Yahoo!Finance/Josh Shafer/6-9-2023

“The much-discussed recession of 2023 still isn’t here, and economists are becoming less confident it will come at all.”

USAGOLD note: There are few signs of a recession at this juncture – a hint here or there – but nothing concrete or lasting. Nevertheless, the warnings come almost daily.

MarketInsider/Zahra Tayeb/6-7-2023

“Forecasts for the world’s largest economy have been growing increasingly grim following the past year’s surge in interest rates and amid a credit squeeze caused by the recent banking turmoil.”

USAGOLD note: Gundlach is not moving off his warning of a severe recession. With new economic vulnerabilities surfacing regularly – anyone one of which could evolve to a full-out crisis in the event of a recession – sage-haven demand for gold is likely to intensify beyond the already high levels.

Bloomberg/Eric Wallerstein/6-7-2023

“Investors are bracing for a flood of more than $1 trillion of Treasury bills in the wake of the debt-ceiling fight, potentially sparking a new bout of volatility in financial markets.”

USAGOLD note: Until we get to the other side of the deep dark wood, we will put emphasis on the coming Treasury bond deluge.

Financial Times/Kate Duguid/6-6-2023

“Everyone knows the flood is coming. Yields will move higher because of this flood. Treasury bills will cheapen further. And that will put pressure on banks.” – Gennadiy Goldberg, TD Securities

USAGOLD note: Erosion in the value of bond portfolios was the key catalyst in the collapse of SVB, First Republic, Signature Bank, and most notably Credit Suisse.

Bloomberg/Laura Curtis, Ruth Liao and Michael McDonald/6-2-2023

“Just as the world’s delivery bottlenecks are easing, Panama’s drought and worrisome weather patterns elsewhere threaten to revive some of the chaos of 2021, when a surge in shipping costs and consumer demand resulted in shortages of goods, helping to drive US inflation to a four-decade high.”

USAGOLD note: One of those unforeseen circumstances that can wreak havoc with central banks’ monetary policy……The shift to El Nino weather patterns translates to severe drought in Panama – perhaps for months to come.

NewsMax/Reuters/6-2-2023

“Powell’s calendar shows the abruptness with which the banking sector problems — which have since triggered three U.S. bank failures in addition to the UBS-Credit Suisse deal — erupted nearly three months ago.”

USAGOLD note: Investors worry about a black swan event, but what we have had thus far is a cluster of gray swans – abrupt but predictable mini-crises instigated primarily by highly publicized but poorly understood central bank policies. Nevertheless, collectively they have taken their toll and uncovered vulnerabilities that may yet instigate the next black swan. Mark Spitznagel, who with Nicholas Taleb (originator of the term “black swans.”) conducts business as Universa Investments, says that decades of easy money is leading to a “mega-tinderbox time bomb”  in the financial system. “He just doesn’t know when the bomb will go off, ” according to a Wall Street Journal article published last weekend.

Yahoo!Finance-Bloomberg/Denitsa Tsekova and Ksenia Galoucho/6-3-2023

“With a debt ceiling deal freshly inked, the US Treasury is about to unleash a tsunami of new bonds to quickly refill its coffers. This will be yet another drain on dwindling liquidity as bank deposits are raided to pay for it — and Wall Street is warning that markets aren’t ready.”

USAGOLD note: “As the tsunami approaches,” says Britain’s National Oceanography Centre, “water is drawn back from the beach to effectively help feed the wave.… A tsunami is short enough to have a rapid effect, in minutes, but long enough to carry enormous energy.”

Bloomberg/Michelle Jamrisko and Ruth Carson/6-2-2023

“Currency experts are leery of sounding like the Cassandras who have, embarrassingly, predicted the dollar’s imminent demise on any number of occasions over the past century. And yet in observing this sudden wave of agreements aimed at sidestepping the dollar, they detect the sort of meaningful action, however small and gradual, that was typically missing in the past.”

USAGOLD note: We note with interest how quickly de-dollarization went from minor to major issue…… The rapid embrace of alternatives suggests a long-suppressed concern about the role the dollar plays in a nation-state’s economic independence.

Yahoo!Finance-Bloomberg/Christopher Condon/5-31-2023

“One reason she’s sanguine is that Yellen is among a number of prominent economists to embrace an alternative method for measuring the sustainability of the nation’s debt. Instead of looking at the pile of outstanding bonds as a share of the economy’s output, she prefers the ratio of interest payments — crucially, after adjustment for inflation — to GDP.”

