Others Have Long Delays… Can’t Deliver Metals Now!
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WARNING: Our competitors are out of inventory. Some are promising to deliver gold and silver to their clients at some unknown, unspecified date far off in the future.
WARNING: If you pay them now, they say, they will try to get you gold and silver in six or eight weeks or some other time down the road and deliver it to you then.
WARNING: We strongly advise you against doing that. Especially in these volatile times. And especially when Republic Monetary Exchange has inventory on hand for immediate delivery!
Because of the extreme demand for precious metals in these uncertain times, the prices for real gold and silver have decoupled from the price of gold substitutes and paper benchmark prices. The world gold prices and index prices you read about in the newspaper are not the real price for physical gold you can take home and put in your safe. There is not enough gold at those benchmark prices.
Most dealers are unable to make prompt delivery to their customers at any price.
But Republic Monetary Exchange has gold and silver. Today! For immediate delivery! Right here in Phoenix!
But you must hurry. We don’t know how long we will be able to meet the extreme demand.
It is strictly first-come, first-serve!
Buy TODAY, take delivery TODAY!
Call your Republic Monetary Exchange gold and silver professional today. Lock in your order and take delivery now, not “sometime later”.
Goldman Sachs – “Time to buy the Currency of Last Resort”
Goldman Sachs gets it. “We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policymakers act to accommodate shocks such as the one being experienced now,” said the investment banking giant this week.
The company cited the 2008 precedent when the Federal Reserve announced its Quantitative Easing liquidity operations. Over the next three years, gold surged to all-time highs.
Similarly, in the current pandemic environment, the Fed has announced that it will use “its full range of tools” in liquidity operations.
Money Printers Gone Wild! A Trillion Here, a Trillion There!
The coronavirus and bailout package in Washington could amount to more than a quarter of America’s Gross Domestic Product.
Altogether the package could total $6 trillion!
At the White House coronavirus task force briefing on Tuesday, Larry Kudlow, the President’s economic advisor, said measures would include $4 trillion in lending power for the Federal Reserve as well as the $2 trillion aid package.
“This package will be the single largest main street assistance program in the history of the United States,” Kudlow said.
US Output Drops at Fastest Rate in a Decade
The Purchasing Managers Index reports on the expected contraction of the US economy. It’s business output index shows a sharp decline in March, following a decline in February.
“The service sector signaled an especially steep downturn in business activity, while manufacturers registered the sharpest drop in output since August 2009.
“Companies also reported the first contraction of new business since data collection began. The marked decrease in new orders stemmed from sharp falls in client demand following the outbreak of COVID-19, according to panel members.”
Republic Monetary Exchange Continues to Meet Client Needs!
While many – if not most – of our competitors across the country have found themselves unable to meet the needs of clients anxious to acquire gold and silver, Republic Monetary Exchange continues to provide its customers with the popular gold and silver products they seek.
Many of our competitors are out of gold and silver. Either sold out, or without the inventory, market connections, and experience we have. In any case, they are not able to deliver gold and silver.
Many dealers ask to be paid today for gold and silver that may be delivered at some indeterminate time in the future. We recommend strongly against that.
We urge you to contact Republic Monetary Exchange today. Speak with one of our precious metals experts and prepare now for conditions to come.
Do not wait for more Washington red ink and trillions in printing press money to drive gold and silver prices to new highs. Contact us today!
ONE ADDITIONAL NOTE: We know that events have squeezed many people’s personal finances and that some may need to sell gold and silver. Perhaps you’ve heard our advertising over the years, that in addition to offering the best prices to buyers of precious metals, because we operate a continuous two-way market, buying and selling, we are able to pay the most for gold and silver when you wish to sell.
Let us help you, even if you didn’t buy your gold and silver from us.
You do not want to risk being locked down in an incurable paper money economy. One with no escape. You need to be aware of just how grim the prognosis is for the Fed’s dollar.
So today we share an observation from Tom Dyson, who writes a newsletter called Postcards from the Fringe. Dyson is himself a veteran of the “repo” desk at Citigroup.
“The Federal Reserve’s balance sheet is about to EXPLODE higher,” he notes.
Dyson believes that between existing spending and the trillion-dollar deficit it is already running, a parade of stimulus schemers, and plunging tax revenue from a stalled economy, the Treasury is going to have to borrow another $10 trillion on top of the $23.5 trillion it already owes.
But stand back and ask who is going to fund that debt? Who is going to buy trillions of more treasury bonds?
Not China, says Dyson. He’s correct. China is up to its eyeballs in its own problems and not just the Coronavirus. It’s a debt problem, staggering, to begin with, it grows with the health crisis and the slowdown.
Not the oil-exporting nations. Not at these petroleum prices, for some below the cost of production.
Not emerging markets says Dyson. They are having to dump their treasuries to support their plummeting currencies.
And not Wall Street. “Asset managers are dumping their Treasury holdings to meet redemption requests and margin calls,” he writes.
So who does that leave? It will be left to the Fed to “monetize the debt.” That means magically turn the debt into money. It must print money to buy US government bonds. The Fed is not even making a secret of its willingness to print money until the cows come home.
“And that’s why the Fed’s balance sheet has started to hyperinflate,” says Dyson. “It’s at $4.5 trillion now. If I’m right about the hole the government finds itself in right now, the Fed’s balance sheet will pass $10 trillion later this year… and then pass $20 trillion or $30 trillion in the next few years.”
If you don’t own gold and silver, then face it: your portfolio is quarantined in dollars.
Silver Eagles and other products are availableFor Immediate Delivery! Buy Today… Take Delivery Today
Empty store shelves. Staples of life missing from stores. A stock market collapse. Quarantines. And the hunt for toilet paper seems to have suddenly become a leading topic in American life!
You are right if you feel an urgency to own gold and silver!
The events of the last few weeks have crystallized the importance of owning gold and silver. Under the circumstances, people realize that means owning physical gold and silver. Precious metals in their possession. Gold and silver bullion and coins that they can get their hands on for-profit and for safety in times of trouble.
Many of our competitors are out of gold and silver. Either sold out, or without the inventory, market connections, and experience we have. In any case, they are not able to deliver gold and silver.
Some say pay them now, but it will be weeks before they can come up with your gold.
That is a bad idea! Do not do that!
Buy TODAY, take delivery TODAY at Republic Monetary Exchange! Paper promises about gold or representations that someone somewhere has gold or gold shares or gold futures in your name that may or may not be delivered sometime in the future are no more comforting than someone somewhere else claiming to be holding toilet paper on your behalf in New York or Beijing when you need it now!
We are Republic Monetary Exchange. We’ve been around a long time, both buying and selling precious metals. We have inventory for immediate delivery. Now!
And while we think everyone needs to own gold and silver, if you need to sell precious metals, remember because of our volumes and active market, we pay the most when you need to sell.
Call us or stop by today to add more silver or gold while supplies last and premiums rise again.
We know that even if you are unable to go to work, practicing social distancing, or even quarantined, that you still can’t read everything. So here is a sampling for you of observations and insights from people we turn to from time to time.
Bretton Woods Research writes that we are only in the third inning of this process of Federal Reserve actions, falling oil, shutdowns, and adjustments. It foresees a lot more downside for the stock market: “Depending on the length of the shutdown, it’s possible to see a downside scenario where the S&P 500 reaches 1750 almost 50% below the 2020 peak.”
That’s almost another 30 percent lower than we are today.
Veteran gold and silver analyst Jim Sinclair’s associate Bill Holter doesn’t pull any punches. He says global bankruptcy will result from the world’s most over-leveraged shutting down for a month or more.
“It is over folks,” says Holter. “The system is coming apart at the seams and the ‘promises’ the world ran so smoothly on for so long are being laid bare. You might ask, which promises? The answer is ALL promises.
Holter points out that precious metals prices on the exchanges are for paper representations of the metals and are quite different from the actual prices for real gold and silver that you can hold in your hands. “In the metals arena, you see paper pricing extremely weak. However, the real world shows something very different. The US Mint is out of both gold and silver eagles. Other sovereign mints are also running out of supply or already out.”
Conditions have been changing fast. Be sure to check in with your Republic Monetary Exchange gold professional for current conditions and product availability.
David Stockman is keeping an eye on the growing roll of bailout-ees: “They are talking about Bailouts for Everybody—airlines, shale producers, Boeing, corporate America, the banks, hotels, restaurants, cruise lines, casinos, small business, medium business, every business and some or all of the households of America in the form of helicopter money from Washington.”
We ask you to bear in mind that when Washington and the Fed bailout everybody when they pass out $1,000 check to everybody, everybody pays. They really bail out nobody, because the burden is borne by the recipients. By everybody. The cost is hidden in the falling purchasing power of the paper money.
And that is extremely bullish for gold.
Even more unhinged, and more bullish for gold is the belief that we – Washington, the Fed, the US taxpayers – can bail out everybody. Even so, the Fed announced its decision on Thursday (3/9) to make dollar loans to a slew of foreign central banks for the next six months.
“How much dollars will be available? As per the release, the Fed will release up to $60 billion each for the Reserve Bank of Australia, the Banco Central do Brasil, the Bank of Korea, the Banco de Mexico, the Monetary Authority of Singapore, and the Sveriges Riksbank and $30 billion each for the Danmarks Nationalbank, the Norges Bank, and the Reserve Bank of New Zealand.”
We will end today’s discussion by looping back around to our own comments recently about the Plunge Protection Team, here. Yesterday (3/18), White House economic advisor Larry Kudlow floated the idea of a sovereign wealth fund, that the Federal Reserve print money to buy stock. Kudlow war purportedly limiting the idea to companies the seek government aid in the COVID-19 episode.
But that kind of limitation will fall quickly. We’ve seen these kinds of things before and we’ve seen this particular idea coming. It is a reflection of the unmatched influence of the government’s Wall Street cronies. Taken to its logical extreme, they basically want to empower the Fed to buy stocks and guarantee their stock market profits. This proposal is advancing quietly, but quickly.
As we said, “If it is allowed to do this, say goodbye to American prosperity. Cronyism and influence peddling will run rampant in a carnival of corruption as state bureaucrats and officials decide which stocks to buy and at what prices. As money flows to the influential and the well-connected, honest pricing, innovation and free-market competition will grind to a halt, product inferiority will rule the day and the living standard of the American people will fall hard.
“It will be Mussolini time in America.
“Buy gold. And if the government starts buying stocks, buy more gold.”
It could have been one of many other things, but the Coronavirus is the pin that popped the stock market bubble.
Now the Federal Reserve has started another aggressive round of Quantitative Easing. It does so under the general behavioral rule that when you’re holding a hammer, everything looks like a nail.
Printing money is the Fed’s hammer. It uses that tool for every crisis. In the original QE program, the Fed created almost $4 trillion dollars. In response, gold marched higher over the next three years, from just above $700 an ounce in 2008 to its all-time high of $1900 in 2011.
Having already launched its new money printing binge last fall, before the Coronavirus, the Fed is now stomping on the accelerator. As the red arrow points out, the Fed’s balance sheet, having leveled off somewhat at the end of last year, turned virtually straight up at the end of February. And it will climb much higher from here. Indeed, it is already on track for a new all-time high, past $4.5 trillion and headed quickly to $5 trillion.
What does that mean? It means a heck of a lot of new money printing. And that’s early in the crisis. New inflation-funded spending initiatives are coming faster than anyone can track.
But the stock market sell-off and the business shutdowns in place and to come are so devastating, that nothing that could be considered “normal,” even on the scale of the prior liquidity easing will be effective.
Doug Noland of Credit Bubble Bulletin puts it this way:
“I do doubt fiscal and monetary stimulus will resuscitate the Bubble in global leveraged speculation. Illiquidity and market dysfunction have been exposed. Huge losses have been suffered and ‘money’ will flee popular (and overcrowded) leveraged strategies (i.e. risk parity). I also suspect confidence in derivatives has also likely been shaken. Liquidity risk will be a persistent feature of global markets.”
Warren Buffett described times like these in a more folksy way: “When the tide goes out you see who’s been swimming naked.”
Make no mistake. The tide has gone out.
Now we must hold our breath while we watch to see the financial trouble that will be exposed, in banks, funds, brokers, companies, pension plans, insurance companies, and investment products like annuities. The criminal recklessness on display will extend to all levels of government.
This is not an age of fiscal prudence or honest stewardship. The politicians and government have established the standards of our age, with its fraudulent representations. It taught generations of Americans that they, like the government itself, could spend their way to prosperity. It taught that it could make up money out of thin air, that deficit doesn’t matter, that debt doesn’t matter either because we somehow owe it to ourselves. They taught the people that they can all live at someone else’s expense. And they even taught that honest accounting doesn’t matter and that something as routine and sensible as an audit was beneath the dignity of the world’s largest money manipulator, the Federal Reserve System.
Now all these lessons have to be unlearned. After so many years of delusion, there is pain involved in confronting reality. But reality always asserts itself in the end.
Now is the time to buy gold. That is because gold is the only financial/monetary asset that is not someone else’s liability. It is not a hopelessly indebted company or government. It is not dependent on someone else’s honesty, prudence, or accounting practices. It is not dependent on the pictures engraved on it, or on the country that minted it. It is not a promise of performance that may or may not be met in the future.
As J.P. Morgan said in congressional testimony over a hundred years ago, “Gold is money. Everything else is credit”
A Look at the Price of Gold During the Stock Market Selloff
In February we described a familiar market pattern in a stock market collapse. Stock investors forced to come up with cash to meet margin calls or to cover other losses often turn to gold as a source for their liquidity needs.
“Traders in markets with perfectly sound economic fundamentals can sometimes liquidate their positions in other things to meet margin calls in collapsing markets. It appears that in the general carnage of the stock market, large investors scrambling for cash to meet margin calls took profits in gold, the most liquid commodity of all.
“To repeat, we have seen this kind of action before, and we know what happened then. Gold fell hard – but only briefly – in the fall of 2008 during the stock market carnage of the mortgage meltdown.
“But that margin call selling opened a window of opportunity to buy gold at ‘sale prices.’
“Of course, it didn’t last long. Soon gold was racing to new all-time highs. Three years later it was up well over 2 ½ times its October 2008 low.”
Now. as the stock sell-off deepened, the pattern repeated itself last week.
On Thursday (3/12) an Investing.com story headline read, “Gold Loses $1,600 Support as Investors Sell to Save Bleeding Wall Street.”
“Gold lost its key $1,600 support on Thursday as investors cashed out their long positions in the yellow metal in a scramble to cover margins and losses on Wall Street amid the U.S.”
Bloomberg News wrote that gold selling showed, “how extreme the selling pressure has been in every corner of the markets.
The Investing.com story goes on to quote as an analyst who says, “Gold investors are scratching their heads as the fear trade is only seeing steady flows into Treasuries right now.”
We think moving into US Treasuries is an extremely bad move. When the yield on the 10-year US treasury bond dipped to .5 percent last week we wrote that we think loaning money to the government is to guarantee to lose purchasing power. That is because the Federal Reserve’s stated policy is to erode the purchasing power of the dollar at four times that rate.
We strongly advise against seeking safety in the bond market. Bear in mind that if interest rates rise in reaction to events, the result is a fall in bond prices. Furthermore, since the correction in gold prices is widely agreed to be a result of margin call selling by those suffering losses in stocks, we view the lower price as almost certainly temporary and therefore an attractive buying opportunity.
One final note: The COVID-19 crisis has produced almost universal calls for the Fed and the government to spend money and defer or reduce taxes. The Fed and the administration are complying with both monetary and fiscal policies. This is a certain sign that policymakers here and abroad will be flooding the US and the global economy with new liquidity. An enormous amount of liquidity.
Money pumping. Liquidity Operations. Open Market Committee interventions. Quantitative Easing. We prefer to call it “money printing.” It is the artificial expansion of money and credit by the central bank. Juicing the markets. By any name, it will devalue the purchasing power of the dollar and other currencies.
And it will drive gold higher. That’s why we renew our call for our friends and clients to take advantage of today’s lower gold prices…
We’d like to step back from the daily reports of the wild swings and mounting losses in the stock market to let you ponder a couple of longer-term, big picture items. We think the two charts that follow are mostly self-explanatory, so we will just tell you what they represent and otherwise keep out commentary to a minimum.
The first chart plots the relentless rise in the US federal debt (in red), now at $23.5 trillion dollars. Because the value of the dollar is subject to the debt as is the Federal Reserve’s willingness to create more dollars to keep the debt game going, you can see that for years the rising debt pulls dollar gold prices higher.
By the way, with businesses slowing down due to the Covid-19 pandemic, tax revenue will fall. It will fall further still if a payroll tax cut is implemented.
At the same time, government spending will rise at a relentless rate with new spending on health-related measures.
That means the red line will turn steeply higher. And pull the gold line along with it.
The next chart shows the US Treasury 10-year bond rate back to 2015 (the blue line) compared to the gold price over the same period. Their mirror image movement is impossible to miss. Over the period, as interest rates have ticked up, gold has paused or moved lower; as interest rates have fallen, gold has moved higher.
Now the Fed has forced interest rates to never-before-seen lows, with the 10-year yield actually dipping below 5 percent. Plunging rates in 2020 on the right side of the chart are impossible to miss. They foretell higher gold prices.
We would not like to have the job of persuading US Treasury bond buyers and auction bidders that loaning money to Uncle Sam for 10 years at for a paltry one-half a percent annual return is a good deal. Especially since it is clear that the Washington big spenders are going to have to borrow an additional trillion dollars or more each year for the foreseeable future.
A guaranteed loss is assured since it is the policy of the Federal Reserve to erode the purchasing power of the dollar at four times that rate each year.
It can sometimes take a while for critical masses of the people to wake up, but at some point, the guaranteed loss of purchasing power will become apparent to everybody and cause a stampede into gold and silver.
Why not beat the rush? Contact your Republic Monetary Exchange gold professional today.
After long years in Washington, the presidential candidate didn’t seem to know what it was. Senator John McCain was caught up short when Ron Paul asked him in the 2008 Republican debates what his position would be on the President’s Working Group on Financial Markets.
It’s doubtful most people of Capitol Hill, much less the American people, know any more than McCain about what we call the Plunge Protection Team.
We call it that because this high-level panel of government officials and the Federal Reserve chairman was created by President Reagan after Black Monday, the October 1987 stock market crash. That sell-off amounted to a 23 percent stock market free-fall as measured by the Dow Jones Industrial Average.
The explicit mission of the Plunge Protection Team was “enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets and maintaining investor confidence.”
In other words, it was to protect the stock market from plunging.
Of course, the only resources the government or the Fed has to buy stocks or options or index futures to try to blow up the stock market bubble are resources it takes from the American people. Or it puts its regulatory apparatus to work to divert people’s economic activities into channels it believes best.
Think about that: the wealth of the American people being put to work supporting the crony classes. It’s actually even worse than that because it misleads the people about the true value of stocks. It amounts to the government secretly going to work to pump the market up and persuade the people to buy our own stocks at levels unsustainable in a market free of the state’s fat thumb on the scales.
So you will not be surprised to learn that in the current stock market blood bath, the Plunge Protection Team was assembled by phone.
On Monday (3/9) the Dow 30 stock index fell 2,014 points, a one-day total of 7.8 percent. The S&P500 fell 7.6 percent. In the aftermath of the selling panic, according to a report by Zero Hedge, the Plunge Protection Team joined a telephone conference called by Treasury Secretary Steven Mnuchin.
The following day, Tuesday, the Dow reclaimed 1,167 points, or 4.88%, while the S&P 500 gained 4.94 percent. It is impossible to know whether this is the result of government market intervention. But a one-day intervention wasn’t enough to halt the hemorrhaging in stocks which continued on Wednesday.
Here is a lesson to be remembered in these times. The government is like a blowhard huckster. It is always trying to blow bubbles, to inflate markets and conditions. It will use all the powers at its disposal to do so. You have seen it push and pull on policy levers to inflate its earlier bubble in the dot com market and in housing. The market always seeks to deflate away those excesses, even if it has to wait for something unexpected like the coronavirus to pop the government’s bubble.
We advise you once again to stay away from markets that are only sustained by gimmicky monetary policy.
One other thing. Already there is movement in Wall Street circles for the government or the Federal Reserve to step in and begin buying stocks to stop the sell-off and prop up the market. This is the endgame of a syndrome that we have written about repeatedly: that the Federal Reserve has become the towel boy of Wall Street, and believes it has the mandate to keep stock prices at a permanently high plateau.
If it is allowed to do this, say goodbye to American prosperity. Cronyism and influence peddling will run rampant in a carnival of corruption as state bureaucrats and officials decide which stocks to buy and at what prices. As money flows to the influential and the well-connected, honest pricing, innovation, and free-market competition will grind to a halt, product inferiority will rule the day and the living standard of the American people will fall hard.
It will be Mussolini time in America.
Buy gold. And if the government starts buying stocks, buy more gold.
We expect it because we keep an eye on Washington.
But you need to think about the unexpected, too.
Monty Python, the comedy troupe had a routine about the fact that “nobody expects the Spanish Inquisition.” We don’t expect it either.
But more realistically, nobody expected the coronavirus. Nobody much expects most natural disasters. But they happen. So do wars and revolutions, mostly unexpected.
So we urge you to prepare for the unexpected with gold and silver.
Federal debt and money printing? We know where that’s headed. But we’re here to help you prepare for the unexpected, too. Things like coronavirus and natural disasters. Things that the last couple of weeks have demonstrated can rock a top-heavy stock market or threaten an entire economy.
The Spiking Sales of U.S. Mint Silver Eagles
The arrival of the unexpected may be responsible for spiking sales of US Mint Silver Eagles. The move in recent days has been dramatic.
In February the mint reported sales of 650,00 of the one-ounce silver coins for the entire month. But it sold 750,000 in just the first five days of March!
The surging sales is another sign of the developing gold and silver bull market and a growing public awareness of financial challenges on the horizon. Be sure to speak with your Republic Monetary Exchange precious metals advisor about silver and the advantage of owning US silver Eagles.
At the same time ask to find out more about trading the gold/silver ratio, a powerful strategy to increase your precious metals portfolio.
Gold Headed Higher
Gold is headed to an all-time high in dollar terms.
So says Jeffrey Gundlach, CEO of Double Line Capital. Gundlach, known as “the bond king,” told CNBC viewers on Thursday, (3/5) that gold is the thing to own. “I turned bullish on gold in the summer of 2018,” he said. The dollar getting weaker appears to be almost a policy of the Fed as it “panics” and slashes rates, he said.
“The Fed slashing rates is clearly going to be dollar negative. And that means gold is going to go higher.
“Gold is doing super well, even with the dollar unchanged,” he pointed out, raising the question of just how high gold will go as lower interest rates take their toll on the dollar.
“Gold is at a record high in terms of the Euro and many other currencies. And I feel it is almost a certainty that gold is going to tog to an all-time high versus the dollar as well.”
The Fed cut interest rates. Stocks fell. Gold climbed.
In an unscheduled emergency meeting Tuesday, the nation’s central bank cut the benchmark federal funds rate by a half-point to a range of 1%-1.25%. It cut the discount rate as well.
It made the moves in response to COVID-19, the Coronavirus.
Stocks fell. The Dow lost almost 800 points.
Gold rocketed $43 higher.
It makes perfect sense. In the last two weeks, the Dow has plunged below both its long-term and short-term moving averages, both of which have rolled over and turned down (the blue and red lines respectively on the following charts).
Gold, on the other hand, is above both trend lines. Both trend lines are moving up. And even in the face of margin-call selling of gold by stock traders that we wrote about last Friday was not enough to break support at the short-term trend line. (“Traders in markets with perfectly sound economic fundamentals can sometimes liquidate their positions in other things to meet margin calls in collapsing markets. It appears that in the general carnage of the stock market, large investors scrambling for cash to meet margin calls took profits in gold, the most liquid commodity of all.” From our 2/29 commentary “What the Historic Wall Street Tumble Means for Precious Metals”)
We believe that Fed policy will mean still lower stock prices. And much higher gold. In this commentary, we would like to share with you why this is so.
We might as well start with the C-virus. People everywhere are wondering about the coronavirus and asking the same thing: How bad will it get?
We wonder as well, but since there is little we can do about the public health impact, we confine most of our thoughts to the financial impact it will have.
As far as that goes, the handwriting is already on the wall. Wherever the medical calamity ends up on a scale of 1 to 10, from mild to unrestrained tragedy, the markets have made clear that the stocks cannot weather the storm, while gold continues to provide shelter like nothing else.
There are people in high places watching just as intently as we are, and though they have no more medical skills to bring to bear on the crisis than do we, they have intervened with more interest rate manipulation, nonetheless.
“The U.S. economy remains strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments…” So said Fed chairman Jay Powell. That was before the Tuesday rate cut.
The Fed is always “monitoring the situation.” It is always “keeping a close watch on conditions.”
For all that monitoring and watching, what can it actually do about what it sees? Let’s take it from the beginning.
Prosperity is the result of production. Cars, food, consumer goods, energy, clothes, entertainment, personal and professional services. Wealth is the increase in these things. Does the Fed produce any of these things?
No. It can only print more money and credit. And the creation of money and credit is not the creation of actual wealth.
In fact, the Fed’s creation of more money and credit – by pouring money into the repo markets, or printing money to drive rates down – can temporarily inflate financial markets, but ultimately only lessens the value of the money you already have.
Seriously, if the Fed can plan and create economic outcomes, why exactly have we had the worst economic dislocations in the country’s history under its regime? The Great Depression. The Great Recession. A housing bust that saw millions lose their homes. The destruction of the dollar’s purchasing power. Weak economic growth. $23 trillion dollars in federal debt. As much as ten times that hidden debt. A stalled-out middle class. A widening wealth gap.
Is it possible that the Fed planned and created these outcomes intentionally? Or is it more likely that the Fed created these consequences by failing to understand the fundamentals of markets and prices, of production and consumption? Created them with a fantasy-land misunderstanding of its own ability to affect the interactions of hundreds of millions of producers far-flung across the country and around the world with its constant interventions, meddling in rates, bailing out reckless banks, and destroying the price discovery function of markets?
Columnist and best-selling author John Tammy points out that Fed stimulus is no different than another government spending “that shrinks the supply of resources that would otherwise be made available to private sector producers.
“The Fed can only act insofar as the private sector creates resources that economic actors would seek in the marketplace, so ‘policy action’ by the Fed is by definition intervention on the part of non-market actors that pushes resources to where they wouldn’t otherwise go in a free economy helpfully free of government meddlers. Just as government spending happens to the detriment of private investment, production, and growth, so do Fed or central bank machinations take place at the expense of private, market-disciplined lending and investment, production, and growth. In short, the [Fed] intervention called for… will almost as a rule blunt any recovery from COVID-19.”
There is no question the coronavirus is suppressing economic activity. But will you be more willing to go gambling in a palatial Singapore casino with the Fed’s lowering of the fed funds and discount rates? More willing to fly to Korea or Italy? Or even fly domestically? Will Chinese suppliers of essential industrial parts and electronics in areas hard hit by the C-virus suddenly go back to work producing goods needed by foreign manufacturers now that the Fed has lowered rates?
“We do recognize a rate cut will not reduce the rate of infection, it won’t fix a broken supply chain. We get that,” said Powell. “But we do believe that our action will provide a meaningful boost to the economy.”
It will certainly provide a boost to prices. It shrinks the supply of resources in the productive economy, as Tammy describes. At the same time, following David Stockman, we might point out that the breakdown of global supply chains means higher production costs “… via a lot more cost (for inventories, second suppliers, shorter supply lines etc.,) and a lot less profit.”
At the same time, monetary policy dilutes the value of every other dollar in existence.
Economist Robert Wenzel summed up Fed policy this way: “Money supply growth has been extraordinarily strong in recent months and this Fed action will result in even stronger money growth—which will add to the upward pressure on prices that has been slowly developing.”
Blood Running on Wall Street Creates Buying Opportunity for Precious Metals
You might not have been too worried last Monday when the Dow Jones Industrial Average fell 227 points. But you certainly must have taken notice of the carnage on Tuesday when it fell 1031 points. The collapse was confirmed for any doubters by midweek because on Wednesday the Dow plunged another 879 points. And then came the worst day in the history of the Dow, Thursday, February 27, when the Dow fell 1190 points.
Friday’s loss of another 357 points capped off the week, the worst stock market performance since the last fiscal crisis, the Mortgage Meltdown in 2008. Altogether the Dow had a loss of 12 percent for the week; the S&P fell 11 percent.
Look closely at this, one of the ugliest charts we’ve ever seen, as the Dow falls off the cliff:
For our part, we wrote last Monday that New York stock brokerages that were calling for a mere correction in response to the coronavirus were guilty of “gross understatements.”
Even more absurd was the comment of Jim Cramer on Wednesday (2/26) as he urged his viewers to get off the sidelines and into the stock market. “If you haven’t put anything to work, I think you’re playing with fire,” said the CNBC “Mad Money” host.
Huh? If you are on the sidelines, avoiding the danger entirely, you’re playing with fire?
In early October we warned about the spread of disease (Gold Coins for Black Swans) when we wrote about unpredictable events that make gold a crucial part of your portfolio:
“Those include everything from the sudden outbreak of war, widespread crop failures, and the spread of disease like the flu epidemic of a century ago, to uncontrollable civil turmoil, power grid failures, earthquakes, volcanic eruptions, and even less likely events like an asteroid impact.
“Unexpected? Unlikely? Precisely the qualities of the Black Swan events that order and reorder just about everything in our lives.”
Since then, the unlikely events that have actually occurred are the fires that devastated Australia, a plague of locusts in Africa, and bats in Australia. Outbreaks of Swine Fever and bird flu. All that and earthquakes, too.
Yet the worst of these unexpected events appears to be the COVID-19 outbreak.
The stock market has been whistling past the graveyard about the coronavirus from the beginning of the news from China.
Last week it could no longer avert its gaze. The Wall Street Journal summarized the bad news with a headline: “The Week that Wiped $3.6 Trillion Off the Stock Market.”
Gold was caught in the crossfire. Although it surged close to $1,700 on Monday as the virus news spread, it fell hard on Friday amidst what could be called a low-grade panic on Wall Street, finishing at $1,566.
We Have Seen this Kind of Action Before
Traders in markets with perfectly sound economic fundamentals can sometimes liquidate their positions in other things to meet margin calls in collapsing markets. It appears that in the general carnage of the stock market, large investors scrambling for cash to meet margin calls took profits in gold, the most liquid commodity of all.
To repeat, we have seen this kind of action before, and we know what happened then. Gold fell hard – but only briefly – in the fall of 2008 during the stock market carnage of the mortgage meltdown.
But that margin call selling opened a window of opportunity to buy gold at “sale prices.”
Of course, it didn’t last long. Soon gold was racing to new all-time highs. Three years later it was up well over 2 ½ times its October 2008 low.
We haven’t liked what we have learned so far about COVID-19. As we have said repeatedly, we are not epidemiologists and don’t pretend to know what even the experts themselves don’t yet know either. But having spent a lifetime learning about how money reacts in a crisis, so we urge you to avoid any further bloodletting in the stock market as this pandemic plays out. Take advantage of the dip in gold and silver prices while you can.
As we wrote in October, “Owning physical gold and silver is the single most important thing you can do to protect yourself from low predictable events that carry outsize impacts.”
Take action now. We could be witnessing the beginning of the 2020 economic crisis. Analysts have been saying for years that the next one would be way worse than 2008. It’s still not too late. Contact Republic Monetary Exchange today and diversify your portfolio with physical gold and silver.
We are compelled to take our attention off the spreading of the Coronavirus for this post, simply to remind you of the presidential race. It’s become something of a bidding war as the Democratic candidates outbid one another for what the intend to give the American people – guaranteed jobs, national rent control, and free housing, free health care, free college, free daycare, yada, yada, yada.
Next Tuesday, March 3, is Super Tuesday, with Democratic primaries in 14 states. More than a third of the Democratic National Convention delegates will be awarded on Super Tuesday.
Right now Bernie Sanders is the odds-on favorite to snatch the Democratic nomination according to all the betting markets. Real Clear Politics places Sanders’ average among the markets at 55 percent.
Michael Bloomberg is way behind at 21 percent.
How is the rise of Bernie Sanders affecting the outlook for the markets? Frankly, it’s not good for stocks. It is very good for gold.
Goldman Sachs, which had an earlier target for gold to reach $1600 later this year, has raised its forecast. The firm now calls for gold to climb to $1700 over the next three months, and to $1750 in six months.
The investment bank identifies three factors in its projection:
1) Fear-driven investment demand based on the coronavirus;
2) Large global savings glut, while gold has a better outlook for appreciation than bonds in the next recession;
3) The rise of Bernie Sanders, with a policy of large tax hikes that can slam stocks, and a proposed wealth tax that makes gold especially inviting for high net worth individuals.
Jeffrey Gundlach, the man known as “the Bond King, and the CEO of DoubleLine Capital, also views Sanders as a threat to the stock market. In an email to CNBC on Wednesday (2/26) Gundlach wrote, “If this stock market reversal is due exclusively to the virus, then why is United Healthcare down far more than (the S&P 500)? Why is healthcare as a sector broadly not outperforming? Answer to these questions: The market is digesting a better than 50 percent chance of Bernie getting the nomination.”
Senator Sanders’ plan to overhaul the economy runs up to at least $50 trillion. He says the Medicare For All part of his plan would cost $30 trillion over ten years, but this week was only able to offer the means to fund $17.5 trillion of it. That $17.5 trillion is necessarily the result of new taxes, and Sanders is just getting started.
It reminds of Margaret Thatcher’s pithy observation that the problem with socialism “is that pretty soon you run out of other people’s money.”
Of Sanders boosting investment demand for gold, Goldman Sachs says his “proposed wealth tax could incentivize high net worth individuals to buy physical gold bars and store them in a vault, where it is more difficult for governments to reach them.”
A lot of things aren’t yet clear about COVID-19. But one lesson is clear: Buy gold to protect yourself in a crisis!
People around the world get the flu every year. Some people die from it. The important public health question is just how lethal any spreading strain is.
We don’t know the answer about this coronavirus.
Estimates in the press range from 0.04 percent mortality to 2 percent.
The difference is a factor of 50. It matters a lot.
Two percent of the US population is 6,540,000. That is a wartime level of magnitude. 0.04 percent is 130,800. That’s more than twice the number of Americans that died in the Vietnam war.
Fortunately, those numbers must be adjusted by the percent of people who would actually fall victim to the coronavirus. It is estimated that about ten percent of the US population get the flu in any given year. In a particularly bad strain, that may rise to 25 – 30 percent.
We’ve taken the time to look at these numbers to show just how little is known about this disease. The range of possible consequences is simply immense.
But we do know that in a crisis, the world turns to gold.
That was evident on Monday (2/25) when both South Korea and Italy raised the alarm about the spread of the virus in those countries. So much for the hope it would be mostly “contained” to China. The Dow Industrials fell more than a thousand points. It was the worst day single day in two years for both the Dow and the S&P 500. Gold raced toward the $1,7o0 mark. On the spot (physical cash markets) gold hit a high Monday of $1,688, a seven year high, before settling back a little to close at $1,671.
