Friday, 19 July 2019

Wolf Street Report: The True Victims of Inflation


Who are the true victims of inflation and who are the winners? On whose side are the Fed and the media?

Thursday, 18 July 2019

Gold Tier 1 Asset Price Strength vs Silver


Silver & Gold both had positive week’s in fiat US dollar spot price action up a percentage point or two respectively since last week's closes. 

The silver spot price ended the week around the $15.25 per troy ounce mark. While the gold spot price finished the week around the $1,415 fiat Federal Note per troy ounce mark. 

The gold-silver ratio is still hovering around 30-year highs, closing the week near 93 ounces of derivative silver to acquire 1 ounce of derivative spot price gold. 

This week we welcome a new guest to this silver and gold podcast. 

Hear why this long-time gold trader believes the yellow precious monetary metal has been trading stronger than fiat silver prices of late, and how long he thinks this trend may continue along for. 

As well, what are some catalysts that might change the pattern? We also touch on the Gold-Silver Ratio, where it may go and why. 

A long-time commodity trader, Mr. Vince Lanci of Echobay Partners, speaks with us.

- Source, Silver Doctors

Wednesday, 17 July 2019

Jeff Berwick: Crypto from Beginning to the End Game


Topics include: being early into the crypto space, accepting diverse opinions without hating, who is Satoshi Nakamoto, origins of The Dollar Vigilante, hearing about Bitcoin for the first time, crypto and Anarchapulco, picking the top of the market, crypto vs gold and silver, silver price suppression, if you don't hold it you don't own it, unregulated crypto with decentralized exchanges (DEX), handling crypto securely, fractional reserve lending, Facebook's Libra coin, a global currency? the heart of Anarchapulco.

- Source, Dollar Vigilante

All Hell is Going to Break Loose: Silver is Going to Skyrocket

With silver rallying while gold continues to consolidate, is the price of silver about to skyrocket? Plus “All hell is going to break loose.”

“All Hell Is Going To Break Loose”

Peter Schiff: “Our entire way of life has been built on the privilege of issuing the world’s reserve currency. And when the dollar loses that status, all hell is going to break loose here in the US.”

ECB Balance Sheet Expanding Again

Holger Zschaepitz: “ECB balance sheet resumes uptrend. Rose by €6.9bn as QE reinvestments > QE redemptions. Now at €4,684.4bn, just shy of a fresh high, and equal to 40.4% of Eurozone GDP vs Fed’s 18.1% and Bank of Japan’s 102.2%. (See chart below).

ECB Balance Sheet Expanding Again


Silver Breakout:

Lawrence McDonald, Former Head of Macro Strategy Society Generale: “Silver making its move on gold, copper, and nickel as well. Capital is flying into reflation bets, Mr. Powell has his hands full. (See chart below).

Capital Flying Into Reflation Bets As Silver Breaks Out:


Silver May Be Set To Skyrocket

Peitro Di Tora, Analyst & Global Macro Investment Strategist: “Silver keeps following fractal from sharp move up 1970-73. History always repeats itself. True silver bull market classic signals supporting the breakout: 

1) Silver miners start to outperform and push Silver up. 

2) Silver strongly outperforming Gold and USD on the move up.

- Source, King World News, Read More Here

Bank Run Accelerates: Deutsche Bank Clients Are Pulling $1 Billion A Day, Lehman 2.0

There is a reason James Simons' RenTec is the world's best performing hedge fund - it spots trends (even if they are glaringly obvious) well ahead of almost everyone else, and certainly long before the consensus.

That's what happened with Deutsche Bank, when as we reported two weeks ago, the quant fund pulled its cash from Deutsche Bank as a result of soaring counterparty risk, just days before the full - and to many, devastating - extent of the German lender's historic restructuring was disclosed, and would result in a bank that is radically different from what Deutsche Bank was previously (see "The Deutsche Bank As You Know It Is No More").

In any case, now that RenTec is long gone, and questions about the viability of Deutsche Bank are swirling - yes, it won't be insolvent overnight, but like the world's biggest melting ice cube, there is simply no equity value there any more - everyone else has decided to cut their counterparty risk with the bank with the €45 trillion in derivatives, and according to Bloomberg Deutsche Bank clients, mostly hedge funds, have started a "bank run" which has culminated with about $1 billion per day being pulled from the bank.

As a result of the modern version of this "bank run", where it's not depositors but counterparties that are pulling their liquid exposure from DB on fears another Lehman-style lock up could freeze their funds indefinitely, Deutsche Bank is considering how to transfer some €150 billion ($168 billion) of balances held in it prime-brokerage unit - along with technology and potentially hundreds of staff - to French banking giant BNP Paribas.

One problem, as Bloomberg notes, is that such a forced attempt to change prime-broker counterparties, would be like herding cats, as the clients had already decided they have no intention of sticking with Deutsche Bank, and would certainly prefer to pick their own PB counterparty than be assigned one by the Frankfurt-based bank. Alas, the problem for DB is that with the bank run accelerating, pressure on the bank to complete a deal soon is soaring.

Here are the dynamics in a nutshell, (via Bloomberg): Deutsche Bank CEO Christian Sewing is pulling back from catering to risky hedge-fund clients, i.e. running a prime brokerage, as he attempts to radically overhaul the troubled German lender while BNP CEO Jean-Laurent Bonnafe wants to expand in the industry. A deal of this magnitude would be a stark example of the German firm’s retreat from global investment banking while potentially transforming its French rival from a small player in the so-called prime-brokerage industry to one of Europe’s biggest.

Of course, publicly telegraphing that DB is in dire liquidity straits and needs an in-kind transfer of its prime brokerage book would spark an outright panic, and so instead the story has been spun far more palatably, i.e., "BNP is providing “continuity of service” to Deutsche Bank’s prime-brokerage and electronic-equity clients as the two companies discuss transferring over technology and staff", according to a July 7 statement. The ultimate goal of the talks is for BNP to take over the vast majority of client balances, which are slightly less than $200 billion currently.

There is just one problem: nothing is preventing those clients who would be forcibly moved from a German banking giant to a French banking giant from redeeming their funds. And that's just what they are doing. Or rather, nothing is preventing them from moving their exposure for now, which is why they are suddenly scrambling to do it before they are suddenly gated.

Which is why the final shape of the deal remains, pardon the pun, fluid, and it is unclear how it will proceed, facing a multitude of complexities, including departing clients.

In an attempt to stop the bank run, BNP executives are meeting with U.S. hedge-fund clients this week to convince them to stay following similar sit-downs with European funds last week, Bloomberg sources said.

However, if this gambit fails, and hedge funds keep moving their business elsewhere, officials at the German bank may just relegate its assets tied to the prime finance division into the newly formed Capital Release Unit, i.e. the infamous "bad bank" which is winding down unwanted assets totaling 288 billion euros ($324 billion) of leverage exposure, and the prime brokerage is responsible for much of the 170 billion euros of leverage exposure that’s coming from the equities division into the division, also known as CRU a presentation shows.


