Category: Today’s top gold news and opinion

Introducing Our New Online Order Desk Department

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‘Collectible Coins’

We are pleased to announce the expanded availability of USAGOLD’s market leading offers of type sets, date runs, complete date sets, regional sets, and mint-mark sets of both U.S. and World gold coinage to our Online Order Desk, in a brand new section titled ‘Collectible Coins‘. These items can now be purchase anytime, day or night, via our secure, password-protected, live-pricing environment.

Contrary to the moniker ‘Collectible Coins’, many of our sets sell within a reasonable range of the spot gold value of the coins, and are typically offered at a discount to the cost of the coins individually. That said, items offered at this page are generally extremely limited in their availability, and represent unique, hard-to-find accumulation opportunities for heirloom-minded investors.

We invite you to peruse our current offerings. And, to commemorate the opening of this new section of our Online Order Desk, we’re offering some great, albeit short-lived discounts. All discounts expire Friday (9/21) at midnight! And check back often! New sets will be added all the time.

** $25 off any sets under $2500 **
** $75 off any sets over $2500 **

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The ‘Great Bull’ market is ‘dead,’ and here’s what’s next, Bank of America Merrill Lynch predicts

CNBC/Jeff Cox/9-19-2018

“In that climate, he advised investors to focus on ‘inequality, innovation and immortality, that would benefit pharma companies and technology disruptors, along with inflation plays in commodities, value stocks and markets outside the U.S. and Canada. . .Yet the Fed is now saying ‘this time is different’ and a flat/inverted curve won’t stop them hiking,’ he said. ‘A much more hawkish-than-expected Fed is the most likely catalyst for fresh losses across asset markets.'”

[Emphasis added.]

 

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DMR–Gold seesawing around $1200, but higher this morning on firming yuan, China premier comments

DAILY MARKET REPORT

Gold continued to seesaw around the $1200 mark this morning.  At report post-time, it is trading in the $1203 range and up $3 on the day.  Silver is up 4¢ at $14.23.  Overnight, gold got as high $1206 after Chinese Premier Li Keqiang was quoted on Bloomberg as saying China would refrain from devaluing the yuan to boost exports.  The yuan is also higher in early trading.

The yield on the 10-year Treasury went vertical yesterday to 3.048% on a TIC report showing a minor reduction in Chinese holdings of U.S. sovereign debt. In keeping with Li Kequiang statements this morning, China might be forced to sell U.S. government paper in order to defend the yuan.  Yield on the 10-year is even higher this morning at 3.074%, an indication that the market has not backed-off from yesterday’s assessment. Julius Baer’s Norbert Ruecker told Reuters this morning that “Overall, we are constructive for gold and we are telling our clients to start to build a long-term position. Negative sentiment and positioning looks like it has hit rock bottom, so this will start normalizing and support gold.”

Chart courtesy of TradingEconomics.com

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart note:  The CBOE SKEW Index signals when option traders are concerned about a black swan event.  In August, the SKEW hit its highest level since inception in 1999.  Since then it has backed-off marginally, but the trend in sentiment and the danger signal remain intact. 

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The risk of derivatives isn’t gone. It’s merely morphed.

Bloomberg/Opinion/Sajiyat Das/9-18-2018

“In the 10 years since Lehman’s failure, policymakers eagerly have pointed to initiatives that, they believe, made the financial system safer and a repeat of 2008 unlikely. That view is Panglossian.”

USAGOLD note:  With attention focused on the trade wars, shrinking credit spreads, and the potential for a new emerging country debt crisis, the elephant in the room – the highly-leveraged, multi-trillion dollar derivative market – has been pushed discreetly into the closet.  A Norwegian traders $132.6 million loss trading energy futures last week, though small potatoes in the world of derivatives, issued a warning how suddenly things can go wrong.  This Bloomberg opinion piece tells why current safeguards are likely to fall short in the event of a larger and more widespread meltdown.

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Gold: A new trade war weapon?

321Gold/Stewart Thompson/9-18-2018

“The bottom line is that if the trade skirmish becomes a war and damages the US economy, Trump is going to become more likely to use some form of dollar devaluation as a weapon. . .Clearly, many top bank FOREX analysts believe the trade skirmish will soon become a war involving currency devaluation. I put the odds that it happens at 50% now and trending higher!”

USAGOLD note: The public remains complacent while the pros become more nervous by day.

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China’s US Treasury holdings just fell to six-month low amid escalating trade war

CNBC/Patti Domm/9-18-2018

“Bond pros have been watching the data for clues as to whether China would dump Treasury securities to retaliate against U.S. tariffs, but the July data does not indicate a major move, several strategists said.”

USAGOLD note:  Japan not China has been the leader in reducing bond holdings over the past two years.  China has actually added marginally to its holdings over the period. . . .See below. That said, we still do not know how China is likely to react to the current trade war pressures.  The greatest danger to the bond market could very well become Chinese and Japanese bond liquidations to prop up their currencies and discourage capital flight – an economic necessity rather than a wilful retaliation.

