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America's Insolvency Is Mandatory
https://www.zerohedge.com/economics/americas-insolvency-mandatory
Excerpt:
Without action, however, time is coming for Social Security and Medicare in a big way. Social Security’s trust fund is projected to run out around around 2035. Absent congressional intervention, that will trigger a 20% cut for everyone receiving benefits when the well runs dry. Medicare’s trust fund is projected to vanish in just six years, with less clarity on how shrinking resources will be apportioned.
Milton Berg:
“The US Dollar Is a Joke”
https://www.mauldineconomics.com/download/global-macro-update-transcript-milton-berg
This is what I think. Inflation is a monetary phenomenon. I know people talk about supply
chains and shortages. In the history of the world, all inflation is caused by the money increase
to a greater extent than goods increase, and goods and services increase. And this has been
going on for decades, where the Federal Reserve has been basically... I don’t want to use the
word printing because they don’t really print. They’ve been allowing credit to increase, debt
and credit to increase.
Now, if you get an honest Federal Reserve, Jerome Powell is honest and he wants to get
inflation back down to 2% or lower, it’s going to be very difficult for our economy. It’s going to
be very difficult. Rates are going to have to go high, and it’s probably going to be very, very
deflationary. Very, very deflationary and very, very negative for the economy.
On the other hand, if that happens, the United States can’t pay down their debts because if
rates go up, the United States have been borrowing on the short end, they won’t be able to pay
down the debts except if they raise taxes. And if they raise taxes to the extent they can pay
down the debt, it’s going to again, be very deflationary, very depressionary. So, the choices at
Federal Reserve, are they honest and they want to have real money and they don’t want the
fiat money to be strong, what do they say? Listen, we can’t allow a government to go bankrupt
and can’t allow a government to raise taxes to 60, 70, 80% to cover their debts, and we’re going
to increase money supply.
So, it depends on what the Fed does, but it’s a choice. Either we have strong inflation in the
future if they’re a dishonest Fed, or you have an inflationary period or a deflationary period if
they really want to have sound money in the United States.
Ed D’Agostino:
I think this leads into an asset class that I think confuses a lot of people, and that’s gold. It really
hasn’t performed as well as, I think, most people would expect in an inflationary environment.
Is that really a function of the strength of the dollar up until now—or is there another reason
why you feel gold maybe is lagging a little bit? And what’s your forecast?
Milton Berg:
I believe that gold has acted very, very well. If you look at the history of gold, there’s no
retained assets in gold. There’s no retained earnings. The price of gold is not the price of a
stock. It’s not a price of a stock like Apple. A company like Apple Computer, they manufacture
things, they make money, and they retain their earnings, and they pay earnings to
shareholders. Gold is an asset that should maintain its inflationary value, maintain its value over
the years, over the decades. And gold has.
In fact, going back 100 years or so, gold returned more than 3% per annum... 3–4% per annum,
which is above the inflation rate over that period. That’s all gold is supposed to do. Now, gold is
very cyclical, and therefore you have big moves up and big moves down in gold. But the fact
that you have inflation now does not tell you that gold has to move up in price right now.
A prime example is, from 1980 to the year 2000, gold collapsed from $850 per ounce to $250
per ounce while the CPI doubled. Again, CPI doubled, gold is cut more than in half. Gold does
not track inflation on a year-to-year basis. But over the long term, gold maintains its value in an
inflationary environment.
That is why people who are smart and want to keep their assets for themselves and for their
children or grandchildren, keep it in gold. Because if it’s in gold, it’s in your safe deposit box. Or
if it’s in your safe, it will not be taxed. You don’t pay interest on the income. It won’t go
bankrupt. But it’s going to maintain its value.
So, if you want to buy your child a Lamborghini, and you want to put $300,000 worth of gold in
a safe deposit box. You tell my six-year-old grandson, “When you’re 36 years old, just take this
gold, you’ll buy a Lamborghini then.”
In other words, it’ll retain its value. You can’t say that with any other currency. And I’m not sure
you can say that with Bitcoin either, because I don’t think Bitcoin is actually a currency. It’s just
my opinion as well. But gold has been a great method of maintaining long-term value. And
again, you don’t pay taxes on it.
I think the Fed is fighting a losing battle against inflation and with all of the Fed hawkishness (Bullard says 7% Fed rate needed into 2024 to quell inflation) a hard recession is in the cards given how fragile the global economy is after 35 years of reckless Fed policies that created one bubble after another. It's the debt!!! The debt will really bite in a recession and the national debt will soar. The Fed is fighting a mirage since inflation is a supply problem, not a demand problem. With bird flu (1.8Million chickens destroyed) and swine flu and climate change and the war in Ukraine driving up food prices and now Chinese rioting against zero-covid lockdowns impacting supply chains and China's economy, and driving up inflation, the Fed has no control over the drivers of inflation. Gold will win eventually.