It also means that countless hegde funds are suddenly at risk of being gated on whatever liquid exposure they have toward Deutsche Bank.

To be sure, Deutsche Bank’s hedge fund balances have been declining throughout the year as speculation swirled around Sewing’s intentions for the prime brokerage, but the rate of redemptions was far lower than $1 billion per day. Now that the bank jog has become a bank run, the next question is how much liquidity reserves does DB really have and what happen if hedge funds clients - suddenly spooked they will be the last bagholders standing - pull the remaining €150 billion all at once.

We are confident we will get the answer in a few days if not hours, until then please enjoy this chart which compares DB's stock decline to that of another bank which was gripped by a historic liquidity run in its last days too...


- Source, Zero Hedge

Tuesday, 16 July 2019

Why Do The Fed And Powell Hate Gold and The Gold Standard?


Powell was asked a question about gold and the goldstandard, which conveniently left out silver. 

Why does the Fed hate gold? Tune-in to find out why!

- Source, Silver Doctors

Monday, 15 July 2019

Martin Armstrong: USA Prettiest Ugly Sister in Global Economy


Legendary geopolitical and financial analyst Martin Armstrong says America’s economy is like being “the prettiest ugly sister in the family” of nations. 

So, if the U.S. economy is so good, why the rush to cut interest rates? Armstrong explains, “It’s really the world economy which is in serious trouble. You really have to look closely and pay attention to the words (Fed Head) Powell said. 

The economy is strong, unemployment is fine. Why would you cut interest rates when the stock market is making record highs? 

Powell said basically because it was things happening outside the country. The Fed, as I have said before, has become the central bank for the world.

This is the problem, and Europe is a complete basket case. They don’t get it, and they keep trying to hold onto their power and punish anyone who disagrees with them. 

Why is the U.S. economy so good? Why is the Dow at a record high? 

China is in trouble. Europe is in trouble. Japan is a basket case. The capital is coming here.”

- Source, USA Watchdog

Saturday, 13 July 2019

The Fall of the UK Economy: British Pound Enters BEAR MARKET As Currency CRASHES


Josh Sigurdson talks with author and economic analyst John Sneisen about the fall of the UK economy as the British Pound sees 2 year lows that if not for what we saw in early 2017, would be closer to 34 year lows

As the Bank of England desperately attempts to prop itself up as Brexit among countless other reasons play into the new bear market, the bank intends to lower interest rates. The problem is, they are already at a mere 0.6% rate! 

They will likely be going negative as Australia heads in the same direction and the Federal Reserve talks about lowering interest rates as well. Meanwhile, the European Union ECB interest rates are even lower... AT 0%! 

They've attempted to prop up this old guard system far too long. It's been propped up on debt, derivatives and faith. It had to go down eventually. 

Everything appears to be in a slow spiral downwards on a global basis and individuals need to understand that all fiat currency eventually fails. It always has, it always will. They need to be financially responsible and understand money to be able to control their own money.

Friday, 12 July 2019

More Proof The Elites Have Lost Control Of Gold and Silver


Are gold & silver really breaking free from the price suppression? Join Mike & Half Dollar as they dive into fresh new evidence which suggests the cartel is losing control of the "markets". 

In addition to this new evidence, additional topics discussed include: 

- Fed Chair Jerome Powell's Q&A session with Congress going on today and tomorrow. 

- Big changes are coming down the pike as evidenced by the recent shakeups at major central banks and institutions around the world, including the latest developments from just yesterday. 

- How safe are pension plans are retirement systems? - What is the end game for the US dollar? 

- Debunking the "1 oz of gold buys a fine suit" myth. For discussion on those topics and a whole lot more, including addressing some comments and questions in the chat, tune-in to today's show in its entirety.

- Source, Silver Doctors

Wednesday, 10 July 2019

Trapped: Are You In An Illiquid Fund Full Of Ghetto Bonds?


Trapped! Are You In An Illiquid Fund Full Of “Ghetto Bonds”? Trump’s best cheerleaders & supporters - The angry, crowded democrat candidates. DOW has best June in 81 years (on low volume) Safe haven investors flee into cover. Will SWIFT be swiftly replaced?

Tuesday, 9 July 2019

Everyone Needs Exposure To Gold and Silver, Heres Why


Thanks for watching this Silver Doctors Interview. Share your thoughts below and make sure to click the subscribe button to join the Silver Doctors Community. 

Today's guest, Simon Popple, joins us to share his thoughts on the economy and the importance of everyone having exposure to gold and silver. He believes the time is approaching where to much debt will lead to the financial ruin of everyone not holding metals.

- Source Silver Doctors

Thursday, 4 July 2019

Michael Pento: The FED Will Crush the Dollar


Today's guest, Michael Pento, joins us to share his thoughts on the economy and how the Federal Reserve's monetary policy will crush the dollar like a sledgehammer.

- Source, Silver Doctors

Tuesday, 2 July 2019

We Are in a Gold Bull Market that May Well Last 20 Years


Collin Kettell fills in for Kerem and interviews Jordan Roy-Byrne about the potential of a new bull market in gold. Jordan is not sure how long this particular move will last, but it could be a big one that lasts at least the next six months to a year. 

Jordan has said previously, “The market will move when the Fed cuts rates, because gold rises with declining interest rates or rising inflation rates.” He says, “This is now playing out exactly as it should, but it’s too early to determine how long it will last. The days of a thousand dollar gold are long gone. We are just at the start of something that is going to be historical and last the next fifteen plus years.”

- Source, Palisade Radio

Sunday, 30 June 2019

Gold, Cryptos, Censorship, & Strategic Relocation


Jim Rawles, founder of SurvivalBlog.com, returns to Reluctant Preppers to bring us up to date on these hot topics: 

- Gold, Silver, and Platinum: Still Undervalued? 

- Cryptos: portable and undetectable? 

- Internet Censorship to be weaponized for 2020 elections, but there’s a NEW UNSTOPPABLE ALTERNATIVE...

- Strategic Relocation on the surface of the Real-Estate bubble: what’s a family to do? 

- Going mobile: several surprising options for survival get-out vehicles.

Friday, 28 June 2019

What to Expect From the Gold Price Ahead of G-20


With global growth worsening and the trade war tensions intensifying, a rise in gold prices could be coming by September, according to Bill Baruch, founder and president of Blue Line Futures. 

“Global growth has been deteriorating for a while, and now it’s the trade war just speeding the process up,” Baruch said. “If we see progress on the trade war, then the dollar could sell off, and gold lifts higher.” 

Baruch also said gold could see levels of $1,484 over the next two months, as the path of least resistance is both technically and fundamentally higher. After that, gold could see some seasonal resistance. 

“Looking at the Fed being more dovish than expected in the meeting last week, ultimately that helped lift gold higher, by putting a little bit of pressure on the dollar,” he said. 