In reviewing what we have written about the coronavirus so far, we would like to repeat our advice: to use this outbreak as time to pivot to caution with stock and bond holdings. In January we looked down the road and wrote that from what we could see, the coronavirus “looks very worrisome indeed. It may be much bigger than anything the world has experienced since the Spanish flu epidemic that claimed hundreds of thousands of American lives just over 100 years ago.” (The Coronavirus, Black Plagues, and Black Swans)
On February 9 (In a Crisis), we wrote, “Some of our readers will recall all the things that were shut down after 9/11, especially air travel. Today’s epidemic has us wondering how long these grids can function if whole cities and workers are quarantined. We may learn from China’s experience. In any case, we wonder what would happen if the increasingly stressed national electricity grid went down, or if transportation were broadly encumbered.
“What would you do if a power grid interruption meant ATM machines stop spitting out cash? Or if emergency health measures mean that banks and other business can’t open for some time?
“Tragedies can provide us valuable reminders. When the questions have to do with the monetary system, the answer is that in a crisis you would be very happy to own gold and silver, the world’s most liquid commodities. Precious metals have weathered the storms and saved fortunes and even lives for people throughout the ages and around the world.”
As we write in the middle of the trading day on Tuesday (2/25) everything on our screens is red. That means down. The Dow is off more than 900 points. And gold has given back some of its Monday gains. We are grateful for that, because it means a more favorable buying price (for now!) as this crisis continues to unfold.
The eventual impact of COVID-19 is unknown. But the centrality of gold in a global crisis is very well known.
If you have not reduced your exposure to stock and bond markets and spoken to a Republic Monetary Exchange gold and silver specialist about protecting yourself and your family with gold, we urge you to do so at once.
Market Looks Ahead, Doesn’t Like What’s Coming Our Way!
Gold prices screamed to seven-year highs on Friday. Early Monday morning, investors woke up to see the Dow Jones hammered down over 700 points while gold continued its rise, reaching as high as $1,687, up over $40 per ounce from its previous close. This is as of print. This gold bull market seems poised to continue its vigorous run.
No wonder. Have you been watching the news?
A deadly virus from China. A plague of locusts in Africa, and bats in Australia. Outbreaks of Swine Fever and bird flu. All that and earthquakes, too.
These may not be biblical events, but they are reminders to protect your family’s wealth from the unexpected.
The Drudge Report headline Friday was short and to the point about the coronavirus: OUTBREAK SHIFTS, SPREADS. “This new virus represents a tremendous public health threat,” said a CDC official on a call with reporters Friday.
But the COVID-19 virus, bats, and locusts aren’t the only developments to be concerned with. They aren’t the only things driving gold higher. Remember that the new gold bull market got underway last summer, well before the plagues.
The factors driving gold include the skyrocketing US debt, global de-dollarization, Fed policy, and US interest rates.
And don’t forget the top-heavy stock market. At the same time we wrote last week that the stock market has the “jitters,” Goldman Sachs was telling its clients that a near-term correction “is looking much more probable.” Oppenheimer agrees, telling its clients “the impact of the coronavirus on earnings may well be underestimated in current stock prices.”
We think those are gross understatements.
On the interest rate front, the yield on the 30-year US Treasury sank to an all-time low on Friday.
Would you loan money to the US government for 30 years for an annual return of only 1.89 percent? That’s a negative real return if the Fed succeeds in its target of debauching the dollar by two percent a year. We think that as the global de-dollarization movement continues, the Treasury will be forced to pay far more than today’s rates to borrow enough to fund its debt. Those higher rates mean huge capital losses in the bond markets.
It’s shaping up to be a bloodbath, the financial equivalent of a global plague.
For those who have not already done so, we recommend our friends and clients move to safety now. The stock and bond markets have had a powerful run, but they are no place to be as a crisis deepens.
No other financial safe haven can even compare with gold. It is universally desired in good times and bad.
Visit with your Republic Monetary Exchange gold and silver professional for specific suggestions based on your portfolio.
We don’t know who first said that the stock market is a bubble in search of a pin, but it’s an image that is both vivid and true.
It would be easy to excuse missing the current stock market bubble, if we hadn’t already suffered the popping of the dot.com bubble and the housing bubble in just the last 20 years. When the dot.com bubble burst the Nasdaq lost 80 percent of its value. When the housing bubble found its pin, millions of Americans lost their homes.
The current stock market bubble is sustained by the following beliefs:
The coronavirus doesn’t matter.
An economic slowdown in unlikely.
Deficits don’t matter.
The national debt doesn’t matter.
The Federal can really control interest rates.
Yet any one of those things can be the pin the bubble is in search of.
Indeed, there are more pins than those. In a new article, the popular economist Nouriel Roubini identifies geopolitical pins among the others.
He writes that the markets are “blissfully in denial of the many predictable global crises that could come to a head this year.”
“For starters, the United States is locked in an escalating strategic rivalry with at least four implicitly aligned revisionist powers: China, Russia, Iran, and North Korea.”
“As of early 2020,” says Roubini, “this is where we stand: the US and Iran have already had a military confrontation that will likely soon escalate; China is in the grip of a viral outbreak that could become a global pandemic; cyberwarfare is ongoing; major holders of US Treasuries are pursuing diversification strategies; the Democratic presidential primary is exposing rifts in the opposition to Trump and already casting doubt on vote-counting processes; rivalries between the US and four revisionist powers are escalating.”
“History has never recorded a bubble which settled magically onto a ‘permanently high plateau’ and stayed there for months or years. So the Fed has finally reached the point of no return: either it accepts a painful bursting of the monster moral-hazard bubble it has created or it lets the monster lead the stampede over the cliff to a financial collapse that the Fed can’t rescue with the usual tools of lowering interest rates and bailing out banks.”
“The problem is that bubbles always pop, and they pop regardless of what central banks do. This is contrary to the popular opinion that if only the Fed had saved Lehman Brothers, the Global Financial Meltdown of 2008 would never have happened.”
If you’d like a little more detail about the Fed’s role in creating bubbles, see our post Do You Really Think This Can End Well?In it we wrote, “What we are saying is simply this: The stock market is a bubble of enormous proportions. The Fed will try to keep it inflated, but eventually it will fail. Eventually rates will rise.”
“And as always, the bigger the bubble, the bigger the bust.
“That’s just one reason why you should own gold.”
Contact Republic Monetary Exchange today to learn how to protect yourself and your wealth before the bubble finds its pin.
Today’s comments come from former Congressman and presidential candidate Ron Paul.
“The only way to avoid economic disaster,” says Dr. Paul, “is to cut spending and audit, then end, the Federal Reserve.”
Dr. Paul is a well-known gold authority with a great track record for predicting the calamities that result from economic irresponsibility. His warnings given before the 2008 mortgage meltdown, an unnecessary tragedy that cost millions of Americans their homes, should be studied by everyone – Fed officials in particular – who insist that financial bubbles can’t be identified in advance.
For years, as a member of the House Banking Committee, Paul would hold Federal Reserve chairmen’s feet to the fire in their official congressional appearances.
At one such hearing, Congressman Paul asked Fed chief Ben Bernanke if gold was money.
“No,” said Bernanke.
“Then why do central banks hold it?” asked Dr. Paul.
Paul’s latest warnings about economic disaster come from his February 17 column about the administration’s new fiscal year 2021 budget proposal. He writes:
“President Trump deserves credit for proposing an 11.6 billion dollars cut in funding for the Department of State and the US Agency for International Development (USAID). Foreign aid does little to help impoverished people overseas. Instead, it benefits foreign government officials willing to do the US government’s bidding. The State Department and USAID are extensively involved in US intervention abroad, including efforts to overthrow governments….
“Even if Congress agrees to all of President Trump’s cuts, federal deficits will still be over one trillion dollars for the next several years. However, President Trump claims the budget will balance in 15 years. In order to show a balanced budget by 2035, the administration assumes three percent economic growth for most of the next decade. This level of growth is unlikely to come to pass. Instead, the current boom will likely end soon, and the economy will experience another major recession. Signs that we are on the verge of a downturn include rising homelessness and the Federal Reserve’s bailout of the repurchasing market.”
Dr. Paul observes that if Fed interest policies remain unchanged, it will inevitably lead to a dollar crisis. If on the other hand, the Fed lets rates normalize, the debt bubble will burst.
As we have said in these discussions, the Fed has put itself into a box.
The Coronavirus is giving a lot of stock market professionals the jitters.
No wonder. An economic slowdown in China, spreading with the virus, spells trouble for highly-leveraged sectors of its economy, trouble that can snowball quickly to other sectors.
And to other countries.
It’s wise to be defensive now. Simply ask yourself how attractive is the thought of being quarantined in some foreign port on a cruise ship right now. A slowdown in travel, hospitality, and trade will have wide consequences for stocks.
Consider supply chains as well. Companies that depend on parts manufactured in China are drawing down thin inventories as the quarantines tighten. The quarantine is already crippling some Korean automobile manufacturing dependent of Chinese suppliers.
You get the idea. As the cliché goes, it really is a global economy. That will become even more clear if the virus isn’t contained and dominoes start falling.
We think most people work way too hard for their money to swallow whole the empty assurances that this outbreak will be contained. No matter what the WHO and the CDC and the Chinese bureaucrats say, the truth is they don’t really know. Nobody really knows.
One thing we do know from the monetary philosophy that reigns at central banks: they will try to offset any slowdown with additional liquidity. Central bankers questioned about the risks of the coronavirus have made that clear.
It is no time to be complacent. Protect your profits with gold.
As the world has discovered many times, gold is the best place to go in a crisis.
Learn more and protect yourself from a jittery stock market. Call Republic Monetary Exchange and speak with one of our gold and silver professionals.
It’s time to review the latest numbers. We hear from Washington that the economy is stronger than ever. Perhaps. But that doesn’t mean the American middle class is in good shape.
So here are the disturbing facts:
Americans are so financially stressed that 32 percent of them run out of money between paychecks. The percentages of those who run dry between paydays are worse among the poorest workers, but the problem of living from paycheck to paycheck is not limited to them alone. For example, 31 percent of workers earning $100,000 to $129,999 suffer from the same syndrome: running out of money between paydays.
Americans are deeper in debt than ever before. US household debt has passed $14 trillion dollars. That’s $1.5 trillion more than late in 2008, when the economy cratered and millions of American lost their homes. Meanwhile, and although the economy is in an record expansion now going on 127 months, credit card debt is at record highs. Just in the last quarter alone balances rose 5 percent to $930 billion, while delinquencies are at an 18-month high. Half of student loans are non-performing, in some state of deferral, grace period, or default.
Yet in a prolonged expansion and what is touted as the strongest economy ever, the chairman of the Federal Reserve had to lecture congress about its deficits. Powell made the obvious point that the current deficit and debt trajectory is unsustainable.
On Monday, President Trump proposed a federal budget for fiscal year 2021, one that comes with another trillion-dollar deficit. And never mind that the proposal is claimed to put the government on track for a balanced budget in 15 years. We are old enough hands that we have heard that sort of thing before. In fact we have heard it more times than we can count.
Here’s a reality check: the only budget that ever counts in Washington is the one for the current year.
And we don’t rely it in very much.
We don’t put much faith in anything that comes out of Washington. As we said, we’ve are students of history and have ourselves been around for a long time.
Here are just a few observations about the markets from others, some new comments worth being shared.
The first is about the stock market from analyst David Rosenberg, founder of Rosenberg Research and Associates:
“While I cannot pick the date, I can tell you that this turbocharged debt cycle will end miserably, not unlike 2008 and 2001. Don’t try to time the inevitable mean-reversion trade…. In nearly 11 years the S&P 500 has soared nearly fivefold to multiples (on earnings, sales and book value — take your pick) we have only seen twice in recent history.”
“… there really is no reason to wait for the herd to head for the exits.”
The next is from an account by the editor of the Strategic Trader newsletter, E.B. Tucker. We think the headline on the story says it all:
“Investing In Gold: The Biggest Upside With the Smallest Risk.”
As we have commented frequently, long past is any likelihood of the US government getting its financial house in order. The rubber band of federal debt will be stretched until it snaps. And if the government needs to print money and shove it out helicopter doors when it can no longer borrow– an updated version of the German inflation of the1920’s – it will do so.
Société Générale analyst Albert Edwards looks as the debt “spiraling out of control” and has a few words on the subject worth reading:
“Does anyone seriously believe that any democratically elected government would be willing to raise taxes or cut government spending and future pension/health benefits in a bid to delay the fiscal time bomb? Of course they wouldn’t! And any government that attempts to do so will be hounded from office by an indignant public armed with pitchforks and much else besides.”
And finally, we’re not saying it is exactly like the seven Biblical plagues, but blogger Michael Snyder rounds up a few of the things going on all at the same time that could pass as curses:
“Global weather patterns have gone completely nuts, large earthquakes are popping off like firecrackers, it looks like the plague of locusts in Africa could soon develop into the worst in modern history, and a massive plague of bats is severely terrorizing parts of Australia. On top of all that, African Swine Fever is wiping out millions upon millions of pigs around the globe, the H1N1 Swine Flu is killing people in Taiwan, there have been H5N1 Bird Flu outbreaks in China and in India, and the H5N8 Bird Flu has made an appearance at a poultry facility in Saudi Arabia. Of course the coronavirus outbreak which is causing people to literally drop dead in the streets in China is making more headlines than anything that I have mentioned so far.”
The Coronavirus is a terrible event and a good reminder.
We join the rest of the world in hoping that this outbreak is limited, as was its related coronavirus malady Severe Acute Respiratory Syndrome. SARS also originated in China, and resulted in some 8,000 cases in 2002-2003, but fewer than 800 deaths.
That is quite limited compared to the biggest pandemic in history, the Spanish Flu of 1918. That one infected a half billion people – and that is not a typo! No one knows for sure how many lives it claimed, but estimates range from 20 million to 50 million victims, including as many as 675,000 Americans. That was on a US population base of 103 million.
An equivalent US death toll today would be 2,144,000. That’s like the entire population of Phoenix, Scottsdale, and Chandler combined.
While it remains to be seen what this virus will bring, it is beginning to concentrate peoples’ minds. If you listen to radio talk shows or eavesdrop in a Starbucks, you hear concerned people wondering aloud what might happen next.
As the coronavirus has spread in China, so too have quarantines. We think an early outcome of a spreading disease and quarantines is problems with the grid. That primarily means the power grid, but a broader definition should include the transportation grid and the communications grid.
Some of our readers will recall all the things that were shut down after 9/11, especially air travel. Today’s epidemic has us wondering how long these grids can function if whole cities and workers are quarantined. We may learn from China’s experience. In any case, we wonder what would happen if the increasingly stressed national electricity grid went down, or if transportation were broadly encumbered.
What would you do if a power grid interruption meant ATM machines stop spitting out cash? Or if emergency health measures mean that banks and other business can’t open for some time?
Tragedies can provide us valuable reminders. When the questions have to do with the monetary system, the answer is that in a crisis you would be very happy to own gold and silver, the world’s most liquid commodities. Precious metals have weathered the storms and saved fortunes and even lives for people throughout the ages and around the world.
Contact Republic Monetary Exchange and speak with one of our precious metals professionals today, before a crisis.
The numbers are in for global central bank gold buying in 2019. The World Gold Council reports, “Central banks were net buyers for a 10th consecutive year: global reserves grew by 650.3 tons, the second highest annual total for 50 years.”
As you know, we believe central bank gold buying is among the most important megatrends of today’s financial world. It eclipses in importance any other supply-demand fundamentals.
The WGC also notes that the central bank buying trend is widespread, with at least 15 central banks acquiring a ton of gold or more last year. Here is the chart from the report:
The Cost of the Coronavirus
Goldman Sachs is estimating that the coronavirus outbreak cost to China and the spillover effects on the rest of the world will reduce global GDP growth by two percent in the current quarter.
The firm expects that impact will be contained in the first quarter, writing, “Aggressive response from the authorities in China and elsewhere will bring the rate of new infections down sharply by the end of Q1.”
That’s the hope, anyway.
Is This a Hospital? Or a Place Coronavirus Victims Go to Die?
Here’s a link to a Bloomberg News story that ran February 5 headlined, “China Sacrifices a Province to Save the World From Coronavirus.”
Hubei province has a population of 60 million. Its capital is Wuhan, the epicenter of the coronavirus. At the time the story was written, Hubei had 67 percent of all patients and had experienced 97 percent of all deaths from the coronavirus.
But amid all the reports and statistics, a photo in the Bloomberg story caught our attention for graphically portraying the possible scope of the outbreak.
Stocks didn’t act on Tuesday (2/4) like the Coronavirus outbreak was an extinction-level event.
But as usual, there’s more to the story than immediately meets the eye.
UBS customers were told that China’s stock sell-off “is an opportunity to buy that country’s stocks.”
One headline said, “Stock Market Rally Soars as Coronavirus Fears Fade.” Another read, “Coronavirus? What Coronavirus?”
The Dow Jones Industrial Average, which lost 600 points on Friday, gained back 144 on Monday and 400 more on Tuesday, while gold sold off both days, down almost $27 on Tuesday.
It seems like there are a lot of virologists, epidemiologists, and public health experts working as stock analysts and running investment portfolios, because these voices are acting like they know a lot more than the rest of us about the still spreading virus.
But did anybody who really knows blow the all-clear whistle?
No. In fact, as we have gone to great lengths to explain in these discussions, the only thing that lifts stocks these days is the gushing of liquidity from central banks. So, to understand the market action of the last couple of days, we need only look for the money spigots being turned on full force. That’s what gets the algorithm traders excited.
And if fact the world’s central banks are opening the floodgates. The People’s Bank of China mainlined $174 billion into the markets on Monday. The Federal Reserve and the European Central Bank are onboard as well.
This is what the central banks do: They print money. That’s it. It’s their only tool. It’s the hammer in the hands of central bankers who see every problem as a nail.
You could call it counterfeiting, since it is all just made up money; but unfortunately, it’s legalized counterfeiting. (And of course, it’s actually digital money, but we use the expression “printing money” as a short-hand.)
A writer at CNBC on Monday described the syndrome we’re discussing about as well as anybody in the mainstream media ever. He wrote, “Central banks like the PBOC and its counterparts around the world — notably the U.S. Federal Reserve and the European Central Bank – have been bailing out economies and financial markets since the 2008 financial crisis. Trillions in digital money printing along with bargain-basement interest rates have been the main weapons of choice to combat recurring episodes of slowness.”
Of course, doing the same thing over and over without solving the underlying problem could be clinically diagnosed as a derangement. Meanwhile, the real problem, financial bubbles of gargantuan proportion that will eventually pop, go unaddressed by the central bank bureaucrats.
In any case, Wall Street follows the central bankers’ lead. If they are going to print a lot of money to offset the slowdown from the Coronavirus outbreak, then the stock markets will go up. At least for a couple of day. And even hedge funds guys that understand the long-term effects are nimble and will sell gold even if just a trade for a day or two, for the liquidity they need to leverage up in front of the new, aggressive money pumping.
That’s about as concisely as we can describe the action of the past couple of days. If the Coronavirus has the deadly punch that many fear, its financial impact on the stock markets will be devastating and gold will rocket higher. If Coronavirus proves to be less than a pandemic-level catastrophe, the central banks’ additional money printing will send gold higher as well.
The central banks are in a box of their own creation.
The risk to stocks is extraordinarily high. Gold is the only safe haven. We recommend our friends and clients take advantage of this break in the gold price. It isn’t likely to last for long.
We have recommended our clients take advantage of this clear megatrend before it becomes widely recognized and prices begin to move up exponentially.
Former Reagan budget director David Stockman sees the same risk: that Wall Street and hedge fund professionals will suddenly take notice and begin front-running the central banks in the gold market. That means that, being assured of more gold buying, they will buy ahead of the Fed. Front-running the Fed in one market or another has been Wall Street’s primary activity for decades now; it is what they do. For years Wall Street has been shielded from losses and guaranteed profits by Federal Reserve liquidity policies. Someone even coined the phrase “the Greenspan put,” for the Fed’s implicit willingness to manipulate interest rates to protect Wall Street from a stock market downturn.
With changing Fed chairmen The Greenspan put morphed into the “Bernanke put” and then the “Powell put.”
It was that policy, the Powell put, that kicked in last year when Chairman Jerome Powell suddenly reversed the Fed’s tightening policy in favor of more money printing. He was protecting the stock market. In the same way the Fed has spent almost 40 years manipulating interest rates lower to protect the bond market.
In any case, Stockman, a long-time Wall Street professional after leaving the Reagan administration many years ago, thinks that a light will go off and Wall Street will begin trying to front-run the world’s central banks, buying gold before the world’s global governments bid prices higher.
We’ll let Stockman speak for himself. What follows is from a recent interview he gave to Doug Casey’s International Man newsletter:
“I think that intelligent people can see that this system of balance sheet expansion and interest rate repression—and $17 trillion in bonds trading with sub-zero yields a few months ago—isn’t sustainable.
“Some central banks at least are trying to hedge their bets by reallocating their balance sheet to have a larger share of gold. As the crisis of what I call ‘Keynesian central banking’ becomes more and more intensive and acute, more central banks will be buying gold.
“Gold has a small trading value, or market cap, compared to something like a trillion dollars that turns over in the repo market every day. Or the five trillion dollars a day that turns over in the currency markets. Gold is a minor player, compared to that.
“If central banks begin to really stock up on gold, what’s going to happen is people will try to front-run them.
“This is the whole secret of what’s been ongoing for the last 20 years in other markets. The reason bond yields have gone to rock bottom is the central banks have been buying the bonds. So, the smart traders are buying what the central banks are buying.
“If the central banks are going to start buying gold, the same guys who have been buying the 10-year Treasuries or Bunds are going to start buying gold, and it’ll soar. The same way that bond prices have in last few years.
“In other words, the world is awash with massive artificial liquidity created by the central banks. It’s in the hands of traders, who move in split-second intervals and attempt to leverage anything that looks like it’s going up. Especially if they can put it on leverage that costs nothing.
“Maybe the next chapter is the whole system becomes unwound and the banks start buying more gold, and the frontrunners start buying more gold, and the price begins to multiply by breathtaking rates.”
Stockman has described a market prospect that it not only reasonable, it is very likely. To “front-run” the Wall Street central bank frontrunners, speak with a Republic Monetary Exchange professional today.
Another reason gold goes up? More free stuff from the government!
It was no surprise around here, but the Congressional Budget Office just announced that the 2020 deficit will break $1 trillion. For that reason, among others, gold will move higher.
But what will the presidential election bring?
John Stossel has been following the campaign promises and tallied up the additional spending proposals of the remaining presidential candidates.
Here is the breakdown of each candidate along with their proposed spending increases:
Donald Trump $267 billion
Joe Biden $532 billion
Pete Buttigieg $752 billion
Elizabeth Warren $2.8 trillion
Bernie Sanders $4.9 trillion
By the way, and not that it matters, but before she dropped out of the race Kamala Harris was the big-spending champion. If you had a hangnail or a crack in a flowerpot, Harris would offer a federal program to fix it.
We say not that it matters, because the Federal government is already bankrupt, and facing default. It can’t sustain any more deficit financing without its creditors and the world’s dollar holders going on strike. The Fed’s rescue of the repo markets is just one sign that we are ending the game-over phase.
But if y0u do like to keep score, that’s the breakdown for now. “In the race to spend money, Bernie Sanders is the ‘winner.’ And you,” says Stossel, “are the loser.”
And that’s why you need to own gold and silver!
Click HERE to watch John Stossel’s report, MORE FREE STUFF 2020.
It is because we are dealers in precious metals and not epidemiologists, that we will leave it to others to speculate on the long-term outlook for the coronavirus, its strands, and mutations. We are innately suspicious of all government reports and news releases, to begin with, and that certainly includes whatever information about the coronavirus that comes out of Beijing!
But we don’t mind commenting on the outlook for gold.
For now, we only wish to point out that the coronavirus outbreak is a classic “Black Swan” event. A Black Swan is an unexpected event that has an outsized impact.
9/11 was a Black Swan event.
Black Swan events are almost always destructive to the established order. That would be things like government finances, trade, state currencies, and stock markets.
They are almost always bullish for gold.
The initial reactions of the markets confirm this. The Dow Industrials quickly gave up a thousand points as the coronavirus story began to spread. Gold moved up.
That is easy to understand. Stock markets and paper money schemes display fragility in the face of the unknown. Gold is robust, as its history of millennia shows.
The Black Plague decimated trade, emptied cities, produced starvation, and slammed shut the door on economic growth. It produced periods of high inflation and other economic disruptions.
Meanwhile, back in this century, here is the lead from a Wall Street Journal story, “Coronavirus Tests Market’s Faith in Global Economy,” this week:
“Investors who began the year feeling largely sanguine about the stock market are struggling to make sense of whether a growing coronavirus outbreak could upend their bets on a global economic recovery.”
From Bloomberg came this headline, “Safe Havens Shine as Spreading Virus Spurs Rush to Buy Gold.” From the story:
“ ‘News flow on the virus is pushing safe-haven buying,’ Gnanasekar Thiagarajan, director at Commtrendz Risk Management Services, said by phone from Mumbai. ‘In this kind of an environment, stock markets could tank and that fear is further adding to the risk-averse sentiment. The outlook is bullish for gold, targeting $1,610 in the near term.’ “
The coronavirus story is moving fast. It may be no more deadly that was swine flu or sars. On the other hand, what we know of it looks very worrisome indeed. It may be much bigger than anything the world has experienced since the Spanish flu epidemic that claimed hundreds of thousands of American lives just over 100 years ago.
We urge you to take the appearance of the coronavirus into account and take steps to protect your wealth. Use it to focus for a few moments, considering all the other so-called Black Swans events that can occur at any time: tsunamis and earthquakes, nuclear accidents, wars, and terrorist events, illnesses, and famines.
Consider as well just a few of the things that January 2020 has brought along with it:
The deadly raging fires in Australia.
Substantial earthquakes in Jamaica (7.7), Turkey (6.7), and the Solomon Islands (6.3).
The assassination of Iranian major general Qasem Soleimani.
The impeachment trial of President Trump.
Flash floods in Jakarta, Indonesia,
A major shakeup at the top of the Russian government.
We think the coronavirus and its unknown impact, and all these other things are ample reasons to review your financial situation and take steps to preserve and protect your wealth with gold.
We’ve spilled more than a little digital ink here recently sharing the views of well-positioned people about how high the price of gold will go this year.
A quick review:
Author Jim Rickards, says if the authorities let a debt crisis materialize, we can “watch gold soar to $14,000 per ounce or higher, not because they wanted it to but because the system is out of control.”
One of our favorite forecasts is from Congressman Ron Paul. Dr. Paul was long the leading gold authority on Capitol Hill. But we especially note his forecast since it is very unusual for Dr. Paul to make any kind of price forecast. Congressman Ron Paul thinks gold will double, reaching $3,000 by the end of 2020. Furthermore, says Dr. Paul, when the big crisis hits, it is conceivable that his prediction of $3,000 gold will prove to be far too modest. ($3,000 Gold at the End of Next Year!)
More recently, we’ve shared the forecasts from people at the world’s largest hedge fund, Bridgewater Associates. Greg Jensen, the $160 billion dollar fund’s Co-Chief Investment Officer told the Financial Times that gold could gain 30 percent this year, as global political uncertainties increase. That forecast would put gold at $2,000 per ounce. (The World’s Largest Hedge Fund Says “Gold to Surge!”)
A lot of informed people are expecting gold to move much higher this year. A McKinsey & Company consultant expressed the view shared by many of those cited above that ongoing global de-dollarization would be “good for gold.” Veteran market analyst David Rosenberg said the other day that “gold is the place you want to be.” Rosenberg said, “There is no such thing as a no-brainer, but this is close!”
Below is a one-year gold chart. It paints a picture of a market poised to move higher. You can see that gold broke out last summer (the birth of the bull market). After consolidation at the end of last year, it has surged higher still. For those technically minded, gold has broken convincingly over both its long-term (red line) and short-term (blue line) moving average trend lines.
The price movement traced in the chart is a response to objective economic and financial conditions: De-dollarization. A new generation of Quantitative Easing. Unconstrained federal budgets. Unfunded liabilities. Trillion-dollar deficits. Spending crazed politicians. Monetary flapdoodle like Keynesianism and Modern Monetary Theory. Negative interest rates. Spend a few minutes pondering Washington’s behavior, the Federal Reserve’s folly, and fast-changing global financial realities, and we think Rosenberg is right: Gold is the place to be.
Every now and then something worthwhile slips out at the World Economic Forum in Davos, Switzerland, an annual meeting of the world’s wealthy. We weren’t surprised that this year that it came from billionaire investor Ray Dalio since we ourselves have cited Dalio a few times here in these comments.
Dalio is the founder of the world’s largest hedge fund, Bridgewater Associates.
Tuesday during an on-location CNBC interview at the World Economic Forum, Dalio warned “Get out of cash,” and “Cash is trash.”
Once again, Dalio urged investors to own gold, just as he has done before. He has stated that gold will be his top investment for years to come. In the same Davos interview, he took a swipe a cyber-currencies. “There are two purposes of money, a medium of exchange and a store hold of wealth. And bitcoin is not effective in either of those cases now.”
Just last week we quoted Greg Jensen, Bridgewater’s Co-Chief Investment Officer, who told the Financial Times that investors should make gold a cornerstone of their portfolios, as “most of the world is long equity markets in pretty extreme situations.”
Jensen pointed to rising geopolitical tensions, saying “There is so much boiling conflict.”
He talked about the precariousness of the dollar’s role as the global currency reserve. “When you look at the geopolitical strife, how many foreign entities really want to hold dollars? And what are they going to hold?” he asked. “Gold stands out.” (See “The World’s Largest Hedge Fund Says “Gold to Surge!” 1/16/20)
As long as we are letting billionaires speak for us today, here’s one more. David Einhorn is the founder of Greenlight Capital.
Here is how Einhorn explained why gold is one of his top positions: “The bipartisan consensus is that deficits don’t matter – it implies we can always print our way out of trouble. All told, we can count on aggressive fiscal and monetary policies in both good times and bad. Gold continues to be a hedge in our portfolio against adverse outcomes related to those policies.”
“I hold gold, and I am never going to get rid of it. I hope that I never have to use it,” Einhorn said last year.
To learn more about gold and silver for wealth protection and profit, speak with an RME Gold professional today.
We didn’t expect it to happen now. But it did, in Germany earlier this month.
We’ve seen it before. People standing in lines that snake around the block, that is, waiting for their turn to buy gold. Hoping that they’ll get their turn before it’s too late.
It happened here in the United States, during the Carter presidency as inflation screamed along at double-digit rates and gold raced higher and higher every day. People began standing in line to exchange their dollars for gold. With every trip to the grocery store, people could see that their paper dollars were losing value. Maybe they didn’t know anything about money printing, central banking, or the Federal Reserve. But they knew they were going broke with dollars. And they wanted gold.
So they stood in line waiting. Hoping that there would still be gold for sale and that it wouldn’t be too much higher when it was their turn.
This has happened in the not-too-distant past. In 2013, thousands of people in China waited in line to buy gold.
But when it happened in Germany the other day, it wasn’t just because people were desperate to exchange their Euros for gold before prices went higher. No, the people stood in line because they wanted to protect their financial privacy. They stood in line because of Germany’s war on cash.
Just days ago, the German government implemented new restrictions on its citizens’ buying of gold. It added strict new reporting requirements on the people, whose otherwise legal activity – buying gold – now demands new intrusive reporting to bureaucrats. The measure requires dealers to record identification for buyers of precious metals in amounts of 2,000 Euros or more and includes criminal background checks for businesses.
A measure of this type is always represented as anti-crime provisions. In Germany, the reporting requirements are called “anti-money laundering” provisions. But they never really reduce crime. Instead, they are intended to suppress the efforts of people to protect themselves from intrusive government and bizarre monetary schemes like negative interest rates.
For a negative interest rate regime to be effective, people must be forced to keep their wealth institutionalized, so that it can be automatically taxed at the negative rate.
Imagine making a bank deposit of $10,000 dollars. When you go to withdraw it, you are given only $9,800 dollars. Forget earning an interest return! You are charged for the privilege of making a deposit with the bank.
That’s negative interest rate policy.
You may well ask yourself why anyone would deposit money with a bank only to be charged for doing so. You are right. Few people would willingly cooperate. Unless they have to because cash is no longer allowed and all money must be held by banks.
Because negative rates are the latest enthusiasm of central bankers, and likely headed for the US soon, a war on cash is picking up steam in the US, just as it is in Germany.
During the 2008 economic panic, a photo captured a line wrapped around the building of the Indy Mac Bank in Pasadena. You’d think they were giving away free money, but in fact, it was a run on the bank as account holders desperately raced to withdraw the money from their accounts.
Watch the following video originally aired at the time in 2008:
There will be a run on gold again, perhaps sooner than most people expect, because of failing banks and because of the dollar’s collapse. But the growing war on cash is just one more good reason to include gold and silver in your portfolio now.
The global ‘Super-rich’ are buying gold… physical gold. We’re talking the kind you hold in your hand… gold coins, gold bullion.
That’s the story from the Drudge Report the other day. The super-rich are reading the signs of the time. They are taking steps to protect themselves with gold.
Well, they probably didn’t get to be the ‘super-rich’ by ignoring what’s going on in the economy.
Deficits and debt. Money printing and monetary manipulation. Anomalies like negative interest rates and the desperate stovepiping of money to the overnight repo markets. Wealth tax schemes and economic frauds like Modern Monetary Theory. (Learn more about MMT in our commentary Helicopter Money and MMT. Believe me, you need to know about this particular scam!)
Here at Republic Monetary Exchange, like the super-rich, our clients are also buying physical gold. And silver, too. That’s our business.
We deal in physical metals, real gold and silver. You take them into your possession. We don’t just give you a promise or a piece of paper. You get the most trusted money of the ages, known and prized throughout the world and across the centuries.
That’s what we deal in and what the global super-rich are buying. Because they recognize, and we recognize, that it is a world of counter-party risks, unpayable debt, unaudited central banks, defaults, and bankruptcies. And all of those risks rise sharply in a financial crisis.
Goldman Sachs recently commented on the evidence of the Super Rich buying gold and storing it for themselves. “This [data] is consistent with reports that vault demand globally is surging,” the firm notes.
“Political risks, in our view, help explain this because if an individual is trying to minimize the risks of sanctions or wealth taxes, then buying physical gold bars and storing them in a vault, where it is more difficult for governments to reach them, makes sense.”
The super-rich and Republic Monetary Exchange clients understand that gold and, to the extent it is a monetary commodity, silver too, is not someone else’s liability. They are not IOU’s, or dependent on the solvency of some bank or company. Or the honesty of some government or politician.
Gold and silver are their own value.
You don’t have to be among the ‘super-rich’ to invest in gold and silver. But if you have wealth you want to protect, contact us.
The knowledgeable precious metals professionals here at RME Gold can help you take the kind of measures the global super-rich are taking.