Click to enlarge.

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10-year Treasury yield extends climb above 3%

Financial Times/Staff/9-18-2018

“The benchmark 10-year Treasury yield extended its move above a key 3 per cent threshold on Tuesday, as investors took new trade tariffs into their stride and instead responded to expectations of further interest rate increases by the Federal Reserve.”

USAGOLD note:  The latest TIC report posted above shows a minor reduction in China’s bond holdings. Some in the media say that news may have triggered today’s Treasuries’ sell-off.

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Recent client testimonial

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“Thank you! It has been a pleasure doing business with your Company! You’ve treated the small investor (me) just like you would a millionaire. Best wishes, and I hope I can make some purchases in the future.” – L.W., Savannah, Georgia

We also treat millionaires . . . well. . . like millionaires – whether they admit to it or not [smile].

We receive unsolicited testimonials like L.W.’s routinely. Please see our Client Testimonials page for more feedback, and be sure to visit  the Better Business Bureau for even more in the way of FIVE-STAR reviews.  Don’t do business with any gold company until you have checked it out.

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The USAGOLD Website – A guiding light for current and would-be clientele since 1997

Welcome newcomers!  We invite you to kick back, stay awhile, do some interest-driven browsing

When the USAGOLD website was established in 1997, there was no Google, no Facebook, no I-Tunes, no Amazon. Instead there was just a handful of scattered websites trying to figure what this new technology was all about and how it could be used to some advantage.  We were among that group.  Our idea of innovation in those early days was two spinning globes on either side of the USAGOLD logo.  We marveled at it; considered it state of the art.  If you would like to witness that piece of technology in action, you can see it here at the WaybackMachine.  (Don’t laugh.)

But being among the first on the internet to have spinning globes was not our only achievement. We were also among the first to sponsor a Daily Market Report (1996), a Discussion Group (1997), Live Prices and Charts (2007) and a Mobile Website (2011) – to mention just a few of our ground-breaking internet ventures.  We await the next wave of innovation so that we can offer even more value to our regular visitors.

Through our 22-year presence on the world wide web, the philosophy underlying our website has always been a simple one – to act as a guiding light for our current and prospective clientele by providing a state of the art information portal coupled with a reliable and competitive brokerage service.  We had and still have no aspirations beyond that, and that pinpoint focus has paid dividends beyond anything we would have imagined in 1996.

From a humble beginning (When you visit the WayBackMachine, take special note of the number of visitors registered on our counter!) we have grown to over 600,000 visitors per month currently and there have been times when that count has been significantly higher. USAGOLD today remains one of the most highly referenced and visited web portals in the gold business. We once had a client tell us of visiting the Gold Souk in Dubai and being surprised that so many merchant stalls had USAGOLD on their computer screens. 

If you would like to gain a better understanding of what USAGOLD has to offer to you as a current or prospective client, the menu at the top of the page is good place to start.  For a full site outline including links and page descriptions. . . . . .

We invite you to visit our
Table of Contents

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The Fed isn’t heeding the bond market’s message

Bloomberg/Opinion/Komal Sri-Kumar/9-18-2018

“Bad central bank policies were a factor in the collapse in global markets a decade ago. A coordinated tightening of monetary policy in the U.S. and Europe could have similar implications for equity and bond investors today.”

USAGOLD note:  Ill-timed Fed tightening ignited the crash of 1929 and the crash of 2008, along with a few other panics in between.

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DMR–Gold unmoved by trade war escalation

DAILY MARKET REPORT

Gold had a muted reaction to today’s trade war escalation with the price going sideways. The U.S./China trade war thus far has had a negative effect on commodities across the board including gold, so holding its own and not retreating further comes as something of a surprise. Alibaba’s Jack Ma came out over the weekend predicting a protracted struggle that could last twenty years.  Thus far, the reaction in the West to the trade conflict has been subdued.  That sentiment, however, could change as the trade war moves from peripheral concern to immediate reality.  In China, the trade wars have done little to put a damper on gold imports.  It is on track this year to import another 2000+ metric tonnes of the metal – two-thirds of the annual global mine production.

Quote of the Day
“Two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war. We can also say that if … things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit.” – Ray Dalio, Bridgewater Securities

Chart of the Day


Chart courtesy of HowMuch.net

Chart note:  “One thing is immediately clear, ” says HowMuch. “Imports and exports are both on an upward trajectory year over year, but imports tend to grow faster. In other words, when looking at the graph you will notice the gap between the two numbers has gotten larger and larger while the space between the two circles has also become darker and darker. In short, the trade deficit used to be relatively small, averaging less than $150B year over year in the 1990s, but then it exploded in the 2000s. The single biggest increase occurred in 2004 when it jumped from $532B to $655B—a whopping $122B in one year.”

