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THIS WEEK’S EDITORIAL
BOOM SWITCHES PLATFORMS: BOOM is available on three platforms — on the Paper.Li platform, on LinkedIn and on WordPress (where all BOOM editorials are available) at https://boomfinanceandeconomics.wordpress.com/
BOOM will continue to be published on LinkedIn and WordPress. However, the Paper.Li platform will no longer be available from 20th April. BOOM will soon launch on Substack to ensure that three platforms continue to be available. You will be kept informed.
GLOBAL TRADE RECOVERY: BOOM constructs a key indicator in-house that is correlated to both world trade prospects and global stock market performance. The indicator flattened in October 2021 for a year and then went into steep decline during August/September 2022, indicating severe weakness in global trade settlements. When the decline began, BOOM again warned about a possible economic recession (or significant slowdown in growth) beginning in late 2022, especially in the United States.
However, readers should take note that the indicator stopped declining during February, this year. And during March it began rising steadily. In the past, strength in global trade as signalled by this indicator has usually been accompanied by significant strength in global stock markets. This recent strengthening in global trade should now (theoretically) underwrite the financial market strength that we are currently seeing in financial asset prices. BOOM is expecting history to repeat.
In October last year, while expecting a significant slowdown in the US economy, BOOM forecast a turnaround in key US stock and bond markets. That forecast has proven to be accurate. BOOM was the lone commentator on the planet who predicted a resurgence of stock market strength at the time when doom and gloom was rampant.
On 16th October last year, BOOM wrote — “the inflation statistics and retail sales figures were a good result, offering some firm evidence that the peak of CPI inflation may be in the past. If we are past the peak, then the prices of stocks and bonds should start to rise from here”. US stock prices started rising 2 days later and US bond prices started rising 5 days later.
Since BOOM’s forecast in October, the Nasdaq Index has risen by 20%. The S & P 500 Index has risen by 18.5%. And the Dow Jones Index has risen by 19.2%. The German DAX Stock Index is up by 31.25%. The French CAC Stock index is up by 32%. Readers who noted BOOM’s forecast in October should be happy with their stock portfolio performance since then.
Just 2 weeks ago, BOOM’s Editorial on 2nd April stated — “In the US last week, despite considerable Doom and Gloom, there was notable strength in the prices of Junk Bonds and in regard to Insider Buying of stocks. When these two combine, it usually indicates that asset prices will gather in strength. BOOM has been forecasting this strength in asset prices since October last year. “
US BOND PRICES CONTINUE TO RISE – CPI INFLATION CONTINUES TO FALL IN THE US: All US bond prices continue to rise since October last year. The US Yield Curve is still mildly inverted which concerns many commentators. However, BOOM feels that the steepness of the curve is not sufficient to cause panic, especially if the observer is looking for an end to the Fed’s aggressive tightening at the short end. That will hinge on clear evidence of CPI disinflation (falling rates of CPI inflation).
BOOM called “we are past the Peak of CPI Inflation in the US” in October last year. In retrospect, we can now look at the Annual CPI inflation numbers to see that the June reading of 9.1 was actually the Peak. The Monthly series, beginning with the June 2022 number reads : 9.1; 8.5; 8.3; 8.2; 7.7; 7.1; 6.5; 6.4; 6 and 5.
The annual inflation rate in the US slowed for a ninth consecutive period to 5% in March of 2023, the lowest since May of 2021 from 6% in February, and below market forecasts of 5.2%.
The Month on Month CPI inflation rate fell from 0.4 % in February to 0.1% in March. The US Bureau of Labor Statistics released this last Friday 14th — “The Producer Price Index for final demand in the United States increased by 2.7 percent from a year earlier in March 2023, easing from an upwardly revised 4.9 percent rise in the previous month and below market expectations of 3 percent. The rate of inflation was the lowest since January 2021, adding to signs that inflationary pressure in the world’s largest economy might be cooling following the policy tightening delivered by the Fed over the past year.”
Most importantly, services inflation in the United States eased to 7.3% year-on-year in March 2023, the lowest in four months, from 7.6% in the prior month.
The US Treasury 10 Year Bond Yield peaked at 4.338% during the week ended 16th October 2022. Mortgage rates on offer in the US have now begun to fall over the last 5 – 6 weeks. This suggests that US house prices may soon begin to rise in price.
THE FEDNOW: The US banking system has been using the Automated Clearing House (ACH) for almost 50 years to transfer money between bank accounts. However, ACH transactions can take up to two business days to complete, causing inconvenience for customers who require faster payment.
In July, a change is coming in the United States with the introduction of FedNow as a method to transfer funds between financial institutions. The US Federal Reserve has a website dedicated to this initiative. It is FRBservices.org and this is its explanation of FedNow:
“The FedNow Service is a new instant payment infrastructure developed by the Federal Reserve that allows financial institutions of every size across the U.S. to provide safe and efficient instant payment services.
