Author Archives: News

Yahoo/AFP/4-16-2023

“‘”There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar,’ Yellen said on CNN.”

USAGOLD note: An unusual admission by a US Treasury Secretary……

YahooFinance/Bloomberg/4-12-2023

“Deposits at JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. are expected to have tumbled $521 billion from a year earlier, the biggest drop in a decade, according to analysts’ estimates. The decline — which includes a $61 billion slide in just the first quarter — comes as a late influx of cash following a crisis at regional lenders failed to offset the steady drain of customers to products offering higher rates.”

USAGOLD note: The lion’s share of the deposit drain is going into money market funds while a not-so-insignicant amount is flowing into gold and silver. Investors are attempting to protect hard earned savings.

MarketsInsider/Jennifer Sor/4-10-2023

“Whether he’s blasting crypto as a criminal enterprise in the wake of FTX, or warning that markets are headed for a ‘Bermuda Triangle’ of risk, the economist has a lot of opinions, and most are pretty dire.”

USAGOLD  note: His viewpoint receives considerable attention in financial circles and we post his forecasts regularly here at News & Views. This profile provides more background on what makes this controversial economist tick.

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ActionForex/Staff/4-10-2023

“In his first press conference as new Bank of Japan Governor, Kazuo Ueda stated that the central bank will maintain its massive stimulus program, echoing the stance of the previous leadership. Ueda commented, “The BOJ’s current monetary easing is a very powerful one. We need to strive, as we have done so far, to appropriately grasp economic, price, and financial developments to see whether trend inflation will stably and sustainably achieve 2%.”

USAGOLD note: Ueda’s ultra-dovish comments sent the Japanese yen lower and the Dollar Index higher contributing to gold’s downside today.

Dollar-yen exchange rate and gold
(One week, yen inverted)

Chart courtesy of TradingEconomics.com • • • Click to enlarge

Bloomberg/Christopher Condon/4-12-2023

“The US federal government’s budget deficit hit $1.1 trillion in the first half of the fiscal year, a 63% jump over a year ago, driven by higher outlays for education, health care benefits and debt interest payments.”

USAGOLD note: Those increased outlays are not likely to go away anytime soon.

Bloomberg/Fiona MacDonald and Sam Dagher/4-3-2023

“Mere months after rebuffing President Joe Biden’s pleas to pump more crude, an increasingly confident Riyadh is using its regional clout to carve out its own path. Whether in the fields of energy or diplomacy, through forging ties with former foe Iran and moving toward embracing Syria’s pariah leader, it’s evidence of a determination to pursue Saudi priorities even if they run against Washington’s interests.”

USAGOLD note: The surprise production cut of one million barrels per day was important in terms of the effect on the price of oil. There might be an even more important geopolitical component with longer-term economic implications that needs to be understood. The warming of ties between Iran and Saudi Arabia may have given rise to an OPEC with  clout rivaling its heyday in the 1970s.

MarketWatch/Joy Wiltermuth/3-30-2023

“The sale of $72 billion in assets from the failed Silicon Valley Bank by regulators at a $16.5 billion discount, which pencils out to about 77 cents on the dollar, offers a glimpse into a new clearing price for commercial-real-estate loans.”

USAGOLD note: A number of top-drawer analysts have identified commercial real estate as the next source of problems for the financial system. The problem is similar to the one presented by bank bond holdings. “What everybody has been operating under,” says CapStack’s David Blatt, “is this hold-to-maturity veneer. There’s just no way these things get resolved at par:…”

Financial Times/Kate Duguid, Harriet Clarfelt and Colby Smith/4-1-2023

“The flood of cash pouring into US money market funds is unlikely to stop soon, analysts and investors say, and has the potential to exacerbate strains in the banking system.’

USAGOLD note: Some of that cash is making its way to the precious metals market as savers attempt to circumvent the financial system’s problems in their entirety.

Bloomberg/Sagarika Jaisinghani/4-2-2023

“Of all the top Wall Street strategists who predicted a rocky first half for equity markets back in December, many warned about mounting economic and profit risks from higher interest rates, but no one saw the turmoil in the banking sector coming.”

USAGOLD note: It is precisely because it is difficult, if not impossible, to guess where the next financial crisis will originate, or when, that prudent investors hedge their portfolios with precious metals – assets (unlike bank deposits, for example) not subject to default or counterparty risk.

Financial Times/Laura Noonan and Brooke Masters/3-30-2023

“The end of historically low interest rates was billed as good news for banks, which make more money as the difference widens between what they charge borrowers and what they pay for funding. But recent crises on both sides of the Atlantic show that the reality is more complex, upending the conventional wisdom.”