COVID Lockdown Protests Erupt In Beijing, Xinjiang After Deadly Fire
https://www.zerohedge.com/covid-19/covid-lockdown-protests-erupt-beijing-xinjiang-after-deadly-fire
My Comment: So, what options does China have to fight Covid if lockdowns are resisted? Lockdowns are not working as the number of daily new cases of Covid keep rising. I suspect Covid will be a worsening problem and it will also slow the economy. Could China's economy be the catalyst for the next financial crisis?
Another one in trouble -
GBTC discount hits a record 45.2%, prompting some to wonder if Grayscale will be the next black swan.
https://www.kitco.com/news/2022-11-21/GBTC-discount-hits-a-record-45-2-prompting-some-to-wonder-if-Grayscale-will-be-the-next-black-swan.html
My Comment: Biance is the big one and I suspect there's a lot of shenanigans there also
Excerpt:
The newest contagion risk to emerge from the FTX debacle that threatens to plunge the cryptocurrency market even deeper into the doldrums is uncertainty around Grayscale and its flagship crypto product, the Grayscale Bitcoin Trust (GBTC).
WOW!! How could you ever trust crypto? -
FTX bankruptcy filings rebuke SBF, decry ‘complete absence of trustworthy financial information'
https://www.kitco.com/news/2022-11-17/FTX-bankruptcy-filings-rebuke-SBF-decry-complete-absence-of-trustworthy-financial-information.html
My Comment: The Fed gave a green light for speculators and money was cheap. How many more such schemes will be uncovered in the economy? The Fed has made a total mess of the economy with unlimited QE.
These two need to talk to each other and come to an agreement about where gold is headed.
'Big Short' Michael Burry says this is gold's time, cites crypto 'contagion'
https://www.kitco.com/news/2022-11-16/-Big-Short-Michael-Burry-says-this-is-gold-s-time-cites-crypto-contagion.html
TDS says Gold's selloff isn't over, sees prices falling to $1,575 in Q1 2023
https://www.kitco.com/news/2022-11-16/TDS-says-Gold-s-selloff-isn-t-over-sees-prices-falling-to-1-575-in-Q1-2023.html
Nouriel Roubini says the cryptocurrency ecosystem is 'totally corrupt'
https://www.kitco.com/news/2022-11-16/Nouriel-Roubini-says-the-cryptocurrency-ecosystem-is-totally-corrupt.html
My Comment: I agree with Roubini both on crypto and the economy
Excerpts:
This past week the outspoken professor at the NYU Stern School of Business and CEO of Roubini Macro Associates has made headlines describing cryptocurrencies as a "corrupt cesspool." But he took his battle to new highs Wednesday, saying it's an "ecosystem that is totally corrupt" in a live panel discussion at the Abu Dhabi Finance Week.
In a direct attack on Binance CEO Changpeng Zhao, also known as CZ, Roubini said that he doesn't know why the crypto mogul has been allowed to live and operate in the UAE.
He noted that Zhao's cryptocurrency exchange has been banned in the U.K. by British Regulators, and is now under investigation by U.S. officials for processing nearly $8 billion in funds from Iran, skirting U.S. sanctions that have been in place since 2018.
"He is a walking time bomb and he should be kicked out of this country and not be allowed to operate," he said.
The harsh comments about the crypto economy come as Roubini issues a stark warning for the global economy, saying that it is headed towards a decade-long stagflationary debt crisis.
"When the recession comes, it will not be short and shallow but long and severe. Not only are we facing persistent short- and medium-term negative supply shocks, but we are also heading into the mother of all debt crises, owing to soaring private and public debt ratios over the last few decades," Roubini wrote in a recent commentary for Project Syndicate.
"If we don't stop the multi-track slow-motion train wreck that is threatening the global economy and our planet at large, we will be lucky to have only a repeat of the stagflationary 1970s," he said.
"Investors will need to find assets to hedge against inflation, political and geopolitical risks, and environmental damage: these include short-term government bonds and inflation-indexed bonds, gold and other precious metals, and real estate that is resilient to environmental damage," he wrote.
Bailing out the world's asset class?-
Beijing Pivots: China Issues Sweeping Property "Rescue Package" To Kickstart Economy
https://www.zerohedge.com/markets/beijing-pivots-china-issues-sweeping-property-rescue-package-kickstart-economy
My Comment: Sounds like it only buys more time before the collapse
Excerpt:
Still, Bloomberg cautions that the financial backstop is dwarfed by the looming debt maturities facing developers. China’s property sector has at least $292 billion of onshore and offshore borrowings coming due through the end of 2023. That includes $53.7 billion in borrowings this year, followed by $72.3 billion of maturities in the first quarter of next year.
