Economics

Economics
Max and Stacy give you all the financial news you need as the Global Insurrection Against Banker Occupation gathers pace. Occupy Wall Street, Crash JP Morgan, Buy Silver and DEFINITELY visit MaxKeiser.com!
Updated: 6 hours 38 min ago

[KR1129] Keiser Report: Time for #CrashJPMBuyBitcoin?

30-Sep-2017

In this episode of the Keiser Report from Aspen, Colorado, as JPMorgan’s CEO calls bitcoin a fraud, Max and Stacy take a look back at just some of the frauds in which the biggest bank in America was found to partaken. Is it time for #CrashJPMBuyBitcoin? In the second half, Max interviews Roger Ver, aka ‘Bitcoin Jesus,’ about the scaling debate, Bitcoin Cash, China’s crackdown on Initial Coin Offerings and the exchanges that offered access to them and Jamie Dimon’s ‘bitcoin is a fraud’ statements.

Stagnation Is Not Just the New Normal–It’s Official Policy

30-Sep-2017

Although our leadership is too polite to say it out loud, they’ve embraced stagnation as the new quasi-official policy. The reason is tragi-comically obvious: any real reform would threaten the income streams gushing into untouchably powerful self-serving elites and fiefdoms.

In our pay-to-play centralized form of governance, any reform that threatens the skims, privileges and perquisites of existing elites and fiefdoms is immediately squashed, co-opted or watered down.

So the power structure of the status quo has embraced stagnation as a comfortable (except to those on the margins) and controllable descent that avoids the unpleasantness and uncertainty of crisis. We all know that humans quickly habituate to gradual changes in circumstances, and that if the changes are gradual enough, we have difficulty even noticing the erosion.

So wages/salaries stagnate, inflation eats away at the purchasing power of our net income, junk fees, tolls and taxes notch higher by increments too modest to trigger protest, fundamental civil liberties are chipped away one small piece at a time, healthcare costs rise every year like clockwork, and the gap between the bottom 95% and the top 5% widens, as does the gap between the top .1% and the bottom 99.9%, productivity stagnates, the growth rate of new businesses stagnates, but it’s all so gradual that we no longer notice except to sigh in resignation.

Japan is a global leader in how to gracefully manage stagnation. Here’s how Japan is managing to maintain a comfortable secular stagnation:

Japan’s central bank creates a ton of new currency every year, which it uses to buy Japan’s government debt/bonds. This keeps interest rates near-zero, so the cost of government borrowing is kept minimal.

This also gives the government a ton of new cash to spend that it doesn’t have to raise from additional taxes. The government then spends this “nearly free” money (i.e. deficit spending) to keep the whole stagnating machine glued together.

To keep asset prices comfortably elevated, Japan’s central bank creates additional gobs of currency out of thin air every year to buy assets such as stocks and corporate bonds.

It helps if domestic and global investors are willing to buy bonds yielding near-zero, but if not, no problem, the central bank can just create another trillion of new currency and buy all newly issued government bonds. What’s another trillion between friends?

There are only two potential spots of bother in this comfy setup:

1. If all this new currency is no longer accepted as having much purchasing power by the rest of the world

2. Inflation arises despite the tender machinations of the central bank and government.

Here are some snapshots of secular stagnation in the U.S.: here’s productivity:

New business growth:

Fulltime employment:

 

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

China Catalyst To Send Gold Over $10,000 Per Ounce?

30-Sep-2017

China Catalyst To Send Gold Over $10,000 Per Ounce?


Jim Rickards is on record forecasting $10,000 gold.

But is China about to provide the catalyst to send gold even higher? And by how much?

Today, we fare forth in the spirit of speculation… follow facts down strange roads… and arrive at a destination stranger still…

China — the world’s largest oil importer — struck lightning through international markets recently.

According to the Nikkei Asian Review, China has plans to buy imported oil with yuan instead of dollars.

Exporters could then exchange that yuan for gold on the Shanghai Gold Exchange.

Not only would the plan bypass the dollar entirely… it would restore gold’s role in international commerce for the first time since 1971, when Nixon hammered the last nail through Bretton Woods.

If the rumors hold true, China’s plan could enter effect by the end of this year.

Billionaire business magnate and sound money advocate Hugo Salinas Price ran China’s plan through his calculator.

It turned up a basic math problem that spells drastically higher gold prices — if the plan is to work.

Details to follow.

But first some background on oil and gold… a brief detour down Bretton Woods Lane…

Price:

By 1970, it was evident to those running the U.S. that it would very soon be necessary to import large quantities of oil from Saudi Arabia. Under the Bretton Woods Agreements of 1945, the immense quantities of dollars that would shortly flow to Saudi Arabia in payment of their oil would be claims upon U.S. gold, at the time quoted at $35 an ounce. Those claims would surely deplete the remaining gold held by the U.S. Treasury in short order.

Washington found itself on the sharp hooks of a dilemma…

Dramatically raise the price of gold to limit redemptions — and devalue the dollar in the process — or repudiate its commitments under Bretton Woods.

Dishonor, that is… or dishonor.

It chose dishonor.

Price again:

To continue under the Bretton Woods monetary system would have meant that the U.S. would have been forced to raise the price of gold to an enormous figure in order to reduce the amount of gold payable to the Saudis to a tolerable level. But raising the dollar price of gold in that manner would have constituted a great devaluation of the dollar and collapsed its international prestige; that in turn would have ended the predominance of the U.S. as the No. 1 power in the world. The U.S. was not willing to accept that outcome. So Nixon “closed the gold window” on Aug. 15, 1971.

If China is willing to trade gold for oil under its latest plan, a similar dynamic enters play.

Consider:

China takes aboard some 8 million barrels of oil a day.

That’s 2.92 billion barrels per year — nearly 3 billion in all.

But China holds only a few thousand metric tons of gold (officially about 1,850. Some estimate the true figure much higher).

You see the problem, of course.

China rapidly depletes its gold reserves if too many oil exporters choose to exchange yuan for gold.

If the plan’s to be sustainable at all, gold must rise — drastically — in order to balance the vast amounts of oil it’s supporting.

As Price explains, “To balance the mass of oil received by China against a limited amount of available gold… it will be necessary for gold to skyrocket upward in yuan terms and, necessarily, in dollar terms as well.”

Price crunched the numbers…

One ounce of gold (about $1,300) currently fetches 26 barrels of oil (about $50 per).

One barrel of oil is worth 1.196 grams of gold.

Price calls this ratio “an unsustainably low purchasing power of gold vis-a-vis oil.”

Only a drastically higher gold price would render the plan plausible.

How far would gold have to climb before the relationship was stable in Price’s estimate?

Ten times. Thus, Price arrives at a reasonable gold price:

$13,000 per ounce.

Price:

At $13,000 per gold ounce, one barrel of oil, at $50, will be bought with 0.1196 grams of gold; perhaps we may see $13,000 per oz gold in the not distant future.

Here, a road map to $13,000 gold.

We don’t know if Price’s figure is correct.

But if not $13,000, it seems gold would have to rise dramatically if Price’s thesis is correct — or else China’s plan collapses.

We can only conclude that China knows the implications of the math.

$13,000 gold also means a massive devaluation of the yuan.

China prefers a weak yuan to goose exports. But a worthless yuan?

The plan may prove a mirage in the end for all we know.

But if the plan does proceed… Jim Rickards’ $10,000 gold prediction might be vindicated — fully and then some.

