, GOLD SILVER LIBERTY: 2019

Saturday, October 12, 2019

Demand for Gold ETF's Surge as Quantitative "Not" Easing Returns

The Federal Reserve has cut interest rates twice this year, slashing rates lower in an attempt to spur the economy and keep the good times rolling.

Despite this fact, the markets are not happy and they have demanded more and as it now appears, they are going to get exactly what they wished for.

The odds of an additional rate cut occurring within 2019 has surged higher, with market analyst predicting overwhelmingly that another rate cut is on the way and soon.

The reasoning for this is the Federal Reserve themselves, as they have proven that they will not and are not going to let the free market regulate itself, as seen in their recent intervention in the short-term lending markets throughout the month of September, in which they rushed in to save the day.

The Financial Times reports;

"In recent weeks, the Federal Reserve Bank of New York has injected billions of cash reserves into short-term lending markets to ease the pressures that bubbled up in September and sent the cost of borrowing cash overnight via repurchase, or repo, agreements as high as 10 per cent."

Despite these bail-outs, the short-term lending markets are still seen as on shaky ground and incredibly vulnerable to a repeat collapse.

This has prompted the Federal Reserve to take even further action, announcing that they would once again resume purchases of Treasury Securities from the open market, in an attempt to keep the system chugging alone.


At the National Association for Business Economics conference in Denver on Tuesday, Federal Reserve Chairman Powell explained  how the Fed plans on supporting the markets moving further, however, he strongly stressed that this should not be viewed as Quantitative Easing, stating the following;

“I want to emphasize that growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis.”

Reiterating this point, Powell would later go on to state;

“In no sense, is this QE,”
Obviously to anyone with half a brain, the above statement by Powell is pure nonsense, as this is obviously QE, whether the Fed wants it to be or not.

This recent softening by the Federal Reserve, in addition to the ongoing geopolitical risks that seem to be plaguing much of the world, has resulted in a massive surge into Gold ETF's as market participants seek the protection that only the king of metals can provide.

ETF gold holdings reached an all time high in the month of September, resulting in the longest run higher in holdings, in the past decade. With the most notable being holdings within the UK.


The last time that such demand for gold ETF's was seen was shortly after the 2008 financial crisis, which does not bold well for what may be coming just over the horizon.

According to the World Gold Council, gold backed ETFs added 75.2 tons of metal to their holdings last month, bringing the total to 2,808 tons.

This surpasses the previous record set in 2012, when gold was at $1,700 per ounce, highlighting just how underpriced gold is at the moment.

Despite these warning signs, signals from the Fed and the deteriorating geopolitical climate around the world, gold stubbornly remains around the $1500 USD per ounce level, struggling to break higher.


2020 is going to be one for the record books and I believe that anything could happen as we head into the US Presidential Elections, with political violence and uncertainty creating a powder keg style situation.

These artificially suppressed prices are not going to last much longer, as the fundamentals for higher gold prices are inevitably going to win the day and precious metals are going to surge higher as we head into an even more tumultuous and unpredictable next year.

Until then, enjoy these prices while you can and as always, keep stacking.

- As first seen on the Sprott Money Blog

Thursday, October 10, 2019

What Is Your Next Strategy After Gold Goes Parabolic?


What Is Your Next Strategy After Gold Goes Parabolic? Wall Street cookie cutter investment plans don’t work. 

When gold rose from $700 to $1900 there were five $100 corrections. China & India buying increase whenever gold corrects down.

Wednesday, October 9, 2019

Rob McEwen: Is the gold price still in good shape and how to stomach volatility


Gold prices may have had a rough start to the week, but the long-term trend remains bullish and investors should not get sidetracked by noise, said Rob McEwen, chairman of McEwen Mining. 

“Despite the last few days, the trend is much higher,” McEwen told Kitco News. “Buy when you have that opportunity, because the momentum is building.”

- Source, Kitco News

Sunday, October 6, 2019

The Case Against Numismatic Gold for Wealth Preservation


Little did I know as I ventured into conversations about owning physical gold, that discussing the option of buying collectable, rare, or “numismatic” coins would draw such heated controversy from multiple corners. 

Many of the topics we’ve addressed to help us all be aware and prepared have encountered polarized positions and world-views (cryptos vs. precious metals, vault storage vs home-storage, and online purchasing vs. cash-in-hand private and local, etc..).

But the extreme views of people I’ve encountered who are earnestly devoted to or repelled by numismatic coins has convinced me that we’ve got to take a closer look, and bring this controversy out of the trenches and into the light of open, civil debate to discern the facts and data, and help us all be better informed. 

