The Miles Franklin Newsletter
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From The Desk Of David Schectman
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David's Commentary (In Blue):
Do you remember the phrase,
“We hold these truths to be self-evident”
in the Declaration of Independence - Well, these days nothing seems to be “self-evident.” Whatever the topic – politics, the Coronavirus, the economy, the stock market - there are always two opposing positions each of which are certain that they got it right. It can be very unsettling that whatever position we take on the above-mentioned topics, there are many people who will take the other side of the argument.
Are you looking for guaranties? There are no guaranties. The best approach is to do your own research, and form your own opinions, and then hang tight. You will win some and you will lose some. That’s life.
I am absolutely convinced that the economy is not coming back. It will not resemble the pre-Covid-19 economy. We will have to suffer through - at minimum - a severe recession with high unemployment, an underperforming stock market and stagflation. In the worst-case scenario, we will be hit with a Great Depression, along with a stock market collapse, and hyperinflation. This really is a distinct possibility, in spite of what your broker or money manager or Donald Trump tells you.
But many people tend to hang unto an “optimistic” view and point to the
possibility
of a vaccine for Covid-29, and the rising stock market and expect an uptick in the economy as people leave their home-bound quarantine and start to spend again.
There is nothing wrong with being an optimist. Our President is a cheerleader, but he has his own agenda. He needs to be optimistic to bolster his chance of being re-elected.
I believe that the worst possible thing one can do is to be optimistic when it is based solely on hope. It sets you up for failure and disappointment. I am not suggesting that anyone should be a pessimist. How about being a well-informed realist. And if that leads you to be pessimistic, then so be it. I try to be a well-informed realist.
For the first time in a decade, people are coming to me for advice. Due to the Pandemic and crashing economy, suddenly I have credibility. I suppose I should. I have been warning about what would happen when a “Black Swan” popped the debt, bond market and stock market bubbles. The Coronavirus turned out to be the pin that popped all of the bubbles and the end game that I warned would come has arrived. Yesterday my wife (of 56 years) told me, “The thing I admire about you the most is that you have never wavered.” It’s true, through the ups and downs of the markets over the last 35 years, I have never wavered. To me, there were economic truths that were “self-evident.” You cannot print your way to prosperity. That always ends badly (like now). All debt must be paid, either by the borrower or the lender. In this case, it should have been the lender, (the same was true in 2008) but the Federal Reserve ramped up the printing presses and flooded the world with trillions of dollars, created out of thin air and they made sure that the banks would be taken care of. They also bailed out hedge funds and large corporations too. The rest of us got – very little.
The (misplaced) optimism we see today is because since they are using the same playbook they did in 2008-09 - and the economy DIDN’T collapse - people assume that it will work again this time too. Yes, The Fed have saved the banks and bond funds and hedge funds and big corporations for now – at the cost of many trillions of new dollars with a lot more to come, but they cannot save main street or the tens of millions of people who will not have a job to return to. Propping up the stock market is not the same thing as saving the economy.
Look at what is happening from the bottom up. Millions of people have lost their jobs and the companies they worked for will never re-open. As soon as their unemployment runs out and the government’s additional assistance runs out, these folks, and I truly feel for them, will lose their houses and their cars and will default on their credit card debt. All of those losses will be shifted to the banks and landlords.
For example, look what’s happening to the shopping malls. The biggest mall in America is right here in Minneapolis. The Mall of America is looking at bankruptcy. Commercial real estate is a disaster area. Commercial real estate is being decimated. “For Lease” and “For Sale” signs are popping up all over. People are now working from home and the big offices are no longer necessary.
How about the airlines and the restaurant industry and the cruise industry and retail? How about the wholesale and retail car industry and the auto manufactures? All of the repossessed cars, added to the hundreds of thousands of cars that are being put up for sale by the leasing companies will kill the auto industry.
All of the states are deeply in debt and are facing massive increases in unemployment benefits and collapsing tax revenues. The State of Minnesota went from a $1.5 billion surplus to a $2.4 billion deficit in two months.
