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7.29.21 - Fed Holds Rates Near Zero

Gold last traded at $1,829 an ounce. Silver at $25.57 an ounce.

NEWS SUMMARY: Precious metal prices rose sharply Thursday on safe-haven buying as disappointing GDP data weakened the dollar. U.S. stocks rose modestly as investors shrugged off economic data showing slower-than-expected growth.

If gold price breaks through $2,000, we have a dangerous inflation problem - Mark Skousen -Kitco

"Inflation concerns are escalating due to loose monetary policies and unprecedented stimulus, with June CPI data rising at the fastest level since 2008. However, this has not been reflected in the price of gold, with the precious metal not hitting the $1,900 an ounce level since January.

Mark Skousen, an award-winning economist, warns that if gold were to breach the $2,000 an ounce level that would indicate that inflation is a very serious problem.

'Gold tends to be a leading indicator of inflation, and gold is moving up, but it hasn't broken above the $1,900 level. But if it does break that level and goes from $2,000 to $2,100, that suggests a very serious inflation problem,' Skousen told Michelle Makori, editor-in-chief of Kitco News, on the sidelines of the Freedom Fest 2021 conference.

Skousen is the editor-in-chief of Forecasts & Strategies and is currently on the faculty of Chapman University, where he is a Presidential Fellow.

'I think Powell is a little too optimistic about the problem of inflation. It's here to stay and it's going to last for a long time,' said Skousen, who is a best-selling author, and a presidential fellow at Chapman University.

'Trying to control inflation is like trying to catch a tiger by the tail,' said Skousen, 'It can easily get out of control as it did in the seventies. It's a very dangerous game, I'm really concerned that the government is acting irresponsibly at this point.'"

Delta Here’s when US could possibly reach peak in COVID-19 cases fueled by delta variant -WKMG/Florida

"With the increase of COVID-19 cases - and the delta variant now the dominant strain in the United States - many are eyeing the way the variant is impacting the U.K. as a possible indicator of when the U.S. could see its peak.

The delta variant, first identified in India, quickly became the dominant strain in the U.K. and was named a variant of concern in the U.S. near the end of June. The delta variant accounts for more than 80% of all COVID-19 cases in the U.S.

In an interview with CNBC, former Food and Drug Administration Commissioner Dr. Scott Gottlieb said he expects the U.S. to begin seeing a decline in cases in two to three weeks, based on the U.K.’s current timeline.

'If the U.K. is turning the corner, it’s a pretty good indication that maybe we’re further into this than we think and maybe we’re two or three weeks away from starting to see our own plateau here in the United States,' he told CNBC.

Data from the Public Health England agency shows an increase beginning in late May with a significant jump in cases on June 14 from nearly 7,000 cases to over 10,000 cases, and another jump reported on June 21 from nearly 10,000 cases to nearly 16,000 in England.

According to the Associated Press, as of July 27, the U.K. overall has seen a falling number of COVID-19 cases for the last seven days. On July 21, the U.K. reported 44,104 new cases but a week later, it was seeing 27,734 new cases."

Fed holds rates near zero, says economy has gotten better even with pandemic worries -CNBC

"The Federal Reserve on Wednesday held its benchmark interest rate near zero and said the economy continues to progress despite concerns over the pandemic spread.

As expected, the Federal Open Market Committee concluded its two-day meeting by keeping interest rates in a target range between zero and 0.25%.

Along with that, the committee said in a unanimously approved statement that the economy continues to 'strengthen.' Despite the optimism about the economy, Chairman Jerome Powell said the Fed is nowhere near considering a rate hike....

Markets had been watching for the Fed’s views on the spread in the Covid-19 delta variant, but Powell and his fellow officials were relatively sanguine at least in terms of the threat the virus poses to the economy....

The Fed has faced growing inflation fears, with consumer prices running at their highest since just before the financial crisis of 2008. However, officials insist the current surge is temporary and will abate once supply chain bottlenecks ease, demand returns to normal levels, and certain items, particularly used car prices, also get back to baseline."

