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9.20.19 - Geopolitical Tensions Boost Gold Prices

Gold last traded at $1,515 an ounce. Silver at $17.93 an ounce.

NEWS SUMMARY: Precious metal prices rose Friday on safe haven buying amid ongoing geopolitical tensions. U.S. stocks fell to session lows after China trade officials cut US visit short.

Gold edges higher as softer dollar, Gulf tensions lend support -Reuters
"Gold prices rose on Friday and were headed for their first weekly gain in a month, supported by a softer dollar, tensions in the Middle East and caution about Sino-U.S. trade talks, while palladium climbed to a fresh record peak. Spot gold was up 0.3% at $1,503.36 per ounce, up about 1% this week. 'A weaker U.S. dollar is giving gold a little bit of an upward drift,' said Michael McCarthy, chief market strategist at CMC Markets...'Investors are all waiting on any further developments in the trade negotiations as they move towards October meeting and that may provide next big driver for gold prices,' McCarthy said....Gold prices have risen about 17% this year mainly on U.S.-China trade tensions, concerns over the global economic growth outlook and prospects of monetary easing by central banks. The Fed cut interest rates for the second time this year on Wednesday to help sustain economic expansion but gave mixed signals on future rate cuts. Also, giving bullion a lift were tensions in the Middle East as the United States said on Thursday it was building a coalition to deter Iranian threats following a weekend attack on Saudi Arabian oil facilities."

bubble Beware Mocking Bubbles & Bears -Global Macro-Monitor
"Once again, seeing lots of articles and talking heads mocking bubbles and the bears, which is usually a sign a big bubble is going to burst. The last time we saw this kind of taunting of the bears was three days before the bear market, which we think is on, began in January 2018. Nobody really knows for certain what is causing the stress in the money markets, but our calculated guess is it is: 1) somehow related to the massive new issuance of Treasuries, which is sucking liquidity out of the markets, as prices are repressed and not allowed to clear –> think, a) rent control, where the excesses have to be cleared through quantities, and b) Le Chatelier's principle, where, in a dynamic equilibrium, pressure on one variable has to be offset by movement in other variables...Whatever the case, the markets are so distorted now and becoming more so, especially by the false belief that central banks can even now fine-tune a Stradivarius violin. Haha! We believe quantitative easing and the massive expansion of central bank balance sheets are the financial equivalent to excessive carbon emissions resulting in kind of a of global warming in the markets. Thus, traders and investors should expect more extreme market conditions....So, folks, when listening to the Street, bubble vision, the market talking heads, and even central bankers and policymakers, take heed the words of the great American author, Upton Sinclair: 'It is difficult to get a man to understand something when his salary depends upon his not understanding it.'"

Democracy Doomed the Money System -Bonner/Bonner And Partners
"The plain people vote. But insiders - the elite, the cronies, the Deep State - make the important decisions. And these few can increase their own wealth and power only by taking it from the many they are meant to serve - the public. And when they are in the 'Inflate-or-Die' trap, rarely are they willing or able to risk easing off from inflation. First, because it threatens their power (the masses want free stuff too). Second, because it slows the transfer of wealth in their direction (it curbs the government spending on which they rely). And third, because it usually means an immediate cut in their personal wealth (as stock prices collapse). That is why there is always a bias towards inflation - the benefits come quickly and mostly go to the people in charge of the system. The bill shows up much later and is paid - in higher prices, depression, and misery - by the public. Team Trump - including the president's nitwit advisor, Peter Navarro - believes it may be able to get the Dow up to 30,000 in time for next year's election. As far as we recall, it is the first reelection strategy in history expressly tied to the Dow. Whether stock prices will rise or not, we don't know. But if they rise, we'd be very surprised if gold didn't go up more. Gold is real money. When fake money gets debased and inflated, gold shines. Since the beginning of this century, central banks have added some $22 trillion in new, fake money - or 15 times the value of all the gold ever mined from the time of The Flood to 2000 A.D. In January 2000, the price of gold stood at $280. It is now $1,500 - a more than five-times increase...You would have made twice as much in capital gains from low-risk gold as from high-risk stocks over the last 20 years."