So whether each of us may hold deep-seated views, or a casual opinion, or haven’t even heard of or thought about the virtues vs. risks of acquiring “collectible” coins, I hope we will all learn from this discussion, and come away better prepared to protect our family’s financial well being. 

This guest, Franklin Sanders, known as “The Money Changer,” and founder of The-MoneyChanger.com, has been in the gold & silver business for 40 years. 

Sanders visits Reluctant Preppers this first time to explain his experienced view of the factors affecting premiums on collectible gold coins, and why he says the data argues “against” buying numismatic coins as a part of your wealth preservation strategy.

Saturday, October 5, 2019

Fears of a Global Recession Grow, Gold and Silver Rally

With each passing day, the chances of the United States and in all likelihood, the entirety of the global economy entering into a deep recession grows.

The trade wars continue on and as I have written about numerous times in the recent past, I can't see a solution on the horizon, this is bad news in the short term for not only China, who relies heavily on the United States, but also the US economy as well.

Neither party is willing to budge and Central Bankers around the globe are beginning to come to the stark realization that things are going to get a whole lot worse, before they get better.

This is exactly why the FED is cutting rates, this is why the European Central Bank plans on once again entering into a massive stimulus program, as they know that a reckoning is coming.

Confirming this new reality, the World Trade Organization once again cut its forecast for global trade growth on Tuesday.

The Washington Post reports;

"On Tuesday, the WTO said world merchandise trade volume is expected to rise 1.2 percent in 2019 — markedly slower than the 2.6 percent forecast in April. For 2020, the forecast estimates 2.7 percent growth instead of 3 percent.

The revised projections come less than two weeks after President Trump called China a “threat to the world” and said there was little urgency for an interim trade agreement. On Sept. 20, he told reporters he was under no pressure to reach a deal with China before the 2020 election, despite his early insistence that China was eager to return to the negotiation table."

Further confirming this news, it is reported that both US and Chinese manufacturers have entered into recession territory, as the ISM’s U.S. manufacturing Purchasing Managers Index fell to 47.8% last month.

According to CNBC, this is the worst level in a decade, with the index not seeing these numbers since June 2009, when the United States was going through its "great recession" after the 2008 collapse.

Unfortunately, as many of you know, when the United States sneezes, the world gets a cold and already, it appears that the contagion is spreading, with countries such as Singapore reporting that its economy is also "tipping" into recession.

All this negativity and talks of recession, caused gold and silver to plummet lower in price early this week.




(Charts via Goldprice)

Fortunately, it appears that market participants regained some semblance of sanity as the week dragged on, with both gold and silver recovering much of their earlier week losses.

As it stands now, gold bullion has moved once again above $1500 USD per ounce, while silver bullion stands at $17.70 USD per ounce.

These are important levels to maintain and any protracted time spent below these levels could mean much lower prices, however, given the fundamentals it seems unlikely that this will be the case.

Central bankers around the world are now fully aware that we are about to enter into a dragged out global recession as the trade wars continue to go on, with no end in sight.

This means that interest rates around the world are going to be slashed by Central Bankers, stimulus programs are going to once again be all the rage and the money printing is going to be happening at a feverish pace.

In addition to this, the Democratic party in the United States seems hell bent on moving forward with impeachment proceedings against President Trump, a plan that appears to be pivotal in their 2020 election campaign strategy and nothing further, as it is incredibly unlikely that he will be impeached and removed from office.

Even if the House does vote to impeach, the Senate, which is controlled by Republicans are not going to vote to remove him from office, as 2/3rd's must do so.

Unfortunately for the Democrats, I along with many others believe that this is going to backfire on them, as it is only going to embolden Republicans and result in a staggering high turnout for the President come 2020.

Regardless, uncertainty abounds and precious metals are going to take notice as this political theater continues to unfold.

People should not be selling gold and silver bullion as we saw earlier in this week, but in fact be buying it hand over fist in the coming climate.

Expect much higher prices as global risk grows and as QE to infinity goes worldwide.

Keep stacking. Focus on the long term. Ignore the short term noise.

- As first seen on the Sprott Money Blog

Friday, October 4, 2019

The Most Important Technical Indicator For Trading Gold and Silver


Expert technical analyst & professional trader JC Parets says that over the last two years, we've seen the U.S. stock market bear market, and we're closer to the start of a new bull market than we are to a crash, but that doesn't stop JC from turning bullish on gold & silver. 

