This Coming Financial Crisis Is Different, but Gold Is the Same as Ever

Via Birch Gold Group

This Coming Financial Crisis Is Different, but Gold Is the Same as Ever

From Peter Reagan at Birch Gold Group

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: What to watch out for in the coming financial crisis, Citi thinks $30 silver is a lowball forecast, and how to solve the debt ceiling stand-off with a single platinum coin…

Gold is the best defense in a financial crisis of privacy, property and ownership

Stansberry Research’s George Gammon joined Daniela Cambone in an in-depth interview detailing the imminent financial crisis. One of the primary assertions Gammon makes is that the crisis is going to differ from previous ones. That much has already been beaten in, to the point of even the IMF saying it will be unlike previous crises. But what’s the difference?

Gammon believes central bank digital currencies (CBDCs) are going to take center stage in what’s shaping up to be a decade-long financial tumult. It will have similarities to 1940s, along with some rather controversial developments. In fact, Gammon tells us we was roundly criticized in 2019 for promoting “conspiracy theories.“ A lot of these predictions have either already materialized or are in the works. The Federal Reserve is rolling out FedNow, while both the International Monetary Fund (IMF) and the Bank of International Settlements (BIS) are having ominous meetings over some kind of global digital currency. Continue reading “This Coming Financial Crisis Is Different, but Gold Is the Same as Ever”

The Mother of All Crashes Is Coming in April 2023

Guest Post by Brandon Smith

The Mother of All Crashes Is Coming in April 2023

The signs of the coming economic contraction are already both present and obvious, but the overall economic picture probably won’t be acknowledged in the mainstream until the situation becomes much worse.

It’s a problem that arises at the onset of every historic financial crisis – mainstream economists and cable-news commentators deliberately mislead the public about the severity of the challenges and the chances of recovery. They feed their audiences false reassurances in the hope of lulling people back to sleep.

Even now with inflation pummeling the average American family, they tell us that there is nothing to worry about. The Federal Reserve’s “soft landing” is on the way. Continue reading “The Mother of All Crashes Is Coming in April 2023”

Markets Are Expecting the Federal Reserve to Save Them – It’s Not Going to Happen

Guest Post by Brandon Smith

Markets Are Expecting the Federal Reserve to Save Them and It Is Not Going to Happen

I have said it many times in the past but I’ll say it here again: Stock markets are a trailing indicator of economic health, not a leading indicator. Rising stock prices are not a signal of future economic stability. When stocks fall, it’s usually after years of declines in other sectors of the financial system.

Collapsing stocks are not the “cause” of an economic crisis, they are just the delayed symptom of a crisis that was already there.

Continue reading “Markets Are Expecting the Federal Reserve to Save Them – It’s Not Going to Happen”

The Financial “Samson Option” and What You Need To Do Before Governments Use It

Via International Man

by Nick Giambruno

“Samson Option”

In the early ‘90s, legendary investigative journalist Seymour Hersh revealed the “Samson Option,” a secret Israeli nuclear deterrence strategy.

It states that in a scenario where its enemies were about to overrun the country, Israel would respond with massive use of nuclear weapons as a last resort.

Continue reading “The Financial “Samson Option” and What You Need To Do Before Governments Use It”

There Is No Means of Avoiding the Final Collapse

Via International Man

By Nick Giambruno

Economic collapse

The Fed has already printed trillions—and shows little sign of slowing down—which means much higher inflation is already baked into the cake.

The only question is how the Fed will respond to it.

Ludwig von Mises, the godfather of free-market Austrian economics, summed up the Fed’s dilemma:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

The Fed has two choices:

1) keep printing trillions and let inflation skyrocket

2) tighten monetary policy and watch the markets crash.

In other words, it can sacrifice the stock market or the dollar.

#1 Keep Printing Trillions and Let Inflation Soar

Continue reading “There Is No Means of Avoiding the Final Collapse”

The Goal of Covidism is Communism

By Doug “Uncola” Lynn via TheBurningPlatform.com

Most of us have heard the phrase: “The goal of socialism is communism”.  Perhaps, at its core, the statement is a reference to creeping incrementalism, or, stated another way:  Give Marxism an inch and it takes a mile.

Just like Covidism: it was given an inch and it took a mile.  In only eighteen months America advanced, incrementally, from Flatten the Curve® and lockdowns to mandatory vaccinations:  All because of a virus that mostly endangers the elderly and those with serious health concerns.