Desperate Central Bankers Grab for More Power -Ellen Brown Blog
"Conceding that their grip on the economy is slipping, central bankers are proposing a radical economic reset that would shift yet more power from government to themselves. Central bankers are acknowledging that they are out of ammunition. Mark Carney, the soon-to-be-retiring head of the Bank of England, said in a speech at the annual meeting of central bankers in August in Jackson Hole, Wyoming, 'In the longer-term, we need to change the game.' The same point was made by Philipp Hildebrand, former head of the Swiss National Bank, in an August 2019 interview with Bloomberg. 'Really there is little if any ammunition left,' he said. 'More of the same in terms of monetary policy is unlikely to be an appropriate response if we get into a recession or sharp downturn.' 'More of the same' meant further lowering interest rates, the central bankers' stock tool for maintaining their targeted inflation rate in a downturn....So what is a central banker to do? Hildebrand's proposed solution was presented in a paper he wrote with three of his colleagues at BlackRock, the world's largest asset manager, where he is now vice chairman...Their proposal calls for 'more explicit coordination between central banks and governments when economies are in a recession so that monetary and fiscal policy can better work in synergy.' The goal, according to Hildebrand, is to go 'direct with money to consumers and companies in order to enliven consumption,' putting spending money directly into consumers' pockets....Central bankers would be acquiring even more power, by giving themselves a new pot of free money that they could deploy as they saw fit in the service of 'government objectives.'....Better would be to nationalize the Fed, turning it into a true public utility, mandated to serve the interests of the economy and the voting public."

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9.19.19 - Market's Eerie Parallels to Sept 2007

Gold last traded at $1,509 an ounce. Silver at $17.91 an ounce.

NEWS SUMMARY: Precious metal prices rose Thursday on bargain-hunting and a weaker dollar. U.S. stocks rose as gains in Microsoft, AT&T and other tech companies offset an underwhelming decision by the Fed.

Gold holds near $1,500 after Fed cuts interest rates -CNBC
"Gold edged lower on Wednesday but held near the key $1,500 per ounce level after the U.S. Federal Reserve decided to cut interest rates, a decision that was widely expected. 'The gold market has been pretty sensitive to FOMC and Fed policy this year, so the expectations of a rate cut are supportive for gold,' said James Steel, chief precious metals analyst at HSBC. The Fed approved an interest rate cut of a quarter point, which the market had largely priced in to expectations....Meanwhile, limiting safe-haven inflows into bullion, oil prices pulled back, having jumped nearly 15% earlier this week following attacks on production facilities in Saudi Arabia, after the major producer said it would restore its output by month-end."

america Democrats and Republicans Aren't Just Divided. They Live in Different Worlds. -Wall Street Journal
"America's political polarization is almost complete. Its two main political parties increasingly represent two different economies. And they barely overlap. Democrats can be found in educated cities and suburbs where professional jobs are plentiful. Republicans live in working-class and rural communities, home to agriculture and low-skill manufacturing. Let's look at GDP to understand how the two parties are divided. These days, Democratic House districts are doing substantially better: Two-thirds of the nation’s GDP comes from those areas, with Republican districts making up the rest. This is striking, because the Republican share of GDP is shrinking. Even though the party controls more House districts than a decade ago, those districts account for less economic activity, Brookings Institution data show....Democrats represent districts with the biggest clusters of professional jobs. That includes tech hubs around Silicon Valley and Boston. Nearly three quarters of jobs in digital or professional industries are in Democratic districts. Republican districts, by contrast, hold growing shares of the nation's agriculture, mining and low-skill manufacturing jobs, many of which do not require a college degree, have lower pay and are more exposed to overseas competition....The two parties represent different parts of the economy, in large part because they represent different kinds of places." [Image: Courtesy Wall Street Journal]

Stock market's eerie parallels to September 2007 should raise recession fears -Marketwatch
"Since last year real GDP growth in the U.S. has been slowing. The chair of the Federal Reserve has been signaling that while growth is slowing, there is no recession risk and the Fed is forecasting continued positive growth. Warning signs in the economy, including an inverted yield curve, have been ignored and stock markets continued to make new highs in July. In August a correction took a place and subsequently a rally ensued into early September. On September 18 the Fed cut rates. Sound familiar? It fairly describes market and economic conditions in the U.S. over the past couple of months. Except that this paragraph would be as true for the U.S. economy and stock market in September 2007 as it is today. Consider that 12 years ago the yield curve was inverted and U.S. economic growth was markedly slower than it had been in 2006. Yet the Standard & Poor's 500 made a new high in July 2007 (same as 2019), there was an August correction (same as 2019), and then the Fed cut rates on September 18 (ditto - same day even). U.S. stocks proceeded to make another marginal high that October - and that was it. Lights out. We all know what happened next. It seems we are at a curious moment in time. Parallels to late 2007 are running through the markets now. This doesn't mean the market's fate will play out as it did then, but the ingredients are there and all that's needed is a trigger....According to a November 2007 Reuters report, Bernanke told a congressional committee: 'Our assessment is for slower growth, but positive growth, going into next year.' The U.S. economy entered recession in December 2007. Does this not sound eerily similar to what Fed Chairman Jay Powell has been saying? Here's Powell on September 6: 'We're not forecasting or expecting a recession,' he said....What does all of this suggest? For starters, the Fed will not tell you when a recession starts. They can and will be in total denial until after the fact."