The co-chief investment officer of the world’s largest hedge fund says gold could gain 30 percent this year, as global political uncertainties increase.
That forecast would put gold at $2,000 per ounce.
Bridgewater Associates, located in Westport, Connecticut, manages $160 billion for its clients, some 350 of the world’s largest institutions. Greg Jensen, the firm’s Co-Chief Investment Officer, told the Financial Times that investors should make gold a cornerstone of their portfolios, as “most of the world is long equity markets in pretty extreme situations.”
But Jensen’s recommendation is not just because of extreme stock valuations. He cited growing income inequality in the US and rising tensions with China and Iran as some of the uncertainties that could prompt investors to look to so-called safe-haven assets.
“There is so much boiling conflict,” he said.
Jensen also said that the US dollar could lose its global reserve currency status. That is an outcome we believe is inevitable (see here), one that will rock the American economy to its core, taking an enormous toll on the dollar. “It’s definitely in the range of possibilities. And when you look at the geopolitical strife, how many foreign entities really want to hold dollars? And what are they going to hold? Gold stands out,” he said.
It’s a headline we are all too accustomed to seeing: “Federal Spending Sets Record.”
It seems that federal spending is always setting a new record. This time the story was on the Drudge Report the other day. It reported that the federal government spent a record breaking $1,163,090,000,000 in the first three months – October, November, December – of this new fiscal year, FY2020.
How fast is the debt climbing? By about $100 billion a month!
But it gets worse as we go along. By some projections we are looking at today’s $23 trillion in federal debt exploding to $43 trillion by the end of this decade.
The satirical website The Babylon Bee also had a story the other day that we wanted to share. A story about the most recent televised presidential debate:
“Warning: Gang Of Known Criminals Holds Meeting To Discuss How Much Of Your Money To Steal”
“DES MOINES, IA—Authorities are warning that a gang of known criminals is currently holding a meeting to debate various plots to steal your money.
“The criminals are debating exactly how much of your money to steal. Some are suggesting stealing all of your money, while others would just like to steal most of your money. Whatever the case, they all agree on two things: A.) you have money and B.) it must be stolen.”
It’s true, that when politicians want money, they will go to any lengths to get it. Sometimes they borrow it (and then they have to tax you later to pay back their borrowing). Sometimes they tax you right upfront. But often the easiest way to get the money they want is to simply print it up. Since most people don’t understands how money printing destroys the currency and their savings, it allows the “gang of criminals” to slink away undetected.
That matters to us since every act of money printing makes gold’s allure shine even more brightly. And of course, since gold can’t be printed, politicians really don’t like it very much.
Anyway, we’d like to wrap up today with the common-sense reminder that a country cannot spend its way to prosperity.
And as long as we’re at it, we’d like to add that the lowest interest rates in history cannot long co-exist with the biggest debts in history!
As our regular clients and readers know, we, as well as others, identified the birth of the new gold bull market last year.
Now there is additional new evidence that the bull is off and running.
Gold reached all-time highs last year in key foreign currencies: the pound, the yen, and both the Canadian and Australian dollars.
Just days ago the price of gold hit an all-time high in the Euro!
But precious metals prices are still really attractive at these levels for Americans. That’s because gold and silver are well below their all-time highs in terms of dollars.
The new gold bull market is still young. It has a long way to go!
One author of books on gold, Jim Rickards, says if the authorities let a debt crisis materialize, we can “watch gold soar to $14,000 per ounce or higher, not because they wanted it to but because the system is out of control.”
A British fund manager has a new call, saying that “a bullish target for $7,166 is both logical and plausible.”
Last week with the flare-up of US/Iran hostilities, gold hit $1613. That was on Tuesday. When gold closed Wednesday at $1557 we put out an Alert Recommendation to take advantage of the price break and add to your gold and silver positions.
How high gold will eventually go, we are not prepared to say. After all, the authorities will face many new decisions between now and then. We have only faint – or no – hope that they will make wise decisions. Their foolish decisions are what will drive gold much higher, but we will report on them to you along the way, in any case.
Meanwhile, we will leave you this additional bit of statistical corroboration for one of the chief dynamics that drive gold bull markets: Fed money pumping reached a breathtaking $413 billion last quarter.
That means the Fed grew its balance sheet by more than ten percent in three months.
For now, it appears that the market is taking a breather in the matter of the US vs. Iran. As we wrote yesterday, we are waiting for the next shoe to drop.
President Trump says Iran is “standing down.” Perhaps. But Iran is saying something different.
Iran’s Supreme Leader Ayatollah Ali Khamenei says that yesterday’s missile attacks on two US bases in Iraq amount to a mere slap in Uncle Sam’s face and are not nearly enough.
Khamenei tweeted, “The corruptive presence of the US in the region of West Asia must be stopped.” The region “won’t accept the US presence,” says Khamenei. “The US has caused war, division, sedition, destruction, and the demolition of infrastructures in this region. Of course, they do this everywhere in the world.”
So at this point, the most important question is what happens next between Iran and the US.
We have cited the centrality of the confrontation between the US and Iran as a major key to the Middle East, an issue that will realign geopolitical bedfellows everywhere and diminish the US dollar’s global status, and as a powerful dynamic that will drive the gold price much higher.
We sometimes marvel at the people the news networks put in a guest chair and expect us to listen to. Instead of listening to 2o-something “political consultants” and armchair warriors, we prefer to let someone of more wisdom and experience read the tea leaves. Someone with an informed view of not just tomorrow’s consequences, but the longer-term trajectory.
Colonel Douglas McGregor is storied for his military career, geopolitical knowledge, and his outspokenness. He appeared on Fox News Tuesday evening. “At this point,” said McGregor, getting to the heart of the matter, “certainly we could go to war with Iran. Iran would suffer. The Russians would undoubtedly join the fray at some point. The Chinese, with inexhaustible piles of cash, will finance the Russians, and ultimately go to work to help the Iranians.”
“Europeans will look at this as if we’ve lost our minds and they are probably right. The Japanese, the Koreans will stay out of it, refuse to have anything to do with it. And when the rest of the Middle East starts to be destroyed under hails of missiles, I imagine that our alleged strategic partners in the Arabian Peninsula will back away.”
McGregor’s conclusion: “Remember that when you destroy Iran, you are essentially opening the floodgates to Mr. Erdogan in Turkey and the Sunni Islamists that we have been fighting. If you like ISIS, destroy Iran and you will get ISIS times 100.”
Every outcome McGregor has postulated – every one – also means irreversible damage to the US dollar and much higher gold prices.
At the risk of overdoing our criticism in this post, we must say that the mainstream media’s ability to see more than one thing at a time is very limited. In an October post, Global Tensions, (10/20/19), we reported on the little-noted but renewed US military buildup Saudi Arabia. “11,000 troops were sent to Saudi Arabia, a purported ally, in May. Now another 3,000 have been added, along with two new fighter jet squadrons. The most recent addition to US forces there also includes two Patriot anti-missile batteries and one high altitude area defense system. US forces in Saudi Arabia have long been a powder-keg issue in the Islamic world.”
Meanwhile, few know that just days ago Iran, Russia, and China staged joint naval exercises in the Gulf of Oman. It doesn’t much look like the actions of countries that intend to let the US exercise heremony in the region forever. Rather, it is a not-too-subtle challenge.
Nor to be overlooked is Turkey’s deployment of troops to Libya; Turkey is providing arms to factions that, in turn, fly MiG’s from Russia. And while there is much more to point out on the geopolitical scene – for example, Indonesia and China are now in a confrontation in the South China Sea – we will leave that for another day so that we still have room to point briefly to extraordinary monetary shenanigans by the Federal Reserve.
The Fed is engaged in a frenzy of “money printing.” Just this week ZeroHedge reported that the Fed had provided $99 billion in new liquidity to the repo markets. We will write more about this and the Fed’s reckless new Quantitative Easing in the days to come. In the meantime, read our post What is the Fed So Afraid Of, (12/13/19), and our briefings on the topic from November, Inflate of Die, Part I and Inflate or Die, Part II.
Gold will spike in an instant in the event another shoe drops in the US-Iran face-off. For now, gold has pulled back from its high of over $1600 reached on Monday, 12/6, following the assassination of Iranian General Soleimani. Today gold closed at $1557.24.
We recommend our friends and clients take advantage of the pullback to add to their gold and silver positions.
If the gold market could talk, we imagine it would be asking something like that.
Gold surged throughout December, ending 2019 at $1523.
Priced in dollars gold rose 18.3% and silver by 15.1% in 2019. Then, with the killing last week of a top Iranian military commander Qassem Soleimani, gold briefly hit seven-year highs, touching $1590.
It is significant that gold also made new all-time highs in the Euro.
Gold Sets New High in Euros
We have repeatedly expressed our view that 2020 will very bullish for gold. Now we have had a glimpse of what the year ahead may hold.
As you can see on the following chart, gold has been up every single day since Christmas week, when it moved – and has stayed – above its 50-day moving average.
In a model of understatement, Moody’s senior analyst wrote clients on Monday that “a lasting conflict would have wide-ranging implications through the broad economic and financial shock that significantly worsens operating and financing conditions.” Senior analyst Alexander Perjessy added, “A protracted conflict would potentially have global repercussions, in particular through its effect on oil prices.”
Both UBS and Goldman Sachs called for gold to outperform oil as conditions in the region worsen. The global head of commodities research at Goldman Sachs said “… history shows that under most outcomes gold will probably rally to well beyond current levels.”
Other analysts are predicting an ‘escalatory’ cycle lasting for months.
We share that view. We have not seen the last of US-Iranian turmoil that dates back more than 30 years. In fact, this is only the beginning.
We hope that gold’s price movement has grabbed your attention. Don’t wait for the other shoe to drop to add to your gold and silver holdings.
Always a sensitive barometer and the financial world’s go-to sanctuary in a crisis, gold wasted no time reflecting the dangers implicit in the US-Iranian face-off.
Already in a bull market that began last summer, gold surged higher throughout December.
Now, with the escalation playing out in Iraq and with threats and taunts being hurled from one side of the globe to the other, it has climbed even more. On Friday (1/3) gold shot up more than $24 an ounce to finish at $1552.40.
Silver’s move has been more than impressive: it has climbed more than a dollar an ounce over the last month to finish Friday at $18.05.
We consider the geopolitical situation to be grave. Price action shows the markets agree with our assessment. Events are at a point where they can easily spin out of control. The US embassy has asked Americans to leave Iraq. Iran has called the killing of General Suleimani an act of war. We recommend you speak with an RME Gold professional about taking defensive measures now to protect your wealth.
As we wrote here in 2018, “If things get hot over the Strait of Hormuz, it will realign the major powers of the world, creating explicit new alliances and sorely test America’s geopolitical dominance. It will change the dollar’s role in international trade and send energy prices to crippling highs.” (See our post Watch This One Carefully, 12/4/18).
Last fall we noted that such violence “will send gold prices to uncharted new highs.
“That’s because gold is the world’s currency of choice in times of crisis.
“Our point is simply that you can’t know exactly when someone will launch a deadly attack and start a war.
“It is normally in Iran’s interest to see the shipping lanes open. But there is no telling what Iran will do in extremis. The threat to shut down the passageway is the only defense Iran has to any kind of attack.
“The Strait of Hormuz is a sea-lane between Iran and the Arabian Peninsula. It links the otherwise landlocked Persian Gulf with the Gulf of Oman and the Arabian Sea, providing access to the world’s oceans.
“Twenty-one miles wide at its narrowest, the waterway is a critical chokepoint.
“The Strait accounts for nearly 20% of global oil trade, with Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the United Arab Emirates all relying on the Strait to ship their oil. Most of these shipments have Asian destinations: Japan, India, China, and South Korea.
“Now, imagine you run a powerful company that owns and operates supertankers that sail through the Persian Gulf. If hostilities break out and the Strait of Hormuz is shut down – even for a day – will you authorize your ships to sail in those waters?
“Imagine you insure oil tankers. You will have very strict terms to suspend coverage for a company foolish enough to ship in the waterways of warfare.
“Either way, the flow of oil is interrupted. Geopolitical alliances begin to shift as countries weigh their self-interest and seek advantage from an international incident. Of course, oil prices explode.
It is worth reiterating, that we can’t know exactly how things will escalate. The range of possible responses from Iran is wider than most people imagine, ranging from military options and a standoff in the Strait, to ship sabotage and other covert options. Larry Johnson, the former CIA analyst, reminds us of Iran’s “robust” cyber warfare capability that may have targeted US banking sites years ago. In any case, one widely followed commentator who keeps a close watch on Iran says war is about 80 percent certain. His view is that any form of Iranian retaliation for the death of Suleimani will be used as a US pretext to attack Iran. Another warns of war “from the Mediterranean to the Indus.”
We do not know. But we do know from long experience that things can move very, very fast.
Do not delay implementing a sound plan to protect yourself and your wealth with precious metals. If you detect some urgency in this recommendation, you are correct.We will just warn once again that the Persian Gulf is dry tinder, which once sparked could lead to a dangerous conflagration.
Gold and silver go up in response to dangerous geopolitical events, just as they do in response to economic mismanagement by Washington.
Let us help you prepare for the fallout from our dangerous world and from Washington’s economic irresponsibility. Resolve to take action now and contact us at once.
O gold! I still prefer thee unto paper, which makes bank credit like a bank of vapor.
—Lord Byron, Don Juan
Commodities such as gold and silver have a world market that transcends national borders, politics, religions and race. A person may not like someone else’s religion, but he’ll accept his gold.
— Robert Kiyosaki
. . . of silver no one ever yet possessed so much that he was forced to cry “enough.”
— Xenophon, “On Athens”
In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper.
—Hans F. Sennholz
The Fed took a dollar and eliminated 98% of its purchasing power and they’re doing that more rapidly than ever but it just hasn’t been fully discounted. When it is, gold is going to be much, much higher.
Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.
It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.
—Ludwig von Mises
Gold will be around, gold will be money when the dollar and the euro and the yuan and the ringgit are mere memories.
There can be no other criterion, no other standard than gold. Yes, gold, which does not change in nature, which is made indifferently into bars, ingots and coins, which does not have any nationality, which is considered, in all places and at all times, the immutable and fiduciary value par excellence.”
—Charles de Gaulle
If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold.
The gold standard was the world standard of the age of capitalism, increasing welfare, liberty, and democracy, both political and economic. In the eyes of the free traders its main eminence was precisely the fact that it was an international standard as required by international trade and the transactions of the international money and capital market. It was the medium of exchange by means of which Western industrialism and Western capital had borne Western civilization into the remotest parts of the earth’s surface, everywhere destroying the fetters of age-old prejudices and superstitions, sowing the seeds of new life and new well-being, freeing minds and souls, and creating riches unheard of before. It accompanied the triumphal unprecedented progress of Western liberalism ready to unite all nations into a community of free nations peacefully cooperating with one another.
—Ludwig von Mises
With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people
Below are our predictions for the New Year. Read our Top Ten 2020 Predictions and in the end, you’ll discover a little surprise about our list!
10. The Federal Reserve won’t stop managing the monetary system to benefit the banks that created it to serve their interests in the first place.
9. Foreign central banks won’t increase their dollar holdings, although they will increase their gold holdings.
8. Congress won’t reduce federal spending; it won’t stop creating trillion-dollar deficits; and, it won’t make a serious attempt to reduce the $23 trillion debt.
7. The Washington establishment won’t hold most of its members to the same legal standards that it applies to the ordinary people.
6. Washington Republicans and Democrats won’t stop trying to divide the people to win elections. They will, however, concentrate their attention on smaller divisive issues while the fundamental issues of America’s freedom and prosperity go unaddressed.
5. The establishment’s lapdog press won’t bother to report accurately on the fate of the dollar. Nor will their reporting on gold be accurate.
4. The establishment lapdog press won’t blame the nation’s monetary problems on the Federal Reserve and the nation’s money manipulators. It will blame the people instead.
3. While Washington may commission a study, launch a new bureau, or even appoint a bureaucrat, nothing meaningful will be done about the declining lifespan of the American people.
2. The monetary and fiscal policies won’t stop shrinking the American middle class.
1. In a crisis, you won’t see people standing in line to exchange their gold for paper money like dollars. It’s always the other way around.
Now here is the surprise…
These are the exact same predictions we made last year, at the beginning of 2019.
Well, actually, they aren’t exactly the same. We made one change to number 8. We had to change the national debt to $23 trillion. Last year it was $22 trillion. This proves the point of the prediction, that Washington won’t stop creating trillion-dollar deficits!
Because these predictions worked out so well, we dusted them off to re-issue them for 2020. How accurate do you think these predictions will be when we look back on them next year?
In the meantime, all we can say is buy gold, and have a Happy and Prosperous New Year!
Excerpts from The New World of Gold, by Timothy Green, published in 1981:
When Napoleon escaped from Elba in 1815 and was back in France raising an army, the price of gold in the London market jumped overnight from 4.6.6d an ounce to 5.7.0d. ‘There was an extraordinary demand,’ a partner in Mocotta and Goldsmid, the London bullion house admitted. The big buyer was Nathan Mayer Rothschild, under orders from the British Treasury to dispatch gold quickly to the Duke of Wellington. Not until Wellington finally defeated Napoleon at the Battle of Waterloo did the gold price simmer down….
For over 6,000 years men – and women – have fought for it, died for it, cheated for it, slaved for it. ‘Get gold,’ wrote King Ferdinand of Spain to his men in South America in 1511, ‘humanely if you can, but at all hazards get gold.…’
The civilizations of ancient Egypt and Rome were nourished by gold, wrestled from mines in conditions of unbelievable misery.…
As a gold dealer in Southeast Asia, busy selling bars to Chinese caught in racial strife in Indonesia put it, ‘Gold takes no account of race, religion, culture, or politics….”
What John Maynard Keynes called ‘this barbarous relic’ still clings tenaciously to men’s hearts. It remains the only universally accepted medium of exchange, the ultimate currency by which one nation, whether capitalist or communist, settles its debts with another.
‘You have to choose,’ wrote George Bernard Shaw, ‘between trusting the natural stability of gold and the honesty and intelligence of members of the government. And, with due respect for these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold.’
“For 2,500 years the global electorate has identified gold as the most reliable standard of value—which means that gold, a specific amount of gold, is the best possible unit of account, the best proxy for all goods, services and financial assets that are involved in the banking system and exchange economy.”
– Jude Wanniski
“Gold is money. Everything else is credit.”
– J.P. Morgan
“Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort.“
– Antony C. Sutton
“A U.S. dollar is an I.O.U. from the Federal Reserve Bank. It’s not backed by gold or silver. It’s a promissory note that doesn’t actually promise anything.“
– P.J. O’Rourke
“Specie [gold and silver coin] is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war.“
– Thomas Jefferson
“Governments lie; bankers lie; even auditors sometimes lie. Gold tells the truth.“
– Lord Rees Mogg
“Bitcoin is not an actual physical coin, and if computers are shut down, you can’t buy or sell them. That’s why nothing will ever replace gold and silver coins themselves, and all investors should have them at home or in a safe deposit box.“
– Mark Skousen
“With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.“
– F.A. Hayek
“The question is would you rather put $10,000 in a box for 20 years or a few gold coins?“
– Ron Paul
“Paper money eventually returns to its intrinsic value—zero.“
“The gold standard did not collapse. Governments abolished it in order to pave the way for inflation. The whole grim apparatus of oppression and coercion — policemen, customs guards, penal courts, prisons, in some countries even executioners — had to be put into action in order to destroy the gold standard. Solemn pledges were broken, retroactive laws were promulgated, provisions of constitutions and bills of rights were openly defied. And hosts of servile writers praised what the governments had done and hailed the dawn of the fiat-money millennium.“
– Ludwig von Mises
“The Golden Rule: He who has the gold makes the rules.“
– Attributed to a 1967 Wizard of Id comic strip
“I think there is a question mark over the durability of any power that relies as heavily as the United States on importing capital and borrowing from abroad.“
– Niall Ferguson
“. . . if we face a monopolist we are at his mercy. And an authority directing the whole economic system would be the most powerful monopolist conceivable.“
This time of year, with holiday gatherings and celebrations, many of our thoughts center on family.
For wealth protection, from generation to generation, nothing endures like gold. In fact, someone called gold and silver “the superheroes of wealth preservation.”
Gold is one of the least reactive chemical elements; it does not tarnish or rust. It is handy to think of that as a metaphor for the fact the gold’s core value is impervious to corruption by the actions of its issuer. The value of an ounce of gold is not dependent on whose picture or name is inscribed on it. Nor does it depend on any government; governments come and go, but the value of gold persists.
If you had your choice of putting some government’s paper money in a box under your bed, or gold, to pass along to your children and grandchildren, you would be wise to choose gold.
Gold ownership has traditionally been prized as a means of passing wealth along in families, in discreet, private ways.
It is the only financial asset that is not someone else’s liability, not dependent on someone else’s promises.
Gold’s special virtues have been recognized around the world and throughout the centuries. So honored is gold that the wise men who followed a star made it among their gifts to a child born in a stable more than 2,000 years ago.
So this time of year, while so many of our thoughts center on family, choose to protect your family and all that you’ve worked for. Find out why gold is the money of the ages, and why it makes a perfect gift for family members and loved ones.
Speak with an RME Gold specialist today.
And Merry Christmas from all of us at Republic Monetary Exchange!
As we head to the end of the year, there are a couple of things we have intended to mention to you that we could not get to until today.
So here they are:
“The Maestro,” former Federal Reserve Chairman Alan Greenspan was back in the financial media this week, remarking that if the deficit continues to rise, “inflation is inevitably going to rise.”
That’s the sort of thing that should go without saying since the Fed is monetizing the deficit, printing money to cover the gap between exploding federal spending and revenue.
According to Greenspan, “Putting the federal budget on a sustainable path would aid the long-term vigor of the U.S. economy and help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy if it weakens.”
As we have pointed out repeatedly, there is not any prospect for the budget being put on a sustainable path. The most of the very few fiscal conservatives there once roosted in Washington have gone the way of the dodo bird.
None of these financial realities are lost on investment banking giant Goldman Sachs, which is bullish on gold in 2020. A Goldman Sachs analyst has taken note of Modern Monetary Theory, the newest inflationary rage on the left. He writes, “In the next recession, our US economists do not expect governments to adopt direct monetary financing and expect inflation to remain firmly anchored, But this doesn’t necessarily prevent an increase in debasement concerns if conversations around MMT become more widespread — a potential boost to demand for gold as a debasement hedge.”
Maybe the word “direct” in carefully chosen here, since the latest surge in repo funding and the latest round of Quantitative Easing is effective Fed monetary financing of the US deficit already.
And in fact, just over a week ago, a Credit Suisse analyst said the Fed would begin a new round of money printing before the end of the year. According to CNBC:
The fourth version of quantitative easing — often referred to as “money-printing” for the way the Fed uses digitally created money to buy bonds from big financial institutions — would be needed by year’s end to bridge a funding gap as banks scramble for scarce reserves, Zoltan Pozsar, Credit Suisse’s managing director for investment strategy and research, said in a note to clients.
“If we’re right about funding stresses, the Fed will be doing ‘QE4’ by year-end,” Pozsar wrote.
The Federal Reserve is positively gushing dollars. As the US money supply surges, it ultimately depreciates the value of the dollar.
Over the last 12 months, the M2 money supply has grown by an unprecedented $1.1 trillion dollars.
WASHINGTON CAN’T/WON’T BUDGET RESPONSIBLY!
Here are some quotes from Maya MacGuineas, The Hill, from 12/17/19:
“Later this week we will reach the expiration date on the current short-term continuing resolution that is funding the federal government and preventing a shutdown.”
“This is no way to run a government. That the largest economic entity in the world is running without an actual budget in place should be shocking; that it has become routine is downright depressing. Yet we have entered a new fiscal year without a budget in 12 of the last 20 years…
“It is time for Congress and the president to, at the very least, take the Hippocratic oath to do no harm and not add more borrowing on top of our already massive national debt.”
EAST EUROPE’S NATIONALIST LEADERS OBSESSED WITH GOLD!
Gold is all that nationalist leaders in Eastern Europe can talk about these days.
Just this week, the Polish government touted its economic might after completing the repatriation of 100 tons of the metal.
In Hungary, anti-immigrant Hungarian Prime Minister Viktor Orban has been ramping up holdings of the safe-haven asset to boost the security of the nation’s reserves…
The gold rush mirrors steps by Russia and China to diversify reserves exceeding US$3 trillion away from the US dollar amid flaring geopolitical tensions with the US.
However, motivations in Europe’s ex-communist wing can vary.
Take the latest example. Former Slovak prime minister Robert Fico, who has a shot at returning to power, has urged parliament to compel the central bank into bringing home gold stocks stored in the UK.
The reason? Sometimes your international partners can betray you, Fico said, citing a 1938 pact by France, the UK, Italy, and Germany allowing Adolf Hitler to annex a chunk of what was then Czechoslovakia, and — more recently — the Bank of England’s refusal to return Venezuela’s gold stock over political differences.
“You can hardly trust even the closest allies after the Munich Agreement,” Fico told reporters. “I guarantee that if something happens, we won’t see a single gram of this gold. Let’s do it as quickly as possible.” – Bloomberg, 11/28/19
A TRILLION HERE, A TRILLION THERE!
With just two weeks left in 2019, the US Federal Debt has climbed to $23.108 trillion.
How can one imagine a number that large? Consider for a moment that a trillion seconds ago was 31,709 years ago. That was in the period known as Last Glacial Maximum when sheets of ice covered much of North America, Europe, and Asia.
So 23 trillion seconds ago was 729,325 years ago. That takes us back to the Paleolithic or Old Stone Age, about a half-million years before homo sapiens evolved.
But in Washington, these days, a trillion dollars is just a rounding error!
The Federal Reserve is panicking. Or at least it is acting like it, with moves of seeming desperation that are not clearly explained.
Quietly, the Fed is printing money like crazy. But it isn’t saying what it is so afraid of.
For anyone steeped in the unhinged Keynesian theories that rule at the central bank, three interest rate cuts in 2019 are not internally logical. The US economy is enjoying the longest sustained boom in history, now running 126 months. And unemployment is said to be at a 50-year low.
Keynesian theory calls for lowering rates, deficit spending, and loose money when the economy is in contraction. Not in an expansion.
And now the Fed has cranked its money creation machines to eleven. As the rock music parody motion picture Spinal Tap showed, eleven is even faster than the top rate of ten!
And indeed, the new money printing regime is faster than Quantitative Easing, the unprecedented monetary experiment that gushed forth almost $4 trillion beginning in the Great Recession.
Liquidity operations, more repo funding, more QE. We refer to them generically: more money printing.
What is going on in the Marriner Eccles Building in Washington? Why has the Fed cranked the presses up faster than fast?
Although it’s all shrouded in mystery, we can suggest some possibilities.
Informed sources say the Fed is desperately trying to stop interest rates from flaring up… and spreading like wildfire.
By other accounts, among them that of the Bank of International Settlements, the central bankers’ central bank, the stepped-up money printing is funding the borrowing of private hedge funds so that they don’t have to sell anything.
And we ourselves have wondered in these pages if a major bank is on the brink of failure, with the potential of setting off cascading failures. That’s what happened in 2008 when the failure of Bear Stearns and Lehmann Brothers triggered the Great Recession.
Like flaring interest rates, either widespread hedge fund selling, or a major bank collapse are both capable of tanking the stock and the bond markets.
As the song said, “Something’s happening here. What it is ain’t exactly clear.”
We think that financial conditions are very dangerous and urge our clients to move to safety. When the Fed starts printing money the best place – the only place – to be is in gold.
We’ve probably used our share of clichés in these posts, but we don’t think we’ve ever resorted to “perfect storm.” (If we have, we beg forgiveness!)
But sometimes it takes a cliché. How better to describe the convergence of critical factors that together create a transcendent calamity, a disaster that is greater than the sum of its parts? So if today we mean such an event, we’ll cop-out and just say “P.S.”
Because the P.S. book and the 2000 motion picture with George Clooney and Mark Wahlberg describe the real-life conditions of a 1991 tragedy driven by two powerful weather fronts and a hurricane, we will similarly limit our description of the coming economic P.S. to the confluence of three factors.
First, the US government deficit is spiking. The Congressional Budget Office points out that for the first two months (October and November) of Fiscal Year 2020, the deficit is already $342 billion. Annualize that and we would be looking at an unthinkable $2 trillion deficit of the year. In any case, for the first two months of the new fiscal year, the deficit is up 12 percent over the same period last year.
Here’s the thing to remember:Federal spending has risen twice as fast as revenue.
The second factor is closely related to the first. We are not going to grow our way out of our deficit spending. As we have pointed out several times, additional debt is not resulting in sufficient growth or productivity. We call this the Doom Loop: how much growth do you get for each additional dollar of borrowing? “It is one thing,” we wrote, “if incremental indebtedness is producing more wealth. But it is very serious indeed when debt is outpacing productivity. And that is what is happening in the US today.”
The point:A dollar of new debt is not producing a dollar of additional GDP.
Thirdly, the Fed has already embarked on a massive new money-printing program. It has been pouring liquidity into the repo markets (the overnight and short-term borrowing market among financial institutions, banks, and hedge funds) since mid-September when overnight rates surged to 10 percent. This dramatic policy response is an attempt to stamp out interest rate flare-ups. Earlier this week we reported that on one day alone the Fed added close to $100 billion in new liquidity to the financial markets. The Fed is desperate to extinguish any signs of higher rates breaking out since normalization of interest rates means a bond market collapse and a breakdown of the stock market. At the same time servicing US government debt in a higher interest rate environment will become impossible without unprecedented, full-tilt money printing and debt monetization. But the markets are filled with well-grounded speculation that more bank-liquidity interest rate flare-ups are headed our way. Very soon, according to those that watch such things carefully. And those interest rate flare-ups can only be met by aggressive money printing, a stepped-up QE.
Here’s the takeaway: The Fed has stomped on the money-printing gas, but it looks like it will have to push it even harder.
To recap: Debt growing faster than revenue. New debt failing to result in sufficient growth justify the debt. And because the debt is not matched by revenue or economic growth, it is being sustained by massive money-printing.
We won’t say it, but this has the makings of a P.S.
Gold is the only financial or monetary asset that is not someone else’s liability. That makes a big difference in when you are seeking shelter from the storm.
It has long been said that a fool and his money are soon parted. But we sometimes wonder how the money manipulators get away with it.
How did they get away with calling in all the American people’s gold in the early 1930s? How did the get away with making it a felony to own monetary gold, a crime punishable by huge fines and imprisonment? How did they get away with forcing people to relinquish their private gold to the government at $20.67 an ounce and once they had the gold, suddenly raising the price to $35 an ounce?
How does the Fed get away with creating trillions of dollars to provide liquidity to foreign governments and even private foreign banks? How did it get away with creating trillions of dollars out of thin air to bail out the crony banks, while not bailing out millions of Americans as they lost their homes?
How do they get away with manipulating interest rates to boom Wall Street, while savers and pension plans and old people on fixed incomes are going bust and even taking outsized risks to earn a meaningful return?
How has the Fed gotten away with destroying 97 percent of the dollar’s purchasing power?
We sometimes wonder how they get away with it.
Well, here’s a partial answer. Most people don’t know what’s going on. A crypto-currency company in the British Virgin Islands commissioned a study of Americans in September 2019 that found that:
29 percent of respondents think the US dollar is still backed by gold. 4 percent think the dollar is backed by oil.
54 percent think the Federal Reserve is owned by the US government.
26 percent thing that banks keep on hand 100 percent of the deposits made with them by customers.
Of course, none of these things are true.
At Republic Monetary Exchange, we take educating our friends and clients seriously. We have found that the more people know about the essentials of money and gold, the better they prepare themselves and their families for the upsets that are only too predictable with unbacked paper and unbacked digital monetary schemes.
Feel free to share our blog posts and articles. The more people understand why gold remains the world’s preeminent monetary commodity, the more likely it is that we can one day replace monetary manipulation and deceit with monetary reliability and ensure a long-term prosperous future for ourselves and our fellow Americans.
That may be underestimating the power of this new bull market in gold. Just last week a mystery buyer spent $1.75 million in the options market betting that gold will hit $4,000 by June 2021.
In any case, the signs warning of higher gold prices are all around, as Congressman Paul says.
One of the warning signs we have written about is global de-dollarization. 2018 saw the most aggressive gold buying by central banks in 50 years. Although it is long before the numbers for the year are all in, we already know 2019 has surpassed record 2018 central bank gold buying. All the fundamentals driving this de-dollarization megatrend look to continue in force in 2020.
Another important warning sign is the compounding of global debt, on track to hit $255 trillion dollars by the start of 2020, just weeks from now. That’s almost three times the global GDP. Can it be paid back? Of course not. Debt is mounting faster than productivity. A dollar of new debt is not producing a dollar of growth. We call this “The Doom Loop,” a vicious circle that ends in a cataclysmic bust.
Think about this another way. Debt is exploding both in the US and around the world. And yet the Fed has cut interest rates three times this year? Something is not right.
If the demand for a good or service skyrockets and the supply stays the same, the price will have to rise. It doesn’t matter what it is– new homes or prime rib or money. It’s the law of supply and demand.
But borrowing (debt), the demand for money, is climbing, while the price of borrowing money (interest rates) keeps falling.
And in fact, the only way debt can be rising and rates falling is if somebody is printing more money. So, let us call your attention to the manic new Fed money printing underway as we write. Just last Tuesday, 12/3, the Federal Reserve added close to $100 billion in new liquidity to the financial markets. Add to that the new Quantitative Easing (called by the Fed chairman “Not Quantitative Easing”) of $60 billion a month.
It will all play out with the dollar losing more value. Which will drive even more global de-dollarization. And a tightening of The Doom Loop.
We encourage you to look ahead to the coming year. And take steps now to protect yourself and profit with precious metals in 2020 and beyond.
There’s no telling how many warnings you’ll get. Tuesday’s sharp sell-off can be considered a fair warning.
The stock market closed down. The Dow Industrial were off 280 points at the close, but at one point during the session, it had dropped 450 points; that follows a 268 point drop on Monday, a day that also registered the biggest S&P500 drop in months.
It was quite a sharp reversal for the stock markets with the S&P off to its worst start for a December since 2oo8. And you probably remember 2008. If not, maybe the term “Great Recession” will ring a bell.
American manufacturing has been shrinking for four straight months. Construction spending is down. At the same time, hope for trades deals appears to be dashed once again.
We think you should take this warning seriously. This is the longest bull market in stocks without a 20 percent correction in history.
While we’re at it we probably ought to remind you of what happened last December. It was the worst December for stocks since 1931. And in case you don’t remember 1931, two words: Great Depression.
As we wrote recently about the market’s action at the end of last year, the S&P500 had traded as high as 2941 points in late September; by Christmas Eve it was 2350, a staggering 20 percent loss in only three months!
Fair warning: the more volatile the stock market, the more dangerous to you. And the more important it is to own gold.
We will part with advice for stock market investors from Baron Nathan Rothschild who explained that he made his fortune because he always sold “too soon.”
It’s in your best interest to read this post. After all, it’s your money they’re burning.