By Brian Maher, Managing editor, The Daily Reckoning

Gold Prices (LBMA AM)

28 Sep: USD 1,284.30, GBP 961.04 & EUR 1,091.40 per ounce
27 Sep: USD 1,291.30, GBP 963.83 & EUR 1,099.54 per ounce
26 Sep: USD 1,306.90, GBP 969.59 & EUR 1,105.38 per ounce
25 Sep: USD 1,295.50, GBP 957.89 & EUR 1,089.26 per ounce
22 Sep: USD 1,297.00, GBP 956.15 & EUR 1,082.09 per ounce
21 Sep: USD 1,297.35, GBP 960.56 & EUR 1,089.00 per ounce
20 Sep: USD 1,314.90, GBP 970.53 & EUR 1,094.79 per ounce

Silver Prices (LBMA)

28 Sep: USD 16.82, GBP 12.53 & EUR 14.28 per ounce
27 Sep: USD 16.89, GBP 12.58 & EUR 14.38 per ounce
26 Sep: USD 17.01, GBP 12.67 & EUR 14.43 per ounce
25 Sep: USD 16.95, GBP 12.57 & EUR 14.27 per ounce
22 Sep: USD 16.97, GBP 12.52 & EUR 14.18 per ounce
21 Sep: USD 16.95, GBP 12.58 & EUR 14.24 per ounce
20 Sep: USD 17.38, GBP 12.84 & EUR 14.48 per ounce


Recent Market Updates

– Financial Advice From Man Who Made $1+ Billion in 1929 – Importance Of Being Patient and “Sitting”
– “Gold prices to reach $1,400 before the end of the year” – GoldCore
– Commodities King Gartman Says Gold Soon Reach $1,400 As Drums of War Grow Louder
– Bitcoin “Is A Bubble” but Gold Is Money Says World’s Biggest Hedge Fund Manager
– Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms
– Gold Investment “Compelling” As Fed May “Kill The Business Cycle”
– “This Is Where The Next Financial Crisis Will Come From” – Deutsche Bank
– Global Debt Bubble Understated By $13 Trillion Warn BIS
– Bitcoin Price Falls 40% In 3 Days Underlining Gold’s Safe Haven Credentials
– Gold Up, Markets Fatigued As War Talk Boils Over
– Oil Rich Venezuela Stops Accepting Dollars
– Massive Equifax Hack Shows Cyber Risk to Deposits and Investments Today
– British People Suddenly Stopped Buying Cars

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

Throwin’ A Party For Silver But There’s NOTHING SWEET ABOUT IT

29-Sep-2017

First this:

 

RECORD HIGH FOR S & P 500!

— Donald J. Trump (@realDonaldTrump) September 29, 2017

 

Pertaining to this:

 

 

Not that the Exchange Stabilization Fund along with the Fed, smashing gold & silver, buying the indexes, and forcing “fear” out of the markets has anything to do with it of course. 

Speaking of gold:

 

 

We new it was crucial to hold the 50-day moving average. Sure enough, it wasn’t just a tap-and-bounce like we had hoped for. Of course, we should come to expect this type of action. It is gold we are talking about.

When we look over the course of the week, we can see just how constant the pounding has been.

The peak to trough was especially grueling:

 

 

Could’ve, should’ve, would’ve. We did catch a break on Monday, and on high volume too. It’s possible that the only surge in price we saw all week may have just saved the gold price from going even lower from the effects of what otherwise was constant short covering which served to feed on itself through most of the week.

We can see just how important that 50-day moving average is in silver:

 

 

We can rest assured knowing that all efforts are being made to make sure the 50-day does not cross through the 200-day on the daily. The cartel has almost succeeded in rolling over the 50-day and pointing it down again, but the more they try to force a rollover, the more this becomes a problem, which emerged as a very serious problem earlier in the week:

 

 

We brought up the gold-to-silver ratio (GSR) on Tuesday evening. The ratio is starting to get out of hand again. Amazingly, for several months now, the GSR has been slowly rising, but as we revert back to the mean, it would mean, no pun intended, a drop in the number of ounces of silver it takes to purchase one ounce of gold. Sure enough, the drop has started. It is still very high, however, and there is nary an analyst around who could argue it’s sustainable above 75, less of course they are hidden motives behind such nay-saying.

The precedence is a lower gold to silver ratio, much lower:

  • 2007 – For the year, the gold-silver ratio averaged 51.
  • 1991 – When silver hit its lows, the ratio peaked at 100.
  • 1980 – At the time of the last great surge in gold and silver, the ratio stood at 17.
  • End of 19th Century – The nearly universal, fixed ratio of 15 came to a close with the end of the bi-metallism era.
  • Roman Empire – The ratio was set at 12.
  • 323 B.C. – The ratio stood at 12.5 upon the death of Alexander the Great.

To put this week’s silver price action in perspective, however, we need to pull up that super-scary chart from a few weeks ago:

 

 

 

We knew it was coming, but that doesn’t make it any easier. But not all is lost. There is good news. We have seen this price smash three times before in 2017, and only once did the pain last for more than three weeks. Currently, this is our third week of pain.

What is more alarming, however, is the sideways channel that silver has been stuck in since October of last year.

Silver has been forced into a range between $16 – $18:

 

 

Seeing as how the multi-week price smash on silver has been successful, we must now contend with the very real possibility of staring down a $16 silver price. It does not look good for the home team right now, unless you have $10, $1,000, or $100,000 in U.S. debt based fiat currency to drop on some shiny metal. We have repeatedly wondered when the buyers would step into the market and scoop up physical silver during this bargain-basement fire sale. We keep wondering if $16.50 is that price, but now, they way this chart has been painted, we might want to think about that one some more.

Only in early to mid March did the silver price not get smashed down far enough to tap the $16 handle, but smashing the price down from here has consequences, and the cartel knows it.

They may think they have found the perfect water temperature in their paper silver shower, but sooner or later the hot water runs out in the boiler, and they will either have to stop the wash-rinse-repeat, or they risk temperature shocks that could lead to the market flinching at first, but then removing some serious physical silver from the market.

However, it is hard to be bullish in the immediate term. Looking at other precious metals does not help:

 

 

Platinum is down over 10% since earlier in the month. In market lingo, anything down ten percent or more is called a “correction”, and anything down twenty percent or more is called a “bear market”. Platinum is squarely now in a correction. Silver is barely clinging to not being in a correction.

Crude has held on to its gains:

 

 

The question is whether crude will fade the move, like so many analysts are calling for, or whether this is just more confirmation that increased commodities prices are for real. Interestingly, the gain in crude took place at the same time the U.S. dollar strengthened. Generally speaking, a stronger dollar translates to a weaker crude price. However, this week, we did not see that inverse correlation.

This means that either crude oil or the U.S. dollar is going to roll over, and by the looks of it:

 

 

It seems like dollar is the one that’s out of gas. While we have been perhaps too quick to throw the dead cat on the chart, we do understand that dead cats bounce, and there is no way a dead cat could have this much air-time.

This is not to say the dollar is about to surge. It could simply be peaking out on a “bear rally”, meaning that the dollar is headed lower, but it has temporarily seen an increase in price. Nothing goes up or down in a straight line, unless of course it’s 2:15 a.m. on a Monday morning and we’re talking about gold and silver, but we already knew it.

The VIX and TNX (10-Year Yield) have been acting as if they had inverse relationships ever since Candidate Trump became President-Elect Trump:

 

 

In addition to looking as if they were inversely correlated, both the VIX and the bond market are at extremes. There is an extreme level of “no fear” in the markets, and while at least nominally, U.S. interest rates are treading water, when one factors in the costs of good and services that actually pull fiat dollars out of one’s own wallet, real interest rates are already negative.

In other words, that dollar nestled in a wallet or “deposited” into a bank account buys less and less stuff over time. It is extreme to have low interest rates like we do now, let alone negative rates (ZIRP/NIRP).

The 2.31 percent yield on a 10-year note is much higher than it was earlier in the month, but make no mistake about it:

The yield is very, very low when looking back on the long-term:

 

 

In the year 2000, the yield on the 10-year note was 6.8%. We are so far past the ability of having a slow, normal rise in interest rates that the more likely scenario is a bond market crash, but let’s hop on our bikes and enter the slow drag competition anyway:

Imagine how much economic turmoil would be wrought when interest rates begin to move somewhere close to normal. What is going to happen to the U.S. economy when the prices of homes and cars, the interest rates offered to take out student loans, and the cost to service the interest on debts all become more expensive and destructively prohibitive?

After answering that question, go ahead and mix in increased government spending, bigger deficits, growing debt and rising prices on pretty much all good and services. It is easy to see that moving back to normal, in a centrally planned incremental manner, is not only far-fetched, but gradually raising interest rates totally assumes that the United States does not enter into a recession. Ever.

Oops. Forgot. Add in the Fed “unwinding” its balance sheet. Do the markets really buy that? Or perhaps there is literally nobody left in the markets, with the exception of institutional investors clinging on to their stock market heavy pension and retirement investments?

