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12.6.16 - Wanted: A New Fed Leader

Gold last traded at $1,170 an ounce. Silver at $16.81 an ounce.

NEWS SUMMARY: Precious metal prices steadied Tuesday on bargain hunting despite a dollar rebound. U.S. stocks traded near flat line as investors digested geopolitical events and the Fed meeting outcome next week.

Spain Joins World War On Cash -Cointelegraph
"Spain has entered the war on cash. According to El Mundo, the government plans to enforce a cash limit of 1,000 euros. The Spanish government says the ban comes amid a push to combat tax fraud and lower its deficit as per a directive put forth by the EU. The directive also outlines an immediate registration of tax information for about 80 percent of the population and a tightening of controls on deferred payments. The government claims this will limit the need to raise taxes. Other EU countries already have similar cash limits in effect. Notably low countries being Portugal with a maximum of 1,000 euros, Greece with 1,500 euros, Italy with 999,99 euros and Belgium with 3000 euros. This war on cash has also been seen globally, with notable examples being India abolishing its two biggest notes overnight and movements in the U.S. pushing for a ban of $50 and $100 bills."

Cash is under attack from multiple entities - government, banks and technology. As we explained in our 2014 book, Don't Bank On It! Use of cash could get you branded as a criminal. Capital controls are already being put in place to prevent bank runs. Get the full story in our 12-page White Paper: The Secret War on Cash.

Yellen The Fed Needs A New Leader--And New Policies, Too -Steve Forbes
"Donald Trump took several shots at the Federal Reserve during his election campaign. Let's hope he effects a real overhaul of this increasingly destructive agency. Fed boss Janet Yellen's recent appearance before the Joint Economic Committee underscores why a major makeover is necessary for our future prosperity. Yellen openly and unapologetically made clear that our central bank still hews to the discredited theory that prosperity causes inflation....Yellen confuses changes in prices that come in response to supply and demand in the marketplace with movements in prices that result from changes in the value of the dollar. It's the dollar changes that wreak havoc....What should Trump do? Push the Fed to let the markets set interest rates....Trump should also fire Janet Yellen. She told Congress she will finish her term, which expires in February 2018, and implied that Trump can't remove her. She should do her homework. Our central bank fought the Treasury Department twice in the late 1940s and early 1950s, and both times the Fed head was axed. Fantasies and pretensions to the contrary, the Federal Reserve is not an independent branch of government enshrined in the Constitution."

Gold Sell-Off: How Low Can It Go? -Hedge Eye
"The market is currently pricing in a goldilocks scenario of stronger economic growth, stable inflation and partial normalization of interest rates. This has put upward pressure on the U.S. Dollar and downward pressure on gold prices....In our view, even under the most optimistic outlook, the Fed will not be able to raise rates to levels that would push gold significantly lower over the long run. Since the recent US elections gold prices in USD have sold off 7% and prices are down 13% from the year's highs. This has led some market commentators to declare this as a turning point in the renewed upward trend in gold prices that began last year....What the election result has really changed is business confidence....This might last for a while, keeping downward pressure on gold price. But eventually it will become clear current rate path predictions are still overshooting the more probable reality."

Indian Prime Minister's Shake Down of Private Wealth -Reason
"Indian Prime Minister Narendra Modi stunned his country earlier this month when, out of the blue, he declared 85 percent of the nation's currency notes null and void....The theory with Modi's new scheme is that rich hoarders of illicit cash would simply forfeit their money rather than risk jail. Meanwhile, middle-class folks who work for legitimate businesses and poor laborers who have small cash savings would be free to legally swap old bills for new. The reality is different. Yes, the rich have indeed gotten poorer. But the poor have been decimated. Call it trickle-down poverty....Modi hatched his scheme in complete secrecy, without consulting his own economic advisers or the Parliament, lest rich hoarders catch wind and ditch their cash holdings for gold and other assets....But the biggest tragedy of Modi's demonetization scheme is that because it does nothing to eliminate the underlying causes of black money - India's tax burden that includes hidden levies such as bribes to bureaucrats - won't disappear. People will simply park less of it in cash and more in harder-to-trace, non-cash assets such as gold and real estate, which already account for almost 60 percent of household savings. (Poor households have taken to buying jars of Tide to barter for goods and services, giving new meaning to the term money laundering.)"