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Trade war could become currency war depending on how China fights back

“[Exante Data’s Jens] Nordvig said there’s a 50-50 chance China could let its currency fall again. ‘Everybody is too relaxed that they’ve repegged the currency again. It’s never going to move,’ said Nordvig, warning if there could be a snap higher in the dollar. ‘Why would they help out Trump on the currency front. It doesn’t make any sense to me,’ he said.”

USAGOLD note:  Opinions vary about what China might do on the currency front, as this article points out.  As is the case with all the emerging countries, China will be concerned about capital flight.  The weaker the yuan the stronger the possibility of investors selling Chinese assets and buying assets in other countries including the U.S. and Europe – the situation to which Nordvig alludes.

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Mitsubishi: What are the two possible supportive factors for gold?

Scrap Register/9-18-2018

“Investors may be overlooking some factors that potentially could underpin gold prices, said Mitsubishi. Gold has been held back by a strong dollar and expectations for more U.S. rate hikes, as well as a strong stock market that has reduced buying of gold as a hedge. However, two factors that could end up underpinning gold are political risks and rising inflation.”

 

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Alibaba’s Jack Ma warns U.S.-China trade war could last 20 years

Bloomberg/Lulu Yilun Chen/9-18-2018

“‘Short term, business communities in China, U.S., Europe will all be in trouble,’ said Ma, pacing a stage in an open white dress shirt and punctuating his remarks with forceful jabs. ‘This thing will last long, if you want short term solution, there is no solution.'”

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‘Rolling bear market’ will paralyze stocks for years: Morgan Stanley

Investopedia/Shoshanna Delventhal/9-14-2018

“U.S. stock investors should brace for a market that will be paralyzed for several years in a narrow trading range, according to one team of analysts on the Street, and as reported by CNBC.”

USAGOLD note:  Morgan Stanley sees stocks down as much as 17% in a bear market, it says, ‘is now upon us.’

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DMR–Gold up $11 on technical factors, oversold conditions

DAILY MARKET REPORT

Gold got the week off to a strong start nudging back over the $1200 level to $1205 – up $11.00 on the day. Silver is up 21¢ at $14.25.  The move began overnight during Asian trading hours.  It then carried over to Europe and got a bit of a kicker in early New York trading.  Gold seems to be trading on technical factors and oversold conditions today rather than any specific political or economic development.  Last week’s Commitment of Traders numbers revealed some minor short-covering that might be indicative of a trend. The record short-position in gold and silver remains the prime factor in the paper gold market. A number of analysts have made the case for a healthy rally once the short-covering begins in earnest.  Turkey’s banks are reportedly selling physical gold to allay the effects of the lira crisis.  If there has been an effect on the market price, it has been minimal thus far.

Quote of the Day
“Banks in the United States have the potential to increase liquidity suddenly and significantly – from $12 trillion to $36 trillion in currency and easily accessed deposits—and could thereby cause sudden inflation. This is possible because the nation’s fractional banking system allows banks to convert excess reserves held at the Federal Reserve into bank loans at about a 10-to-1 ratio. Banks might engage in such conversion if they believe other banks are about to do so, in a manner similar to a bank run that generates a self-fulfilling prophecy. . . What potentially matters about high excess reserves is that they provide a means by which decisions made by banksnot those made by the monetary authority, the Federal Reserve System – could increase inflation-inducing liquidity dramatically and quickly.” – Christopher Phelan, economist, Minneapolis Federal Reserve

Chart of the Day

Chart note 1:   Though it is probably too early to confirm a correlation, this chart offers some early clues that Christopher Phelan’s scenario outlined in our Quote of the Day might be coming to fruition.  In January 2015, the inflation rate was at its nadir under zero percent.  Excess reserves were near their peak at $2.6 trillion. In September 2015, commercial banks began siphoning off excess reserves, leveraging that capital and lending it into the economy. Keeping in mind Milton Friedman’s widely accepted dictum that there is an 18 to 24 month lag between monetary stimulus and response, the first signs of inflation appear to be right on schedule.  By September 2017 – two years from the initial draw downs – the inflation rate had climbed back to the 2% mark.  As of last week’s Consumer Price Index release, it had reached 2.8%.  

Chart note 2: This past June, the Fed lowered the rate on excess reserves to match the Fed Funds rate adding even more incentive for the banks to accelerate their draw downs. 

Related:  Please see Gold a safe haven in an ocean of excess reserves (Gold was trading at $1060 when this article was first-published.) Also see, the more recent update Excess reserve statement by chairman Powell moves markets

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China’s Shandong Gold Hong Kong IPO to pay for acquisition of Argentina’s largest mine

South China Post/Yuging Liu/9-14-2018

“But [Shangdong Gold’s chairman, Li Guohong] said the company was confident that an upwards trend in gold prices will emerge within the next 12 months, with interest rates steadying in the US by the end of next year. Increasing geopolitical tensions will also fuel the demand for gold as a safe haven, he added. The company counts the Shanghai Gold Exchange, the world’s largest spot physical gold exchange, as its top client, making up 73 per cent of its sales in 2017.”