Why is the NY Fed pumping billions into the money market? -Yahoo Finance
"For the first time in more than a decade, the US central bank this week stepped into financial markets to keep interest rates on short-term lending from popping above its target range. The New York Federal Reserve Bank conducted money market interventions on Tuesday and Wednesday and planned another for Thursday morning, as a cash crunch drove up the cost of borrowing for banks that need to replenish the reserves they hold at the central bank. Financial institutions use money markets to borrow for very short periods, from one day to a year, a crucial function to keep the gears of the economy running. In so-called repurchase or 'repo' agreements, banks borrow by putting up assets like Treasury notes as collateral and then repay the loans with interest the following day....The reasons behind borrowers' sudden demand for cash were attributed to a host of technical conditions that converged to drain money out of the system...'It looks like a lot of cash left the system in recent days and that demand for dollars was greater than the number of dollars in circulation,' said Gregori Volokhine of Meeshaert Financial Services."

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9.18.19 - Dollar Devaluation Will Impoverish Americans

Gold last traded at $1,515 an ounce. Silver at $17.91 an ounce.

NEWS SUMMARY: Precious metal prices traded higher Wednesday ahead of the Fed's rate decision. U.S. stocks lower as the Federal Reserve loses control of its own interest rate on the day of their big decision.

3 Reasons Why There's Further Upside Potential for Gold Prices -Holmes/Forbes
"Gold may be off its 52-week highs, but the precious metal is still up more than 15 percent for the year through September 17. This appears to put gold on a path for its best year since 2010, when it gained just under 30 percent. I believe buying the dips in gold right now could turn out to be a wise investment decision. I see a lot happening at the moment - from an unprecedented $17 trillion in negative-yielding bonds worldwide to heightened geopolitical threats - that might boost investors' appetite for the metal, which has a history of holding its value in times of crisis. Read on for three reasons why I believe there's further upside to gold prices... #1 U.S. inflation is finally starting to heat up...In the past, faster inflation has been constructive for gold prices. That’s because inflation, by its nature, destroys your purchasing power, and to limit these losses, investors have traditionally turned to the yellow metal as well as gold mining stocks. #2 Negative yields in the U.S.? $17 trillion in debt around the world...has recently pushed the price of gold to new all-time highs in a number of currencies, including the British pound, Japanese yen and Canadian and Australian dollars...It could only be a matter of time before U.S. fixed-income yields turn subzero - especially if Trump gets his way. #3 Geopolitical and economic risks raise the demand for a safe haven. There are a number of geopolitical and economic risks right now that have triggered gold's 'fear trade' Economic growth is slowing worldwide as a result of trade tensions....Other geopolitical concerns, including unrest in Hong Kong as well as last Saturday's attack on Saudi Arabia's oil facilities, have helped support gold demand."

autos The Dollar and Democracy Are Frauds -Bonner/Bonner And Partners
"Today's dollar is fake, with no firm connection to the real world of time, resources, and output. The 'wealth' it produces is fake too. We saw that last week; in the 50 years after WWII, household net worth averaged about 350% of GDP. Then, suddenly it shot up to over 500%. Where did that extra money – about $30 trillion of extra household wealth – come from? Among the many, it's slim pickins. Real median household income was a little over $60,000 in the late '90s; it's still a little over $60,000. But among the few, it's high cotton all year round....During that same period, central banks flushed some $22 trillion in new (fake) money into the world economy. That money bid up prices for stocks and bonds, making asset holders much richer, relatively, than everyone else. In effect, the feds aided and abetted the grandest larceny in history. The essential fraud of the financial system is not only that the money is fake. It is also the overweening conceit that seven jackasses on the Federal Open Market Committee can control, improve, and stimulate a $20 trillion economy… as if it were a cranky lawnmower in need of a tune up. The essential fraud of democracy has two parts to it too. First is that some voters have the right to tell other voters what to do… and second is that they control the government....In the absence of real information or real knowledge, the voter defaults to campaign slogans, lies, and empty promises… and leaves the real decision-making in the hands of the elites in the Swamp. Naturally, these insiders look out for themselves. Their main goal is to keep the power and money headed in their direction, which is why any reform of federal budgets or the fake money system is impossible… and why deficits, debt, and funny-money finance will worsen until they finally blow sky-high."