How about the US Agency for International Development throwing $22,000,000 at a “sustainable local development” budget that includes the crucial mission of bringing Serbian cheeses up to international standards?
Or how about Operation Golden Potty? $500,000. And hooking fish on nicotine? $708,466.
I’ll get to those in a moment.
Senator Rand Paul has released his new Waste Report. No sensible American can be pleased by what it tells about your tax dollars at work. The Federal Reserve’s monetary regime has so warped Washington’s understanding of money – after all, it can just “print” trillions of it if it wants – that throwing money away is like a sport in DC.
And since the Fed has provided Washington with interest rates so low – the government can borrow money for ten years at less than two percent – and that’s as good as free to politicians – they borrow like there’s no tomorrow.
But of course, everything Washington spends comes from the productivity of real people. You. Me. Us. When it prints money, it dilutes the value of the money we own. When it borrows, it leaves us on the hook for repayment. Every dollar Washington spends is a burden, a tax, on all of us.
At the risk of making your blood boil, here are some examples of your tax dollars at work, direct from Senator Paul’s Fall 2019 edition of The Waste Report:
Flushing Money Down the Drain: From 2003 to 2017, according to the Office of Inspector General, the Washington Metropolitan Area Transit Authority spent “approximately $500,000 maintaining a single self-cleaning toilet located at the Huntington Metro Station.” The OIG cannot definitively state how much was spent because Metro lost invoices for 2007, 2012, 2013, and 2014.
Your Money Going Up in Smoke: The National Institutes of Health is sponsoring a nearly five-year project that involves actively addicting its subjects, Zebrafish, to nicotine. The project, being conducted at the Queen Mary University of London, will cost the American taxpayer $708,466.58.
Blowing (Money) in the Wind: The State Department [bought] an original Bob Dylan sculpture, for $84,375,61 to place in its embassy in Mozambique.
How Do You Spell “Waste” in Hieroglyphics? The US government is investing up to $16 million to improve the quality of the Egyptian educational system.
There’s a lot more where that came from. Millions on a program that includes unused textbooks rotting away in warehouses in Afghanistan. Up to $300,000 on debate and Model United Nations competitions in Afghanistan. The National Institutes of Health spending $4,658,865 over several years to study the connection between drinking alcohol, hurting yourself or somebody else, and winding up in the Emergency Room. You don’t suppose?
Look, these cases are just symptoms, but they are symptoms of a much bigger problem, one that matters a great deal. As a headline in The Hill read the other day, “Trillion-dollar deficits as far as the eye can see, and hardly a voice of caution to be heard.”
What will happen? Eventually interest rates will go up and the debt that ballooned during the era of low rates will become unpayable. The printing presses will run overtime to try to fix the problem, but that will only tank the dollar. The markets will discount each new round of money printing by demanding still higher interest rates, tanking the economy, too.
Gold prices will explode.
Maybe the people will storm the castle walls with pitchforks, looking for the people that did this to America. But it won’t matter, because the damage will already have been done.
But what will matter to you and your family is that you protected yourselves and your wealth with gold.
There are a lot of reasons for this new gold bull market.
One of the most important reasons is a new worldwide phenomenal: negative interest rates.
History doesn’t record the successes of any financial regimes or monetary systems based on negative interest rates. Ever. That’s because there aren’t any.
Negative interest rates are so utterly foreign to any kind of normal human economic behavior that they can only be the creation of delusional central bankers.
Or madmen. But pardon me for repeating myself.
In a negative interest rate regime, you lend your hard-earned money, for example by depositing it in a bank or buying a bond. And then, when you withdraw your deposit or cash in your bond, you get backless than you loaned. You pay the borrower for the privilege of using your money. A cartoon character like Wimpy might say, “I will gladly pay you $900 tomorrow for $1,000 today.”
Make sense? Of course not! But there is now a total of about $17 trillion in negative-yielding debt – both government and corporate bonds – around the world. And it just keeps growing.
To make matters worse, it looks like negative interest rates are headed to the US. Every time the Fed cuts rates it moves the US closer to negative rates. And now, says Alan Greenspan, the longest-serving Federal Reserve chairman in history, they will inevitably show up here. “You’re seeing it pretty much throughout the world,” he says. “It’s only a matter of time before it’s more in the United States.” Ron Paul agrees negative rates are headed here. He identifies this massive build-up of negative interest rates as a symptom of “the biggest bubble in history.”
No wonder that as negative interest rates spread, informed people turn to gold. We have noted that as the reported amount of negative interest rate debt has climbed from $12 trillion to $13 trillion to $14 trillion, and now to around $17 trillion, gold has marched higher.
That’s not hard to understand. If you had to choose between some unreliable borrower who offered you a negative interest rate for the use of your money, or gold, which would you choose?
The question answers itself. In the words of Greenspan, “Gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.”
The negative interest rate phenomena will end in a crash. Such madness always does. The world has been through episodes of monetary lunacy before, but usually, they are limited to one or two countries at a time. A Venezuela here or a Zimbabwe there. But this time the derangement has gone global.
The best possible safe haven – in fact probably the only safe haven for a monetary calamity of this global scale – is gold.
RME is here to help you avoid being victimized by unsustainable monetary fads and the central bank’s ruination of the dollar.
This shift away from dollars and into gold is a harbinger of things to come for two reasons.
First, if one central bank decides to upgrade its reserves with the world’s most enduring money, it may only represent a political statement. It is perfectly understandable if a heavily sanctioned state like Iran or Venezuela decides to avoid dollars for political reasons. (Note, though, that US sanctions have proliferated to so many countries that the US is forcing the world’s turn to dollar alternatives.)
But those jumping on the gold-bandwagon include friendly countries like Hungary and Poland. Most recently Poland has been ratcheting up its gold reserves, purchasing 125 metric tons over the past two years. At the same time Poland is repatriating gold. This week Poland announced that it has brought home to Warsaw 1oo tons of gold that had been held on its behalf by the Bank of England. This is not a sign of long-term confidence in the post-war dollar reserve monetary order.
The global megatrend is also important because it represents a huge and stable base of gold holdings.
Central banks need to hold reserves against which they issue their own currencies. Central banks can be described as strong hands; having made the decision to make gold a foundation of their monetary systems, and adding gold reserves at rates measured in hundred of tons, they can be expected to maintain that position.
To sum up, confidence in the global dollar-based monetary system is beginning to crack. This loss of confidence is justified by trillion-dollar deficits, ballooning debts, both corporate and governmental, politics driven by giveaways, vote-buying, and spending sprees, and finally by a new surge in reckless Fed money printing.
At the same time, gold is moving into strong hands, holders not prone to liquidate their holdings. There has been a years-long subterranean flow of gold from the West (the US and Europe) to the East (mostly China), also strong hands.
We would like to see our friends and client protect themselves and profit from advance knowledge of these trends. Simply call or visit an RME professional to implement a sound strategy for the times ahead.
We believe everyone should own gold and silver. But we encourage people to use best practices in both buying and selling precious metals.
Said differently, we encourage people to use common sense.
We just don’t think it’s a good idea to buy gold and silver from boiler room operators or to send your money somewhere across the country to a voice on the phone. Even worse- to a place you know nothing about.
And then wait for weeks to get your gold.
You should be able to buy with confidence. Face-to-face. Getting your gold and silver right then for most of the commonly traded products. On the spot upon receipt of good funds. That’s how we do business. Best practices.
Although we think everyone should own gold for many reasons including wealth preservations, financial privacy, and insurance against monetary crises, we know that sometimes people will want to sell their precious metals. As we’ve said many times, making good old-fashioned profits are just one good reason to invest in gold and silver. And there are life situations and opportunities that mean people will want to sell their precious metals in a safe and secure manner.
That’s why we offer same-day payment on most liquidations. Even if you didn’t buy your gold and silver from us. You don’t have to pack and box up your precious metals, go off to the post office or shipping service, buy special insurance, and send them someplace far away to someone you’ve never met, just a voice on the phone.
At RME, you’ll get the most competitive prices whether buying or selling. And as a courtesy to our clients, we provide on-site security facilitated by the Phoenix Police Department. Our officers provide round-the-clock surveillance, so customers can feel safe during all business transactions. Best practices.
Call and make an appointment to see us. And deal in person with a knowledgeable Republic Monetary Exchange precious metals expert.
Buy and sell gold and silver face-to-face. Safe. Convenient. Secure.
Republic Monetary Exchange. We’ve been here for a long time.
Now it has discovered that the trillions of dollars it already “printed” can’t be neutralized or rolled back.
The genie can’t be put back in the bottle.
The Fed tried that. It tried to undo some of the trillions of dollars of funny money it created in Quantitative Easing. That’s because even Fed officials know that if those trillions of dollars aren’t somehow unwound before they work their way into the general economy, they will eventually create a real Third World-style inflation here in the US.
Worse than that, the Fed not only can’t undo what it did in its QE money printing spree, it now is scrambling to print more money to replace what it tried to roll back last year.
The Fed is in a real bind. A mess of its own creation. And since we are all helpless victims of its policies, we are in a mess, too.
Here’s the story. It can be seen in the chart below.
The Federal Reserve reacted to the mortgage meltdown in 2008 by creating almost $4 trillion. It was all just made up digital money. It did this so that it could buy toxic mortgage and other bonds from the crony banks. To help them out. And, boy oh boy, did it ever help the crony banks out!
The spree lasted from 2008 to 2014.
This chart shows the assets on the Fed books after QE ended. It had assets bumping along close to $4.5 trillion dollars.
Recognizing the inflationary potential of that liquidity when, under certain circumstances, it starts finding its way into the commercial banks and into the consumer economy and sets off a nightmare inflation, the Fed decided to undo what it had done.
It didn’t go well. We’ll tell you what happened then and why it matters to you and the gold market in our next post, Inflate or Die, Part II.
Before the trillions of dollars of made-up digital “money” it created in 2008-2014 does its real damage, driving consumer prices to the moon, the Fed started to reduce its assets with a program called Quantitative Tightening. They didn’t discuss it much, and the mainstream press didn’t say much about the risk overhanding the economy from QE either, but even the Fed knew that had created a huge problem with trillions of dollars of money it made up out of thin air in its Quantitative Easing program. You can see on the chart below that Fed assets began to move lower in 2018 as the Fed targeted reducing its holdings by $50 billion a month
But by last fall, the stock market threw a fit. Since it had been climbing for years on the backs of free money for Wall Street, as the Fed tightened and reduced its assets, the market began to collapse. The S&P500 had traded as high as 2941 points in late September; by Christmas Eve it was 2350, a staggering 20 percent loss in only three months!
Wall Street was on strike! More free money, it told the Fed, or we’ll bring the whole stock market house of cards down.
The Fed got the message. By Labor Day, as you can see on the chart, the Fed’s balance sheet began to grow once again. Fast!
Not only did the Fed reverse gears, but it also stomped on the money printing accelerator!
Notice that the blue line, Fed assets, is now climbing faster than it came down. The upward trajectory is steeper than the rate at which it declined in the first nine months of the year. This illustrates the fact that with the new QE the Fed is printing at least $60 billion a month, which is more than the original QE that began in 2008.
Fed chief Jerome Powell says the new QE (which he refuses to call QE) is an interim measure. But is it?
The Fed knows it has to print money or the stock market will go into free-fall. The Fed has become the guarantor of stock market profits. The Fed has become Wall Street’s “Hey, boy!” It is inflate, or die!
Eventually, a critical mass of investors will figure that out. Discovering that the market is only held aloft by the Fed, they will head for the door all at once. And there is nothing the Fed can do at that point.
Well, there is one thing. The Fed can begin printing money and buying stock itself. That is a real endgame scenario. Seriously, if that happens, it’s the end of American free enterprise. Get out of the way!
One more thing. And this is the reason for telling the whole story. When the Fed prints new money, it reduces the value of every other existing dollar. That’s inflation. It’s a stealth tax, voted for by no one. It appears to make everything cost more, but in reality, the dollar buys less and less.
That’s one of the reasons people buy gold.
And in fact, you may remember when the market figured out last summer that the Fed was going to start a new round of inflation, the new gold and silver bull market was born. Gold and silver prices took off!
Here’s a chart that shows what happened.
The Inflate or Die Fed is in a fix. The only beneficiaries of its dilemma are people with gold. By its own logic, the Fed must continue to print more dollars. That will drive gold higher. Much higher. If it stops printing money, the stock market will plummet. And stock investors will rush into gold.
Today we’d like to share with you one reason they are doing so and why we think it is a very good idea right now for you, too!
It is because silver today is very inexpensive.
Many of our clients probably know that silver has been used as money around the world, in fact that it has served as money longer and in more places than gold itself. And silver is always prized in a crisis.
Our clients are also taking advantage of the growing silver demand in high-tech applications.
But the message that we would like to impress upon you today is this:
About 40 years ago, at the beginning of 1980, silver was $50 an ounce.
In today’s dollars – because the Federal Reserve has sharply eroded the purchasing power of the dollar – that would be more than $156.00!
At today’s prices, silver would have to triple to reach $50 an ounce. But to reach the purchasing value in today’s dollar that silver had in 1980, it will have to increase more than nine times!
Another way of putting it is that silver today is only a third what it sold for 4o year ago.
And it is only about 11 percent of the dollar value it had in 1980.
Oh, and by the way, silver came close to $50 again eight years ago. It reached $49.80 in 2011.
We think silver is really underpriced today. Many of our clients agree.
Don’t miss out at these prices!
Find out more by calling RME and speaking with one of our precious metals specialists. 602.955.6500.
Money printing jumps… World debt dangers… US deficit balloons… Consumers grow wary… Rich investors prepare for stock market troubles. Here’s some of the latest news about the fundamentals that drive gold and silver prices higher over time.
Money Supply Explodes! “Nothing Short of Spectacular.”
With two months to go, 2019 M2 growth is on track to easily exceed 2016’s record $854 billion expansion. Recent M2 growth is nothing short of spectacular. M2 has jumped $329 billion in ten weeks, about an 11.5% annualized pace. Over 26 weeks, M2 surged $677 billion, or 9.3% annualized.
–Credit Bubble Bulletin (11/9/19)
World Debt Warning!
Ratings agency Moody’s has issued a debt downgrade warning to the entire world…. It cut its global sovereign outlook to “negative” from “stable” for 2020, cautioning that “disruptive and unpredictable” politics was worsening the slowdown in growth.
‘Unsustainable’ Budget Deficit Swells 34% in October
The federal government, which ended the 2019 budget year with its largest deficit in seven years, began the new budget year with a deficit in October that was 33.8% bigger than a year ago as spending hit a record.
The Treasury Department said Wednesday that the deficit last month totaled $134.5 billion, up from a shortfall in October 2018 of $100.5 billion.
–Money and Markets (11/14/19)
American Consumer Comfort Crashes
Despite stocks soaring to record highs, The Bloomberg Consumer Comfort index fell last week to 58.0 from 59.1 a week earlier, and has now plunged 5.4 points in three weeks, the biggest such drop since 2008…
Wealthy investors are bracing for a ‘significant drop’ in stocks
Even as the market ascends to new heights, wealthy investors are bracing for a turbulent period that could produce a “significant drop” in equity benchmarks in the near term.
That is according to a recent survey produced by UBS Wealth Management that finds that some 55% of deep-pocketed investors are preparing for a drop in the market before the end of the 2020.
Wealthy investors hold 25% of their portfolios in cash, far higher than the roughly 5% that UBS recommends on average.
Market bubbles don’t just happen. They are the result of the government or its financial arm artificially creating excesses money and credit conditions. Fractional reserve banking, policies like Quantitative Easing, outright money printing, and interest rate manipulations are the tools they use to create these excesses, sending misleading signals to investors and businesses alike.
The pain of bubbles popping – the unemployment, the impoverishment of millions, the bankruptcies, the loss of families’ hard-earned financial security, even the loss of freedom and the ruin of entire countries – seem like they should be reason enough for bubble policies to be avoided in favor of sound, gold based monetary systems. But the inevitable suffering of the people is never enough to stop the bubble-blowers.
It never is.
Why do governments and central bankers alike engage in bubble economics and oppose sound, gold based monetary systems? The answer is simple enough: A gold-based monetary system disempowers them. Since the government or the central bank can’t simple create gold out of nothing, in imposes an unwelcome discipline on governments and politician. They are no longer free to buy votes in the way the have grown accustomed to, or to fund unaffordable foreign wars, or to enrich powerful cronies.
We are well past the days of a financially disciplined state. For evidence, look no further than our trillion dollar deficits and $23 trillion in national debt.
Two Fed bubbles have already burst in this young century. When the dot com bubble burst in 2000, the Nasdaq market lost 80 percent of its value. When the housing bubble popped, it didn’t just cost millions of Americans their homes; between October 2017 and March 9, the stock market fell by over 50 percent.
But, lessons never learned, now the Fed is inflating the biggest bubble of all.
But it’s not the “Mother of All Bubbles” because we say so. It’s because it’s bigger than any bubble that has gone before.
In any case, Joe Zidle, a chief investment strategist at Blackstone, trotted out the “Mother” term for our current bubble the other day, observing that global sovereign (government) debt is set to join a long list of historical bubbles.
The end of a cycle comes with ample warning, observes Zidle. “Many seemingly unrelated signs appeared during the housing bubble: skyrocketing property prices and excess speculation on raw land, the failure of auction rate securities, a money market fund breaking the buck (i.e., when its net asset value falls below one dollar) and the failure of an asset-backed hedge fund. In retrospect, the role that each of these phenomena played in the ensuing meltdown was obvious.”
Now Zidle surveys some of the warning signs in our current bubble. They include $13 trillion in negative interest rate debt, the failure of the overnight repo market that the Fed keep inflating, the collapse of manufacturing, and an ongoing trade war.
These aren’t random and unrelated events. “Every cycle ends with excesses. The warnings are normally subtle and usually dismissed.”
Among all the warning signs of this cycle’s excesses, sovereign debt stands out, says Zidle. “Every cycle ends with excesses. The warnings are normally subtle and usually dismissed. This cycle’s excess is sovereign debt.”
He calls the bubble in sovereign debt, which is now approaching $70 trillion, the Mother of All Bubbles.
To invest in gold and silver safely now, call or visit with a knowledgeable RME Gold professional. Don’t be caught up short when the Mother of All Bubble bursts.
We talk a lot about buying gold for safety. To protect your wealth, with governments out of control, running huge deficits and printing money like crazy, we recommend people move to safety with gold, the world’s most enduring form of money.
After all, the world has been through governments and episodes like this countless times. We know from experience that gold always come out on top.
But people buy gold for a lot of different reasons.
Many of our clients buy gold and silver for good old-fashioned profit!
They have had a great year! And we think next year will be even better!
Now we’ve had a pullback in both gold and silver prices, one we welcome. Since we are in a primary bull market that promises much higher prices ahead, we look at any correction or pullback as a gift, a buying opportunity.
But first, let’s look at how both gold and silver have done over the last 12 months.
Gold finished on Friday (11/8) at $1463. A year ago, it was $1200. Over the last 12 months gold has gained almost 22 percent.
Silver finished Friday at $16.82. A year ago, it was 14.25. That’s an 18 percent gain.
For comparison, the DJIA closed Friday at 27,681. That’s a 5.7 percent gain for the past 12 months. The S&P 500 has done a little better, up about 10 percent. But note that neither have shown the appreciation over the past year of gold and silver, and both stock market indices are at all-time highs.
We think it makes much more sense to invest in gold and silver, both in new bull markets and both well below their earlier highs, than to buy stocks at the top of a long and exhausted expansion.
The price of gold is well below its high of $1900 set eight years ago; it will have to climb an additional 30 percent just to reach its prior high.
Silver will have to almost triple before it reaches its prior high of $50.
Gold has retraced almost exactly one-third of the powerful summertime breakout that took it to $1566 in September. That would be a rather typical correction and creates an attractive entry level for buyers.
There are a lot of reasons that people buy gold, not the least of which is for profits. The fundamental of debt, deficits, international de-dollarizaition, and renewed and aggressive “money printing” remain the background upon which gold will chart far higher prices. But for those positioning for profit opportunities in 2020, now less than eight weeks away, we recommend taking advantage of this pullback in gold and silver prices.
Negative interest rates, the enthusiasm of central bankers near and far, are so self-evidently deranged, so utterly nuts, that we don’t feel obligated to say anything more about them that what we have already said here, here, and here.
But what else is crazy? How about cutting interest rates more than ten years into the longest economic expansion in history? With the stock market at record highs? And with unemployment at long-term lows?
We’ve always said that spend-your-way-to-prosperity economics – the ruling dogma of Keynesian economics, the official religion of our ruling classes – is batty. But even in by its own terms, loose money, lowering rates, and deficit spending are tools to be used in a downturn. In times like these the Keynesian catechism calls for paying down deficits and an end to “stimulative” monetary policies.
Everywhere you turn, the authorities are demonstrating their idiocy.
We’re not the only ones noticing it. Ray Dalio, billionaire founder and CEO of Bridgewater Associates, the world’s largest hedge fund, has written a new piece called “The World Has Gone Mad and the System Is Broken.”
We cite a few of Dalio’s points as evidence of the malady:
“Money is free for those who are creditworthy because the investors who are giving it to them are willing to get back less than they give. More specifically investors lending to those who are creditworthy will accept very low or negative interest rates and won’t require having their principal paid back for the foreseeable future. They are doing this because they have an enormous amount of money to invest that has been, and continues to be, pushed on them by central banks that are buying financial assets in their futile attempts to push economic activity and inflation up.”
“At the same time as money is essentially free for those who have money and creditworthiness, it is essentially unavailable to those who don’t have money and creditworthiness, which contributes to the rising wealth, opportunity, and political gaps.”
“At the same time, large government deficits exist and will almost certainly increase substantially, which will require huge amounts of more debt to be sold by governments—amounts that cannot naturally be absorbed without driving up interest rates at a time when an interest rate rise would be devastating for markets and economies because the world is so leveraged long.”
“At the same time, pension and healthcare liability payments will increasingly be coming due while many of those who are obligated to pay them don’t have enough money to meet their obligations. Right now, many pension funds that have investments that are intended to meet their pension obligations use assumed returns that are agreed to with their regulators. They are typically much higher (around 7%) than the market returns that are built into the pricing and that are likely to be produced. As a result, many of those who have the obligations to deliver the money to pay these pensions are unlikely to have enough money to meet their obligations.”
So, says Dalio, “This set of circumstances is unsustainable and certainly can no longer be pushed as it has been pushed since 2008. That is why I believe that the world is approaching a big paradigm shift.”
So say we. That big paradigm shift means far higher gold prices, as the world makes the shocking discovery that the fantasies and manipulations of our monetary geniuses are a recipe for ruin. As the late Henry Hazlitt noted long ago, “The monetary managers are fond of telling us that they have substituted ‘responsible money management’ for the gold standard. But there is no historic record of responsible paper money management … The record taken, as a whole is one of hyperinflation, devaluation and monetary chaos.
The productive people, responsible people, savers, investors, the self-reliant and those not easily fooled by the central bankers and the Washington whack jobs, can protect themselves and their wealth from chaos with gold, the preferred money of the ages.
The trade association says central bank gold buying remains “healthy.” Although this year’s third quarter fell short of the blistering pace of the third quarter last year, in the first nine months of this year central banks have purchased 547.5 tons, an increase of 12 percent over the same period last year.
More on Deutsche Bank
We aren’t fixated on Deutsche Bank and its problems except to the extent that they could be the straw that breaks the over-leveraged and indebted financial system as did Lehman and Bear Stearns a little over 11 years ago. See more here and here.
But it doesn’t have to be Deutsche Bank. There are other candidates for a triggering event that can disclose deep and systemic global solvency issues far and wide. As Warren Buffett put it, “when the tide goes out you find out who has been swimming naked.”
The tide could be receding in China as well. China’s banks are awash in bad loans, yet the central planners keep policies in place that assure more and more building of apartments for which there is no demand, shopping districts without shoppers, and mega-transportation projects with too few users. Those aren’t brand new malinvestment problems in China, but with growth slowing there, serious problems may become visible. Meanwhile, Hong Kong has slipped into a recession which doesn’t help Beijing.
Still, Deutsche Bank is worth keeping a close eye on. If you are interested in knowing more, here’s a link to an article by Michael Snyder called “The Deutsche Bank Death Watch Has Taken A Very Interesting Turn.” Snyder has followed the bank closely and suggests that “the final collapse could happen sooner rather than later.”
Buy the Break!
Central bank gold buying and solvency issues in sovereign nations and global banks, not to mention highly “accommodative” monetary policies from the Fed, are the kind of fundamentals that drive gold higher. Because we share the view that we are in a primary gold bull market, we advocate aggressively buying any break in gold prices. Speak with an RME Gold professional today about the latest developments and opportunities.
We don’t like to be suspicious. We prefer to be able to take people at their word. But there seems to be more going on in the economy than meets the eye.
Let’s start a long time ago.
When the US was wracked with ruinous double-digit inflation, the new chairman of the Federal Reserve, Paul Volcker, decided to do something about it. He raised rates fast and furiously until inflation was mostly wrung out of the system.
Whether or not you were harmed by his policies, and even if you disagreed with Volcker, you knew he was taking extreme measure in response to extreme conditions.
Last week, the Federal Reserve lowered its policy interest rates for the third time this year. They lowered rates to Fed borrowers below the rate of inflation. That means the real interest rate for Fed borrowers is below zero.
We have to ask why.
The stock market is cruising along around all-time highs. The economy, we are told, is doing great. In fact, we are in the longest economic expansion in history, we are told. On Friday we learned what the Fed would already have had a peek at, that employment was strong, with “blowout” numbers.
But if everything was hunky-dory, why did the Fed feel it was necessary to cut rates three straight time in a row? Especially since this time last year they told us they would be raising rates.
If that’s all there were to it, we might set our skepticism aside.
But wait! As they say in the infomercials, there’s more!
In September the Fed began providing billions of dollars to the repo market, the overnight and short-term borrowing market among financial institutions, banks and hedge funds, which found itself in a “liquidity event.”
The Federal Reserve has tried to soft-pedal it, but in October it launched a massive new money printing program.
I mean a big one!
Early on, in the depths of the housing bust and Great Recession with millions of people losing their homes, the Fed launched a money printing operation called Quantitative Easing. It was “printing” $30 billion a month to bail out banks and fund US debt. Before long that ratcheted up to $40 billion a month. Soon it was $85 billion a month.
Now the Fed has quietly started its new round of QE at a rate of $60 billion a month. That’s twice the rate that QE started with a decade ago. And they say that they intend to keep it up through next June. We’ve written about it here, calling it a “backdoor bailout” of somebody, somewhere. At the same time, the money supply is growing at double-digit rates as we recounted here.
So, again, we ask “why?” Why the extreme Fed interventions? If we are in an economic expansion of unequaled duration, then why the serial interest rate cuts usually reserved for a crisis?
They don’t do this because they think everything is just fine.
Nor was QE money printing a policy option created for times when everything is alright, either.
There is more to all this than meets the eye. Extreme measures are being taken. Extreme measures imply extreme conditions. The Fed is acting like something big is brewing.
And that is usually time to move to the safety of gold.
Sometimes even otherwise bright people have a big gap in their common sense. Absent-minded professors are the stuff of legend, while “pointy-headed intellectuals” have been accused of not being able to park a bicycle straight.
Robert Shiller is a pretty bright guy. He’s a Yale economics professor (we don’t automatically discount him for that; we prefer to judge him on the merits of what he professes), a Nobel Laureate, and the author of the book Irrational Exuberance.
That book, published right at the top of the dot.com market bubble, made a cogent case the stock markets were over-valued. A 2005 edition of Irrational Exuberance made the case that the real estate bubble would soon burst.
We think Shiller is pretty capable, at least more so than the Keynesians and Modern Monetary Theorists found in most college economics departments and on the pages of the New York Times. So we’re not accusing anybody of anything or calling any names here… just helpfully pointing out where something obvious might have been overlooked.
Shiller is back on bubble patrol, sounding out new warnings. “I see bubbles everywhere,” he says. The stock market is a bubble, he says. The bond market is a bubble. Shiller even thinks the housing market is in a bubble again.
Using a long-term valuation measure (the CAPE ratio) for stock prices, Shiller says we’re in a market bubble that “you know is going to decline.’ The bond market is just as threatening, he says. “It seems to be related to people not paying enough attention thinking through the simple logic … this can’t keep going and it’s going to end badly.”
We share his views about both the stock and bond markets. We have written about the bubbles in both many times. And without a doubt, when the bond market crashes, it will mean interest rates have risen, which will have a negative impact on real estate.
So what is our problem with Shiller? It is simple this: Shiller doesn’t know where to go to escape the carnage of these inevitably bursting bubbles.
“There’s no place to go,” he says. “You just have to ride it out.”
This is the second time in recent weeks that we have encountered this meme (see Nowhere to Hide, Part I here). We aren’t sure yet, but are beginning to grow suspicious that this may be a new focus group-tested talking point or meme contrived by Wall Street: “Sure, the stock market is grossly overvalued, but you have to stay invested in it since there is nowhere to hide.” We’ll be interested to see if the phrase starts showing up often in the financial press
We’ve had two stock market crashes already in this very young century. This time, though, the stock and bond bubbles are bigger than ever. That means the bust will be bigger than ever.
In any case, Shiller is too despairing when he says that you have to invest in the stock market, “even though you expect the price to decline.”
That is simply bad advice. It took decades for the market to recover from the 1929 crash. It took the Nasdaq market 15 years to recover from the dot com crash.
Michael Shedlock of Mish’s Global Economic Forecast also takes a caustic view of Shiller’s advice, that you have to ride it out, that there is no place to hide.
Number one on Mish’s list of places to go is gold. He says, “I do not care about books or past predictions. I care about logic of the moment.”
“It is absurd to say there is no place to go,” says Mish. “Choose wisely where to hide.”
We agree. Let the professionals at RME Gold tell you about gold and the logic of the moment before the bubbles burst.
What Have We Learned from Investment Bank Failures like Lehman Brothers and Bear Stearns?
If you wanted to watch the world economy collapse into a nightmare depression of currency failures and bankruptcy, you would start by looking for the failure of a major financial institution.
And when that happens, you would be glad to own gold.
Few people today know of the 1931 failure of Credit Anstalt, the Viennese banking giant founded by the famous Rothschild family of international financiers. The conventional wisdom was that Credit Anstalt was impregnable. When the bank teetered and fell, shockwaves were felt across Europe and around the world. The ensuing panic made the Great Depression a worldwide calamity.
Not everyone was blind to the unsound practices that brought Credit Anstalt to its knees. Seeing that it was actually bankrupt, the great free market economist Ludwig von Mises refused several executive positions with the bank. It is said that when Mises would walk down the street by the bank’s huge building edifice, he would tap it with his umbrella, saying, “You’ll be coming down soon!’
The failures of Bear Stearns and Lehman Brothers, the fourth largest investment bank in the United States, ushered in the Panic of 2008 and the bursting of the mortgage bubble.
In each of these examples, central bankers and government authorities quietly scrambled to provide liquidity and bailouts to the so-called “too big to fail” banks.
Now the Federal Reserve has begun moving a monetary heaven and earth of liquidity into the banking system to deal with issues that are shrouded in mystery.
We don’t claim any special insight or inside knowledge about what may be underway, but we have a good alarm system that tells us all these Fed machinations mean something is up in the financial world. Back in July we asked if Germany’s Deutsche Bank could be ‘the key log in the log jam.”
“That’s the log that, once moved, sets the whole destructive torrent of all the other logs loose to destroy everything downstream in their path,” we wrote.
At that time Deutsche Bank announced it was cutting 18,000 jobs; its share price cratered. A week later we reported that its clients were pulling a billion dollars a day out from Deutsche Bank.
We’re not the only ones wondering if all this hyperactive Fed money printing is an attempt to “paper over” problems cascading down from Deutsche Bank. MarketWatch reported in the summer that the bank had created a book of $53 trillion in derivatives instruments, although the bank claimed its own exposure was only $22 billion; we take that with a grain of salt having heard understatements of their own exposure from the banks last time around . Last month Deutsche Bank invited bids to auction off some of its interest rate derivative contracts.
Deutsche Bank may not be the next Credit Anstalt, or Bear Stearns or Lehman. It’s just as likely, perhaps even more so, that the US government’s voracious borrowing appetite is running into supply troubles. Perhaps Deutsche Bank’s troubles are simply pulling the curtain back on something larger. We say larger because the Fed’s latest liquidity measures and Quantitative Easing are huge. It appears that a backdoor bailout is underway somewhere.
The Federal Reserve has quietly launched a massive new round of money printing.
We hope you will take time with this very important piece. It should be shared widely. It describes a new phase of Fed monetary management, a turning point that people will look back on as a crucial moment in the US economy, and one that will drive gold to new heights.
The Fed has quietly launched a new round of Quantitative Easing (QE), the most outrageous monetary experiment in American history. QE began in 2008 with the Fed’s frenzied purchase of US treasury bonds and toxic mortgage and other troubled bonds. (It was mostly another example of crony capitalism; the Fed bought worthless mortgage paper from the banks, taking it off their books, and putting it on the books of the American people.)
The spree lasted until 2014, by which time the Fed had acquired about $4 trillion in assets.
Where did the Fed get $4 trillion to buy all those bonds? It just made it all up. We call it money printing, but that is an old-fashioned term. It’s mostly just made-up digital money. Bookkeeping entries.
There were three rounds of QE, known as QEI, QEII, and QEIII. The madness more or less came to an end in 2014. But all that made-up money is still out there. It represents a sort of Sword of Damocles hanging over the US economy.
Recognizing the danger that all that made-up money would find its way from the Fed’s balance sheet into the hands of the commercial banks, setting off a nightmare rise in consumer prices, the Fed tried to mop up some of this crazed money with a program called Quantitative Tightening. That necessarily involved higher interest rates, but when the stock market had a tantrum, the Fed apologized and stopped at once.
So, most of that QE funny money is still out there, an unresolved problem that can drive consumer prices (and gold) to the moon when it leaks out into the banking system and the general economy.
That’s all history, and it is bad enough. But now the Fed has begun a new round of money printing. They don’t like to call it Quantitative Easing, but it is.
Fed Boosts Amount of Liquidity Offered to Financial System
Besides bailing out crony institutions, flooding the overnight markets with Fed money, these “liquidity operations” in all their variety are aimed at driving down interest rates and keeping the stock market artificially high. To that end, Fed Chairman Powell recently announced a new program to buy $60 billion of Treasury bills each month through the end of the second quarter of 2020.
Powell objected to calling it what it is, but we’re more direct. Welcome to QE IV!
A couple of paragraphs ago I said that made-up Fed money seriously threatens the consumer economy with higher prices when it leaks out of the Fed’s hands and into the general economy. That’s when the money supply starts growing. And gold starts to take off.
And that is just what is now happening.
The peerless Doug Noland, who blogs at Credit Market Bulletin, observed recently that US money supply is at last beginning to explode.