USAGOLD note:  Shangdong Gold is state-owned. Its chairman’s optimistic view on gold’s future is particularly interesting when you take into account the current interaction between the yuan and gold.  Does it tell us something about China’s intentions with respect to the yuan?  China has publicly stated its interest in making the yuan a viable competitor to the dollar for international reserve status.  One might read in all of this that Li Guohong and Shangdong Gold take that commitment seriously. By the way, those sales on the SGE are recycled to the nation’s population and banks which, in turn, are owned by the Peoples Bank of China.  Acquiring mines, like the Valdero mine in Argentina, in our view, is a back-door scheme for China to build its gold reserves.

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Gold speculators cut back on their bearish bets this week

Investing.com/Zachary Storella/9-16-2018

“Large precious metals speculators decreased their bearish net positions in the Gold futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday. . . The speculative bearish position was reduced for a second time out of the past three weeks following six straight weeks of rising bearish bets (through August 21st). The gold spec position has now been in bearish territory for five straight weeks after falling into a bearish standing on August 14th.”

Table courtesy of GoldSeek.com

USAGOLD note:  Some covering of record short position , but not a rush for the exits – as yet.

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Next crash set to wipe $10 trillion off global stock and property markets

New Zealand Herald/Ambrose Evans-Pritchard/9-17-2018

“[Former chairman of the White House Council of Economic Advisors, Martin Feldstein] warned that a decade of super-low interest rates and monetary stimulus by the US Federal Reserve has pushed Wall Street equities to nose-bleed levels that no longer bear any relation to historic fundamentals. Stock prices will inevitably come plummeting back down to earth. Prof Feldstein said the next bear market – most likely triggered by a spike in 10-year Treasury yields – risks setting off a US$10 trillion (NZ$15 trillion) crash in US household assets. The cascading ‘wealth effects’ will drain the retail economy of US$300bn to US$400bn a year, causing recessionary forces to metastasize.”

USAGOLD note:   A must read from one of our top financial journalists citing sources you normally would not associate with a doomsday scenario. . . . . . . .

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A decade is too soon to gauge the true implications of the crisis

Financial Times/John Authers/9-15-2018

“First, how could you best have responded as a private investor on the Friday night before Lehman’s lost weekend? And second, what is the market telling us about the future course of the world?”

USAGOLD note: One more retrospective in a week of retrospectives on the 2008 financial crisis. . .This one struck a chord.  For the crisis that never went away, the markets’ final verdict might still lie ahead.

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China may reject new trade talks if more tariffs imposed

Reuters/David Shepardson and David Morgan/9-16-2018

“The Chinese government may decline to participate in proposed trade talks with the United States later this month if the Trump administration moves forward with additional tariffs on imported Chinese goods, the Wall Street Journal reported on Sunday, citing Chinese officials.”

USAGOLD note:  The Trump administration is preparing a new round of $200 billion in tariffs to launch as early as next week, perhaps even Monday. China says it will not negotiate with a gun pointed to its head. Thus far the markets have treated the trade war as a sound and fury signifying nothing. One wonders what happens if that changes.  We might find out next week.

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DMR–A word on the ten-year anniversary of the Lehman Brothers’ collapse

DAILY MARKET REPORT

Gold pushed back below the $1200 mark this morning in lackluster trading – down $4 on the day at $1198. Silver is down 4¢ at $14.14.

Much of the news and opinion the past few days has centered around the Lehman Brothers’ collapse ten years ago this weekend. One of the more telling features is the amount of analysis pointing to a repeat crisis before 2020. JP Morgan, Ray Dalio, Moody’s Analytics, SocGen are prominent among a group warning of a Lehman moment at some point over the next two years. Even former Fed chairman, Ben Bernanke, says there will be a Wile E. Coyote moment in 2020.

The rush to the podium (so to speak) among analysts to make sure they are on the record with their warnings is something to behold. It is a much different spectacle from the financial elite’s We-Didn’t-See-It-Coming mantra first uttered in 2008 and religiously ever since. The Queen of England was among the group to hear that rationalization. Her response was classically discreet: “People had got a bit lax, had they?” Today, the financial elite display great care. The general public though has become alarmingly lax. Complacency is a word often bandied about in this context. In 2008, it was the other way around: The financial capitals were lax but the public was vigilant – as evidenced by the strong gold demand at the time.

Day to day, financial media tend to center their gold coverage around the price. The safe-haven argument for gold is offered but routinely muddied in the same paragraph. We tend to forget that the real reason to own gold is not to make speculative gains, but to protect against the kind of excesses the Lehman moment represents. The aftermath of 2008 is testament to gold’s role as the asset of last resort. The Queen’s question fittingly came, by the way, during a visit to the Bank of England’s gold room in 2012. The sight of all that gold must have set the wheels in motion. . . . .