USAGOLD note: It is beyond our understanding how a Treasury Secretary could look at the level of the federal government’s interest payments without being alarmed. It’s because insiders like Yellen do not lose sleep over the national debt, that so many others do.

Sources: St. Louis Federal Reserve [FRED], Office of Management  and Budget

Yahoo!Finance-Reuters/Naomi Rovnick and Libby George/5-25-2023

“Rivalry with China, fallout from Russia’s war in Ukraine and wrangling once again in Washington over the U.S. debt ceiling have put the dollar’s status as the world’s dominant currency under fresh scrutiny.”

USAGOLD note: Though the dollar is likely to remain the currency of choice in international transactions, its status as a reserve holding is in decline. Gold could be among the long-term beneficiaries if the trend continues. In fact, central bank gold demand set a record in 2022 and continues at a record pace in  2023. Reuters says “mushrooming alternatives could create a multipolar world.”

Yahoo!Finance-Reuters/David Lawder/5-26-2023

“The International Monetary Fund said on Friday U.S. interest rates will likely need to remain higher for longer to tame inflation, and Washington needs to tighten fiscal policy to bring down its federal debt.”

USAGOLD note: Isn’t this the kind of advice IMF usually offers to countries like Argentina and Turkey? Needless to say, even if the politicians agree on a debt ceiling the spending will continue at a high level.

MarketWatch/Joy Wiltermuth/5-24-2023

“Treasury bills are debt issued by the U.S. government that mature in four to 52 weeks. New bill issuance could reach about $1.4 trillion through the end of 2023, with roughly $1 trillion flooding the market before the end of August, according to an estimate from BofA Global strategists. They expect the deluge through August to be about five times the supply of an average three-month stretch in years before the pandemic.”

USAGOLD note: If it’s not one thing, it’s another. This situation could seriously impact rates if sufficient demand doesn’t materialize. Then again, there is always the printing press if things get out of hand.

Yahoo!Finance/Nate DeiCamillo/ 5-23-2023

“If the Treasury paid some debts and not others, Yellen would run the risk of neglecting her duties, said [Bipartisan Policy Center’s Shai] Akabas. This could make both Yellen and her department targets for lawsuits from affected parties. Already, a union of government employees has filed a suit against Yellen and Biden, arguing that they have a legal obligation to ignore the debt ceiling.”

USAGOLD note: A bizarre twist to the already bizarre debt ceiling soap opera ……

Bloomberg/Craig Torres/5-23-2023

“Federal Reserve policymakers are increasingly grappling with a critical question: How much should they weigh the adverse impact of their interest-rate hikes on banks against the goal of containing the fastest price increases in decades?”

USAGOLD note: Stark choice…… And, in our view, it’s not just the banks that the Fed needs to be worried about.

Financial Times/Chris Giles/5-18-2023

“The Bank of England is holding a ‘Festival of Mistakes’ this week, celebrating lessons learnt from financial disasters of the distant past. Some would argue that they, and their counterparts at other central banks, should focus on more recent errors.”

USAGOLD note: If their forecasts are wrong, can policy be far behind? James Grant recently called the Fed problem #1 in American finance, and Elon Musk slammed the Fed for being slow to raise rates and thinks it will now be too slow to lower them.

USAGOLD note: For those curious about the history of the debt ceiling ………

The Visual Capitalist/Dorothy Neufeld and Nick Routley/5-17-2023

‘Raising the debt ceiling is nothing new. Since 1960, it’s been raised 78 times. In the 2023 version of the debate, Republican House Majority Leader Kevin McCarthy is asking for cuts in government spending. However, President Joe Biden argues that the debt ceiling should be increased without any strings attached. Adding to this, the sharp uptick in interest rates have been a clear reminder that rising debt levels can be precarious. Consider that historically, interest payments on the U.S. debt have been equal to about half the cost of defense. More recently, however, the cost of servicing the debt has risen, and is now almost on par with the defense budget as a whole.”

Bloomberg/Ksenia Galouchko/5-16-2023

“The mood among global fund managers soured further in May, with investors flocking to cash amid concerns that a recession and credit crunch are looming, according to Bank of America Corp.’s latest survey.”

USAGOLD note: Given the run of today’s posts, the pessimism is justified. The demand for gold worldwide is a further indication of the concern reflected in the BofA survey.