“The dollar hasn’t really sold off, and one of the reasons why is because there’s a lot of safe-haven tailwinds in the dollar because of the trade war.” “This is a bullish breakout above the five-year trend,” Baruch noted. 

“It’s a matter of where we go from here in the sense of holding support, and a more immediate term move higher, or consolidation before moving higher.”

- Source, Kitco News

Wednesday, 26 June 2019

Despite Pullback, One Man Says Gold Price May Retest Record High Of $1,921

On the heels of King World News warning on Tuesday that the gold market may correct in order to consolidate recent gains, the price of gold is trading nearly $20 lower on Japan’s TOCOM. But here is a look at the big picture from one man that says gold may retest its record high of $1,921.

From CNBC: “Bigger picture though, given the magnitude of the base which has taken six years to form, we suspect we could even see a retest of the $1921 record high,” David Sneddon, global head of technical analysis at Credit Suisse, said in a note to clients on Monday.

Credit Suisse: Gold May Retest Record High Of $1,921


Expect “Long-Lasting Rally” In Gold

Sneddon said gold has established a multi-year base that could provide the platform for a “significant and long-lasting rally” for the precious metal.

“Significant Catalyst For Gold To Extend Its Gains”

“We have finally seen more conclusive signs of the USD starting to materially weaken,” said Sneddon. “With the DXY removing pivotal support from its 200-day average to complete an important bearish ‘wedge’ reversal, which should provide a fresh and significant catalyst for Gold to extend its gains.”

- Source, King World News, Read More Here

Harvey Organ: $20 Silver Blows Up the Banks Before the End of 2019


Hey there stackers and other smart investors!

Here’s a very important interview about the current state of the gold & silver markets.

And what is the state of the markets?

Oh, they’re only blowing up! During this interview, we discuss:

– Comments on recent gold & silver price moves.
– Discussion on current state of gold & silver markets.
– $20 silver blows-up the banking system.
– Gold quickly to $2,000, then reset to $10,000 per ounce.
– COMEX & LBMA breaking…game’s over.

- Source, Silver Doctors

Gold to Silver Ratio is Indicating a Potential Recession


With the gold-to-silver ratio as high as it is (at the time of recording it is over 90 times), Rhona O’Connell, from INTL FCStone Ltd, says watch out.

- Source, IG UK

Tuesday, 25 June 2019

Global Money Laundering Watchdog Launches Crackdown on Cryptocurrencies...


Cryptocurrency firms will be subjected to rules to prevent the abuse of digital coins such as bitcoin for money laundering, a global watchdog said on Friday, the first worldwide regulatory attempt to constrain the rapidly growing sector.

Financial Action Task Force (FATF), set up 30 years ago to tackle money laundering, told countries to tighten oversight of cryptocurrency exchanges to stop digital coins being used to launder cash.

The move by FATF, which groups countries from the United States to China and bodies such as the European Commission, reflects growing concern among international law enforcement agencies that cryptocurrencies are being used to launder the proceeds of crime.

Countries will be compelled to register and supervise cryptocurrency-related firms such as exchanges and custodians, which will have to carry out detailed checks on customers and report suspicious transactions, FATF said in a statement.

“This will enable the emerging FinTech sector to stay one-step ahead of rogue regimes and sympathizers of illicit causes searching for avenues to raise and transfer funds without detection,” U.S. Treasury Secretary Steven Mnuchin told a FATF meeting in Florida, according to remarks posted on the U.S Treasury website.

Simon Riondet, head of financial intelligence at Europol, the European police agency that coordinates cross-border investigations, told Reuters he saw a growing use of cryptocurrencies in laundering criminal money.

“This is a risk we all face worldwide,” FATF President Marshall Billingslea told Reuters. “Nations need to move forward rapidly. This is an urgent issue.”

Europol broke up a Spanish drugs cartel this year that laundered cash using two crypto ATMs, machines that issue cryptocurrencies for cash.

Riondet said cryptocurrencies were used to transfer money across borders, as well as to break down large criminal money transfers into smaller amounts that are harder to detect.

“We also have some investigation on the dark web in which the payments are made in cryptocurrencies, sometimes in bitcoin, and they are switching it to more anonymized cryptocurrencies,” he said...

- Source, Reuters, Read More Here

Monday, 24 June 2019

ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters


Draghi’s shenanigans get hilarious, months before his term ends.

So here’s ECB President Mario Draghi, whose term ends in October, and he’s at the ECB Forum in Portugal, and in a speech on Tuesday titled innocuously, “Twenty Years of the ECB’s monetary policy” – so this wasn’t a press conference after an ECB policy meeting or anything, but a speech on history at an ECB Forum – he suddenly threw out a whole bunch of stuff…

How, “in the absence of improvement” of inflation, “additional stimulus will be required,” in form of “further cuts in policy interest rates” and additional bond purchases, and how “in the coming weeks, the Governing Council will deliberate how our instruments can be adapted commensurate to the severity of the risk to price stability,” and that “all these options were raised and discussed at our last meeting.”

Whoa! Wait a minute, said the good folks who were part of the ECB’s June meeting. These options were not discussed, they told Reuters on Tuesday.

Draghi had ventured out there on his own – apparently trying to push his colleagues into a corner single-handedly as his last hurrah.

His vision laid out on Tuesday was quite a change from the June 6 post-meeting announcement, which didn’t mention anything about even discussing rate cuts. It said that the ECB expects its policy rates to “remain at their present levels at least through the first half of 2020,” before the ECB would begin to raise them, with the bias still on raising rates, not cutting rates. That was less than two weeks ago, and there had not been another ECB policy meeting since then.

Interviewing six “sources” at the ECB with “direct knowledge of the situation,” Reuters found that these policy makers “had not expected such a strong message and that there was no consensus on the path ahead.”

At the June 6 policy meeting, any possibility of a rate cut or renewed asset purchases had been mentioned “only in passing” and without any substantive discussion. The discussion had instead focused on the new package of loans for the banks, the sources said.

The sources told Reuters that ECB policymakers were worried “Draghi was flagging his measures so strongly to markets as a ‘fait accompli’ that there would be no chance for them to disagree with them in at the next policy meeting on July 25,” Reuters reported.

“But they added that, with a global trade war escalating and financial worries around Italy already high, there was little appetite for a fight in July,” Reuters said.

Several sources told Reuters that, because very little new economic information on the Eurozone will come out before the July 25 meeting, “it would be difficult to justify coming to a different policy conclusion than in June.”

And at the June meeting, the conclusion was to delay rate hikes – and there was no mention of rate cuts.

The sources told Reuters that the debate about which policy measures to implement, when, and in what order was still wide open, with policy makers having very different opinions.

For some the first step should be a change in the ECB’s policy message. Others favor a reinforcement of the pledge not to raise rates for a longer time.

Others favor restarting the asset purchase program to bring borrowing costs down for governments so that they could spend more during a downturn, though that would be handicapped by the “issuer limit” that prevents the ECB from holding more than 30% of a country’s sovereign bonds. But the ECB could dispose or circumvent that limit, “some” sources said.

