Mises: More Money Pumping Won't Make Us Richer

Whenever a central bank introduces easy monetary policy, as a rule this leads to an economic boom — or economic prosperity. At least this is what most commentators hold. If this is however the case then it means that an easy monetary policy can grow an economy.

But loose monetary policies do not generate economic growth. These policies set in motion the diversion of real savings from wealth generators to the holders of the newly pumped money. Real savings, rather than supporting individuals that specialize in the enhancement and expansion of the infrastructure are consumed by various individuals that are employed in non-wealth generating activities.

Moreover, not all consumption is a good thing. The consumption of real savings by individuals engaged in the enhancements and the expansion of the infrastructure is productive consumption. Conversely, the consumption of real savings by individuals that are employed in non-wealth generating activities is non-productive consumption.

It is non-productive consumption that sets the foundation for the weakening of the existing infrastructure thereby weakening future economic growth. In contrast, productive consumption sets the foundation for a better infrastructure, which permits stronger future economic growth. Needless to say, productive consumption leads to the increase in individuals living standards while non-productive consumption results in the lowering of living standards.

Why then is loose monetary policy seen as a major contributor towards economic growth?

Given that economic growth is assessed by means of the gross domestic product (GDP) framework — which is nothing more than a monetary turnover — obviously then when the central bank embarks on monetary pumping (i.e., loose monetary policy) it strengthens the monetary turnover in the economy and thus GDP.

After deflating the monetary turnover by a dubious price deflator one obtains the so-called real GDP. By means of real GDP, economists and various other experts are supposedly in a position to ascertain the state of economic growth, or so it is held. (Note that the increase in the monetary turnover because of the increase in the money supply is regarded as reflecting economic growth). In such a framework, it is not surprising that central bank policies are an important factor in setting in motion an economic boom.

From this, economists and various other experts conclude that the central bank by being able to grow the economy can also make sure that the economy follows the correct growth path. (The growth path as outlined by policy makers of the central bank).

Whenever the economy deviates from the path outlined by central bank policy makers and the government, this will allow them the opportunity to intervene by either raising or slowing the pace of monetary pumping.

The economy in this way of thinking is depicted as a helpless creature that must be guided by the all-knowing bureaucrats all the time. The passivity of the creature called the economy is also reflected by the fact that the output generated must be distributed by the all-knowing bureaucrats. In fact, one gets the impression that bureaucrats supervise the entire production process and individuals are just submissive entities that have hardly anything to say here.

If loose monetary policies of the central bank are able to generate through the GDP statistic so-called economic growth, then this must mean that a tighter monetary stance sets an economic bust.

"Economic bust" is here associated with the liquidation of various non wealth-generating activities. That is, the economic bust results in the curtailment of non-productive consumption.

Note that an important vehicle in setting the boom-bust cycle is the existence of the fractional reserve banking, which through the expansion of money out of thin air sets an economic boom while through the contraction of money out of thin air sets an economic bust.

Observe that in fractional reserve banking an expansion of money out of thin air emerges because of the ownerless lending. Consequently, when banks curtail the ownerless lending this leads to the contraction of money out of thin air...

- Source, Mises.org

Silver VS the World and Why I Went All in On Silver

What a Gold Shock Could Look Like: Institutional Investors Start Buying

I once asked my institutional investor friend, who used to work at Goldman Sachs and has been a gold owner for many years, what would make him buy more bullion. Without hesitation, he said, “When the price breaks out.”

Well, as is clear to the world, gold has broken out of its long-term trading range.

My friend is not alone in this sentiment of waiting to buy an investment until it’s rising. Institutional advisors, brokers and managers sit on the sidelines until a dormant asset class comes alive and establishes an uptrend—then they jump in.

With the recent uptrend in the gold price, it’s time to look at what kind of cash could come into the gold market from these types of investors. Institutions will want exposure. Not just because financial and market risks are higher, but because gold can net them a profit...

- Source, Gold Silver

Mario Draghi Accelerates Quantitative Easing on His Way Out the Door

Let the good times roll, well, at least for a little bit longer.

Mario Draghi, whose term as President of the European Central Bank comes to an end on October 31st, a position he has held since 2011, made one final, desperate move to secure his legacy as he exits his seat of power.

In a bold announcement, Mr. Draghi took to the airwaves, indicating that the European Central Bank would slash deposit rates to minus 0.5% from minus 0.4%. 

While at the same time, Mr. Draghi stated that he is renewing the ECB's bond repurchase program, indicating that the ECB would buy an additional $22 billion USD of bonds per month, starting on Nov. 1st.