Through financial institutions participating in the FedNow Service, businesses and individuals can send and receive instant payments in real time, around the clock, every day of the year. Financial institutions and their service providers can use the service to provide innovative instant payment services to customers, and recipients will have full access to funds immediately, allowing for greater financial flexibility when making time-sensitive payments. The FedNow Service will be deployed in phases, with the initial launch taking place July 2023.”
Instant transfer of funds between financial institutions is long overdue in the US. The term used to describe this as ‘Instant Payments’. Some readers may assume that the US Federal Reserve is the leader in instant payments. However, this is not the case. They lag the rest of the world in regard to such an obvious service.
In Australia, their instant payments system is called the “New Payments Platform” (NPP) and the “Fast Settlement Service” (FSS). It was initiated in 2019 and is now heading towards 5 years of use. Together, the NPP and FSS enable Australian customers of more than 90 financial institutions to make fast payments 24 hours a day, every day of the week (‘24/7’).
Customers can send detailed information with a payment and nominate the payment recipient in a simple way. While the rollout of the NPP has been gradual, usage grew rapidly over the second half of 2019 and compares favourably with other successful fast payment systems introduced in other nations. NPP payments made between customers of different financial institutions are settled finally and irrevocably in real time (instantly) in central bank funds through the FSS, a settlement system built by the Reserve Bank of Australia (RBA) – Australia’s central bank.
Other nations have also developed and launched Instant Payment systems for their inter-bank transfers and funds transfers between other financial institutions (such as credit unions). In the UK, the system is called the Faster Payments Service (FPS) which has been in operation for over 5 years. In Denmark, they called their system MobilePay. It was launched in Denmark in May 2013 and in Finland later that year.
In Sweden, the instant payments system is called Swish. It has been in operation since 2012. Swish is a member of the EMPSA. The European Mobile Payment Systems Association (EMPSA) is an association that aims to foster collaboration and to enable the use of different mobile payments systems internationally – between nations. EMPSA is headquartered in Zurich, Switzerland.
In the European Union, all instant credit transfers denominated in Euro are based on the European Payments Council’s SEPA Instant Credit Transfer scheme (SCT Inst), which was launched in November 2017. The key features of SCT Inst include the service being consistently available (24 hours a day, 365 days a year); and it taking no more than ten seconds for the recipient’s payment service provider (PSP) to inform the payer’s PSP whether the money has been received and, in the case of a successful transaction, to make the funds available to the recipient.
So, the US central bank, the Federal Reserve, is definitely not an innovator in the matter of instant payments. It lags other nations by many years.
USE CASH: Of course, some commentators worry that FedNow will enable “the Fed to see all my transactions” and that is true. However, other third parties have been able to see such transactions for over 60 years when credit or debit cards have been used.
If you don’t want the banking system to see your transactions, BOOM advises that you use physical cash for as many transactions as possible. BOOM is a strong supporter of physical cash. It is sovereign money, non-interest bearing, issued by the Treasury (in most nations) and distributed by the banking system for no profit. Use it or lose it.
Physical cash must be printed if demand for it rises. That is a fact. So use it and encourage others to do so as often as possible. Cash money is our buffer in the monetary system to credit money (interest bearing money created as a bank loan to a willing borrower). That buffer is a monetary stabiliser which reduces our dependence on credit and the costs associated with credit. It also dampens CPI inflation.
THE RIPPLE CONTROVERSY: Ripple Labs, Inc. is an American technology company which developed its Ripple payment protocol and exchange network. Originally named Opencoin and renamed in 2015, the company was founded in 2012.
Ripple offers similar technology for money transfers to FedNow and has gained popularity in the Crypto world for offering cheap cross-border payments using the XRP token. However, Ripple has an ongoing case with the Securities and Exchange Commission (SEC) over whether XRP is an unregistered security.
The SEC initiated a lawsuit in December 2020, claiming that Ripple illegally sold its XRP token as an unregistered security. Ripple disputes the claim, arguing that XRP doesn’t constitute an investment contract under the Howey test — the legal test used to determine if a transaction qualifies as an investment contract.
The test was established in 1946 by the US Supreme Court in the SEC v. W.J. case. The Howey Test refers to the case for determining whether a transaction qualifies as an “investment contract,” and therefore would be considered a security and subject to disclosure and registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934.
Under the Howey Test, an investment contract exists if there is an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.” The test applies to any contract, scheme, or transaction.As the legal battle between the SEC and Ripple continues, whether XRP is a security remains unresolved.
The XRP token trades on various Crypto exchanges globally and is currently priced at US$ 0.52 on Coinmarketcap. Its price in US Dollars has varied a great deal since its launch almost 10 years ago in 2012. To BOOM it is clearly a digital asset, a digital commodity. Whether it is also a security will be decided by the US courts.