Some policymakers lean toward rate cuts, the sources said. And other policymakers think the ECB should not make any changes at all unless economic data deteriorated substantially and inflation expectations dropped further below the ECB’s target.

But there was no consensus, and there had been no substantive discussions of these topics at the last meeting that had focused on the modalities of the new bank loan package.

What is hilarious is how Draghi was outed as a fabricator and schemer on the very same day he made his additional-stimulus-will-be-required speech, by people who were surprised by his speech, some of whom felt “powerless,” as Reuters put it, and knew he was trying to box them into a corner with his devious move. This has the smell of a palace revolt at the ECB against the head honcho and his last hurrah.

- Source, Wolf Street

Sunday, 23 June 2019

Gold's Monster Rally, Can It Continue?


Gold’s rally isn’t over yet by any means, as one analyst sees the upward momentum continuing. 

Phil Streible, RJO Futures, told Kitco News that prices for the yellow metal may still see much higher levels from here. “We should continue to see that break through $1,400 and I anticipate that a lot of the short sellers will end up giving up at that level. 

So, no telling how high we can go from here, it’s kind of got that perfect storm going on with increasing geopolitical risks and then also a dovish Fed,” Streible said.

- Source, Kitco News

Friday, 21 June 2019

Are We Now Moving Toward a New Gold Standard?


Ronald Peter Stöferle and his colleague have published the annual “In Gold We Trust” report suggests that a world awash in debt is on the edge of a financial abyss.

- Source, Jay Taylor Media

Wednesday, 19 June 2019

The Currency Standard: A Playpen for Financial Predators

Main idea: Currency fluctuations are so independent of economic growth – and used as weapons by politicians. Moving to the gold standard is the only option.

The idea of trekking back through twentieth-century history to excavate the ruins of the gold standard seems downright retrograde — like returning to quill pens, horse-drawn carriages, or slavery, or wampum beads.

After all, didn’t John Maynard Keynes, hallowed English macroeconomist, call gold a “barbarous relic”?

To Paul Krugman, recent Nobel Prize-winning macroeconomist, the gold standard is a “mystical” repetition of the “sin of Midas.” Worshipping a shiny metal.

Let’s be clear — this is not a partisan issue.

Krugman, a self-described Liberal, often cites Milton Friedman, a Republican, who as early as 1951 made the case for banishing gold in favor of a free competitive float of currencies, rather than a flat rate. Friedman also fatefully counseled Richard Nixon to remove gold backing from the dollar in 1971.

Warren Buffett summed up the conventional view with his usual pith:

“Gold gets dug out of the ground . . . we melt it down, dig another hole, bury it again and pay people to stand around guarding it. . . . Anyone from Mars would be scratching their head.”

The gold standard has moved beyond the pale of respectable thought.

A bipartisan University of Chicago business school poll for a Wall Street Journal blog in 2012 found zero support for the gold standard.

Forty-three percent of the surveyed economists “disagreed” with returning to gold, and an additional 57% “strongly disagreed.”

That adds up to 100% — a “consensus” that might spark envy even in such airtight circles of “settled science” as a UN séance on climate change.

With a limited total tonnage, which could be stored in a single small room, gold is seen to suffer from an acute deflationary bias.That is, since the basic money supply cannot expand significantly, it is believed that money prices, including wages and salaries, have to shrink.

An American Tragedy Paved in Gold

Academics make the case that gold failed first under the stresses of World War I, when the combatant states defected, one after another, and most noncombatants followed.

Then it failed again in the Depression of the 1930s, with recovery coming to countries in the exact order of their departure from gold.

Finally it collapsed, seemingly for good, in the 1970s, when — with gold bleeding from the American trove of reserves and the French kibitzing sanctimoniously — Nixon tipped over the table and set up the dollar as the house money.

His Texas swagman John Connally explained the sophisticated strategic calculation behind Nixon’s move: “Foreigners are out to screw us. It’s our job to screw them first.”

Ultimately fatal for the gold standard, however, were studies focused on the 1930s by some of the world’s most respected economic statesmen and scholars.

From Friedman and Krugman, to former Fed chairman Ben Bernanke and former White House chief economic advisor Christina Romer (chosen by Obama for her mastery of depression economics), all ascribed the Great Depression chiefly to the monetary shackles of the gold standard.

Friedman, who advised Richard Nixon on gold, did the most damage.

In his magisterial Monetary History of the United States, 1867–1960, written with Anna Jacobson Schwartz, he tied the Depression directly to the Fed’s gold-based monetary policy.

Supposedly, that forced a 40% money supply collapse amid the carnage of failing banks between 1929 and 1931.

Crediting Friedman, Bernanke’s influential paper “The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison” focused on how the Depression ended.

He showed that Japan bolted from the standard first in 1931, with Britain close behind, and that they led the world in recovery. Next came Germany (1932), the United States (1933), and recalcitrant, gold-grasping France (1936).

After Roosevelt abandoned gold in 1933, as Romer points out, U.S. industrial output lurched up 57% between March and July, apparently exulting over escape from its gilded cage.

Now, it is clear that if you are in a global depression, with a third of the workforce unemployed and communists marching in the streets (and in the White House advising you on money), the best course may not be to sit around counting your ingots and reflecting on the lucrative gold backing of the Industrial Revolution.

A better, faster, truer replacement for the gold standard, we are to believe, is the high-technology “information standard.”

All Hail the New Gold Standard

If you have an information economy, with wealth as knowledge and growth as learning, you want a monetary system that rapidly conveys crucial information on prices in time and space.

And there has never been an information system so global, so fast, so robust, as the foreign exchange trading system of convertible currencies.

This awesome, multidimensional system, spanning the globe and extending into the future, enables any company anywhere at any moment to exchange goods and services for money with customers in other countries — without risk.

It enables world trade, globalization, integrated markets, and multinational corporations. It provides a cosmopolitan carpet for courtesy and commerce in the modern world. It garners profits, fees, and margins for its providers, while enabling commerce for the companies that use the services.

This trading system for floating currencies is Milton Friedman’s dream.

But it also reflects the concept of “spontaneous order,” a mainstay of the Austrian school of Friedrich Hayek and Ludwig von Mises, famed Austrian economists who influenced the modern libertarian movement.

On the world’s most advanced computer networks, this trading system links the thousands of foreign exchange desks of all the major banks and other financial institutions — thousands of hedge funds and specialized dealers, and scores of principal trading funds (PTFs, mostly automated high-frequency operators, the so-called “flash boys”).

It brings in multinational corporations that command sufficient international business to support their own trading desks. They all work in parallel, with no central coordination, to arrive instantaneously at convertible currency prices around the world.

The volume of currency exchange dwarfs by orders of magnitude all other economic measurements—GDP, global trade, Internet transactions, industrial production, Google searches, global stock market exchanges, global commodity values, and even derivatives.