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12.5.16 - Is This the End of the EU?

Gold last traded at $1,176 an ounce. Silver at $16.90 an ounce.

NEWS SUMMARY: Precious metal prices traded mixed Monday as the dollar whipsawed higher then lower following Italian "no" vote. U.S. stocks traded higher, unfazed by a key vote in Italy which led to Prime Minister Renzi's resignation.

Italy Sinks Into Political Limbo as Defeat Sweeps Renzi Away -Bloomberg
"Italy fell into political limbo after Prime Minister Matteo Renzi announced his resignation, with rival parties jockeying to fill the power vacuum following his crushing defeat in a constitutional referendum. Financial markets reversed an initial sell-off as investors came to terms with Renzi’s impending departure. The premier is preparing to hand in his resignation to President Sergio Mattarella on Monday afternoon having signaled that he won’t stay on to help stabilize a caretaker administration. Much of the attention remains on Banca Monte dei Paschi di Siena SpA, which is in the middle of a 5 billion-euro ($5.3 billion) capital raising and is vulnerable to government instability....'From today on, this becomes a banking story,' Megan Greene, chief economist at Manulife Asset Management, told Bloomberg Television’s Francine Lacqua."

christmas lights Europe Imploding? What Italy's Referendum Means For Investors -Hedge Eye
"The mainstream media is talking about what this means for Europe. The 'no' vote was seen as a victory for the populist Five Star Movement, which led the opposition to the vote and is generally seen as anti-European Union....Meanwhile, in the Austrian presidential election, pro-E.U. Alexander Van der Bellen beat right-wing rival and Freedom Party leader Norbert Hofer....(So it wasn't all bad for leftist European leaders this morning who undoubtedly breathed a sigh of relief.) Here's Hedgeye CEO Keith McCullough in this morning's Early Look note to subscribers: 'In addition to the pathetic example of long-term leadership that the Italians have had to endure (63 governments in the last 70 years), now they’re going to have to deal with this thing called credit risk. The yield on the 10-year Italian government bond has popped 11 basis points (that’s a lot, in a day) to 2.01% this morning. While your TV is watching stocks, watch that.' In short, Europe's woes are far from over. Investors are clearly concerned about the prospects of Italy exiting the E.U."

Fed's Dudley: More stimulus could mean Fed would hike rates faster -CNBC
"More stimulus could mean the Federal Reserve would raise interest rates faster, New York Fed President William Dudley told CNBC on Monday. 'We don't know what the fiscal policy is, we don't know how big it is and we don't know when it's actually going to occur,' Dudley said in an exclusive interview on 'Squawk on the Street,' echoing prepared remarks from earlier in the day....Trump was elected on a vow to increase infrastructure spending, cut taxes, reduce government regulations, and renegotiate or halt international trade agreements. Dudley said more spending on infrastructure would actually increase the productivity capacity of the economy."

Gold Standard Approved for Islamic Finance, Opening New Market -Bloomberg
"Gold is acceptable for the first time as an investment in Islamic finance after the group that sets standards for the industry adopted Shariah-compliant rules for trading the metal. The rules approved Nov. 19 allow gold to be used in the $1.88 trillion Islamic finance business, the Accounting and Auditing Organization for Islamic Financial Institutions said Monday in a statement. The AAOIFI developed the standards with help from the producer-funded World Gold Council, which has said the new rules could spur demand for 'hundreds of tons' of gold....'We fully expect to announce imminently that GLD does qualify,' Natalie Dempster, a managing director of the World Gold Council, said at the conference. Physical gold bars and coins may also qualify, she said....'The time has come for gold instruments in Islamic finance,' Mark Mobius, executive chairman of Templeton Emerging Markets Group, said Monday in a World Gold Council report accompanying the statement."