USAGOLD note: The section under the subhead, “Losses on bond portfolios,” is particularly illuminating. It explains the acute dangers presented by accounting standards that have allowed the banks to build massive underwater bond positions.

Bloomberg/Joe Weisenthal/3-29-2023

“Another wave of deposit outflows is coming for the banking system as customers wake up to the existence of higher interest rates available to them in money-market funds, according to Barclays strategist Joseph Abate.”

USAGOLD note: Depositors are also awakening to the precarious position in which the banks find themselves and the risk of an extended systemic breakdown. Banks forced to meet a second wave of deposit outflows will be tempted to tap the Fed’s new rescue facility adding to its already bloated balance sheet. Bloomberg points out that there has already been a “substantial jump” in money market funds, but that the “cycle may be just warming up.”

Bloomberg/Ruth Carson, Masake Kondo and Michael Mackenzie/3-29-2023

“Bank of Japan Governor Haruhiko Kuroda changed the course of global markets when he unleashed a $3.4 trillion firehose of Japanese cash on the investment world. Now Kazuo Ueda is likely to dismantle his legacy, setting the stage for a flow reversal that risks sending shockwaves through the global economy.”

USAGOLD note: The high level of Japanese ownership of foreign bonds will shock many investors. Beyond the $1.1 trillion it owns in U.S. Treasures, itself a formidable figure, it owns 10% of the Dutch and Australian sovereign bond issue, 8% of New Zealand’s outstanding debt, and 7% of Brazil’s. Now with the BOJ seemingly poised to raise rates and normalize monetary conditions bond market experts expect much of that position to be sold off and the capital returned to Japan. With China already selling off US treasuries and the Fed reducing its holdings through its quantitative tightening program, as well as natural market attrition as rates continue to climb, one wonders if the bond market can withstand Japan becoming a seller. A monetary Pearl Harbor may be ahead of us.

CNN Business/Julia Horowitz/3-29-2023

“This would allow them to withstand ‘severe but plausible stresses’ in the UK government bond market and meet any calls to post collateral in an orderly fashion.”

USAGOLD note: The Bank of England has already shown it is ready and waiting with more quantitative easing at the next sign of trouble. The financial sector comes out a winner; the citizenry will likely feel the pinch of more inflation.The inflation rate in UK is already in double digits at 10.4%.

United Kingdom Inflation rate

Chart courtesy of Trading Economics.com

Bloomberg/Liz McCormick, Ben Holland and Edward Harrison/3-28-2023

“Look deeper into the latest US banking crisis, and the cause may come as a surprise to anyone still thinking in terms of the crash of 2008. It wasn’t dodgy loans to impecunious homebuyers that sank Silicon Valley Bank. It was a stash of what are thought to be the safest securities on Earth: US Treasuries.”

USAGOLD note: Now that the cat’s out of the bag on the position of a good many commercial banks i.e., deposits supported by eroding bond holdings, investors will have to make a decision on gold as a savings instrument within their personal asset structure. It brings to mind gold’s most important attribute. It is an asset that is not simultaneously someone else’s liability.

Yahoo!Finance/Staff/3-21-2023

“The Federal Deposit Insurance Corporation said shortly before Silicon Valley Bank’s collapse that the market value of U.S. banks’ long-term assets had dropped $620 billion in 2022. New research co-authored by Columbia Business School’s professor of real estate Tomasz Piskorski finds that the banking industry’s unrealized losses are now more than three times that, with the system accumulating $2.2 trillion in unrealized losses over the past year.”

USAGOLD note: A troubling update on the upside-down reality in the banking system –  190 “precarious” banks and $2.2 trillion in potential losses.

MarketWatch/Vivien Lou Chen/3-23-2023

“Despite quick action by regulators and policymakers, there’s a rising risk that banking-system stress will spill over into other sectors and the U.S. economy, ‘unleashing greater financial and economic damage than we anticipated,’ said Moody’s Investors Service, one of the Big Three credit-ratings firms.”

USAGOLD note: With reports that the Treasury Department and Fed are scrambling to develop solutions, the ordinary investor needs to take precautions. There have been times in economic history when things couldn’t be contained, leading to the worst outcome – either an inflationary or deflationary breakdown. Thus far, we  have avoided the worst, but perhaps, as Moody’s suggests, we’ve been pressing our luck.

CNBC/Christina White/3-23-2023

“‘We have used important tools to act quickly to prevent contagion. And they are tools we could use again,’ Yellen said in written testimony before a House Appropriations subcommittee.”

USAGOLD note: That offer of support seems to leave a lot of wiggle room on the deposit limits debate. With the Fed’s unlimited, open-to-all credit facility in place, does it really matter?