So while Beijing's move is welcome, much more will be needed to convince markets that systemic risk has been mitigated: “China developers are facing another peak in debt maturity next year, if regulators don’t make adjustments for property-related policies, developer liquidity will continue to deteriorate,” said Shen. “This will very likely trigger systemic financial risk.”
The FTX Saga-
FTX Held Just $900MM In Liquid Assets Vs $9BN In Liabilities As Video Emerges Conf irming Alameda Knew It Was Pilfering Client Funds
https://www.zerohedge.com/markets/ftx-held-just-900mm-liquid-assets-vs-9bn-liabilities-video-emerges-confirming-alameda-knew
My Comment: It's now being said that SBF is on a plane to Argentina to avoid extradition. FTX investors will get nothing. How would anyone trust cryptos now? FTX's $32Billion market cap reduced to zero overnight!!
FTX was valued at $32 billion in 1Q22. Now the value is likely zero as restructuring specialist John J. Ray III, who handled Enron's liquidation, has been hired to oversee the bankruptcy.
S&P500 Predictions-
Wall Street's Biggest Bear Buys The Dip: "I Don't Think This Rally Is Over"
https://www.zerohedge.com/markets/wall-streets-biggest-bear-buys-dip-i-dont-think-rally-over
Excerpts:
“There’s probably further to go, probably through Thanksgiving, maybe even into early December,” Wilson, the bank’s chief US equity strategist, said in an interview on Bloomberg Television on Friday.
But once the S&P 500 breaks through its 200-day moving average, which currently sits around 4,081, that may “get the animal spirits going” and draw in more passive flows, he explained.
That could propel the broad index to 4,200 or 4,300, he added.
Of course, there is downside risk as Wilson hedged in October, "if this market cannot hold the 200-WEEK moving average, then it's likely there will be no meaningful countertrend move. Instead, we can make straight shot to 3400 or lower. A break below last Thursday's lows would seal the deal in that regard, in our view."
“It’s going to remain volatile,” Wilson cautioned.
“It’s still a bear market so it could rip you apart.”
Ain't gonna happen-
Biden Signals 2024 Run, Will Announce 'Early Next Year'
https://www.zerohedge.com/political/biden-signals-2024-run-will-announce-early-next-year
But then who do the Democrats have to run as president?
Hillary?
Barack?
Kamala?
Bloomberg?
All losers
How much longer till Biden ceases to function?-
Watch: Biden Thinks Russia Invaded Iraq
https://www.zerohedge.com/political/watch-biden-thinks-russia-invaded-iraq
My Comment: Biden's brain is scrambled eggs
Excerpt:
Biden was asked about reports that the Russian military is to leave the city of Kherson in Ukraine, one of the only major cities they have successfully occupied since the invasion began.
“I think the context is that whether or not they’re pulling back from Fallujah,” Biden said before racking his brain to try and recall where Russian troops really are.
Fallujah is in Iraq.
It’s not even on the same continent.
The Ship of Fools-
Sequoia Writes Off Entire $210MM FTX Investment; Here Are All The Other Funds That Are Losing Billions In FTX
https://www.zerohedge.com/markets/here-are-all-funds-are-about-lose-billions-ftx
Excerpt:
Still, while billions will be lost, nobody will be crushed as much as Bankman-Fried himself, whose personal wealth has collapsed from $16 billion to what may now be a negative number when accounting for his personal debt. Of course, it's all downhill from there especially once SBF is thrown in prison from stealing billions in client funds in his exchange and using them not even to buy yachts but to make catastrophically bad investments.
270,782886
Yeah, China's markets rallied on speculation of less restrictive lockdowns, but it ain't happening
China reports 8,335 new COVID cases for Nov 8 vs 7,691 a day earlier
''https://www.reuters.com/world/china/china-reports-8335-new-covid-cases-nov-8-vs-7691-day-earlier-2022-11-09/
China's COVID epicentre shifts to Guangzhou as outbreaks widen
https://www.reuters.com/world/china/guangzhous-covid-outbreak-deepens-more-lockdowns-loom-china-2022-11-08/
Cryptos are showing their true values -
Panic in crypto can trigger 'capitulation' in most markets that are already under pressure - analysts
https://www.kitco.com/news/2022-11-09/Panic-in-crypto-can-trigger-capitulation-in-most-markets-that-are-already-under-pressure-analysts.html
My Comment: What a joke. I think Cryptos' intrinsic value is zero and it is fast approaching that level. The turmoil certainly destroys trust in the market
Excerpts:
Bitcoin tumbled to November 2020 lows, down nearly 16% on the day, and last trading at $17,029.47. Ethereum dropped to July lows, down 24.5% on the day, and last trading at $1,165.42.