JC says once gold breaks-out above $1,600, there's no denying this bull market is on, a bull run which likely leads to a $10,000 gold price based on the technical analysis alone.

- Source, Silver Doctors

Thursday, October 3, 2019

The Real Problem With Low Interest Rates...


We review the recent BIS paper which highlights the issues with low interest rates.

- Source, Walk the World

Sunday, September 29, 2019

Insights From The 2019 Denver Gold Forum


Apparently Canadian investment bankers are working on a lot of mergers and acquisitions among mid-tier primary gold miners. 

Not all the deals will go through but it sounds like many are being worked in because many producing miners cannot raise enough capital to fix their balance sheets and remain on their own.

Saturday, September 28, 2019

Out Of Control Healthcare Costs: Cost of Annual Family Health Coverage in the US Now Tops $20k


The cost of family health coverage in the U.S. now tops $20,000, an annual survey of employers found, a record high that has pushed an increasing number of American workers into plans that cover less or cost more, or force them out of the insurance market entirely.

- Source, Wall St for Main St

Thursday, September 26, 2019

Ron Paul: Negative Rates Can’t Save The Empire, It’s The Debt Stupid


Central Planning is always destined to fail, and central planners (at everyone else's expense) always do whatever they can to delay the inevitable. 

Negative interest rates (that is, getting paid to borrow money) would never occur in a free market monetary system. Such a ludicrous idea will only further exacerbate the end of central banking. 

Debt continues to skyrocket, and the interest payments will only get more unbearable. It's time to audit and then End The Fed.

- Source, Ron Paul

US Constitutional Crisis? Not According to Gold Bullion

The system is collapsing, the markets are crashing and gold and silver bullion are soaring higher, attempting to protect its investors from the impending doom that is about to befall us all..

Or not.

The Main Stream Media is at it again, beating the war drum and attempting to rile up the people of the United States, the markets and anyone else that will listen, after all, you've got to get those clicks.

The hub hub that I am referring to is in regards to the ongoing "constitutional crisis" taking place, as I write this article, in the United States.

A "whistle blower" in the Intelligence Community has stepped forward, with damning information, that he / she heard from a guy that knows a guy, who knows for a fact that President Trump is attempting to circumvent the election process, big league.

Straying from tradition and in record breaking fashion, the Trump administration released the transcripts of the supposed incident that took place via phone, with the President of Ukraine, in which the "whistle blower" believes the President attempted to garner foreign interference in the upcoming 2020 elections, by having Ukraine investigate Joe Bidens and his son, Hunter Biden.

This of course would be very concerning if true, even if there was undoubtedly some funny business that took place regarding Hunter's "incident" while Vice-President Biden was in office.

To read more about the background surrounding this past event, I suggest Karl Rove's recent Op-Ed that appeared in the WSJ this morning.

If all of these allegations were true, then you would expect that President Trump and his administration would go into immediate "lock down" mode, making it as difficult as possible for the opposition to investigate his "wrongdoings". Which is what I believe both the Democratic party and the MSM thought was going to unfold.

Much to their surprise, not only did the Presidents administration release the phone call transcripts, but also the whistle blowers memo, with only minor redactions, of which you can read below;



A few key takeaways from the whistle blowers complaint, include, self admittedly, that they were not personally privy to any information first hand, but received news of wrongdoing from others;

In the course of my official duties, I have received information from multiple U.S.
Government officials that the President of the United States is using the power of his office to solicit interference from a foreign country in the 2020 U.S. election."


"Over the past four months, more than half a dozen U.S. officials have informed me of various facts related to this effort."

"I was not a witness to most of the events described... However, I found my colleagues' accounts of these events to be credible..."

Many of you know that I am not the biggest fan of President Trump, nor many of the choices he has made while in office, however, I also am not blind to the fact that he has received the most negative coverage via the MSM, of any President in history.

Once again, this appears to be another "nothing burger", especially given the fact that the markets are simply yawning over this "constitutional crisis".

Let's take a look at the current price of gold bullion in the last five days of trading action;


(Chart via GoldPrice)

Wait down? This can't be right, gold should be rapidly moving higher if a "constitutional crisis" was currently unfolding, as risk would be exploding higher.

The markets must be telling a different story;




(Charts via MarketWatch)

Now that's a market collapse if I've ever seen one! Both the Dow Jones and the S&P 500 are down less than 1%.

