Dollar Shortage Will Only Be Temporary? Flood of Dollars Coming?

During this comprehensive interview, Jason asks Lyn a lot of questions about the global economy including: the shape of the global economy before the coronavirus and the precarious state of the US Dollar now that the Fed, the US Treasury & Congress seem to want to do trillions more in fiscal spending. 

Is the Dollar shortage only temporary? Did the global economy slowing down a lot all of 2019 help cause the September 2019 Repo Madness problems?

- Source, Wall St for Main St

Can the West Survive Another Economic Shutdown?

We are now entering into the "new normal", a new post COVID-19 age, in which things are going to be radically different for the near to medium term future.

Many businesses are beginning to "re-open", albeit as a shadow of their former selves, including a shadow of their former profits.

Many other businesses have succumbed to the pressures, collapsing under the economic strain that was forced upon them due to the government mandated COVID-19 shutdown, such as Hertz, a company founded in 1918, which just recently announced that they are entering into bankruptcy.

However, Hertz is far from unique, as many other businesses have shuttered their doors as of recently, filing for bankruptcy and throwing in the towel. These include, but are not limited to the following major companies;

• Dean & Deluca
• Apex Parks
• FoodFirst, Bravo and Brio Restaurant Parent
• True Religion Apparel
• CMX Cinemas
• Rubie’s Costume Company
• J. Crew
• Gold’s Gym
• Neiman Marcus
• Stage Stores, (Bealls, Goody's, Palais Royal, Peebles, Gordman’s, and Stage Parent)
• JCPenney
• Pier 1 Imports

Of course, these companies are just a small number of the victims, as the economic sundering is catastrophically bigger when you include all the small to medium size businesses that have also been destroyed during this period of mandated quarantine.

Others more fortunate were able to weather the storm better, adapt and still earn some profits during these troubling times, even if those profits were much less than what they were previously accustomed to.

Without a doubt, even more companies would be out of business, if it was not for the monumental amount of fiat money printing that many Western governments around the world partook in, revving up the printing presses and engaging in quantitative easing the likes of which we have never seen before.

(Image source, economist.com)

Unfortunately, as I have previously written about, the true cost of our governments historic debt creation has yet to be seen and thus, the true damage has yet to be seen. 

Make no doubt about it, this is coming and the ripples are going to be felt for years, if not decades to come.

Not surprisingly, this period of economic slowdown has led to reduced spending for many, as well as deflation in many parts of the economy, as businesses slash prices to encourage consuming spending, hoping to keep the cash flowing.

This however is not going to last forever and eventually, money is going to once again begin to enter into the system, causing a tidal wave of inflation as all of this newly created money inevitably finds its way into the economy.

During these coming years, as the world gets much smaller due to an increased level of geopolitical uncertainty, trade wars and economic strife, it will be vital to have a portion of your savings in precious metals, most notable gold and silver bullion.

(Chart source, goldprice.org)

Throughout the entirety of this crisis, gold and silver bullion have weathered the storm exceptionally well, acting as a safe haven in this time of uncertainty, just as it has always done for over 10,000 years as a monetary instrument.

(Chart source, goldprice.org)

Most notably, precious metals have protected you against one thing above all else, the blatant proliferation of fiat money printing, of which governments around the world have engaged in, in such a grotesque and reckless fashion, doing so to fend off crisis after crisis, while systematically eroding the value of said currencies.

The gains that you see above are going to be considered child's play in the coming years, as precious metals and most other hard assets in the world trends higher and higher, adjusting to the newly created money printing that has flooded the world in the last few months.

This is especially true if the world is once again forced to shutdown come this fall, as many health experts are warning that a second COVID-19 wave is on the way.

If governments mandate another economic shutdown, the likes of which we just went through, forcing them to print more fiat money to keep the system afloat, then it is anyone's guess as to where the prices of precious metals are going to eventual end up at, as I believe that the West cannot handle another economic shutdown.

Many things are unknown about the future, however, a few things are all but guaranteed, given the economic damage that has already been done. 

You can expect more economic casualties as we move forward into the coming months, more money printing and more geopolitical uncertainty.

Keep stacking and stay safe.

- Source, Nathan McDonald via the Sprott Money Blog

The Coming Chaos: Your Money Is Not Safe in the Usual Places

With unemployment surpassing Great Depression levels at 40+ Million, and 10-15% of businesses shuttering, the Fed’s “UNLIMITED” currency debasement and direct asset and corporate debt purchases are propping up stocks to re-inflate the “Everything Bubble.” 

Where is a responsible and wary person to turn for safety in these deep and troubled waters? Andy Schectman, CEO of Miles Franklin Precious Metals Investments returns to Liberty and Finance / Reluctant Preppers to offer an experienced view based on his unique 30-years perspective from inside the gold and silver supply chain. 

Andy also answers viewers’ questions on the potential for gold asset confiscation, the specter of climactic failure of the COMEX market as contract holders stand for physical delivery, and the personal need to prepare NOW during this momentary comparative lull in the unprecedented encroachments on our financial and civil liberty.

- Source, Reluctant Preppers

Gold Prices Could Hit a Record High by Year End. Just Don’t Expect an Easy Ride

Gold prices could reach a record by the end of the year. But don’t expect to see a smooth ride to the top, even as measures to offset the pandemic-hit economy support the precious metal’s appeal as a haven.

U.S. gold prices are likely to gradually increase over time, says Darwei Kung, portfolio manager and head of commodities at asset management firm DWS Group.

An increase in individual investor demand has been “offset by reduced demand from central banks,” as many of these bank reserves are being depleted due to the economic downturn, he says.

Kung also expects central banks to act if inflation accelerates. That could lead to higher interest rates, which can pressure gold. The Covid-19 effect, meanwhile, is likely to be transitory, says Kung. These factors are “contributing to limits on gold price performance in the near term.”

As of May 20, gold futures stood at $1,752.10 an ounce, up about 15% year to date but stuck in a tight trading range of less than $60 an ounce this month. Gold trades 7.4% below the record settlement of $1,891.90 from Aug. 22, 2011, according to Dow Jones Market Data, based on records dating back to November 1984.