Quote of the Day
“Why then is so much writing on the subject of money so needlessly complicated, with dense, impenetrable language and equations that make sense to only a handful of academicians? And why do so many people insist that bad ideas about monetary policy, like ‘inflation is needed to increase employment,’ are as settled and unassailable as scientific principles?” – Steve Forbes and Elizabeth Ames, Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It

Chart of the Day

Chart note: ““When President Nixon closed the gold window at the U.S. Treasury on August 15, 1971,” writes Economic Prism’s MN Gordon, “he told several whoppers. He said it was to, ‘defend the dollar against the speculators.’ He also said the action would, ‘suspend temporarily, the convertibility of the dollar into gold.’ Furthermore, he told Americans that, ‘your dollar will be worth just as much tomorrow as it is today.’ Nixon’s actions came on the heels of 60-years of gradual steps to remove gold’s backing of the dollar. In effect, $1 today has the same buying power that $0.16 had when Nixon took these ‘temporary’ actions. Over this same period, the U.S. national debt has run up from about $398 billion to over $21 trillion, and the economy has been utterly warped.” We sometimes become so immersed in the short-term ripples that we forget the long-term waves.

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A Chronology of History’s Black Swans

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Panics, mania, crashes and collapses from 400 BC to present

by Michael J. Kosares

We have had a steady stream of retrospection in conjunction with the tenth anniversary of the Lehman Brothers closure and the launch of the 2008 credit crisis – the crisis that never went away. As I read through some of the ruminations of the past few days (a small portion of it posted below), I could not help but recall a quote from the Roman philosopher Seneca. I ran into these words during my own research and writing at the time of the crisis:

“You say: ‘I did not think it would happen.’ Do you think there is anything that will not happen, when you know that it is possible to happen, when you see that it has already happened?”

Seneca penned that bit of wisdom in 62 AD during the reign of the Roman emperor Nero. They have held up well over the ensuing nearly twenty centuries of economic history.  The following is a repost of an article I wrote several years ago.


This chronology was compiled as an accompaniment to my short study on the four most commonly predicted worst-case economic scenarios – Black Swans, Yellow Gold: How gold performs during periods of deflation, chronic disinflation, runaway stagflation and hyperinflation. My original intent was to make a short list that would illustrate the frequency with which periods of economic breakdown made their appearance in the historical record. Little did I know how extensive a project it would become. So much so, that it became worthy, as you can see, of its own web page.

Panics, mania, crashes and collapses, as it turns out, are as common to financial history as thunderstorms to placid summer afternoons. They tend to show up suddenly, wreak more than their fair share of havoc, and recede into the history books only after endless discussion of their causes and cures. Whether brought on by popular delusion, unscrupulous market operators, misguided governments and/or central banks or some random, unforeseen shock, black swan events are part and parcel of the human experience and just as permanent a fixture in our collective history as wars and natural disasters.

Those who think it can’t happen here, or that this time around it’s different, should take note of the number of black swan events in American history alone. The record is formidable. Gold ownership is traditionally a form of battening down the hatches against these recurring storms and, for the minority who adhere to it, an effective and ever-ready defense. Nialls Ferguson, the economic philosopher, summed up what a good many were thinking in the wake of the 2008 meltdown when he said, “Those few goldbugs who always doubted the soundness of fiat money — paper currency without a metal anchor — have in large measure been vindicated. But why were the rest of us so blinded by money illusion?”

Why indeed. . .

* * * * * * * * * *

Sovereign Default of 400 BC (Syracuse, Greece) – Dionysius confiscates gold and silver money, re-mints it keeping the weight the same but changing the denomination from one to two drachmae — the first known official devaluation at the expense of the general population. A virulent inflation ensues.

Sovereign Default of 377 BC (Ephesus, Greece) – Gold and silver jewelry confiscated to pay budgetary deficit and avoid a collapse of the city-state, no compensation is paid to owners (reported by Aristotle).

Punic Wars Inflation of 241-146 BC (Rome) – Continuous debasement of gold and silver coinage to pay for wars against Carthage. Wealthy classes of savers, who saved in the form of metal, suffered greatest losses, heavily indebted masses did not object.

Sovereign Default of circa 200 BC (Miletus, Greece) – Economic depression, first instance of forced public bond subscription by citizens to pay the debts of bankrupt city-state.

Inflation Crisis of 64 AD (Rome) – Emperor Nero debased gold, silver and copper coinage as an indirect tax on Roman savers, policy ignited inflation and caused general impoverishment of the lower classes. This same devaluation tactic was used repeatedly by emperors during Rome’s decline and fall.

Inflation Crisis of 301 (Rome) – Emperor Diocletian minted an overvalued silver denarius and touched off a rapid and devastating price inflation, then speculative frenzy and social chaos.

Inflation Crisis of 1020 (China) – One of the first paper money printing schemes (S’ung Dynasty) to buy off potential invaders that led to rapid inflation.