But, what about the people, the men and women on the street, they are the ones that truly matter, especially with the 2020 elections rapidly approaching;


What?

While this news was breaking, Rasmussen, one the largest polling firms in the United States had President Trumps approval rating at 51%, which is 7% higher than President Obama's, at the exact same number of days in office, the latter of whom did not have a "constitutional crisis" unfolding at the time.

All sarcasm and joking aside, clearly this story is yet to fully unfold, but unfortunately for the Democratic party and the MSM, the latter of which continues to discredit themselves more and more everyday, this looks like a massive miss, which could backfire on them "big time", as Karl Rove stated in his recent Op-Ed.

This game can only be played so many times before people simply stop believing these type of "breaking news" stories altogether, of which I believe is the point we are now approaching.

The stock market, gold bullion, the people and the current evidence being presented all points to the true reality, there is no crisis.

As I have written about numerous times in the past, the 2020 elections are going to be dirty, they are going to be nasty and the world is going to be taken on a roller coaster of a ride, as the greatest reality TV show to ever be presented unfolds in front of our very eyes.

Strap yourselves in and keep stacking, madness approaches.

- Source, As first seen on the Sprott Money Blog

Wednesday, September 25, 2019

Expert who called $1500 gold is now betting on $20 silver in two months


E.B. Tucker, director of Metalla Royalty & Streaming, doubled down on his bet earlier this year that gold would eventually rise to $1,500, an now he’s betting that silver will hit $20 in the next two months. “Right now, we want to trade silver up to $20. 

We think gold is going to stabilize at $1,500 and we see silver moving to $20, so that’s a 12% move we think we can capture in the next probably eight weeks. 

We see that as pretty much a certainty, and we’re willing to bet on that,” Tucker told Kitco News on the sidelines of the Denver Gold Forum.

- Source, Kitco News

Tuesday, September 24, 2019

Nick Barisheff: Gold Beating Warren Buffett Since 2000


Every week, there are new warnings sounding about an ever increasing wobbly economy? Stocks are near record highs, and so is the global debt. So, what do you do? 

Nick Barisheff, CEO of Bullion Management Group (BMG), says, “In the U.S. dollar since 2000, gold is up an average of 9.4% per year. In some countries, it’s up 14% and so on. 

If you take the overall average of all the countries, the average increase is 10% a year. Every time Warren Buffett is on CNBC, he seems to go out of his way to disparage gold, but if you look at a chart of Berkshire Hathaway and gold, gold has outperformed Berkshire Hathaway.

 Everybody worships Warren Buffett as the best investor in the world, and gold has outperformed his fund in U.S. dollars. I would not disparage gold if I were him. I’d keep quiet about it.” There is a first for Barisheff, too, in this financial environment. 

He says for the first time ever, he’s “100% invested in gold” as a percentage of his portfolio. He says the bottom “is in for gold,” and “the bottom is in for silver, too.” 

Barisheff contends with the record bubbles and the record debt, both gold and silver will be setting new all-time high records, as well, in the not-so-distant future.

- Source, USA Watchdog

Bearish Macro View: Global Recession Fears Grow Among Top Money Managers

Economic data out of Europe and the US on Monday showed that manufacturing recessions are spilling over into services and employment. Global trade volumes are suddenly rolling over, and global central banks are cutting interest rates at the fastest clip since the last financial crisis, more than a decade ago. 

On Sunday, the Bank for International Settlements (BIS) warned about an impending financial crisis, while billionaire hedge fund manager Paul Singer is building cash to take advantage of the next stock market crash.

Economic storm clouds are quickly gathering across the world, and some of the top money managers are becoming more nervous than ever that economic doom is around the corner, according to Absolute Strategy Research (ASR), first reported by the Financial Times.

Nearly 52% of respondents said an economic downturn could arrive as early as next year -- driven by investment uncertainty and trade tensions.

ASR created the survey in 2014, surveyed more than 200 institutions that manage a combined $4.1 trillion in assets, said this is the first time that more than 50% of respondents feel a recession could be imminent.


Many of the respondents expect US unemployment to increase over the next year.

Which by the way, after today's Services Employment data fell to the lowest since December 2009, it's like that employment growth will continue to weaken and push up the unemployment level in 1H20. This should not come as a massive surprise as we warned the cyclical top in employment had already hit.

"People have definitely bought into the bearish macro view," said David Bowers, ASR's head of research. "When you look at the pattern over the past four or five years, it is definitely quite an important inflection point."