The most significant supportive factor for gold is the “amount of debt being created to fund the various global monetary and fiscal deficits,” says Peter Grosskopf, chief executive officer at Sprott Inc.

Against that backdrop, gold is experiencing a broad rally, with “participants ranging from state funds to pensions to [high-net-worth] clients to hedge funds.” Still, the precious metal hasn’t been able to reach record levels, as “all assets are still dealing with the deflationary shock and liquidity crisis that were accompanied by a global U.S. dollar shortage,” Grosskopf says.

The yellow metal spent some time trading lower for the year as investors sold gold in a bid for cash to cover losses in the stock market. U.S. benchmark stock indexes have recovered a bit in the second quarter.

“More investors need to add gold as a protection asset in their portfolios,” Grosskopf says. That will “create more demand than the market can handle,” he says, and with the increasing amounts of monetary accommodation and fiscal deficits, gold could move through its past highs—to $1,900 or $2,000—by the end of 2020.

He refers to gold as a chameleon, as well as an “anti-confidence thermometer” that “attaches itself to themes and…does equally well during periods of extreme deflation and inflation.”

Playing up that chameleon reference, Grosskopf says if more economies reopen and there’s a strong recovery in China and elsewhere this year, there will be inflation, and gold “will do well as bond markets get crushed.” On the other hand, if the coronavirus continues to spread and economies stay mostly shut, “there will be more money printing and debasement, [which] is also good for gold.” Still, that doesn’t mean gold is immune to suffering during a liquidity or credit crisis like the one that unfolded in March, he says.

Kung, meanwhile, expects gold prices to reach $1,800 by March of next year. “While equity prices have risen, we continue to see gold as a good hedge given the uncertainty” in the markets, he says.

Kung thinks gold has the potential to reach $1,900 and beyond over time. Possible supportive scenarios include a persistent correction in the equity market, a rerating in “the long-term inflation expectation…significantly above current explicit or implicit targets set by central banks,” or new economic or geopolitical conflicts, he says.

Near term, Kung sees prices trading around $1,680 to $1,780 an ounce, with a good buying opportunity around $1,700 or below.

- Source, The Silver Bear Cafe

Keith Neumeyer: The Silver Breakout is Here

Collin welcomes returning guest Keith Neumeyer to the program to discuss all-things silver. Keith is the President and CEO of First Majestic Silver Corp. 

Keith is seeing an increase in inquiries from big institutional funds regarding silver. It seems the high silver to gold ratio has caught the attention of many investors. He believes everything should trade on real supply-demand fundamentals. As an industry, silver is mined at an 8 to 1 ratio with gold. 

This ratio should correct at some point much lower, perhaps as little as 25 to 1. Keith expects that we will see triple-digit silver. Silver is a precious metal, an industrial metal, but often not considered it is also a strategic metal. 

Everything we do as a human race requires silver from transportation to electronics, and Keith says, "We're not going to produce enough silver to meet the demands of the world."

- Source, Palisade Radio

A New Cold War? Resentment Towards China Intensifies, Both on the Right and Left

In last week's article, I highlighted the fact that the trade wars between the United States and China were back in full force, with President Trump taking action against Huawei Technologies, a company that has been at the center of the trade wars, since they began.

This was done by blocking a shipment of semiconductors to Huawei Technologies from global chipmakers, a move that unsurprisingly infuriate Chinese officials and of which was followed up by harsh rhetoric from both sides.

Perhaps this move was political, as the November 2020 Presidential elections are rapidly approaching and recent polls have indicated that Americans on both the left and right spectrum are united in one front, their growing resentment towards China for their initial handling over the coronavirus crisis and apparent lack of shared information.

(Chart source, Pew Research)

Whether or not this resentment is founded is up for debate, however, this does not change the fact that it is there and it is growing, rapidly.

As seen from the chart above, approximately two thirds of Americans now have a negative view on China, which is the highest number since polling began in 2005.

(Chart source, Pew Research)

Many at first would dismiss this as a partisan issue, however, as previously indicated, this resentment is shared by both Democrats and Republicans, with the latter tending to be more negative than the former, which is of course to be expected.

Growing Resentment to Affect Spending Habits

Further indication that the trade wars are going nowhere anytime soon and are likely to be a favorable talking point heading into the 2020 elections was another recent poll, which indicates that this growing resentment towards China is very likely going to impact consumers spending habits moving forward.

A recent poll conducted by Bloomberg indicates that a growing number of Americans would be willing to spend more on products, if they were simply made outside of China;

(Chart source, Bloomberg)

In addition to the poll indicating that 40% of Americans would be boycotting goods made in China, Bloomberg's poll also discovered the following;

• 55% don’t think China can be trusted to follow through on its trade-deal commitments signed in January to buy more U.S. products.

• 78% percent said they’d be willing to pay more for products if the company that made them moved manufacturing out of China.

• 66% said they favor raising import restrictions over the pursuit of free-trade deals as a better way to boost the U.S. economy.

This is a growing trend that is likely creating great uncertainty within the Chinese government, given the fact that a very large percentage of their economy relies on exporting Chinese made goods to the United States, a shift in spending habits, even minor, could have dire consequences.

This situation is only going to get worse the longer this resentment remains, as it will force many U.S. businesses who manufacturer their goods in China, to shift production to new locations, whether that be back to the United States, or another country.

This will have a direct impact on the bottomline of many companies, hurting them in the short to medium term.

Resumption of the Cold War? Safe Haven Assets Rally

The markets hate uncertainty, and that is exactly what we have at the moment.

With the ongoing threat of COVID-19 and the intensifying of the US-China trade wars, it is no surprise to see precious metals rally once again.

(Chart source, goldprice.org)

Both gold and silver bullion have headed higher over the past week, with silver bullion experiencing a sharp rise in price, rally strongly into the $17 USD plus territory.