"Many of the problems of traditional finance which cryptocurrencies aim to solve are being replicated in the crypto market, as many centralized entities have become too greedy,"[color=red][/color] Sotiriou added.
Interesting Times -
Chinese stocks and Yuan are crashing and their debt levels are a serious problem.The zero Covid lockdowns are negatively impacting the economy. Their bubble economy is deflating.
Biden is losing it. I don't think he will be able to complete his term. But can the country survive with Kamala Harris as president? I think they will try their best to literally prop Biden up for two more years. One problem is countries like China, Iran, and Russia will see Biden in a weaken state and take advantage of it (eg Taiwan invasion).
China Stocks Crash As Xi Tightens Grip On Power
https://www.zerohedge.com/markets/china-stocks-crash-xi-tightens-grip-power
After Xi's 'Crowning', China 'Surprises' World With GDP Growth Beat; Yuan Slides
https://www.zerohedge.com/economics/after-xis-crowning-china-surprises-world-gdp-growth-beat-yuan-slides
Watch: Biden's Brain Reboots Mid-Interview
https://www.zerohedge.com/political/watch-bidens-brain-reboots-mid-interview
Biden: Deficit reduction in chief -
U.S. 2022 budget deficit halves to $1.375 trillion despite student loan costs
https://www.reuters.com/markets/us/us-fy-2022-budget-deficit-halves-1375-trln-despite-student-loan-costs-2022-10-21/
My Comment: The Federal budget deficit fell to $1.4Trillion for FY2022, half of the $2,8Triilion deficit for FY2021. And this reduction was in part due in large to tax receipts hitting a record $4.896 trillion, up $850 billion, or 21% from fiscal 2021. The total debt under Biden over two years is $4.2Trillion. And he keeps spending like a drunken sailor. I'm expecting the national debt to reach $40Trillion by 2026. The deficits will explode higher in the recession. The national debt will keep interest rates high as investors demand compensation for holding US Treasuries.
The BOJ (Kuroda) is asking the same thing as the Yen is near a critical 150Yen/US$. If it breaks above that level, it could bring in more Yen weakness and make YCC very difficult for the BOJ.
Nouriel Roubini: stagflationary debt crisis like 'never seen before,' investors need assets like gold
https://www.kitco.com/news/2022-10-17/Nouriel-Roubini-stagflationary-debt-crisis-like-never-seen-before-investors-need-assets-like-gold.html
My Comment: Got Gold? Buckle up.
Excerpts:
"The decade ahead may well be a Stagflationary Debt Crisis the likes of which we've never seen before," Roubini wrote in his latest Time essay.
There are enough signs to forecast that a severe stagflationary debt crisis will define the next recession.
"As a share of global GDP, private and public debt levels are much higher today than in the past, having risen from 200% in 1999 to 350% today. Under these conditions, rapid normalization of monetary policy and rising interest rates will drive highly leveraged households, companies, financial institutions, and governments into bankruptcy and default," Roubini explained.
In light of this, investors need to seek assets that protect against inflation, political and geopolitical risks, and environmental damage. And that includes gold.
"These include short-term government bonds and inflation-indexed bonds, gold and other precious metals, and real estate that is resilient to environmental damage," Roubini added.
At this point in time, central banks are in the so-called "debt trap," Roubini described. "Any attempt to normalize monetary policy will cause debt-servicing burdens to spike, leading to massive insolvencies and cascading financial crises," he wrote.
Nouriel Roubini: stagflationary debt crisis like 'never seen before,' investors need assets like gold
https://www.kitco.com/news/2022-10-17/Nouriel-Roubini-stagflationary-debt-crisis-like-never-seen-before-investors-need-assets-like-gold.html
My Comment: Got Gold? Buckle up.
Excerpts:
"The decade ahead may well be a Stagflationary Debt Crisis the likes of which we've never seen before," Roubini wrote in his latest Time essay.
There are enough signs to forecast that a severe stagflationary debt crisis will define the next recession.
"As a share of global GDP, private and public debt levels are much higher today than in the past, having risen from 200% in 1999 to 350% today. Under these conditions, rapid normalization of monetary policy and rising interest rates will drive highly leveraged households, companies, financial institutions, and governments into bankruptcy and default," Roubini explained.
In light of this, investors need to seek assets that protect against inflation, political and geopolitical risks, and environmental damage. And that includes gold.
"These include short-term government bonds and inflation-indexed bonds, gold and other precious metals, and real estate that is resilient to environmental damage," Roubini added.
At this point in time, central banks are in the so-called "debt trap," Roubini described. "Any attempt to normalize monetary policy will cause debt-servicing burdens to spike, leading to massive insolvencies and cascading financial crises," he wrote.