The ultra-bearish views of more than 50% of the respondents, keep in mind, they manage trillions of dollars, coincide with JPMorgan Global Manufacturing PMI printing sub 50. There's even fear with respondents that the world is now stuck in a "low-growth trap" - where central banks are powerless to spark inflation.


Despite the doom and gloom, respondents still believed stocks could outperform bonds over the next year.

However, most thought it was less than a 50% chance that stocks will be higher a year from now.

ASR's survey suggests respondents are hoping central banks can save the world again with unconventional monetary policy.

"They haven't gone maximum defensive," said Bowers. "People are thinking the cavalry is going to come quickly to create stimulus to provide that turnaround."

But as we learned from the European Central Bank (ECB) earlier this month: 

"The room for monetary policy maneuver has narrowed further. Should a downturn materialize, monetary policy will need a helping hand, not least from a wise use of fiscal policy in those countries where there is still room for maneuver."

So with that being said, respondents betting that extreme monetary policy will save the day this go-around is unwise.

- Source, Zero Hedge

Monday, September 23, 2019

Billionaire Hedge Fund Manager Hedges Against Upcoming Market Crash



Billionaire hedge fund manager Paul Singer is the founder & CEO of Elliott Management. Singer is preparing to raise additional funds from investors to build up a war chest of cash to spend on new opportunities, as he anticipates a market downturn could be imminent, reported the Financial Times.

Elliott Management, a $38.3 billion activist fund, has spent the summer months stockpiling cash, closed a $2 billion co-investment fund in August to take companies private.

Now Singer is scrambling to raise an additional $5 billion, in a new funding round, before the cycle turns, according to FT sources.

"The hedge fund is using a drawdown structure that will feed into the main fund, an arrangement that is often used by private equity firms but has become more popular among activists," sources said.

A drawdown structure will not allow investors to immediately front capital to Elliott but instead will be called overtime as opportunities emerge.

Elliott used a similar structure in 2017 when it raised money for market disruptions. At the time, Singer told investors in a letter that the firm wanted to raise funds before investor liquidity dried up.

FT suggests Elliott's dash for cash is a sign that "Singer is anticipating a market meltdown. The billionaire investor, who has been vocal about complacency in global financial markets, recently predicted that the economy was headed for a significant downturn with risk at an all-time high."

"The global financial system is very much toward the risky end of the spectrum in terms of debt," Singer said during a panel at the Aspen Ideas Festival in July. "Global debt is at an all-time high, derivatives are at an all-time high, and it took all of this monetary ease to get to where we are today."

In a separate report from Sunday, Claudio Borio, Head of the Monetary and Economic Department at the BIS, warned about the increasing acceptance of negative interest rates has reached "vaguely troubling" levels.

Borio said that the effectiveness of monetary policy is severely waning and might not be able to counter the next global downturn.

"The room for monetary policy maneuver has narrowed further. Should a downturn materialize, monetary policy will need a helping hand, not least from a wise use of fiscal policy in those countries where there is still room for maneuver."

The BIS, known as the 'central bankers' bank,' said the recent easing by the Fed, ECB, and PBOC, has pushed yields lower across the world, contributing to the more than $17 trillion in negative-yielding tradeable bonds.


Borio also warned about the corporate debt market, specifically major imbalances in leveraged loans known as collateralized loan obligations (CLOs) which "represent a clear vulnerability" to the global financial system.

And it should become increasingly disturbing to readers that not just a billionaire hedge fund manager [Singer] is anticipating a market crash, but as we reported Sunday, the 'central bankers' bank' [BIS] is warning of imminent financial disaster.

Singer is building cash to take advantage of the coming implosion of corporate debt markets in the US.


- Source, Zero Hedge

Sunday, September 22, 2019

Free Money for Everyone Won’t Solve Our Problems


The world economy is turning toward a depressingly familiar cycle of lower rates, renewed quantitative easing and more fiscal stimulus. The return to a persistent semi-slump in advanced economies is likely to increase interest in universal basic income, or UBI – an idea supported by Democratic presidential contender Andrew Yang and business figures from Facebook Inc.’s Mark Zuckerberg to Tesla Inc.’s Elon Musk. If adopted, this radical prescription is unlikely to prove a magic bullet.

Advocates argue that guaranteeing every individual a flat-rate payment irrespective of circumstances will help to address the poverty traps inherent in traditional welfare systems, the declining share of income going to labor, and increasing threats to employment from automation. Yang, a tech entrepreneur and an outsider for the Democratic nomination, proposes giving $1,000 a month in cash to every American and has made the plan a key talking point in candidate debates.