(Note: China’s Cai Lun invented paper in 105 AD, so it is fitting that China would introduce the first paper banknotes in 806 AD. Upon Marco Polo’s return from China, he described its use as money: “All these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver; and on every piece a variety of officials, whose duty it is, have to write their names, and to put their seals. And when all is duly prepared, the chief officer deputed by the Khan smears the Seal entrusted to him with vermilion, and impresses it on the paper, so that the form of the Seal remains printed upon it in red; the Money is then authentic. Anyone forging it would be punished with death.” It would follow too that the first abuses in the printing of paper money would occur where it was first issued.)

Hyperinflationary Crisis of 1166 (China) – Money printing scheme (Chin Dynasty) based on government monopoly of tea and salt to pay for war against Mongols led to hyperinflationary breakdown.

Inflation Crisis of 1296, 1309, 1350 and 1374 (China) — Series of inflationary crises related to debased currency issuance by various dynasties, explosive credit and subsequent economic breakdowns.

Inflation Crisis of 1455 (China) – Excess issuance of paper money caused inflation to soar, paper currency eliminated as means of payment for several hundred years.

Medici Bank Collapse of 1494 (Florence, Italy) – Corruption, faulty investment, political intrigue and incompetent management brought down the famed Florentine bank — millions lost resulting in tyrannical taxes imposed on citizenry.

Inflation of 1520-1640 (Spain, Europe) – Gold and silver from the New World drove down the value of money leading to Europe-wide hyperinflation. Spain defaulted on its sovereign debts in 1557, 1560, 1575 and 1596.

Tipper and See-Saw Debt Crisis of 1621 (Holy Roman Empire) – States in Europe minted debased coinage that touched off an inflationary nightmare resulting in widespread riots, political instability and crippled economies.

Tulipmania of 1637 (Netherlands) – Speculative frenzy in tulip bulbs ruined thousands when the bubble burst.

South Sea Bubble of 1720 (Great Britain) – Collapse of inflated shares in the South Sea Company ruined investors; value depended on individuals willing to pay ever higher prices for shares, not company- generated profit.

Mississippi Bubble of 1720 (France) – Financial crisis and paper money scheme perpetrated by John Law based on exaggerated wealth and trade opportunities in Louisiana. French economy collapsed when the bubble burst.

Crisis of 1772 (Great Britain) – Triggered by collapse of a major London banking house.

Continental Currency Failure of 1779 (United States) – America’s first currency collapsed, George Washington complained that a “wagon load of money will scarcely purchase a wagon load of goods”, Spanish silver dollar cost 1.25 Continentals in 1777 and 500 Continentals in 1781.

Fiat money inflation of 1789 (France) – Over-issuance of paper money plunged nation into decade-long inflationary crisis leading ultimately to the French Revolution.

Panic of 1792 (United States) – Brought on by credit expansion of newly formed Bank of the United States and rampant speculation by prominent bankers.

Panic of 1796 (United States, Great Britain) – Precipitated by collapse of inflated land prices.

Debt panic of 1813 (Denmark) – Early sovereign default created internal financial crisis.

Panic of 1819 (United States) – End to first American boom-bust economic cycle fueled by unrestrained issuance of paper money through the Second Bank of the United States, encouraged speculation resulting in financial disaster.

Panic of 1825 (Great Britain) – Stock market crashed due to widespread failure of British banks, near collapse of the Bank of England.

Panic of 1837 (United States)– Deflationary breakdown in the United States caused 25% unemployment rate, bank collapses, business failures.

Panic of 1847 (Great Britain) – Financial markets collapsed following 1840s railroad boom with similar effects to the Panic of 1837, specie standard reinstituted as a result.

Panic of 1857 (Global) – First pervasive international economic breakdown. New York financial sector did not recover until after the Civil War Panic of 1866.

Panic of 1873 (United States, Europe) – So-called “Long Depression” lasting twenty years started with financial failures in Vienna and spread to rest of Europe and finally the U.S., resulting in widespread bank failures and railroad bankruptcies.

Panic of 1884 (United States) – Caused by tight credit following depletion of gold reserves in Europe and failure of two New York City banks with ripple effect to other banks.

Panic of 1890 (Great Britain) – Crisis triggered when Barings Bank nearly went bankrupt due to poor investments in Argentina. Bank of France bailed out British central bank.

Panic of 1893 (United States)– Gilded Age collapse and stock market collapse similar to 1873 triggered by shaky railroad investments and a coup in Argentina, also caused a run on gold at the U.S. Treasury.

Panic of 1896 (United States)– Commodity price deflation and a drop in U.S. silver reserves caused stock market collapse and minor economic depression.

Panic of 1901 (United States) – First crash on the New York Stock Exchange precipitated once again by speculation in railroad stocks.

Panic of 1907 (United States) – Major banking panic, run on deposits, stock market collapse (many feel that this panic led ultimately to the creation of the Federal Reserve System). JP Morgan organized bank bailout to keep financial failure contained.

Panic of 1910–1911 – The after-effects of the Sherman Anti-Trust Act, the break-up of Standard Oil caused slight depression.