Throwing good money after bad -
My Comment: This will be a global collapse with Europe, Japan, and China in dire straits and the US not far behind. It's all about the DEBT.
China is facing a full-blown debt crisis with $8 trillion at risk as Xi Jinping eyes an unprecedented 3rd term
://www.msn.com/en-us/money/markets/china-is-facing-a-full-blown-debt-crisis-with-8-trillion-at-risk-as-xi-jinping-eyes-an-unprecedented-3rd-term/ar-AA131ejK?ocid=msedgntp&cvid=d3f1fd2365894f3296e333bdb9cc3586#image=AA130YVW|7
Excerpt:
Experts think Beijing will have to step in with a bailout as officials try to prevent an already-slowing economy from deteriorating further.
"To avoid major local dislocations or damage to overall economic recovery, the government is, in our view, still highly likely to intervene to support strategically important state-owned companies and prevent defaults that would trigger localized financial stress events," said Yating Xu, principal economist at S&P Global Market Intelligence.
Derivatives: Weapons of Financial Destruction -
Macleod: The Great Global Unwind Begins
https://www.zerohedge.com/markets/macleod-great-global-unwind-begins
My Comment: This rising interest rate environment is putting real pressure on banks through their derivatives exposure. Even Central Banks balance sheets are negatively impacted by rate increases. Something really big is going to break. The dominoes are lined up and ready to fall. This article is long, but it gives a very good discussion of the financial quagmire in Europe and Japan. Something really big is going to break.
Excerpts:
The LDI episode is a warning of the consequences of a change in interest rate trends for derivatives in the widest sense. We should not forget that the evolution of derivatives has been in large measure due to the post-1980 trend of declining interest rates. With commodity, producer, and consumer prices now all rising fuelled by currency debasement, that trend has now come to an end. And with collateral values falling instead of rising, it is not just a case of dealers adjusting their outlook. There are bound to be more detonations in the $600 trillion OTC global derivatives market.
The burden of bail outs will undoubtedly lead to new rounds of currency debasement directly and indirectly, as vain attempts are made to support financial asset values and prevent an economic catastrophe. Accelerating currency debasement by the issuing authorities will almost certainly undermine public faith in fiat currencies, leading to their entire collapse, unless a way can be found to stabilise them.
But one thing is clear: with CPI measures rising at a 10% clip, interest rates and bond yields will continue to rise until something breaks[color=red][/color]. So far, commercial banks are dumping financial assets to deleverage their balance sheets. The effects on listed securities are in plain sight. What is less appreciated, at least before LDI schemes threatened to collapse the UK’s gilt market, is that the $600 trillion OTC derivative market which grew on the back of a long-term trend of declining interest rates is now set to shrink as contracts go sour and banks refuse to novate them. That means that up to $600 trillion of notional credit is set to vanish, in what we might call the Great Unwind.
This downturn in the cycle of bank credit boom and bust will prove difficult enough for the central banks to manage. But they themselves have balance sheet issues, which can only be resolved, one way or another, by the rapid expansion of base money. And that risks undermining all public credibility in fiat currencies.
I see it as a short squeeze. I also think the markets interpret the CPI as using old (6-9 mos old) rent data, but the Fed will raise rates based on the numbers generated for the CPI (another 75 bp this month). This rally should be shorted.
The $31 Trillion Dollar Question – Can The Fed Afford To Pivot?
https://www.zerohedge.com/geopolitical/31-trillion-dollar-question-can-fed-afford-pivot
My Comment: It's going to get ugly. Got Gold?
Excerpt:
In the short to medium term, however, the pain for much of the world will be intense, including the US. Much of the deflation in certain sectors of the US economy from the Fed’s intense interest rate policy should be offset by capital inflow from those who have lived beyond their means because of the weak dollar in the past.
The prime beneficiaries of this have been Europe and their overly generous entitlement/pension systems, which are teetering on full collapse as we saw in the UK recently, and China with its massive trade surplus with the US.
The winners will be those who produce and export base commodities. Because in broad strokes, assets inflated through easy credit for over a decade, like gov’t bonds, stocks, real estate and mid-to-high end consumer goods, will be deflating. On the flip side, base commodity prices, the main driver of inflation today, will continue rising – oil, gas, gold, metals, food, etc.
In short, the easy money of the post-2008 era fueled stock, bond and real estate booms which will now bust, suppressing investment into base commodities. With the credit cycle reversing so too will this dynamic.
My advice to people is the same as it’s been for years. Get and stay out of debt, minimize expenses where you can, and develop strong local communities to assist each other while the geopolitical tensions continue to rise.