Bye-bye, bitcoin: It's time to ban cryptocurrencies -The Hill

"I’ve never quite understood why cryptocurrencies are worth anything. Of course, the untraceable payments are worth a lot to ransomware hackers, cyber criminals and money launderers. But dollars, euros and yen are backed by nations’ respective treasuries. If someone invents a cryptocurrency, any value is based solely on convincing others it has value. But is it a usable means of exchange? International banking officials say cryptocurrencies such as bitcoin are speculative assets, not sustainable, usable money.

Yet the epidemic of hugely disruptive ransomware attacks in recent months - on JBS Foods, a major meat processor; on Colonial Pipelines, our critical infrastructure, causing gasoline shortages for weeks; and on 1,000 or more U.S. businesses on July 4 - highlights the enormous risks....

As the eminent economic analyst Martin Wolf outlined in a recent Financial Times essay, the risks and chaos of a wild world of unstable private money is a libertarian fantasy. According to a recent Federal Reserve paper, there are already some 8,000 cryptocurrencies. It’s a new mom-and-pop cottage industry.

How should governments respond? Wolf argues that central banks (e.g., the U.S. Federal Reserve) should create their own official digital currencies - central bank digital currencies (CBDC) and make cryptocurrencies illegal.

I’ve been asking the same question: Who needs cryptocurrencies? Apart from the nasty uses and wild speculative value swings, data mining to produce bitcoin is a serious environmental hazard, using huge amounts of electricity by rows and rows of computers....

I suspect that with a little U.S. leadership, jump-starting financial diplomacy would go a long way. Certainly, it’s a good test for President Biden’s efforts to align democracies."

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7.28.21 - Washington Ignores Our Most Critical Economic Crisis

Gold last traded at $1,802 an ounce. Silver at $24.89 an ounce.

NEWS SUMMARY: Precious metal prices traded in a tight range Wednesday ahead of the Fed statement this afternoon. U.S. stocks traded flat as investors parsed through a slew of corporate results while awaiting a key policy update from the Federal Reserve.

Fed tightening: It’ll come, and it’ll be a 'crisis', $1,800 gold is 'good price' - Adrian Day -Kitco

"The current level of national debt in the U.S. cannot sustain a rise in the Fed Funds rate, said Adrian Day, chairman and CEO of Adrian Day Asset Management.

Speaking to Michelle Makori, editor-in-chief of Kitco News on the sidelines of the Freedom Fest 2021 conference, Day said that while the Federal Reserve is 'reluctant' to raise rates, it is still ultimately an inevitability, and when that happens, there will be a 'crisis.'

The main risk is that when interest rates rise at the short-end of the curve, interest expenses will rise proportionally and become unaffordable, Day noted. The solution is to issue longer-term maturity Treasuries, he said.

'The U.S. government should be doing 100-year bonds right now...but they’re not. They’re refinancing at the short end. But even with that…just servicing the debt is about 16% [of the federal budget]. If rates went back to even halfway of their 25-year average, it would be 25% to 30% of the budget would be on debt service, which would be unsustainable. 'It would be a crisis,' he said....

Gold is the obvious thing to buy because gold is the only asset that is a hedge and will hold up when the dollar falls. So owning gold is a way to preserve your purchasing power."

american flag The U.S. Is Declining as One of the World’s Best Places to Live -Rogue Economics

"'To much of the world,' writes columnist Spengler in the Asia Times, 'the U.S. looks like it is in decline. Because it is in decline.'

We were thumbing through an old book, one that we published in 1988. Titled 'The World’s Best,' it told readers about the best things we had discovered in almost 10 years of publishing the magazine International Living.

The book began by describing our attempt to rate the world’s countries from best to worst, giving them scores for everything from Freedom to Infrastructure… Culture to Cost of Living....

Guess what country came out as Numero Uno… the world’s best place to live? Here’s how we reported it then:

'The United States takes first place, with a total score of 88.88. Although it is not outstanding in all categories, its consistently good scores in most categories averaged out to put it on top.