Taxes will rise. Food prices are already rising rapidly. We are already in a 1970s type of stagflation – some prices are falling but some are rising. like the stock market, which is the major beneficiary of the Fed’s bail outs. The bottom line is, according to Shadowstats, unemployment is 35.4% and that doesn’t include the 10 million people who filed in May). This is beyond a disaster. It is a catastrophe. How do you bounce back from this?
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ShadowStats Alternate Unemployment for April 2020 is 35.4%, 39.6% net of BLS errors (see Flash No. 1435).
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This is the new “normal.” How can the economy ever recover under these conditions?
As much as we would just like the Covid-19 to go away, a second wave of Covid-19 infections are pretty much a certainty at this point. We’re already seeing initial proof of this in Asia in the very countries that have to-date been most successful at suppressing the virus: Hong Kong, China and South Korea are experiencing a new wave of outbreaks. Even after extended lulls in new cases, they’re finding that opening social movement back up results in flare-ups in new covid-19 clusters.
It’s quite possible that these second waves will be followed by third and fourth waves, as a growing number of scientists worry that the coronavirus may never go away — as it can hide in asymptomatic carriers and because it mutates so rapidly that a permanent vaccine may not be realistic.
Any hope for a vaccine is unrealistic. Researchers are finding that the virus is mutating and that there are different forms out there, some more lethal that others (like the one in NYC). The common flu mutates and there are different strains that circulate around the globe every flu season. That’s why the flu vaccine is at best only 60% effective and that number can drop to 20% in any given year. Why should we expect better results for Covid-19? And even if a vaccine is developed that is safe and effective, it will take a year and a half to test it, manufacture it, and distribute it. That’s the best case. So, the question is – can our economy survive another year or two, minimum, with the virus in our midst? How can restaurants, concerts, sporting events, or any large gathering get back to normal? They can’t. The same goes for air travel and vacations - and so many other parts of the economy.
If you still want to be optimistic, then go for it. Maybe you would be truer to yourself if you first tried to find answer to how can we correct the problems I brought up?
Do you know that the Fed could send EVERY MAN WOMAN AND CHILD IN AMERICA a check for $35,000 for less a measly TEN TRILLION DOLLARS?
Think what that would do for the economy and the small and medium sized businesses. The national debt will hit $30 trillion this year so is it that unreasonable an idea to up it to $40 trillion? It’s not unreasonable if, as Fed Chairman Powell says, the unlimited printing of money is a good idea and the Fed will do whatever is necessary. The Fed and Treasury seem to be going on the premise that they can print all the money that’s necessary, trillions upon trillions, to save the economy. Between the Fed and the Treasury, they probably will borrow/create $10 Trillion this year anyway.
So, I ask again, “Why not send the check for $35,000 directly to the people and small businesses who need it the most?” Retail would be revived. The economy would jump back to life. It would be something to behold.
The only logic I see is that the money flows to the top, not to the bottom. The 1% (.01%) get most of it, as usual and the rest of us eat cake. That’s not surprising. The Fed is owned by large banks and its mandate is to save the banks and not us.
The best advice that I can offer is to avoid the day-to-day market “noise” and focus on the big picture, the endgame. It’s clear to see what is coming. Can the stock market remain at such lofty levels while the economy is spiraling out of control toward a Great Depression? Can the dollar hold its value while the Fed prints trillions and the National Dept will explode from $20 trillion to $30 trillion this year? Can the states and pension plans survive the shock to the economy and the tax revenues? Just because the Fed has thrown enough money into the stock market to keep it from collapsing, does that have anything to do with the real economy? In spite all of this, there are many – probably a majority of people who still cling to the belief that everything will go back to normal. No one likes a pessimist – even if they are telling it like it is.
As for the stock market, I say it is now just one big illusion. Just like the video that follows. So lifelike that you can believe it.
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I will finish the up with one last question. Got Gold?
The following article is from Bill Holter. Does he sound a bit like me? He should. I hired Bill and he wrote for Miles Franklin for several years before joining up with Jim Sinclair.