So, yet again, think of this week as a gift.

If the change jar was raided last week, as was mine, then this weekend might be a good time to have a yard sale, scrounge up some more fiat, and add to that stack.

Besides, the weather is not going to stay this nice forever.

Something is coming. Oh yeah. Winter… 

 

 

Gold Matches S&P 500 Performance In First 3 Quarters; Up 12% 2017 YTD

29-Sep-2017

Editor Mark O’Byrne

– Gold climbs over 12% in YTD, matching S&P500 performance
– Palladium best performing market, surges 36% 2017 YTD
– Gold outperforms Nikkei 225, Euro Stoxx 50, FTSE and ISEQ
– Geo-political concerns including Trump and North Korea supporting gold
– Safe haven demand should push gold higher in Q4
– Owning physical gold not dependent on third party websites and technology remains essential

Click to enlarge. Source Finviz.com

In the year-to-date the gold price performance has matched the S&P 500, climbing over 12%.

Gold’s matching of the S&P 500 is particularly impressive when you consider the record-breaking performance of the benchmark stock market index in the last year. Yesterday it advanced 0.1% to 2510.06, a new all time record high price.

It is also impressive considering sentiment towards stocks is shall we say “irrationally exuberant”, while sentiment towards gold remains muted despite gold eking out gains in 2016 and now again in 2017.

The precious metal has performed well predominantly due to rising uncertainties regarding North Korea, Trump and the political mess in the U.S. and other geopolitical tensions.

Its strong performance is despite noise from the US Federal Reserve regarding its alleged plans to tighten money supply and increase rates. Other major central banks have also provided similar indications.

Elsewhere, gold has outperformed both the Euro Stoxx 50 and Nikkei 225 which are 8.5% and 6.5% higher respectively. The UK’s FTSE and Ireland’s ISEQ are underperforming and have the hallmarks of markets that are topping out.

The FTSE and the ISEQ are 2.5% and 4.25% higher year to date.

Click here to continue reading on www.GoldCore.com

This Chart Defines the 21st Century Economy

28-Sep-2017

One chart defines the 21st century economy and thus its socio-political system: the chart of soaring wealth/income inequality. This chart doesn’t show a modest widening in the gap between the super-wealthy (top 1/10th of 1%) and everyone else: there is a veritable Grand Canyon between the super-wealthy and everyone else, a gap that is recent in origin.

Notice that the majority of all income growth now accrues to the the very apex of the wealth-power pyramid. This is not mere chance, it is the only possible output of our financial system. This is stunning indictment of our socio-political system, for this sort of fast-increasing concentration of income, wealth and power in the hands of the very few at the top can only occur in a financial-political system which is optimized to concentrate income, wealth and power at the top of the apex.

Well-meaning conventional economists have identified a number of structural causes of rising wealth/income inequality, dynamics that I’ve often discussed here over the past decade:

1. Global wage arbitrage resulting from the commodification of labor, a.k.a. globalization

2. A winner-takes-most power law distribution of the gains reaped from new technologies and markets

3. A widening mismatch between the skills of the workforce and the needs of a rapidly changing economy

4. The concentration of capital gains in assets such as high-end real estate, stocks and bonds that are owned almost exclusively by the top 10% of households

5. The long-term stagnation productivity

6. The secular decline in the percentage of the economy that flows to wages and salaries

While each of these is real, the elephant in the room few are willing to mention much less discuss is financialization, the siphoning off of most of the economy’s gains by those few with the power to borrow and leverage vast sums of capital to buy income streams–a dynamic that greatly enriches the rentier class which has unique access to central bank and private-sector bank credit and leverage.

Apologists seek to explain away this soaring concentration of wealth as the inevitable result of some secular trend that we’re powerless to rein in, as if the process that drives this concentration of wealth and power wasn’t political and financial.

There is nothing inevitable about such vast, fast-rising income-wealth inequality; it is the only possible output of our financial and pay-to-play political system.

Policy tweaks such as tax reform are mere public relations ploys. The cancer eating away at our economy and society arises from the Federal Reserve and the structure of our financial system, and the the degradation of our representative democracy into a pay-to-play auction to the highest bidder. 

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Gold Standard Resulted In “Fewer Catastrophes” – FT

28-Sep-2017

Editor Mark O’Byrne

– “Going off gold did the opposite of what many people think” – FT Alphaville
– “Surprising” findings show benefits of Gold Standard
–  Study by former Obama advisor in 1999 and speech by Bank of England economist in 2017 make case for gold
– UK economy was ‘much less prone to extremes’ under than the gold standard – research shows
– ‘Gold standard seems to have produced fewer catastrophes for Britain’ – data shows 
– FT still wary of gold standard arguing ‘stability can be overrated and growth is worth having’
– Finding is not surprising and joins a wealth of evidence and research that shows gold’s importance as money, a store of value and safe haven asset

300 years ago last week on the 21st September, 1717 Sir Isaac Newton, Master of the Royal Mint of Great Britain, accidentally invented the gold standard.

Last month it was the 46th anniversary of President Nixon ending the gold standard. Since then the world has existed on a system of fiat paper and digital currency. It works so badly that it has lead to the global financial crisis, unending debt issues and a dramatic devaluation in sovereign currencies.

Despite this, much of the media and central banking system remain supporters of the current financial and monetary status quo.

They are so convinced that the time before fiat money was a disaster that anyone who suggests otherwise is labelled a gold-bug and told to move along.

Last week, there was a glimmer of light when the Financial Times’ Matthew C. Klein uncovered some 18-year old research into the gold standard and a recent speech by a Bank of England economist.

Mr Klein although a young man has quite an impressive journalistic c.v. He writes for FT Alphaville and Bloomberg View about the economy and financial markets.

Click here to read full story on GoldCore.com.

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

Gold & Silver Price Smash: The Only Thing On The Menu Today

27-Sep-2017

First the good news.

If copper is finding a bottom in the short-term, the silver price can find a floor based on the “industrial use” aspect of the white metal:

Silver has two unique properties that, when comparing all other asset classes, are only seen in gold as well: Silver is money and silver is an industrial metal. If the copper price is turning up, as shown in the chart above, silver could start moving up in price as well, which it looks like it wants to do when compared with copper.

In addition to the industrial side of silver piggy-backing the turn with copper, The gold-to-silver ratio (GSR) is screaming “buy silver”:

From just a few trading days ago, the ratio has shot up, meaning that it takes way more silver to buy just one ounce of gold right now. Said differently, the ratio is getting extreme again, which means that silver could start moving quickly in price as more and more people decide to purchase silver over gold.

Last night we put out a post discussing the GSR, which is a great primer for those new to the precious metals.

We can see one of the reasons why silver has taken such a hit lately if we look at the action in the trading:

Make that lack of action. Yes, there is options expiration, but when the market is thinly traded, that adds to the cartel’s ability to smash the price. 

We have not even passed the full brunt of The Fed Offensive yet:

Once again, we can see there will be a triple attack, and just like Monday, we have morning, afternoon, and then early evening Fedspeak to deal with. If we can say the Fed will let up, they will do so only to a lesser extent because there are speeches on Thursday and Friday too.

In fact, when we look at gold and silver compared to the debt-based US fiat currency known as the dollar, the intent of all the Fedspeak has been clear:

The question is, why is “hawk” Yellen & Co. pumping the greenback now? As the dollar has done nothing but weaken all year, it seems as if the Fed is merely looking to slow the rate of the dollar decline for whatever reason. Are the markets really “fooled” into thinking the Fed is going to unwind it’s balance sheet, raise interest rates and let a morbid U.S. economy run hot?

Possibly, but it’s all weighted for December, 2017:

We have not even started October, there are still three full trading days left in September, and we don’t even know the integrity of the data CME Group is pushing anyway.

Looking at the dollar a little closer, we can see that it is about to start wreaking havoc on the number one silver exporter again:

After the earthquake struck Mexico on September 19th, we discussed how any strengthening against the peso would result in a drop in consumer spending in the United States due to U.S. families remitting funds to their families still in Mexico. Sure enough, the dollar surged against the peso yesterday and moved back above 18. With Mexico ending “search and rescue” efforts today, the assessment of damage and spending to replace both durable goods and basic goods is about to increase, just as the purchasing power of the peso is dropping.