Trump Nominates Ben Carson As Housing Secretary -Zero Hedge
"Donald Trump announced his plans early Monday to nominate Dr. Ben Carson to lead the Department of Housing and Urban Development (HUD). 'Ben Carson has a brilliant mind and is passionate about strengthening communities and families within those communities,' Trump said in a statement distributed by his transition team. 'We have talked at length about my urban renewal agenda and our message of economic revival, very much including our inner cities. Ben shares my optimism about the future of our country and is part of ensuring that this is a Presidency representing all Americans. He is a tough competitor and never gives up,' Trump added. 'I feel that I can make a significant contribution particularly by strengthening communities that are most in need,' Carson, a former GOP presidential candidate who became a Trump supporter, said in the statement."

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12.2.16 - Weekend's Italian Vote Could Crush Banks

Gold last traded at $1,177 an ounce. Silver at $16.83 an ounce.

NEWS SUMMARY: Precious metal prices rose Friday on bargain hunting, EU uncertainty and a weaker dollar. U.S. stocks traded mixed as investors digested upbeat jobs data while bracing for a key constitutional referendum in Italy on Sunday.

Why a strengthening dollar is bad for the world economy -The Economist
"The world’s most important currency is flexing its muscles. In the three weeks following Donald Trump’s victory in America’s presidential elections, the dollar had one of its sharpest rises ever against a basket of rich-country peers. It is now 40% above its lows in 2011....America’s ten-year bond yield has risen to 2.3%, from almost 1.7% on election night....There are lurking dangers in a stronger dollar for America, too. The trade deficit will widen as a strong currency squeezes exports and sucks in imports. In the Reagan era a soaring deficit stoked protectionism.....If Mr Trump succumbs to his protectionist instincts, the consequences would be disastrous for all....Stock markets in America have rallied on the prospect of stronger growth. They are being too cavalier. The global economy is weak and the dollar’s muscle will enfeeble it further."

Washington The Next Crisis Will Be Very Inflationary -Craig R. Smith/SATC
"If President-elect Trump gets just half of the infrastructure spending he is proposing - along with tax cuts - we will see a run up of another $5-6 trillion in debt. This will cause huge inflation as more money is in peoples' pocket from the tax cuts and the jobs created start to fill the economy. Of course none of this is applicable until after Jan 21, 2017 and even then it may take a year or more. I am of the belief the next crisis - unlike the 2008 crisis - will be very inflationary. That inflation will allow debt to be paid off with inflated dollars at a discount. Inflation affects people in a way that, 'not one in a million can diagnose until its too late'. It will look like the honest way, but will take from people who have left their money in currencies that lose value ie: the dollar. Leaders like Mr. Trump, who don't believe in paper but in things like real estate, gold, etc., are comfortable with the tool of inflation because they understand it. Frankly, America needs a healthy dose of inflation...IF you have your money in things, not paper."

How December 4 Could Trigger the “Most Violent Economic Shock in History” -International Man
"I walked through Piazzale Loreto during a recent trip to Italy, which is suffering its worst economic downturn since 1945. And I realized that Italians are angrier now than they’ve been since they hung Il Duce up by his heels. Italy has had no productive growth since 1999. Real GDP per person is smaller than it was at the turn of the century. That’s almost two decades of economic stagnation. By any measure, the Italian economy is in a deep depression. And things will probably get much worse. The Financial Times recently put it this way: 'An Italian exit from the single currency would trigger the total collapse of the eurozone within a very short period.'....On December 4, Italian Prime Minister Matteo Renzi’s current pro-EU government is holding a referendum on changing Italy’s constitution....A 'No' vote is a chance for the average Italian to give the finger to EU bureaucrats in Brussels. Given the intense anger Italians feel right now, it’s very likely they’ll do just that."