Nightmare Hyperinflation of 1923 (Germany) – Inflation rate hit 3,250,000% per month at its peak, many blamed World War I reparations as the cause of the money printing binge that brought on the crisis. (Note: Similar hyperinflationary crises, though not as severe, occurred during the 1920s in Hungary, Poland, Austria and the Soviet Union.)

Wall Street Crash of 1929 (United States, Global) – The most devastating stock market crash in U.S. history launched the Great Depression of the 1930s.

Nightmare HyperInflation of 1944 (Greece) – Started with the German occupation and reached its peak after liberation. Citizens refused to accept the Drachma in commerce, the country became impoverished.

Nightmare Hyperinflation of 1946 (Hungary) – Worst inflation ever recorded, prices doubled every fifteen hours wiping out savings.

Stagflation Crisis of  1973 (United States, Global) – Global double-digit inflation rates and high unemployment caused by decoupling gold from the dollar and two associated dollar devaluations (1971, 1973).

Debt Crisis of 1982 (Latin America) – Excessive external debt triggered most serious capital crisis in Latin American history,  currency devaluations and  sovereign debt defaults.

Stock market crash of 1987 (Global) – Began in Hong Kong, spread to Europe and then the United States, the largest one-day percentage decline in history of Dow Jones Industrial Average (called Black Monday).

S&L crisis of 1989-1991 (United States) – Nearly one-fourth of U.S. savings and loan associations failed as the result of bad real estate loans and brought on a mirror real estate crash and disinflationary economic environment.

Asset bubble of 1990 (Japan) – Stock and real estate prices crashed launching Japan’s Lost Decade, deflationary/disinflationary crisis largely confined to Japan.

Scandinavian banking crisis of 1990 (Sweden, Finland) –  Currency and financial institution breakdown, real estate bust.

Pound sterling crisis of 1992–93 (Great Britain) – Speculative attack on British pound forced UK’s withdrawal from European Exchange Rate Mechanism and caused recession.

“Tequila Crisis” of 1994 (Mexico) – Sudden devaluation of peso touched off high inflation,  asset destruction, bank runs and  controversial bailout by the United States government.

Financial Crisis of 1997 (Asia) – Financial contagion affected several Asian nations, including stock market collapses, high inflation and unemployment, real estate busts and a general financial panic.

Monetary Crisis of 1998 (Russia) – Russia devalues ruble, defaults on its debts with knock-on effects globally, including an 11.5% drop in the Dow Jones Industrial Average in three trading sessions and the collapse of Long Term Capital Management.

Economic collapse of 1999 (Argentina) – Government defaults on sovereign debts causing bank runs, riots, capital flight. Overnight, the government freezes all bank accounts for 12 months. The economy grinds to a virtual halt.

Dot-com bubble bust of 2001 (United States) – Internet stock speculative frenzy ended in general stock market collapse and malaise that lasted for over a decade. Helped launch gold’s secular bull market.

Bank crisis of 2008 (Iceland) –  Banks’ collapse caused depositor run, sharp drop in value of Icelandic kronor.

Nightmare Hyperinflation of 2008 (Zimbabwe) – The worst 21st century hyperinflation thus far, a 79.6 billion per cent annual inflation rate at its peak in 2008.

Financial Crisis of 2008 (United States, Global) – Near collapse of global financial system caused extensive, widespread government bailouts and strong international safe-haven gold demand among private investors, institutions and central banks.

Sovereign debt crisis of 2010 (European Union) – Began in Greece and spread through most of Europe. Ongoing crisis precipitated fear among global investors about stability of Europe’s banking system and the euro currency bloc.

* * * * * * * * * *

Michael J. Kosares is the founder of USAGOLD and the author of “The ABCs of Gold Investing – How To Protect and Build Your Wealth With Gold.”

* * * * * * * * * *
Related reading:

Black Swans, Yellow Gold
How gold performs during periods of deflation,
chronic disinflation, runaway stagflation and hyperinflation

* * * * * * * * * *
References

Financial Crisis/Wikipedia
Hyperinflation/Wikipedia
Foreign Bonds: An Autopsy/Max Winkler (source ancient examples)
Ten Fascinating Economic Collapses/Richard Urban
China’s First Experience with Paper Money/Mike Hewitt

___________________________________________

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$250 trillion in debt: The world’s post-Lehman Legacy

Bloomberg/Opinion/Brian Chappatta/9-13-2018

“In many ways, all the talk about global central banks beginning a “great unwind” of their extraordinary monetary stimulus is positively quaint. After all, how can officials from the Federal Reserve to the Bank of Japan even pretend to know how to reverse what they’ve done over the past decade? I’m speaking specifically about propping up financial markets with easy money and allowing the world’s debt burden to balloon to almost $250 trillion.”

USAGOLD note:  Chappatta outlines the residue from the crisis that never went away. . .  Worth a visit to the link above.