If retail spending dips even further than expected over the coming month at the same time the dollar is strengthening, that would be further support of the thesis, and that dynamic can be added on to the many reasons mentioned in that article we put out about the dollar/peso social relationship. We shall be watching this closely because if one has an interest in silver, it goes hand-in-hand that one has an interest in Mexico.

The yield on the 10-year is not so sure, however, that all the “hawkish” rhetoric will translate into higher interest rates and an unwind of the balance sheet:

Does that yield look more like a dip in the face of continuously dropping yield? It does not because that chart is not bullish for those looking for an increase in interest rates. Said differently, the increase in the yield on the 10-year looks to be more of a dead cat bounce than the start of a new uptrend.

Over the last six months, the increases in yield have shown to be followed by slow, drawn out fades. If we are now four days into that fade, it could mean a slow grind lower. The wild card is the Fedspeak and what effects it could have on the market translating hawkishness into bullishness on the chart.

Besides, crude oil is not buying the strong dollar and hawkish Fedspeak at all:

Crude has just taken out the highs of May 23rd. If the dollar is strengthening, generally speaking, the price of crude should be dropping. This could lead one to the conclusion that either crude is in a break-out fake-out, or the dollar is in a dead cat bounce. Hope can crush a trading account on the quick, however, and any dollar bulls watching are surely well aware and taking cues from crude.

And so we close on the bad news since we opened on the good:

That is one big, fat, ugly bearish engulfing candle in gold on the daily. Since options expiry is not over yet, the very near term does not look good for those looking for price increases in gold. On the other hand, gold could be having one of the best door-buster sales of the year today and tomorrow. We will know on Friday whether it did or not. Timing is never easy in the short term, but the signals on the chart are clear.

And we finish the Midweek Update with two of the stocks that have been responsible for most of the gains in the stock market:

probably nothing…

SilverDoctors.com has been on the leading edge of Gold News and Silver News Since 2011. Each month, more than 250,000 investors visit SilverDoctors.com to gain insights on Precious Metals News as well as to stay up-to-date on World News impacting the metals markets.

Financial Advice From Man Who Made $1+ Billion in 1929 – Importance Of Being Patient and “Sitting”

27-Sep-2017

Editor Mark O’Byrne

– Listen to Jesse Livermore and ignore the noise of short term market movements, central bank waffle and daily headlines  
– Stock and bond markets are overvalued but continue to climb… for now
– What goes up must come down and investors should diversify and rebalance portfolios despite market noise
– Behavioural biases currently drive markets, prompting legendary investors to be confused and opt out
– Lesson is to prepare portfolios for long-term and invest in assets that will act as hedge in next market correction or crash
– Gold performs well over the long-term and delivers to those “sitting” and being patient

When it comes to your investment portfolio it is harder than ever to sift through market and central bank noise and focus on the fundamental drivers and long-term strategy.

Take for example a quick glance at financial news pages this morning:

  • A story about bitcoin’s rise from $200 in 2013 to $5000 just three weeks ago –  a gain of 2,400%
  • Fed rate hike odds in December have soared to 78% thanks to Yellen’s “noisy” comments yesterday
  • Luxury homes in London’s best neighborhoods are set to rise by 20.3% over next five years – allegedly
  • Warnings of supply gap in oil production next year

Meanwhile, we look at more quiet, conservative gold and it has varied no more than $200/oz over the last four years.

It can be difficult to correlate this with a background of markets that are teeming with behavioural biases. Market reactions are short-tempered thanks to this age of instant information… and disinformation.

Greed and fear become more exaggerated than ever and greed is currently dominant.

The most recent individual to get frustrated with this state of affairs is money manager Hugh Hendry. Hendry recently decided to close his hedge fund, after 15 years. Hendry joined the likes of Eric Mindich, Leland Lim and John Burbank all of whom have shuttered hedge funds this year.

Click here to read full story on GoldCore.com.

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

Our Crazy-Making, Profiteering Education-Career Maze

27-Sep-2017

So let’s say we want to set up a system to help students choose a career that fits their aptitudes and interests. What would we do? How about:

1. Give them zero (or superficial) aptitude and career-related tests.

2. Provide a few minutes with a counselor who knows nothing about them, their aptitudes or potential career-related interests.

3. Design the high school education system to provide near-zero knowledge of finance, debt, economics, how the economy functions and what the world of work demands of workers.

4. Denigrate (subtly or directly) non-college career options, channeling those who aren’t sure into 4-year colleges, higher education paid with student loans designed to maximize profiteering.

5. Force them to choose a major or field of study at 17 or 18 years of age, despite their lack of real-world experience and objective knowledge of how the economy functions and their own aptitudes/character traits.

6. Disconnect this higher education from real-world work places so they exit higher education with little actual knowledge of the skills employers need.

7. When the student graduates after borrowing a fortune and discovers their diploma has low value in the marketplace or is in a field they’ve found they loathe, then suggest the “solution” is to borrow another fortune and invest more years in obtaining another credential.

This is the American education-career maze–ineffective, self-defeating, wasteful, irrational, and apparently designed to maximize student confusion, poor choices and profiteering by higher education and the student-loan racketeers.

As if this wasn’t bad enough, what do we decide to teach our students if careers might be significantly different in 10 or 20 years? Yes, math, the basics of science and communication skills will remain useful as a foundation, but these basics aren’t enough to prepare students for a fast-changing emerging economy/4th Industrial Revolution.

Clearly, it would be enormously beneficial to teach the skills needed to learn on one’s own and adapt successfully to changing circumstances. The current system is a hierarchy of credentialing that enriches those dispensing and funding the credentialing.

Our system’s response to those left behind, those with inadequate skills and those who chose unwisely is always: get another credential, at enormous expense. Nobody tells students that credentials are in over-supply and are therefore losing their value.

Value and profits flow to what’s scarce and in demand. Trying to reach the top of the credential pyramid is a crowded race, and the losers are left with debt and wasted years they could have spent actually learning useful knowledge bases and skills–in effect, pursuing a self-directed path of accrediting yourself.

The education-career maze doesn’t have to be so self-defeating, costly, convoluted or ineffective. My book The Nearly Free University and the Emerging Economy lays out a model of higher education based on workplace apprenticeships in all fields, from carpentry to chemistry to sociology, from Day One, a structure that dramatically lowers costs while providing an education based on real-world acquisition and use of knowledge and skills in the workplace, not sitting in a chair watching a lecture.

Technology is a core part of improving results while lowering costs by 90%. Consider this article: Imagine how great universities could be without all those human teachers.

I describe the process of accrediting yourself in my book Get a Job, Build a Real Career and Defy a Bewildering Economy, which also details the eight essential skills needed to navigate the emerging economy.

What’s the emerging economy/4th Industrial Revolution? It’s not so much the replacement of human labor by robots as the augmentation of human skills with technology, and the focus on a simple but profound source of value creation: what’s scarce and in high demand? What’s abundant and not in demand?

The point of my book is to lay out a pathway of learning how to learn on our own and acquiring the soft skills needed to collaborate, communicate and manage teams/projects effectively, regardless of the field of endeavor.

How can we expect young students with little life experience to choose wisely when they don’t even understand how the economy works? The current education-career maze assumes that some basic math and science knowledge is all students need to figure out their role in a fast-changing economy that they don’t even understand.

The inadequacy of our crazy-making education-career maze boggles the mind.We need to do much, much better, not just for our students but for our society. The answer is not another $1 trillion in student loan debt to pay for another raft of declining-value credentials. We need a new system, and fast. Solutions abound, but not within the current crazy-making education-career maze.

Here’s a snapshot of the workforce’s education level:

Even the most credentialed workers’ earnings have stagnated:

And here’s your wunnerful federal government, enforcing debt-serfdom on college students to maximize the profits of the student-loan racket:

 

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

[KR1128] Keiser Report: Dow One Million in the Age of Credit Freeze

27-Sep-2017

Max & Stacy ask what happens when a nation of consumers goes into cold state credit freeze? And is Warren Buffett’s Dow 1,000,000 possible in such a state? Max interviews Charles ‘Chuck’ Johnson of GotNews.com about how his operation managed to take down the billions-of-dollars establishment candidates and media empires in this latest US election series. He also reveals who his deep political sources claim is the source of funding for the Steele dossier.