Here’s a breakdown of the U.S. category rankings. In health, it ranks 15th. In the culture category, it ranks first. In the economy category, the U.S. ranks 20th. In cost of living, it comes in a mediocre 49th [it was not cheap to live in the U.S… compared to the rest of the world]…

In terms of political stability, the U.S. ties for third place… It ranks first for infrastructure… In recreation/environment, the U.S. also fares well, tying with Australia, France and Italy and New Zealand for first place. And in freedom, the U.S. ties with 21 other countries for first place.'

Now, it’s 33 years later. How are we doing? International Living gave up its quality-of-life scoring efforts years ago, but almost all the other rankings show the U.S. slipping… and after 2000, almost in freefall....

Compared to 1988, almost all the news is bad.

The federal government owed just under $2.5 trillion at the beginning of 1988. Now, the debt is more than 10 times as much. The cost of living today is at 5% and going up. In 1988, it was 4% and going down.

Social tensions, today, are heating up – exacerbated by a big increase in inequality. 'Wealth inequality widens to a record level,' says a headline in this morning’s FT. (Thanks to the Fed’s stimmies, your editor adds.)

In 1988, the U.S. was ending a 'Cold War' with the Soviet Union… Now, it is beginning a new one with Russia and China."

U.S. Population Growth, an Economic Driver, Grinds to a Halt -Wall Street Journal

"America’s weak population growth, already held back by a decadelong fertility slump, is dropping closer to zero because of the Covid-19 pandemic.

In half of all states last year, more people died than were born, up from five states in 2019. Early estimates show the total U.S. population grew 0.35% for the year ended July 1, 2020, the lowest ever documented, and growth is expected to remain near flat this year.

Some demographers cite an outside chance the population could shrink for the first time on record. Population growth is an important influence on the size of the labor market and a country’s fiscal and economic strength.

One bad year doesn’t automatically spell trouble for future U.S. demographic health. What concerns demographers is that in the past, when a weak economy drove down births, it was often a temporary phenomenon that reversed once the economy bounced back.

Yet after births peaked in 2007, they never rebounded from the nearly two-year recession that followed, even though Americans enjoyed a subsequent decade of economic growth."

As inflation and government debt surge, Washington is ignoring our most critical economic crisis -The Hill

"Economic crises of all sorts loom on the horizon, ranging from high and rising federal debt, to high and rising inflation, to unsustainably high and rising housing costs. But the most important crisis we currently face is one you never hear about: historically low labor productivity growth.

Raising productivity growth is crucial. If we don’t do this, inflationary pressures will rise even more, we will struggle to manage all the federal debt we have already accumulated and the living standards of future generations will be much lower than they should be.

Despite this grim potential economic future, there is nary a word from Washington, D.C., policymakers about this challenge. Not from the White House, not from the Federal Reserve and not from Congress. Economic policies can make a big difference for productivity growth. But recent record spending, including Biden’s $1.9 trillion COVID-19 relief plan, did not incentivize higher productivity, and the future taxes required to pay for the debt used to finance this relief may well depress productivity growth even further.

Productivity growth fell significantly and abruptly in 2007, and it has never recovered. Since 2007, productivity has grown just 1.4 percent per year. But between 1948 and 2006, worker productivity grew at nearly 2.6 percent per year. This 1.2 percent annual difference is a very big deal, because at 2.6 percent, productivity, output and incomes will double every 27 years through the magic of exponential growth. But at 1.4 percent productivity growth, it now takes almost 50 years to double productivity, output and income....

What to do? It has been recognized for decades that regulation in the United States depresses productivity and takes cash away from workers, particularly among small companies. But despite this recognition, not enough has been done...The federal government and state governments should create bipartisan commissions to evaluate regulations from the ground up and determine which regulations do not satisfy a cost-benefit assessment and eliminate those that do not measure up.

Social Security, Medicare, Medicaid and unfunded pension liabilities continue to push us closer to a debt crisis. Lawmakers in both parties have ignored this problem for years, and they perceive no payoff from taking it on. It is time for Congress and the president to address these issues while there is still time. Such a resolution would clarify the future for investors and businesses that need such clarity to commit to long-term investments."