From an economic standpoint, Covidism, like socialism, has allowed for some capitalism over the last year and a half: a centralized form of capitalism, to be sure, as some workers and businesses were defined as “essential” and others deemed more equal were financially subsidized by the state.

Continue reading “The Goal of Covidism is Communism”

This Kind of Duality

Guest Post by John Mauldin

This Kind of Duality

Improving World

Below is the second part of my podcast conversation with David Bahnsen. You can read the first half in my last letter, or listen to the entire podcast. [Note that items in brackets are inserted today.]

David Bahnsen: Well, hello and welcome to another edition of the Capital Record. This is part two of a two-part series, picking up where I left off last week with my good friend John Mauldin. We decided last week to bite off the last 20 years of national debt and economic stagnation and then talk about the next 20 years of national debt and monetary policy. And it turns out 40 minutes was not quite enough to get it all. So John graciously agreed from his beautiful home in Puerto Rico to join me once again. John, thanks for joining us once again at Capital Record.

John Mauldin: David, some of my best memories in recent years are just simply time with you. You always force my mind to work a little bit better. I wish I had you on my shoulder when I was writing my letter.

David Bahnsen: Well, I certainly appreciate hearing that, especially from you, John. And, you know, even before it became more personal in these discussions and correspondence and conversations and dinners and lunches, and things took on a life of their own for many years, I felt like I had you on my shoulder while reading Thoughts from the Frontline so religiously every week, and of course your books like Bull’s Eye Investing. That is always going to be a very underrated book, and I think it was actually rated very highly.

John Mauldin: It hit number one in China [investing books], of all places. And the editor of the Hong Kong Economic Review and someone in Beijing decided it was the best book of all time and they just promoted the heck out of it. I had a column in the Hong Kong newspaper for like 10 years translated into Chinese. And when I went over to Hong Kong, I was the front-page picture and had a thousand people in the room. Those were heady times for this country boy.

David Bahnsen: Well, as it should be. And when I say underrated, I mean, I would say Michael Jordan was an underrated basketball player and he’s the greatest of all time and everyone knows it. Yet he was that good. The Bull’s Eye Investing was that good in this sense, at the time it was written and the introduction of the concept of Muddle-Through Investing. There are people that have, I believe, a sociological and a psychological affinity towards pessimism and doom and gloom. And there are certainly people that are really almost addicted to a Pollyanna-ish, everything’s-always-bullish type of dynamic as well. And for me, as someone who could identify early on the psychological hang-ups that were keeping people from being more objective, your book was so refreshing in that I didn’t have it in me to be a permabear. All I had to do is look out my window. And yet I certainly knew coming out of the tech crash, 9/11, the unsettling parts of our new millennium, this wasn’t a time for permanent bullishness either. And I’m sure over the years you were proud of things you got right and other [way too many for my comfort] things you now recognize maybe you got wrong. But the point is coming at it from a posture that is realistic, not committed to permanent pessimism or permanent optimism.

John Mauldin: I’ve developed this kind of duality. It’s hard to think of the next 20 years or indeed the last 20 years without being very optimistic about the future of humanity. In terms of our ecosystems, the amount of forest, amount of water we’re using, the amount of power and so on, with the exception of oceans, we are so much better off than we were 10 or 20 or even 40 years ago. We’re not doing a very good job with the oceans but fewer people are in poverty. The world is improving. Technology is moving absurdly fast. I think this will be the decade of biotechnology. Look at what we’ve done with the COVID response, the speed of the vaccine development. We’re going to see so much science, so much knowledge come out of this that we have no idea where it’s going to take us. We can create all sorts of incredible new approaches to health and aging. This decade is going to be powerful. So it’s hard not to be optimistic.

David Bahnsen: Is your optimism limited to technology and biomedicine, health sciences? That’s been a focus of yours for a long time. But where else do you derive it?

John Mauldin: I look at artificial intelligence. I don’t think we realize the extent to which 3D printing and virtual reality is going to be a focus. There’s a technology coming along that’s literally absolutely going to turn the agricultural world on its head. It’s going to be great for humanity. We’ll be using less fertilizer and less fungicide and less herbicide and getting healthier, better plants. So my pessimism, if you will, goes back to what we were discussing last week. We as a society are not managing our debt, are we’re not managing our social systems very well. I get very concerned. My letter this last week [two weeks ago] was about what happened in 1971. The Great Society was beginning to kick in and we were looking at all Nixon’s social programs. We think of him as this arch-right conservative but he had a lot of very liberal policies.