Italian Banks Flirt With Disaster Again as Renzi Teeters -Bloomberg
"They’re burdened with a mountain of bad loans. Their stocks have cratered. And they have to operate in an economy prone to recession and political upheaval. Signs have been mounting for months that Italy’s weakest lenders, and in particular Banca Monte dei Paschi di Siena SpA, were sliding toward the precipice, threatening to reignite a broader crisis....The wild card is Monte Paschi itself, an institution that’s become a byword for the troubles that have long plagued Italian finance. Undermined by derivatives deals that hid losses, the lender has received 4 billion euros in taxpayer-funded bailouts and 8 billion euros from investors since 2009. Now Italy’s third-biggest lender is back for more. More than a third of its loan book has soured and its shares have fallen 83 percent this year."

Payrolls Rise 178K As Unemployment Rate Tumbles To 4.6% But Average Hourly Earnings Worst Since 2014 -Zero Hedge
"While the headline November payrolls print came in almost on top of expectations at 178K, vs consensus of 180K there were two big surprises in today's report, one being the unemployment rate which plunged from 4.9% to 4.6%, well below the 4.9% expected, but the biggest negative surprise was that the Average hourly earnings in November dropped by 0.1%, far below last month's 0.4% rise, and below the 0.2% expected....In November, average hourly earnings for all employees on private nonfarm payrolls declined by 3 cents to $25.89, following an 11-cent increase in October. Over the year, average hourly earnings have risen by 2.5 percent."

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12.1.16 - Lower Prices Trigger China Gold Rush

Gold last traded at $1,169 an ounce. Silver at $16.51 an ounce.

NEWS SUMMARY: Precious metal prices steadied Thursday as bargain hunting offset speculative selling on a weaker dollar. U.S. stocks traded mixed as investors digested economic data, oil prices rose another 3% based on promised OPEC production cuts.

China Curbs Gold Imports To Slow Capital Flight -Zero Hedge
"While all eyes were on India (as rumors swirled of an imminent gold import ban), The Financial Times reports that China curbed gold imports in the wake of government attempts to clamp down on capital leaving the country, according to traders and bankers....'The limits on imports bite as the weakening renminbi raises Chinese investors’ interest in gold. Lower gold prices have also triggered more buying. The combination of tighter quotas and an uptick in demand caused the premium for gold in China over the international gold price to jump as high as $46 in the past few weeks, according to data from Wind Information. Normal levels are about $2 to $4.'....If the restrictions on imports are sustained that could raise questions about China’s moves to open its gold market to international traders. The world’s largest consumer of the precious metal has moved to have a greater voice over the price of gold."

Physical gold offers the simplest form of protection from rising inflation - which causes the buying power of paper currencies to evaporate. History is full of examples of the sudden and crushing impact of runaway inflation such as; Venezuela, Argentina, Zimbabwe and Weimar, Germany. Owning physical gold serves as wealth insurance. Discover The Timeless Truth About Gold & Silver.

OPEC OPEC's Toothless Deal to "Cut" Oil Production -HedgeEye
"Oil prices have surged over 10% since OPEC announced a deal to 'cut' oil production. We'll get to the complete nonsense of it all below. For the record, the 14-member country oil cartel controls one-third of global oil production and sits on 80% of global crude reserves....OPEC has had virtually no impact on how much oil its members produce. While it sets quotas, its member countries cheated about 96% of the time from 1982 to 2009. That's according to a study by Brown University professor Jeff Colgan....Bottom Line: This OPEC 'deal' pays lip service to a cut in oil production. History strongly suggests this is yet another toothless OPEC commitment that won't be honored."

Mobs Lock Up Bankers during India's Cash Chaos -Bloomberg
"Bankers are bracing for long hours and angry mobs as pay day approaches in India, the first test for Prime Minister Narendra Modi’s move to invalidate almost all cash in circulation. ‘Already people who are frustrated are locking branches from outside in Uttar Pradesh, Bihar and Tamil Nadu and abusing staff as enough cash is not available,’ said CH Venkatachalam, general secretary of the All India Bank Employees’ Association. The group has sought police protection at bank branches for the next 10 days, he added. He estimates that about 20 million people -- almost twice the population of Greece -- will queue up at bank branches and ATMs over the coming week, when most employers in India pay their staff. In an economy where 98 percent of consumer payments are in cash, banks are functioning with about half the amount of currency they need....Withdrawals are capped at 10,000 rupees per person instead of the 24,000 rupees limit set by the government, said a manager at a state-run Bank of India branch in the eastern state of Jharkhand.”