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7.27.21 - Redesigned American Eagle Gold Coins

Gold last traded at $1,799 an ounce. Silver at $24.72 an ounce.

NEWS SUMMARY: Precious metal prices traded steady Tuesday on a weaker dollar ahead of Fedspeak. U.S. stocks fell ahead of quarterly earnings reports from several megacap technology companies.

The U.S. is deciding how to respond to China’s digital yuan -CNBC

"China is beating the U.S. when it comes to innovation in online money, posing challenges to the U.S. dollar’s status as the de facto monetary reserve. Nearly 80 countries - including China and the U.S. - are in the process of developing a CBDC, or Central Bank Digital Currency. It’s a form of money that’s regulated but exists entirely online. China has already launched its digital yuan to more than a million Chinese citizens, while the U.S. is still largely focused on research.

The two groups tasked with this research in the U.S., MIT’s Digital Currency Initiative and the Federal Reserve Bank of Boston, are parsing out what a digital currency might look like for Americans. Privacy is a major concern, so researchers and analysts are observing China’s digital yuan rollout.

'I think that if there is a digital dollar, privacy is going to be a very, very important part of that,' said Neha Narula, director of the Digital Currency Initiative at the MIT Media Lab. 'The United States is pretty different than China.'

Another concern is access. According to the Pew Research Center, 7% of Americans say they don’t use the internet. For Black Americans, that rises to 9%, and for Americans over the age of 65, that rises to 25%....

'The digital yuan is the largest threat to the West that we’ve faced in the last 30, 40 years. It allows China to get their claws into everyone in the West and allows them to export their digital authoritarianism,' said Kyle Bass of Hayman Capital Management."

gold coin Redesigned United States Mint American Eagle Gold Coins Go On Sale July 29 -Yahoo Finance

"The United States Mint is pleased to announce the beginning of sales for redesigned 2021 American Eagle Gold Proof Coins on July 29, at noon EDT. Orders are limited to one coin per household for the first 24 hours from the on-sale date and time.

Struck in 22-karat gold at the West Point Mint, these popular coins are collector versions of the official United States Mint American Eagle Gold Bullion Coins. For the first time since their debut more than three decades ago, the reverse (tails) of American Eagle Gold Proof Coins features a newly designed portrayal of an eagle, created by United States Mint Artistic Infusion Program Designer Jennie Norris and sculpted by United States Mint Medallic Artist Renata Gordon.

The coins' obverse (heads) features Augustus Saint-Gaudens' full-length figure of Liberty with flowing hair, holding a torch in her right hand and an olive branch in her left. To render a closer reflection of Saint-Gaudens' original vision, legacy details have been restored that include modifications to the U.S. Capitol Building, stars, torch, sun rays, and other design elements based on the original bronze cast.

In addition to redesigning the reverse and enhancing design details on the obverse (heads) of these coins, the Mint introduced anti-counterfeiting features that include a reeded edge variation on the one ounce coin (only)."

Stock Bulls Look Toward $17 Trillion Burning a Hole in Pockets -Yahoo Finance

"In the stock market, the refusal of retail investors to back down from every macro threat has become the only story. When will it end? Judging by the size of all the pools of cash lying around, it could be a while.

Among all the economic stories of the pandemic, the one about money piling up in people’s accounts has been the most significant in the stock market, where the S&P 500 just notched its seventh gain in nine weeks. Money market accounts, viewed in some circles as a 'dry powder' reserve for equity deployment, sit at just under $4.5 trillion. A more obscure balance, the Federal Reserve’s count of money on deposit with commercial banks, has risen 33% from 2019 to $17 trillion.

While none of the money is completely unencumbered and professionals tend to hate the concept of 'cash on the sidelines,' something is arming the day-trader cadres who seem bent on letting no market selloff last more than 24 hours. Take Monday, for example, when fears the delta variant would upend progress sent the S&P 500 down as much as 2.2%. Dip buyers ran to the rescue then and the rest of the week, sending the S&P 500 higher by almost 2% through Friday, despite virus cases still spiking....