Dollar Devaluation Will Impoverish Americans, Weaken the Economy -Real Clear Markets
"After years of complaining about countries manipulating their currencies, trade protectionists have finally found a country they would be happy to see drive down the value of its money: the United States. Sens. Tammy Baldwin (D-Wis.) and Josh Hawley (R-Mo.) make amazing promises about legislation they have introduced, the Competitive Dollar for Jobs and Prosperity Act. According to the bipartisan duo, the bill would 'make U.S. exports more competitive, boost American manufacturers and farmers, and reduce our trade deficit.' The measure may be well intentioned, but it is fundamentally misguided because it misunderstands the underlying economics. This congressional version of 'if you can't beat them, join them' would harm the U.S. economy and make us poorer....The economic realities of currency manipulation are counterintuitive. A shift in exchange rates changes a country's 'terms of trade,' an expression used by economists to describe the ratio of a nation's export prices to its import prices...Just as individuals at the grocery store would be better off if they are able to buy more apples for the same amount of money, so the United States is better off when our dollar is strong and we can purchase from other countries at favorable prices....If Congress wanted to do something that genuinely benefits exporters, it would work to end the trade war...Let's get the economics right. Ending the trade war will lead to increased U.S. prosperity. Devaluing the dollar will not."

What Ever Happened to 'We the People'? -Carrington/Wall Street Journal
"Sometimes you know something so well that you stop seeking out what it can teach you. This can happen with anything from a beloved novel to the Bible. In our divisive political times, one well-worn text that bears re-examining is the preamble of the Constitution....Consider its opening and closing: 'We the People . . . do ordain and establish this Constitution for the United States of America.' Every political community has to decide who is ultimately sovereign. Our commitment to popular rule stems from a belief in the inherent equality of all human beings. As equals, the only just rule is self-rule. In so committing, America was one of the first countries to reject the rule of the few elites, building on an English commitment to freedom. But unlike Britain's customary constitution, 'We the People' would record the structures and conditions of our rule, setting them in stone as a standard of liberty. The Founders chose another route, a summary of the just ends of political society. These ends were grounded in human virtue, not greed or vainglory....Liberty bestows myriad blessings, allowing us to fulfill our purposes as human beings, to seek the good, virtue, and the worship of our Creator. We must secure these not only for us, but for our children and children's children. The Founders sought in the Constitution 'to form a more perfect Union.' The rule of the people and their commitment to certain purposes came in the form of a common bond....The preamble's commitments articulated the basis of our union. But every one of them now is contested, even the most fundamental: self-rule...This Constitution Day, (September 17th) let us seek to learn anew from the preamble."

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9.17.19 - Gold Steady as Markets Await Fedspeak

Gold last traded at $1,513 an ounce. Silver at $18.14 an ounce.

NEWS SUMMARY: Precious metal prices rose Tuesday on safe-haven buying ahead of Fed statement. U.S. stocks fell for a second straight day as the Federal Reserve kicked off a two-day monetary policy meeting.

Gold steady as markets await Fed clues on rate outlook -Reuters
"Gold prices were little changed on Tuesday as traders largely remained on the sidelines, awaiting a widely expected cut to interest rates by the U.S. Federal Reserve this week and a steer on its longer-term plans. 'The market is searching for a new catalyst ... The 25 basis point rate cut is relatively priced in already, but what traders are really looking for is forward guidance,' said Phillip Futures analyst Benjamin Lu. A quarter-point cut to U.S. interest rates is widely expected when the Fed issues its next policy statement on Wednesday. It would be the central bank’s second such cut after lowering rates in July for the first time since 2008....The Fed's language and new economic projections will be examined closely, given the backdrop of a bruising U.S.-China trade war, stimulus by the European Central Bank and a stream of weak manufacturing data that hints at larger potential problems for the United States....Attacks on Saudi Arabia's main oil refinery at the weekend have also entered the equation, prompting U.S. President Donald Trump to apply more pressure on the Fed to lower interest rates. 'It appears conviction remains positive so long as gold hangs around $1,500,' AxiTrader strategist Stephen Innes said in a note, adding that the market has been caught between hedging against a possible U.S. military response on Iran and position-squaring ahead of the Fed’s two-day meeting"