Trump Is Right On The Money But Some Of His Transition Team Are Not -Benko/Forbes
"The presidential transition has been going very well. The transition team is composed of impressive, high proficiency, high integrity people....Politico has provided the world with an organization chart of the presidential transition team. The org chart presents the presidential team leader on economic issues as David Malpass, with Bill Walton (who I count as a friend and admire) as deputy....Malpass makes a wonderful aspirational statement to the Wall Street Journal: 'We need monetary integrity. We need to have a situation where the U.S. dollar is a trustworthy currency. I would like to see the world’s most trustworthy currency.' Bravo! That said, how to create the world’s most trustworthy currency? Charles de Gaulle summed it up beautifully: '[Gold] is eternally and universally accepted as the unalterable fiduciary value par excellence.' That really describes something worthy of being the world’s most trustworthy currency. Trump hints that he may share De Gaulle’s insight....You just can’t make America great again without a dollar as good as gold."

In Money, Morality, & the Machine, Craig Smith and Lowell Ponte argue that in an era of 'elastic money,' society has become debased and greed has triumphed; yet there is a growing hope that President-elect Trump can turn things around by considering a return to a Gold Standard. Meanwhile, citizens can establish their own personal gold standard by converting elastic money into hard money.

What Will Donald Trump’s Presidency Mean for the Dollar? -Tamny/Liberty Law
"The world would be a much better place if economists, politicians and pundits had this line from Henry Hazlitt memorized: 'What is harmful or disastrous to an individual must be equally harmful of disastrous to the collection of individuals that make up a nation.'....When an economy is broken down to the individual, what might seem opaque becomes very clear. Figure that no individual is made better off by a bigger income-tax bill; no individual is able to create more wealth if more and more work hours are spent complying with regulators; no individual is made wealthier if tariffs block the world’s talented from serving his needs; and no individual is able to amass more wealth if the dollar earned is constantly being devalued....Get the four basics right and the economy soars. Get even one wrong, and growth is hampered....A weak dollar is a major antagonist of the individuals who comprise the economy, not to mention of the investment that makes each individual more productive. What’s unknown is where Trump will come down on this question. His protectionist leanings should have those in favor of good money scared, along with his oft-expressed view during the campaign that currency devaluation is the path to prosperity....Time will tell if Steven Mnuchin mimics fellow Goldman Sachs alum Robert Rubin’s strong dollar leanings, or if he’ll talk down the dollar. The Trump presidency could pivot based on Mnuchin’s stance. If he talks down the dollar, he’ll be talking down the very investment necessary for a booming economy."

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11.30.16 - Trump's Treasury Man to Slash Taxes

Gold last traded at $1,173 an ounce. Silver at $16.48 an ounce.

NEWS SUMMARY: Precious metal prices backpedaled Wednesday as oil prices rallied, propelling the dollar to fresh heights. The Dow hit new record highs following OPEC's announced oil production cuts and Wall Street bullishness over President-elect Trump's cabinet member announcements.

“The Fuse Has Been Lit”: Jim Willie Issues Financial Collapse Warning -BeforeItsNews
"Many are the potential fuses to be lit, which would create the conflagration, the massive bonfire of the bond vanities and bank charades. Many are the fuses lying around, all criss-crossed, all exposed, all overlapping each other in highly dangerous manner. If any single fuse is lit, then several will light and the detonation arrives. It is unavoidable since the financial world is so deeply interwoven. Never in modern history has the global financial structure been so badly weakened, so totally corrupted, so thoroughly undermined by control mechanisms, so intensely defended by sanctions even war....The reality is that the failure of any one major bank guarantees the systemic breakdown of all of them....When the collapse occurs, the solution will finally be discussed, the solution avoided for eight full years. THE GOLD STANDARD WILL BE INSTALLED. It will first arrive in the trade payment system. Then it will arrive in the banking reserves system. Lastly it will be seen in the gold backed currencies."