“Gold prices to reach $1,400 before the end of the year” – GoldCore

26-Sep-2017

by MarketWatch

Gold finished sharply higher on Monday, recouping roughly half of last week’s loss, as declines in the U.S. stock market and growing tensions between the U.S. and North Korea lifted prices for the yellow metal to the highest settlement in more than a week.

December gold rose $14, or 1.1%, to settle at $1,311.50 an ounce. Prices, which lost about 2.1% last week, saw their highest finish since Sept. 15, according to FastSet data as reported by Marketwatch.

“The backdrop for gold today is as bullish as it has been in a long time,” said Mark O’Byrne, research director at GoldCore in Dublin.

Gold in USD (5 years) 

He expects gold prices to reach $1,400 before the end of the year.

With President Donald Trump “in the White House and the political situation in the U.S. and globally more uncertain than it has been in many years, gold will almost certainly continue to see robust safe-haven demand,” he said.

“This should push gold higher in the coming months.”

Recent military tensions between North Korea and the U.S. and its allies has helped to underpin gold’s haven status as a hedge against a sudden escalation in geopolitical tension.

Click here to read full story on GoldCore.com.

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

You Can Only Choose One: Cheap Oil or a Weak Dollar

25-Sep-2017

Glance at this chart of the trade-weighted U.S. dollar, and note the swing highs and lows in the price of oil per barrel around each peak and trough. You can look up historical inflation-adjusted prices of oil in USD on this handy chart: Crude Oil Prices – 70 Year Historical Chart (macrotrends.net)

The correlation isn’t perfect, of course. Oil was relatively cheap between 1986 and 2003, due to a relative abundance of supply as Saudi Arabia and new fields ramped up production, with two periods of extreme price action: a brief spike higher in 1990 preceding the First Gulf War, and a collapse to $17 in the 1998 Asian Contagion financial crisis.

Geopolitical crises, wars and supply shocks will move oil prices regardless of the value of the USD. That said, it’s clear that absent such shocks, there is a strong correlation between a stronger USD and lower oil prices (in USD of course) and a weaker dollar and higher oil prices.

The reason why is straightforward: if the dollar gains purchasing power against other currencies, it buys more oil for each dollar.

Conversely, when the USD weakens, its purchasing power declines and it takes more USD to buy an imported barrel of oil.

(Note that the price of domestically produced oil is largely set on the global marketplace. West Texas crude oil may be a few dollars less per barrel than Brent crude oil, but if the global price skyrockets, so does the price of US-produced crude.)

Since oil and gas are the essential resources of the industrial economy, the price paid by consumers and commercial users matter.

The one way the US can get an across-the-board global discount on oil is to push the purchasing power of the USD higher. That is an enormous benefit that few commentators ever mention. Instead, pundits talk about the benefits of a weaker dollar, which boil down to lower priced exports.

Which matters most to households and enterprises? A tiny blip higher in exports (a relatively modest slice of the U.S. economy) or lower energy prices at the pump?

If a recession were to pressure household budgets, the one sure way to lower household spending on oil/gasoline would be to strengthen the USD.

There are two basic mechanisms that strengthen the USD: raise interest rates, so global capital flows to USD-denominated debt to earn the higher yield, or a global financial crisis which causes global capital to seek the relative safe haven of the USD.

In a global crisis, liquidity and credit will dry up, and all those non-US debtors holding the $11 trillion in USD-denominated debt I mentioned on Friday will be scrambling for USD to service their debts. This will also increase demand for USD, pushing the USD higher.

The Federal Reserve insists that yields must remain near-zero or the economy will collapse. Americans paying 15% to 23% interest on their credit cards haven’t seen any benefit from near-zero rates, nor have student-loan debtors. The real beneficiaries of low yields are financiers, banks and corporations which borrow immense sums for next to nothing. (Try finding a credit card with a 1% or 2% interest rate.)

At some point, the price of oil might start mattering to households and businesses. Note that the discoveries of oil are now a thin slice of annual consumption. As the cheap oil is depleted, what’s left is the costlier-to-extract stuff.

Even more alarming, the global supply of oil might fall well below global demand, and stay there.

When the price of oil rises to the point of pain, just remember the handy-dandy discount mechanism: a much stronger US dollar. 

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

The Fed Offensive: Raining Down “Fire and Fury” On ALL Markets This Week

25-Sep-2017

Two weeks ago we discussed the Fed radio silence for the entire week before the FOMC meeting.

This is what it looked like:

Last week we of course we know what happened, which was basically nothing until talk turns into action.

This week, however, it’s going to be all about talking the markets. Every day of the week there are Fed speakers. What is particularly interesting is that today, Monday 9-25, the Fed will be jawboning in the morning, in the afternoon, and in the early evening.

Prepare for an all-out assault from the Fed, in addition to a heavy hand in the market (behind the scenes and not spoken of in the MSM of course):

What is the message here? The Fed is holding control of these markets like the over-protective parent who walks around with their kid on a leash. The kid is also wearing elbow pads, knee pads and a helmet. Not only that, but the Fed is carrying the kid even with all the measures taken to ensure “safety”. These markets can no longer walk on their own.

Last week finished the week rather optimistic. Gold and silver fought hard and finished above the whole numbers. 

For now, seeing as how the Fed will be engaged in their main policy tool (talking the markets) in addition to gold and silver starting the week off under considerable pressure, we might want to just cast aside the optimism and brace for impact.

And because we know the routine, let’s focus for a minute on the importance of moving averages and how they have an impact on gold and silver prices.

Here is that all important 50-day moving average in the gold price:

Last night, at exactly 7:19 p.m. EST on Sunday September 24th, the gold price broke through the 50-day to the downside.

That is a very bad sign. Recall that every time we have fallen through the 50-day, gold has gone lower, but as long as we remained above the simple moving average indicating what the average price of the yellow metal is over the last fifty days, we have stayed positive on the price action.

The question in gold is this. Does a Sunday night piercing count? Is that the “bounce” off the 50-day we are looking for? For now that remains to be seen. Either way it is an omen that we are now forced to deal with.

Here is how important the 50-day is in the silver price:

It is just as important as it is with gold right now, but for a different reason. If the 50-day moving average crosses the 200-day moving average on the daily chart above, that is very bullish. That is the “golden cross”, and it generally means that price is moving higher.

The 50-day is very close to punching through the 200-day on the daily, and the cartel will do everything in their power to delay this as long as possible. In fact, just to add insult to injury, look at the price action in silver since the opening on Sunday evening. Silver opened below the average, and it hasn’t even gone up to touch the line.

If there is a bright side on the price action, silver has been pushed down for 10 of the last 12 days. Are they just going to clobber the price for the next five too?

They are skating on very, very thin ice. We said there is a price point where buyers will flood the retail market and scoop up as much physical silver as possible. Is that price $16.50?

Check out how choppy crude oil has been all year:

The low point on the chart could be the head of an inverse head-and-shoulders patter, and if that is the case, the price is going even higher from here. For now, it looks like West Texas Intermediate is set to make a run at the $54 – $55 price range range.

Oil is a key expense in gold and silver mining. There is a lot of energy required to get the precious metals out of the ground and to the market, and the more it costs to fuel the equipment required to mine and transport the metal, this more this contributes to a rise in price. So now, the cartel must deal with cost-push inflation, where the higher cost of production contributes to higher prices to the end user.

Looking at the “go-to” safety of the US dollar and US Treasury paper, there has been this divergence in the 10-year yield compared to the performance of the dollar index:

This is not to say the dollar is going to strengthen. Also, it remains to be seen how much selling of bonds, as in rolling them over at maturity, which is what the Fed calls “balance sheet normalization” will impact interest rates. The Fed talked interest rate “hikes” for years before they actually did anything. When they finally did “hike”, interest rates on the fed funds rate have risen to a whopping 100 to 125 basis points (1.0% – 1.25%). That is still basically nothing and nowhere near “normal”.

