Author Archives: Opinion
Signs of de-dollarisation emerging, Wall Street giant JPMorgan says
“JPMorgan’s assessment is the most high profile of any large U.S. bank although heavyweight asset managers such as Goldman Sachs Asset Management have also voiced views on the trend.”
USAGOLD note: These mainstream press articles on de-dollarization inevitably include the caveat that the dollar’s global dominance is not going to happen anytime soon. What they overlook is the damage that can be done on the long road to getting there.
Ex-Treasury chief Larry Summers says the Fed should consider a big bump in interest rates
“Hiking interest rates by 50 basis points in July should be an option on the table at the Federal Reserve, even if it pauses its tightening campaign at its meeting this month, according to former Treasury Secretary Larry Summers.”
USAGOLD note: Appears Mr. Summers, still echoing Paul Volcker, sees inflation as much more resilient than either the Fed or Wall Street.
Why the Fed is hard to predict
Project Syndicate/Mohamed A. El-Erian/5-30-2023
“The real reason that we have so much policy confusion is that the Fed is relying on an inappropriate policy framework and an outdated inflation target. Both of these problems have been compounded by a raft of errors (in analysis, forecasting, communication, policy measures, regulation, and supervision) over the past two years.”
USAGOLD note: El Erian says that no one knows what is going to happen at it June meeting – not even the Fed itself. It lacks, he says, “a solid strategic foundation.” Our interpretation? It bends with the wind and has become vulnerable to political pressure, it is unpredictable and not the kind of Fed Wall Street is likely to find reassuring.
Fred Hickey: ‘Long term, conditions are perfect for gold to go to record high’
theMarketNZZ/Interview of Fred Hickey by Christoph Gisiger/5-26-2023
“Even the central bank of Singapore, which is friendly to the US, bought 70 tons in the first three months. This buying activity from eastern countries has lifted gold to the current level close to $2000 per ounce. And that’s even without the participation of western institutions who have very low positions right now. But it’s those western institutions that will propel gold to new record highs once they come into the market.”
USAGOLD note: Hickey says “gold does best when stocks are going down.” He adds that stocks are being held up by “this FOMO move” in tech stocks but it will eventually end.
Elon Musk warns house prices are set to plunge – and says commercial real estate is in meltdown
“Elon Musk is once again ringing the alarm on the US real estate sector. ‘Commercial real estate is melting down fast. Home values next,’ the Tesla and SpaceX chief tweeted on Monday. The tech billionaire made the comment in response to a tweet by Craft Ventures founder David Sacks, who pointed out a big chunk of commercial real estate debt is due to mature soon.”
USAGOLD note: There will be repercussions…… in the banking sector and the overall economy. Let’s hope they are not major.
Unruly politicians and unchecked spending risk US debt catastrophe
Financial Times/Michael Strain/5-26-2023
“The nation has arrived at the brink of disaster because of a collision of structural problems in the economy and political system. A deal to increase the debt ceiling and cut certain categories of federal spending would fix the immediate crisis, but would not address these festering problems.”
USAGOLD note: The real debt crisis……The problem of too much debt and its future growth overshadows any debt ceiling arrangement the politicians might stitch together now. Michael Strain is the American Enterprise Institute’s director of economic policy studies.
Sources: St. Louis Federal Reserve [FRED], US Department of the Treasury, Fiscal Service
Fed poised for another big policy mistake?
Credit Bubble Bulletin/Doug Noland/6-2-2023
Selected quotes from Friday’s report:
“It’s not a close call. If the Fed “Skips” policy tightening at the June 14th FOMC meeting, it will be yet another big policy mistake. The long string of errors has greatly damaged the Federal Reserve’s inflation-fighting credibility. It has also promoted dangerously dysfunctional market structure. At this point, the Fed should err on the side of demonstrating resolve in reining in inflationary excesses.”
. . . . . . . . . . . . . .
“Financial markets are also poised to sustain inflationary pressures. Resurgent Bubble Dynamics have fueled a major loosening of financial conditions. Surveys and anecdotes point to a degree of bank lending tightening. But this has been more than offset by risk embracement, leveraged speculation, and liquidity excess throughout the financial markets.”
. . . . . . . . . . . . . .
“Basically, the Fed/GSE liquidity backstop was integral to the pricing and liquidity dynamics that made derivatives so appealing for both hedging and speculating. And the bigger this complex became – and the more critical to the markets and economy – the more the Fed was compelled to quickly intervene to stabilize markets. Last year’s heightened concerns that the unfolding tightening cycle created ambiguity with respect to the Fed’s liquidity backstop were allayed by the Bank of England’s September and the Federal Reserve’s March interventions.”
Jim Rogers predicts worst bear market of his life, de-dollarization, and higher interest rates.
“You should be extremely worried. If you’re not, you don’t know what’s going on. Many countries are starting to look for alternatives to the US dollar, partly because of its horrendous debt problem. I’m looking every day, because I know that something bad is going to happen in the currency markets in the next two or three years.” – Jim Rogers
USAGOLD note: Rogers says the world has never seen the debt and money printing it has in the last few years. “There will be trouble in all markets,” he adds.
Traders are duped by bear market rally, Morgan Stanley’s Wilson says
“We would characterize this as the bear market is continuing, This is what bear markets do: they’re designed to fool you, confuse you, make you do things you don’t want to do, chase things at the wrong time and probably sell them at the wrong time.” – Mike Wilson, Morgan Stanley chief US equity strategist
USAGOLD note: As Richard Russell (deceased but not forgotten) once put it “bear markets are sneaky beasts and they like to do their damage as secretly and as unobtrusively as possible. I hate to say it but somewhere ahead, the bears going to get it all together and the innocent little stream is going to turn into a waterfall. What can you do about it? Stay out of the market? Protect yourself by remaining in pure wealth, gold.”