Although we have not hit "Cold War" status as of yet, we have undoubtedly entered into a period of "freezing over", now that both the sitting President and general public's opinions are solidly in alignment in their resentment towards the Chinese government.

The true risk is yet unknown however, as it is anyone best guess as to how this all unfolds. 

How will China respond? What course of action will they take and will resentment among their population against the United States grow in tangent?

Things are likely to get a whole lot worse, before they get any better.

Uncertainty is plentiful and supply is no where near running out.

Stay safe and keep stacking.

- Source, Nathan McDonald via the Sprott Money Blog

Silver Soars and Posts Big Gains Versus Gold

Silver is finally gaining on gold, reversing nearly all of its richer cousin’s gains since silver’s coronavirus collapse. It took 125 ounces of silver to buy one ounce of gold barely a month ago. This drove the gold/silver ratio far above its previous all-time highs. It now takes 97.38 ounces of silver to buy one ounce of gold. This is a sharp downward reversal of 22%, over half of which has occurred in the last three days. This volatile price action has all the characteristics of a classic “blow-off.”

Blow-offs in the gold/silver ratio are rare and nearly always game-changing. While the past is not a perfect predictor of the future, we view the blow-off happening now as a powerful signal that silver is shifting into higher gear as it rallies to catch up with gold. This fundamental change in the relationship between these two metals could last for years.

Blow-off tops (marked by arrows in the 35-year chart of the gold/silver ratio above) tend to correspond with the early innings of a major, bull market in silver. Perhaps the one that interests us most is the decline that took the ratio from a high of 82 to a low of 32. This decline corresponded with a powerful rally that saw silver soar from a low just above $8.00 per ounce in 2008 to a high just below $50 per ounce in early 2011.

Data Source: Futuresource

2008 marked the beginning of the “Great Recession.” 2020 could go down in history as the beginning of what could be an even “Greater Recession.” 2008 was an election year; so is 2020. Stocks crashed in both 2008 and in 2020. The events of 2008/2009 fundamentally changed the global economy. The events of 2020 are doing the same thing. The similarities between these two time periods are uncanny.

Silver got trashed 2008 (see chart below) because of its dual status as both a precious and industrial metal. Fears that an economic slowdown resulting from a crashing stock market would diminish industrial demand for silver sent it sharply lower at the onset of the 2008/2009 recession. COVID-19 did the same thing to silver as well. Prices took out key, multi-year lows, blowing the bulls out of the market in both cases.

Data Source: Futuresource

“The Best Cure for Low Prices Is Low Prices”

This old adage — from a time when traders screamed and gestured at each other while crowded in a trading “pit or “ring” — is just as valid today. Reduced demand leads to lower prices. When prices fall below the level needed to cover costs, production slows to a crawl or stops entirely. Supplies eventually drop far enough to cause a shortage. Shortages cause prices to rise again and begin the cycle anew. In a recession, demand for nearly everything drops. Prices follow.

Falling commodities are one thing, but when the prices of financial assets like stocks, bonds, and real estate get mauled by the bear it sets up a dangerous situation. Financial assets serve as collateral for trillions of dollars in loans. Failure to grow, or at least maintain the value of these assets, causes them to lose their value as collateral. This directly impacts the quality of the loans backed by this collateral. This has the potential to undermine confidence in the holders of these loans which tend to be banks – especially large, global investment banks.

Modern economies cannot function without solvent banks. For banks to stay solvent they need the value of the collateral backing their loans to remain stable. This is why the Fed rescued the banks at the beginning of the “Great Recession.” It is why they continue to fire the money cannons non-stop.

COVID-19 has shut down huge segments of the economy, threatening to drive the value of financial assets sharply lower. The Federal Reserve knows it cannot let this happen and has vowed to support banks. The trillions spent by the Fed to break the tide of falling prices due to COVID-19 is already many times the amount spent in 2008/2009. Expect this to double, and even triple again, before it is over.

The Federal Government, on the sidelines in 2008, is also jumping in and injecting trillions more. Classic price inflation may not be rearing its head yet, but it is alive in a different form. It is manifesting itself in gains for stocks and bonds – both of which are ridiculously (and artificially) expensive at current levels. We believe the huge amount of money being thrown at the problem will eventually lead to the return of classic price inflation.

- Source, Silver Bear Cafe

Poll: 78% Of Americans Are Willing To Pay More For Non Chinese Made Products

A Bloomberg poll has revealed that an overwhelming majority of Americans would be willing to spend more money on products if they are manufactured outside of China, with 40% saying they simply will not buy anything made in China at all.

In addition to these findings, 55% said that they do not believe China can be trusted to fulfil its trade-deal commitment to buy more U.S. products, while 66% said they favor raising import restrictions over the pursuit of free-trade deals as a better way to boost the U.S. economy.

The findings come as President Trump announced that he now feels ‘differently’ about the trade deal he signed with China earlier this year.

”Once the virus came in, once the plague, as I called it, came in, I said how did they let that happen? And how come it didn’t go into other sections of China? Why did they block it from leaving Wuhan? But they didn’t block it from going to the rest of the world, including the United States. Why is that? Beijing doesn’t have it. Other places don’t have it,” he continued.

The President touted trade deals that the US has with other countries.

People don’t realize the amount of business that we do with Canada and with Mexico is monumental. It is the biggest trade deal in the world, bigger than the deal we made with China, most people don’t know and the China deal is kicking in.” Trump said.

- Source, Summit News

Frank Holmes: Every Time This Happens, Gold Stocks Explode

Major bull rallies in gold stocks have been preceded by generalist investors rushing back into the sector, and this is exactly what is happening right now, said Frank Holmes, CEO of U.S. Global Investors. 

Holmes discusses sentiment in the gold sector, as well as the historic bitcoin halving that took place last week.

- Source, Kitco News

The Evils Of Money Printing and the Coronavirus Response

On par with the terrible public health costs of covid-19 has been the horrific damage it has done to the global economy. In the US alone, over 36 million jobs have been lost (so far) and Q2 GDP is predicted to be down -43%. 