"2023 Will Be Year From Hell" - Martin Armstrong Warns Europe 'Could Suck The Rest Of The World Down The Tubes'
https://www.zerohedge.com/markets/2023-will-be-year-hell-martin-armstrong-warns-europe-could-suck-rest-world-down-tubes
My Comment: Yep
Excerpt:
Armstrong says governments are borrowing and spend huge amounts of money. The Fed will keep raising interest rates to fight inflation, but Armstrong says,
“Raising interest rates will only make things worse. We have supply shortages, and raising rates will not fill the gaps.”
Armstrong has never been more positive on buying gold. Why? Armstrong explains,
“We are looking at a sovereign debt default. This is what’s going on. This is why Biden will spend whatever he wants because he knows he doesn’t have to pay it back. Eventually, this is what’s going to happen. This is Schwab’s agenda.”
Armstrong has predicted “2023 will be the year from Hell.”
Beginning of the End -
Larry Summers Pre-Empts Coming Crash, Says Market Feels Like 2007
https://www.zerohedge.com/markets/larry-summers-pre-empts-coming-crash-says-market-feels-2007
My Comment: The instability in the currency markets are the beginning of the end. The consequences of the past 35 years of Fed interventions which created one economic bubble after another are starting to be felt as things unravel globally. It's going to get a lot worse. The central banks have created a problem for which they have no solution.
Excerpts:
Besides the UK, “I don’t there’s any sign that I see -- yet -- of other markets being disorderly,” said Summers, a Havard University professor and paid contributor to Bloomberg Television. “But we know that when you have extreme volatility, that’s when these situations are more likely to arise.”
According to Summer, some of the dynamics behind the current fragility are substantial leverage, uncertainty about the economic policy outlook, unease about high rates of underlying inflation, volatility in commodities and geopolitical tensions tied to Russia’s Ukraine invasion and to China.
One particular area to monitor is the strains inherent in Japan’s policies right now, the former Treasury chief said, echoing what we said back in March (see "Yen At Risk Of "Explosive" Downward Spiral With Kuroda Trapped... And Why China May Soon Devalue")
Pointing out what our readers have known for much of the past year, Summers said that - like the BOE - on one hand, Japan has been withdrawing liquidity from its markets, through its purchases of yen last week in an effort to support the exchange rate. But on the other hand, it’s injecting liquidity through the Bank of Japan’s continuing monetary easing. It’s an “extraordinary thing” Summers said adding that “It will be interesting to see how that plays out." Japanese investors have “vast holdings” of fixed-income securities around the world, and that will be something to keep an eye on, he said.
Turning to the UK, Summers said that “we’re in very complex and uncharted territory,” warning that while the Bank of England’s intervention in the gilt market stabilized things for a time, that won't last, noting that the BOE’S plan is for operations to continue until Oct. 14. The key problem - according to the man who single-handedly redefined unsustainable economic policy - is that markets don’t believe UK macroeconomic policy is sustainable.
“It’s not going to stay stable forever on the basis of two weeks buying -- and it’s probably not even going to stay stable for two weeks, unless there is a sense that this is a bridge to the fundamentals being fixed,” Summers said of UK markets. “And that’s not what we are seeing from the indications we’re getting this morning.”
Metals traders: Watch for FOREX markets extra closely
https://www.kitco.com/news/2022-09-27/Metals-traders-Watch-for-FOREX-markets-extra-closely.html?sitetype=fullsite
Of course, if something really big breaks, all bets are off. Weakening FX currencies (Yen, Sterling, Yuan) or an escalation of the war in Ukraine could be the catalyst. The Fed would be in a bind if a financial crisis erupts and inflation is still high.
And there's margin calls
What happens if someone steals your digital wallet? Of course, CBDC would not be restricted to a limited production. It just makes it easier to print more money. What happens if the value fluctuates wildly like Bitcoin?
Emerging Markets Start Sending Out Warning Signals Against The Soaring Dollar
https://www.zerohedge.com/markets/emerging-markets-start-sending-out-warning-signals-against-soaring-dollar
My Comment: EMs may be the epicenter of the next financial crisis. Of course, there are so many weak and vulnerable links, especially Europe with its escalating energy costs, China with its bursting debt bubble, and Japan with its bond market catastrophe in the making. It's just a bunch of dominoes.
There is a limit to how high the Fed will take interest rates - VanEck
https://www.kitco.com/news/2022-09-20/There-is-a-limit-to-how-high-the-Fed-will-take-interest-rates-VanEck.html
My Comment: So higher rates mean higher deficits due not only to lower revenues and increased expenditures from a recession, but also from increased Fed interest payments on its balance sheet.
Excerpts:
Not only do Foster and Casanova not expect the Fed to bring inflation back down to 2% anytime soon, but they said that the central bank could face growing political pressure to end its tightening cycle as rising interest rates will make servicing its debt more expensive.
