For now the Fed is going to plug the funding gap at the banks with these Repo operations. But my bet is that the problem is escalating rapidly. It is much bigger in aggregate globally than anyone can know, just like in 2008. In all probability the Fed has no clue how big the potential problem is and these Repo operations will eventually morph into outright money printing. Full Story
I think it may be as simple as you cannot move around the world’s largest hot-air balloons without a gargantuan money supply to make those moves. It is not just US bubbles that trade in US dollars, but all of these other bubbles in other nations, which trade mostly in their own currencies but interact via exchanges, etc., with the US dollar. If you suck the hot air (US dollars) out of all the world’s bubbles, I think you get a lot of flubbery balloons that no longer float along so nicely. Slowly, you fall out the sky into the darkness below. It could result in balloons starting to settle all over the world. Full Story
Back in January, we predicted that in 2019 the precious metals would see their best annual gains since 2010...and so far, they have! So now the question becomes: will the metals hold these gains and extend or will they fall back in the fourth quarter?
And why were we so confident back in January, when every major analyst and sell-side economist was expecting higher interest rates and lower gold prices at the time? Because it was clear that the U.S. and global economy would be slowing this year, and to combat that slowdown, the only central bank option would be lower interest rates and additional quantitative easing. This turn of events would prompt a revelation that the central bankers were, indeed, "flying by the seats of their pants" and simply making things up as they go along. Global confidence in these charlatans would begin to fail—just as it did in 2010—and this would lead to higher precious metal prices. Full Story
Hurricane Federal Reserve has devalued the dollar for over a century. The destruction has been large. A few benefited, many lost wealth, purchasing power, pensions, jobs, and homes.
Hurricane National Debt has reached Cat 5 status, over $22 trillion in unpayable debt that weakens the U.S. economy, strains the government budget with half a trillion in annual interest payments, and sucks capital away from more beneficial uses. This debt hurricane should reach Cat 6 soon.
Hurricane Pension Default sits at only Cat 1 status today, but it will strengthen during the next recession. Low and negative interest rates will make it worse.
Hurricane Crazy Politics is building into a major force, expected to reach Cat 5 in October 2020. Full Story
On the 3-year chart for the Dow Jones Industrials we can see that it looks tired and toppy, and it is remarkable how long it has held up, which is due to the Fed going to extraordinary extremes to stop the bubble from popping. We can see a clear line of tops going back January 2018, and with today’s news we could now see some serious downside develop, especially as interest rates have turned higher again. The only thing that might save it and usher in a final parabolic blowoff would be if the Fed suddenly wheeled out QE4, but right now it is looking very vulnerable, especially if the movement to impeach Trump gains traction. One possibility is that the Fed lets the market’s crash and then uses the crash as justification for QE4. Full Story
One of the most common reasons to buy gold is to use it as a stable store of value. This analysis uses 50 years of history to test that common belief, and finds it woefully lacking - for it misses the best parts of investing in gold.
By: Keith Weiner, Monetary Metals - 23 September, 2019
With the Treasury deemed to be risk-free, and the only real difference between a Treasury security and a dollar being the duration, it is logical that regulation generally treats Treasurys the same as cash. If a bank has $1,000,000 in Federal Reserve liabilities (i.e. dollars, i.e. cash) or if it has $1,000,000 in short-term Treasury liabilities (i.e. T-Bills), there is little practical difference.
As our financial system becomes more computerized and more sophisticated, one would expect that Treasurys could be used to settle transactions directly, without the need for dollars as an intermediary. Perhaps Harry wouldn’t pay for dinner with Treasury paper, but a financial institution should be happy to take it in payment. Full Story
This is bigger than what people are talking about. The Fed has been struggling to keep overnight rates down to their target rate for months, and this week overnight rates took off in a moonshot unlike any rate spike ever seen at this foundational level. The Fed hasn’t even been able to wrestle those extremes back down after a week of trying. That means the Fed’s statements last month and this that it is lowering rates are completely empty talk. Twice the Fed has lowered its target, while actual rates refused to comply with the target. They are not owning up to it (lest they cause all-out panic), and the mainstream media isn’t smart enough to see it because their senses are dulled to accept whatever Grandpa Fed tells them.
Mere hiccups notwithstanding, I’ll be continuing on all of this with quotes about where the Fed and its central-bank colleagues are taking us in the Patron Post that I am working on right now. Full Story
Why did the London Bullion Market Association drop JPMorganChase commodity trading desk chief Michael Nowak from its board of directors this week?
Probably not because Nowak was indicted by the U.S Justice Department, accused of racketeering with other Morgan traders in part of the longstanding manipulation of the monetary metals markets. For the indictment was announced Monday and the LBMA did not drop Nowak until Friday. Full Story
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