The stark ‘de-risking’ choice facing economies
Financial Times/ Mohamed El-Erian/5-26-2023
“Slowly and surely, countries will now be pushed towards choosing between two strikingly divergent paths: collaborate more to strengthen multilateralism and its ruled-based framework, or embrace economic decoupling as an inevitable accompaniment to greater risk mitigation by individual states.”
USAGOLD note: El Erian makes a cutting-edge observation. Economics is no longer alone in determining the structure of national currency reserves. The combined forces of national security, “politics National security, and geopolitics are supplanting economics in shaping national and international interactions. An argument can be made that the level of fragmentation and uncertainty El-Erian elevates gold as the more reliable, long-term option.
Debt ceiling drama will be ‘resolved, but not solved,’ says Jim Grant
“There’ll be a resolution as there was in 2011, but in 2011 we promised $2.2 trillion in savings over 10 years and the net result was an increase in cumulative deficits of $11.5 trillion, On form, this imminent resolution will entail a lot of out-year promises, which based upon history will be negated and forgotten.” – James Grant, Interest Rate Observer
USAGOLD note: He goes on to say that these borrowing levels pose a threat to the dollar as global investors worry that the US government could default on future debt payments.
The new gold boom: how long can it last?
Financial Times/Harry Dempsey and Lelie Hook/5-25-2023
“The revival in gold’s fortunes has central bank officials, fund managers and retail investors wondering whether the world is on the precipice of a new gilded period. Some forecasters reckon gold could escalate towards its real record high of nearly $3,300 per troy ounce in today’s dollars, set in 1980…”
USAGOLD note: Financial Times takes a deep dive into what is driving gold demand at present and comes away with conclusions that might come as a surprise to many of our readers……
The most predicted recession ever maybe won’t happen. Get ready for the ‘asset class recession’
“[S]ome investors are warning about a different kind of recession that has to do with how much of Main Street really has piled into equities: an asset class recession.”
USAGOLD note: There is a certain amount of logic in this argument in that much of the inflation over the past several years has ended up in the stock and bond markets. The article goes on to explain that an asset class recession involves a recession for Wall Street while Main Street remains recession-free.
Do we need to destroy the economy to save it?
Cartoon courtesy of MichaelPRamirez.com
“It is one thing for natural events to conspire to wreck an economy. It is another to intentionally slow one down.”
USAGOLD note: Jaffer ends with a few investment suggestions and a caution about more centralized planning which he says is reminiscent of Soviet Russia. “There should be a better way,” he says, “to adjust for economic conditions than what we are doing now.”
Cut stocks, buy gold, hold your cash, JPMorgan’s Kolanovic says
“A team of JPMorgan strategists led by [Marko] Kolanovic trimmed its allocation to stocks and corporate bonds while boosting its stake in cash by 2%. Within the commodities portfolio, the firm also rotated out of energy and into gold on haven demand and as a debt-ceiling hedge — another move intended to strengthen the JPMorgan’s defensive posture.”
USAGOLD note: At one time, Kolanovic was considered Wall Street’s most vocal bull.
Three reasons to buy gold now
UBS/Chief Investment Office/5-18-2023
“The direction of a weakening dollar is clear, with the US Fed having signaled a pause in its current tightening cycle after 500 basis points of rate hikes over the past 14 months. Other major central banks, meanwhile, remain on track to do more to fight inflation.”
USAGOLD note: UBS sees gold at $2100 by year end and $2200 by March 2024.
Short & Sweet
The Exter Inverted Pyramid of Global Liquidity
“[Exter’s Inverted] Pyramid stands upon its apex of gold, which has no counter-party risk nor credit risk and is very liquid. As you work higher into the pyramid, the assets get progressively less creditworthy and less liquid. . .[In a financial crisis] this bloated structure pancakes back down upon itself in a flight to safety. The riskier, upper parts of the inverted pyramid become less liquid (harder to sell), and – if they can be sold at all – change hands at markedly lower prices as the once continuous flow of credit that had levitated those prices dries up.” – Lewis Johnson, Capital Wealth Advisor’s Lewis Johnson
Gold: Older than the solar system itself
Deutsche Goldmesse/Dominic Frisby/5-6-2023
“Gold was present in the dust which formed the solar system billions and billions of years ago and gradually that dust accreted to form the planets.”
USAGOLD note: In this video, Frisby makes an engaging presentation on the yellow metal saying “We have a primal instinct for gold.”
Buffett: Debt standoff an idiotic waste of time……
Markets Insider/Theron Mohammed/5-27-2023
“Warren Buffett has dismissed concerns that Congress won’t raise the debt ceiling and the federal government will be forced to default on its loans. He went even further during a previous standoff, describing the clash as an idiotic waste of time, and calling for the borrowing limit to be removed entirely.”
USAGOLD note: Hard to disagree with Buffett’s assessment. Putting Wall Street and the rest of the country through this periodic ritual comes off as a childish desire to get attention – political gamesmanship at its worse.
The gold cases resurface
The New York Sun/Editorial Staff/5-22-2023
“While Perry affirmed the federal government’s burden to repay its debts, the case isn’t as ringing a vindication of the 14th as the Sun, back then, had hoped. The thing to remember about the 14th is that those who enacted it intended it to be about gold — meaning, honest money defined in law and certain contracts in terms of gold. Its authors meant to protect the right of such debt holders to be repaid in gold, or the equivalent in paper money.”
USAGOLD note: We note with interest that President Ulysses S. Grant (photo insert) declared at the time that the US should pay its debts in gold as a matter of national honor. If that were to occur today, it would wipe out the US gold reserve of 8133 metric tonnes. The Sun delves into what the Fourteenth Amendment is really all about.