The concept isn’t new. It was first suggested by Sir Thomas More in his 16th century work “Utopia,” and was championed by free-market economists such as Friedrich Hayek and Milton Friedman in the 20th century. In a national referendum in 2016, Switzerland rejected a proposal to establish a universal basic income.

The case for UBI is that it can increase the efficiency of welfare systems by minimizing bureaucracy, the administrative costs of delivery, and drainage of resources through political exploitation or benefit fraud. Trials in Finland, Canada and India have been inconclusive, showing psychological improvements among recipients but limited success in achieving economic or social objectives.

Critics point to the financial constraints of funding such programs. In the U.S., $1,000 per month per person would equate to a total cost of around $4 trillion per year, approximately the size of the 2018 federal budget. The Organization for Economic Co-operation and Development found that income tax would have to increase by almost 30% to fund a modest UBI.

The key to the proposal’s renewed political appeal is how it could neutralize rising criticism of QE, which has disproportionately benefited the wealthy by driving up the prices of financial assets. UBI funded by new rounds of central bank purchases of government bonds – branded as “QE for the people” – may be a more palatable way to return to monetary stimulus.

UBI would allow for the introduction by stealth of “helicopter money,” a controversial proposal for central banks to print money and distribute it to consumers to boost growth and inflation. The idea covers a wide range of policies including the permanent monetization of budget deficits and direct transfers to households financed with base money.

Friedman outlined the concept in his 1969 parable of dropping money from a helicopter. If everyone is convinced that this is a unique, non-repeatable event, then it is assumed they will spend the money, increasing economic activity. The concept generated revived interest in recent years as a means of preventing deflation.

There’s a telling link between universal basic income and modern monetary theory, an unconventional economic approach that’s been gaining ground with politicians. MMT, loosely, argues that a state cannot go bankrupt, where it can print its currency – a version of the argument that deficits don’t matter. Under MMT, governments should borrow and spend when demand is inadequate to move the economy to full employment. It provides theoretical cover for governments to issue debt to central banks in greater amounts than hitherto contemplated. This can then finance spending programs – such as a universal basic income – to maintain economic activity.

Whether a guaranteed minimum income can produce economic recovery is questionable, though. It’s a repackaging of existing approaches that have had limited effectiveness. There’s little new in central banks financing governments via QE or fiscal stimulus, including welfare spending. It doesn’t address key structural issues such as excessive debt, imbalances, wage levels and demographics. Adoption of such an approach would also mean the economy becomes dependent on government intervention to sustain activity...

- Source, Yahoo Finance

Saturday, September 21, 2019

Recipe for Higher Gold Prices: Cutting Rates and Rising Oil


Just as expected they would, the Federal Reserve, led by Chairman Powell cut interest rates for the second time since July of this year, signalling that they believe the markets as a whole remain unstable and the future unpredictable.

Cutting interest rates by another quarter point, the Federal Reserve has once again thrown a bone to the markets, even if it was much smaller than what Wall St would of wanted.

However, this was once again not a unanimous vote within the Fed, with many board members expressing their concerns and venting their displeasures with the current direction that the Federal Reserve is heading.

As reported by Zerohedge;

"The Fed has never been more divided: 7-3 vote to cut; Esther L. George and Eric S. Rosengren voted to keep rates unchanged; Bullard voted for a 50bps rate cut (guaranteeing him the job over Kashkari when Trump fires Powell); 7 FOMC members predicted another cut this year, while 10 say hold or raise."

This dissension within the ranks did not stop Fed Chairman Powell from pushing forward, however, as it appears that he is attempting to meet both his board members and the markets in the middle by offering a minor cut in rates, but not the deep slash that some wanted.

Following these cuts, Mr. Powell stated the following;

“There may come a time when the economy weakens and we would then have to cut more aggressively,” he continued. “We don’t know. We’re going to be watching things carefully, the incoming data and the evolving situation.”It is incredibly likely that this move is going to be mirrored by other countries around the world, such as Canada, as the currency wars continue to unfold and participants partake in the merry go round of ever lower rates.

As it stands today, the Fed’s policy interest rate is now set in a 1.75 to 2 percent range, with Powell stating that he sees no further cuts this year, unless markets significantly worsen.

Immediately following this news, markets across the globe fell, however, it was short lived as they quickly bounced back and recovered.

Venting his frustration with the Federal Reserve, yet again, President Trump, as always, took to Twitter;

"Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!"