Noland writes, “Let’s focus on the extraordinary $575 billion M2 expansion over the past 22 weeks (that receives zero attention). This was the second strongest (22-week) monetary expansion in U.S. history, trailing only 2011’s “QE2” period (Fed expanded holdings by $600 billion) where M2 expanded as much as $616 billion over 22 weeks. M2 growth peaked at $530 billion (over 22 weeks) in February 2009 during the Federal Reserve’s inaugural QE operation.”
Factoring in other money fund liquidity growth, Noland discovers that we are experiencing “a blistering 11.9% annualized growth rate” in the money supply. This is monetary inflation such as we haven’t seen for a very long time.
And it is very bullish for gold.
We admit that all this is a little wonkish for some of our readers, so we have prepared a chart using Fed data that illustrates what we are talking about.
It shows money supply growth (M2 – a measure of cash and cash-like liquidity such as checking deposits, savings accounts, and money market funds) taking off earlier this year. And just as you would expect, gold responded, surging powerfully throughout the summer. Please note that while gold has been consolidating its gains around $1,500 an ounce, the money supply (the blue line) continues to climb.
Here’s the way the Wall Street Journal headlined a story about the Fed’s new policies on Friday, 10/25:
This money supply growth and the new QE is a policy error that must result in serious consequences for the general economy, as well as much higher gold prices.
The Fed can create more dollars with a computer keystroke, but it can’t print more gold.
That’s why gold goes up.
It’s vital that you find out more. Call or stop by and visit with an RME Gold professional. Because this is a pivotal moment in monetary policy, feel free to share this post with family, friends, and colleagues.
They may appreciate learning that the Fed’s money printing has gone wild. They must not wait before protecting themselves and their families with the safety of gold, because the Fed is finally letting the much-feared inflation genie out of the bottle.
It’s impossible to separate three of the most powerful drivers of the new gold and silver bull market. They are joined at the hip and travel together.
First is the dangerous trajectory of geopolitical events – trade and currency wars, and their usual accompaniment, hot wars. From the Persian Gulf to Hong Kong and the South China Sea, which we wrote about that in our last post, Global Tensions, to other hot spots few people are watching, international confrontations will play a key role in driving gold prices much higher.
Next, we look at the US dollar. Nothing is as fundamental to the bull market as the mismanagement of the dollar, on the fiscal and monetary fronts. The government’s spending and debt, and the Federal Reserve’s monetary schemes grow more unhinged with each passing day. They are on a collision course with reality. We have written about them often and intend to update you soon on the Fed’s latest bond-buying program.
This new move of desperation, Quantitative Easing IV, is another round of what we call for convenience “money printing.” Were it not for out-of-control US borrowing and spending, the government would never have had to abandon the gold standard, to begin with. The Fed provides the means for the government to pull off its money-printing sleight of hand with schemes like this new QE.
The third of the trouble triplets is the deterioration of the global dollar reserve standard. We have written about the movement of foreign central banks away from maintaining their own reserves in US dollars, which has been the almost universal global reserve currency since the end of WWII. Now central banks are falling all over themselves to replace their dollar reserves with gold. This, too, we have written about before. See here, here, and here.
Much of the reporting we have done on central banks moving out of dollars and into gold has focused on China and Russia. But now, ominously, Germany has gotten into the act, adding gold to its reserves for the first time in more than two decades.
Bull markets are born in fits and starts. But this new gold bull market is already underway. These three factors – worsening geopolitics, the government’s dollar debt and monetary mismanagement, and the ending of the global dollar standard – are a pretty heady fuel for our gold bull market.
We knew Germany had gotten the message when it announced in 2013 that it would call home the gold it had stored with the US. That was like an alert depositor making withdrawals from a troubled institution before the bank run gets going in earnest. But now Germany is making it respectable for purported US allies to begin moving from dollar reserves into gold.
We hope you’ve gotten the message, too.
If not, speak with an RME Gold professional today. They are prepared to help you make gold and silver a part of your portfolio in a safe and secure way that will provide you with peace of mind.
It’s a dangerous time for traditional investments and established financial institutions. The headline from an October 20 Wall Street Journal story tells the tale:
Financial Markets Face Fresh Wave of Political Uncertainty:
‘There’s Literally Nowhere to Hide’
Investors spooked by widespread turmoil are seeking havens
The story highlights the battle over UK Brexit as “highlighting the extreme levels of uncertainty that some investors worry isn’t being properly accounted for with U.S. stocks near all-time highs.”
But the challenges are bigger than Brexit:
“The U.S.-China trade war, Britain leaving the EU and impeachment proceedings in the U.S. are just some of the major political obstacles facing investors. Adding to the uncertainty is the Turkish military operation in Syria, attacks on Saudi oil production, and social unrest spanning from Hong Kong to Barcelona.
“In response, some investors are boosting holdings of cash and other assets that tend to hold their value when markets turn rocky. Others are recommending strategies that could protect against a swift downturn.
It is an era of financial challenges, most of which we detail in our blog posts and briefings. The Wall Street Journal tells us investors are “spooked,” need to “hide,” and are seeking “havens.”
Those of us that have made a lifelong study of these periods of “political uncertainty” and “turmoil” know that the haven they seek is real money, gold.
But, predictably, it is not until the 21st paragraph, the next to the last paragraph, that the word “gold” finally appeasers in the WSJ story. And even then it is in the typically disreputable company: “Esty Dwek, head of global market strategy at Natixis Investment Managers, said she favors gold and the Japanese yen given the ever-changing geopolitical backdrop.”
The Japanese yen? They lump gold in with the Japanese yen, another notoriously troubled, unbacked, massively emitted, destined-for-worthlessness paper currency?
Oh well. The establishment financial press can not help itself, any more than central bankers can stop responding to every problem with another round of “liquidity operations,” money printing under its endless variety of names: monetary injections, quantitative easing, debt monetization, interest rate management, reserve adjustments, and more.
For those not mesmerized by the mainstream media and the failing institutions it serves, there is a haven of safety and place to profit. We know, because this isn’t our first rodeo. It’s not the only time the world has experienced political uncertainty and widespread turmoil.
Find out more about gold’s place in your portfolio. Contact an RME Gold professional today.
With global tensions running high, we think it is important to remember the role geopolitical standoffs and the outbreak of hostilities play in driving gold prices higher.
When we say we’re keeping a sharp eye on the market, it includes tracking important developments on the international front. One of the best examples of that kind is the role the 1979 Iranian revolution played in fueling one of history’s most powerful gold and silver bull markets.
Let me pepper you with a few such things that are on our radar screen today:
Old alliances shifting. The Pentagon reported that US forces “came under artillery fire from Turkish positions” on October 11. The gravity of this event cannot be overstated. The US air base at Incirlik, Turkey is universally believed to host some 50 US nuclear weapons. Since tensions are high enough that US military spouses and children have been relocated from the base, it is clearly not a good idea to leave dozens of B-61 hydrogen bombs in Turkey.
The unrest and street rebellion in Hong Kong. Incursions by the People’s Armed Police from Shenzen into Hong Kong and the fate Hong Kong dollar are things to watch for. In any case, the Hong Kong protests have been going on for months now, just as disturbances went on in the streets of Iran persisted for months before the Shah was driven out and the rule of the Ayatollahs was established.
Vital waterways crowded with warships. The Ronald Reagan Carrier Strike Group, maneuvering in the South China Sea, has been tailed by Chinese warships. This is nothing new, but territorial claims in the South China Sea are being asserted ever more vigorously and the crowed waterways can quickly lead to an accident or incident.
The renewed US military buildup Saudi Arabia. 11,000 troops were sent to Saudi Arabia, a purported ally, in May. Now another 3,000 have been added, along with two new fighter jet squadrons. The most recent addition to US forces there also includes two Patriot anti-missile batteries and one high altitude area defense system. US forces in Saudi Arabia have long been a powder-keg issue in the Islamic world.
These are all fuses that can ignite an explosion in gold prices. Dangerous geopolitics drive gold prices higher. Don’t wait for an international incident to invest in gold. Protect your wealth before it happens. A month too early is better than a day too late.
The Federal Reserve’s Open Market Committee meets again at the end of the month. This is the arm of the Fed that votes on, and sets, interest rate policies.
In a healthy economy, prices of things (including interest rates, which are the prices of money) are set by supply and demand. This alleviates shortages and prevents surpluses, helps business prioritize production and compare resources, and enables consumers to make informed choices about real costs, spending, and savings.
But the Fed pretends that it can do better. And so, with each interest rate intervention it distorts people’s perception of reality. For example, in the Fed’s housing bubble artificially low interest rates convinced homebuilders that there was much more real demand and ability to meet mortgage payments that there actually was. The Fed sent false signals to the economy. When the bubble burst, 500 banks went under; nearly 10 million Americans lost their homes.
Probably the most irritating thing is the way that the Fed dresses all this up as though there is something scientific about what they do. They are awash in high-priced economist and expensive consultants. They gather a never-ending flood of statistics.
Observing all this, James Grant says that instead of a gold standard, the US operates on “a Ph.D. standard.”
Still, for all the academic pretense, there is nothing scientific about what the Fed does. No board or body argues about the freezing or boiling point of water. 32 degrees and 212 degrees Fahrenheit respectively. That’s science. In electronics, Ohm’s law is science. In chemistry, the periodic table of elements. In astronomy, Kepler’s laws.
But the Fed just apes the language of the physical sciences and makes up money supply and interest rate policy to serve favorite constituents, like Wall Street, money center banks, or powerful politicians.
The Open Market Committee meets on Tuesday and Wednesday, October 29 – 30. It voted to lower the Fed funds target interest rate to 1.75-2 percent during its September meeting, and many suspect it will cut rates again this month.
The analysts at Bretton Woods Research are level-headed and, believe there is a bias for lower rates:
“Odds of a rate cut later this month are presently greater than 65 percent. Although there is just a 22 percent probability that the Fed will bring the policy rate down to 1.5% by December — completely rolling back Powell`s rate hikes from 2018 — we suspect the likelihood of further easing is greater than what futures markets currently suggest.”
The following chart represent the Fed fund rate and the gold price over the last year. The Fed made plain that it was intent on a tightening policy until the stock market had a terrible temper tantrum in the second half of 2018. With stocks falling hard, the Fed reversed its policy course and began cutting rates (blue line).
As you can see in the following chart, gold surged as the Fed cut rates:
We expect more of the same. Especially since the Fed has now quietly embarked on a new fourth round of Quantitative Easing. More on that in days to come but suffice it to say that the Fed has quite simply gone off the edge. It will collapse entire sectors of the economy in steaming, smoldering piles of wreckage. Just like it did with the housing bubble.
Let us help you through the bubble-blowing of the Fed’s Ph.D. standard. Speak with an RME Gold associate today about owning real gold and silver. Simply call our office, (602) 955-6500, and you will be connected to one of our knowledgeable gold and silver professionals.
“If the Entire System Collapses, Gold Will Be Needed to Start Over.”
De Nederlandsche Bank, Central Bank of the Netherlands
If we said something like, “Gold is the perfect piggy bank – it’s the anchor of trust for the financial system,” you would not be at all surprised.
We’ve said things exactly like that many times.
But this time its not us saying it. The statement comes from a central banker! Spoken by someone in that community, it amounts to a stunning admission!
This surprising candor is from the central bank of the Netherlands, the sixth largest economy in Europe. Its central bank, De Nederlandsche Bank (DNB), holds more than 600 metric tons of gold. It explains, “A bar of gold always retains its value, crisis or no crisis. This creates a sense of security. A central bank’s gold stock is therefore regarded as a symbol of solidity.”
For all their money-printing shenanigans, many central bankers (although not all!) know exactly what they are up to. There is no better example of this than Alan Greenspan, the Federal Reserve’s longest serving chairman. Before he joined the Fed, Greenspan wrote quite lucidly about gold as real money and fiat, made-up central bank money as a path to economic peril. After he left office, he returned to that view. It was only while he wielded the power to boom and bust the economy at the Fed that he forgot what he had espoused. And so, boom and bust the UUS economy he did for 19 years!
Now the Fed is booming the economy again, but this time on a bigger scale than ever before. That means that the next bust will be bigger than ever before.
De Nederlandsche Bank says, “In times of financial crisis, DNB’s physical gold stock functions as an ultimate reserve asset and as an anchor of trust. The gold stock serves to cover ultimate systemic risks. To ensure a wide geographical distribution, the gold reserves are held at different locations in the world.
“Shares, bonds and other securities are not without risk, and prices can go down. But a bar of gold retains its value, even in times of crisis. That is why central banks, including DNB, have traditionally held considerable amounts of gold. Gold is the perfect piggy bank – it’s the anchor of trust for the financial system. If the system collapses, the gold stock can serve as a basis to build it up again. Gold bolsters confidence in the stability of the central bank’s balance sheet and creates a sense of security.”
We could have said the same thing. But sometimes its nice when their own man says so!
As last week ended, stocks jumped on reports that on-again, off-again trade deals were perhaps on-again.
We don’t know if the fact that he is besieged from within and without the White House has made the President any more eager for a deal or any more conciliatory. Nor do we pretend to know what will happen with the impeachment movement. In that regard please see out recent post Impeachment and the Stock Market. We agree with Trump that if he is impeached the stock market will go down. But we believe the stock market will go down in any case.
Although we don’t know what will happen with the impeachment, we do know that powerful forces are lining up against Trump.
For all this agnosticism on our part, candor about what we do and do not know, we do know that Elizabeth Warren is polling better than ever. Even considering the prospect of a Warren presidency has us wanting to share a thought with you about what the socialist juggernaut will mean. And you can be sure that the socialist juggernaut is not just found in the presidential campaign. It is very much alive in elsewhere in Washington.
Let us make it simple: Experience from many places and many times makes clear that when the socialist state wants money, it intends to get it… at any cost. If that means a capital destroying wealth tax, it will do it. If that means tanking the stock market, it will do it. If it means destroying the dollar and private businesses, it will do that, too. If it means robbing your pension plans, bank accounts, or retirement funds, it will do it.
It will kill the goose that laid the golden egg. It will get the money.
To fund their something-for-nothing, free money schemes, the socialists look first to the money in institutions. They do that for the same reason that the bank robber gave when asked why he robs banks: “Because that’s where the money is!”
Whether it is socialists in the courts, congress, or the White House, it’s hard to miss the growing popularity of this wealth-destroying philosophy. We’ll keep a close eye on its advance and update you from time to time. In the meantime, let us repeat our warning:
They will get the money. They will turn to the visible institutions first. The paper and digital-bookkeeping dollar, made up out of nothing. Stock markets, businesses, banks, retirement accounts. Savings. Visible wealth.
The best wealth haven as this wealth-crushing juggernaut rolls along is your investment in physical gold and silver.
Once or twice a year we check in to see what Jim Rogers says about things. Rogers thinks the worst bear stock market of our lifetimes is headed out way.
We sample Jim’s opinion for several reasons, not the least of which is that he has a stellar track record. During the brutal bear market of the 1970s, the Quantum Fund, which Rogers co-founded, beat the S&P by an incredible 4,150 percent, making it one of the best performing hedge funds ever.
Since there is no substitute for up-close and personal real-life experience, Jim Rogers has twice driven around the world, once by motorcycle, crossing primitive frontiers and backwater boundaries in search of investment opportunities.
So, what does Jim say about the US stock market? The “worst bear market in my lifetime is coming,” he says. “It has been over 10 years since we had a serious bear market in the United States. I would suspect by the end of this year or next year, it will start,” Rogers says. “These things always start small, where people are not looking and then they work to the major markets, and then you see them on the major news.”
Although he says he’s the “worst market timer in the world,” Jim keeps his eyes on the fundamentals. He puts his money where his mouth in and says that he doesn’t own any US stocks now.
Despite headlines to the contrary, all touting the stock market as the place for investors to be, that’s a pretty wise position. Especially from the perspective of those of us that understand gold.
Measured by gold, the Dow has lost half its value since the turn of the century. That’s according to newsletter writer Bill Bonner, who notes the US hasn’t gotten off to a very good start in the new millennium:
“Our guess is that America peaked out at the end of the last century. Since then, with Dubya’s $5 trillion war against Iraq… Obamacare… quantitative easing and a negative real fed funds rate for 10 years… transgenderism, the Kardashians, Lee Greenwood, trillion-dollar deficits, $22 trillion in federal debt, fake money, fake interest rates, and fake wars – it has been all downhill.”
“The Dow – the flower of American capitalism – has lost more than half its value (measured by gold).”
Speak to your RME professional today about a sensible plan to protect your wealth from the next crisis. Simply call our office, (602) 955-6500, and you will be connected to one of our knowledgeable gold and silver authorities.
The term was popularized in a 2007 book by author and market trader Nassim Nicholas Taleb called “The Black Swan: The Impact of the Highly Improbable.”
Before the discovery of Australia, he writes, it was universally believed that all swans are white. But all it takes is the sighting of one black swan to invalidate what was commonly believed. Taleb uses the term now to represent events of low predictability and outsize impact. He says that just about everything going on in our world can be explained by Black Swan events.
What was widely understood about the world in 1914 didn’t help to explain the wars and carnage that followed the Black Swan assassination of an archduke. The demise of the Soviet Union. The rise of Islamic fundamentalism. These are Black Swan event.
9/11 was a Black Swan event.
So, what will the next Black Swan events be? It’s hard to say because they are unexpected.
It seems more than likely that some kind of economic/monetary calamity will be next, despite the fact – or maybe even because – the authorities insist everything is just fine. But sudden, unexpected, high impact economic/monetary calamities occur often throughout history, thanks to the same economic practices and folly that our authorities persist in today.
Almost every economic/monetary Black Swan event is a persuasive reason to own gold (and silver} coins and bars.
Making a list of the possible trigger events for such a calamity is an inexhaustible exercise. We write often about the financial possibilities since they loom larger and more certain with each passing day: the ending of the dollar reserve system; unpayable sovereign and other debt; cascading government and private bankruptcies; bank failure; foreign dumping of US treasuries; runaway inflation and crippling stagflation.
But we need to allow for even less predictable Black Swans that can trigger these economic/monetary calamities. Those include everything from the sudden outbreak of war, widespread crop failures, and the spread of disease like the flu epidemic of a century ago, to uncontrollable civil turmoil, power grid failures, earthquakes, volcanic eruptions, and even less likely events like an asteroid impact.
Unexpected? Unlikely? Precisely the qualities of the Black Swan events that order and reorder just about everything in our lives.
The gathering in Armenia this week of 200 technology and security officials from 70 countries at the World Congress of Information Technology includes special attention to Black Swan events. Organizers ask attendees, “Are we doing the kind of hard-nosed vulnerability assessments that are necessary of our increasingly complex and fragile infrastructure systems?”
Are you doing the kind of hard-nosed vulnerability assessments of your exposure to an increasingly fragile economic and monetary system? Owning physical gold and silver is the single most important thing you can do to protect yourself from low predictable events that carry outsize impacts.
Speak with you RME Gold and Silver professional today.
Will Rogers offered this advice for making money. “Take all your savings,” he said, “and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.”
Rogers was a humorist and could get away with giving that kind of advice. We, on the other hand, take your money and wealth (and our own!) more seriously. And we have never seen better advice than this:
“Buy low, and sell high.”
Not many people do that of course. Too often they do the exact opposite. They buy high and sell low.
If you would like to buy low and sell high, we can’t think of better advice than to sell stocks now. And buy silver.
That’s because silver is low. And stock are really, really high.
The all-time high of Dow Jones Industrial Average was 27,359 points. That was last July.
As you can see, the Dow keeps bumping up against resistance in the neighborhood of 27,000, and can’t break through. That stands to reason, since there is ample evidence that a slowdown is on the horizon. September was the worst month for US manufacturing since the Great Recession; global growth has slowed; political turmoil worsens by the day, and the trade war is spreading.
Please make sure you see the report we featured recently here that corporate insiders are selling their company stock at a furious rate, on pace for a record not seen since the dot com bubble. It reads in part, “Executives across the United States are shedding stock in their own companies at the fastest pace in two decades, amid concerns that the long bull market in equities is reaching its final stages.”
Think about this a moment: Instead of paying dividends to their shareholder, they are using company earnings to buy back their stock and thus run the share price up, so they can exercise options and sell their own stock at higher prices. What it should tell you is that corporate managers engaged in such practices have very short time horizons for their companies. And they have their own best interests at heart. Not yours.
So, if the stock market is high, you know what to sell.
But what is low? What should you be buying? Something that is not subject to corporate mismanagement and can’t be printed into worthlessness.
What is low right now that has proven itself as both a monetary and an industrial commodity? Is there anything that stands up to government debt and bankruptcy? Prized for wealth preservation and financial privacy?
The answer is silver. It meets all those important qualifications. And silver is just over a third its price of 40 years ago. Think about that a moment. How many other investments are less than a third the price they were almost 40 years ago?
Forgive us for repeating the point we made not so long ago. “Today, everywhere you look, things are higher. In 1980 the median price of a US home was only $47,200. Today it is $226,800.
“Oil stopped out a $40 a barrel back in 1980. Today it is $53.
“At the beginning of 1980 the Dow Jones Industrial Average was 824. Today it is around its all-time high of 26,500.
“Everything is higher today. Everything except silver.”
Call or visit an RME professional today.
By the way, Will Rogers also said, “Remember, write to your Congressman. Even if he can’t read, write to him.”
As September was winding down, we warned you about the risk of a coming sell-off in stocks, the seasonal danger known as the October Effect: “We believe the stock market is being floated on Fed policy and not on economic reality. Indeed, the level of corporate debt is so high that there is a real risk of a prairie fire of defaults and bankruptcies sweeping corporate America in the event of an economic downturn.”
“In any case, as September comes to an end, we want to warn stock market investors of the October effect.” Read the rest of the piece, Beware the October Stock Market.
As it happened, October blew in like a bear for stocks! On Tuesday, October 1, the Dow Industrials lost 343 points on news of the economy contracting.
As we write this in the middle of the trading day on Wednesday, October 2, the Dow continues to plummet, down another 558 points! [Update: The Dow closed down 494.42 points on 10/2]
Gold and silver are up.
We don’t read tea leaves or crystal balls, but we do look closely at the economic fundamentals and what is going on behind the scenes in the markets. Here’s an example of the sort of thing that goes into our assessments, Corporate Kingpins Are Dumping Stocks: “Executives across the United States are shedding stock in their own companies at the fastest pace in two decades, amid concerns that the long bull market in equities is reaching its final stages.”
“Corporate insiders — typically CEOs, chief financial officers and board members — sold a combined $19 billion of stock in their companies through to mid-September, according to data from Smart Insider, a U.K.-based group.”
“That puts them on track to hit about $26 billion for the year, which would mark the most active year since 2000. That year executives sold $37 billion of stock amid the giddy highs of the dot-com bubble.”
We’re not going to load this commentary down with a raft of numbers that would leave your head swimming, but you should know that consumer spending growth is weak, weak, weak, as are exports and other revealing components of the economy.
Our advice today is exactly the same it was last week when we wrote, “We have made the case repeatedly and the evidence confirms that we are in a long-term gold bull market. Because markets never move in a straight line, we advise our friends and clients to use any price corrections or pullbacks to add to their portfolios.”
Gold and silver are below their September highs, but showing great strength in the face of trouble in the stock markets. This is evidence that the smart money is moving out of stock danger and into the safety of gold.
We recommend you do the same at once! Speak with your RME Gold professional today!
President Trump says that if he is impeached, the stock market will crash.
We think that he is right.
We also think the stock market will crash even if he is not impeached.
That is because stocks are kept aloft by monetary policy. It is a neat trick, to appear to levitate the entire economy by monetary magic and the printing press, but that is an illusion that will shatter.
We have made the case for the illusory stock gains conjured by the Federal Reserve many times and in many ways. See here, here, and here.
In the last few days, a few Wall Street professionals have been trying hard to make the case that the impeachment of the president could actually be good for stocks. We think they are trying too hard to lipstick the pig. The economic fundamentals still apply as time goes by; uncertainty and turmoil are good for gold, not for stocks.
Interest rates fell sharply throughout 1974, the year the Nixon impeachment proceedings began and the year of Nixon’s eventually resignation. Lower rates didn’t help the stock market. In fact, there is no nice way to put it: Hard on the heels of Nixon repudiating the US promise to redeem dollars in gold, the stock market basically collapsed in 1973 and 1974. It didn’t matter what the Fed did. It desperately tried everything from sharply higher rates to sharply lower rates.
The Clinton impeachment took place in a qualitatively different period. By the beginning of 1998 the scandal was racing along. Clinton had denied his affair with intern Monica Lewinsky and had urged her to file a false affidavit and had coached his secretary to lie about related events. In September, the Clinton report by Independent Counsel Ken Starr was released. By October, the House had initiated formal proceedings.
The stock market had suffered substantially already by the time of the Clinton impeachment in 1998, thanks to a variety of major financial developments: the 1997 Asian Crisis, the Russian default and the 1998 collapse of the hedge fund Long-Term Capital Management. In late August 1998 the Dow Industrials suffered its second worst one-day loss ever. It fell 512 points that day, and was more than 19 percent below its all-time highs.
In the fall of 1998, the Fed funds rate was over 5 percent. Unlike today, there was meaningful room to cut rates more. The Fed obliged.
It is true that the market rallied in the final months of the Clinton proceedings, which wound down with his acquittal in January 1999. But the Dow peaked nonetheless a year after the Clinton proceedings, in January 2000. The dot com Nasdaq bubble also peaked early that year, crashing from 5,000 to 2,000, a 60 percent collapse.
Since the Fed had been relentlessly forcing interest rates down almost without interruption for nearly twenty years, the crashes of 2000 were inevitable. Household debt to GDP climbed higher and higher. As David Stockman wrote, the 90s boom was rooted in a massive credit bubble.
Like today, the easy credit of the era was powerful fuel for stock bubbles. In fact, the dot come crash at the end of the Clinton presidency was only the first of three $5 trillion crashes in less than ten year. It was followed by the housing bubble and the stock market bubble that burst in 2008.
All evidence and precedent suggest another stock market crash is inevitable. We urge you to avoid the risk and to move to the safe havens of gold and silver – no matter what happens with the impeachment.
And remember that although Nixon left the presidency amidst the proceedings, while Clinton remained and finished his second term, the years following both Nixon and Clinton saw the birth of powerful gold and silver bull markets that lasted for years.
Protect yourself from the fundamentals of this biggest-of-all bubble. Protect yourself and profit with gold. Contact your RME Gold professional today.
If you watch the news about government spending and debt closely, you’ll understand why you need to own gold.
This is the end of one government accounting year and the beginning of another. So in Fiscal Year 2019 the federal government added well over a trillion dollars to the national debt.
And nobody who knows anything about anything thinks next year’s debt will be any less. Quite the contrary, if the widely expected recession materializes, tax revenue will fall thanks to slowing business conditions, while the government’s social welfare spending will skyrocket. And we’ll be looking at little old trillion-dollar deficits in the rearview mirror.
Same thing when interest rates normalize. The interest on the federal debt will explode, exacerbating a situation that already is beyond control!
Ten years ago, the total on-the-books federal debt was less than $12 trillion dollars. Now its $22.6 trillion, so we’ve been adding a trillion dollars a year to the debt for a decade now.
In fact, you may remember when the Tea Party came together to yell, “Stop!” to the exploding debt. Anybody hear much about the Tea Party these days? Do you hear anything much about the debt in the presidential debates? Or do you hear promises about the next big government giveaways?
The following chart is one we have shown several times. It is easy to understand and it tells the whole story. The nation’s productivity – called GDP – is represented by the blue line. The red line represents the visible, explicit portion of the national debt.
As you can see the dollar value of government debt has passed the total dollar value of the nation’s productivity. And it is climbing at a steep rate. This is a very dangerous situation. The government is spurting red ink from every vein and artery.
$22.6 trillion is an incomprehensible amount of money, more than the government will ever be able to pay. The government must borrow every year just to pay the creditors that it borrowed from last year. And just like someone taking cash advances from Visa to pay their MasterCard bill – it can’t go on forever.
The government can only hope to print its way out of this mess. If you listen carefully you will hear the drums beginning to beat already for new money printing. It’s just what you would expect in the end-game. Printing more paper money will devalue the dollar. And make more people realize that they need gold and silver.
Because you can’t know exactly when the government’s spending and debt game of chicken will end, you must take steps now to protect yourself with gold and silver.
Before it is too late.
We have made the case repeatedly and the evidence confirms that we are in a long-term gold bull market. Because markets never move in a straight line, we advise our friends and clients to use any price corrections or pullbacks to add to their portfolios.
America’s economic growth has been the envy of the world. From the earliest days of the Republic, foreign observers could foresee the prosperity powerhouse that American would become.
A dependable monetary system based on gold and silver was a central component of America’s success. This should have been no surprise. An honest precious metal coinage has been the basis of economic success stories throughout history, from the Golden Age of Greece, to the Byzantine Empire, the Florentine Renaissance, and the British Empire upon which the sun never set.
The abandonment of gold and silver in America has likewise been accompanied by a diminishing economic vitality.
The founders of the new American Republic understood this and wrote into the Constitution gold and silver’s central role in the nation’s monetary system.
Unfortunately, gold and silver disappeared from out monetary system in two steps, in the 1930’s and 1970’s. There was still some powerful forward momentum, but our growth trajectory has mostly slowed ever since.
Now the American middle class is being wiped out.
Here’s the evidence:
HEADLINE: Income inequality in America the highest it’s been since Census started tracking it, data shows
(Washington Post, 9/26/19) — Last year, income inequality in America reached its highest level since the Census Bureau started tracking it in 1967, according to federal data released Thursday.
In the midst of the longest economic expansion the United States has ever seen, with poverty and unemployment rates at historic lows, the separation between rich and poor from 2017 and 2018 was greater than it’s ever been, federal data show.
HEADLINE: Census: US inequality grew, including in heartland states
(Associated Press, 9/26/19) — The gap between the haves and have-nots in the United States grew last year to its highest level in more than 50 years of tracking income inequality, according to U.S. Census Bureau figures released Thursday.
Income inequality in the United States expanded from 2017 to 2018, with several heartland states among the leaders of the increase, even though several wealthy coastal states still had the most inequality overall, according to the figures.
The nation’s Gini Index, which measures income inequality, has been rising steadily over the past five decades.
It’s too bad that American is giving up its economic preeminence and marginalizing the middle class. A strong middle class in vital to the freedom and prosperity of a country. The wealth gap need not have grown as it has, but the governing classes convinced the people that they could spend their way to prosperity and print their way to riches.
What is to be done? It is not clear that there is any pathway to restoring our former state, not if the people believe they are entitled to live at the expense of someone else.
You and I working together cannot restore America to fiscal prudence and monetary integrity.
I wish we could, but we cannot.
Even so, you can take powerful steps to protect yourself and your family. You can do this by giving gold and silver a central role in your own monetary system: in your personal savings and investing.
If the nation won’t reclaim its dynamism with gold and silver, if the US refuses to return to gold and silver, even as other countries like Russian and China are doing so, you can do it for yourself.
Speak to your RME Gold representative today about a sensible plan to make real money a part of your future.
Even if your country won’t do what the Constitution requires it to do.
P.S. As we write, we are seeing a pullback in the gold price from recent highs of about $50 an ounce, as well a similar correction in silver. In a bull market such as this, pullbacks from a recent run-up generally represent excellent buying opportunities.
After two rate cuts in three months, billionaire hedge fund founder Leon Cooperman has fired a shot at the Federal Reserve’s interest rate policy. The Goldman Sachs veteran and founder of Omega Advisors says the Fed is “screwing savers” with the rate cuts.
He joins others who wonder why rates are being cut while the economy remains in a record-long economic expansion. Financial writer Michael Snyder asks, “Why does the Federal Reserve keep slamming the panic button over and over if everything is okay?”
Reports that Elizabeth Warren poll numbers are rising has Cooperman warning that “They won’t open the stock market if Elizabeth Warren is the next president. You don’t make the poor people rich by making rich people poor.”
Cooperman may have been exaggerating for effect, admitting that they will still open the market if Warren wins, but it will be “a helluva lot lower. It would be a bear market and they go on for a year and go down 25 percent.”
Meanwhile, when the monetary authorities war on dollar savers with currency destruction, gold and silver represent superior alternatives for real savings.
Still More on Negative Rates
Denmark’s second largest bank has announced that beginning later this year it will introduce negative interest rates for its largest depositors. Jyske Bank will charge 0.75 percent per annum for corporate and private client depositing more than 750,000 Danish kroner ($111,100 US).
Why, exactly, anyone would pay someone else to borrow their money, is more than a mystery. It is a symptom of monetary manipulation that has gone completely off the rails.
Switzerland, long a paragon of monetary and financial prudence, has gone off the rails as well. Its UBS ban will charge the same negative rate on deposit more of more than 2 million Swiss francs.
When Japan began imposing negative interest rates, hardware stores reported a run on safes. It stands to reason: if cash in the bank is a wasting asset, avoid the banks.
But bear in mind that paper money still carries a much larger risk of depreciation no matter where you store or save it.
Beware the October Stock Market
On the evidence we believe the stock market is being floated on Fed policy and not on economic reality. Indeed, the level of corporate debt is so high that there is a real risk of a prairie fire of defaults and bankruptcies sweeping corporate America in the event of a and economic downturn.
In any case, as September comes to an end, we want to warn stock market investors of the October effect. Goldman Sachs is warning about October volatility, which is says runs 25 percent higher than other months dating back to 1928,
The October 1987 crash saw the market fall almost 23 percent in a single day. Goldman Sachs tells its client that “October volatility is more than just a coincidence. We believe it is a critical period for many investors and companies that manage performance to calendar year-end.”
As we wrote last year, “If things get hot over the Strait of Hormuz, it will realign the major powers of the world, creating explicit new alliances and sorely test America’s geopolitical dominance. It will change the dollar’s role in international trade and send energy prices to crippling highs.”
And it will send gold prices to uncharted new highs.
That’s because gold is the world’s currency of choice in times of crisis.
Our point is simply that you can’t know exactly when someone will launch a deadly attack and start a war.
Or decide to close the world’s shipping lanes.
Last year, there was a close encounter between the US and China when a Chinese ship came within 150 feet of a US destroyer in the South China Sea. Such events are becoming uncomfortably common. Last week, China mobilized forces after it accused a US destroyer of penetrating its territorial waters in around the disputed Paracel Islands.
Shipping in the South China Sea has grown increasingly crowded, an unavoidable result of China’s economic rise. The area is also crowded with conflicting territorial claims that a Solomon could not fairly sort out.
The point is that you cannot know when an accident or other incident will escalate and draw in the US.
Speaking of China, you cannot know when China will dump a trillion dollars of US Treasury notes and tank the dollar. But we know that weaponizing its dollar portfolio remains an ever-present trade war option in the eyes of China’s officialdom.
If you watch the news closely, you’ll understand why you need to own gold, the world’s currency of choice, in a crisis.
Rather than simply watching events begin to spin out of control, we urge you to take steps to protect yourself and your family now.
RME gold professionals are always only a phone call away.
The Fed’s latest interest rate cut has us contemplating the insanity of negative interest rates. Trillions of dollars of sovereign debt instruments around the world now bear negative interest rates.