oil How an Oil Price Surge Could Hurt Consumer Spending, and the Economy -New York Times
"For months, American consumers have kept the economy humming. While businesses pulled back, shoppers continued to spend. But a prolonged surge in gasoline prices after the attacks on oil production facilities in Saudi Arabia could undermine that phenomenon and increase the risk of a recession. 'It's clearly not a positive, and it adds a negative to the outlook,' said Steve Blitz, chief United States economist at T.S. Lombard, an independent research firm. 'It's another straw on the camel’s back.' Monday's nearly 15 percent spike in oil prices to $62.90 a barrel isn’t big enough to bring on a recession - it only returns crude prices to where they were this spring. Monday's jump is expected to add roughly 20 cents to gas prices, which now average $2.56 a gallon nationally, said Tom Kloza, global head of energy analysis for the Oil Price Information Service. But a shock in the form of a rapid $20 or $30 a barrel jump in oil prices would have a bigger economic impact. 'At that level, the consumer takes a significant hit,' said Ethan Harris, head of global economics and research at Bank of America Merrill Lynch. A $25 a barrel increase in oil prices, the kind of move analysts cite as a potential threat to the economy, would add 50 cents to the cost of each gallon of gas. That would mean an extra $45 in monthly spending for the typical family....The biggest risk to consumers - and the economy itself - would be a significant military conflict between the United States and Iran. Businesses, already cautious about spending, would pull back further. Consumers would likewise retreat."

The Fed's Mandate Is Up to Congress and the President -Sheldon/Wall Street Journal
"The role of the Federal Reserve as an instrument of public economic power could use some clarification. The central bank's status as an independent agency derives from an act of Congress in 1913, and is reinforced by oft-invoked references to its statutory 'dual mandate': to achieve stable prices and full employment. But the Fed's job description is more complicated than people usually think. Its purposes have evolved through various legislative changes over the decades, the most notable of which was imposed by Congress in 1977. The Federal Reserve Reform Act, which gave the central bank its current, explicit mandate, named three goals rather than two. The legislation as amended states: 'The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.'....It would be appropriate and constructive for the Fed to consider international monetary stability in its interest-rate decisions. In an era of world-wide currency exchange, America’s central bank should not ignore the effects of movements spurred by other major central banks. With no consistent free-trade principles governing global monetary policy, the Fed must take proactive steps to ensure that the U.S. can compete successfully. It would be in keeping with its historical mandate if the Fed were to pursue a more coordinated relationship with both Congress and the president. When it comes to fulfilling the economic goals authorized by legislative decree, it isn’t seemly for a government agency to be selective."

Book Review: 'The Smallest Minority' -Tamny/Real Clear Markets
"The Houston-based Kevin Williamson's very entertaining and insightful book, 'The Smallest Minority: Independent Thinking In the Age of Mob Politics,' is among other things a rejection of 'mob politics,' and 'its effects on our political discourse and our culture.' In the free market, the mob most certainly doesn't rule...Free markets are about individual choice, as opposed to decrees from the Commanding Heights about what we'll purchase, and how. When Burger King rolled out its plant-based Whopper, it tested it in St. Louis first, as opposed to ramming it down the throats of thousands of franchisees. Williamson plainly doesn't trust the mob, and it seems one message the National Review reporter is trying to send is that we should aim to localize our policymaking a la Burger King. If so, bad ideas will be contained while good ones will be widely adapted. The free markets account for our many differences, while politicians increasingly strive to craft national solutions to perceived problems. Williamson would no doubt prefer to leave things to the people....Most important is Williamson's muscular disdain for democracy. 'I come not to praise democracy but to bury it.' As he later explains, the 'Founding Fathers understood the dangers of democracy' without limits on government: it would lead to ochlocracy, another word introduced to me by Williamson which is, you might have guessed, mob rule. And while most would describe Williamson as a conservative, particularly given his views on abortion, he's really a libertarian as the previous paragraph makes rather plain. Williamson believes in individual freedom to do as one wishes short of hurting others, and undiluted democracy has little do with freedom....The crisis narrative is easily my favorite part of Williamson's book...'Every interest group, faction, and policy entrepreneur in the country has a crisis narrative to peddle. The Right blames the rhetoric of the Left every time a cop is ambushed, the Left blames the rhetoric of the Right every time a gay man or Muslim is assaulted or worse.' Conservatives and liberals, and conservative and liberal pundits most of all, have thoroughly stripped any meaning from the word 'crisis.' Thank goodness Williamson is willing to showcase this truth....Williamson's conclusion at book's end is that 'the biggest democracies will always be a dangerous place for the smallest minority,' as in the individual. So true. The answer is freedom."

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