David Bahnsen: I just want to be on the record that I did not think of Nixon as ultra-right conservative.

John Mauldin: Well then, we agree.

David Bahnsen: Price controls, wage controls, and significant weakening of the US dollar. Other than that, how was the play, Mrs. Lincoln?

Out the Risk Curve

John Mauldin: For 70 years, we’ve only seen 3.9% unemployment rate twice in our history, one was 2019, the other was during the middle of the Vietnam War when we took half a million young men and put them into the Army and those men don’t count as employed. They’re in military service. So we took half a million people out of the labor force, stuck them into the Army or Navy or whatever. Those two brief instances, and now you’ve got the Federal Reserve saying they want to get back to [that employment nirvana].

I mean, I’m not so old and neither are you, David. We used to think of 4–5% unemployment as pretty much full employment. Now we have a Fed saying 3.9% is our goal.

And that’s going to so distort the financial world.

David Bahnsen: There’s nothing new under the sun, right? I mean, there hasn’t been. I wrote a piece recently arguing that, by definition, if we’re actually getting our vocabulary right, all bubbles are debt-fueled because if you look at the consequences of equity-fueled bubbles, they don’t feel like bubbles when they blow up. They’re bad, but it’s not systemic. The pain and aftermath is limited to those who took direct risk. It is debt-fueled bubbles that actually feel like bubbles and look like bubbles and act like the bursting of bubbles when it happens. A hedge fund recently blowing up [from leverage], and we can go back three or four hundred years, I’m not sure we’d find anything that blew up that wasn’t out of leverage. But now the great leverage-taker in our society [is the government and the central bank]. I mean, you get a hedge fund here, there, but I don’t know about you, John, I don’t mean to be crass, I don’t care about these hedge funds… Let them blow themselves up. It’s their damn money. It’s their investors. These are all grown-ups. But the government is now the big levered actor.

Let’s talk investment stuff for a little bit. I’m an investment guy, you’re an investment guy. And I spent so much time on this podcast because I also love macroeconomics. But let’s talk investing. You bring up an interesting dynamic. Let’s not use a 75-year-old, but let’s use a 62-year-old that’s getting ready to go into retirement. I would make the argument that the reason people right now largely need equity exposure that are into a withdrawal phase of their financial lives is not for the growth. It’s not for the total return. It’s for the income. A good dividend portfolio can give them a 5% coupon and a bond portfolio is going to give them a 1% to 2% coupon. This is a total turning on the head of that idea [of fixed income]—bonds for income, stocks for growth. Right now, there is no yield available in safe bonds. You talk about going out the risk curve. Well, you can get some 4% and 5% yields in the bond market and…

John Mauldin: But dear gods. What risk are you taking?

David Bahnsen: B-minus credits. They call them junk bonds. You’re going to go to levered loans. You’re going to go to commercial mortgage-backed securities. Is that risk any less than equity markets?

John Mauldin: No, no. And I think we’re setting ourselves up. It’s happened three times in my career. You see this huge push down in yields on high-yield bonds, junk bonds, and they’re going to blow up someday. I mean that we don’t know when. They are encouraging leverage by making rates so low and they’re screwing retirees just as the biggest piggy-in-the-python, the Boomer generation, comes along and needs low-risk income. [It is financial repression and it is one of the massive evils that central banks have committed.]

David Bahnsen: [Is the market going to] blow up because of defaults or is it going to blow up because the spreads are re-widening?

John Mauldin: The spreads’ re-widening is the big problem, not a few defaults here and there. You have a trigger point, a few defaults, that makes everyone nervous. The last trigger point we saw was the financial crisis, the Great Recession. Before that it was the tech bubble bursting and a lot of margin debt everywhere. When there’s a lot of leverage, you don’t sell what you want to sell. You sell what you can sell. If you start saying, let’s sell our debt, well, the spreads just blow out. And that creates a phenomenal opportunity.

The last time you started seeing high-yield paying 18%, 19%, 20%… Then you can start taking some risk because it’s blown out and all the stuff that’s really going to blow up has already blown up in the portfolios. We’ve seen this three times before and I think it’s going to happen again. But the sad part of it is the investors in those high-yield bonds today are going to blow up. They’re going to panic and get out, so they’re going to lose a lot of money. They’ll swear off high-yield bonds forever. It’s this financial repression from 12 people sitting around a table setting the most important price in the world, which is interest rates on the US dollar. [And often it’s just one person.]