The Federal Reserve's balance sheet, while falling, is valued at $8.8 trillion.
Quoting data from the Wall Street Journal, Foster and Casanova said that if the Fed raises interest rates to between 3.25% and 3.50%, it would cost the Treasury $195 billion annually to fund the U.S. central bank.
"As the targeted Fed Funds rate (currently 2.5%) rises above 3%, the interest it pays will exceed the revenue gained from its portfolio assets," the analysts said.
In a report in July, the Congressional Budget Office said that the government could end up paying $1.2 trillion in interest payments by 2032.
The analysts said that they expect it's only a matter of time before consumers see inflation as a threat again.
"We believe that at some point, the markets will lose patience with the Fed's talk and see that inflation is indeed out of control. Such an awakening would benefit gold," the analysts said.
The Tipping Point For Gold
https://www.zerohedge.com/commodities/tipping-point-gold
Excerpts:
The Wave 4 A-B-C correction I forecast back then is also basically complete, with the risk of a dip to 1663 next, where wave C is the same size as the decline in wave A. If this correction is indeed complete, wave 5 up to 2300+ is next.
In the meantime, China and India in particular continue to load up on physical Gold. Bridgewater is joining the party by buying into three physical-backed Gold ETFs in China. Silver is being drained from the SLV ETF, the LBMA vaults, and the COMEX futures markets. Inventories of physical metals are drying up, sending premiums over spot up to 50%, over three times their normal level and higher than in April 2020 when Swiss Gold refineries were closed due to Covid. India is loading up on physical Silver based on import data.
Russia's new gold exchange could challenge LBMA and reveal gold's 'fair' price - Matthew Piepenburg
https://www.kitco.com/news/2022-09-20/Russia-s-new-gold-exchange-could-challenge-LBMA-and-reveal-gold-s-fair-price-Matthew-Piepenburg.html
London Silver Inventories Continue to Plummet as Metal Exits LBMA Vaults (bullionstar.com)
My Comment: The days of Silver price manipulation via paper Silver are numbered.
Excerpts:
With consistent silver outflows over the last 9 months to the end of August 2022, the LBMA silver vaults have now lost a whopping 254.5 million ozs (7915 tonnes) of silver since the end of November 2021. In other words, from a situation where the LBMA silver inventories had been 36,421 tonnes at the end of November 2021, they are now 21.7% lower at 28,506 tonnes.
To put all of this into context, the that world annual silver mining production will only be 843.2 million ozs this year. That’s 26,262 tonnes. So the LBMA vaults, with 28,506 tonnes as of the end of August 2022, now hold just less than one year’s mine supply of silver.
But that is actually only half the story, because as readers of these pages will know, a majority of the silver within the LBMA vaults is held by Exchange Traded Funds (ETFs) and is already accounted for, and is therefore not (unless it is sold out of ETFs) available to the market. Additionally, this silver in ETFs is not, as the LBMA disingenuously claims, available to “underpin the physical OTC market."
Backing this ETF silver out of the headline figure is thus even more revealing. According to the calculations of GoldCharts’R’Us, as of the end of August there were 18,110 tonnes of silver held by silver-backed ETFs which store their silver in London. This means that of the 28,506 tonnes of silver that the LBMA claims to be held in its London vaults, 63.5% of this is held in ETFs, and only 10,396 tonnes (36.4%) is not held by ETFs. This 10,396 tonnes also represents only about 40% of annual silver mining supply.
Over on COMEX in New York, the silver situation is also precarious, with ‘Registered’ in the COMEX approved warehouses practically in freefall, and at a four and a half low. See the following chart. Latest figures for 9 September show that registered inventories (those that are warranted and available to back COMEX silver futures contract delivery) are now only 46 million ozs (1430 tonnes). This is insanely low. For example, more silver left the LBMA vaults during July 2022 (1447 tonnes) than there is currently in COMEX registered silver stockpiles.
Regarding the COMEX category of ‘Eligible’ silver (which merely represents silver stored in the COMEX approved vaults which could be traded if it was put under warrant, but which realistically may have nothing to do with COMEX trading), the amount of silver in the COMEX eligible category hasn’t really fluctuated much so far in 2022 and has ebbed and flowed by about 30 million ozs (930 tonnes) within the 250-280 million ozs range
The existence of ETF silver in London is key to the ability of the LBMA bullion banks to control the market and the silver price.
LBMA bullion banks / ETF Authorised Participants appear to use London silver ETFs as a top up fund for physical silver, scaring the market by bringing the paper silver price lower and flushing out / triggering institutions and retail to sell ETF units, at which point the bullion banks pick up and convert these units, thereby obtaining extra metal that’s needed to meet physical demand. In fact, as physical silver demand rises, bullion banks will try to get the price lower so as to have access to the silver that is held by the ETFs.