Our political and economic leaders have been out at the forefront of the emergency response efforts to deal with this crisis. But in many ways, their "rescue" efforts are just as pernicious as the coronavirus itself. Jay Powell, Chairman of the US Federal Reserve, has overseen more than $2.6 trillion in new liquidity being flooded into the system. 

And on 60 Minutes last night, he told the nation he's standing ready with the Fed's ability to print 'infinite dollars' should more rescue be needed. But as usual, no one asked him what the repercussions of printing so many dollars are. 

He wasn't asked about how the Fed's recent efforts have vastly enriched the already-wealthy, while the remaining 99% are dealing with job loss and spiking costs of living. 

He wasn't asked how taking on trillions of more debt will help America recover from its current insolvency crisis, a crisis the Fed was a direct enabler in creating. 

The greatest wealth transfer in US history is underway, in broad daylight. What will it take for the mass public to start seeing money printing for what it is: a robbing of our future prosperity by the top 1%?

- Source, Peak Prosperity

Nothing’s Fixed: What’s Behind the Corporate Debt Bailout

Over the past two years, nobody knew what would trigger the next financial crisis, but just about everyone saw that it would involve the record pile of corporate debt. And so it happened. Now the Fed fixed it...

- Source, Wolf Street Report

1.5 oz Random Year Canadian Maple Leaf Superleaf Gold Coin

Trade Wars Return With a Vengeance, Radical Changes to the Global Economy Are Coming

The zeitgeist is shifting in more ways than one as the COVID-19 crisis continues to drag on, month after month.

In many parts of the world, the situation in regards to the spread of the virus seems to be drastically improving, while others, such as many of the major cities around the world are still in a precarious situation, albeit getting slowing better.

This is leading to communities isolating on not only a state by state, or province by province level, but also on a municipality level, as those least affected begin to demand their freedoms back, while at the same time, hoping that they do not get flooded from more higher risk zones.

However, this form of segregation and protectionism is nothing compared to what is unfolding on the global scale, as international flights remain ground to a halt, as countries continue to keep their borders closed virtually to everyone.

This is necessary to help stop the spread of COVID-19 and has largely been effective, however, as I have written about numerous times recently, it comes with a tremendous economic cost that we are going to be paying for, for decades to come.

Now, as the zeitgeist continues to shift in this direction, a risk from last year has once again flared to the forefront, the United States and China trade wars, which are back in full force.

These renewed tensions come at a very unfortunate time for China, as country after country have begun questioning China over their initial handling of the coronavirus crisis and what many believe to be a lack of information sharing / warnings to the global community about what was truly unfolding in Wuhan.

The European Union, United States and Australia are just a few calling for a formal investigation into the matter, based on assessments conducted by their intelligence communities.

This of course has greatly angered the Chinese government, who have placed their own blame on others, most notable the United States, who they initially blamed for spreading the coronavirus, a claim that has been widely dismissed by others in the international community.

The true source of the virus is yet unknown, despite the numerous conspiracy theories that exist, claiming otherwise.

However, make no doubt about it, that the two key titans in this battle, as it has been in the past, are going to once again be the United States and China, who have already had hostilities mounting for years.

This has led to recent statements from President Trump, who believes that China is not upholding its end of the Phase 1 trade deal, struck between the United States and China in January, even going as far as to say that he would "tear up the deal".

The Globe and Mail reports;

Beijing agreed to increase purchases of U.S. goods in exchange for Mr. Trump cutting some tariffs on Chinese products.

“If they don’t buy, we’ll terminate the deal. Very simple,” Mr. Trump told a Fox News virtual townhall last weekend. On Wednesday at the White House, the President said he would decide by the end of next week whether to tear up the agreement. And he laced into Beijing for failing to contain COVID-19.

This is really the worst attack we’ve ever had. This is worse than Pearl Harbor. This is worse than the World Trade Center,” he said. “It should have never happened. It could have been stopped at the source. It could have been stopped in China.”

This renewal in tensions initially sent markets lower, as the risks of a full blown trade war once again reared its ugly head.

(Chart source, google.com)

Although markets recovered somewhat, safe haven assets such as gold and silver bullion continue to be bought, with silver most notably experiencing significant gains.

(Chart source, goldprice.org)

Further gains for precious metals are likely in store as well, while pressure on the broader markets is likely to remain with President Trump following through on his threats, taking action against the Chinese company Huawei, attempting to cut them off from global chip suppliers.

Reuters reports;

The Trump administration on Friday moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action that could ramp up tensions with China.

The U.S. Commerce Department said it was amending an export rule to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”

This news once again sent futures tumbling lower, with many market participants beginning to finally realize that this will not be the last volley, from either side.

(Chart source, Investing.com)

Now comes the inevitable retaliation from China, with the game continuing on as it always does, with neither side truly winning in the end.

The trade wars are back on the table, another threat to the global economy is here to stay and will likely only resolve itself after much more damage is done, at a time when the world already stands on the brink of economic collapse.

However, I believe that the risks of escalation are higher than ever before, as I previously mentioned, the zeitgeist has greatly shifted in the minds of a significant portion of the population and as protectionism gains in popularity due to the continued threat of COVID-19.

The question is, where will this all end? Will the West bring its manufacturing base home, or will it continue to outsource large sectors of its manufacturing, including medicine, to China?

Regardless of the end result, incredible volatility lies in store and risks to the current system remain everywhere.

Stay safe and keep stacking.

- Source, Nathan McDonald via the Sprott Money Blog

Future Economy: Freedom or Dystopia?

Will our future be one of freedom and increased prosperity, or are we headed towards something more dystopian? That’s the question Mike Maloney addresses in his latest analysis of world events.

- Source, Mike Maloney

10 oz New Royal Canadian Mint Silver Bar

Infinite money printing: Fed now buying ETFs

Just when you thought they couldn’t come up with any more crazy ideas, the Federal Reserve announced last night that they will start buying Exchange Traded Funds, effective immediately.