Image:  Lehman Brothers sign offered in auction at Christies-London, October, 2010

 

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‘I’m nervous’ that a market meltdown is unfolding, investor David Tice warns

CNBC/Stephanie Landsman/9-13-2018

“The stock market may be on the cusp of a major setback, according to David Tice. Tice, who made a name for himself in running the Prudent Bear Fund before selling it to Federated Investors in 2008, believes the market is dangerous. ‘I’m nervous,’ he said Wednesday on CNBC’s ‘Trading Nation.’ ‘We’re getting closer to a meltdown scenario.'”

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Albert Edwards: Why we are destined to repeat the mistakes of the past

Zero Hedge/Tyler Durden/9-13-2018

“I was amused to read the NY Times op-ed, co-authored by the three leading US policy makers at the time of the crisis (Ben Bernanke, Tim Geithner and Henry Paulson). In a piece entitled ‘What We Need to Fight the Next Financial Crisis’ they lament the fact that ‘Congress has taken away some of the tools that were crucial to us during the 2008 panic. It’s time to bring them back (link).’

Tools! Apparently, they always need more tools. Rubbish, they had all the tools necessary. They just never recognised beforehand that the economy was a massive credit bubble – just like it is now. It was worse than that. In 2005 Bernanke had even derided an interviewer who asked him about the possibility that the housing bubble could burst. And I also remember Shelia Bair, who headed up the FDIC (the Federal bank liquidator) at the time, and had successfully seized and closed many banks during that period, including the massive Washington Mutual, lamenting that she had not even been consulted about Lehman’s.”

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Trader blows €100m hole in Nasdaq’s Nordic power market

Financial Times/Phillip Stafford and David Sheppard/9-13-2018

“Nasdaq, the principal trading exchange where futures contracts tied to physical energy markets in the Nordic region are transacted, said a clearing member had defaulted on Tuesday after they were unable to meet margin calls at its clearing house on loss-making trades.”

USAGOLD note:  Over €100 million vanishes. . . exchanges and a clearing house cover losses.  There is no way to know how much of this sort of thing is lingering out there in trader land.  Nor do we know how much of the global financial system is at risk.  In this particular case, we do not know what other trading entities might be at risk.

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DMR–CPI report stops gold in its tracks

DAILY MARKET REPORT

A benign U.S. consumer price report stopped yesterday’s gold rally in its tracks this morning.  Early on, the metal pushed past the $1210 mark and was up nearly $4 on the day. It is now down $3 on the day at $1204. Silver is down 4¢ on the at $14.21. Reuters reports that “Despite the moderation in price increases last month, inflation pressures are steadily building up, driven by a tightening labor market and robust economic growth.” The news service goes on to cite price increases building up in the supply pipeline resulting from tariffs on Chinese imports.

Yesterday, we posted our guess that some traders covered shorts in anticipation of the report. Those traders, if our hunch was correct, have apparently retreated to the sidelines – at least for now. Yesterday’s rally is a reminder how quickly things can change once sentiment shifts.

“[T]he net short on COMEX,” writes GFMS’ Rhona O’Connell in a report released yesterday, “was at record levels at end-August since the CFTC introduced its ‘managed money’ classification, at 244 tonnes. With outright shorts standing at 593 tonnes. Some short covering has ensued; we expect more and a sharp short covering rally is not out of the question.”

Inflation worries are one in a long list of concerns that could instigate the short-covering rally many gold market professionals anticipate.

Quote of the Day
“I wish Montagu Norman, Philip Snowden and the monetary experts were admirals or generals. I can sink them if necessary. But when I am talking to bankers and economists, after awhile they begin to talk Persian, and then they sink me instead.” – Winston Churchill, 1924

Chart of the Day

Chart note:  Growth in the money supply continues to be stubbornly restrained. That circumstance, however, does not necessarily signal weakness in the price of gold.  As this chart illustrates, the effect can be just the opposite. As the 2008 credit crisis unfolded, gold to the surprise of many proved its mettle as a hedge under disinflationary circumstances. Demand flourished among investors worldwide concerned about potential bank failures and a stock and bond market crashes. Even in the more placid economic setting since early 2016, gold has risen as monetary growth has slowed.  

 

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China to continue driving global silver demand forward

The Silver Institute/9-12-2018

“China will continue to be a major driver in the global silver market for years to come, fueled by continued industrial demand and silver mining activity. China is by far the largest consumer of silver globally, accounting for 18% of global fabrication demand in recent years. In addition, to meet its robust demand needs, the country is a major destination for imported silver products fabricated in the U.S., Japan and other countries. Moreover, China is also the third largest silver producing country worldwide and is a key nation for processing primary raw materials from around the world.”

USAGOLD note:  It is a little known fact that China’s influence in the silver market is binary. It is the world’s largest consumer of the metal.  It is also a major producer whose production stays, for the most part, within the country’s borders.  As an aside, we should not ignore India’s growing role in the silver market as a major consumer.

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Jim Rogers: Crash later this year or next

Business Insider/Video/9-9-2018

USAGOLD note:  Worth the four minutes it takes to watch it.  Henry Blogett interviews one of the most colorful and outspoken analysts in the investment business. . . . . .

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