Imagine what that means.
You work hard and save. Your savings represents capital, which is the lifeblood of economic growth. Your deferred consumption allows for future prosperity. Didn’t we all learn this as children in the tale of the grasshopper and the ants?
But in a negative interest rate regime, the ants are penalized for saving for the future. Buy a negative interest rate bond for $1,ooo today and get $900 back at maturity. In such a never-before-seen, topsy-turvy world it makes sense to consume today since saving for the future is a guaranteed loser.
Yet observers from Alan Greenspan to Ron Paul tell us that negative interest rates are on their way here to the US. We know that the Fed even considered implementing negative interest rates during the last financial crisis.
Since rational people would just hold on to their money themselves instead of lending it for a guaranteed loss, what is going on? If it is so economically unnatural and unprecedented in human history, why is the world awash in trillions of dollars of negative yield bonds?
In short, it is the work of central banks like the Federal Reserve.
In the financial centers and trading desks of the world’s banks, funds, and brokers, traders and fund managers are buying negative yield bonds precisely because they are speculating that there will be more foolish central bank intervention.
Remember that bond prices are like a teeter-totter. When interest rates go up, the market price of bonds go down; when interest rates go down, the market prices of bonds goes up.
So in the major financial centers traders think that central banks will force rates even lower allowing them to profit by selling the negative yielding bonds to another sucker at higher prices.
But they are walking on the razor’s edge. And they have taken the entire world’s financial system along with them.
Here’s Deist: “Of course, it must be noted that rational purchasers of negative-yield bonds hope to sell them before maturity, i.e., they hope bond prices rise as interest rates drop even lower. They hope to sell their bonds to a greater fool and generate a capital gain. They are not ‘buying’ the obligation to pay interest, but the chance of reselling for a profit. So purchasing a negative-yield bond might make sense as an investment (vs. institutional and central bank bond buyers, which frequently hold bonds to maturity and thereby literally pay to lend money).”
That’s fine. And it works according to plan. Until interest rates rise.
Then instead of capital gains, the holders of trillions of dollars of negative yield bonds will suffer huge capital losses. The losses, says Deist, of those holding trillions of dollars of bonds could be staggering.
It is, in other words, exactly what Ron Paul called it, a bond bubble – the biggest bubble in history. Massive. Global.
And when it pops it will take everything with it: bonds, currencies, stocks, real estate…
Fed Cuts Rates: We Think of Ron Paul and Negative Rates
The Federal Reserve Open Market Committee ended its September meeting with a decision to lower interest rates again. The policy cuts the Fed funds rate by 25 basis points to a new target range of 1.75 to 2 percent. The announcement on Wednesday afternoon (9/18) was accompanied by a broad hint that rates may be cut again before the end of the year.
As we watched the Chairman Powell’s announcement – which amounted to not much more than reading and repeating well-worn talking points — our thoughts turned to Ron Paul’s recent comments about negative interest rates.
We’ll get to that in a moment, but first, we recently wrote (here) about Ron Paul’s prediction that gold would double by the end of 2020.
We don’t mention it because we think it is a particularly bullish prediction. Quite the contrary. We could highlight many economic observers and technical analysts whose price target for gold are higher.
Some are much higher.
We thought you should see Dr. Paul’s prediction because it is unusual for the former congressman and Presidential candidate to voice such a specific prediction to begin with.
The suggestion that gold could reach $3,000 by the end of next year is not overstated in the least. It is a cautiously moderate forecast. As we would expect from Dr. Paul.
Indeed, Dr. Paul himself acknowledges that when the monetary crisis strikes, his call may prove to substantially understate the case.
We agree. In fact, alert market watchers are already feeling the hot breath of the approaching monetary crisis breathing down their neck. After all, we are now in an era of Quantitative Easing, trillion-dollar deficits, and hundreds of trillions of dollars in unfunded US government liabilities.
Not to mention an era of negative interest rates.
Negative rates are such a profound anomaly that they remind us of every catastrophic economic scheme that has ever gone before. Things like the South Sea Bubble and John Law’s Mississippi Bubble, both schemes of the 18th century. Only this is the biggest bubble of all time.
Dr. Paul thinks that the US government and Federal Reserve will have us following much of the rest of the world into the negative interest rate abyss.
“We will join the rest of them and go to total negative rates in hopes that that will be the solution,” Paul said on CNBC last week. “We’ve never had as many currencies in negative interest rates. $17 trillion worth of bonds [are] in negative interest rates. It’s never existed before. And, that’s a bubble.”
“So, we’re in the biggest bond bubble in history, and it’s going to burst.”
When confronted with the choice between real money – gold – and paying the government a fee to let it use your money, like Dr. Paul we believe that in a crisis rational people will opt for gold. After all, as Dr. Paul asks, “How do you sell a bond that pays a negative rate? Who’s going to jump up and down?”
The long-term consequences of negative interest rates are incredibly destructive and immeasurable bullish for gold and silver.
The US government keeps its book not on the calendar year, but on a “fiscal year” (FY) that begins on October 1 and ends on September 30. That means its FY2019 will end in just over two weeks, and then FY2020 begins.
Some of the financial press is reporting that it looks like FY2019 will result in a one trillion dollar federal deficit.
But there is no need to wait until the end of the year to see. Treasury debt for the year passed a trillion dollars earlier this month. Already, in the middle of the eleventh month of FY2019, the deficit is $1,023,500,000,000.
At the same time, the visible portion of the US debt has risen to $22,539,500,000,000.
How will all this debt ever be paid?
It won’t be paid. In fact, the only way the US bonds (the government’s I.O.U.s) that come due today can be paid is by the issuance of new I.O.U.s tomorrow.
It’s like paying your VISA card by borrowing on your MasterCard.
Obviously, this can’t go on forever. So, historically governments attempt to rid themselves of their debts in one of several ways.
One of the most common means that governments employ is to simply print more currency. As long as the monetary system consists of government-issued money unbacked by anything tangible like gold, it can print as much money as it takes to pay its debts.
It wrecks the functioning of the economy when it does so. It destroys capital and enforces financial ruin on its citizenry along the way. But governments choose this path over and over again.
And in fact, this old approach to the government’s spending and debt problem has been dressed up in new garb for 21st Century Americans. If you watch the debates and the promises of the presidential candidates, and if you read the position papers of their supporters you will run across the term “Modern Monetary Theory.”
Modern Monetary Theory asserts that debt doesn’t matter, and governments can spend endlessly as long as they have a monopoly on the money system. To mix the metaphors, it’s the same old snake oil in new bottles.
Another popular alternative of governments is to simply refuse to pay its debts in whole or in part. Sometimes a government will admit candidly that it can’t pay its debts and that it is very sorry.
That’s when the people sharpen their pitchforks, grab torches, and head for the castles.
At other times governments announce that their debts aren’t actually debts at all. If its debts aren’t real obligations, they need not be repaid.
Already government apologists say this about the promises the government has made about things like Social Security. They say these aren’t “real” debts. But of course, when they create these programs, they employ language that if used by a private business would be considered nothing less than actionable fraud. For example, our government uses terms like “insurance,” “reserves,” and “trust funds” for Social Security. But the money has all been spent.
I suspect that if you have paid into Social Security all your life on the promise that your benefits will materialize when you need them, you damn well consider it an actual debt.
But just so you know, the government looks at it differently.
With these prospects in mind, it’s good that more Americans are thinking about owning gold. We are in an era of churning stock markets, free-stuff-for-everybody politicians, and rumors of wars.
You need to protect yourself and your family with gold and silver. The government can default on its debts. It can destroy the value of your dollar savings by printing more dollars.
But it can’t print more gold and silver.
So, where do you start?
Start with us. Call or stop by. We’re here to help. We’ve been here a long time. Our professionals will take time to answer all your questions and help you get started.
“Russia’s Huge Gold Stash is Now Worth More than $100 Billion”
Russia decided some years ago that it wanted more gold and fewer US dollars. It was a smart move, as Bloomberg reported this week:
“The country quadrupled gold reserves in the past decade as it diversified away from U.S. assets, a move that has paid off recently as haven demand sent prices to a six-year high. In the past year, the value of the nation’s gold jumped 42 percent to $109.5 billion…”
Today Russia owns 2,219 tons of gold. At the same time, Russia began adding gold to its central bank holdings, it began dumping US dollars. In other words, it was selling dollars to buy gold. Russia concluded correctly that the future of gold was brighter than the future of the dollar.
Ten years ago, Russia held $180 billion in US Treasury securities. Now the Treasury Department reports Russia’s dollar holdings as so low they are down in the asterisks, below the holdings of countries like Iraq and Columbia, and less than one percent of what both China and Japan own.
But the de-dollarization move is not limited to Russia. It is a global phenomenon. Countries like Kazakhstan and Poland are moving out of dollars and into gold. Turkey, Mexico, and India are buying gold as well.
China’s central bank has been buying gold aggressively all year long, adding 100 tons since December, while its dollar holding has fallen some $70 billion over the last year.
Gold’s strength has been a windfall for gold owners. Both China and Russia saw the dollar value of their gold reserves jump by $7.5 billion between July and August.
The US still has the largest gold reserves, but, of course, its gold holding has not been audited since the Eisenhower administration. Actually, because that audit was never completed, it is probably more accurate to say that US gold reserves have never been audited.
In May, Congressman Alex Mooney (R-WV) introduced a bill in the House calling for a “full assay, inventory, and audit of all gold reserves, including any gold in ‘deep storage,’ of the United States at the place or places where such reserves are kept.”
A real audit is more than just an inventory. It is not enough to count bars. The title to our gold must be verified. In that respect Mooney’s bill is thorough. Because we know the propensity of governments to try to operate in secrecy – note how vigorously the Federal Reserve has resisted an audit – Mooney’s bill seeks to discover if the title to any US gold has been impaired or encumbered. It mandates “a full accounting of any and all sales, purchases, disbursements, or receipts… a full accounting of any and all encumbrances, including those due to lease, swap, or similar transactions presently in existence or entered into [in the past 15 years, and] an analysis of the sufficiency of the measures taken to ensure the physical security of such reserves.”
Assuming the gold is all present, accounted for, and with clear title, the $400 billion in US gold reserves is a very small base of liquidity upon which to rest a $23 trillion dollar national debt.
One of the most important reasons to own gold and silver is to avoid major risks common to stocks, bonds, banks, and other financial assets and transactions: the risk of insolvency and default.
All these financial markets and institutions carry a risk of insolvency and default. Those are risks that grow more threatening with each passing day.
But gold and silver are monetary commodities in their own right. They are not claims to something else somewhere else down the road. The value of an ounce of gold or silver is utterly indifferent to the issuer’s total debt, or the wisdom of its political leaders. An ounce of gold is an ounce of gold no matter whose image or national motto is engraved on it.
Its value is not contingent on someone else’s integrity.
That’s why it is such a high compliment to say that someone’s word “is as good as gold.” It is claiming that there is no risk of their failure to abide by their word; there is no risk of default.
When investment advisors, money managers, and stockbrokers reluctantly agree that owning gold makes sense (a conclusion they often try to avoid), they try desperately to steer their clients into gold stocks or gold exchange-traded funds (ETFs). They do so because it means that they still have control of their clients’ funds; their money stays in an account at the financial institution.
But with this advice, they deprive their clients of one of gold’s chief virtues. All these “paper gold” investments still have a risk of default.
The Only Real Gold is Gold
What about Gold stocks? Governments nationalize mines, expose them to wars, appropriate their profits with taxation. At the same time mining companies can be guilty of fraud, mismanagement, and subject to disasters.
…or Gold ETF’s (Exchange-Traded Funds)? Bank holidays, risk of institutional mismanagement, insolvency, title challenges, and counter-party risk, hypothecation and re-hypothecation, outright fraud, government failure, and nationalization are among the risks that may impact paper claims to gold.
It’s Time to Put the Security of Your Wealth in Your Own Hands
In times like these, times of currency wars, unpayable debt, interest rate anomalies, sky-high government and business debt, central bank volatility and confusion, cultural stress and political polarization, state corruption, abuse of power and betrayal of trust, institutional failure, and widespread social and moral recklessness, protecting yourself and your wealth demands avoiding unnecessary risk.
You have probably heard it said that gold and silver are unique in the financial world because they are not someone else’s liability, they are not dependent on someone else’s promise or performance.
Make sure that you take advantage of these virtues. Use gold and silver to protect yourself from default and insolvency risk. Especially in times like these when those risks are heightened.
But you can only accomplish this risk avoidance with real, physical gold and silver that you take into your actual possession.
The new gold bull market is off to a powerful start. According to gold expert and former Congressman Ron Paul, it will move sharply higher by the end of next year.
He confidently predicts that gold to reach $3,000 an ounce by the end of 2020.
Actually, says Dr. Paul, that’s a cautious prediction. Especially since gold has already risen $500 from its 2016 low.
We are in a period of a disintegrating monetary system, he says, “Warning signs are all around us!”
The endpoint of these monetary and debt problems can come upon people suddenly, as though in the dead of night when some event occurs that causes them to panic.
In the meantime, Dr. Paul asks skeptically, “If you have savings, are you going to put it in a C.D?” He points to the trillions of dollars of negative interest rates bonds proliferating around the world. At some point, people will rush out of those instruments and want to buy real things.
That is what the great economist Ludwig von Mises called “the crack-up boom.” It’s the sudden awakening of the public that the currency itself is corrupt and headed toward worthlessness. They become anxious to exchange their currency for anything tangible. When that happens, prices will go up all over. And liquid monetary assets like gold and silver are especially prized.
In that event, says Dr. Paul, when the big crisis hits, it is conceivable that his prediction of $3,000 gold will prove to be far too modest.
Dr. Paul is the author of Gold, Peace, and Prosperity, End the Fed, and The Case for Gold.
Watch Ron Paul’s discussion, “Where Does Gold Go from Here?” on the Liberty Report.
The dollar’s share of central bank reserves is falling. In 2000 the greenback represented 70 percent of foreign central bank holdings. Today that has fallen to 60 percent. And it continues to fall as central bank’s gold holdings rise.
Now even our “best friends” are admitting that the dollar game is up. At Jackson Hole, Wyoming, where many of the world’s central bankers gather each August, Mark Carney, the governor of the Bank of England, called for the dollar’s international role to be supplanted by “synthetic hegemonic currency . . . provided . . . perhaps through a network of central bank digital currencies.”
By that, of course, he means another monetary flim-flam.
Would you like one more? Okay, here goes:
PREPARING FOR A FINANCIAL APOCALYPSE: INSIDERS ARE SELLING $600 MILLION OF STOCK PER DAY IN AUGUST
Your stockbroker may be trying desperately to keep you from withdrawing money from the market, but a lot of corporate insiders are getting out while the getting is good.
“August is on track to be the fifth month of the year in which insider selling tops $10 billion. The only other times that has happened was 2006 and 2007, the period before the last bear market in stocks.”
As we repeatedly observed, the price of silver was historically low compared to the price of gold. As it so often does in a bull market, we expected silver to surge and outperform even gold itself!
And it did! In blockbuster fashion!
How did we know that? By tracking a simple metric called the Gold/Silver Ratio.
The ratio is simply the gold price divided by the silver price. It tells you how many ounces of silver you can buy with one ounce of gold.
As your RME precious metals professional will explain, employing a simple strategy of trading from gold to silver and then back as the ratio changes is a time-tested and powerful strategy for increasing the total number of ounces of gold and silver you own without making any additional investments!
As you can see from the chart, the Gold/Silver Ratio has been high, above 80 to one all year… and kept trending higher!
Then the ratio spiked in July to almost unprecedented 95 to one. In our radio messages and here on our blog we wrote again in July (here) about the profitable opportunity it presented to trade gold for silver and take advantage of the superior outperformance we expected from silver.
As forecast, silver’s price performance has been explosive. It is now knocking on the door of $20 an ounce.
Let’s look in more detail. Silver had a low last fall of $13.86. It’s 2019 low, recorded in May, was $14.27. Since then it has traded as high as $19.69. That’s a gain of more than 40 percent in a year, and up almost 38 percent from its May low.
What Should You Do Now?
The Gold/Silver Ratio remains above 80 to one and still suggests that silver’s gains should continue to outpace gold. Experienced gold and silver investors and professionals want their portfolios to emphasize the precious metal poised to move up the most. At this ratio, they will trade and adjust their portfolios to emphasize silver. Do as they do. Take advantage of this strategy and increase your precious metals holdings without making any additional purchases.
See our post from last March How to Acquire More Gold with Ratio Trading, It illustrates the power of this simple trading strategy using a ratio like today’s of 80 to one to trade gold for silver, and then targeting a ratio of 50 to one to trade back into gold.
Your RME Gold professional will explain this powerful strategy for profit in detail, answer your questions, and then alert you as the strategic ratio changes develop in the future.
Maybe you’re like a lot of people who always meant to buy gold but never got around to it.
Marketing experts tell us that there are two times that people become especially focused on their affairs, their business, and the opportunities before them. One of those time is right after the Christmas holidays when people make resolutions for the New Year.
The other time is now. Right after Labor Day. Summer is over, beach vacations are becoming memories, and kids are back in school. Like the New Year, it’s a great time to make changes for the future.
If you, like many people, always meant to protect yourself and your family with gold, but you still have not gotten around to it, this is the time to do so.
You probably already know a lot of important reasons to buy gold. Like its thousands of years of history as the world’s preferred money.
Let us give you one more reason. It is the unfortunate but unchanging trajectory of American prosperity.
The American middle class is hanging on by its fingernails. That is a very bad thing, even if you are not a member of the middle class. That’s because the bulwark of freedom is a robust middle class.
Here are a couple of paragraphs from a recent Wall Street Journal story, as cited by writer Bill Bonner:
The median net worth of households in the middle 20% of income rose 4% in inflation-adjusted terms to $81,900 between 1989 and 2016, from the latest available data. For households in the top 20%, median net worth more than doubled to $811,860. And for the top 1%, the increase was 178% to $11,206,000.
Put differently, the value of assets for all U.S. households increased from 1989 through 2016 by an inflation-adjusted $58 trillion. A third of the gain – $19 trillion – went to the wealthiest 1% according to a Journal analysis of Fed data.
The point is further illustrated by the observation noted by financial journalist Lance Roberts that in 1981 the top 1 percent of US adults earned 27 times what the bottom 50 percent earned. Today, the top 1 percent earn 81 times what the bottom 50 percent earn.
That explains why there is a socialist juggernaut loose on the land. It explains whatever traction Elizabeth Maduro Warren and Bernie Fidel Sanders and Alexandria Ocasio-Chavez have today. They can thank the Federal Reserve and its fiat dollar for their success.
That’s because the things that are destroying America’s widely-based prosperity are all rooted in a corrupted and manipulated monetary system. But for the Federal Reserve and the fiat dollar, there would have been no housing bubble, a calamity that saw 10 million Americans lose their homes to foreclosure!
But for the Fed there would have been no meltdown, no bank bailouts. Neither Ben Bernanke nor Goldman Sachs alumni in Washington could have stovepiped trillions of taxpayer dollars to the money center banks and to the Wall Street cronies. But for the funny money system, there would be no $22.5 trillion national debt. But for central banks, the world would not be bouncing around in an economic house of mirrors based on $15 trillion in negative interest rate debt.
But for the Fed running the pumps, a third of all the asset value increase over the last 30 years wouldn’t have ended up in the pockets of the top one percent.
Before you read any further, let me note that this is not some screed against the rich. In fact, we consider it part of our job description to help the rich and everybody else protect their wealth, and to help all of our clients become prosperous, too. But we can’t defend people who use government connections and political influence for special favors, sweetheart deals, and crony gains.
We just want you to be aware of what has happened over the past few decades. One more metric: The Fed has destroyed m lore than 96 percent of the dollar’s purchasing power over the last one hundred years.
The destruction of the dollar, the explosion of debt, and the polarization of wealth are trends in force. And a trend in force remains a trend in force until something changes it. There is nothing on the horizon – nothing short of a complete reboot of the monetary system – that will change these trends.
This is a good time to assess our national trajectory as well as your personal trajectory. Let us show you how gold and silver can help you.
If you have always thought about owning precious metals, call on us now. Don’t wait for New Years’ Day to focus on what you have already resolved to do now.
The world is awash in negative interest rate government bonds. Basically, you loan the governments money by buying its bonds, and at maturity you cash is your bonds for less than you paid.
How crazy is that? You pay the government for the privilege of letting them waste your money for a few years.
The folly at the heart of our times is clear. Money is not supposed to work like this. Thousands of years of economic progress make the record clear: borrowers are supposed to offer to pay to borrow our money. And the more of a credit risk they are, the more they have to pay us to offset the risk.
Negative interest rates are a sign of a topsy-turvy world. None of it makes sense. And we can assure you that we, like most rational people, will never pay some spendthrift good money to borrow money from us.
There are about $15 trillion of negative interest rate government bonds out there. You can’t see it yet, but it represents a world-class economic calamity hurling down the tracks.
That is why gold and silver are moving higher. The smart money wants to get out of the way of the coming monetary train wreck.
Jim Grant, the editor of Grant’s Interest Rate Observer agrees. He told CNBC’s Rick Santelli the other day that these radical policies beget other radical policies. So this monetary drama ends with a much higher gold price, says Grant.
Meanwhile, the President is at war with the Fed, and the Fed is at war with the President. Bill Dudley, the former president of the New York Fed has explicitly called for the Fed to pursue policies that put Trump’s reelection at risk.
In the meantime, is the trade war on or off? Some days it appears to be both on and off. Some days the US and China are both talking and not talking. All we can say is that we’re glad we’re not soybean farmers wondering before the next planting season if we are losing an important market to Brazil.
We advise our clients to get out of the way of this uncertainty and madness, by moving to the safe-haven gold and silver.
You don’t need a Ph.D. in economics to recognize the causes of the gold and silver bull market! Take steps to protect yourself and your family. But do it now. Don’t be left behind!
Of course, banks don’t like gold. Burger King doesn’t like McDonald’s. Ford doesn’t like Mercedes.
Similarly, banks see gold as a competitor.
We get that. They have seen their clients walk in to pull out money and head straight to the gold desk.
That’s why it’s amusing to watch Bank of America fall all over itself trying to explain why gold is rising, even though it doesn’t really want its customers to own gold. A recent piece by BofA analysts makes the obvious admission that central bank monetary policies, with all their interest rate machinations, currency manipulation, and money printing scams – “quantitative failure” says BofA– “make gold an attractive asset.”
So we have been saying.
The bank warns of a stock market sell-off, thanks to ultra-easy monetary policies that have floated equities to unsustainable levels, prevented needed corrections and even kept “zombie companies” alive.
But the key observation, at least in our view, is that the inevitable stock market sell-off will prompt central banks to increase liquidity operations (money printing) even further. So “a sell-off,” says BofA, “may prompt central banks to ease more aggressively, making gold an even more attractive asset to hold.”
So we have been saying.
We don’t have too much sympathy for the banks, especially those that remain afloat today thanks to taxpayer bailouts. BofA got more than $150 billion in bailouts and guarantees from unwilling American taxpayers.
And then there is Wells Fargo…
Wells Fargo is another major bank that has stood silently by and profited while the Federal Reserve engineered one bubble after another. And then when the bubble popped, it, too, got a bailout from the taxpayers. Theirs amounted to $25 billion.
Wells Fargo, no doubt kicking and screaming, has now conceded that “we do believe that gold has a place in a well-diversified portfolio”
“The reason is that gold can become a good alternative to bonds when their yields are negative…Investors now pay to invest in German government debt. On the other hand, gold is not tied to a particular government … this eliminates the risk that a government may act irresponsibly …”
So we have been saying. And in the face of reality, with gold racing to catch up with years of foolhardy monetary policy, the banks can hardly say otherwise.
Fiat is derived from a Latin term that translates to “let it be so.” Fiat currency is paper money printed and guaranteed by a government without the backing of a physical commodity, such as silver or gold. In other words, fiat currency is worth something simply because a government says so, and the people who hold and exchange that currency agree to it.
Here’s everything you need to know about hyperinflation, fiat currency, and how you can protect yourself in future depression periods that could be punctuated by hyperinflation.
What is Hyperinflation?
Hyperinflation is a period when prices rise uncontrolled while the value of the local currency plummets, often due to reckless currency-printing by the government, far beyond what it makes with tax revenue.
While there is no magic inflation number that marks the start of hyperinflation, many experts consider 50% inflation during the course of a month to be a hyperinflation scenario.
How does hyperinflation affect fiat currency?
In a hyperinflation scenario, paper money is rendered almost useless. After World War I, Germans famously burned Reichsmarks to stay warm because it was more cost-effective than buying wood. Another example is America during the Civil war. The Confederate government printed “Greybacks” to finance their war effort, and began with a matching value to the US dollar in January 1961. By May of 1965, it took 1200 Confederate dollars to equal one US dollar.
A more recent example we can look to is Venezuela. Over the course of several months, prices of goods skyrocketed while the value of the Venezuelan bolivar tanked. Now you can buy a chicken for dinner in Venezuela for about 14.6 million bolivars, or $2.20.
How Can You Protect Yourself During Periods of Hyperinflation?
Precious metals such as gold have been proven to be a smart hedge against depressions and hyperinflation.
Gold prices tend to shoot up during depressions as investors scramble to buy up gold reserves. Then in the depression recovery period, people sell off their gold as prices ease downward. Studies show that gold prices beat inflation rates about 54% of the time, and if you can wait out the inflationary period, gold is an extremely stable investment that holds its value better than just about any other commodity.
In 1913, America all but abandoned the gold standard in favor of the Federal Reserve Banking system. While the dollar remained partially gold-backed, this was the start of America’s fiat currency. Dollar supplies outpaced the gold supply within a couple of decades, and as a result, the US devalued its own dollar by 41% in 1934.
In 1971, the dollar was in a similar situation again. Foreign governments started selling off their USDs for American gold, until President Nixon put a stop to it. At that point, the American dollar was officially a fiat currency, totally unsupported by gold.
The most recent policy, called quantitative easing, will have a lasting impact on the dollar for years to come. From 2008 to 2014, the Fed added $4 trillion to the money supply by taking out credit from member banks and printing more money to add to the economy.
Why Is the Dollar Losing Value?
Have you noticed that your paycheck doesn’t seem to buy as much as it used to?
The unrelenting devaluation of the American dollar is due to several fiscal decisions made over the last century. There is more currency circulating than the economy has generated. It’s a matter of time before irresponsible fiscal policies catch up to us and cause another financial crisis.
Two future causes of the dollar’s devaluation will be loss of confidence in the currency and a rising tide of currency sales. The governments of Japan and China are the two biggest holders of American dollars, and if they start selling off their stockpiles, devaluation of the dollar will happen shortly thereafter.
How to hedge against fiat currency devaluation
The one material good that hasn’t lost value in, well, all of history, is gold.
Governments and individuals will always find inherent value in gold. That makes this precious metal a sound investment and a smart way to diversify any portfolio. While the dollar’s value fluctuates, gold provides a steady anchor point for an increasing number of investors.
When the dollar’s value drops, the price of gold rises. Depending on the severity and duration of the next depression, gold prices could remain high for a long time.
Republic Monetary Exchange is a full-service precious metals brokerage firm helping investors purchase coins and bullion for their personal possession, as well as creating private precious metal self-directed IRAs. We have served thousands of customers nationwide, making RME America’s premier dealer in precious metals.
Since we first told you we’re in a Dollar Doom Loop in March, gold has broken out!
Now things are getting worse with the dollar. Things that will drive gold prices higher still.
Friday’s action, with gold up more than $28, is a sign of things to come.
To describe the Doom Loop we asked you to imagine that you have a business that has to borrow a dollar to make 90 cents. When that happens, you’re in the Doom Loop. Forget borrowing your way to prosperity. When you’re in the Doom Loop, all your additional borrowing just leads to a more painful bankruptcy.
The Dollar Doom loop is when US debt grows faster than the economy. You can see in the following graph that federal debt, the red line, has not only passed the Gross Domestic Product, the blue line but that the debt is climbing at a steeper rate.
Federal debt today is just over $22.4 trillion dollars. It roared right past the GDP in 2013. Today GDP is estimated to be about $2 trillion below the debt level. And that is at the end of what we are told is one of the longest expansions in history, now going on for more than ten years!
But there is more to the Doom Loop story. As we reported recently, for the first ten months of the government’s current fiscal year (FY 2019 through July) federal revenue is up 3 percent. But federal spending is up 8 percent.
If that’s what happens during a booming economy, imagine what happens in the event of a widely expected recession. In that case, federal social spend goes up; federal revenue falls with the slowdown. And the gap widens.
Former Reagan budget director David Stockman says that in constant dollars under President Trump federal spending has increased 4.22 percent a year. That’s more than twice as fast as under Obama. It’s faster spending increases than under either Bush, Clinton, Reagan, Carter, or Ford.
Since President Trump was inaugurated on January 2017, federal debt has grown by almost $2.5 trillion.
We’re not politicians. We’re not running for office. We’ll leave it to others to decide who is to blame: The White House, the Fed, Congress, R’s and D’s, divided government, the media, or the people themselves. Frankly, they are all likely good candidates for some of the blame.
Our job is helping our clients both protect themselves and profit during a period of accelerating dollar destruction. Since the Fed has already destroyed about 97 percent of the dollar’s purchasing power, we’re in the late stages of this debacle.
That’s why we urge you to add to your precious metals holdings now.
Gold continues it’s front and center advance into the world’s monetary system. The mainstream news media misses it, but one of the biggest financial stories of our time is the massive move of the world’s central banks to add gold to their reserve holdings.
Of course, the mainstream media is missing it. After all, it will only affect… EVERYTHING.
That’s because it represents a “de-dollarization” of the world economy, a trend that will make Americans poorer.
And now, as though to underscore the strange new respect the central banks are paying to gold, they are even holding international conferences on gold reserves.
That is the sort of thing that signals an acceleration of their gold-buying spree.
The Global Central Bank Gold Buying Spree of 2019
We have diligently reported for our friends and clients on global central bank gold buying. See here, here, and here just for starters.
2019 has been a record-setter for central bank gold buying. In the first half of this year, the institutions added 374.1 metric tons to their holdings.
Currency wars, record debts and trillion-dollar deficits, negative interest rates and quantitative easing are some of the reasons behind the new gold awareness on the part of central banks.
They are among the reasons for you to buy gold as well.
It should surprise no one that the next international central bank gold reserve conference will be held in China. China is the world’s largest importer of gold. The 2019 Executive Program in Gold Reserve Management takes place in mid-October in Tsinghua University’s School of Finance in Beijing. Attendance is limited to “executives at central banks, sovereign wealth funds and finance ministries from around the world.”
As we wrote some time ago, “Central bank gold buying is a megatrend for a reason. The prognosis for the dollar is negative.”
If you knew what was coming, you would “buy gold on any level!”
So says Mark Mobius, the founder of Mobius Capital Partners and an emerging markets fund manager.
We think Mobius is worth listening to
On his retirement from Templeton last year Barron’s wrote, “The renowned Franklin Templeton Investments value manager has jetted from one far-flung corner of the world to the next, navigating military coups, Siberian snowstorms, and corrupt executives hurling threats, to unearth bargains as some of the world’s poorest countries transformed into economic powerhouses.
“Mobius… made a name for himself with on-the-ground research.”
In an appearance on Bloomberg Tuesday (8/20), the interviewer asked, “At what level should people be looking to buy gold.?”
“I think you have to be buying gold at any level, frankly,” he replied. “I think gold’s long-term prospect is up, up, and up.”
“The reason why I say that,” he explained, “is the money supply is up, up, and up. You know, with the efforts by these central banks to lower interest rates they’re going to be printing like crazy.”
Mobius was especially clear that he means physical gold and warned against paper gold substitutes.
That’s a point that cannot be made too clearly. One of gold’s chief attributes is that it is not someone else’s liability. It is not dependent on someone’s promise or management. But this unique and increasingly crucial advantage only applies to physical precious metals, the gold and silver coins and bullion that you own outright and have taken into you own possession. It does not extend to paper gold, stock and other representations of gold ownership, commodity contracts, or ETFs.
Learn more about in our post from last March on needless Counter-Party Risk, and speak with an RME Gold associate today about owning real gold and silver. Simply call our office, (602) 955-6500, and you will be connected to one of our knowledgeable gold and silver professionals.
In April 2019, Forbes declared gold will outperform equities and bonds due to global equity corrections, wealth creation in emerging markets, a falling U.S. dollar, and rising political uncertainty. Any alarmist myths about a “gold crash” are moot.
Want proof? Here are some real expert opinions.
1. Alan Greenspan: Volatile Stock Market Will End the Bull Market
In December 2018, former Federal Reserve Chairman and Capitalism in America author Alan Greenspan told CNN claimed the bull market is beginning to fumble due to volatility and is unlikely to stabilize and take off again. Greenspan says the rise in long-term interest rates is putting pressure on stocks, which will weaken as rates continue to rise.
Greenspan predicts long-term rates will keep rising, and that we’re moving toward a period of stagflation, which is a combination of inflation and stagnation that causes the economy to weaken. He calls stagflation a “toxic mix” and has returned to his original stance, claiming gold as the “premiere currency.”
2. Judy Shelton: Gold Standard Is Needed to Fight Inflation
Judy Shelton, U.S. Executive Director of the European Bank for Reconstruction & Development and candidate for Trump’s Federal Reserve Board of Governors, wrote an op-ed piece for the Wall Street Journal titled, “The Case for Monetary Regime Change.”
In the piece, she writes that it’s worth considering linking a money supply to gold instead of relying on monetary officials setting interest rates. She continues that a linked system under gold would enable currency convertibility and mitigate inflation.
One of Trump’s top picks is advocating for gold. How likely could a gold crash be?
3. Peter Schiff: The U.S. Is Nearing a Great Financial Crisis
In May 2019, veteran stockbroker and CEO of Euro Pacific Capital, Peter Schiff, told RT the U.S. is on the verge of a greater financial crisis now than it was last year.
He says interest rates have no chance of normalizing, and balance sheets are going to balloon to new heights, a process that has been gaining momentum since early this year. That means gold will get a boost.
Bitcoin as “fool’s gold”
What about cryptocurrency? Schiff calls the cryptocurrency Bitcoin “fool’s gold.” He says it has none of the commodity properties of gold (which was a valuable commodity for centuries before it became money) and has no intrinsic value, making Bitcoin a Ponzi scheme.
Schiff compares Bitcoin trading to the Beanie Babies craze, but at least you can play with and admire Beanie Babies. You can’t do anything with Bitcoin except pray it’s worth trading.
4. Doug Casey: The Stock Market End Times Are Near
World-renowned investor, author, and founder of Casey Research Doug Casey wrote in November 2018 that gold continues to be the best form of money for reasons including:
Gold is durable
Gold can be convertible into larger and smaller pieces without losing value
Gold’s quality is consistent and easily recognizable
Gold is compact, portable, and convenient
Gold is something people want and can use, in forms like jewelry
Gold is something that can’t just be created out of thin air
He predicts the next crash will be much worse, much different and much longer lasting than the Great Recession. Since many global governments looked to inflation as a solution to the last recession, we’re in for something far worse.