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Bill Holter
Remember 2 months ago when friends, family, and other acquaintances came to you asking for your opinion and even advice? Things looked very dour indeed and people for the most part were in full blown panic mode. They were going to lose their job; they were losing their money and if they left the safety of their home…they were going to DIE!
For a brief moment, you were no longer an idiot. Still strange maybe, but because it looked as if everything was spinning out of control, it was you they sought advice from. It was you because maybe you were the only one warning them prior, or maybe THE only one they knew who had counseled caution? You might have even heard from people you hadn’t seen or heard from in years? You might have even had relatives that needed help financially and you helped them? Very briefly, you were no longer an idiot!
Alternatively, some may have thought you even a bigger idiot than before? Some, maybe even many, only feared the virus and believed we would be back to “normal” in short order? This group believed you were dead wrong about the economy, the markets etc. Not only were you dead wrong but plain foolish because you prepped for something that would never come? (Even if it was not you who had to stand in line to purchase four rolls of toilet paper). In any case, you are still an idiot…again!
The average person has been duped again for the umpteenth time. Yes, we have had 39 million new claims for unemployment. Yes, there have been (and will be) many old-line corporations file bankruptcy, and yes a huge percentage of debt versus all sorts of real estate go into arrears but not to worry! Not to worry because the government has (and will) save us all. Not to worry because whatever is needed to spend will be spent and all will be good. Just look to the stock market as proof! While those 39 million new unemployment claims were being filed, the stock market climbed over 30%. The unicorn juice of the stock market not falling any further has served to calm the public nerve!
But now for the reality. The reality is this, the next few months will likely become a financial and economic nightmare. Just as an atomic bomb exploding 10 miles away, you see the flash, you then hear the bang but nothing happens immediately. “Immediately” is where we stand today. The concussion and destruction is delayed but when is does arrive it demolishes everything.
Plain and simple, the world was already seriously rolling over in the fourth quarter last year. You could plainly see this in my series, “trade” being the most obvious because it is the most difficult to fudge. The fateful day of Sept. 16 when repo broke should go down in infamy as the day the levee broke. The Fed was forced to pump $ billions day after day to keep that canary from being noticed. I will only say the virus was “convenient” because it has been cover for central banks to flood the grossly indebted, financially illiquid and insolvent system with new credit and liquidity. How fortuitous!
Folks, we are already in a global depression as measured by unemployment. $ trillions in debt have gone unserviced for 2 months now and will never be paid on again. $ trillions have already been created and spent by broke central banks and sovereign treasuries. It has ONLY been this largesse that has prevented postponed financial carnage. “Normal” as we thought it to be back in January will never return because frankly, our past way of life was anything but normal! Is it really sensical to spend more each and every year than you take in and fund the gap by borrowing the difference? Can that be sustained? We are just about to see the answer to this, and the resounding NO will be in your face with clarity!
Individuals, small businesses, large corporations, cities state and local governments, pension plans galore and even central banks and sovereign treasuries have been bankrupted. The “bankruptcies” are working their way up and down the line and spreading like wildfire because every failure either adds pressure to or creates another (more) bankruptcies. We have lived a financial life where everybody owes everybody and “liability” exists everywhere and in everything known as an asset. In many cases, what was believed to be an asset has very quickly turned into a liability. All that is now necessary for you to never be thought of as an idiot again is the realization that once believed assets, turned liabilities, BECOME UNWANTED LIABILITIES! ie. To whom do you sell?
I believe this scenario will happen soon and happen with a vengeance. I have long said “confidence” would break for any number of reasons. And that is exactly what have now, ANY NUMBER of reasons for the average person to wake up to the fact the financial markets are completely fraudulent and bluntly, FUBAR’d! Vast wealth will be destroyed on a nightly basis from asset class to asset class and culminate in systemwide failures. The financial atomic bomb has already detonated, there is no going back nor “unseeing” it.