Fundamentally, the yield of a bond rises as the price goes down. If the Fed is selling their treasury paper, this theoretically increases the interest rate because more sellers are in the market trying to sell the same thing. But for now, all the Fed has done is talk. Furthermore, the United States seems set to go on a spending spree that not only offsets the increase in interest rates, but increases the notional dollar value of the net overall buying. There is the aftermath of three devastating hurricanes to deal with, increased beating of the war drums, tax cuts, increases in spending, a debt ceiling, the need to spend more to service the debt if interest rates continue rising, and the need for more treasuries to pay the maturing ones at the Fed. With all of those factors, are yields really going to rise? If even a handful of those factors comes to fruition, yield is most likely going lower, not higher. There is a day coming, however, when the bond market crashes and the yield explodes. Then we wouldn’t be talking about 2.5% yield on a 10-year but something much, much higher.

There is another thrown at the whole US Treasury market as well, and it’s the dreaded “D” world: Who will buy our bonds when the whole world is starting to become spooked by “de-dollarization”? The topic of the move away from the dollar is just as polarizing as the cryptocurrency topic, and that is not good news for the dollar no matter how one looks at it. Since 2017 so far has been the year of cryptocurrencies, if de-dollarization comes front and center in the MSM, one can assume that there will be equally massive market shocks and movements as the concept picks up speed, which right now is only on the fringe of the alternative media.

So where is the dollar and treasuries headed?

The answer to the dollar part is left open to interpretation. Here’s one:

The dollar has been strengthening for the last 3+ years, and the Fed is set on making sure it “officially” loses 2% of purchasing power per year, even though anybody who ever buys something with dollar realizes that the “real” loss of purchasing power is way more than 2%. Said differently, price inflation is much higher than the government and the central bankers will admit.

And the same goes for the the bond market:

Hurricanes, de-dollarization, tax cuts, war drums, debt servicing costs, extra bond issuance to cover rolling debts, and all the other factors mentioned is screaming that the United States needs lower interest rates, not higher.

Finally, there’s this:

Just in case anybody was looking for a sick joke…

SilverDoctors.com has been on the leading edge of Gold News and Silver News Since 2011. Each month, more than 250,000 investors visit SilverDoctors.com to gain insights on Precious Metals News as well as to stay up-to-date on World News impacting the metals markets.

Commodities King Gartman Says Gold Soon Reach $1,400 As Drums of War Grow Louder

25-Sep-2017

– ‘Commodities King’ Gartman sees $1,400 gold surge in months
– “Gold is the one currency that will do the best of all…”

– Pullback below $1300 “is relatively inconsequential”
– Use gold price weakness to be a buyer “no question”

– Bullish on gold due to central banks and easy monetary policy and gold will be even higher in euro terms
– Gold will be the best of all, as a result of QE and expansionary policies
– Dalio reconfirms belief that ‘gold serves a purpose’ and portfolios should have exposure
– ‘Gold is a diversifying asset’ says Dalio
– Own allocated, segregated gold in Zurich or Singapore

Editor Mark O’Byrne


Dennis Gartman has called 2017’s gold rally and he is now forecasting gold will be “demonstrably higher” rising to $1,400/oz in the coming months and rise by even more in euro terms.

In an interview on CNBC, he said that the recent correction in gold is but a mere pullback prior to much higher prices and “gold is the one currency that will do the best of all.”

Earlier this year Dennis Gartman, of the Gartman Letter, successfully called this year’s gold rally. In the year-to-date the precious metal is up by nearly 13%, thus outperforming the S&P 500 which is 12% higher.

“A year from now, gold will be demonstrably higher than it is right now…I would certainly think we could see $1400 [an ounce] in dollar terms.”

Gartman’s prediction comes a few days after another respected investor, Ray Dalio, called for gold to be held in portfolios.

Both Gartman and Dalio encourage gold investment as they believe it is an excellent diversifier and will be among the best performing currencies.

Their comments came following an intense week both political and economic developments, across the globe.

Click here to read full story on GoldCore.com.

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

You’re Likely A Lot Less Prepared For Crisis Than You Realize

24-Sep-2017

The recent hurricanes are merely reminders that sometimes things happen that are out of our control. They remind us that risk still exists.

Our longstanding view is that there’s a financial storm coming. One that is going to be larger and more destructive than all the others that came before.

Just as the hurricanes in the Atlantic basin were fueled by ocean temperatures a full 1.5 degrees warmer than average, the coming financial storm will be fueled by the most excessive pool of “hot money” created in all of history.

Click here to read the full article

[KR1127] Keiser Report: China Effect on Oil & Bitcoin Markets

24-Sep-2017

In this episode of the Keiser Report, Max and Stacy discuss the China Effect on oil and bitcoin markets. In the second half, Max interviews Chris Blasi of the PMC Ounce. They debate whether or not bitcoin is the new gold. Chris argues only gold is gold but that bitcoin is an interesting new financial asset.

VICTORY IS OURS: Gold & Silver REFUSE to Drop a Handle

22-Sep-2017

Silver Doctors Friday Wrap: Sure, they have succeeded in smashing price lower on the week, but gold & silver refuse to drop a handle! WE GET THE VICTORY, and that will bother them even more than today’s closing prices…

First this (queue Rocky theme song):

 

 

Gold ain’t having $1200 and silver says get that $16 outta here!

Both precious metals hold, and close on the day both higher and above the key whole numbers.

Last Friday we put out this very scary silver chart:

 

 

It turned out to not be that scary of a movie at all. It was more like your typical teen-age slasher flick.

Still, it was pretty disgusting to watch:

 

 

In the above chart, it is easy to see that more and more selling volume is needed to keep the silver price suppressed. So far, 2017 has been nothing more than a monkey-hammering on the weekly, but looking at the volume of the last few weeks, compared to the last price attack, and compared to the attack before that, it looks like the volume is ready to pick up even more from here, but the more paper that gets thrown at silver, the more they can only get sideways choppy price action.

Here’s what the volume looked like as they knocked exactly $1.00 off the price from the high to the low. The cartel was smashing the juice out of the hamburger all week long:

 

 

 

Let’s just do some quick math. Pick your premium, we’ll go with $.50 on some generic (even though SD Bullion had new generic rounds for $.39 over spot all week).

An investor who spends $1000 on physical silver:

$1000 spent with a spot price of $17.87, [1000 / (17.87 + .50)] could purchase 54.43 ounces of silver.

$1000 spent with a spot price of $16.87, [1000 / (16.87 + .50)] could purchase 57.57 ounces of silver.

Said differently:

An investor who bought the dip this week was able to buy 5.75% more silver thanks to the desperate silver price suppression. 

The good news is that there is reason to be optimistic with the silver price moving forward. There are still two weeks left before the non-farm payrolls report, which Eric Sprott said are one of the two main price smashing events that the manipulators look forward too. We happen to agree with that. Since we’ve got a couple weeks until then, we could see a nice silver price rise over the next couple of weeks.

Either way, The take-downs dips just mean we can get more bang for our US debt based fiat currency buck. 

Recall that for the month of August, the amount of paper gold trading was off the charts. It stands to reason that the cartel would be throwing a bunch of paper at gold too on FOMC day, and sure enough, they did not disappoint.

The volume in the gold smash post-FOMC was quite impressive:

 

 

If anybody wants to do the math on how much “gold” was “traded” post-FOMC, here’s a spoiler: It was $3,287,500,000 in paper gold.

Gold continues to look worrisome. We have been rooting for the silver price to catch-up to the gold price, but more and more, it’s looking like the gold price could pull-back to the silver price on the analog in terms of performance and closing of the divergence.

Especially with this little bad omen:

 

 

All year long, if the gold price has stayed above the 50-day moving average (end of January and again in early August), price has recovered. But, and it’s a big but, if the gold price falls below the 50-day, we have gone lower before recovering in price.

 Of course, we could totally blow that call, but here’s a close up of the 50-day to see just how critical that blue line is:

 

 

The gold cartel sees this exact same line, and they know what the significance of it is. In the short term, a break down in price would be more of the same old frustrating stuff, but, it is good news for us as this is a line in the sand for the cartel, and they don’t really know if they want to cross it.

If gold comes down in price to converge with silver on this latest price smash:

 

 

Then when price recovers, silver is poised to outpace gold on the upside. That is the problem the cartel has right now. Said differently, they can win the short term battle for the 50-day, and they can push the gold price temporarily lower, but they will back themselves into a corner because they will have set-up silver for the lead on the next move.