'It’s almost like investors are seasoned to say, stocks are down, it’s got to be a buying opportunity,' said Gene Goldman, chief investment officer at Cetera Financial Group. 'Part of that is because there’s no other game in town right now. You look at bond yields so low, cryptocurrencies struggling, other parts of the market are not that great.'....

'The buy-the-dip mentality is the one the Fed has taught institutional and retail investors to follow, and the Fed remains hyper easy,' said Jim Smigiel, chief investment officer of SEI. 'The biggest positive out there is that the easy stance from the Fed is in place and every other central bank and is going to be in place for quite some time.'"

New Home Sales Crash In June To Lowest Since April 2020 -Zero Hedge

"After existing-home sales printed a very modest rebound from lowered numbers, analysts expect new home sales to rebound from 12-month lows in June (even as homebuilder confidence sinks to an 11-month low), but boy oh boy were they wrong.

Against expectations of a 3.7% MoM jump, new home sales plunged 6.6% MoM in June (and worse still May was revised lower from -5.9% to -7.8%)

Even more amazing is the fact that new home sales are down almost 20% YoY - the worst since 2011.

This leaves the SAAR at its lowest since April 2020.

Supply is finally beginning to pick up (up 7% MoM) to highest since March 2020."

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7.26.21 - U.S. Headed Towards 'Bankruptcy'

Gold last traded at $1,797 an ounce. Silver at $25.21 an ounce.

NEWS SUMMARY: Precious metals traded steady Monday on a weaker dollar ahead of Fed meeting. U.S. stocks drifted lower ahead of a busy week of earnings reports from technology’s heaviest hitters.

U.S. headed towards 'bankruptcy'; Gold will protect you, everything else will 'get crushed' -Kitco

"The U.S. is headed for bankruptcy and economic decline, and the best way to protect your wealth is with gold, said Yaron Brook, managing partner of BHZ Capital.

Brook is the best-selling author of several books, including 'Free Market Revolution: How Ayn Rand's Ideas Can End Big Government'. He is the chairman of the board at the Ayn Rand Institute and is host of the Yaron Brook Show.

Speaking with Michelle Makori, editor-in-chief of Kitco News, on the sidelines of the Freedom Fest 2021 conference, Brook said the government is 'destructive' and is responsible for the economic troubles the U.S. finds itself in.

'COVID has shown us that the American people are willing to behave like sheep when the government dictates what they should and shouldn’t do. Also, the government is willing to take on massive powers,' he said. 'We’re seeing the government move systematically towards bankruptcy. Who’s going to pay this debt?'....

'We are approaching levels of debt we saw in World War Two, but in World War Two, right after the war, we ran surpluses, so we paid it all back. Nobody’s going to run a surplus today. Politically, it’s impossible,' he said.

The more immediate consequence of high debt and government policies, including fiscal and monetary policies, is high inflation with no growth, or stagflation. However, the economy won’t reach hyperinflation territory, Brook said.

'[Hyperinflation] is quite unlikely because we know how to deal with inflation, we know how to stop it, it’s just very, very painful. I think what we’re really in for is a very long period of stagnation, maybe combined with inflation, maybe now. One thing we’re not going to see is significant economic growth,' he said....

The solution, according to Brook, is to reduce government intervention and abolish the Federal Reserve.

For the investor, assets to avoid in a stagflation scenario are risk assets like equities and long-term bonds. In fact, bonds will 'get crushed', he said.

'You want to be in something like gold, because gold actually maintains its value. It's on an investment as much as it is a store of value,' he said."

budjet No, Inflation Isn’t Good for Workers -Wall Street Journal

"An odd notion seems to have taken hold in Washington: that the Federal Reserve’s easy monetary policy is good for workers. Near-zero interest rates are being hailed as the key to higher wages - even as consumer prices are increasing at the fastest pace since 2008. But nominal wage gains are an illusion when inflation wipes out real gains. The financial rewards from the Fed’s 'accommodative' stance overwhelmingly favor Wall Street over Main Street....