What is even more insane, is the fact that he stated that the ECB would be pursuing this repurchase program indefinitely, until their inflation goals are met. A goal that can easily be adjusted at a later date.

Clearly, Mr. Draghi is once again entering into the currency wars fray, whole heartedly.

This is all par for the course for Mr. Draghi, as he has been a strong prominent of Quantitative Easing throughout the course of his entirety as President of the European Central Bank, printing his way out of crisis after crisis, including the near collapse of Greece years ago.

This move is being looked at by some, as way for Mr. Draghi to protect his legacy and end on a strong note for years to come, as many fear a recession looms just over the horizon, a recession that could tarnish all of the "hard" work he has done to keep the European Union economy artificially inflated during his tenure.

While announcing this next tidal wave of Quanitiative Easing, Draghi revealed that these decisions were not even put to vote, stating the following;

“There was more diversity of views on APP. But then, in the end, a consensus was so broad there was no need to take a vote. So the decision in the end showed a very broad consensus. As I said, there was no need to take a vote. There was such a clear majority.”

These statements were soon to be revealed to be a farce, as many key players within the ECB stepped forward, indicating their displeasure with President Draghi's latest moves.

Bloomberg reports on the "revolt" within the ECB;

"The unprecedented revolt took place during a fractious meeting where Bank of France Governor Francois Villeroy de Galhau joined more traditional hawks, including his Dutch colleague Klaas Knot and Bundesbank President Jens Weidmann in pressing against an immediate resumption of bond purchases, the people said. They spoke on condition of anonymity, because such discussions are confidential."

These three dissenters alone, represent almost half of the euro region's economic output and population, however, it was revealed that even more were displeased, including colleagues from Austria and Estonia.

This exit move by Mr. Draghi is going to create a massive headache for his replacement Christine Lagarde, who is set to take over his position come this November and place her an awkward position, from the moment she takes office.

Will she appease the dissenters and curtail these moves, will she risk angering the markets? Unlikely.

Seeing this for the move in the currency wars that it is, President Trump, who has been pressuring the Federal Reserves to act quicker and lower rates in a similar fashion, took to Twitter, targeting the Fed once again;

"European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports.... And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!"

Of course, the ECB denies that it is attempting to manipulate anything and is only trying to stave off the growing possibility of a recession, of which the odds grow with each passing day.

The currency wars continue on, the manipulation continues on and the printing presses keep on printing. 

Ultimately, this is good for gold, silver and precious metals as a whole, but bad for the health of the economy in the long run.

Prepare accordingly, keep stacking.

- As first seen on the Sprott Money Blog

Bill Holter: The Whole Thing is Going to End in a Panic

Financial writer and precious metals expert Bill Holter says a failure to deliver is not a maybe but a sure thing. 

Holter says, “Whether it is this year or the first few months of next year, it doesn’t matter. It is going to happen. 

I can basically guarantee there is going to be a failure to deliver, and that failure to deliver is going to unmask and scare the crap out of the entire fractional reserve banking system and the fractional reserve commodity system. 

The whole thing is going to come down in a panic because somebody gets a failure to deliver. If you listen to what Trump is saying, he wants a lower dollar. 

How much of a lower dollar does he want? He’s talking about debasing the currency to make the debt payable.

That is the most palatable way for any government to pay debt and that is to debase the currency and pay it off in monkey money.”

- Source, USA Watchdog

John Williams: The FED Will Get Blamed if the Economy Tanks

Economist John Williams says the Fed is still not in President Trump’s corner when it comes to the economy. 

Williams contends, “The Fed was working against him (President Trump) on the economy, and they still are. 

Their primary concern is the banking system, and that certainly has to be supported, but when you have a weak economy, and this was fueled by the tightening of the Fed, I don’t think Trump is going to get blamed for that. 

It’s going to go against the Fed, and I don’t think it is going to hurt him that much in the upcoming election.

- Source, USA Watchdog

Michael Oliver Explains Where He Sees Precious Metals Markets Going

Markets Soar Higher, The Trade Wars Are Over?

Treasury yields are up, stocks are up and everything is peaches and cream once again. The trade wars are apparently over? All geopolitical risks have dissipated over night?

Of course not.

The market is reacting to positive news coming out from both China and the United States, that is indicating that both sides are willing to resume talks next month and are once again willing to return to the negotiating table in regards to the ongoing trade wars.