Just to be clear, this means that the Fed is going to conjure money out of thin air, and then use that new money to buy ETFs.

But not just any ETF. The Fed is specifically targeting ETFs that own corporate bonds.

The key idea here is that the Fed is trying to bail out bankrupt companies across the Land of the Free.

Under normal circumstances, most medium and large businesses regularly issue corporate bonds (which is a type of debt) to help fund their companies.

This is pretty normal; even very strong and healthy businesses regularly go into debt by issuing bonds.

For example, Apple has been wildly profitable for years. But the company has about $90 billion in debt according to its most recent financial statements, plus they just issued another $8 billion in bonds last week.

Companies all over the world do this, and the total size of the global corporate bond market is absolutely enormous– tens of trillions of dollars.

The obvious problem is that there are countless businesses around the world, both big and small, that simply aren’t going to make it through this economic crisis.

Airlines, hotels, restaurant chains, factories, shipping companies, retail stores, daycare facilities, construction companies, etc. have all been devastated by the pandemic.

Most of these companies have borrowed extensively. And without any revenue, there’s likely going to be a giant wave of defaults in the corporate bond market.

American Airlines, for example, has $21 billion in debt. There’s practically zero chance they’ll be able to make interest payments, which will trigger a default of their corporate bonds.

Thousands of other companies are in a similar position; they won’t be able to make their payments.

The even bigger problem is that, eventually, bonds mature and need to be paid back.

Unlike the mortgage on your house, whose principal balance is slowly paid down over 20-30 years, most corporate bonds are interest-only.

They pay what’s called a ‘coupon’, which is a regular interest payment, and then the entire principal balance is paid back when the bond ‘matures’ after perhaps 7-10 years.

Usually when their corporate bonds mature, most companies simply issue new bonds. It’s sort of like a refinance; so instead of paying back $1 billion worth of bonds that are about to mature, the company will issue $1 billion in new bonds for another 10 years.

In this way they keep rolling over their debt. And in normal times, that approach typically works just fine.

But these are not normal times.

Right now the bond market is frozen solid. And very few investors want to buy bonds of, say, an airline or cruise operator.

But a lot of those companies have billions of dollars worth of bonds that are about to mature.

And without a way to roll over those bonds and refinance the debt, they’ll be in default… meaning most investors who owns those bonds will suffer major losses.

This is a huge problem because it can cause a chain reaction across the entire financial system.

Let’s imagine “Rude Airways” has $10 billion worth of bonds that are about to mature.

But Rude Airways is out of cash and has no hope of generating revenue while the lockdowns are in place.

So instead of paying back the $10 billion, Rude Airways defaults.

“Big Ego Capital Partners” is a hedge fund that owns billions of dollars worth of Rude’s bonds. So when Rude Airways defaults, Big Ego is also wiped out.

Big Ego owes a lot of money to “Liars Bank”. So when Big Ego goes under, Liars Bank also takes a huge hit.

You get the idea. If thousands of companies constituting trillions of dollars worth of bonds don’t pay, then the chain reaction across the entire financial system will be nothing short of cataclysmic.

This is what the Fed is trying to prevent… with the only tool they have available: PRINTING MONEY.

So, again, the Fed is going to conjure money out of thin air, and use that money to buy corporate bonds and bond ETFs.

Their plan is to help companies like Rude Airways roll over their debts, and hopefully prevent a chain reaction of defaults across the entire financial system.

According to yesterday’s press release, the Fed estimates spending $750 billion initially, though it’s clear they could easily blow past that number.

That, of course, is on top of the trillions of dollars worth of other commitments they’ve already made, the $2.6 trillion they’ve already printed, and the trillions of dollars of other facilities they’ll create in the future.

I’ve been writing about this a lot lately, but at the risk of beating this horse to death, I believe it’s worth repeating:

There is so much we don’t know about the economic consequences of this pandemic. Will we see major inflation? Depression? Stagflation?

No one really knows for sure.

But one thing that has become totally obvious is that central banks around the world are going to continue printing incomprehensible sums of money– this is ‘whatever it takes’ monetary policy.

I won’t bother opining on whether what they’re doing is right or wrong. It doesn’t matter.

The reality is that it’s happening; they’re printing ridiculous quantities of money, and that’s that. Nothing we can do will change that fact.

Our only decision is how we choose to react.

Again, there’s no playbook here, and every possible scenario is on the table.

But historically speaking, whenever central banks devalue their currencies by printing vast amounts of money, real assets (and especially gold and silver) generally tend to be safe havens from the monetary consequences.

- Source, Simon Black

After Trying for a Decade, Central Banks Might Succeed at Generating Inflation

For more than a decade, the Federal Reserve and other central banks have tried and failed to generate the kind of inflation officials see as characteristic of a growing economy. That could be about to change.

Though the near-term trend is clearly lower, a brew of unprecedented fiscal and monetary support, a recoil against growing economic inequality and a burgeoning national debt will produce substantial inflation over the next few years, according to economists at Morgan Stanley and elsewhere on Wall Street.

"The forces that will bring about inflation are aligning," Chetan Ahya, chief Asia economist at Morgan Stanley, said in a note. "We see the threat of inflation emerging from 2022 and think that inflation will be higher and overshoot the central banks' targets in this cycle. This poses a new risk to the business cycle, and future expansions could also be shorter."

The Fed specifically has set its target for inflation at 2% and has used a variety of strategies to get there. Other central banks aren't as specific as the U.S. policymakers but generally consider a modest level as helpful to boost the standard of living and keep the economy on an expansionary tract.

Ahya thinks that the policy response around the world will be conducive to boosting inflation but sees the biggest impact in the U.S. when compared to the actions of the European Central Bank, Bank of England and Bank of Japan. However, he said the actual rise may overshoot central banks' targets and have a longer-term negative jolt to growth.

The '3 Ts' and their impact

The forecast is based on what Ahya calls the "3 Ts," or trade, technology and titans. A backlash against all three because of the impact each has on wealth inequality will push policy that ultimately will be inflationary, Ahya said.