Every three years, the Bank for International Settlements (BIS) in Basel, Switzerland, adds it all up on a “net-net” basis, adjusted to nullify double counting from local and cross-border transfers between dealers.

By this careful metric, BIS in April 2013 identified a flow of some $5.3 trillion a day, more than a third of all U.S. annual GDP every 24 hours.

The 2013 total signified currency transactions throughout the year and around the globe at a rate of more than $600 million every second.

And by 2016, that number was still running strong at $5.1 trillion per day.

The benefits of such a system cannot be ignored.

It provides entrepreneurs with accurate measurements of the relative value of all the world’s hundreds of different moneys. And it makes mutually interchangeable funds available on the spot without currency risk.

In other words, with vastly greater speed and automated efficiency, the system performs the role previously played by the gold standard.

Yet it also enables every country to follow its own monetary policy.

In light of this indispensable double service — combining two apparently incompatible goals — no one has complained about inadequate liquidity or performance.

To its advocates, this market’s rapid growth attests to its usefulness and robust results.

Nonetheless, as one might suspect in the wake of the global crash led by the same big banks, the system is less than impeccable...

- Source, Laissez Faire

Monday, 17 June 2019

Silver Prices at 26 Year Low in Relation to Gold, Should Investors Buy?

The price of silver in comparison with the price of gold is at a 26-year low. The ratio of gold price to silver price is currently around 90, the highest after March 1993. A higher ratio indicates that silver is much cheaper than gold. If silver is so cheap relative to gold, should investors consider buying the precious metal?

The ratio, calculated by dividing the current price of gold by the price of silver, indicates how the two metals are performing against each other.

“Despite the persistent challenges that silver has faced, we remain cautiously positive about the price outlook for the rest of 2019.” The consultancy believes that the lacklustre macro-economic backdrop will favour renewed investment into gold, which in turn should also benefit silver," said Philip Newman, Director of Metal Focus.

The reason for the cautious approach is that while gold may see safe haven buying, half of silver’s demand comes from industries, a segment that itself is subdued following the re-emergence of a trade war.

Metals Focus states in its just-launched Silver Focus 2019 report, “Year-end, we think prices will struggle to surpass $18, a level not seen since the third quarter of 2017. On annual average basis, we see prices averaging $15.60.” In 2019 so far, silver price have averaged $15.23 and ounce.

In other words, investing in silver could give 20 per cent returns in 2019. India’s silver investment market size was 1,680 tonnes in 2018 making India the world's largest investor in silver.

“Silver’s fundamental as precious metals is turning good though for some more time investors have to live with high ratio of above 80. Base metals looking subdued impacting silver demand to that extent,” said Naveen Mathur, head of commodities and currencies at Anand Rathi Commodities. He added that he did not see big returns from silver in the near future.

India has emerged as a big investment destination for silver. So far, its biggest consumer segments were jewellery and silverware. Although both have shown a marked a positive growth and have contributed towards keeping the overall global demand positive, silver demand grew at a handsome 30 per cent in India.

According to Metal Focus’ Silver Focus 2019 report, “2018 saw strong demand for 1kg and 5kg bars, compared to 15kg and 30kg bars in 2017, which suggests that small retail investors have returned to the market.”

The demand for slver in India is price sensitive and traditional investors also keep a portion of investment for trading or buying low and selling high.

Debajit Saha, senior analyst for India and UAE with GFMS TR, another global research firm, said that “India’s import in March quarter was 1310 tonnes which is higher by 9 per cent but in February silver price increased to Rs.40, 000 per kilo, investors offloaded 180 tons silver (bought at a little lower price and booked trading profit) resulting in higher domestic supply.” He is very optimistic about silver demand further increasing in June quarter."

Thursday, 13 June 2019

Job Openings Fall In April, Layoffs Pick Up

After February's big dip, and March's rebound, April Job Openings data was expected to extend the bounce modestly in April but it did not.

April Job Openings fell to 7.449 million (7.496 million expected) from a revised lower 7.474 million in March, but Job Openings remain above the number of unemployed workers in America for the 14th month in a row...


There are 0.78 unemployed job seekers for each available job.

Quits reached a new record high but layoffs also ticked higher...


Layoffs and discharges at 1.2% in 2019 vs 1.1% in March

1,752,000 people were fired or laid off in April vs 1,788,000 in April last year

An additional 344,000 people left their employer due to retirements, transfers to other locations, death, and separations due to disability.

On the heels of Friday's dismal payrolls print, this weaker JOLTS print suggests perhaps the jobs outlook is not as rosy as many perceive.

- Source, Zero Hedge

Tuesday, 11 June 2019

Why A Lack Of Discovery Is A Good Thing


With gold prices having traded range-bound for most of 2019, miners should be more focused on creating value through discovery, which the industry is lacking, said David Suda, CEO of TerraX Minerals.

“The opportunity for us is in the fact that producing gold companies have actually had a lack of discovery. They haven’t spent money on exploration, and all the major gold companies in the world can merge with each other until they go blue in the face, they’re not going to come up with a discovery that way, and I think that’s what the opportunity here is,” Suda told Kitco News on the sidelines of the 121 Mining conference in New York.

- Source, Kitco News

Monday, 10 June 2019

Even if the Fed cuts rates this summer, it could be too late to stop a recession

Even if the Federal Reserve does what the market wants and lowers interest rates this summer, things may already be too far gone, according to Morgan Stanley.

“Fed cuts may come too late,” Morgan Stanley’s equity strategist Michael Wilson said in a note to clients Monday. “Fed could cut as soon as July but it may not halt slowdown/recession.”

The economy is already facing some “very real macro risks” including weak jobs data, low inflation and escalating trade tensions, Wilson said.

The market is expecting a rate cut by July by the Fed in response to diving bond yields, volatile stock markets and some sings of weakness. On Friday, May payrolls came in much lower-than-expected and the markets rallied in hopes that the Fed would start cutting as soon as July.

Paired with the “falling rate of inflation and the inability to hits its 2 percent goal” and trade tensions weighing on business confidence, the Fed’s rate cut won’t halt a weakening economy, Wilson said.

Morgan Stanley changed its forecast for global growth to “stagnation” through the end of the year instead of a “continued recovery.”

Investors should stay defensive, despite a more dovish Federal Reserve, Wilson said.

“Investor enthusiasm around the idea of easier Fed policy is understandable,” Wilson said. “However, if the Fed were to cut out of concern that we are entering a real unemployment cycle, we think such a cut should not be bought. Until there is further clarity on the employment picture, we think Friday’s rally should be faded and investors should continue to skew portfolios defensively.”

Wilson said to keep “a cautious eye toward expensive growth stocks that are now at a greater risk of missing earnings estimates due to these very real macro economic risks.”

- Source, CNBC

Friday, 7 June 2019

Sorry Silver Price, You May Need To Wait It Out


Silver prices are not likely to catch up to gold soon, said Jon Lamb, portfolio manager of Orion Resource Partners. 