gold bull Post-Election Market Rally On? Off? (A Closer Look at Hedgeye's Trump Tracker) -HedgeEye
"How did Donald Trump's historic Election Day victory alter financial markets? We recently introduced our 'Trump Tracker' to monitor just that. The macro moves since November 8th have been nothing short of remarkable (even if the initial exuberance is dissipating a bit). Here is a look at the performance of various asset classes since Election Day, compared against the 1-day percent change in Monday's trading: Aluminum: +17.3% (since 11/8); -2.5% (on 11/28) ... U.S. Dollar Index: +3.5% (since 11/8); -0.2% (on 11/28) ... Financials: +10.8% (since 11/8); -1.2% (on 11/28) ... 10-year Treasury yield: +47bps (since 11/8); -4.5bps (on 11/28)....So what exactly changed following Trump's Election Day win? Here's the latest Wall Street thinking as recounted by Hedgeye U.S. Macro analyst Christian Drake in today's Early Look: 'Yes, the short-term move may be overdone, but the burden of proof has shifted from the bulls to the bears and there is no overly conspicuous negative catalyst to point to. We may get some here-and-there underwhelming fundamental data over the next few months but as long as it’s generally 'okay' it’ll be easy to look past it with an eye towards handicapping how the first 100 days platform progresses.'"

Trump's Treasury pick says he wants to slash taxes across the board -CNBC
"In line with President-elect Donald Trump's proposals, Steve Mnuchin told CNBC on Wednesday his focus as Treasury secretary will be stimulating economic growth and creating jobs through tax reform. 'By cutting corporate taxes, we're going to create huge economic growth and we'll have huge personal income,' Mnuchin told "Squawk Box," confirming he has been tapped for Treasury secretary. Reducing the corporate tax rate from 30 percent to 15 percent will be a major goal for the Trump administration, the former Wall Street executive said. Mnuchin said he was confident the new administration would be able to expand gross domestic product growth from the current 3.2 percent....In addition, he said he wants to simplify taxes for the average citizen. 'Taxes are way too complicated, and people spend way too much time worrying about ways to get them lower,' he said".

Steve Mnuchin - who served as the Trump campaign's chief fundraiser - is a banking insider, a former Goldman Sachs partner, a Hollywood film financier and a government outsider with no economic policy experience or known views on any key issues. It will be interesting to find out if Mr. Mnuchin shares Mr. Trump's view that returning to some form of a Gold Standard would be "wonderful."

Trump Taps Billionaire Investor Wilbur Ross For Commerce Secretary -NPR
"President-elect Donald Trump has chosen Wilbur Ross Jr., a billionaire investor and turnaround specialist, as his commerce secretary....'Wilbur Ross is a champion of American manufacturing and knows how to help companies succeed,' Trump said in a statement announcing his choice. 'Wilbur knows that cutting taxes for working families, reducing burdensome government regulations and unleashing America's energy resources will strengthen our economy at a time when our country needs to see significant growth.'....A former Democrat, Ross has been a loyal Trump supporter who shares his skepticism about trade agreements and said in a June interview with CNBC that the U.S. needs a 'more radical, new approach to government.'"

How will Mr. Ross apply his "radical, new approach to government"? In March 2012 Ross said, "I think the greatest bubble that is about to burst is the 10-year and longer Treasury, because the idea that inflation is gone forever and for all time, and therefore these artificially low rates can last, is silly," the president of W.H. Ross & Co. said in an interview." Back in 2010 Ross said, "The dollar should be devalued because the U.S. economy is less competitive than other economies and has higher debt, and some form of SDR [special drawing rights] should become the world's reserve currency,” said Wilbur Ross, of W.L. Ross & Co. to CNBC.

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