"Taken together, the policy actions ... are more likely than not to result in a significant distortion of underlying productivity growth trends," he wrote. "Hence, we view the threat of inflation returning in this cycle as a serious one. It could transition into a malign form of inflation, especially if significant disruption to the 3 Ts creates a regime shift in the outlook for corporate profitability."

In the near-term, most economists see low levels of inflation ahead. Social distancing rules and the resulting economic shutdown are likely to drive overall costs lower, and will be reflected in this week's consumer price index reading.

Owing largely to a plunge in oil prices, headline CPI for April is projected to show just a 0.3% year-over-year growth, which would be the smallest gain since September 2015. Stripping out food and energy, core CPI is expected to be 1.7% over the year, according to economists surveyed by Dow Jones.

Ahya's forecast does not foresee runaway inflation. But he notes that price instability poses a significant danger to a recovery that he sees will be "sharper but shorter" than the financial crisis.

"Just as the consensus underestimated the disinflationary trends of the past 30 years, it is at risk of underappreciating the inflation threat," he said. "In response, I would argue that the driving forces of inflation are already aligned and a regime shift is under way. The near-term disinflationary trend will quickly give way to reflation and then inflation."

The debt factor

One other pressure point for inflation is the rapid rise in public debt.

In the U.S., the national debt last week passed $25 trillion for the first time and will continue its move upwards as Washington commits more money to rescue efforts. The Treasury Department announced that it will be issuing $3 trillion in debt this quarter, $54 billion of which will come from a new 20-year bond that will be sold to help pay for the fiscal efforts plus lengthen the duration of the U.S. debt.

In trying to manage the surge, the Fed and government could adopt more pro-inflation policies that will make the debt cheaper.

"The Treasury's plan to issue more long-term debt is sensible enough when long rates are at ultra-low levels, but a more marked shift in debt issuance policy could signal that policymakers are hoping to engineer a rise in inflation to help bring the ballooning government debt burden under control," Paul Ashworth, chief U.S. economist at Capital Economics, said in a note.

Inflating out of debt has a poor track record as it often leads to higher interest rates and more expensive financing costs. However, the Fed has entertained the idea of buying debt with longer duration as a way to keep those yields lower.

"A more marked increase in duration would make it easier to reduce the real burden of the Federal debt by engineering an unexpected rise in inflation. The latter would boost nominal GDP and consequently the tax revenues used to pay down that debt," Ashworth said.

However, he added that it's "way too early" to contemplate debt monetization, though that is advocated by those who believe that high government debts don't matter as long as inflation is kept under control.

Indeed, Jefferies economist Aneta Markowska said inflation concerns are "overblown" as the economy grapples much more with a demand drought that will exert lower price pressures.

"Supply chain disruptions may cause price spikes in certain products, but in the face of constrained incomes, this would only lead to demand destruction and become self-limiting," Markowska said.

- Source, CNBC

Jim Sinclair: Debt Jubilees Everywhere, $50000 Gold is on the Low End

Is a biblical debt jubilee coming to America? Sinclair says, “We already have jubilees. If you don’t pay your rent, you have a jubilee. If you don’t pay your student loan, you have a jubilee. If the payment of your auto insurance is postponed, you have a jubilee. We’ve got jubilee after jubilee after jubilee. 

Keep in mind, one man’s jubilee is another man’s disaster. It’s almost as if the Bible is correct in terms of economics. Also, keep in mind, the people who aren’t being paid are being hurt very badly.” Sinclair thinks the recovery will take a decade or longer, and Sinclair says, “It will be just like the period between 1929 up to WWII (1941).” 

Sinclair also stands by prior predictions of an extremely high gold price in the next few years. Sinclair says, "The price on the low end is $50,000 per ounce. The true price is $87,500 per ounce.” Sound outlandish? Not if you listen to his simple math for coming up with this price range for the yellow metal.

- Source, USA Watchdog

Alasdair Macleod: Bullion Banks In Trouble Again As Comex Premiums Spike Higher

Gold and silver rose on the week, with gold up $21 from last Friday’s close at $1721 in morning European trade today and silver up 70 cents over the same timescale at $15.48. For gold and silver, the week started on a subdued note after the previous week’s fall, before picking up strongly yesterday (Thursday).

Gold & Silver Surged This Week

Silver was sharply higher, open interest having fallen to a very low 132,725 contracts. Preliminary figures for yesterday show an increase of 4,357 contracts, which for silver is a bullish increase. The position is shown in our next chart.

SILVER BULL ALERT: Open Interest Has Collapsed

The contraction of open interest recently has been unprecedented, and the accompanying fall in the silver price tells us that weak holders have been eliminated. The pickup in open interest yesterday and the strong rally in the price are a signal for a decent rally. Importantly, the swap dealers (bullion bank trading desks) have closed their shorts, shown in the next chart.

Bullion Banks Have Closed Silver Shorts

The commitment of traders’ figures, from which this chart is derived, were last updated for 28 April, since when there was a further sell-off. Therefore, updated figures tonight for 5 May should show swaps are net long.

The current sharp rally tells us the swaps will not want to go short and would rather mark prices higher to deter buyers.

Earlier in the week both gold and silver saw a decline in the premiums for their active Comex contracts over London spot to as little as $2 for gold and a few cents for silver. But this morning Comex premiums began to increase again, roughly $10 on gold, and 30 cents for silver. It appears another short squeeze is in the offing.

The position in gold is different from that of silver, with the swaps still dangerously short, as the next chart illustrates.

Swaps Still Dangerously Short The Gold Market

From here on, a further rise in the price of gold will be potentially catastrophic for some swaps, and the problem is replicated in the largest four traders’ positions, suggesting one or perhaps two of them have been badly caught. The next four largest have managed to reduce their shorts in line with the general fall in open interest, so an increase of net shorts in the large four is an aberration. This is our next chart.

What Do They Know?

Putting all the evidence together, both gold and silver appear set to rise over the course of this month.