In an interview with Kitco News on the sidelines of the 121 Mining Investment Conference in New York, Lamb said that when looking at silver in historical terms, prices may remain depressed when compared to gold. 

“Right now, the gold-silver ratio, thinking about it in historical terms, is going to remain at these high levels,” he said.

- Source, Kitco News

Wednesday, 5 June 2019

Gregory Mannarino: We're on Notice Protecting Us From Our Own Accounts


Renowned stock trading coach Gregory Mannarino, known as "The Robin Hood of Wall Street," answers YOUR QUESTIONS in this fast-paced and wide-ranging interview. The expose starts with this week's sobering printed notification from one of the largest US online banks to all account holders that they will be subject to a clamp-down on access to their funds.

Tuesday, 4 June 2019

Catherine Austin Fitts: Inflation is Already Here


Just because trillions of dollars are “missing” and the federal budgets are now “secret” doesn’t mean you cannot see the effects of all the massive amounts of money created. 

It’s is showing up in the form of inflation, not official inflation calculated by the government, but real inflation for the man on the street. Investment advisor and former Assistant Secretary of Housing Catherine Austin Fitts contends, “The U.S. dollar is getting debased.

Inflation is already here. If you are looking at an area with a 14% increase in the cost of goods year over year and your income isn’t rising, or it’s falling, we are already there. It’s not hyperinflation, but it is very significant inflation. 

It you look at the controls they have put on globally to fight inflation, they are quite significant. The U.S. debt went up 6% last year, and it’s estimated to go up 8% this year. God forbid we try to start any of the wars rattling around the world because the debt will skyrocket. 

We are in a spiral upward on the amount of debt. Next year, the social security fund will go negative cash flow. 

In other words, it’s going to stop being a net buyer of Treasuries and is going to be a net seller of Treasuries, which means if the foreigners are not buying, it’s down to the U.S. pension funds and the Fed.” Fitts says “invest in real things” such as gold, silver, and she “loves farmland.”

- Source, USA Watchdog

Sunday, 2 June 2019

New IMF Report: We've Reached 100% Risk Level


Have you been told that the International Monetary Fund (IMF,) which is comprised of 189 of the world's 196 nations, recently released their Global Financial Stability Report, for the FIRST TIME EVER pegs us at 100% risk level for sovereign debt failure? 

Lynette Zang, chief research analyst at ITM Trading, returns to Reluctant Preppers to expose why this record risk rating by the IMF is of grave importance to all of us. Lynette also answers a large number of your viewer questions, in this wide-ranging interview!

Friday, 31 May 2019

Get Ready, It’s Coming, Restructuring Of The Global Economic System


The UK is about to change, Farage's party won and now they want change, they want to leave the EU just like the people voted. 

The UK was deceived by PM Edward Heath, he sold the UK out for £1. 5 million the same way Woodrow Wilson sold the US out to the Central Bank. 

Trump and other countries are about to change the global economic structure, the Central Bank, Elite never saw this coming.

- Source, X22 Report

Wednesday, 29 May 2019

Gold firms above $1,280 as weak US data rekindles rate cut hopes


Gold prices held steady on Friday after rising above $1,280 in the previous session as weak U.S. data pushed the dollar off 2-year highs and reignited hopes of a rate cut by the Federal Reserve this year.

Spot gold was steady at $1,283.21 per ounce by 0653 GMT, after rising as much as 1.1% to a one-week peak of 1,287.23 in the previous session. The metal has risen 0.5% so far this week.

U.S. gold futures for June were down 0.2% at 1,283.10.

“Gold has found a very good support around $1,270. There was some short covering after the (weak U.S.) data that pushed prices up. However, the upside could be limited as $1,290 is acting as a strong resistance,” said Peter Fung, head of dealing at Wing Fung Precious Metals.

The U.S. dollar retreated after hitting its highest level in two years as weak domestic data and the potential economic fallout from the trade war with China increased expectations for an interest-rate cut this year.

Sales of new U.S. single-family homes fell from near an 11-1/2-year high in April as prices rebounded and manufacturing activity hit its lowest level in almost a decade in May, suggesting a sharp slowdown in economic growth was underway.

While the expectations of a rate cut is good for gold, prices can go higher only if the metal can break above $1,290-$1,300 range with the dollar still being strong, Fung added.

Lower interest rates tend to lift gold as it reduces the opportunity cost of holding the non-yielding bullion.

Four Fed officials on Thursday conceded that aggravating U.S.-China tensions could threaten economic growth, a marked deviation from Chair Jerome Powell’s Monday comments where he said it was too early to ascertain the impact of trade on the trajectory of monetary policy.

However, gold has been under pressure of late as investors preferred the U.S. dollar amid intensifying U.S.-China trade tensions. The bullion is down nearly 5 percent since touching a 10-month peak in February at $1,346.73.

“Gold has disappointed to the upside often in the past and we would therefore like to see a string of more consistent gains before we feel comfortable signalling an all-clear on the upside,” INTL FCStone analyst Edward Meir said in a note.

Spot gold may break a resistance at $1,286 per ounce and edge up to the next resistance at $1,290, according to Reuters technical analyst Wang Tao...

- Source, Reuters, Read More Here

Monday, 27 May 2019

Markets Are Worried About Much More Than Trade

Markets are a mess. Across the world and across asset classes, there were new highs and lows Thursday, and sharp deviations from trends. Something is definitely up. But what?

There is also, of course, a welter of news coverage of the increasing hostilities between China and the U.S. over trade and technology. Does it therefore follow that the trade war is to blame for the turbulence in markets? We should not take this for granted.

So, could this be about world trade? Equity traders do not generally think of world trade data much in their day-to-day work, but it turns out that changes in equities do tend to predict changes in global trade volumes. The following chart, from London’s Absolute Strategy Research, shows that equity market moves tend to move ahead of changes in trade flows, with a six-month lag:


The issue here is that the rebound in world equities since the Christmas Eve selloff suggests that traders are pricing in a trade recovery. This would imply that they are due quite a correction. Further, trade volumes appear to be enduring the most significant interruption yet to their steady improvement since the aftermath of Lehman’s bankruptcy:


A further argument that this market selloff, unlike the one that preceded it in December, is about trade, might come from the relative performance of emerging markets. Rightly or wrongly, they are seen as far more exposed to trade conflict than the U.S. This might explain why the sell-off at the end of last year functioned as a correction to drawn-out U.S. outperformance, while this latest moment has seen emerging markets lag behind the S&P 500 even more. At this point, all the outperformance by emerging markets since 2003 has been canceled out – an extraordinary statistic given the speed of growth in much of the emerging world. 


But despite this, it is hard to say that what’s going on is just about trade. Or at least, if the trade conflict is driving this it is leading to a startling and swift reappraisal of the prospects for the economy.