QB Explained: https://boomfinanceandeconomics.wordpress.com/2019/12/15/boom-as-at-15th-december-2019/ and
BOOM’s Perfect Economy: https://boomfinanceandeconomics.wordpress.com/2020/01/18/boom-as-at-19th-january-2020/
In economics, things work until they don’t. Until next week. Make your own conclusions, do your own research. BOOM does not offer investment advice.
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In aggregate, the stock Market provides only the illusion of profit.
I bailed on the stock market in 2012. After years of “investing” I saw no real increase in purchasing power. Sure the numbers went up but were fully offset by depreciation of purchasing power. Factor in all cost related to investments, taxes incurred/due on gains and inflation of the currency, I saw minimal gains in actual purchasing power. Plus, the worry associated with economic downturns or some unforeseen calamity and the fact that years of increases could be wiped out on any given sunny day I had enough and closed out completely.
Gold in particular has been the best investment overall this century (from 2000 to present). Of course there have been some exceptions like BitCoin ,etc. but where that is headed is anybody’s guess. Further, I see energy problems making the long term view of stocks dubious at best. You can’t have infinite growth on a finite planet and there has been a terrible lack of investment in long term energy strategies and discoveries.
Your stockbroker or fund manager reports an outstanding return of 12%!!!!…… Yeah, but inflation last year was over 15%. Oopps, you lose…
Worries about market gyrations and the huge wipe out in the markets that is undoubtedly due sometime relatively soon (today, tomorrow, next week, month , year?)
Forgetaboutit…
It’s not for everybody but works well for me.
I love PMs too Steve, but as you say, many see it as a lump of rock that provides no divs/returns, a barbaric relic they say. I guess the real secret is the eighth wonder of the world – compound interest – Albert Einstein said “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it”
“Nominal inflation reached very high levels. In A.D. 301, one pound of gold was worth 72,000 denarii. It finally stabilized at about 3,000,000,000 denarii by the end of the 4th century implying an average annual compounded inflation of 12.5%”
“I’ve read that the price of a toga in ancient times was equivalent to 1oz of Gold, the same as a handmade suit now. And that under King Nebuchadnezzar (605 – 562BC), 1oz of gold would buy you 360 large loafs of bread – again, roughly the same as now. How true are these statements?”
.
the price of many things over the ages has varied a lot from time to time and place to place , and one problem with trying to get a good picture on historical prices is the scarcity of good contemporary information. most of the time mention of prices of things is kind of an accidental coincidence in ancient sources. The price in silver or gold still doesnt tell the whole story even if one finds prices in some places or times, that match recent prices closely – one could argue that more useful would be what’s the total effort or cost involved in acquiring or doing the thing in question. In ancient times, when these things were all made by manual labor, the nature of that labor was a big factor- in roman times slaves were used for a lot of _skilled_ labor, driving free men out of the markets and feeding a factory type economy for a lot of basic commodities like textiles. in some societies where this was paid labor, those items might actually be quite expensive, but at the same time, a larger portion of the society around could afford some of them. the mediterranean world before the roman empire, for example, used slaves for unskilled work or domestic servants, but much less so for skilled labor- there are plenty of references in greek literature for exmaple, of tradesmen who are free citizens.
In rome, a lot of the trades were either monopolized by slaves or curiously, by freedmen – a roman legal category of people who had formerly been slaves – a class that only lasted one generation in any instance because their children were normal free (not freed) men after that.
Relative costs would have been very different – textiles were cheaper in rome than in the pre-roman greek world, for example.
Transport costs likewise were very different and location played a huge role. it was famously demonstrated that in imperial rome it was cheaper to ship a cargo from one end of the mediterranean to the other by sea, than it was to transport it more than a few score miles overland. Thus anywhere something bulky like grain was transported, an inland destination, bread would be a lot more expensive than clothing, for example, but in a coastal location near a port the opposite was more likely, and so on and so forth.
Gold until the middle ages was very seldom used in daily commerce. In the ancient world, silver was the money metal and gold was a prestige and generational wealth medium for the upper class. Late Rome aka Byzantium actually set the trend toward gold by discontinuing the worthlessly debased silver coinage and instituting the gold solidus, which remained stable and undebased for about 7 centuries (thats got to be the all time record for a stable money!), and their daily small change was mostly bronze, not silver. In western europe stilver remained the money of commerce (though there was very little commerce for a while) until the 13th century when gold started really circulating. relative prices in metal through those ages would have been all over the place, especially in relation to a man’s effort. In the medieval west, skilled labor was quite the opposite of roman factory slavery – instead it was free men who organized semi-monopolistic guilds to protect their profits!
but technological innovations in the medieval west also lowered the _cost_ of that suit of clothes to be ultimately cheaper than it was in roman times!
so while it’s a nice story it’s also cherry-picking and detracts from the bigger better arguments about the value of metal money.