5. Jim Cramer: Gold Protects Against Economic Chaos
In December 2018, Jim Cramer, host of CNBC’s Mad Money, cited severe weakness in the economy, according to Market Realist. Feeling “powerless,” he cautioned the Fed on further tightening and said the current odds don’t favor stockholders.
Cramer says if the current course of tightening continues, investors should buy into the bull market in gold. In January 2019, Cramer said if investors want an insurance policy against volatility, gold is the way to go. As he’s been saying for years, the best way to protect yourself from economic chaos is to own gold.
Experts Agree About Gold’s Value
Financial experts agree: The stock market is much more likely to crash than gold — which, as history has shown, never will.
When the stock market crashes, a gold-buying panic is likely. Wise investors are already investing in precious metals before the imminent global economic catastrophe.
To some of us, it is perfectly understandable why gold and silver are in a bull market and racing higher.
To others, it is a mystery.
In our latest radio spot for RME, I joked that there are two kinds of people in the world: those who “get” gold… and those who don’t.
And to make matters worse, they tend to marry one another!
The point is that some of the people closest to us don’t understand what we do about fundamental economic reality. And it’s probably not their fault.
In all my school years I can’t remember anybody really talking much about money and what gives our currency value. They certainly don’t talk about it in presidential debates. Quite the opposite. The candidates almost unanimously know nothing about the production of wealth; they care only about its consumption. They think they can print more wealth.
Apparently, nobody talked much about money and what gives currency value in their schools either.
If you have a spouse or friend who doesn’t understand the need to own gold, bring them by for conversation.
We know for some people explaining why central banks are panicking, or how perverse and destructive the negative interest rates they have created are, is jumping a little too deep into the conversation.
We’ve gotten pretty good at explaining why owning gold is more important now than ever. Even to people who haven’t thought about such things.
So maybe we can help! Call or visit us. No obligation.
The US has had paper dollars for a long time, but through most of our history, even the paper dollars were tied to gold. Until this date, August 15, back in 1971. It was then, 48 years ago today, that President Nixon severed the last remaining link of the U.S. dollar to gold.
Today, almost half a century later, we are experiencing the long-term consequences of that decision. Those consequences include a trade and currency war, a race among nations to destroy the purchasing power of their currencies, unrestrained money printing, inadequate personal savings, interest rate manipulations, weak economic growth, a stalled out middle-class, growing deficits, and skyrocketing debt.
Under the post-World War II monetary regime, the rest of the world had been persuaded to hold dollars as reserves and conduct international commerce in dollars. But U.S. politicians of both parties had a grand time for years spending money and buying votes on left and right to delight their special constituencies. There was the Great Society and the Vietnam War, too. Because they had the Federal Reserve to print money for them, it had been a wild spree.
But like any ne’er do well, the U.S. was writing bad checks. The state was issuing more dollars than it could possibly redeem for gold at the promised exchange rate of $35 per ounce.
The rest of the world saw the U.S. money printing under the dollar/gold exchange standard and noted the falling purchasing power of the dollars they held.
They began to race for the exits. They wanted to cash their paper dollars in for gold while they could.
Like a run on the bank, the demand to exchange dollars for gold was beyond containment.
Nixon decided to find a bogeyman to blame for the government’s wastrel ways. He chose “international money speculators.”
The crisis of the U.S. writing hot checks was their fault, he said.
In making his case against them, Nixon uttered more monetary babble. “The strength of a nation’s currency is based on the strength of that nation’s economy,” he said. But that was simply untrue: America’s economy has been growing while the value of the dollar was sinking.
And so, on that hot August night in 1971, Nixon closed the gold window and abandoned any pretense of dollar redeemability in gold.
That was 48 years ago today.
Now we find ourselves on the doorstep of a long-brewing currency crisis. With the dollar redeemable in nothing, what would act as a restraint on the issuance of more and more dollars, an endless torrent of money printing?
If the rest of the world noticed that they were having difficulty cashing in their dollars for gold decades ago, consider how they must feel today knowing that there is nothing to cash them in for.
We are speeding toward the long inevitable crisis of resolution. At every hand, the central banks and governments of foreign nations, are taking steps to insulate themselves from the developing dollar crisis.
Many of the central banks are using dollars to add to their gold reserves. They may not mind fleecing their citizens with their own debased currencies, but they didn’t want to be victimized by ours 48 years ago. And they still don’t want to be victimized by it today.
Fiscal Year 2019 is winding down and it’s one for the books. For the ten months of the year through July 30, the deficit is already higher than for the entire 12 months of the prior year. So far revenue has increased 3 percent over last year, while spending is up 8 percent. Not smart.
Inflation turned higher in July. Both the Core Consumer Price Index – that’s the one that doesn’t count food and energy – and the broader CPI were up 0.3 percent for the month. Annualize that! The higher number, well above the Fed’s 2 percent annual inflation target, makes it hard to justify further interest rate cuts.
Publisher Bill Bonner writes that gold has outperformed stocks for the entire 21st Century. “And not by just a little – but a lot. The Dow rose 145%. Gold rose 420%. Compare this to the 20th century. It was just the opposite.”
The world is now awash in some $15 trillion in debt instruments (bonds) with negative yields. It’s quite an anomaly and one that screams danger. Jim Sinclair associate Bill Holter asks a question that should answer itself: “If you are offered a bond with negative rates from an issuer who is less than stellar…and your other option is gold or silver, which do you choose?”
Speaking of debt, US mortgage debt has now surpassed the level of 2008 when the mortgage meltdown hit. In the third quarter of 2008 when it all went kablooey, mortgage debt totaled $9.294 trillion. It jumped $162 billion in the last quarter, reaching $9.406.
And still speaking of debt, US bankruptcy filings, both personal and business, rose 5 percent in the month of July. Both student loan debt and auto loan debt just made new highs of $1.605 trillion and $1.174 trillion respectively.
Gold is a valuable barometer of financial conditions.
When gold was the basis of the international monetary system, currencies were more or less stable, exchange rates fixed.
On a gold standard, countries didn’t have to bash their trading partners over exchange rates. An ounce of gold was an ounce of gold everywhere. It didn’t matter whose picture was stamped on it.
Of course, governments always try to corrupt their monetary systems to accrue more power, to fight needless wars, or to reward their cronies. One common technique of this corruption was the printing press. Since the paper money issued by those countries was simply a claim check for gold, they often printed more claim checks then they could back-up. Those that tried getting away with the usual government shenanigans involving creating “money” out of nothing, saw gold begin to flow out of their countries. The real price of gold in their currencies would go up, no matter what the government said the official exchange rate was.
Despite its pledge to redeem its dollars for gold at a fixed rate of $35 an ounce in the years after World War II, the US began printing more dollars than it had gold. In 1965, de Gaulle sent the French navy to pick up gold it had stored in the US.
By 1971 countries and central banks everywhere began lining up to exchange their US dollars for gold. It didn’t matter what the official gold price was. The real price had been rising for years.
Gold has always been a sensitive barometer of troubled economic conditions.
Today all the world’s currencies are nothing but empty representations of value. As such, they can be created at will. This is true of all currencies: Euros, Yen, Francs. Pounds, Yuan, and Dollars.
The rising price of gold reflects the corruption of the currencies.
That’s why gold is making multi-year highs in the dollar and all-time highs in many of the world’s currencies: the British pound, the Japanese yen, the Canadian and the Australian dollars, the Indian rupee, and the South African rand.
Now we have entered a great currency war in which nations fight over fictitious currency values and exchange rates.
As President Trump tweeted a few days ago, “As your president, one would think that I would be thrilled with our very strong dollar. I am not!”
That’s why he’s pushing for additional interest rate cuts.
The central objective of currency warriors is to devalue their money, to reduce its purchasing power.
In fact, as President Reagan’s budget director David Stockman said, “The U.S. Federal Reserve is the all-time champion of currency manipulation.”
What You Need to Know
You should know that Washington’s currency war will send gold prices higher… even if you support it.
You should know that Washington’s currency war will send gold prices higher… even if you don’t support it.
That is because reducing the value of a currency means it buys less. Less of everything, including gold and silver. This is true whether you are a Republican or a Democrat, whether you are a liberal or conservative.
Additionally, when people see governments destroying the purchasing power of their currency, they begin to move out of the weakening currency.
The move to the safety of gold starts off slowly at first (that’s the “smart money”; it is the first to move into gold). Eventually, there’s a stampede as more and more people figure out that the currency is not a reliable unit of account or store of value.
Gold has always been a sensitive barometer of troubled economic conditions. Today gold is telling you there is trouble ahead.
Be the smart money! Talk to your RME professional today about the steps you can take to protect yourself and your family,
Gold and Silver Break Through- But How Did We Get Here?
Although we identified the gold and silver bull market early on, now that it is showing its explosive strength, it is impossible for anyone to ignore it.
At the same time, our calls for a breakdown in this highly overvalued stock market are familiar to most of our readers.
Many have taken our advice along the way, and it is clear that many more will. We’re grateful for the confidence you have placed in us.
With gold racing right through $1500 an ounce, it’s highest since 2013, and silver easily topping $17 an ounce, we think that a short review of our recent commentary is the best way to show how we got here and where we are headed.
Our first observation was short and pointed: “Something big is happening. Take advantage of the price break [in gold] while you can.” Our second was that it is “increasingly apparent that the rest of the year will be verypainful for stock investors.”
Recently we highlighted the time-tested market wisdom to “buy the rumor, sell the news.” As we approached the long-awaited Federal Reserve Open Market Committee meeting at the end of July, we made the case here and here that “that even if the Fed cuts rates, stocks will take a beating.”
So, we said that selling on the news of the Fed announcement would trigger the next big decline.
And so it happened. The Dow Industrial began the last week of July at 27,300. Then the Fed announced its new policy rate and the Dow fell four straight days. Monday was the steepest stock market plunge of the year. It finished Monday, August 5 at 25,700.
The S&P500 began the week of the Fed announcement at 3020. Then the Fed spoke, resulting in six straight days (so far!) of lower prices. The index finished the following Monday at 2844. That’s a loss of six percent from its all-time high set just last month!
Which brings us to our next topic.
Trade and Currency Wars
The biggest drop in each of those markets – and the worst day in the stock market so far this year – came on Monday when China, reacting to increased US tariffs, stopped supporting its currency, the yuan, letting it fall to the lowest level in 10 years.
President Trump responded, designating China a “currency manipulator.”
Which, of course, it is. As is the United States. And in fact, the Fed’s interest rate cut days ago was nothing other than an act of currency manipulation itself. We said as much, citing the Mises Institute, here, and went on to explain, “The President wants a lower dollar, just like the rest of the world wants to lower their Yen, Yuan, and Euros.”
“That’s what governments do in trade wars.”
In fact, everything the Fed does is currency manipulation including every interest rate manipulation, liquidity operations, paying banks interest on excess reserves, Zero Interest Rate Policy (ZIRP), and both quantitative easing and quantitative tightening.
And that is precisely the problem. Why should anyone put their faith in paper currencies that are mere insubstantial assertions of value, vaporous made-up things, and therefore so easily manipulated?
We have positively been on a tear to warn our friends and clients that the developing trade and currency wars have but one clear outcome: Much higher gold prices. Out of numerous posts on the topic, we will just refer to “Gold Breaks Out Big Ahead of G20 Summit” from late June, which it turn refers to an earlier post:
“There are gathering storm clouds that are being overlooked by most commentators: economic darkness approaches in the form of a developing currency war.
“We have observed that the world – including the US – is headed pell-mell into this off-shoot of the trade war. A currency war is a form of financial madness in which the winners are said to be those that most thoroughly destroy their currencies’ purchasing power.
“We have been warning about the escalation of a global currency war for a long time, but have increased our warnings and sense of alarm recently, warning that gold is always the big winner of currency wars.
“These policies are unreservedly bullish for gold (emphasis added). All paper currencies are discredited as they each fight their way to be the cheapest. Since they can’t all be the cheapest, successive rounds of devaluation can become quite frantic as they all fight their way to the bottom.
“When countries devalue their currencies, they are ultimately devaluing them against gold, the true supra-sovereign global currency
“That means the price of gold goes up!
“The best way to protect yourself from a currency war is to own gold.”
Gold and Silver
If we have warned many times that gold is the big winner in currency wars, it is only because currency wars are conducted everywhere by legal counterfeiters of unbacked digital and paper money. No wonder gold has entered a new bull market. No wonder gold has now hit all-time highs in many of the world’s currencies: the British pound, the Japanese yen, the Canadian and the Australian dollars, the Indian rupee, and the South African rand.
No wonder gold roared right past $1500 today! No wonder silver shot up past $17.00 an ounce today!
How long before gold hits an all-time high in the US dollar?
Just over a month ago we headlined a post “Higher Gold Price Targets: To the Moon!”, pointing to budget-busting new spending, compounding debt, and a field of presidential candidates basing their campaigns on offering voters more free things than their opponents. We wrote, “If financial analysts and portfolio managers around the world are starting to notice these things, at last, the target price for gold can barely be computed.”
Gold is up more than $470 an ounce since its low of $1046 in late 2016.
Last May gold traded at its low for the year of $1267. With today’s close over $1500, gold is up 20 percent from the May low.
Silver had a low last fall of $13.86. It’s 2019 low, like gold’s, also recorded in May, was $14.27. Now, finishing up over $17.00, silver is up 20 percent from its May low.
Those are explosive moves, particularly since both materialized in just a few short weeks.
“Confused central bankers flailing all about, banks dependent on Fed cronyism for their survival, foreign nations moving out of dollars and into gold. The remarkable strength of gold and silver is only an early warning of things to come.”
These powerful moves in gold and silver are not accidents. The world is growing more dangerous by the moment, and central bank authorities, not just at the Federal Reserve, but in Europe and around the world, know no other course but massive credit creation and money printing.
It is a path of dollar destruction. It is a road of no return.
We advise our friends and clients to add aggressively to their precious metal holdings now.
There are few phrases as unwelcome as “told you so.” It should be left in schoolyards where it belongs. For that reason, we won’t say it.
But we’re going to come uncomfortably close when we say instead …
“We hope you took our advice!”
Recently we trotted out time-tested market wisdom to “buy the rumor, sell the news.” As we approached the long-awaited Federal Reserve Open Market Committee meeting at the end of July, we made the case here and here that “that even if the Fed cuts rates, stocks will take a beating.”
So, we said that selling the news would trigger the next big decline.
And so it happened. The Dow Industrial began the last week of July at 27,300. Then the Fed announced its new policy rate and the Dow fell four straight days. It finished Monday, August 5 at 25,700.
The S&P500 began the week of the Fed announcement at 3020. Then the Fed spoke, resulting in six straight days (so far!) of lower prices. The index finished the following Monday at 2844. That’s a loss of six percent from its all-time high set just last month!
The biggest drop in each of those markets – and the worst day in the stock market so far this year – came on Monday when China stopped supporting its currency, the yuan, letting it fall to the lowest level in 10 years.
President Trump responded, designating China a “currency manipulator.”
Which, of course, it is. As is the United States. And in fact, the Fed’s interest rate cut day ago was nothing other than an act of currency manipulation itself. We said as much, citing the Mises Institute, here, and went on to explain, “The President wants a lower dollar, just like the rest of the world wants to lower their Yen, Yuan, and Euros. That’s what governments do in trade wars.”
And that is precisely the problem. Why should anyone put their faith in paper currencies that are mere insubstantial assertions of value and therefore so easily manipulated?
In fact, everything the Fed does is currency manipulation including interest rate manipulation, liquidity operations, paying banks interest on excess reserves, and both quantitative easing and quantitative tightening. The government’s fiscal behavior – borrowing and spending – can be described as currency manipulation as well.
We have warned many times (see here) that gold is the big winner in currency wars. It is because currency wars are conducted everywhere by legal counterfeiters of unbacked digital and paper money. No wonder gold has entered a new bull market. No wonder gold has now hit all-time highs in many of the world’s currencies: the British pound, the Japanese yen, the Canadian and the Australian dollars, the Indian rupee, and the South African rand.
How long before it hits an all-time high in the US dollar?
Other authorities, like a gold expert and former presidential candidate Ron Paul, have joined us in identifying this as a gold and silver bull market.
Let’s review what has happened…
Gold is up more than $400 an ounce since its low of $1046 in late 2016.
Last May gold traded at its low for the year of $1267. Since then it has traded as high as $1458. That’s up 15% from the May low.
The recent silver story is even more dramatic as we repeatedly forecast. Silver had a low last fall of $13.86. It’s 2019 low, like gold’s also recorded in May, was $14.27. Since then it has traded as high as $16.68, up almost 17% from its May low.
Those are the kind of substantial moves that should get anybody’s attention, particularly since both materialized in just a few short weeks.
If we look at the low of both metals in 2018, gold moved up more than 25%, while silver climbed more than 20%.
And those moves (the textbooks define a bull market as a move that takes prices 20% higher) qualify both gold and silver as being in bull markets.
No wonder a Bloomberg News story last week said, “gold fever is breaking out from London to New York.”
Because we are old hands at this – our identification of the new bull market, like that of Dr. Paul, came long before the most recent powerful moves higher – we’ll just leave you with the observation that this market is just getting going.
Let me repeat that: This market is just getting going. Wait until you see what happens when large swaths of the public begin to realize they need to protect themselves from stock market bubbles, criminally destructive monetary policies around the world, and compounding government and corporate debt.
Then you won’t need a textbook definition to recognize the bull market! Take steps to protect yourself and your family. But do it now. Don’t be left behind!
Nobody was very happy with the Federal Reserve’s announcement on Wednesday that it would cut its targeted Fed funds interest rate and the interest it pays on “excess reserves” by a quarter-point.
Wall Street wanted more, a half-point, or at least a promise by the Fed that more rate cuts were on their way. It didn’t get that promise either.
So at one point, the DJIA was down 400 points, before settling 333 points lower. President Trump tweeted “As usual, Powell let us down.”
The writer of a Mises Institute article this week said, “With the economy growing at 2.1 percent, unemployment at 3.6 percent, creating 170,000 jobs per month, and estimated underlying core inflation of 2 percent, no objective data justifies cutting rates that are already artificially low.”
Then what is the real reason for a rate cut of whatever size? It’s not like someone has to break out the paddles for an economic coronary event, a rate cut defibrillator for a stricken economy.
Then why cut rates?
The Mises articles suggest it’s because we’re heading into a currency war.
The President’s pressure on the Fed to lower rates has been relentless. But don’t let anybody tell you that Trump is the first to politicize the Fed. One Fed chairman famously said years ago that the Fed has to do what the president wants, or it will lose its independence.
Think about that for a minute!
What is the fallout for gold? What is the collateral damage from another interest rate cut of whatever size? It is a currency destruction.
The President wants a lower dollar, just like the rest of the world wants to lower their Yen, Yuan, and Euros. That’s what governments do in trade wars.
One other thing to note is that with its rate cut, the Fed also announced the early ending of its Quantitative Tightening activity. So monetary easing is the policy of the day. But this time it doubled down. Lower rates and a halt to cleaning up its bloated balance sheet. Constant easing drives bubbles and keeps zombie companies alive just a while longer. Both spell trouble down the road.
Loose money persists. Artificially contrived lower interest rates mean higher gold prices. And the world’s central banks know it. They are buying gold when the dollar trades up and when it trades down. They continue to buy gold when the Fed cuts rates, just as they did when the Fed was set on raising rates.
Here’s the latest from Bloomberg:
“Central banks continued to load up on gold in the first half, helping push total bullion demand to a three-year high, according to the World Gold Council.
“Nations added 374.1 tons in the first six months as Russia and China kept building reserves and Poland made a massive purchase. The trend is expected to continue, with a recent survey of central banks showing 54 percent of respondents expect global holdings to climb in the next 12 months.”
Nothing makes as much sense as buying gold when the money printers of the world are trying to lower the value of their currencies with interest rate cuts. And it makes more sense than ever when they become aggressive and competitive with their rate cuts, seeking to outdo one another in devaluing their currency. That’s what they do in trade wars.
“I think we’re headed for a bout of stagflation like we’ve never before seen.”
That’s the view of well-known market analyst Michael Pento.
Pento, the author of The Coming Bond Market Collapse, has proven himself to be a knowledgeable critic of bad fiscal and monetary policy, one who understands gold.
In a recent interview, Pento said that the stagflation ahead will be like nothing we have ever experienced “in the history of this nation.”
It’s not just the Fed that is panicking, he says. “Every other nation on earth now is panicking, too.” Central bankers are afraid that if they can’t engineer ongoing inflation, bank assets – the housing market, stocks, low grade, and junk bonds – will all tumble and turn into a massive crash.
According to Pento, the leverage in the system is so great that if things even started to correct a little bit, it could turn very quickly into a massive banking crash.
We’re glad Pento has identified stagflation as a very likely outcome of the monetary policies of the Fed and other central bankers. As the name suggests, stagflation combines elements of stagnation and inflation. Stagflation could be described as the worst of both worlds, weak on non-existent economic growth, accompanied by rising prices.
Weak growth makes it increasingly impossible for debtors – individuals and corporate – to service their massive debts. That’s because sales slow down, margins are squeezed, businesses are forced to cut prices, pay raises don’t materialize, and jobs disappear.
At the same time inflation means the purchasing power of the currency falls, interest rates rise in compensation, and, saving money becomes pointless. And it blows up the bond market.
There is a haven of safety and profit in an era of stagflation: Gold.
Some of our clients will remember the “stagflation decade,” the 1970s. Others will have heard about it. The stock market basically collapsed, and unemployment rose as did interest rates. Inflation skyrocketed.
Economic conditions were severe, and just when people most needed the money they had saved to keep afloat, it’s purchasing power failed them.
No wonder people began to pull out of troubled banks and failing currencies and moved into precious metals. A great bull market in gold and silver followed.
It is a pattern of movement that we are seeing today: confused central bankers flailing all about, banks dependent on Fed cronyism for their survival, foreign nations moving out of dollars and into gold. The remarkable strength of gold and silver is only an early warning of things to come.
Pento makes a strong case that stagflation is headed our way. Don’t delay. Speak with your RME Gold professional today about protecting yourself and your family with gold. If you don’t have an advisor, simply call RME Gold and you will be connected with one of our Gold Authorities.
The policy-setting Federal Reserve Open Market Committee meets this week on Tuesday and Wednesday, July 30 and 31. The announcement of any policy decisions will be made on Wednesday at 2 pm Eastern time.
At the top of the agenda is a cut in interest rates. We think that if the Fed fails to cut rates, Wall Street will throw another one of its infamous temper tantrums and stocks will fall. On the other hand, we think the possibility is growing that even if the Fed cuts rates, stocks will take a beating.
Take advantage of the new trend in the Gold-Silver Ratio. See our recent post, here, and speak with your RME Gold professional. He can give you examples of just how this powerful profit strategy can work for you.
Look Out Below!
Emerging market debt has climbed to $69.1 trillion. From Financial Times:
“Debt in the developing world has risen to an all-time high, adding to strains on a global economy flagging under the weight of rising trade protectionism and shifting supply chains.Emerging economies had the highest-ever level of debt at the end of the first quarter, both in dollar terms and as a share of their gross domestic product…
“The combined debts of 30 large emerging economies rose to 216.4 per cent of their GDP in March, from 212.4 per cent a year earlier.”
Exit Rule for the Stock Market Bubbles
From hedge funder John Hussman:
“One of the most important warnings offered by firefighters is simple: get out early.
“Similarly, our ‘Exit Rule for Bubbles’ is straightforward: You only get out if you panic before everyone else does. You have to decide whether to look like an idiot before the crash, or look like an idiot after it….
“Presently, we observe [stock] market conditions that have been associated almost exclusively, and in most cases precisely, with the most extreme bull market peaks across history.”
Why Can’t We All Just Print Money?
“A 20-year-old woman was recently arrested in Germany for walking into a car dealership and trying to by a €15,000 car with fake banknotes printed on a cheap inkjet printer using regular printing paper….
“At first, everything went smoothly. She inspected the car, took it for a test drive, but when the time came to pay the €15,000 price, dealership staff were stunned to receive a waddle of €50 and €100 bills that looked more like Monopoly money than actual currency. One employee told German media that he literally asked the woman if she wanted to play Monopoly or buy a car, but after seeing that she was serious, he called the police.”
Because It Costs More and More to Buy Less and Less!
The $100 dollar bill has overtaken the $1 dollar bill for the first time in history as the most widely used paper money.
Citing the Federal Reserve, the IMF reports there are more $100 bills circulating now than ever before. The $1 bill is now number 2, while the $20 dollar bill comes in third.
The number of $100 bill in circulation has almost doubled volume since the global financial crisis. (see chart).
No wonder we prefer gold! It’s the world’s superior money for wealth preservation, profit, and even privacy
It turned out to be pretty good advice. Silver is up more than $1.00 an ounce since then.
Nice. But experienced gold and silver investors and professionals watch something else: the gold-silver ratio.
That’s because, in bull markets like this, silver often outperforms gold. It’s something we’ve seen over and over again. Experienced gold and silver investors and professionals want their portfolios to emphasize the precious metal poised to move up the most.
Since silver is now outperforming gold, there is a window of opportunity for you to increase your precious metals holdings with an easy strategy, one I have used myself for many years.
It’s called the Gold-Silver Ratio strategy. The ratio is simply the price of gold divided by the price of silver. In other words, how many ounces of silver it takes to buy one ounce of gold.
In a precious metals bull market like this, both gold and silver move higher. But since we want to be in the one that moves the most, at these high ratios we recommend trading gold for silver.
Later, when the ratio is lower you can trade your silver back into gold with a net increase in the number of ounces of gold you own.
As you can see from the following chart, the Gold-Silver Ratio has been moving higher for some time. Suddenly a couple of weeks ago it spiked briefly at 95 to one, turned around, and began to move sharply lower as we expected.
Although it is moving lower, as I write this the ratio is still around 86 to one, still highly advantageous for you to take advantage of this strategy and increase your precious metals holdings without making any additional purchases.
I urge to speak with one of our professionals. Even if you didn’t buy your gold from us, they are happy to explain this powerful strategy in more detail and answer your questions. We especially like this simple strategy for growing your gold and silver holdings because you are always invested in precious metals, moving into the precious metal that is relatively undervalued and therefore the one that promises the greatest relative price appreciation.
Most of the biggest banks and financial institutions find very little fault with the monetary status quo. After all, they are the beneficiaries of it. Bailouts preferred borrowing at the Fed’s discount window, protection from market competition, and interest on excess reserves are just a few the privileges they enjoy under the Federal Reserve’s monetary regime.
There are policy differences at the margin among some of them from time to time. Some will prefer one policy option to another one very much like it, one interest rate adjustment more than another, or one quantitative easing or tightening schedule more than an alternative. But such differences and debates occur within a narrow range of allowable opinions.
But every now and then a development looms so largely, a consequence of monetary malfeasance so certain, that even loyal banking cronies have to say something.
Such is the case with the spreading de-dollarization of the global economy.
Although we have been warning our clients and friends about the certain ending of the US dollar’s role as the world’s reserve currency, one banking giant has noticed this 800-pound gorilla in our monetary future.
From JPMorgan Chase, the largest US bank:
“We believe the dollar could lose its status as the world’s dominant currency (which could see it depreciate over the medium term) due to structural reasons as well as cyclical impediments.”
The bank even says that diversifying from the dollar with a higher weighting in precious metals “makes sense.”
Indeed, it does.
JPMorgan Chase asks if the dollar’s declining role is already under way? Its answer makes us wonder if they have been reading our blog. It writes:
“As a share of overall central bank reserves, the USD’s role has been declining ever since the Great Recession….
“Central banks across the globe are also adding to gold reserves at their strongest pace on record. 2018 saw the strongest demand for gold from central banks since 1971 and a rolling four-quarter sum of gold purchases is the strongest on record. To us, this makes sense: gold is a stable source of value with thousands of years of trust among humans supporting it.”
The world is beginning to de-dollarize. If you’d like to know why read our blog posts over the past year.
Or look instead at the debt ceiling suspension deal working its way through Washington right now with its $320 billion in new spending. To put it another way, spending in the current fiscal year is already up – before the new debt deal — more than 10 percent over last year, while revenue is up just 3.3 percent.
The deficit this fiscal year looks like it will come in a $1.1 trillion
Time to de-dollarize your investments.
Your RME Gold professional can help you embark on a sensible plan to diversify out of the debt-loaded, debt-backed, decaying dollar.
“We are right now sitting on a bubble that’s going to explode and it’s going to be a real bad situation, and we better get rid of the debt and we better straighten ourselves out because we have debt on debt on debt.”
Presidential Candidate Donald Trump, April 2016
The debt bomb is ticking.
That’s because nothing will stop Washington’s spending. Nothing.
Watch the Democrat debates. They don’t even mention the debt.
Not a word. Not one.
Nor do the moderators of their debates, the Democrat’s media allies, mention it.
Not a word. Not one.
So, Washington will be raising the debt ceiling again soon.
But, of course, it’s not just the fault of Democrats. The Drudge Report just prominently featured a Daily Caller report that not only do the websites of the Democrat candidates not mention the debt, “The ‘Promises Kept’ section on President Donald Trump’s reelection website makes no mention of the national debt.”
There was a time when there was a Capitol Hill constituency for fiscal responsibility. It was small, but at least it made some noise.
There’s not much of a constituency like that today.
Some debt ceiling backstory: In early 2018, the debt ceiling was suspended by Congress until a few months ago, March 1, 2019. At that time the debt limit was reset to just over $22 trillion. Since then, US government debt has officially stayed at that level. How is that accomplished, since the government still spends more than it collects?
Since the beginning of March, the Treasury has used money shuffling techniques, “extraordinary authorities,” to pay its bills. The Treasury believes that it can keep this shell game going until October. As we pointed out last week here, Nancy Pelosi thinks that may not be able to keep it up longer than August. After that some programs would be scaled back, some payments would go unmade.
Either way, Congress will be forced to raise the national debt ceiling soon.
The debate on the debt ceiling increase comes at a time of the most divided Congress and the polarized electorate in recent memory. The debate could be rancorous and bitter. That would involve some horse-trading on votes and even agreement on new government spending programs, come more crony deals, to corral the votes necessary for passage.
Or lawmakers could just close their eyes and hope the issue will go away. One proposal is to simply suspend the debt ceiling for 2 ½ years – to take the issue off the table during the elections season in 2020. After all, the nation’s solvency takes a back seat to the real issue politicians care about on both sides of the aisle: REELECTION!
The net effect of another suspension or of a protracted fight “solved” with new spending initiatives that are unpaid for, will be serious questions about US solvency in financial centers around the world. Already foreign central banks are moving away from the dollar and to gold.
New questions about US solvency cannot be comfortably answered. In fact, the only real answer to how debt that comes due today can possibly be paid is by issuance new debt tomorrow.
Or by printing more money of no intrinsic value.
That is why gold marches up in lockstep with the rising debt ceiling.
The historical correlation between the rising debt ceiling and higher gold prices is very strong.
The dollar is backed by nothing but debt. But gold is real money.
Is a short squeeze developing in the silver market? A short squeeze is an exciting market event in which rising prices give rise to still more rising prices, which in turn give rise to more… Well, you get the idea: sharply higher prices!
“Shorts” are speculators who have sold silver for future delivery in the hopes that as that date approaches, they will be able to meet their obligation by buying at lower prices. They hope to profit by the difference in those prices.
But if silver prices are actually higher as the date nears, they have to buy at those higher prices to meet their obligations. And that additional buying (called “short covering”) drives rising prices higher still, which stampedes other shorts to cover their positions with more buying.
And so it goes.
Here is some of the evidence that a silver short squeeze may be in development. As I write this, silver is up more than 13 percent since the end of May. It has even begun now to outpace gold.
As a consequence of this silver strength, the gold/silver ratio that we have written about many times (most recently here) has begun to trend lower. The ratio peaked just two weeks ago at 95 to 1 and as I write is now just below 88 to 1.
Update (7/24/19): as we’ve been saying all along, the ratio keeps gradually shrinking, and the investment opportunities are shrinking along with it. Today the ratio is down to 86:1.
Two takeaways for our clients and friends: If a silver squeeze is underway, you can expect a dramatic (and sometimes very dramatic) increase in silver prices. Your RME Gold professional will monitor all the latest developments and is prepared to advise you how to emphasize silver in your portfolio to take advantage of the move.
The turn-down in the gold/silver ratio also provides you with an important reminder about the potential gains available by trading gold for silver. Be sure to discuss this important and time-tested strategy. There is still time.
A FOLLOW-UP ABOUT DEUTSCHE BANK
Last week we wrote about troubles at Deutsche Bank, the German banking giant. We wondered it was the “key log” in the banking log-jam like Bear Stearns and Lehman Brothers were a decade ago. Their collapses led to a torrent of other collapses, a chain of destruction that became known as the Great Recession and Mortgage Meltdown.
Today we note that others are wondering the same thing. Zero Hedge reports that Deutsche Bank clients are pulling a billion dollars a day from the bank. “The similarities to Lehman Brothers are growing by the day,” it writes.
An old market adage advises to “buy the rumor, sell the news.”
In application, it suggests that you can buy stock XYZ when the market assumes that something important – a takeover, an acquisition, a major breakthrough – is imminent, but then to sell quickly when the actual news hits.
There is a justifiable cynicism to the advice. After all, it sometimes happens that market rumors are fabricated out of little or nothing, simply to run a stock price up. The rumormongers are poised to sell at the top when the news proves to be entirely fictitious or less than impressive.
That’s the description of a “pump and dump” scheme.
When the news is real, insiders have still positioned themselves well in advance. Lest they be accused of illegally trading on material non-public information, some patiently wait to profit when the rumored announcement is finally made.
“Buy the rumor, sell the news” is probably pretty good advice in the face of the widely expected Federal Reserve interest rate cut. In this case, we are not suggesting you go out and buy stocks before the upcoming Fed announcement. Certainly not. But realistically, if you are holding stocks you are already participating in the bubble; you have already effectively “bought the rumor.”
If the market universally expects that the Fed will cut interest rates, what happens when it either does so – or fails to do so – at the July meeting?
First, if it fails to cut rates, the disappointment will be widespread. Expect a hard fall in stock prices. Hard. The S&P 500 fell 25 percent in three months last fall over interest rate disappointments.
Meanwhile, the market has been buying the rumor, the expectation of a Fed rate cut, since the first of June, climbing non-stop ever since. The market believes a rate cut is a given.
That’s the “pump” part of the “pump and dump” scheme.
But if the Fed does cut rates, some observers suggest the Wall Street will “sell the news.” That’s the “dump” part of the “pump and dump” scheme.
Wall Street “selling the news” will trigger the next big decline. That’s the view of Jesse from Cafe Americain and others close observers.
It is a view we share. Although there is no shortage of other candidates to trigger the stock market sell-off, typical rumor/news market behavior is as good a trigger candidate as any. This is especially true in the face of what fund manager John Hussman calls some of the most extreme market valuations in history. Says Hussman, “Presently, we observe market conditions that have been associated almost exclusively, and in most cases precisely, with the most extreme bull market peaks across history.”