Only time will tell, but with physical silver demand firing on all cylinders and massive amounts of silver leaving the LBMA London vaults, the bullion bank tactics of rinse and repeat in creating a ‘paper’ silver price unconnected to physical demand and supply is becoming more and more exposed.
Global debt -
This is an excerpt from Doug Noland at http://creditbubblebulletin.blogspot.com/2022/09/weekly-commentary-super-credit-bubble.html
I’ll refer to data from the IIF’s May Global Debt Monitor: “Total global debt rose by $3.3 trillion in Q1 2022 to a new record of over $305 trillion – mostly due to the U.S. and China.” Comparing Q1 2022 to pre-Covid Q3 2019 (10 quarters), total global debt surged $52.9 TN, or 20.9%. Over this period, emerging market (EM) debt expanded $26.2 TN, or 36.1%, led by a 47% surge in EM government debt and a 32.6% increase in EM non-financial corporate debt.
Additional detail behind the ongoing historic expansion of U.S. and Chinese Super Credit Bubbles:
U.S. Non-Financial Debt (NFD) growth averaged $530 billion during the nineties. This annual average inflated to $1.892 TN for the mortgage finance Bubble period 2000-2007, with a 2004 peak of $2.90 TN. Pandemic year 2020 saw NFD growth spike to $6.752 TN, with last year’s expansion slowing to a still enormous $3.797 TN. NFD then expanded a nominal $1.659 TN during 2022’s first quarter, a blistering 10.2% growth rate. Household Mortgage borrowings expanded at the fastest pace (8.62%) since 2006, while Consumer Credit (non-mortgage) grew at the strongest rate (8.73%) since 2001.
China’s metric for system Credit - Aggregate Financing – expanded $5.1 TN over the past year (through July). While Credit growth slowed slightly from 2020’s historic deluge ($5.2 TN), it still dwarfs 2019’s $3.8 TN and 2018’s $3.3 TN. As a macro analyst of Credit, it is both remarkable and ominous that China confronts such instability even in the face of ongoing massive Credit inflation. Understandably, Beijing is reluctant to push system Credit to only more perilous extremes
Charlie Munger Predicts a Horrible Economic Crisis Where EVERYTHING WILL COLLAPSE
https://www.thehedgelesshorseman.com/uncategorized/charlie-munger-predicts-a-horrible-economic-crisis-where-everything-will-collapse/
My Comment: What's gold's role? Wealth preservation?
Excerpt:
Charlie Munger warns about the biggest inflationary bubble in world history bursting and shares his thoughts on how it is going to unfold. Charlie says that we’re flirting with serious trouble and the consequences may be worse than what Paul Volcker was dealing with in the 1970s.
Where's J.P.Morgan to crush the POD? -
My Comment: The POG is up this AM with a large $16 differential between the bid and the ask. It's time for JP Morgan to sell a lot of paper gold to suppress the POG.
"The Biggest News By Far Out Of Jackson Hole Was Coming Out Of The ECB NOT The Fed"
https://www.zerohedge.com/markets/biggest-news-far-out-jackson-hole-was-coming-out-ecb-not-fed
Excerpts:
”It was the ECB QT piece came out in the afternoon, and the ECB officials Holzmann and Knot confirming the morning leak from Reuters when they said Friday afternoon that 75bp should be considered at the Sept meeting that fueled the ECB angst in equities. It is clear now - on September 8th the ECB is going to hike and signal QT at the same time Italy is having elections a few weeks later - is just a very bad idea. I think people finally starting to pay attention to energy crisis in Europe and how the ECB needs to fight the resulting inflation with tools that do nothing to help the underlying problem (no more gas). This speaks to near term Euro strength vs. USD.”
For most of the last 10 days, even with the much talked up “China economic slowdown” and a surge in recession certainty in Europe – global bond yields kept moving higher. In just a few weeks, Italian 10s marched from 296 to 370bps.
Sovereign credit risk is on the rise in Europe – we have the ECB on September 8, the Fed on the 21st, and the all-important Italian elections on the 25th. The ECB has yet to pick its poison:
On August 11th - we distributed our largest – take down risk – “high conviction” trade alert sell since February of 2020, eleven positions with new shorts on the Nasdaq. U.S. equities have been priced for an American economy on Mars or Venus, NOT Earth. Into this mess - we have a Fed that is expected to do $1T of QT over the next 12 months, NO way. Bullish gold.
Bottom line: Near term inflation expectations are coming down with economic risks on the rise and a still hawkish Powell. The Fed is talking a tough game but risks a Lehman like event in Europe. Our highest conviction call looking out 6-9 months – is long the gold miners - GDX names GOLD, NEM, AEM.