In other news, markets still don’t really know what to make of the situation. US Treasury yields remain very low, with increasing talk of negative interest rates. Whether this happens will probably depend on the banks and their input to the Fed. Negative rates have done nothing for the EU and Japan, and amount to a tax on the banks, making it unlikely the commercial banks will support the Fed in such a move.

The ECB has run into trouble with Germany’s Constitutional Court ruling the ECB overstepped its powers in buying government debt. This is a problem, restricting the ECB’s inflationary activities, potentially triggering a new funding crisis in Greece and Italy.

- Source, King World News

Get Used to It: COVID-19 Taxes Are Coming, Will Remain Indefinitely

Governments do not produce, they do not create, at best they facilitate various services and often times very poorly when compared to the private sector, however, what governments do fantastically, is collect and spend resources that are created by the private sector.

This of course is accomplished through the incredible amount of taxes created throughout our history, whether it be sales taxes, income taxes, property taxes, inheritance taxes, etc, the list goes on and still, governments around the Western world have found ways of squandering this money, sending their nations deeper and deeper into debt.

Collectively, governments around the world now stand at approximately $77,598,169,364,443 USD in debt, with that number growing drastically higher with each passing second.

The majority of this debt was accumulated during the "good times" when many Western economies were experiencing record high GDP levels, record high stock market prices and record high employment rates.

Unfortunately, for at least the short term, the good times are now over due to the COVID-19 crisis and governments around the world have decided to go exponentially deeper into debt, enacting relief plan after relief plan in a desperate attempt to keep the economy that they forced shut down afloat.

Whether or not their decisions during this crisis are going to be deemed correct in the eyes of many in the coming years, is yet to be seen, however, the zeitgeist appears to be rapidly shifting in recent days, with the feeling of angst and frustration becoming increasingly common place in the minds of the average citizen.

This is largely due to an increasingly large amount of information coming out daily, indicating that the mortality rate of COVID-19 is drastically lower than what many health experts were previously indicating, especially when it is taken into consideration just how many people are asymptomatic and thus not getting tested and thus not included in the official numbers.

This is not meant to diminish the harsh reality that COVID-19 is still very deadly to certain demographics, especially the elderly, however, it is making many people question the strategy of isolating / quarantining the "healthy", destroying the economy in the process, a strategy that has never been enacted during any pandemic in mankind's history.

This controversial strategy has and is going to continue to cripple the global economy, regardless of whether it was the correct action or not, which as I have previously written about, is going to have drastic and dire consequences for years, possibly even decades to come.

How Are Governments Going to Pay for This Debt Bomb?

First and foremost, governments are going to rev up the printing presses, create debt and as they have been doing, throw newly fabricated fiat money at the problem, thus diminishing the long term value of the currency as whole in the long term.

This undercuts the savings of those who have saved their entire lives in just fiat money, diligently socking away the fruits of their labor in what they deem to be one of the "safest" asset classes, cash.

On the other hand, those who choose to have a portion of their wealth in hard money, such as physical gold and silver bullion will be able to mitigate many of these problems and shelter their hard earned savings from the coming storm.

However, I believe this is not the end game for many governments.

Take for example Canada, led by Prime Minister Justin Trudeau, who has decided to take a very socialist approach throughout this crisis, handing out fist fulls of money to just about everyone across the country and essentially putting in place a form of "universal income" in the short term, even if that is not what they are willing to call it.

Just head on over to "Canada’s COVID-19 Economic Response Plan" and take a look at all the programs and all the money being "spent".

Some of these figures may be considered small when compared to some of the numbers being tossed around in countries such as the United States, which is also fusing a monumental debt bomb as we speak, however, you need to take into consideration Canada's much lower GDP and population numbers.

Program after program, after program is being enacted to 1), keep the economy afloat during a forced government economic shutdown, 2) to keep people pacified and happy with the sitting government and 3), because the government knows that they are ultimately not going to be the ones paying for the stimulus programs, the people are.

Prepare for the COVID-19 Tax

Many governments are riding high, experiencing record high approval ratings. 

This is nothing new and has occurred time and time again throughout mankind's history during periods of great uncertainty, such as natural disasters, war times, or health crisis. People cast aside many of their political partisanship, for the greater good and coalesce around those in charge, hoping that they will handle the crisis on hand.

Sitting governments know this and will attempt to take full advantage of this situation, hoping to secure re-elections, either naturally such as is the case in the United States in the upcoming election later this year, or through snap elections, in which many countries can call.

This will be vital for those who wish to retain power, as what is coming next will be incredibly unpopular, significant tax increases.

They can call it whatever they want, but new taxes are coming, whether later this year, or next, it is on the way and it will not be minor in nature.

Will it be based on income, will it be slapped onto the sale of all goods? Who knows the finer details, but regardless, something is coming in one shape, form, or another.

Many people are happily taking government handouts, many others are screaming for more, more, more, stating what is being issued is not enough, many of these people are both correct and wrong seemingly at the same time, however, very few are coming to the realization as of yet that this is NOT "free money".

During these times of herculean expenditures, and the immediate time period that follows, it has been a common tactic of governments to introduce new taxes to help pay for the staggering amount of funds spent during the period of uncertainty.

Take for example the income tax, which was introduced both in the United States and Canada in response to help pay for war time efforts.

As per the Canadian Government regarding the introduction of the income tax;

"In 1917, as a temporary measure to help finance the war, the federal government introduced the Income Tax War Act, covering both personal and corporate income. "I have placed no time limit upon this measure . . . a year or two after the war is over, the measure should be reviewed," stated Sir Thomas White, Minister of Finance."
Additionally, in 1920 the "sales tax" was introduced to help pay down debt levels, which is as the name implies a tax on the sale of most goods.

Fast forward to 2020 and we can see that these taxes, which were at the time deemed "temporary", were anything but and are still in existence today, however, in much more grotesque forms, as the demand to feed the increasingly hungry government machine continues to grow year after year.

The coming COVID-19 tax(es) will be no different. 