But don’t fret, you won’t be an idiot for much longer. If you have done your best to prepare, that is all you could do and all that can be asked of you. At least you will no longer be an idiot! People will genuinely ask your advice on many topics, not just financial…because you are no longer an idiot. There is even more upside, relatives you haven’t been in touch with for years will show up on your front doorstep asking for advice, not to mention food, shelter, and a shoulder to cry on…because you are no longer an idiot!
The above said, do not expect anyone to admit they were wrong. Nor should you expect any apologies for thinking (and treating) you like you were an idiot. Also remember this, once you let someone in your door out of the goodness of your heart…don’t expect them ever to leave (you would of course be an idiot if you believed this). Oh yeah, one last pretty obvious question…GOT GOLD? The only financial life preserver in a world flooded with debt…
Standing watch,
Bill Holter
Holter-Sinclair collaboration
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Tom Dyson has a plan. Sell stocks and buy gold. He references the Dow/Gold ratio as favoring gold now. I do a modified version of this myself. Early in the bull market, like now, I buy Junior gold and silver mining companies. As the price of the stocks rise, faster than bullion, I start selling off the shares and use all the profits to buy more physical gold and silver, and it free because the profit paid for all of it. That’s exactly what I did in the last run up 15 years ago.
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Tom Dyson
A Simple Exchange
Back to gold… I’ve been promoting a simple exchange: Sell stocks, buy gold.
Now, keep in mind that we’re not buying gold as an investment. We’re simply lightening up on passive stock market investments like ETFs, robo-index funds, mutual funds, stock ETFs, and buy-and-hold stock market strategies… and moving to the sidelines (in gold) until stocks get cheap enough for us to buy them again.
In other words, we are using gold primarily as money – a safe haven – and not as a speculation on higher gold prices.
This is why I’ve put the bulk of my money into physical gold. It’s a way to keep us safe while the investment markets correct.
This chart shows what I’m talking about. It shows stocks (specifically the Dow) priced in gold.
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As you can see, the primary trend in the stock market has been DOWN since October 2018, when it peaked at around 22. It’s currently around 14. And it’s on its way to below 5.
By owning gold, we set ourselves up to buy stocks at some point in the next five to 10 years at much lower valuations than they are today. And as such, the only thing that matters is how gold performs relative to stocks. Its nominal price of $1,700 – or whatever it is today – is irrelevant.
So, if you’re worried that you’ve missed the boat, keep in mind this trend still has a long way to go. And if the daily moves in the markets are keeping you up at night, remember what I’ve said before: Focus on the process, not the results.
Regards,
Tom Dyson
Editor,
Postcards From the Fringe
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Get ready for the $5,000 bill. Hyperinflation is coming to America, just like it came to Argentina. The Fed’s printing press is humming along at a rate beyond what caused the collapse of the currency in Argentina.
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Bill Bonner
Hyperinflation Now? Argentina Hints at America’s Fast-Approaching Future
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Week 10 of the Quarantine
SAN MARTIN, ARGENTINA — Time is speeding up. Things we expected to take decades are happening in just days, months, weeks…
And here in Northwest Argentina, we get a sneak preview of the fast-approaching future…
What do we see, exactly?
The end of the American Empire, for one. And the end of the fake dollar that supports it.
King of the Planet
To make a long story short, when
v
goes up, $ goes down.
“I remember the late 1980s,” said our administrator in Salta last night. “I was a student in Buenos Aires. My parents had to send me money every day so I could eat. Every day, I’d rush to the supermarket. And there, they always had a lot of people who spent all day long changing the prices, trying to keep up with the inflation.”
But while the Argentine currency was collapsing… the U.S. dollar was king of the planet.
The fake money is fine as long as it acts like real money. And that’s easy, when interest rates are going down and prices appear stable. It’s especially easy when it is the world’s reserve currency. People are happy to take it in payment for goods and services.
They are happy, too, to leave it in bank accounts or under mattresses.
And then, when there is a crisis… they want more of it. They become reluctant to part with it… holding fast to their dollars as if to life itself. Prices go down; the currency goes up.
Easy Way Out
But economies breathe in and breathe out. They make mistakes… and correct them. People become greedy… and then fearful. They are challenged by unexpected shocks… and they react.
