June 2, 2021
* The PPT spends The ESF’s funds to defend the dollar…
* Inflation is not transitory…
Good Day… And a Wonderful Wednesday to you! I like holiday shortened weeks! And I’m not even employed any longer! Day one of being by myself wasn’t unlike most days… I read, I researched, I napped, and tried to stay awake to watch my beloved Cardinals play the daunting Dodgers… I only made it for 3 innings the night before! Darn Pacific Time games! Well, little Evie came home from the hospital yesterday, I was relieved, to say the least! My girl, was sick, and I didn’t like that one iota! Ahhh, the joys of daycare… sharing germs… The weather here is weird… Just plain weird… chilly days, no sun, strange brew, mother nature, girl what’s inside of you? (Cream, with an addition by Chuck!) Paul McCartney and Wings greets me this morning with their song: Let ‘Em In…
Well, around noon yesterday, I checked the price of Gold to see if I was right, yesterday morning, when I said that Gold should turn around that early morning, $3 loss… And my gosh by golly, Gold had indeed turned that early $3 loss into a $5 gain! Yahoo! Said I! But then later in the day I checked it again, and that gain had turned into a loss… Gold held the $1,900 figure, but barely, while Silver couldn’t hold its $28 figure… What the heck happened?
At one point of the day, the euro was rallying, up to 1.2250, and Gold was rallying, and then quicker than a NY Minute, that all ended, and the dollar was rallying… The PPT again? I mean there was nothing else to move the markets the way they turned, yesterday, but some intervention… So, go ahead PPT use all the Exchange Stabilization Funds (ESF) you want, sooner or later you’ll run out of funding… Especially if the Fed demands their funds returned to them!
You may recall me talking about this from several months ago, how there was Trillions of dollar allocated to the Fed for them to use in case of an emergency, and former Treasury Sec. Mnuchin, recalled the funds, becoming persona non gratis with the Fed Heads… I have a dear reader that reminds me every time I refer to the Federal Reserve, as the Fed, that they are not Federal in any way, and that they don’t have reserves either! I guess he thinks I don’t know that… when it was me that a very long time ago recommended everyone to read the book: The Creature From Jekyll Island, by Edward Griffin…
Ok, so the dollar rallied yesterday, for whatever reason the PPT wants to make up that will appease the markets journalists…. Gold ended the day at $1,900.50, down $7.50 on the day… And Silver closed down 17-cents to end the day at $27.98… The BBDXY rallied to end the day at 1,117.08 up from 1,116.82 to start the day… The old time Dollar Index started the day at 89.87 and ended it at 89.83…
In the overnight markets last night… the dollar buying has intensified, and for some strange reason, traders are buying dollars like they are worthy… But like Wayne and Garth, they are NOT worthy! HA ! The BBDXY has risen to 1,120 overnight, and the Dollar Index has risen to 90.23… The euro slipped back below 1.22, and Gold finally gave up the ghost, and fell back below $1,900 overnight. Silver has lost another 11-cents this morning, so our Wonderful Wednesday is turning into a Worrisome Wednesday… UGH!
Well, I wanted to talk about this yesterday, but in my hurry to get the letter out and get my wife to the airport on time, I forgot about it… And this is important stuff! Well, I’ll let you be the judge of that! But the U.S. Mint announced last week that they were not minting any Silver coins, for now, and they admitted that there was a shortage of Silver… Now, why that news didn’t send the price of Silver soaring I have no idea, but, I do know that I’ve been writing about a coming shortage in Silver for years, due to Silver being included in Solar Panels… And now…. Well, now we all know why there hasn’t been any new minting of Silver coins at the U.S. Mint lately… There’s a Shortage in Silver!
Well… longtime readers know that I’ve been beating the drum about deficit spending and deficits for, well, let’s see… I began writing the Pfennig in 1992, but it wasn’t until probably 2000 that I began harping about the debt… So for 21 years! And, just so you know, I’m not stopping here! Here are some things I came across yesterday in my reading and research… These aren’t pretty numbers, so put away the sharp objects…
Prior to the distribution of COVID-19 stimulus money, there were ~$13 trillion in US savings accounts that earn less than 1% interest. According to Shadowstats.com, the real rate of inflation is ~12% versus official government numbers of ~4%. That means the $13 trillion of banked money is losing ~$2.6 trillion of its purchasing-power each year.
