investment – The Burning Platform

What Will Irresponsible Governments Do to Precious Metals?

“Who is he calling irresponsible?”
Image CC BY 2.0 via Gage Skidmore

Programming note: I rescheduled my regular Your News to Know column this week due to two of the three biggest bank runs in U.S. history. I know you’re following this story closely – I am too, and I’ll keep you posted as the situation develops.

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Don’t ignore silver; U.K. gold demand trends set records; and is Australia “de-dollarizing” its own dollar with gold investments?

native advertising

Precious metals will surge “because governments are irresponsible”

Remember silver? In one of Dominic Frisby’s analyses, he referred to platinum as “the other precious metal.” It feels like silver has filled that role in recent weeks and months. Everyone’s obviously watching gold as the global economy crumbles. There was the big correction in platinum to the upside and palladium to the downside. For as volatile as silver is supposed to be, it’s done surprisingly little in comparison.

Rob McEwen, Executive Chairman of McEwen Mining, is here to remind us that silver isn’t to be ignored. In his recent interview with Kitco, the precious metals expert has a fresh and bullish take on silver. As opposed to merely touting the positive manufacturing demand picture, McEwen instead pointed out that silver is a hard asset in a period where people can’t get enough of the stability and security they offer:

Hard assets will increase in value as the dollar drops in relative value to other currencies, because governments are irresponsible. They steal from their citizens by printing excess money and borrowing in ways they shouldn’t… Look at the amount of the debt most of the Western world has right now, it’s enormous.

Based on economic factors alone, McEwen expects silver to hit $250 by 2027, trailing gold’s own path towards $5,000 in that timeframe. If both projections materialize, silver’s gain would be much greater relative to current prices than gold’s. (Gold/silver ratio reversion to the mean, in other words.) Continue reading “What Will Irresponsible Governments Do to Precious Metals?”

FED LUNACY IS TO BLAME FOR THE COMING CRASH

This week John Hussman’s pondering about the state of our markets is as clear and concise as it’s ever been. He starts off by describing the difference between an economy operating at a low level versus a high level. He’s essentially describing a 2% GDP economy versus a 4% GDP economy. We have been stuck in a low level economy since 2008. And there is one primary culprit for the suffering of millions – The Federal Reserve and their Wall Street Bank owners. They are the reason incomes are stagnant, the labor participation rate is at 40 year lows, savers can only earn .25% on their savings, and consumers have been forced further into debt to make ends meet. Meanwhile, corporate America and the Wall Street banks are siphoning off record profits, paying obscene pay packages to their executives, buying off the politicians in Washington to pass legislation (TPP) designed to enrich them further, and arrogantly telling the peasants to work harder.

In economics, we often describe “equilibrium” as a condition where demand is equal to supply. Textbooks usually depict this as a single point where a demand curve and a supply curve intersect, and all is right with the world.

In reality, we know that economies often face a whole range of possible equilibria. One can imagine “low level” equilibria where producers are idle, jobs are scarce, incomes stagnate, consumers struggle or go into debt to make ends meet, and the economy sits in a state of depression – which is often the case in developing countries. One can also imagine “high level” equilibria where producers generate desirable goods and services, jobs are plentiful, and household income is sufficient to demand all of that output.

The problem is that troubled economies don’t just naturally slide up to “high level” equilibria. Low level equilibria are typically supported and reinforced by a whole set of distortions, constraints, and even incentives for the low level equilibrium to persist. In developing countries, these often take the form of legal restrictions, price controls, weak property rights, political and civil instability, savings disincentives, lending restrictions, and a full catastrophe of other barriers to economic improvement. Good economic policy involves the art of relaxing constraints where they are binding, and imposing constraints where their absence allows the activities of some to injure or violate the rights of others.

In the United States, observers seem to scratch their heads as to why the economy has shifted down to such a low level of labor force participation. Even after years of recovery and trillions of dollars directed toward persistent monetary intervention, the economy seems locked in a low level equilibrium. Yet at the same time, corporate profits and margins have pushed to record highs, contributing to gaping income disparities.

Continue reading “FED LUNACY IS TO BLAME FOR THE COMING CRASH”