Leading up to next month's talks, high level officials on both sides are expected to lay out the ground work via various meetings and phone calls, in anticipation of the October meeting.

As reported by the New York Times;

Liu He, a top Chinese economic official and Beijing’s top trade negotiator, will travel to Washington in early October, state media said. Mr. Liu spoke on Thursday morning with Robert E. Lighthizer, the United States trade representative, and Steven Mnuchin, the United States Treasury secretary. Mr. Lighthizer’s office said that deputy-level meetings would take place ahead of the talks.

Of course, this has caused the markets to react in a bullish manner, with the S&P shooting up by over 40 points at the time of writing, or 1.37%, while the DOW Jones, not to be outdone, propelled higher by 1.69%, or 444 points.

Meanwhile, both gold and silver were hammered lower by the news, taking significant hits.

(Gold Price, Chart Source)

(Silver Price, Chart Source)

Gold is currently down by $30.72 per ounce, while silver has fallen by $0.29 cents per ounce.

The market is signalling that the threat of a continued trade war is greatly diminished and the need for protection is lessened, however, one day's worth of trading does not make a trend and the trend is still quite positive for precious metals.

Gold still remains strongly above the $1500 support level, while silver stubbornly remains above $18 per ounce.

Unfortunately for the markets as a whole, I believe that this is nothing more than jawboning from both sides, as it is incredibly unlikely at this point that either side will make any major concessions in next month's meeting.

China cannot afford to back down and neither can President Trump with the 2020 elections just over the horizons. Neither side can give off the appearance of weakness, regardless of the damage that it does to their own economies.

However, both sides would love nothing more than some reprieve in the short term from the pain their economies have been feeling as of recently and both sides do not wish to head into the holidays with people and businesses fearing the worse, clutching their wallets tightly.

Spending is paramount in this consumer driven world and both countries GDP's depend upon it, with one side predominately selling the numerous, largely useless, trinkets and the other buying them.

Already the United States has imposed massive tariffs on Chinese goods entering into the country and plans on enacting even more before next months meeting, antagonizing Chinese officials even more.

China of course has retaliated as well, however, they are taking the brunt of the damage, as they rely so heavily on exporting goods to the United States.

It is already expected that China's GDP is going to be 1.6% lower throughout the course of 2019 as a result of the ongoing trade wars, which is a massive move lower.

The IMF has also revised world growth, lower as a whole, as a result of these ongoing trade disputes.

South China Post reports;

"Higher tariffs and rising trade barriers will weigh heavily on the global economy, apart from the US and China, especially through its impact on confidence and financial conditions. According to model simulations, a full-blown trade war would cause the global economy to slow by more than 0.8 per cent in 2020, with growth remaining roughly 0.4 per cent lower in the long term, compared with a baseline without trade tensions."

Who knows what next month will bring, who knows if a resolution is in order? Anything is possible, however, I wouldn't hold your breath.

I believe that neither side is yet willing to buckle under the pressure, I believe that things are going to get worse before they get better and I believe that the trade wars will continue on, for many months yet to come.

The risk remains, the need for precious metals remains. Keep stacking and ignore the noise.

- As first seen on the Sprott Money Blog

A Massive Job Crisis is Coming, This is Why

Art Bilger sees a jobs crisis on the horizon. Over the course of a career that took him from Drexel Burnham Lambert, to private equity behemoth Apollo, to Akamai Technologies, he met some of the most brilliant people in the worlds of finance, media and technology. 

In this interview with Alex Rosenberg, Bilger shares some incredible stories from his career, and explains how the lessons he learned have led him to advocate for a new way of thinking about employment.

- Source, Real Vision

Trump is Right, China Will be in the Dark Ages Without the United States

The U.S. doesn’t need China and American companies can take their manufacturing elsewhere, this according to Todd Horwitz, chief strategist at Bubba Trading.

“We do not need China, we can exist without China. They will have big trouble existing without us. They will go back into the dark ages,” Horwitz told Kitco News.

- Source, Kitco News

The Fall Of Empires & The Shocking Similarities Exposed

Josh Sigurdson reports on the ground in Rome, Italy on the shocking similarities between the fall of the Roman Empire and the current signs of the fall of the US empire as pressure builds in the cultural, political and monetary complexes that comprise the powerhouse we know as the global US empire. 

The United States much like Rome started off as a republic after kings and queens were thrown out of power. The Republic grew slowly but surely into an empire without people even acknowledging the slow incremental frog boil. 