Under pressure of “necessity” — war, depression, civil unrest — the authorities always take
the easy way out
. That is, they “print” money in the hope that the crisis will pass and the economy will “grow its way” into the extra money supply.
For most of the 20th century, the Federal Reserve added to the money supply at a reasonable rate — between 2% and 3% per year. This was generally in line with economic growth, so prices remained more or less stable (with notable exceptions in education, housing and medical care).
But then, there was the crisis following 9/11… and the fall of the Nasdaq… and another crisis following the mortgage-lending collapse in 2008-2009.
Each time, the Fed reacted by “printing” more money. And each time, it avoided the pain of a real correction, kept bad managers in their jobs, turned bad companies into “zombies” dependent on below-market credit, and made bad investments profitable by juicing up prices with more fake dollars.
Cometh the coronavirus… and what else could it do? Print more money!
And this time — the third crisis response this century — its money-printing is more reckless than ever. America’s monetary footing (the Fed’s balance sheet) stood at $3.8 trillion back in September 2019. And it had taken almost 106 years – from when the Federal Reserve was founded in 1913 — to get there. But over the following 12 months, it will add twice that amount.
Argentines Know Better
Americans — with only faint memories of mild inflation in the 1970s — expect things to go back to “normal” soon. But Argentines know better. They know that when people catch on to the scam of money-printing, they will rush to get rid of their dollars.
The
velocity of money
,
v
, — the rate at which money changes hands — will soar… along with prices.
Combining the experience of the pampas with the business attitudes of North America is a group of Americans doing business in Argentina. They began sharing their ideas and information more than 100 years ago. Since then, “they’ve seen it all.”
Your editor has the good fortune to be included in their email exchanges.
Comes one member with this notice… The Argentine government just introduced a 5,000 peso note:
La Nación
reports that the new paper issue already has a design, and is in current production, with a targeted issue date of mid- to late-June. One of the initial designs pictures Dr. Ramón Carrillo (Perón’s first Minister of Health) and Cecilia Grierson (held out to be Argentina’s first female doctor). At today’s current Blue market, the new bill would be worth about US$35.
Here, another draws on painful experience to predict what will happen next. “We are on our way!” he writes:
Almost 40 years ago, in 1981, the Argentine Central Bank issued a 1,000,000 peso note, which was worth about 90 U.S. dollars. The peso currency was known as Peso Ley 18.188, which lasted from 1970 to 1983. In 1983, the Peso Ley was replaced by the Peso Argentino, and four zeros were dropped. All this took place before the hyperinflation of 1989 and 1991. Imagine what will happen in the next couple of years.
Yes, we are on our way. Since we’ve been in the country — only three months — the peso has lost 30% of its value against the U.S. dollar on the black market.
Writing on the Wall
But the dollar is doomed, too. And for the same reason.
Another member recalls writer and philosopher Ayn Rand’s quote:
When you see that in order to produce, you need to obtain permission from men who produce nothing… when you see corruption being rewarded and honesty becoming a self-sacrifice, you may know that your society is doomed.
The U.S. feds print even more money than the Argentines. And they decide who gets it. Most Americans may be blind. But those who do business in Argentina can read the writing on the wall:
Desastre
!
So, get ready… The $5,000 bill is coming to America, too. Perhaps it will have a picture of a masked eagle on one side… and the hero of the War Against COVID-19, Anthony
Fauci, on the other.
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Mike Savage directs his spotlight on the Fed. He has a lot of interesting things to say.
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Mike Savage
We Have The Fed's Back!
I was pretty upset when I found out that the Treasury Department put the American Taxpayer on the hook for $450 billion so the Fed (who conjures up cash for literally NOTHING and charges us interest on it) would not incur any losses on the $4.5 trillion that they are going to use to buy High Yield (Junk) bonds.
You can imagine that I was even more irate when I learned from Wall Street on Parade that it is FAR worse than I could have imagined. We have seen the Fed increase its balance sheet by over $3 trillion in the last few months. I assumed that, since they conjured up the “money” out of nowhere and bought those assets that that was the end of it.