President Trump would like to see interest rates cut to zero, or even enter into the negative territory, such as the European Central Bank has done, believing that this would make the United States that much more competitive on the global markets. Savers and the currency be damned.

Despite the Fed's jawboning and stating that no more rate cuts are coming in the near future, I believe that there is a high probability that they will once again capitulate to the demands of the markets and lower rates once again. 

I am not alone in this assessment, as many market analysts believe that more rate cuts are coming in the near future, with the odds strongly indicating another rate cut by December 2019.

This is especially likely if the price of oil continues to tick higher in the coming months, due to the recent hostilities in Saudia Arabia, which resulted in an attack on their oil infrastructure from an unmanned drone.

This caused the price of Brent crude to spike by a stunning $12 per barrel, as 5% of the worlds total oil supply was shut off overnight, highlighting how fragile and interconnected our modern global economy is.

Fortunately, it appears that for now cooler heads are prevailing, which has caused oil to stabilize slightly lower, although still higher than the pre-attack levels.

Once again $100 per barrel oil is a very real and scary possibility.

Anything could change overnight, tensions could once again flare and Federal Reserve Chairman Powell would be forced to change course and direction, slashing rates even lower to help stave off a recession caused by runaway energy prices and inflation.

If this happens, gold and silver are going to spike higher, much higher, as they have been historically closely tied to rising oil prices, also known as "black gold".

In addition to this, if the Fed lowers rates in response to rising oil prices, we are going to have a "double whammy" effect, pushing precious metals to even higher levels, possibly even testing old highs.

For now, sit tight and prepare accordingly, as we truly do live in scary, yet interesting times.


- Source, as first seen on the Sprott Money Blog

Friday, September 20, 2019

Lior Gantz: Investors Are Really Scared, Here's Why


Today's guest, Lior Gantz, shares his thoughts on the problems with negative yielding debt and how institutional money is getting scared like in 2008. 

During our discussion, he shares his thoughts on how to navigate the financial markets and how important, precious metals will be in the future.

- Source, Silver Doctors

Thursday, September 19, 2019

Economic Busts Can Happen in a Free Market, But Central Banks Make Things Much Worse


Given the nature of the modern global economic system, it is only natural to focus on the role of government-created money and central banks when discussing recessions and the ever-expanding credit structure. However, it is important to remember that theoretically, booms and busts and other downturns are not impossible in a truly free market system. Although, the length, scale, and scope of such downturns are greatly expanded under a system of fiat credit expansion.

I’ll explain the mechanisms and effects of free market versions of various downturns and why they’ll still exist even in absence of credit expansion. In addition, I’ll explain how these events are muted in relation to similar events under the modern central banking structure.

Local, Non-System-Wide Busts

Imagine for a moment you’re living in a town that is a major lumber producer. Your town is a trade hub for logs for ship building and you also have a substantial manufacturing base creating high quality home furnishings. However, as ship building began moving toward aluminum and steel and people lost interest in wooden furniture, the town began to suffer. Since capital and labor can’t be instantly retooled, the town eventually went through hard times where, even with broad national economic prosperity, the area lagged in poverty and unemployment significantly.

This above scenario is not a hypothetical but what is happened in a place called Lumberton, N.C. The town and surrounding county was once a major hub for lumber for the marine industry and home of a number of furniture manufacturers. However, as the ship industry transitioned away from wood construction and people began to prefer IKEA over hand-built wooden furniture, the town’s fortunes declined. The city and surrounding county went into a lengthy period of depression where it experienced significantly higher unemployment rates than national averages and has experienced a population drop over the past decade. The town’s fortunes have since improved as the area has rebranded itself as a favored location for retirement, but it still, to this day, lags behind the nation.

The above scenario is a classic free market driven depression. But note that is is localized and limited. Towns and cities that have built up an economy around a narrow business sector are at high risk of such busts, which many may also call recessions and depressions. Capital deterioration and obsolescence eventually causes the businesses of an area to become less competitive over time when compared to businesses elsewhere.

Over time, busts of this sort can resolve themselves as entrepreneurs purchase the distressed assets at a discount and retool or rebuild in anticipation of future demand. However, this isn’t always the case. If an area is too specialized, such as the well-preserved ghost town of Saint Elmo, Colorado has proven, people will abandon the area if the geography is no longer conducive to habitation.