Before people knew it, inflation had skyrocketed, laws piled sky high and the small republic morphed into a global empire under the guise of "voting power." In this short film, we break down countless similarities between the empire and why we need to be extremely cautious as we enter into a new age of centralization, control and divide. 

Is a new person in a suit going to change the system? Or is the system the problem in the first place?

- Source, WAM

Here Comes Negative Interest Rates and Hyperinflation Worldwide...

Here Comes Negative Interest Rates and Hyperinflation Worldwide! Jeff Berwick walk and talk from Mexico City. 

Trump has become enamored of European style negative interest rates, what could possibly go wrong?

- Source, The Dollar Vigilante

The Gold to Silver Ratio is Indicating a Massive Move Higher for Silver

At the current time of writing, gold and silver are suffering under a renewed attack, with the former losing $16.54 (1.08%) throughout the trading day and the latter down by $0.20 (1.11%).

Yet, this is not a time to despair, as both gold and silver are showing incredible resilience, adapting and adjusting to these difficult times, with gold holding solidly above the $1500 mark and silver smashing through the $18.00 per ounce level.

This smash lower came just as silver was rocketing towards the $19.00 mark, after quickly passing through its previous resistance levels in prior trading sessions.

The reasoning for these metals moving higher are many fold and have been discussed at length on the Sprott Money blog and most, if not all of these contributing factors are still solidly in place.

The China / US trade war is giving no indication that it is going to come to a close anytime soon, despite President Trumps apparent softening in his approach over the past month, he has once again renewed his efforts and gone on the attack, stating that he regrets not raising tariffs higher on China.

The Fed's are clearly not the only masters of doublespeak.

Obviously, this is an attempt to keep the markets chugging along, while at the same time, trying to force the Fed's hand in lowering rates even further.

I believe that ultimately the Federal Reserve is going to do just that, as they know that the global economy is not healthy and is on the verge of a major recession.

Rates are going lower and that means that both gold and silver are going to adjust accordingly, moving higher in lockstep with lower rates and as investors seek the unique safety that only these metals can provide.

Despite believing that both gold and silver are ultimately going higher, I also believe that silver is destined to outshine gold in price gains, but why?

Good question.

The answer is simple, the gold to silver ratio and the fact that it is currently indicating by all historical standards that silver is very, very underpriced.

As it stands right now, the gold to silver ratio is approximately 85:1, meaning that it takes 85 ounces of silver to buy 1 ounce of gold.

To find the gold to silver ratio, all that you need to do is divide the current gold price by the current silver price.

Just for reference, here are some historical comparisons:

• The ratio of gold to silver in the earth's crust is 17.5:1.
• In ancient Roman times, the gold to silver ratio was set at 12:1.
• In 1792 the gold to silver ratio in the United States was fixed at 15:1 by law.
• In 1803, France set this ratio at 15.5:1.

Even if you disregard all of the above, and use much more recent numbers, the average gold to silver ratio over the past two decades still stands at 60:1, indicating that our current 85:1 ratio is horribly out of alignment and in need of a major adjustment.

This means that even if gold was to remain at its current price levels (something I don't believe is going to be the case), then silver would still have to move higher by roughly $7.00 per ounce, just to reach the more recent, modern day averages.

However, it is very likely given the fundamentals that gold is going to move higher, as David Rosenberg, Gluskin Sheff’s chief economist stated in a recent interview.

He believes that $3,000 gold is a very real possibility, which would mean that silver would need to move to roughly $35.00 per ounce, just to maintain todays current, historically out of whack ratio.

If silver out-paces gold, returning to a more healthy 60:1 gold to silver ratio, then this would put silver at $50.00 per ounce, nearing its all time high.

Either way, we are looking at incredibly impressive gains if gold and silver continue down the current path they are on, heading incrementally higher as the months and years progress.

The printing presses are not slowing down, the Fed is in all likelihood going to lower rates, just as the markets are demanding they do and the 2020 elections are just over the horizon, bringing with them massive turmoil and chaos.

Gold and silver are destined to move higher. Their time to shine is now.

- Source, as first seen on the Sprott Money Blog

Secret Revealed: Why Silver is Spiking

Why is silver going up? Good question, and the reason for the price spike in silver is surprisingly simple. 

Tune-in for discussion on what's going on in the economy & markets in general, and gold & silver specifically... especially silver!

- Source, Silver Doctors

Frank Holmes on the State of the Gold & Silver Markets

Frank Holmes, the CEO and Chief Investment Officer of U.S. Global Funds, helps us look into the future with has strong understanding of gold and gold shares markets.

- Source, Jay Taylor Media