  He has stated that gold will be his top investment for years to come.  In the same Davos interview, he took a swipe a cyber-currencies. “There are two purposes of money, a medium of exchange and a store hold of wealth.  And bitcoin is not effective in either of those cases now.”

Just last week we quoted Greg Jensen, Bridgewater’s Co-Chief Investment Officer, who told the Financial Times that investors should make gold a cornerstone of their portfolios, as “most of the world is long equity markets in pretty extreme situations.” 

Jensen pointed to rising geopolitical tensions, saying “There is so much boiling conflict.” 

He talked about the precariousness of the dollar’s role as the global currency reserve.  “When you look at the geopolitical strife, how many foreign entities really want to hold dollars? And what are they going to hold?” he asked.  “Gold stands out.”  (See “The World’s Largest Hedge Fund Says “Gold to Surge!” 1/16/20)

As long as we are letting billionaires speak for us today, here’s one more.  David Einhorn is the founder of Greenlight Capital.

Here is how Einhorn explained why gold is one of his top positions: “The bipartisan consensus is that deficits don’t matter – it implies we can always print our way out of trouble.  All told, we can count on aggressive fiscal and monetary policies in both good times and bad. Gold continues to be a hedge in our portfolio against adverse outcomes related to those policies.”

“I hold gold, and I am never going to get rid of it. I hope that I never have to use it,” Einhorn said last year.  

To learn more about gold and silver for wealth protection and profit, speak with an RME Gold professional today.

It has happened before.   And it will happen again.  

We didn’t expect it to happen now.  But it did, in Germany earlier this month.

We’ve seen it before.  People standing in lines that snake around the block, that is, waiting for their turn to buy gold.  Hoping that they’ll get their turn before it’s too late.

It happened here in the United States, during the Carter presidency as inflation screamed along at double-digit rates and gold raced higher and higher every day.  People began standing in line to exchange their dollars for gold.   With every trip to the grocery store, people could see that their paper dollars were losing value.  Maybe they didn’t know anything about money printing, central banking, or the Federal Reserve.  But they knew they were going broke with dollars.  And they wanted gold.

So they stood in line waiting.  Hoping that there would still be gold for sale and that it wouldn’t be too much higher when it was their turn.

This has happened in the not-too-distant past. In 2013, thousands of people in China waited in line to buy gold.

But when it happened in Germany the other day, it wasn’t just because people were desperate to exchange their Euros for gold before prices went higher.  No, the people stood in line because they wanted to protect their financial privacy.  They stood in line because of Germany’s war on cash.

Just days ago, the German government implemented new restrictions on its citizens’ buying of gold.  It added strict new reporting requirements on the people, whose otherwise legal activity – buying gold – now demands new intrusive reporting to bureaucrats.  The measure requires dealers to record identification for buyers of precious metals in amounts of 2,000 Euros or more and includes criminal background checks for businesses.

A measure of this type is always represented as anti-crime provisions.  In Germany, the reporting requirements are called “anti-money laundering” provisions.  But they never really reduce crime.  Instead, they are intended to suppress the efforts of people to protect themselves from intrusive government and bizarre monetary schemes like negative interest rates.

For a negative interest rate regime to be effective, people must be forced to keep their wealth institutionalized, so that it can be automatically taxed at the negative rate.  

Imagine making a bank deposit of $10,000 dollars.  When you go to withdraw it, you are given only $9,800 dollars.  Forget earning an interest return!  You are charged for the privilege of making a deposit with the bank.  

That’s negative interest rate policy.

You may well ask yourself why anyone would deposit money with a bank only to be charged for doing so.  You are right.  Few people would willingly cooperate.  Unless they have to because cash is no longer allowed and all money must be held by banks.

Because negative rates are the latest enthusiasm of central bankers, and likely headed for the US soon, a war on cash is picking up steam in the US, just as it is in Germany.

During the 2008 economic panic, a photo captured a line wrapped around the building of the Indy Mac Bank in Pasadena. You’d think they were giving away free money, but in fact, it was a run on the bank as account holders desperately raced to withdraw the money from their accounts.

Watch the following video originally aired at the time in 2008:

There will be a run on gold again, perhaps sooner than most people expect, because of failing banks and because of the dollar’s collapse.  But the growing war on cash is just one more good reason to include gold and silver in your portfolio now.

The co-chief investment officer of the world’s largest hedge fund says gold could gain 30 percent this year, as global political uncertainties increase.

That forecast would put gold at $2,000 per ounce.

Bridgewater Associates, located in Westport, Connecticut, manages $160 billion for its clients, some 350 of the world’s largest institutions.  Greg Jensen, the firm’s Co-Chief Investment Officer, told the Financial Times that investors should make gold a cornerstone of their portfolios, as “most of the world is long equity markets in pretty extreme situations.”

But Jensen’s recommendation is not just because of extreme stock valuations.  He cited growing income inequality in the US and rising tensions with China and Iran as some of the uncertainties that could prompt investors to look to so-called safe-haven assets.

“There is so much boiling conflict,” he said.

Jensen also said that the US dollar could lose its global reserve currency status.  That is an outcome we believe is inevitable (see here), one that will rock the American economy to its core, taking an enormous toll on the dollar.  “It’s definitely in the range of possibilities. And when you look at the geopolitical strife, how many foreign entities really want to hold dollars? And what are they going to hold? Gold stands out,” he said.  

Bridgewater founder and CEO Ray Dalio, cited many of these same factors last year as reasons to expect a major economic “paradigm shift.”  We reported on his observations in our post “Invest in Gold to Protect Yourself from Monetary Geniuses!”  last November.  That piece is worth reviewing 

“There will no longer be an attempt by any of the developed world’s major central banks to normalize interest rates,” Jensen said. That is a forecast for prolonged money-printing around the world.  

“People should be prepared for a much wider range of a potentially more volatile set of circumstances than we are mostly accustomed to,” said Jensen.

“Do I have everyone’s attention now?”

If the gold market could talk, we imagine it would be asking something like that.  

Gold surged throughout December, ending 2019 at $1523. 

Priced in dollars gold rose 18.3% and silver by 15.1% in 2019.  Then, with the killing last week of a top Iranian military commander Qassem Soleimani, gold briefly hit seven-year highs, touching $1590.

It is significant that gold also made new all-time highs in the Euro.

We have repeatedly expressed our view that 2020 will very bullish for gold.  Now we have had a glimpse of what the year ahead may hold.

As you can see on the following chart, gold has been up every single day since Christmas week, when it moved – and has stayed – above its 50-day moving average.

In a model of understatement, Moody’s senior analyst wrote clients on Monday that “a lasting conflict would have wide-ranging implications through the broad economic and financial shock that significantly worsens operating and financing conditions.”   Senior analyst Alexander Perjessy added, “A protracted conflict would potentially have global repercussions, in particular through its effect on oil prices.”

No kidding.

Both UBS and Goldman Sachs called for gold to outperform oil as conditions in the region worsen.  The global head of commodities research at Goldman Sachs said  “… history shows that under most outcomes gold will probably rally to well beyond current levels.”

Other analysts are predicting an ‘escalatory’ cycle lasting for months.

We share that view.  We have not seen the last of US-Iranian turmoil that dates back more than 30 years.  In fact, this is only the beginning.

We hope that gold’s price movement has grabbed your attention.  Don’t wait for the other shoe to drop to add to your gold and silver holdings.