The recent rise in the price of oil has gone into a sudden reverse, for reasons that can mostly be explained with reference to demand and supply (or an excess of it) in the oil market. That is an important driving factor in its own right, and tends to reduce inflation forecasts in the bond market. That said, the way breakeven rate on Treasuries have dropped in the last few weeks is startling and goes far beyond a normal reaction to a drop in oil prices:


Bear in mind also that tariffs are directly inflationary. All else equal, they increase the prices that Americans have to pay for imported goods. So this move lower in inflation expectations needs more than the trade conflict to explain it.

Meanwhile, Wednesday’s release of the minutes to the Federal Reserve’s last meeting on monetary policy suggested that the central bank was more hawkish than had been thought. In other words, the Fed is keener to keep rates higher for longer than anticipated. The response in the federal funds futures market has been to move the odds of a rate cut this year above 80% for the first time...

- Source, Bloomberg, read more here

Saturday, 25 May 2019

What It Will Take For Gold Prices To Hit Highs


Gold prices have been trading range-bound and whether or not prices break out depend mainly on how long the trade war with China lasts, this according to Phil Streible, senior market strategist of RJO Futures. 

“I think that if we resolve [the trade agreement] at the next meeting, we could see interest rates start to actually poke back up again, the U.S. economy could get heated up again, and we might have this hawkish tone, but if we have it dragged out over a period of well over another year, we could see that really wane on the economy and that’s where your interest rate cuts come in,” Streible told Kitco News.

- Source, Kitco News

Friday, 24 May 2019

Can Silver Prices Make A Comeback?


The gold-silver ratio tested 89 recently, the highest level since 1993, as silver still fails to show signs of life, but this may be a good opportunity to buy the metal, said Bill Baruch, president of Blue Line Futures. 

Spot silver closed at $14.41 an ounce on Wednesday, having stayed relatively flat during the trading session. “I think there’s going to be a lot of value down here. 

We could see $14 [an ounce], it’s an eyelash away basically, given some of the moves we’ve seen over the last year, but be ready to buy down there. 

I think there’s a couple of ways to look at it, and right now, if it doesn’t get to $14, a nice way to get some exposure is to look at selling $14 puts,” Baruch told Kitco News.

- Source, Kitco News

Tuesday, 21 May 2019

The Coming Pension Crisis Is So Big That It's A Problem For Everyone


A decade ago I pointed out that public pension funds were $2 trillion underfunded and getting worse. More than one person told me that couldn’t be right.

They were correct: It was actually much worse. It has gotten to $2 trillion and much worse in just a few years.

Note that we are talking here about a specific kind of pension: defined benefit plans. They are usually sponsored by state and local governments, labor unions, and a number of private businesses.

Many sponsors haven’t set aside the assets needed to pay the benefits they’ve promised to current and future retirees. They can delay the inevitable for a long time but not forever. And “forever” is just around the corner.

The numbers are large enough to make this a problem for everyone, even those without affected pensions. The underfunded pensions could also be one of the triggers to the unprecedented credit crisis I see coming in the next five years.

The problem is “solvable”… but the solutions will be problems in themselves.

A defined benefit pension plan knows it owes a certain number of retirees certain monthly benefits for life. Their lifespans are quite predictable when the pool is large enough.

From that, it’s simple math to calculate how much money the plan should have right now in order to pay those benefits when they are due. But then the assumptions start.

The plan must presume a future rate of return on the invested portfolio, an inflation rate, and in some cases future health care costs (medical benefits are part of many plans).

So, when we say a plan is “fully funded,” it may not be so if the assumptions are wrong.

Almost all public pension funds assume investment returns somewhere around 7% (and some as high as 8%+). That’s highly unlikely due to the debt we’ve accumulated, and debt is a drag on future growth.

If you make more realistic assumptions on future returns the unfunded liability becomes $6 trillion according to the American Legislative Exchange Council.

A more conservative and realistic approach would force the state and local governments to fund those pension plans at a much higher level. They have only two ways to do that: either raise taxes or reduce services.

That may be the reason policymakers have turned a blind eye to this...


- Source, Forbes, Read More Here

Monday, 20 May 2019

How Central Bank Interest Rate Policy is Destabilizing Banks


Broadly speaking, banks operate under the concept of maturity transformation. Banks take short-term – less than one year – financing vehicles, such as customer deposits, and use that to finance long-term – more than one year – returns. These returns range from the most commonly understood loans, such as auto loans and mortgages, to investments in equity, bonds and public debt. Banks make money on the interest spread between what they pay to the owners of the money and what is earned from the operations. Banks also make money on other services, such as wealth management and account fees, though these are relatively small compared to the maturity transformation business.

In terms of assets, the primary asset a bank holds is the demand deposit, also referred to as the core deposit. These are your everyday savings and checking accounts. Banks also sell Wholesale Deposits, such as CDs, have shareholder equity and also can take out debt, such as interbank lending. As these assets are owned by someone else, each of them demands a return for the use of those assets. These are part of the costs of operation for a bank. There are also more fixed operating costs, such as employees, buildings and equipment that must also be financed.

So, a bank will take assets and formulate loans on them. Like most of the world, the US operates on a fractional reserve system, one where banks originate loans in excess of the deposits on-hand. Take a look at the balance sheet of a large regional bank, 5/3 Bank, for example. For the 2018 fiscal year, 5/3 reported non-capital assets of $94 billion and a deposit base of $108 billion. However, the cash and cash equivalent component of these assets stood at $4.4 billion, or just 4% of demand deposits. It is critical, then, that the bank convinces those depositors to keep their deposits with 5/3 and not request a withdrawal. Doing so would collapse the bank as it's unable to quickly make good on any withdrawal request greater than 4% of the deposit base. To do this, the bank pays the depositor interest on the deposit.

How the Collapse Happens

This is where interest stability becomes a problem. When the Federal Reserve manipulates interest rates, banks are able to project fairly steady expenses for operations. While a business likes it when operational costs are relatively constant, this creates major problems for the banking system. When interest rates are suppressed to near 0% for, let’s say, a decade, the banking system builds up an income portfolio that is anchored to that near 0% cost of money. Back to the 5/3 balance sheet, we notice that the bank’s returns were $5.1 billion, or around a 5% average return on assets. $4 billion of those returns are tied up in $94 billion in long term lending. Interest expenses came in at $1 billion, or a little over 1%. The company also has $3.9 billion in relatively fixed operating expenses.

Basically, 5/3 Bank is operating on fairly thin profit margins relative to the bank’s asset base, which makes the bank highly vulnerable to any interest rate fluctuations.

Let’s say the Federal Reserve, then, begins to step up the target interest rate. As the Fed reduces competition on the market and sells assets, interest rates rise as these new assets begin to compete with existing assets. 5/3 then runs into a problem. If the risk-free rate starts to rise, depositors will look at that paltry deposit return and begin to wonder why they’re keeping money in the bank when other low risk vehicles are now offering higher returns. Since 5/3 can’t afford to lose much cash, the bank will be prompted to start raising deposit rates since they want to keep money in the bank. They will also have to refinance short term revolving debt at a higher rate.

