MarketsInsider/Zahra Tayeb/5-30-2023

“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.

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

MarketsInsider/Theron Mohamed/5-29-2023

“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.

Bloomberg/Alexandra Semenova/5-26-2023

“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.”

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.

CNBC/Squak Box/5-25-2023

“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.

Yahoo!Finance-Fortune/Tristan Bove/5-24-2023

“[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.

Newsweek/Zain Jaffer/5-23-2023

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.”

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.

Yahoo!Finance-The Telegraph/Matthew Lynn/5-21-2023

“Even so, despite the potential for a financial meltdown, an American debt default might be precisely the kind of jolt that the global economy needs. It would be a powerful reminder that total borrowing can’t simply keep on rising forever without any consequences.”

USAGOLD note: An unusual, and some would say dangerous, take on the prospect of a US debt default, but not one without merit. The global tower of debt was $210 trillion in 2010. It is $300 trillion now and projected to be $400 trillion by the end of the decade.

YahooFinance/The Economist/5-18-2023

“In America, Britain and Europe, officials are debating if they should offer more generous protection for bank deposits. Such moves are just the latest evidence of the diminution of banks’ power and the increase in that of the state. Over the past few months, in areas from deposit insurance to emergency lending to regulation of asset quality, Leviathan has grown ever more dominant.”

USAGOLD note: Banks are becoming wards of the state, says The Economist.  The publication puts special emphasis on the fact that the Fed will buy bank-held securities at par even though the market value has been heavily discounted. “The bigger the backstop,” it says, “the more reason government has to dictate what risks banks may take” – a notion antithetical to tenets of capitalism.

themarketNZZ/Chistopher Gisiger interview of Raghuram Rajan/5-15-2023

“The recent events highlighted mid-sized banks with volatile deposits and asset problems. I think the asset problems haven’t gone away. There are still lots of losses to be absorbed on bank balance sheets, and the problem with volatile deposits hasn’t gone away either.… As a result, there will be an issue of longer-term health of the banking system, especially regarding mid-sized banks exposed to areas like commercial real estate.” – Raghuram Rajan, Professor of Finance at the University of Chicago and former Governor of the Reserve Bank of India

USAGOLD note: Above is Rajan’s reasoning on why the banking system still needs watching. The chart below from the FDIC speaks a thousand words………

Total unrealized gains or losses on investment securities held by FDIC-insured banks
Chart courtesy of the FDIC • • • Click to enlarge

Bloomberg/Liz McCormick and Alex Harris/5-18-2023

“[A debt ceiling agreement] doesn’t mean the economy will escape unscathed, not just from the bruising standoff but also as a result of the Treasury’s efforts to return to business as usual once it can ramp up borrowing.”

USAGOLD note: Be careful what you wish for …… Penso Advisors’ Ari Bergmann sees a confluence factors swamping the bond market all at the same time.