Ahh, the beauty of being backed into a corner. Not team Gold & Silver Community, but team Precious Metals Price Suppression. They are backed into a corner. They can’t win the long-term no matter what they try, and if they push gold down to silver, will they then simply send both metals even lower? They may be full of hubris, but their vaults are not full of gold and silver.

Most likely playing the short game on the gold price, by smashing the percentage move to fall down to silver, this would set-up their only move left on this chess-board if they are to keep the precious metals prices down. If their move is then to smash the price of both metals with the intentions of keeping silver from taking the lead, they seriously risk blowing up the physical market because there is a price where buyers will storm into the retail coin market with a fury. This is a fury from which the cartel may never recover.

The question is, what’s that price in silver? $16.50? $15.50? What about gold? $1275? $1225?

This is why we get the moral victory this week. It’s not about getting a trophy for second place either. We get the moral victory because we know the cartel has no chance of winning this race. They are out of gas, the engine is smoking, and they just blew a tire, just at the time we’re fresh out of a pit-stop.

The dollar looks to be running out of steam if this channel going back over the last three months is any indication:

 

 

Notice how we drew that resistance line. It is very generous. in reality, the drop could be even more imminent if we had lowered the line to very short term tops back in mid-August and then just a couple weeks ago in early September.

Regardless, as has been the case all year, the trend has not been full of sharp declines in the dollar, but rather, just a slow-grind down. This is indicative of a bear market, meaning the dollar could weaken from here. In bear markets, the sharp moves are to the upside (assuming we’re not talking about an all-out crash, which is not out of the realm of possibility either). Conversely, when the sharp moves are to the downside, such as with gold and silver since bottoming at the end of 2015, that is the generally viewed as a tell-tale technical chart pattern of a bull market.

The yield on the US Treasury 10-Year Note has risen for 10 of the last 11 days:

 

 

On top of that, the yield is starting to roll over and fall, even though yield may be closing higher at the end of the day. If you’re looking for higher yields, that’s not a good sign. As Yellen succeeded in flattening yield curve post-FOMC, and as the Fed decided to hold on interest rates, for now, the only go-to tool is once again to “jawboning” because they have only “talked” about “balance sheet normalization”, but the Fed has literally done nothing. Treasury yields are not buying the “interest rate hiking cycle” meme.

Crude oil continues to show that it is slowly but surely rising after bottoming in early 2016:

 

 

We are only beginning to see the effects of all the natural disasters and how it relates to the price of oil, and the various oil derived ground level products such as diesel and gas. If demand has been stable to low for years, one can only imagine demand would have to go up.

Just like a car requires more fuel to start from a stop and get up to highway speed, once it’s up to speed it is more efficient and requires less fuel. Well, zooming out and thinking not about a car but about, say, an island like Puerto Rico, which has been thrust back into the 18th Century, on a fundamental and technical level, the island must get up to speed from a stand still. Now add in the rest of the Caribbean, Florida, parts of Georgia and South Carolina, Texas, Parts of Louisiana, Central Mexico, Southern Mexico, and any other place in North American that has been affected by Mother Nature, and we can clearly see that vast areas of developed, power grid requiring land must get up to speed from a stand still. Just like our car, all of those places are going to need more fuel to do it.

Copper seems to catch Mother Nature’s drift, and looks like to be signaling a reversal on the weekly:

 

 

For the copper bears out there, this is was not a good week. The price action on the chart is holding. As we talked about bull markets having scary pull-backs, copper certainly had one over the last couple of weeks. This week the price action was all over the board, but copper has closed up slightly on the week. Perhaps a bullish reversal is shaping up? Regardless, volume has been slowly picking up all year.

The iPhone 8 has nothing on the new American Palladium Eagle:

 

 

Now might be about the lowest price the Palladium Eagle will be, in a way that people kick themselves in the foot for not being gold or silver buyers back in the year 2000. That channel looks a lot like the US dollar channel with one striking difference: Palladium is riding into town on a bull!

Could palladium dip from here? Of course, but there is no mistaking it, this long-term super-cycle precious metals bull market is on!

Slow and steady wins the race, and palladium has already dipped outside of the channel, so it could start picking back up as early as next week.

Here’s the MSM approved question of the week:

Where’s the line? Apple’s #iPhone8 & #iPhone8Plus are being released today…but where are all the @Apple fans? Thoughts? @ABC7 pic.twitter.com/P1UZZlceYh

— Chelsea Edwards (@abc7chelsea) September 22, 2017

The line is on that chart below. Just don’t look for them to ask what it means:

 

 

probably nothing…

 

 

 

 

 

The Demise of the Dollar: Don’t Hold Your Breath

22-Sep-2017

The demise of the U.S. dollar has been a staple of the financial media for decades. The latest buzzword making the rounds is de-dollarization, which describes the move away from USD in global payments.

De-dollarization is often equated with the demise of the dollar, but this reflects a fundamental misunderstanding of the currency markets.

Look, I get it: the U.S. dollar arouses emotions because it’s widely seen as one of the more potent tools of U.S. hegemony. Lots of people are hoping for the demise of the dollar, for all sorts of reasons that have nothing to do with the actual flow of currencies or the role of currencies in the global economy and foreign exchange (FX) markets.

So there is a large built-in audience for any claim that the dollar is on its deathbed.

I understand the emotional appeal of this, but investors and traders can’t afford to make decisions on the emotional appeal of superficial claims–not just in the FX markets, but in any markets.

So let’s ground the discussion of the demise of the USD in some basic fundamentals. Now would be a good time to refill your beverage/drip-bag because we’re going to cover some dynamics that require both emotional detachment and focus.

First, forget what currency we’re talking about. If the USD raises your hackles, then substitute quatloos for USD.

There are three basic uses for currency:

1. International payments. This can be thought of as flow: if I buy a load of bat guano and the seller demands payment in quatloos, I convert my USD to quatloos–a process that is essentially real-time–render payment, and I’m done with the FX part of the transaction.

It doesn’t matter what currency I start with or what currency I convert my payment into to satisfy the seller–I only hold that currency long enough to complete the transaction: a matter of seconds.

If sellers demand I use quatloos, pesos, rubles or RMB for those few moments, the only thing that matters is the availability of the currency and the exchange rate in those few moments.

2. Foreign reserves. Nation-states keep reserves for a variety of reasons, one being to support their own currency if imbalances occur that push their currency in unwanted directions.

The only nations that don’t need to hold much in the way of currency reserves are those that issue a reserve currency–a so-called “hard currency” that is stable enough and issued in sufficient size to be worth holding in reserve.

3. Debt. Everybody loves to borrow money. We know this because global debt keeps rising at a phenomenal rate, in every sector: government (public), corporate and household (private sectors).(see chart below)

Every form of credit/debt is denominated in a currency. A Japanese bond is denominated in yen, for example. The bond is purchased with yen, the interest is paid in yen, and the coupon paid at maturity is in yen.

What gets tricky is debt denominated in some other currency. Let’s say I take out a loan denominated in quatloos. The current exchange rates between USD and quatloos is 1 to 1: parity. So far so good. I convert 100 USD to 100 quatloos every month to make the principal and interest payment of 100 quatloos.

Then some sort of kerfuffle occurs in the FX markets, and suddenly it takes 2 USD to buy 1 quatloo. Oops: my loan payments just doubled. Where it once only cost 100 USD to service my loan denominated in quatloos, now it takes $200 to make my payment in quatloos. Ouch.

Notice the difference between payments, reserves and debt: payments/flows are transitory, reserves and debt are not. What happens in flows is transitory: supply and demand for currencies in this moment fluctuate, but flows are so enormous–trillions of units of currency every day–that flows don’t affect the value or any currency much.

FX markets typically move in increments of 1/100 of a percentage point. So flows don’t matter much. De-dollarization of flows is pretty much a non-issue.

What matters is demand for currencies that is enduring: reserves and debt.The same 100 quatloos can be used hundreds of times daily in payment flows; buyers and sellers only need the quatloos for a few seconds to complete the conversion and payment.

But those needing quatloos for reserves or to pay long-term debts need quatloos to hold. The 100 quatloos held in reserve essentially disappear from the available supply of quatloos.