Not so. The Federal Reserve is owned by member banks in its region. Wall Street on Parade looked at the financial statements of the 12 regional Federal Reserve Banks. What they found was- to me- astonishing. Most of the Fed’s balance sheet came from the New York Fed. There are 12 regional banks but nearly half of the asset purchases (3.9 Trillion were from one region- NY. Of course, the main beneficiaries of the Fed’s largesse are their owners- the major banks like JP Morgan, Citigroup, Goldman Sachs and Morgan Stanley.
So, it appears that the Fed conjures up “money” out of nowhere, buys assets, owns assets, charges interest on “money” that was created out of nowhere and, if the assets should lose value we are on the hook for just about ALL OF IT.
Wall Street on Parade …
“When we did the math for all 12 regional Fed banks, the bank share owners were responsible for just 1.8 percent of the 6.98 trillion in liabilities that the Fed has created with the flick of an electronic button. In other words, an institution controlled by five unelected people, with insane power to create money out of thin air by pushing an electronic button, have put taxpayers (and the next generation) on the hook for $6.85 Trillion.”
Let’s not forget about the “printing” they are doing to allow the US government to spend like drunken sailors. The first trillion in US government debt took 205 years to amass from 1776-1981. The last trillion took about 4 weeks. Think about that. We are in the blow-off phase of this credit expansion. It is inflate or die and it appears that all other avenues to create more debt have been utilized and now the Fed is the lender, buyer and OWNER of last resort. They win. We lose.
What about the Swap Programs for 50 foreign central banks and the trillions of dollars that are being sent overseas? Are we on the hook for that too? If the collateral that the Fed takes back for these swap lines goes bad do we eat that too?
The more I learn the more I wish I could just stay in the dark.
Life would likely be simpler if I just ignored all of this- right up until the time we go over the cliff and find out that being prepared was a great idea.
This absurdity has to be the reason that central banks and major banks have been loading up on gold and silver and keeping the prices suppressed so they can get as much as possible. It is obvious to anyone that we the people have been saddled with debts that cannot be repaid with our currencies worth anywhere near where they are today.
The
USdebtclock.org
shows the ghastly numbers. Of course, it does not show the 6.85 trillion we are on the hook for if the Fed’s assets go bad but it does show declining tax revenues, massively increasing national debt (over 25.3 trillion now), massive (over $150 TRILLION) in unfunded liabilities and massive amounts of unemployed Americans. How can anything be repaid with 70% of people USING that freshly conjured up cash to survive on? This means it is conjured up, consumed and all that is left is the debt and interest payments to the Fed that got the debt issued virtually for free. See why you and I would be jailed for counterfeiting? What a racket!
As I am writing this I am seeing that there are riots taking place across the globe. In Chile, people are rioting because they are starving. That has been happening in many other places as the regular people have been pushed to the brink.
I believe that if the US dollar was not the reserve currency of the world the exact same scenario would be playing out right here. Our cash creation machine is still cranking out currency units and the economy is being artificially held up- at least for now.
Just think how sick our economy really is. The US (admitted) deficit for 2020 could be $4 trillion or possibly MUCH higher. Using traditional thinking that $4 trillion would be around 19% of GDP. That is a staggering deficit BUT it is but a pittance of the truth.
According to
USDebtclock.org
Federal, state and local spending accounts for $9.5 Trillion of our GDP. This produces no output and may actually COST more than the benefit of the spending. This is 44.6% of GDP- government spending (debt-fueled).
In re-doing the numbers, I believe the real GDP- that which actually produces goods and services would be around 11.8 Trillion. This would balloon the deficit to 33.9% of GDP and is a more accurate portrayal of what is happening here.
How long can 70% of our population continue to collect chits that are created from nothing and with no intrinsic value, continue to use this illusion as money for real goods and services? How much more will government spending have to be this year because of the unemployment crisis?