And if you add in all the people that have had their unemployment benefits run out, and therefore are no longer counted as “Unemployed” (I know, makes about as much sense as a screen door on a submarine, but that’s the Gov’t for you!) The figure would be actually around 40 Million people, which would mean a real Unemployment Rate of 25%!!!!!! (according to Shadowstats.com)
Now, you can do the math just like I can, so you tell me how the Gov’t is going to get tax receipts out of those 40 Million people? And that brings us to the Biden Budget that calls for $6.1 Trillion Budget… I don’t see how that works, do you? Which means more issuance of Treasuries, and the hope that the kindness of strangers continues… You know you can only fill a bottle with water until it overflows, and you can’t add any more… The same thing will happen with foreigners buying our debt/ Treasuries, there will come a time when they say, “no mas”… And I do fear that that that time is drawing near…
In full credit, I got some of these numbers from an article here: You Won’t Believe How Bankrupt the US Is Till You See This – LewRockwell
Now Isn’t Life Strange, a turn of the page… (Moody Blues) You know the whole premise of the MMT (Magic Money Tree) folks is that you can print as much currency as you need and then some, as long as we don’t get big inflation… They think the folks at the Fed have the arrows in their quiver to shoot at inflation to make it go away quickly… I think they are full of baloney! To say so nicely I might add! The Fed has no more arrows, they’ve all been either shot in the air or taken away from them by the architects of Deficit Spending… You see there will never be another Paul Volcker to run interest rates up to 17% to combat 10+% inflation… The U.S. had little debt back in the late 70’s and so running up their debt servicing costs with higher interest rates, was no big deal…
But when you flash forward to today’s debt levels, and the amount of IOU’s that are represented by U.S. Treasuries that have been issued, and will need to be issued to finance all the deficit spending the President is talking about, if you raise interest rates to 5%, you would cause major chaos in financing of things like Medicare, and Social Security… In other words… bye, bye Miss American Pie… (Don McClean)
I wonder where the old folks are tonight… ( Gordon Lightfoot) Oh, that’s right, I’m an old folk now, at least that’s what my wife tells me all the time! But all us Baby Boomers need to fight the good fight VS these Magic Money Tree folks… They’re looney Tunes in my opinion… But we are at the end of the U.S. Empire’s rule, so when you get near the end, you try anything to survive right? Remember what I told you Doug Casey said about this yesterday… “Eventually, of course, such irresponsible economics will cause any country, no matter how powerful, to collapse economically, no matter how many Keynesian economists such as Thomas Piketty, Paul Krugman, and Larry Summers declare otherwise.”
Ahh.. the End of the Empire that is the U.S. let’s see what we have in common with other empires that have collapsed… For one let’s take Rome… they debased their currency, they extended their armies too thin, and spent beyond their means… Sound familiar?
Or how about Egypt, or Mesopotamia… it doesn’t matter what Empire you bring up, they all have similar reasons for collapsing and one of those similar reasons is currency debasing, and deficit spending on wars…
I know, you don’t need me to teach your about the history of Empires… So, I’ll move along to other things that are on my mind this morning… Oh, that’s right I wanted to talk about this… Eurozone inflation rose to 2 percent in May, the first time the rate has surpassed the European Central Bank’s (ECB) target in more than two years… So, inflation is running around the world now, eh? And what’s the ECB going to do about this rising inflation? Will they be nilly willy about like our Fed and allow inflation to run hot? Or, will they find their inner Hans Tietmeyer, and fear inflation, because of the runaway inflation that ruled Germany in the 40’s?
For those that don’t know who Hans Tietmeyer was… he ruled the Bundesbank, Germany’s Central Bank back in the 90’s and made it his mission to keep inflation under his thumb…
Wim Duisenberg, was the ECB’s first President, and he too was an inflation fighter… and probably the best President the ECB has ever had!
Ok, enough!
The U.S. Data Cupboard today has the Fed’s Beige Book today. This is a report from each of the Fed’s regions on how the economy is doing in their respective region… This used to be a big deal for the markets, but now it’s more passé then relevant… We’ll also see the vehicle sales from last month, which should be a bummer given all the cars that are waiting for chips from China and Taiwan…
To recap… The currencies and metals were rallying in the morning yesterday, but their rally was stopped in their tracks, and Chuck can only figure that the PPT was in spending their ESF dollars on defending the dollar… Gold ended the day in the red, along with Silver, and the dollar pushed back against the euro and other currencies… In the overnight markets…. There was more dollar buying, and it has intensified… The euro has slipped back below 1.22, and Gold & Silver are slipping lower too… And Chuck talks about real unemployment numbers, taxes, deficit spending, and other things that you might want to go back and reread, to let the numbers sink in… Oh, and he also talks about collapsed Empires!