Good analysis Anon – thanks. I learn something new here everyday – the value of TBP.
🙂 i likewise, find i learn at least as much from the comments as from the articles!
now, comparing prices in metal is much more useful when we stick to the more recent era, say, the past 4 or 5 centuries. Even the effect of flooding a bullion-poor europe with sidden surges of bullion after the spanish opened up huge new world mines, serves to validate ideas about the stability of metals and how it works, and it’s a largely money economy with a large proportion of long distance trade and transport, complex finance, manufacturing, etc etc.
again when using the post-renaissance picture, we also have much richer historical data, and we also can see the effects of industrialization on the same economic balances. Essentially we’re able to draw more useful comparisons sticking to the past 4 or so centuries because thats the whole era that’s in many ways the kind of economy we would recognize today (maybe just the past few years begin to break that by turnign into disneyland), proto-industrial from the 1600s and industrial from the late 1700s.
there, following prices in gold or silver, and adjusting for the big temporary distortions of huge bullion dumps into the economy after gold rushes or the potosi mines opening, etc, we see that in the industrial economy, yes, the prices in gold and silver are very stable relative to _costs_ and changes there reveal changes in the actual _cost_ of production, etc!
In the past couple decades we’ve also observed the breakdown of many of those relationships. This should tell you that some fuckery is afoot, and not that prices have gone haywire for fundamental reasons, so much as there has been a whole new level of tampering with markets. the fundamentals of resource decline and approaching collapse have been temporarily papered over to keep the ruling class in place.. which of course also can only last so long.
Quite so and I agree entirely. We have come to the end of the Industrial revolution fuelled mainly by oil which has now become uneconomic. There are all sorts of reasons but the main one is EROEI which I discovered in 2013 when I started writing my book and suddenly discovered Dr. Tim Morgan’s book.
I wrote about it in an article last year and your critique would be welcome as someone smart and a critical thinker:
https://austrianpeter.substack.com/p/the-financial-jigsaw-part-2-the-end?s=w
The elites of course know all this even from the 1970s when the Club of Rome’s report explained it all but the vast majority of ‘experts’ either don’t know or more likely have their heads in the sand. This is the main reason for all the WEF nonsense etc. IMHO
I think on closer examination you guys might find the stock market is more illusory than you imagine.
Take a look at Mike’s Book starting on page 65 and especially page 71. While it is old data, the newer data supports what’s presented on these pages.
Like I said “it’s not for everybody” but the markets have highly inflated values and looking shakier by the day. When this enormous bubble pops, I couldn’t care less (other than sorrow for the millions who see their retirement and other asset value fizzle out).
https://v.fastcdn.co/u/9ee0afb9/36629366-0-GTIIGS-MikeMaloney.pdf
Great stuff Steve, and Doug Noland also has a handle on this: “What is most concerning about Doug Nolan’s apocalyptic recap of the last quarter and where we go from here is how logical, likely, and inevitable it all appears. The days of misty-eyed hopes are behind us with hard realities set not just before us but all around us. There is nowhere to turn…” https://creditbubblebulletin.blogspot.com/2022/07/weekly-commentary-nowhere-to-hide.html by Doug Noland on Credit Bubble Bulletin:
Sorry your years of ‘investing’ in the stock market didn’t, apparently, work to your financial advantage … but that’s not even remotely true for all of US …
As for gold’s being the best investment overall this century (2000 to present) — my experience has been totally different from yours.
But, but, the last time gold ran above $2,000 is now, it marks a gain from August 2020 $479 on COMEX. https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart
There will be US areas that recover (the whole south) as the climate switches from La Nina to El Nino, some woke areas that disintegrate (California & NYC), and south Florida will suffer economically from recent bad storms. The BRICS+ global backlash (Operation Sandman) to the FJB Coup will probably have a negative effect on the USA until the dollar collapses (if FedCoin is implemented, the nation collapses). Anybody with any common sense should be getting out of Blue cities and starting a hobby farm on the side. Given the dismal caliber of democrat and republican politicians, business CEOs, the MSM, Medical & Educational Professionals, the Military, Entertainment, etc, everybody else should be getting right with God.
Thanks rhs jr – always god to read your excellent unfailing advice…”yet no one seems bothered” Captured here at TBP some time ago and which I found spot on:
Many thanks and blessings to you Peter. I find your Boom reports are very accurate, and I have used them wisely.
Thanks AKJ you are always a font of valuable wisdom and encouragement. 🙂
Catherine Austin Fitts is that you? Trying to get younger people to use more cash is like pulling teeth. I must say I try to use it more and more but not enough. We should use it for all of our in person transactions.
Yes, it’s hard Mary – people love convenience especially the younger ones already immersed in it.