The quandary to the bank is that nearly their entire revenue stream is made up of fixed-return vehicles. The effective spread between total costs and total revenue is just 0.2% of assets. This means that if financing costs increase by more than 20 basis points, 5/3 bank begins to take a loss. Since the bank had made loans for over a decade with these extremely low rates in mind, it will take some time to rebuild a portfolio of higher interest rate loans and investments to counterbalance this loss or the bank will seek to engage in high risk investments.

For a normal company, this isn’t a big deal. Companies can withstand losses for periods of time because they tend to build up a cash base to get through weak periods as they retool their operations. A bank, though, lacks this flexibility as they have to retain cash ratios to facilitate depositor withdrawals. A mere 1% increase in total borrowing costs to 5/3 will see the bank run out of cash in just four years, but since the bank has to maintain ratios, this will prompt the bank to begin selling assets to take on additional loans.

The problem compounds two-fold from this point for 5/3. First, the primary assets are income generating, so for every asset sold to keep cash ratios afloat just exacerbates the cash bleed and any new debt has interest expenses that need servicing, servicing without a corresponding asset return. Second, the assets have rates below market rate, so have to be sold at a discount.

Compounding further, every bank is operating like this. Every bank is operating on thin margins that assume a perpetual near-zero rate regime. If one bank has to unload assets to keep cash ratios intact, all the banks are inevitably doing the same. The largest portfolio item is usually the one that attempts liquidation – in 2007 that was the home mortgage. This selloff is self-reinforcing and creates a collapse since there aren’t many entities out there with free cash available to absorb this mass sell-off. Hence why the second largest asset class sitting in the Federal Reserve today is pre-2008 non-performing mortgage backed securities – the MBS holders, banks themselves, were stuck holding the bag. Banks ran to the last entity with cash available — the one that prints it — for a bailout.

Central banks will inevitably respond by trying to stabilize rates again, generally suppressing rates below the last cycle’s floor. Central banks, then, perpetually ratchet the rates down until they run into that 0% barrier then begin to engage in radical monetary policy when that lever is no longer available to pull. Canada’s pattern since 1980 is a perfect example of this, an ever downward sloping roller coaster.

How to Avoid This

If banks didn’t operate in a world of constant interest rates, an increase in rates wouldn’t be an especially large problem. First, if rates are fluctuating, banks naturally hedge against changes in interest rates. When they originate rates at a higher level and rates decline, they will enjoy a higher average return to build a buffer for when rates rise again. Second, if rates engage in natural fluctuation, banks would be hesitant to finance long-term loans using short term vehicles. Fractional reserve banking partially operates on the expectation that interest rates will remain stable for the long run. If the cost of money next month could be 20 basis points higher than it is this month, banks will have incentives to seek fixed financing solutions as opposed to leveraging depositor money. In other words, banks would likely cease engaging in maturity transformation since the risk of interest rates exceeding the return on the entire portfolio is just too high. That or at least limit exposure to this form of lending to something less than a gaudy 27-1 leverage ratio and promote sales of fixed financing like CDs. Market uncertainty and the removal of a central banking backstop would create a more stable banking system, which means naturally moving toward a full-reserve system.
- Source, Mises

Sunday, 19 May 2019

The Fed Never Calls The Bubble A Bubble... Why Not?


The Federal Reserve, by manipulating interest rates and creating money out-of-thin air, produces economic bubbles that must always end in painful economic busts. 

Have you ever noticed that Fed officials never actually acknowledge any of this? They never warn Americans ahead of time and everyone acts surprised when it all comes down.

- Source, Ron Paul

Friday, 17 May 2019

Central Banks Know The Dollar's Deteriorating


Today's guest, David Moadel, joins us to share his thoughts on the financial markets, the United States - China trade war and the importance of thinking about alternative approaches to investing.

- Source, Silver Doctors

Wednesday, 15 May 2019

Judy Shelton, Trump's Next Fed Choice, Favors a Gold Standard and Free Trade

Economist Judy Shelton, a Trump economic advisor and a gold standard advocate is rumored to be Trump's next Fed pick.

Bloomberg reports White House Considers Economist Judy Shelton for Fed Board

"The White House is considering conservative economist Judy Shelton to fill one of the two vacancies on the Federal Reserve Board of Governors that President Donald Trump has struggled to fill.

She’s currently U.S. executive director for the European Bank for Reconstruction and Development, and previously worked for the Sound Money Project, which was founded to promote awareness about monetary stability and financial privacy."


Case for Monetary Regime Change

On April 21, Judy Shelton had an ope-ed in the Wall Street Journal: The Case for Monetary Regime Change.

"Since President Trump announced his intention to nominate Herman Cain and Stephen Moore to serve on the Federal Reserve’s board of governors, mainstream commentators have made a point of dismissing anyone sympathetic to a gold standard as crankish or unqualified.

But it is wholly legitimate, and entirely prudent, to question the infallibility of the Federal Reserve in calibrating the money supply to the needs of the economy. No other government institution had more influence over the creation of money and credit in the lead-up to the devastating 2008 global meltdown. And the Fed’s response to the meltdown may have exacerbated the damage by lowering the incentive for banks to fund private-sector growth.

What began as an emergency decision in the wake of the financial crisis to pay interest to commercial banks on excess reserves has become the Fed’s main mechanism for conducting monetary policy. To raise interest rates, the Fed increases the rate it pays banks to keep their $1.5 trillion in excess reserves—eight times what is required—parked in accounts at Federal Reserve district banks. Rewarding banks for holding excess reserves in sterile depository accounts at the Fed rather than making loans to the public does not help create business or spur job creation.

Meanwhile, for all the talk of a “rules-based” system for international trade, there are no rules when it comes to ensuring a level monetary playing field. The classical gold standard established an international benchmark for currency values, consistent with free-trade principles. Today’s arrangements permit governments to manipulate their currencies to gain an export advantage.

Money is meant to serve as a reliable unit of account and store of value across borders and through time. It’s entirely reasonable to ask whether this might be better assured by linking the supply of money and credit to gold or some other reference point as opposed to relying on the judgment of a dozen or so monetary officials meeting eight times a year to set interest rates. A linked system could allow currency convertibility by individuals (as under a gold standard) or foreign central banks (as under Bretton Woods). Either way, it could redress inflationary pressures."


I just ordered the book to have a better idea where she is coming from.

Regardless, I am certain she would have been a better choice for Fed chair than Powell, Bernanke, Yellen, or Greenspan.

Bubbles of Increasing Amplitude

Shelton concluded "Central bankers, and their defenders, have proven less than omniscient."

Indeed.

The judgement of the Fed has produced three consecutive bubbles, each bigger than the one before it. The only reason the latest bubble is not acknowledged yet is that it hasn't yet burst.

It's not clear precisely what Shelton has in mind but at least she is headed in the right direction. What's clear is Trump is fighting the wrong battle when it comes to trade.

Tariffs will not fix the alleged problems of currency manipulation. A gold standard would.


- Source, Mish Shedlock