For What It’s Worth… OK… with Gold slipping this morning, this is a good time to print this article that talks about how Gold’s price slippage is “Transitory” , and not inflation is not! And it can be found here: https://www.sprottmoney.com/blog/Gold-Price-Dips-Are-Transitory-Craig-Hemke-June-1-2021
Or, here’s your snippet: “Much has been made about The Fed’s extensive use of the word “transitory” when describing the current inflationary environment. If you understood why they keep using that word, you’ll soon appreciate why all price dips in COMEX gold are transitory, too.
“You keep using that word. I’m not sure it means what you think it means.”— Inigo Montoya
Let’s begin this week with The Fed’s overuse of this word. What are Powell and his goons attempting to accomplish by relentlessly repeating this term with every public appearance?
First of all, understand that this current inflationary cycle is most definitely NOT transitory. It is being pushed along by BOTH of the two classical inflation drivers:
Cost-Push Inflation: This is where input costs force manufacturers to pass along higher prices to consumers. As examples of higher input costs, consider the recent surge in the prices of lumber, iron ore, steel, copper, soybeans and corn.
Demand-Pull Inflation: This inflation is caused by “too many dollars chasing too few goods”. Government stimulus checks combined with surging wages is prompting this problem, as well.
Typically, in response to higher inflation, bond investors demand higher yields. Consider it this way: Who in their right mind would accept a 2% yield in a 10-year U.S. Treasury note when price inflation is at 4%? That investor would be guaranteeing himself a 2% loss of purchasing power over the life of the note if inflation remains unchanged. Therefore, a rational investor would demand a higher nominal interest rate and would forestall buying a treasury note until the interest rate increases.
But the U.S. government cannot afford higher interest rates and The Fed cannot allow higher rates for a multitude of reasons, chief among them the need for negative real interest rates to inflate away the current extreme levels of debt.
Therefore, in an attempt to “jawbone” interest rates lower and reassure bond investors that it’s OK to buy U.S. treasuries with a yield of under 2%, The Fed is desperately pumping the word “transitory”. Again, why? Because if you believe that, by the end of the year, inflation will be back under 2%, then maybe that 10-year T-note you’re thinking about buying doesn’t sound too bad.
But again, this current inflation is NOT transitory. Instead, it’s a direct consequence of all the fiscal and monetary policies the U.S. has pursued since the onset of The Covid Crisis in March of last year. It was a predictable outcome and here we are.”
Chuck again… Yes, like I keep saying this is not your dad’s inflation, this is different, and a direct result of all the fake money printing and debt levels… But I’ve been saying this for months so nothing new here to you dear reader…
Market Prices 6/2/2021: American Style: A$ .7717, kiwi .7213, C$ .8274, euro 1.2170, sterling 1.4124, Swiss $1.1089, European Style: rand 13.7490, krone 8.3418, SEK 8.2936, forint 284.36, zloty 3.6706, koruna 20.9203, RUB 73.42, yen 109.85, sing 13241, HKD 7.7593, INR 73.08, China 6.3767, peso 19.99, BRL 5.1871, BBDXY 1,120.51, Dollar Index 90.23, Oil $68.38, 10-year 1.60%, Silver $27.87, Platinum $1,188.00, Palladium $2,889.00, Copper $4.57, and Gold… $1,897.70
That’s it for today… Quite wordy today… sorry about that… but I had lots to say! My beloved Cardinals pulled out win in Los Angeles last night… I checked the score when I woke up at 2 am and seeing that the Cardinals won, I was able to go back to sleep easily… One more late night game tonight. UGH! Lots of strange noises in this house that I noticed yesterday because there was no other noise… Another rainy day today, did I move to Seattle while I was asleep? HA! I have a bumper sticker displayed at my writing desk, and it’s a picture of the Great Mogambo Guru, with his saying, What would Mogambo Guru Buy? (Gold, Silver, and Oil, moron!) And every time I look at it, I smile because I really adore the Mogambo Guru! Our favorite musical terrorist, (that’s what we used to call him on the trade desk) Cat Stevens takes us to the finish line today with his song: Wild World… I hope you have a Wonderful Wednesday, and Please Be Good To Yourself!
Chuck Butler