The Opportunity Market

David Bahnsen: Well, so let’s wrap up, John, with this. You’ve teed up a really neat way to conclude that actually connects to where we started this podcast, with the rejection of both permanent pessimism and permanent optimism. Now you’re applying it to portfolio expectations, the way investors ought to think. But from the vantage point of the economy at large, it sounds to me like you are, and I think you even said this exact line before, you are short government and long humanity.

John Mauldin: That is my line, and I’m sticking to it.

David Bahnsen: And I don’t know how we could encapsulate the philosophy of this podcast, the philosophy of National Review, of free-market conservatism, of classical liberalism, much better than saying that we are long those aspects of human ingenuity that are investable, exciting, dynamic, that have created progress for thousands of years, and yet short those elements that create bubbles and bursts and debt problems and mismanaged crises and all those things. Yet we have to live with both. We all live in a world of human ingenuity and we live in a world of the not-so-benevolent hand of government touching everything. So, give us a couple of closing thoughts as to how we reconcile those two dynamics.

John Mauldin: At least 150,000 businesses have had to shut down in the last year. That’s the bad news. The good news is that there’s 150,000 entrepreneurs out there trying to figure out how to get back in the game. I’m optimistic about that. I think as long as we don’t screw around too much with the mechanisms of the opportunity market, I don’t want to use the word free market, just the opportunity market, the country will be fine. The opportunities will be there.

Are we going to have a potential day of reckoning in terms of our debt and government size? Yes, but it’s potential. Can the Federal Reserve monetize more using QE instead of MMT? There’s a significant difference in how those work. And as long as it’s QE, like Japan and Europe, we might be able to keep the game going, albeit with a great deal of volatility. $40 trillion, $50 trillion in debt with the Fed picking up half of that. Yes, it will slow the economy in general. But I don’t have to participate in the general economy, I have my business in front of me and I’m going, OK, this is what I can do within this environment to make money. That’s what entrepreneurs do.

David Bahnsen: And so, as we close out, the takeaway is the more things in the free market and opportunity market and the less out of the coercive hands of the state and the distorted hands of the Fed, the better off we’re all going to be.

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Sleepwalking Toward A Crisis – Got Gold?

Via Investment Research Dynamics

“By sticking to the new orthodoxy of monetary policy and pretending that we have made the banking system safe, we are sleepwalking towards that crisis.” – Mervyn King, former head of the Bank of England in a lecture at the IMF’s recent annual meeting

The market levitates higher on phony economic data from the Government, Trump tweets, Fed money printing and hedge fund algorithms chasing headline and twitter sound bites. Currently the stock market, dulled by money printing and official interventions, could care less about economic reality and rising global systemic geopolitical and financial risk. Corporate headline earnings “beats” are considered bullish even if the earnings declined YoY or sequentially.

Continue reading “Sleepwalking Toward A Crisis – Got Gold?”

Pondering The Collapse Of The Entire Shadow Banking System

Authored by Mike Shedlock via MishTalk,

What’s behind the ever-increasing need for emergency repos? A couple of correspondents have an eye on shadow banking.

Shadow Banking

  • The shadow banking system consists of lenders, brokers, and other credit intermediaries who fall outside the realm of traditional regulated banking.
  • It is generally unregulated and not subject to the same kinds of risk, liquidity, and capital restrictions as traditional banks are.
  • The shadow banking system played a major role in the expansion of housing credit in the run up to the 2008 financial crisis, but has grown in size and largely escaped government oversight since then.

The above from Investopedia.

Image courtesy of my friend Chris Temple.

Continue reading “Pondering The Collapse Of The Entire Shadow Banking System”

WHAT IS THE FED HIDING?

Intervention

Guest Post by Sven Henrich

The Fed has gone into full intervention mode. Not only into full intervention mode, but accelerated intervention mode. Not just a little “mid cycle adjustment” but full bore daily interventions to the tune of dozens of billions of dollars every single day. What’s the crisis? After all we live in the age of trillion dollar market cap companies, unemployment at 50 year lows and yet the Fed is acting like the doomsday clock has melted as a result of a nuclear attack.

Think I’m in hyperbole mode here? Far from it.

Unless you think the biggest repo efforts ever by far surpassing the 2008 financial crisis actions are hyperbole:

What indeed is the Fed not telling us?