Another source of confusion is trade flows. If the U.S. buys more stuff from China than China buys from the U.S., goods flow from China to the U.S. and U.S. dollars flow to China.

As China’s trade surplus continues, the USD just keep piling up. What to do with all these billions of USD? One option is to buy U.S. Treasury bonds (debt denominated in dollars), as that is a vast, liquid market with plenty of demand and supply. Another is to buy some other USD-denominated assets, such as apartment buildings in Seattle.

This is the source of the petro-dollar trade. All the oil/gas that’s imported into the U.S. is matched by a flow of USD to the oil-exporting nations, who then have to do something with the steadily increasing pile of USD.

Note what happens to countries using gold as their currency when they run large, sustained trade deficits. All their gold is soon transferred overseas to pay for their imports. So any nation using gold as a currency can’t run trade deficits, lest their gold drain away.

Nations aspiring to issue a reserve currency have the opposite problem. They need enough fresh currency to inject into the global FX markets to supply those wanting to hold their currency in reserve.

This means any nation running structural trade surpluses will have difficulty issuing a reserve currency. Nations shipping goods and services overseas in surplus end up with a bunch of foreign currencies–whatever currencies their trading partners issue. This is opposite of the global markets need, i.e. a surplus (supply) of the reserve currency.

Any nation that wants to issue a reserve currency has to emit enough currency into the global economy to supply the demand for reserves. One way to get that currency into the global system is run trade deficits, as the world effectively trades its goods and services in exchange for the currency.

A reserve currency cannot be pegged; it must float freely on the global FX exchange. China’s currency, the RMB, is informally pegged to the USD; it doesn’t float freely according to supply and demand on global FX markets.

Nobody wants to hold a currency that can be devalued overnight by some central authority. The only security in the realm of currencies is the transparent FX market, which is large enough that it’s difficult to manipulate for long.

(Global FX markets trade trillions of dollars, yen, RMB and euros daily.)

This is why China isn’t keen on allowing its currency to float. Once you let your currency float, you lose control of its exchange rate/value. The value of every floating currency is set by supply and demand, period. No pegs, no “official” rate, just supply and demand.

If traders lose faith in your economy, your ability to service debt, etc., your currency crashes.

So let’s look at currency flows, reserves and debt. In terms of currencies used for payments, the euro and USD are in rough parity. Note the tiny slice of payments made in RMB/yuan. This suggests 1) low demand for RMB and/or 2) limited supply of RMB in FX markets.

The USD is still the dominant reserve currency, despite decades of diversification. Global reserves (allocated and unallocated) are over $12 trillion. Note that China’s RMB doesn’t even show up in allocated reserves–it’s a non-player because it’s pegged to the USD. Why hold RMB when the peg can be changed at will? It’s lower risk to just hold USD.

While total global debt denominated in USD is about $50 trillion, the majority of this is domestic, i.e. within the U.S. economy. $11 trillion has been issued to non-banks outside the U.S., including developed and emerging market debt:

According to the BIS, if we include off-balance sheet debt instruments, this external debt is more like $22 trillion. FX swaps and forwards: missing global debt?

Every day, trillions of dollars are borrowed and lent in various currencies. Many deals take place in the cash market, through loans and securities. But foreign exchange (FX) derivatives, mainly FX swaps, currency swaps and the closely related forwards, also create debt-like obligations. For the US dollar alone, contracts worth tens of trillions of dollars stand open and trillions change hands daily. And yet one cannot find these amounts on balance sheets. This debt is, in effect, missing.

The debt remains obscured from view. Accounting conventions leave it mostly off-balance sheet, as a derivative, even though it is in effect a secured loan with principal to be repaid in full at maturity. Only footnotes to the accounts report it.

Focusing on the dominant dollar segment, we estimate that non-bank borrowers outside the United States have very large off-balance sheet dollar obligations in FX forwards and currency swaps. They are of a size similar to, and probably exceeding, the $10.7 trillion of on-balance sheet debt.

So let’s wrap this up. To understand any of this, we have to start with Triffin’s Paradox, a topic I’ve addressed numerous times here. The idea is straightforward: every currency serves two different audiences, the domestic economy and the FX/global economy. The needs and priorities of each are worlds apart, so no currency can meet the conflicting demands of domestic and global users.

Understanding the “Exorbitant Privilege” of the U.S. Dollar (November 19, 2012)

So if a nation refuses to float its currency for domestic reasons, it can’t issue a reserve currency. Period.

If a nation runs trade surpluses, it has few means to emit enough currency into the FX market to fulfill all three needs: payment, reserves and debt.

As for replacing the USD with a currency convertible to gold: first, the issuer would need to emit trillions for the use of its domestic economy and global trade (let’s say $7 trillion as an estimate). Then it would need to issue roughly $6 trillion for reserves held by other nations, and then another $11 trillion (or maybe $22 trillion) for those who wish to replace their USD-denominated debt with debt denominated in the new gold-backed currency.

source

So that’s at least $24 trillion required to replace the USD in global markets, roughly three times the current value of all the gold in existence. Given the difficulty in acquiring more than a small percentage of available gold to back the new currency, this seems like a bridge too far, even if gold went to $10,000 per ounce.

Personally, I would like to see a free-floating completely convertible-to-gold currency. Such a currency need not be issued by a nation-state; a private gold fund could issue such a currency. Such a currency would fill a strong demand for a truly “hard” currency. The point here is that such a currency would have difficulty becoming a reserve currency and replacing the USD in the global credit market.

Issuing a reserve currency makes heavy demands on the issuing nation. Many observers feel the benefits are outweighed by the costs. Be that as it may, the problem of replacing the USD in all its roles is that no other issuer has a large enough economy and is willing to shoulder the risks and burdens of issuing a free-floating currency in sufficient size to meet global demands.

Of related interest:

How Dangerous Is Emerging Markets Dollar Debt?

$10.5 trillion in dollar-denominated debt

The Fed’s Global Dollar Problem Borrowers around the world have gone on a dollar binge. This makes them vulnerable when interest rates rise. 

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Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms

22-Sep-2017

– £1 trillion crisis looms as pensions deficit and consumer loans snowball out of control
– UK pensions deficit soared by £100B to £710B, last month
– £200B unsecured consumer credit “time bomb” warn FCA
– 8.3 million people in UK with debt problems
– 2.2 million people in UK are in financial distress
– ‘President Trump land’ there is a savings gap of $70 trillion
– Global problem as pensions gap of developed countries growing by $28B per day

Editor: Mark O’Byrne

There is a £1 trillion debt time bomb hanging over the United Kingdom. We are nearing the end of the timebomb’s long fuse and it looks set to explode in the coming months.

No one knows how to diffuse the £1 trillion bomb and who should be taking responsibility. It is made up of two major components.

  • £710 billion is the terrifying size of the UK pensions deficit
  • £200 billion is the amount of dynamite in the consumer credit time bomb

How did the sovereign nation that is the United Kingdom of Great Britain and Northern Ireland get itself so deep in the red?

This is not a problem that is bore only by the Brits. In the rest of the developed world a $70 trillion pensions deficit hangs heavy.

We are all in this boat because we apparently didn’t learn from the massive man made crisis that was the 2008 financial crisis.

The ‘we’ is referring to UK individuals who are on average holding £14,367 of debt. It refers to the pension fund managers who are ignoring the fact they hold more liabilities than assets. It refers to banks and mortgage and loan providers who give loans to people who are already indebted and who will struggle to pay the debt back. It refers to a compliant media who do not have ask hard questions about irresponsible lending practices and cheer lead property bubbles due to getting significant revenues from the banking and property sectors.

And,  ultimately the ‘we’ is the government who peddled such terrible monetary policy that it has brought us as close to nuclear financial disaster as we have been since 2008.

In the red, everywhere

In the United Kingdom we are running a deficit not only in our day-to-day lives but also in our future lives.

Unsecured consumer credit is now at 2008 levels. There is £200 billion of unsecured credit. The FCA’s Andrew Bailey has put this dangerous issue at the top of the regulator’s agenda.

However it is not just for the FCA to be dealing with. There is no one organisation responsible for the huge levels of personal debt that will eventually cause this financial system to implode.

Click here to read full story on GoldCore.com.

Important Guides

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Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

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