It will be presented as being "temporary", it will be heralded in as a collective effort to pay down the historic amount of debt accumulated during the COVID-19 crisis and as has been the case in the past, an excuse will be created to keep it in place, indefinitely.

Get ready for higher taxes, get ready for the COVID-19 tax, get used to it.


- Source, Nathan McDonald via the Sprott Money Blog

Ron Paul: $25 Trillion in Debt, Courtesy of The Fed... Is The End of the Fiat System Near?

It took over 200 years for the U.S. national debt to reach $1 Trillion. Now, $1 Trillion of debt is added in just 1 month! A monopoly central bank that counterfeits money paves the road to economic ruin. While Americans should have never allowed the creation of the Fed in 1913, and should have put an end to it quickly, the day is approaching when the Fed will have no choice but to end itself.

- Source, Ron Paul

Rob Kirby: Debt, Lies, and Risk Go Vertical

​With unpayable trillions being heaped daily on our debt, massive job losses, scorched earth policies forcing small business closures, and sweeping transfers of the oil industry and more into extremely concentrated hands… 

If you’ve been feeling a gnawing awareness that things are grossly worse than we’re being told, you’re not alone. 

Rob Kirby, founder of Kirby Analytics returns to Liberty and Finance / Reluctant Preppers to deliver a stunning message about what lies ahead for us in the coming weeks and months. 

You may want to sit down for this one, folks.. It’s not going to be pretty.

- Source, Reluctant Preppers

Alex Newman: Federal Government Cannot Bail Everybody Out

Journalist Alex Newman the virus has finally brought trillions of dollars in unpayable underwater state pensions in to the light as blue states are asking for a federal bailout. 

Newman says, “Right now, President Trump is talking about rebuilding our infrastructure. One reason our infrastructure is crumbling is 1/4 to 1/3 of our state and local government budgets are going to fund public pension plans. This is a good opportunity to rebuild our infrastructure, but we have to use some common sense here. 

We can’t keep paying these enormous pensions.” In closing, Newman says, “The idea that the federal government cannot bail everybody out is self-evidentially ludicrous. The government can’t bail out the workers, the companies, states, local governments and the churches. It is self evidentially ridiculous. 

I hope President Trump can make some progress on it, but the task is so big and so complicated I feel like it would take a miracle to have some success on this.”

- Source, USA Watchdog

The Next Financial Crisis: A Global Debt Bomb is Being Primed to Go Off

Central bankers and governments around the world are attempting to stem the economic disaster that has resulted due to the lock-downs caused by the Coronavirus outbreak, which to this date has resulted in the one of the most prolific expansions of debt this world has ever seen.

We have seen countries engage in such money expansions in the past, most notably when countries are circling down the drain, heading towards economic ruin, however, never before have we seen the entirety of the world engage in a massive fiat money printing fiesta all at once, in such a voracious manner.

Even though this may be the correct course of action in helping stop the spread of COVID-19, it is going to come with dire consequences down the road in the form of wealth destruction on a monstrous scale, for those who do not prepare accordingly and begin to protect themselves from the coming fallout.

The day for this occurring is unknown, as it is going to take some time for this historic fiat money expansion to work its way through the system, as at the current time of writing, spending across the globe has taking a massive nose dive lower, due to people not being able to engage in everyday normal life activities and due to the fact that many people have lost significant income.

This however will eventually change and life will return to normal, even if it is a "new normal", meaning that spending will resume, life will go on and sadly the debt that was accumulated by so many countries around the world will remain, like a bad scar reminding us of this crisis.

A Debt Bomb is Being Set, But When Will it Go Off?

Unfortunately, the grim reality is that we are months away from this crisis being over, in the very least, if not even longer, as most medical experts now agree that we are almost certainly guaranteed to be a second wave in the fall of this year.

This means that countries are going to be forced to engage in more Quantitative Easing, more money printing and more debt accumulation.

(Source, commodity.com/debt-clock)

The above image shows the current estimated world debt level of governments. What is truly scary, is that if you click that image above, it will take you to the updated numbers, which are drastically increasing with each and every passing second, meaning that the picture you see above is already horribly out of date.

The most indebted of these countries is Japan, with approximately $9,814,408,995,324 USD worth of debt, however they are far from alone, with the additional following countries suffering from the worst debt to GDP levels;

• Japan 236 
• Greece 191.4 
• Sudan 176.5 
• Venezuela 163 
• Lebanon 157.4 
•  Italy 129.8 
• Eritrea 129.5 
• Barbados 128.8 
• Yemen 128.3 
• Cabo Verde 124.8

In addition to this, the longer this crisis goes on in its current form, the longer a large percentage of the population is going to be forced out of work, living off the meager handouts and crumbs that government officials throw at them, which is often barely enough to get by.

A Double Whammy: Supply Chain Shortages

Compounding the problem is the fact that shortages are going to become increasingly more and more common place, the longer this situation remains as well, with food shortages in many industries already taking place as we speak.

Both American and Canadian meat processing facilities are reporting issues and are warning of coming shortages, as are farmers on both sides of the border.

Time Magazine reports;

"It’s hard, after all, to protect workers from a highly contagious virus in the frequently tight quarters of a processing plant. At least 20 meatpackers have already died from COVID-19, and more than 5,000 have been hospitalized or are showing symptoms, according to labor union United Food and Commercial Workers."

This is going to have a chain reaction on the food industry, which is going to have a rippling effect on food prices down the line, meaning higher prices at the same time as people are suffering financially, a true double whammy on the pocket book.

Numerous other sectors of the economy are also reporting issues within the supply chain, that are going to have an affect on prices in the short to medium term.

This is going to force individuals to dip either into their savings (which many North Americans have little of as a whole), or more than likely head deeper into debt, just as their government officials are doing the same thing as well.

A debt bomb of epic proportions is thus being set and is only going to grow more explosive as time goes on. The question is, when does it go off and are you going to be prepared when it does?

Stay safe and keep stacking.

- Source, Nathan McDonald via the Sprott Money Blog