Low- and middle-income Americans do understand they’re worse off when wage increases don’t keep pace with the cost of living. Workers feel particularly vulnerable to changes in the price of fuel, groceries, healthcare and housing. People also think income inequality - both across households and geographically - is an important issue. These strong views are recorded in 'Fed Listens,' a 129-page report released by the Federal Reserve in June 2020.

Yet none of the questions directed to Fed Chairman Jerome Powell, the only witness testifying at the hearing, mentioned the report. The initiative was undertaken by the central bank in 2019 to get feedback from the public; it included 15 listening events around the U.S. to hear how monetary policy affects people’s daily lives and livelihoods.

At a Fed Listens town hall in San Francisco, participants were asked: 'How important are the Fed’s two statutory goals - maximum employment and price stability?' Price stability was ranked 'very important' by 79% of respondents, while maximum employment was ranked 'very important' by 72%.

The 150 attendees were described as members of disadvantaged communities, labor organizations and businesses representing a 'broad cross section of stakeholder groups and the general public.'

If they viewed price stability as the Fed’s most important goal when inflation was 1.7%, is this likely to have changed with 5.4% inflation?"

As the Fed Powell Continues to Flail, Could an MMT Fed Chair Be Next? -Mises

"Inflation in America continues to rise, and with it skepticism in Federal Reserve chairman Jay Powell’s insistence that increased prices are 'transitory.'This double whammy of consumer pain and declining institutional confidence increases the odds of another challenge to the Fed’s current plans: a change in leadership....

Politico has reported that a second term for Jay Powell is 'his to lose.' Also supporting his case is the degree to which his views on the economy have mirrored that of his predecessor turned Treasury secretary, Janet Yellen.

There is a lot of time, however, between now and the end of his term in 2022.

While Fed chairs in the past have been renominated in the face of weak economic growth and underperforming labor markets, the political calculation of maintaining the status quo is very different in a country feeling the daily pain of rising consumer prices. The more the Fed admits inflation will last longer than expected, the more we are likely to see betting markets lose faith in the return of Chairman Powell.

What would a post-Powell Fed look like? That is where things get interesting....

There is growing interest on the progressive left in the work of Stephanie Kelton and other advocates of modern monetary theory. Additionally, the great political advantage of MMT - like Keynesianism in the 1930s - is that it provides an intellectual veneer for a political left that believes the biggest problem with American economic policy is its frugality. Kelton has publicly advocated for the Biden administration to rely on the Fed - rather than taxes - to support aggressive increases in federal spending....

Could progressive pressure, mixed with escalating economic pressure, push White House decision-makers to embrace a radical, outside the box choice to lead the Fed?"

Killer Biden Inflation Is His Main 'Gift' To America -Issues and Insights

"Excessive taxes, spending, and government regulation have once again gripped America thanks to the policies of Biden, Harris, and the progressives. The predictable result is higher prices for everything and a repeat of the Carter Misery Index from which President Reagan rescued us beginning in 1981.

According to the Bureau of Labor Statistics, and as confirmed by Americans for Tax Reform, since January 2021:
-Gasoline prices have increased by 45% and other energy prices by 24.5%
-The price of bacon has increased by 8.4% and seafood prices by more than 6%
-The price of fresh milk has increased by 7.5% and fresh fruits by 8.4%
-Prices for major appliances are up 14% and furniture and bedding have increased 8.5%
-Airfares have increased by nearly 25%

The root of inflation is too much money chasing too few goods, as our economist friend Milton Friedman frequently observed. The New York Times warns that inflation also results in long-lasting damage if wages don’t keep up.

Biden claims all this new spending will ease inflation. We’re wondering what economics principle he is citing to make this outrageous conclusion. If simply spending more money cures these recent price hikes, why not spend more? Why not another $60 trillion instead of only $6? Preposterous. We’re currently suffering these record-setting price jumps precisely due to the $6 trillion we have already juiced into the economy. The last thing the economy needs is more liquidity....

It’s time for the Biden team to rein in their fiscal policies that are feeding this inflation and will severely undercut our economic recovery from the pandemic. That is the message reverberating loud and clear in the economic data over the past several months. Biden would do well to heed that warning and resist the foolishness of driving even more spending into this overheated economy."

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