What Austrian-school economics identifies here, however, is that the above downturns tend to be amplified and exacerbated by government attempts to help. Stimulus efforts tend to be counter-productive since governments naturally attempt to prop up existing businesses and existing sectors. What this inevitably does is choke off the entrepreneur from the necessary land, labor and capital to form a more valuable business is tied up in a government-subsidized Zombie Company. It’s in the attempt to avoid the inevitable recession where the problem is lengthened.

Additionally, such a scenario is possible only if there’s a single dominant company or industry within a region. This is a common issue with small towns, but a diverse economy shouldn’t ever experience a large-scale disruption. A nation like Uzbekistan is at high risk of a free market recession since its economic output is dominated by gold mining, but a country like the United States, Japan or even Mexico should be entirely immune to this since no one sector has any economic dominance. Large scale recessions are evidence of public sector impositions on the economy, be it regulatory burdens or subsidies tying up resources in zombies.

Further, towns that have become unviable places to live, such as natural resource depletion, are exacerbated by government interference as residents that would otherwise have emigrated elsewhere, like the above Saint Elmo, are now given welfare subsidies that alter the calculation and convince people to stay. A good example of this welfare driven depression is in Issaquena County, Mississippi, which was once a river port until freight rail made the location obsolete and is now counting on welfare transfers as a major source of economic activity when they otherwise would have left seeking opportunity elsewhere.
Free Market Booms

A common misconception is that a boom must always be sparked by credit expansion. However, this is not quite the case. While unstable credit expansion is the most common form to spark a boom, a boom can be nothing more than investors confusing rising prices with sustained rising demand. Booms have been caused by an increase in a commodity-based money, such as in 17th century Spain with a large influx of gold from the Americas, to booms sparked by unstable fads.

For a fun example of a localized boom-bust, I turn to a fad in the early 1990s, POGs. At the time, I was a middle school student. A few entrepreneurial kids began marketing up the various images as rare or common and a brisk market took off. More of my peers began saving up their allowance money to buy up bags of the things to try and sell to classmates to take advantage of the growing fad. Soon, the lunch period generated a rather brisk trade.

However, since everyone wanted in on the profits, everyone started buying bags of these cardboard disks. Everyone became a seller and no one was interested in being the buyer. Predictably, the market cratered. A few kids tried to unload entire bagfuls of these things for a few Dollars and big losses but were eventually stuck with a product they didn’t want.

This POG craze was a classic Minsky Cycle. Yet, at no point in this was credit ever involved. No bank would hand a 12 year old kid a loan to buy bags of cardboard chips on expectation of turning them for a profit. This was a boom-bust financed purely by savings in a fairly strong example of a free market.

Where the fiat credit system causes problems, however, is it allows the boom to become significantly larger than it otherwise would have been. At the turn of the 21st century, housing was treated very much the same way as my middle school peers treated POGs. Buy with the expectation to flip to someone else for a profit in a short timeframe.

In a healthy, free market credit system, the boom would be muted since interest rates would increase as demand for funds to buy housing depleted the savings base. However, with a central bank in play, interest rates were continually suppressed artificially and new money and credit was created out of thin air, fueling the price increase. The longer the boom continued, the more it convinced less risk-averse investors to try their hand at flipping. Interest rate suppression continued to fuel ever increasing housing prices, pulling more and more people into the bubble, leading to a collapse more spectacular than a few middle school kids blowing a few weeks of allowance money. Had interest rates increased as demand for mortgages increased, people would have balked at 12% loans, causing the bubble to burst much earlier.

Of course, instead of learning our lesson, the government has gone right back to manipulating the housing market and prices are higher now than they were at the 2006 bubble peak.
Government Makes the Problem Worse

As noted above, a boom and bust is not necessarily a result of government intervention. However, what we now commonly regard as recessions and depressions are almost always tied to government-caused credit expansion, and government intervention tends to make booms and busts significantly worse than they otherwise would have been. Government involvement can turn a recession, like the one that quickly resolved itself and was forgotten in 1920, to a full-on Great Depression, which didn’t truly resolve itself until after the Second World War.

Economies have ups and downs independent of government-caused business cycles. What is in demand today and how we build things today is not going to be the same in the future and this will inevitably lead to a decline as an economy changes its capital structure. People and plants can’t be retrained and converted to satisfy the newest demand instantly. In a free market, the impact tends to be muted, especially in a region with significant economic diversity, but not all economic fluctuations are tied to the now all-to-familiar business cycles the follow central-bank money creation.

- Source, Mises.org

Wednesday, September 18, 2019

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

Monday, September 16, 2019

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

Saturday, September 14, 2019

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