Continue reading “Intervention”

Currency War Begins: Chinese Yuan Crashes Past 7 To New Record Low; Global Markets Tumble After Beijing Suspends US Agri Imports

Via ZeroHedge

Update 2: – China’s central bank has confirmed that it is, indeed, on, saying that it is able to keep the yuan exchange rate at a reasonable and balanced level – whatever that means – while acknowledging that the Yuan plunging beyond 7 per dollar is due to market supply and demand, trade protectionism and expectations on additional tariffs on Chinese goods.

Meanwhile, resorting to its old, tired and worn out tricks, Dow Jones reports that the PBOC will crack down on short-term Yuan speculation, and anchor market expectations.

Which is great… if only the PBOC didn’t say exactly the same back in May, when it warned currenct traders that  those “shorting the yuan will inevitably suffer from a huge loss.

Three months later, it’s currency traders 1 – Beijing 0.

Continue reading “Currency War Begins: Chinese Yuan Crashes Past 7 To New Record Low; Global Markets Tumble After Beijing Suspends US Agri Imports”

The Trend is Not Your Friend

Guest Post by Jim Kunstler

The be-Muellered, bothered, and bewildered American public may find US-China trade talks about as interesting as a rain delay in an Orioles-Chisox game, but the Friday collapse of negotiations may be marked by historians as the day that the global economy died. The Big Box blue-light-special orgy of bargain shopping ran about thirty years, with China exuberantly pumping out cheap consumer goods to feed the US beast-of-Mammon. Americans happily payed for it all with IOUs based on long daisy chains of previous IOUs. Tom Friedman of The New York Times said it would last forever. Alas….

Continue reading “The Trend is Not Your Friend”

Paul Volcker, at 91, Sees ‘a Hell of a Mess in Every Direction’

Via NYT

Paul Volcker, wearing a blue sweatsuit and black dress socks, stretched out on a recliner in the den of his Upper East Side apartment on a Sunday afternoon. His lanky 6-foot-7 frame extended beyond the end of the chair’s leg rest. He added an ottoman to rest his feet.

“I’m not good,” said Mr. Volcker, 91, the former Federal Reserve chairman, who came to prominence after he used shockingly high interest rates to help end the runaway inflation of the late 1970s and early ’80s. Long one of finance’s wise men, he has been sick for several months.

But he would rather not talk about himself. Instead, Mr. Volcker wants to talk about the country, the economy and the government. And if he had seemed lethargic when I arrived, he turned lively in his laments: “We’re in a hell of a mess in every direction,” he said.

Continue reading “Paul Volcker, at 91, Sees ‘a Hell of a Mess in Every Direction’”

WHAT KEEPS THEM UP AT NIGHT

“Government has coddled, accepted, and ignored white collar crime for too long. It is time the nation woke up and realized that it’s not the armed robbers or drug dealers who cause the most economic harm, it’s the white collar criminals living in the most expensive homes who have the most impressive resumes who harm us the most. They steal our pensions, bankrupt our companies, and destroy thousands of jobs, ruining countless lives.” – Harry Markopolos, Madoff Whistleblower

Image result for bank ceos in front of congress

The tenth anniversary of the Wall Street created financial catastrophe brought back some bittersweet memories this week. I wrote my first articles during the summer/fall of 2008 for Seeking Alpha. They included: Is The U.S Banking System Safe? (Aug 2008), The Great Consumer Crash of 2009 (Aug 2008), Looming Financial Catastrophe: A Real Inconvenient Truth (Aug 2008), Is Wachovia the Worst Run Bank in America (Sept 2008), The U.S. on the Precipice (Sept 2008), On Board the U.S.S. Titanic (Sept 2008), Our Coming Depression (Oct 2008), among others. I was pumping out 5,000 word articles every 2 or 3 days.

Continue reading “WHAT KEEPS THEM UP AT NIGHT”

The Next Financial Crisis Is Right On Schedule (2019)

Authored by Charles Hugh Smith via OfTwoMinds blog,

Neither small business nor the bottom 90% of households can afford this “best economy ever.”

After 10 years of unprecedented goosing, some of the real economy is finally overheating: costs are heating up, unemployment is at historic lows, small business optimism is high, and so on–all classic indicators that the top of this cycle is in.

Financial assets have been goosed to record highs in the everything bubble.Buy the dip has worked in stocks, bonds and real estate–what’s not to like?

Beneath the surface, the frantic goosing has planted seeds of financial crisis which have sprouted and are about to blossom with devastating effect. There are two related systems-level concepts which illuminate the coming crisis: the S-Curve and non-linear effects.

Continue reading “The Next Financial Crisis Is Right On Schedule (2019)”