To summarize we have fake “money” creating fake asset prices that “identify” as markets but in reality are just managed casinos. One day, the fake money will hit a number that will likely cause the entire scheme to fall apart. Assets being propped up will fall and assets being held down will fly higher as the real “market” takes over without the central bank, bank and hedge fund interference. That day may be days, weeks or months away but I believe it is approaching. The only thing that appears to me to be a good hold right now are hard assets, companies that produce them and possibly some currencies that can help out if the US dollar loses a good portion of its value- which with what is taking place right now is extremely likely. Actually, it may be necessary to keep this scheme going a little longer.
Do you have a plan in place or are you like the majority who have their fingers crossed and are hoping that “The Fed has our backs”? Clue- The Fed only cares about its- and its owners backs. You and I are simply a means to an end- that they own and control it all.
They are WELL on their way!
Be Prepared!
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Ed Steer
I think Egon von Greyerz expressed everyone's feelings best in the opening sentence to his
classic Howard Beale-esque type rant
in the Critical Readssection..."It drives you absolutely mad to see a whole world living a lie. How can anyone believe that the fake world the Fed and their fellow central bankers have created has anything to do with reality."
It doesn't.
As you know, this 'Everything Bubble' has already burst -- and only unlimited money printing is keeping it alive. The current financial, economic and monetary systems are dead already -- and most pundits know that. All the worlds' central banks know that. When the money printing finally stops, which it has to at some point, then it will become obvious to all.
To help the day of reckoning along, I have my suspicions about this 3-way Dance Macabrethat's going on between China, Hong Kong and the U.S. There are trip wires being set up all over the place -- and it wouldn't surprise me in the slightest if two of the casualties in all those would be the China-Hong Kong currency pegs to the U.S.
dollar. And whether or not the U.S. deep state is fermenting this crisis in order to produce such a result, is something that should be kept in mind.
If the U.S. deep state wanted to crash the U.S. economy without them looking like they caused it, a currency devaluation by China would certainly precipitate one -- and the powers-that-be in the U.S. would have their scapegoat.
Returning to central banking for the moment, the other problem they have is deflation. Fractional reserve banking doesn't work in reverse -- and all the money printing in the world isn't inflationary unless it's being spent in the real economy. Right now, it's all being used to keep this 'everything bubble' propped up.
To add to their problem is this niggling little thing called money 'velocity' -- and there just isn't any. Unless you have a lot of it, it's impossible to generate the rates of inflation that the world's central banks require.
Returning to the amount of gold and silver that's now pouring into all the world's ETFs and mutual funds, I can't help but think that we're getting set up for much higher precious metal prices. Because as I've been saying for more than a decade...the only card they have left at some point is the gold card -- and we might be seeing the deep state/powers-that-be getting prepared for that.
Jim Rickards puts it even more succinctly -- and I'm paraphrasing...if the Fed wants inflation, all they have to do is raise the gold price to whatever level they require -- and then keep it there. Then they'll have all the inflation they want.
British economist Peter Warburton had it 100 percent correct in his
tome when
he stated that..."What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the U.S. dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets."
This commodity price suppression strategy has worked well to keep everyone in paper assets since the U.S. went off the gold standard about fifty years ago. But as I've said before, it has now become a liability.
And whether a new higher gold price...and by extension, silver and all other commodities...comes by decree from the Fed or the President, or some made-to-order external crisis, matters not. As one way or another, it's coming.
The Congressional Budget Office released its own bleak outlook Tuesday for economic growth, unemployment and the federal budget, predicting job gains later this year but an overall climate that will remain subdued through 2021.
In its latest projections, the CBO sees GDP capsizing 38% on an annualized basis in the second quarter with the 26 million more unemployed Americans than there were at the end of 2019.
The forecasts are roughly in line with Wall Street economists and slightly less dour than the most recent tracking number from the Atlanta Federal Reserve, which sees GDP falling about 42% in the April-to-June period.
If the collective outlook is anything close to accurate, it will represent the worst drop for a U.S. economy that was brought to a halt due to efforts to stem the coronavirus pandemic.