Be ready. The highly anticipated Fed meeting is only two weeks away!
We addressed this briefly the other day, but it is a financial megatrend so important that we want to loop back around to add to what we wrote.
Foreign governments and their central banks have lost faith in the US dollar.
Trust in the dollar dates back more than a century when people used expressions like “sound as a dollar,” or “the dollar is as good as gold.”
Although faith in the dollar lasted for a long time, today it is eroding rapidly.
Paper money is basically a confidence game. As long as confidence persists, the game can continue. Once people begin to lose confidence in the game, things start to break down.
Ask investors in Bernie Madoff’s funds. There were those that got a whiff of the funny business and got out early. Others figured the confidence game out too late.
Foreigners have reasons of their own for shying away from the dollar. Things like the Iraq war didn’t help. Economic sanctions that have replaced diplomacy are another reason that foreign nations are abandoning the dollar.
But those reasons wouldn’t really matter, and the dollar’s preeminence would last if the dollar were still as good as gold.
But, of course, it is not.
That’s why China added 10.3 tons of gold to its reserves in June. That’s the seventh straight month that China added to its official gold position. It is in addition to the 74 tons it added in the six months through May.
The last year has seen China reduce its US Treasury holdings by around $70 billion.
Poland added aggressively to its gold reserves recently, doubling its holdings. Turkey, Russia, Mexico, and India are prominent among those adding to their gold reserves.
We think it is vital that our clients and friends read these signs of the times. Such outsized financial dynamics can tell you what is coming.
For example, former Fed chairman Alan Greenspan said he didn’t see the housing bubble information. No one could have foreseen it, he said. Somehow he missed the fact that mortgage debt had grown from $1.8 trillion to $8 trillion on his watch.
That’s what we mean by “outsized financial dynamics.”
The move by foreign central to build gold reserves are a sure sign that the dollar confidence game is beginning to end. As we wrote in a recent post, “Suspicions about the reliability of the international dollar-reserve monetary system are running so high that countries are not just adding to their gold holdings. They are bringing their gold home from accounts at foreign institutions.”
Federal Reserve monetary officials are very clever and eventually, they will resort to the most inventive shenanigans and desperate measures to try to keep the game going.
Just like Bernie Madoff.
Those measures won’t work. But you already know the confidence game is ending. That’s why you are buying gold.
For many retiring police, firefighters, and public safety personnel, they’ve spent their careers protecting the public, and not micromanaging their finances.
Suddenly, as retirement approaches, these professionals are forced to shift their attention to the complicated world of retirement financing. It can be overwhelming at first, but public safety personnel often get retirement benefits that other professions do not. In the past years, more police, firefighters, and other public safety personnel have reinforced their retirement with gold.
What is a Deferred Retirement Option Plan (DROP)?
Arizona allows police officers to retire with pensions (62.5% of their final average salary) after 25 years of service. Pension amounts increase or decrease as service years exceed or fall short of 25, respectively.
Some police officers, firefighters, and other public safety personnel qualify for DROP, or the Deferred Retirement Option Plan. Qualification into DROP depends on your Retirement Benefit and Membership Tier. DROP provides the opportunity to receive a one-time lump-sum payment upon retirement, in addition to your monthly retirement payment.
Investing the DROP lump sum in gold
This lump sum could be used for paying off a mortgage, investing in “safe” trades on the stock market, or to travel the world. Precious metals, particularly gold and silver, are also excellent investments for retired police and firefighters because of the stability, versatility, and potential profits that come with them.
Any financial advisor will recommend diversifying your retirement portfolio. Putting your nest egg into the stock market comes with quite a bit of risk, especially as the bull market shifts to a bear market and economic bubbles burst. If the mounting national debt and deficit is any indication, the coming years may be a wild ride for those investing their retirements entirely in stocks and depreciating dollars.
Gold as an Inflation Hedge
The values of gold and silver tend to correlate negatively with monetary policy set by the global central banks and Congress. The 30-year price of gold has been fairly consistent, with some large-scale peaks and very few valleys.
Hedge investments offset losses in other types of assets. In the turbulent market since the dot-com bubble recession and skyrocketing national debt, investors have bought gold as a form of wealth insurance, so they don’t lose big in a stock market crash, or the continued inflation of the U.S. dollar.
As an example, if you bought an ounce of gold in the year 2000 for $272.65, it would be worth $1,360 in 2018. Even adjusting for inflation, $1,360 in today’s money is worth $921.15 in dollars from the year 2000. Any way you slice it, gold prices ramped up, despite massive governmental debt, recessions, and stock market disasters.
The stock market is incredibly volatile and has been known to crash. As the bull market turns to a bear market, wise retirees are looking to precious metals as a hedge against inflation.
If a police officer got a lump sum pension of $300,000 in the year 2000, it would have the purchasing power of $200,247 in 2018, losing about a third of its value to inflation. If that lump sum had been invested in 1,100 ounces of gold in 2000, it would have the purchasing power of about $1.5 million in 2018. In 18 years, the police officer would have nearly quintupled his pension, despite the chaotic economy.
Keeping all of your assets in cash and stocks puts you at the mercy of the market, while the gold price tends to have an inverse relationship with the value of the dollar.
Profit Potential of Precious Metals
Precious metals are not get-rich-quick schemes. Those looking to make an immediate profit should probably look elsewhere. That does not mean great windfalls are out of the question.
Silver sold at about $5 per ounce in 2004 and has followed a virtually identical route, as it relates to price fluctuation. The Federal Reserve announced in late 2005 that it would stop publishing the M3 monetary aggregate, the most comprehensive report pertaining to actual dollars in circulation. Three rounds of quantitative easing (money printing) followed. Meanwhile, the Gramm-Leach-Bliley Act of 1999 repealed 66-year-old legislation contained in the Glass-Steagall Act that mandated all commercial and investment banks be separate institutions.
The results of the aforementioned monetary policy and legislative moves are well-known. The U.S. economy went into its worst recession since the 1930s. Millions of Americans lost their homes, savings, and pensions; while gas prices reached historic highs. Those who invested in silver prior in 2004 and prior, however, were sitting prettier than ever.
Those $5 ounces of silver purchased in 2004 peaked at $48.58 in 2011, an astounding 872% increase, without even factoring inflation. The value of the dollar and other world currencies plummeted, while precious metals reached unprecedented heights. These types of gains are not the norm, but the potential is always there, due to very fluid monetary policies at the Fed and U.S. Treasury.
There are no guarantees in currency, but history can teach us powerful lessons on long-term value.
Police officers are proud of their badges and wear them with honor. Decorated public safety personnel earn various medals throughout their careers and proudly display them. Precious metals seem to be a natural investment for both.
Gold and silver coins have both market and intrinsic value, and American Eagles and Canadian Maple Leafs are popular coins among both investors and collectors. Coins, however, have higher premiums on them, versus gold and silver bars because of collectibility. Ultimately, bars and coins are worth their weight in the respective metal, with intrinsic value being in the eye of the beholder.
Retired police officers and firefighters served our country with bravery and dignity. Our heroes deserve to live their Golden Years comfortably. RME consultants are highly knowledgeable and experienced in gold and silver investing, whether your choice is bullion or IRAs.
Contact us today and we’ll walk you through the buying process.
There are a lot of reasons that real money – gold – outperforms irredeemable money created out of thin air.
But for today, here are three news stories that spell higher gold prices in the immediate future.
Reason Number One: The US government, hopelessly in debt, is recklessly piling up more debt by the hour.
Total federal debt, $22,022,825,000,000, is more than 100 percent of total US productivity. But that is not enough to stop Washington’s deficit spending.
The Treasury estimates that the national debt ceiling will have to be raised sometime around October. Nancy Pelosi thinks it may have to be raised in August to avoid a federal default.
Reason Number Two: The world’s central banks continue to ditch the dollar.
This is a story we’ve highlighted many times, here, here, and here.
The implications of this global “de-dollarization” are so far-reaching that we can hardly believe it receives such little attention.
We’ll have more to say about this soon, but just to share one story that captures the megatrend, Poland’s central bank announced last week that it has added 100 tons of gold to its reserves since the beginning of the year. That is four times what it added to its reserves last year.
Those willing to read between the lines will see that suspicions about the reliability of the international dollar-reserve monetary system are running so high that countries are not just adding to their gold holdings. They are bringing their gold home from accounts at foreign institutions. For example, at the same time Poland is adding aggressively to its gold reserves, it is repatriating gold that has been held in its accounts at the Bank of England.
Reason Number Three:Countries around the world are creating institutions to allow them to circumvent dollar-denominated financial institutions.
US control of the international payments system enables it to enforce sanctions against foreign countries, and then to sanction countries that evade existing sanctions. The proliferation of these US sanctions has spurred the development of non-dollar, non-US settlement alternatives of foreign transactions.
Since the Iraq war, a host of new bi-lateral and multi-lateral trade agreements have sprung up among nations. But most significant is the recent announcement by British, French, and German officials that a new system that will enable them to bypass the US SWIFT payments system is now operational. The new system, INSTEX, will initially allow countries to circumvent the US and continue to trade and settle accounts with Iran.
The long-term consequence is to sharply lessen the world’s reliance on the dollar. The dollar reserve standard that has prevailed since the end of World War II has added marginally to the purchasing power of the US dollar. A dwindling reliance of the dollar will have the opposite effect of diminishing the dollar’s purchasing power.
It is our hope that these three news stories will help our clients and friends read the signs of the times and take steps to protect themselves from potentially cataclysmic changes in the dollar and its value.
More than ever, you can’t believe everything you read. What has been hailed as “the Information Age” might as well be renamed “the Misinformation age,” as fake news continues to dominate social media and newspaper headlines around the world.
Not surprisingly, myths about gold have made their rounds in the mainstream media. From the comically misinformed to the moronically smug, every blogger thinks they know the real value of gold. When it comes to investing in gold, everyone has a strong opinion, and most of them aren’t based in reality.
Here are three myths about investing in gold that need to die.
Myth #1: The Gold Bubble Has Popped
This myth is a two-part myth. In 2010, George Soros famously said, “Gold is the ultimate bubble.” First of all, gold is not a bubble. Although several alarmist headlines followed suit, and warned of a bubble burst in 2009 when gold spot prices hit $1000 per ounce, the “pop” never happened.
Precious metals, and especially gold, don’t devalue and inflate like mass-printed, free-floating currency.
“Increasingly, the wealth of the modern world has come to be represented by financial assets rather than real assets, and this to me is a very unhealthy situation, because financial assets are inherently unstable. Financial assets (currencies, bonds, mortgages, stocks, bank credit, etc.) can be quickly and violently reduced in value, or destroyed completely by inflation or deflation.”
Though demand for gold may rise and fall with the volatility of the market, gold is a real asset. It is a physical commodity that maintains its value, despite the unrelenting devaluation of the American dollar and the fickle fluctuations of the financial markets. The Fed has destroyed 96% of the US dollar’s purchasing power since its establishment in 1913, while an ounce of gold has maintained its value.
Anyone calling the gold and precious metals market a “bubble” is in direct need of a reality check.
Myth #2: You Shouldn’t Buy Gold when the Economy is Doing Well
Anyone riding a stock market bull run might scoff at the prospect of buying gold. Time and time again, investors are so elated with their momentary profits that they ignore the very real signs of collapse.
In 1928, shortly before the Wall Street Crash of 1929, president Calvin Coolidge said, “No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity.” Needless to say, the president had to eat his words when the market imploded and a 10-year depression went into effect.
From amateur investors to the highest echelons of financial acumen, no one knows precisely what the market will do. You’d be amazed at how many “financial experts” get it wrong, year after year. Despite the yammering from financial blowhards, the market is more precarious than you think…especially so with the skyrocketing deficit, unthinkable national debt, and several warning signs of an imminent recession.
As stated before, it’s not precious metals’ value you need to worry about; it’s everything else.
Myth #3: Gold’s Return-on-Investment is Poor
There’s no shortage of blogs bemoaning gold as a weak investment, complete with all the earmarks of fake news:
These blogs show year-over-year growth of gold compared to other investments, with very skewed charts and specific time frames that back up their points, without any consideration for alternative points of view.
Let’s look at the past 20 years. In 1999, the closing spot price of gold was $290.25 per ounce. In 2019, the price per ounce has been hovering around $1,300 per ounce. Compare this to the DOW’s gains since 1999, from 16,496.44 to 26,543.33. The S&P 500 has grown from 2,041 to 2,939 over the same period.
Though the DOW’s gains are not negligible at 160%, they pale in comparison to gold’s growth at 460%. The same applies to the S&P 500, at 144% growth. Though investing in gold isn’t a get-rich-quick scheme, investors have made significant profits from gold.
If gold and precious metals don’t get you a decent ROI, you’re doing it wrong.
Everyone thinks they’re an expert until a catastrophe. Every wannabe financial guru is forced to eat crow when the markets shift and the world enters panic mode. Those that scoff at gold as an investment option are likely to lose everything the next time the market goes belly-up. For sound investment advice on protecting your financial future with gold and precious metals, consult with Republic Monetary Exchange today. Call 602-955-6500 or 877-354-4040.
It’s hard to know what will prove to be the key log in the log jam.
That’s the log that, once moved, sets the whole destructive torrent of all the other logs loose to destroy everything downstream in their path.
It could be Germany’s Deutsche Bank.
In the Panic of 2008, Bear Stearns went first. The Fed threw $29 billion into the mess to get JPMorgan to take over the Bad News Bear.
A lot of good that did. Soon other logs were rolling: IndyMac, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac.
It was the biggest bust since the Great Depression.
Deutsche Bank is the world’s 15th largest bank. It is slashing operations everywhere and cutting 18,000 jobs.
While Deutsche Bank is flailing about, the Bank of International Settlements in Switzerland, sort of a central bank for the world’s central banks, is warning that the corporate debt market is growing unstable. From a story in the Guardian:
“The Basel-based watchdog said a surge in the sale of collateralized loan obligations (CLOs), which are collections of low-grade corporate debts packaged for sale to investors, was reminiscent of the steep rise in their forerunner – collateralized debt obligations – which ‘amplified the sub-prime crisis’.”
It is eerily like the last time. Gold was about $600 an ounce at the beginning of 2007. Then banks started failing and the mortgage crisis set gold running to $1900 in 2011.
Deutsche Bank’s problems are just one sign that “the financial system is in trouble,” says Jim Rogers.
Deutsche Bank could be the key log in the log jam. But there are others major European banks that are going to have to confront similar restructuring.
It’s best to just get out of the way of a crumbling financial system. It’s best to move into gold now.
Financial analysts around the world are racing to revise their gold price targets higher… Way higher.
Many are recommending allocating more of their portfolios to precious metals.
Maybe they are starting to take notice of some troubling fiscal and monetary developments.
June’s gold breakout, taking it to over $1,442 was like a wake-up call for many of them. The technical picture is incredibly strong. Even after pulling back to $1,400 an ounce, gold finished last week $74 over its 50-day moving average and $119 over its 200-day moving average.
Maybe somebody noticed that “the everything bubble” engineered by the Federal Reserve and its fellow central banks includes not just a stock market bubble, but a massive bond bubble as well. The bond bubble has resulted in $13.4 trillion in global negative yielding debt!
Negative yielding debt means that when you buy a bond, for say $1,000, at maturity it is redeemed for less than $1,000 dollars.
How long will individuals and even institutions buy bonds with negative yields? I don’t want any and you probably don’t either. It is a market anomaly so great that it fairly screams for informed people to get out of the way before it breaks. To get out of the way of not only bonds but stocks as well.
Maybe they finally noticed all the politicians running around the country promising free goodies to everybody.
Maybe they are starting to pay attention to US spending and debt.
If financial analysts and portfolio managers around the world are starting to notice these things, at last, the target price for gold can barely be computed.
Right now, as John Rubino notes, the financial world’s total invested capital in gold is a mere one percent. What happens when that share rises as it inevitable will? Long-time Templeton Financial fund manager Mark Mobius says portfolios should contain closer to 10 percent gold.
That, says Rubino, would send gold to the moon!
If you have noticed any of these troubling fiscal and monetary developments yourself, call or stop by our offices to discuss ways of protecting yourself and your family with prudent precious metals investments.
What a tragedy Zimbabwe has been. And a monetary laughingstock for the ages.
Now Zimbabwe wants to do it all over again.
Like so many of the African countries that fell under the control of native Marxists-Leninists and other indistinguishable leftist totalitarians in the post-colonial period – Nyerere, Mobuto, Kaunda, Lumumba – it was Zimbabwe’s bad fortune to be home to a madman named Robert Mugabe.
Zimbabwe, of course, is the former Rhodesia. As Rhodesia, it was a food exporting nation. But not long after it became Zimbabwe in 1980, and under the rule of Mugabe, it soon couldn’t produce enough food to feed its own population.
Such stories of economic train wrecks are all too familiar in sub-Saharan Africa. But what made Zimbabwe the butt of the economic jokes was its hyper-inflationary monetary policies.
Gideon Gono, the head of Zimbabwe’s central bank (sort of the Ben Bernanke of Africa) was eventually printing Zimbabwe dollars at a frenzied pace. Annual inflation was reported to have hit 11,200,000 percent in 2008!
Somewhere around the office, I have a 100 trillion Zimbabwe dollar bill. Worthless, except as an artifact of one of the worst inflations in recent history. Afterall, at the end of the money-printing experiment, it took 35 quadrillion Zimbabwe dollars to buy one US dollar.
It was literally not worth the paper it was printed on.
Eventually, Zimbabweans dumped their dollar and began using the US dollar instead. That helped for a while, but now they are back to their old ways. Zimbabwe has banned the use of foreign currencies, including the US dollar, and issued a new Zimbabwe dollar. Predictably, it put the force of law behind it, designating it the new legal tender.
Prices are surging, People are taking to the streets. It is a human tragedy, one enacted again and again. One must feel sorry for the people of the land victimized by their government’s policies. But don’t laugh out loud, because failure is the certain fate of unbacked, irredeemable paper money everywhere. That includes the US dollar.
We can only wonder how many times the lesson needs to be relearned.
“NOTE: So far this year, any pullback of gold below $1,300 has been a favorable opportunity to add to your holdings.”
It’s always risky to make a call like that because we don’t want anyone to fail to acquire gold because they waited for a price pullback. But there are often trading patterns that appear – after a lifetime in the business – predictable.
For example, after a sharp rise, the only way for “long” futures markets traders to realize their profits is to sell. When a market falls, those with “short” positions take their profits by buying. Accordingly, we are never surprised to see a pull-back, no matter how brief, after a good run, or a bounce up after a market moves lower.
Still, modesty demands that we chalk up to good luck that our clients had several opportunities to buy gold below $1,300 as we suggested before the bull market sprang to life in June.
We have just experienced a powerful wave up, in a very short period. From $1,267 on April 29, gold roared up to more than $1,440 in June. On July 1 it closed at $1389.
We would like to suggest now that any pullback to $1,400 or below is a good gold buying opportunity. But be warned: it may not last. There is a very real and broad-based rotation into gold taking place at the level of governments and major institutions globally.
Something big is happening. Take advantage of the price break while you can.
Thought Two: Now that we have entered the second half of 2019, it looks increasingly apparent that the rest of the year will be verypainful for stock investors. We are now in the longest economic expansion in history, tepid though it has been.
David Stockman makes the point that during the past twelve years the stock market’s growth has outpaced the growth of the main street economy by six times.
That is unsustainable.
Stockman asks how the big shots at the Fed could miss this and countless other data points that confirm the basic disconnect between the state of the underlying economy and the market.
The answer is simple: They always miss it.
One portfolio manager interviewed by Yahoo Finance said investors stand to get “clobbered.”
We agree and will have more to say about it in the weeks ahead.
Hint: They didn’t have staggering debt and bottomless printable currency in mind.
As we celebrate America this week, our independence and the birth of our Republic remember that the founders specifically wrote into the Constitution itself a gold and silver based monetary system for the new nation.
First of all, they gave Congress the power to coin money. From Article I, Section 8, “Congress shall have Power…to coin Money.”
Not print. Coin.
It’s hard to believe that proponents of today’s irredeemable, unbacked printing-press money schemes can get away with conflating printed money with coined money.
The founders certainly knew the difference between the two. They had experienced the collapse of the irredeemable paper currencies of the colonies and that of the Continental Congress. The Continental paper dollar was such a failure that it gave rise to a popular expression, “not worth a Continental.” It was an all-purpose description of complete worthlessness.
In Section 10 they addressed the monetary system again without ambiguity: “No state…shall make any Thing but gold and silver Coin a Tender in Payment of Debts.”
Why did the founders incorporate these provisions into the Constitution? First of all, they have learned men, well-read in the historical precedents of paper money failures, base-money inflations, and spendthrift governments.
Secondly, just as they intended to set up a government that would protect our rights, they wanted the new government to protect our wealth as well.
But our politicians had other ideas. They stripped away the protection gold and silver provide to a monetary system, first in the Civil War era with the “greenback dollar,” and then again later with the Federal Reserve system and the final break with a gold-backed monetary system in 1971.
Although we endured a brazen act of unconstitutionality from 1933 to 1974 when the government made it illegal for Americans to own monetary gold, today you can own gold.
So today, our politicians have failed to do what the founders wished, and instead of a sound monetary system that protects your wealth, you have to protect your own wealth.
And that’s exactly why we are here at Republic Monetary Exchange.
Have a happy Fourth of July. Spend some time thinking about the blessings of liberty this week. And when you or someone you know needs help protecting their wealth, call or stop by and find out why the founders trusted gold and silver.
Something about the way the world works seems to have been forgotten in America.
Here it is:
This is a world in which people’s wants are virtually limitless. Resources, on the other hand, the means of fulfilling those wants, are strictly limited.
Economics is about meeting unlimited wants with limited means. It is about trade-offs. It is why accounting is important.
But today people in Washington have an aversion to confronting the real world with its limited resources.
They missed out on that 400-year-old nursery rhyme which said that if wishes were horses, beggars would ride.
These thoughts occurred to us after the Democratic presidential debates. The news site The Daily Caller noticed it, too: “Moderators Ask Zero Questions About National Debt In First Two Democratic Debates Combined.”
“Moderators for the first two Democratic debates asked a combined zero questions about the rapidly expanding national debt.
“NBC and MSNBC hosts Savannah Guthrie, Lester Holt, Chuck Todd, Rachel Maddow, and José Diaz-Balart failed to ask any of the 20 candidates on the stage Wednesday and Thursday night about the national debt.
“The moderators covered a range of topics — other than the national debt.”
You would think that with $22 trillion in unpayable national debt (and unknown trillions more in promises the government has made to pay people for things in the future), candidates and news moderators would be deeply concerned about the ways and means of our national solvency and survival. But not so!
No wonder politics in America has become a contest of offering the people something for nothing: free housing, free medical care, free education, guaranteed annual income.
You knew, of course, that I would bring the discussion back to gold. This indifference to the realities of hard-world accounting and clear-eyed fiscal responsibility got underway with the ending of the gold standard, something that happened in two major steps. The first was with FDR’s unconstitutional confiscation of the people’s gold. The second step was Nixon’s repudiation of America’s promise to redeem its dollars in gold.
A gold-based monetary system provides discipline on governments. No wonder politicians hate it! They can’t simply issue a decree or pass a law that increases the amount of gold in the treasury.
In a gold system, they are forced to live in the real world.
That’s why gold had to go. It is why the Federal Reserve was created to replace it.
If you understand how grim it is that Washington can’t be bothered to deal with little things like national solvency and unpayable debt, you will understand why you need to take steps to insulate yourself from the governing classes’ failing monetary system.
That’s what we’re here for. RME’s experts can help you get started on a plan to protect yourself and your family with gold and silver.
Bloomberg writes this about gold: “Futures post the highest close in six years; funds pile in.”
With gold hitting six-year highs, major institutional financial analysts around the world have been busy revising upwards their precious metals price targets.
Here’s a sampling of comments and observations about the precious metals bull market:
“Gold bulls are back in control,” said one analyst in a Bloomberg article.
Michael Oliver, a technical analyst, said in an interview, “By the end of the year we should see $1,700 in gold. That’s not the end, it’s just where it will be at year-end. We’re in a major situation.
John Rubino headlines a piece about silver this way: “If History Still Matters, Silver Is Poised For A Huge Move.”
Agora Financial wrote this week, “This could be your last chance to hold physical metal before the masses come rushing in.”
Jim Sinclair, a veteran precious metals analyst, called the timing of the June breakout in precious metals with amazing precision. He called for the breakout within a couple of days. Now, says Sinclair, we’ll see a complete monetary re-set by 2024, or heading into 2025, with a gold price so high, I won’t even repeat it here. Not because I disagree with Sinclair, but because at that point, the dollar price of gold will be much less important than how many ounces of gold one owns.
Most of the commentary about the gold and silver breakout refers to trigger events like the Fed’s recent meeting and the Iran situation. The importance of both of those cannot be overstated. We have emphasized both as our regular readers will know.
But there are gathering storm clouds that are being overlooked by most commentators: economic darkness approaches in the form of a developing currency war.
We have observed that the world – including the US – is headed pell-mell into this off-shoot of the trade war. A currency war is a form of financial madness in which the winners are said to be those that most thoroughly destroy their currencies’ purchasing power.
We have been warning about the escalation of a global currency war for a long time, but have increased our warnings and sense of alarm recently (see here and here), warning that gold is always the big winner of currency wars.
“These policies are unreservedly bullish for gold. All paper currencies are discredited as they each fight their way to be the cheapest. Since they can’t all be the cheapest, successive rounds of devaluation can become quite frantic as they all fight their way to the bottom.
“When countries devalue their currencies, they are ultimately devaluing them against gold, the true supra-sovereign global currency
“That means the price of gold goes up!
“The best way to protect yourself from a currency war is to own gold.”
We want to call your attention to the fact that the breakout in gold and silver comes just ahead of the G20 meeting of nations in Japan. Only one other analyst that we have seen also notes the direct linkage between the price movement in the metals and the G20 meeting. It is his view that the Japan summit will result in a sharp devaluation of the US dollar, somewhere on the order of 20-25 percent.
If that is the case, the price movement we have seen in the last month is only the beginning of what is to come.
With gold closing over $1,400 an ounce and silver easily breaking through $15.00 an ounce, the world is discovering that there are a lot of important reasons to own gold and silver.
Reasons like government debt and money printing. Wealth preservation. Financial privacy.
Or just to make money!
Today’s message is for those of you looking for good old-fashioned profits!
Right now, silver is less than a third the price it hit in 1980!
Think about that a moment. How many other investments are less than a third the price they were almost 40 years ago?
Today, everywhere you look, things are higher. In 1980 the median price of a US home was only $47,200. Today it is $226,800.
Oil topped out a $40 a barrel back in 1980. Today it is $54.
At the beginning of 1980, the Dow Jones Industrial Average was 824. Today it is around its all-time high of 27,000. “It’s too late to be bullish” on stocks says a London analyst.
Everything is higher today. Everything except silver.
Is that because no one needs silver?
On the contrary. Because of silver’s dual role – as an industrial metal and prized for its monetary properties – demand rises over time. Silver demand for coins and bullion bars shows powerful growth. Some 60 percent of annual silver supplies are consumed by industrial applications. But new silver mining cannot keep up with overall demand for silver. The shortfall has largely been made up over the decades by scrap silver recovery and by net sales from government stockpiles. But scrap recovery is way down and sales from once huge government stockpiles have now ground to a complete halt as those stockpiles have been depleted.
Today at only $15 an ounce, silver is less than a third the price it topped out at in 1980, $50 an ounce. And that wasn’t just a one-time thing. Silver moved back up to that range – to over $49 an ounce – again in 2011.
Let me state the case I have made here differently. What is more likely to triple in value, the stock market that is already at all-time highs, or silver, priced today at less than one third its 1980 and 2011 highs?
Because somebody wise once suggested that the key to making money is to buy low and sell high, there are a lot of things we might consider to be attractive investments at their prices of 40 years ago. It would make great sense to buy real estate and stocks at the prices that prevailed back in those days.
But you can buy silver today for less than a third its prior highs. And that is a shining profit opportunity!
Gold raced to six-year highs on Thursday (6/20), closing at $1,397.10. That’s a powerful one day move of $48 on news of Iran taking out a US military drone and the expectation of forthcoming US countermeasures.
Gold has now marched up more than $130 an ounce in just the last month!
Silver easily broke above $15 an ounce this week, to close Thursday at $15.49. That’s up from a low last month of $14.27. That’s an 8.5 percent move in just over three weeks.
With these moves, we are watching many of our monetary predictions and warnings about global confrontations being fulfilled.
Two months ago, in one of our frequent posts about the Persian Gulf, we wrote that “the risk of an incident, even an accident, is rising.”
Now, the incendiary geopolitics propelling gold higher is taking place in an environment in which the markets expect more Federal Reserve interest rate manipulation and credit creation, as well.
Although the Fed did not announce an interest rate cut on Wednesday following its Open Market Committee meeting, close Fed watchers concluded that lower rates were in the offing. Bretton Woods Research said it was “95 percent certain the Fed will begin reducing rates sometime during the next 91 days.”
The widespread certainty of lower rates ahead not only pushed gold up, but it also pushed the dollar and treasury market yields lower.
As we reported recently, former Congressman and long-time gold expert Ron Paul is explicit in identifying this as a gold bull market. Similar bullish calls are coming in from every direction. Even Citigroup analysts say $1,500 seems to be a reasonable target for gold. Hedge fund manager Paul Tudor Jones, who we wrote about last week, sees $1,700 gold coming “rather quickly.”
Elsewhere, China’s aggressive gold buying continued in May for the sixth straight month. The chart below from Zero Hedge illustrates this de-dollarization and the move to gold by China and Russia.
We cannot be more clear: These powerful moves in gold and silver are not accidents. The world is growing more dangerous by the moment, and central bank authorities, not just at the Federal Reserve, but in Europe and around the world, know no other course but massive credit creation and money printing.
It is a path of dollar destruction. It is a road of no return.
We advise our friends and clients to add aggressively to their precious metal holdings now.
For those who have not yet taken steps to protect themselves and their families, we urge you to read the timely advice we posted last week: Don’t Wait Until It’s Too Late to Own Gold! Then contact RME Gold to learn more. Simply call our office and you will be connected to one of our knowledgeable gold and silver professionals.
Gold’s close at $1350 on Tuesday, 6/18 was the highest close in over a year. Last week gold reached an intraday high of $1362.
With that, gold is more than $50 an ounce over its 50-day moving average; it is more than $80 an ounce over its 200-day m0ving average.
So, what exactly is going on with gold?
Just exactly what we have been writing about for months. In fact, the forces driving gold are so plentiful that we hardly know where to begin.
But let us touch on a couple of things.
Things are moving fast in the Persian Gulf. According to the Jerusalem Post, diplomatic sources at the UN describe the US as readying a massive aerial bombardment campaign against Iranian targets.
Secretary of State Mike Pompeo visited Centcom Headquarters in Florida, while both John Bolton and Henry Kissinger have been sighted at the Pentagon. All this as the Trump administration announced plans to send 1,000 more troops to the Mideast.
Meanwhile, China has sounded a grave warning about the US opening a “Pandora’s box” in the region and called on the US to halt its “extreme pressure” campaign against Iran.
At the same time, Russia, describing what it called a “conscious attempt to provoke a war with Iran,” has called on the US to halt its “unthinking and reckless pumping up of tensions in an explosive region.”
We don’t know exactly what will happen next. Things can heat up and cool down, only to ignite again when least expected.
Still, there are other fronts that threaten military confrontations, like the South China Sea. We always try to bear in mind that when the world is focused on one trouble spot, real conflagrations often break out somewhere off the news media’s radar screen. The US has just enough military presence scattered across the globe that any incident anywhere can act as a tripwire to assure US involvement.
At the same time, US debt continues to explode. But foreigners, many of whom are skeptical of US attribution of responsibility to Iran for tanker attacks in the Persian Gulf region, are also dragging their feet when it comes to continuing funding US debt.
China, the largest foreign creditor of the US, sold $17 billion of US debt in March and April, a total of $69 billion over the twelve months that ended in April.
Other countries are picking up part of the shortfall, but they won’t be able to continue to do so in the face of the advancing global trade war and the coming currency war. (It should be lost on no one that both Trump and Democratic opponents like Elizabeth Warren want to drive the purchasing power of the dollar down. That means Americans will get less, not more for their money.) Nor can foreign creditors be counted to keep up with the rivers of US red ink. During the same 12-month period ending in April, US debt soared by almost a trillion dollars.
That’s probably enough to chew on for now. We will leave for another day revisiting other dynamics that will propel gold to unimaginable new heights.
Your RME Gold professional can help you take sound steps to protect yourself and profit from a world spinning apart. But don’t delay! Call or stop by today.
At Republic Monetary Exchange, we take client service seriously.
Our gold professionals are always only a phone call away. And with our blog, we provide our clients with online briefings on news and vital behind the scenes-developments. Special profit tips. Spot-on warnings about stock market sell-offs. The deep significance of record gold buying by the world’s central banks.
Let’s discuss some things you must know to protect your wealth.
I have more than four decades in the precious metals business and founded RME Gold in 2008. We have been serving our client from the same location ever since. And we have a staff of professional gold and silver advisors trained to assist you to achieve your investing goals.
Because of our reputation as the Gold Authorities, we know many people have bookmarked our website and read our alerts who have not taken the necessary steps to protect themselves and their families from the approaching financial upheavals.
We think it is important that as many people as possible be alerted to the economic challenges ahead of us. And, in fact, the more people who own gold and silver, the more resilience the economy will have when the breakdown of the current monetary system takes place.
We don’t want commerce to grind to a halt because no one has reliable money. Nor do we want people to suffer avoidable loss.
But all the information in the world is not enough for people who procrastinate forever. Too many people in this country still have not acted to protect themselves in a currency crisis.
But we are not willing to throw in the towel simply because someone hasn’t taken prudent action yet.
With that said, below are links to four recent posts on the RME Gold blog that should help move people to add gold and silver to their holdings now.
Back in April, I called central bank gold buying a “megatrend.” It is one of the most important and overlooked monetary developments of our time. For more on the story be sure to read The Gold Buying Spree Continues.
The national debt, now more than $22 trillion, is one of the best indicators of the scale of US fiscal recklessness. Through the first eight months of the fiscal year 2019, the US government spent more than $3 trillion, which is a new spending record. The budget shortfall, the deficit for the 8 months, came in at $738,639,000,000. The spending and deficits are, of course, unsustainable. We have taken pains to put them in perspective several times, most recently in a piece called It’s The Titanic and the Iceberg- Full Speed Ahead.
In The Doom Loop, published in March, we confronted a concept economist call “the marginal productivity of debt.” It is one thing if incremental indebtedness is producing more wealth. But it is very serious indeed when debt is outpacing productivity. And that is what is happening in the US today.
And finally, six months ago I surveyed for you three dramatic stock market collapses in the modern era that resembles today’s markets in many ways.