Job growth will improve "materially" in the third quarter as social distancing policies associated with the virus diminish somewhat. However, the CBO said, "persistence of social distancing will keep economic activity and labor market conditions suppressed for some time."
The office also cautioned that, "The decline in economic activity has been so rapid and so recent that the depth of the downturn is still uncertain, and the data on spending are preliminary and incomplete."
This news item showed up on the
cnbc.com
Internet site at 2:45 p.m. on Tuesday afternoon EDT -- and it's the first contribution of the day from Swedish reader Petrik Ekdahl. Another link to it is
here
.
One month ago, after the banks reported Q1 earnings, we showed that the major US money center banks saw their loan loss provisions surge by roughly 4x from year ago levels in response to expected deterioration in their loan books, with JPMorgan jumping the most, or just over 5x, hinting the other banks are likely under provisioned for the storm that is coming.
With banks set to be hit with tens of billions in charge offs - for which they are trying their best to reserve even if they have no idea just how bad the hit will be - we next looked at what the banks did in the aftermath of the financial crisis. What we found is that most banks reserved total losses anywhere between 4 and 6% of total loans. This time around? So far it is less than 2%...
Putting it in context, so far the Big 4 banks have reserved an additional $24BN in Q1 for future loses. But if the GFC is any indication of the defaults that are about to be unleashed, the real amount of losses, discharges and delinquencies will increase 3x-4x compared to the current baseline, meaning that over the next several quarters, banks will have to take another $75-$100BN in reserves on loans that go bad, wiping out years of profits, which were used not for a rainy day fund but to pay for -- drum-roll -- buybacks.
As we concluded, "this to put it mildly, is a major problem for banks which until now were seen as generously overcapitalized, because if the U.S. banking sector is facing $100BN (or more) in loan losses, then the Fed will have no choice but to once again step in and bail out the U.S. financial sector."
Well, it now appears that this estimate may be optimistic, because as Bloomberg writes today, millions of Americans who have so far been getting breaks on roughly $150 billion loans in are about to hear from their banks. The reason: banks are starting to take a closer look at consumers who have arranged to delay payments, "potentially pushing some out of the programs, as the industry tries to get a clearer picture of how many customers are truly unable to keep up during the coronavirus pandemic."
This very long Zero Hedge article was posted on their Internet site at 6:45 p.m. EDT on Wednesday evening -- and another link to it is
here
.
Necessity may be the mother of invention. But it is the deadbeat dad of intervention, too. The authorities use "necessity" to meddle, control, tax, and spend... while providing no real support.
They are like dangerous quack doctors... promising fantastic elixirs that will grow hair on a billiard ball... and cause 90-year-olds to jump and twitch like teenagers. Then, when the patients get worse, they come up with even quackier remedies - such as printing $10 trillion in fake money.
Yes, Dear Reader, welcome to the feds' treatment center, where they're prescribing Clorox Chewables for the economy. Just take as directed... and die!
The S&P 500 is trading near the top of its range, as if investors could expect growing earnings and dividends in the years ahead. But anticipated earnings are going down, not up. Go figure.
What we figure is that stock prices reflect something else altogether - more intervention. That is, stock market speculators know Dr. Feelgood is on the case. And they're betting that the worse the ailment gets, the more funny-money he'll administer, much of which will go into the stock market.
This very worthwhile commentary from Bill was posted on the
rogueeconomic.com
Internet on Wednesday sometime -- and another link to it is
here
.
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Here are a few worthwhile articles from The Hedge if you have some extra time.
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Zero Hedge
"And now we have come to the unfortunate moment of having to start involuntary layoffs."
"...bringing out the
bazooka
..."
There’s a
debate
in gold bug circles over whether the price difference between gold and silver – the gold/silver ratio – tells us
anything useful
...
The pandemic is just the icing on the cake of a collapse that was going to happen anyway.
It is also a convenient scapegoat, because now the
banking elites are going to escape all the blame...
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Private Safe Deposit Boxes
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Unencumbered / Segregated Storage
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About Miles Franklin
Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.
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