December 8, 2022
* currencies & metals rally on Wednesday
* Egon Von Greyerz visits us today…
Good Day… And a Tub Thumpin’ Thursday to one and all! A long day yesterday, no soccer was on, no Blues hockey, no Mizzou or StL U. basketball, I was out of luck there! The Big News in St Louis yesterday was that the Cardinals had signed a new catcher to replace the retired Yadi Molina. Lots of money being thrown around the Free Agents this year, but then I guess it’s just sign of the times, when a shortstop, gets paid $40 Million a year, or whatever it was they paid him… I worked my tail off since the 7th grade, and saved everything I could, wage wise. And I never even came close to piling up that amount of money… But he’ll get it every year for the next 11 years! I wish I had learned to hit the curveball! HA! Beegie Adams greets me this morning with her version of one of my fave songs this time of year: Winter Romance…
Well, the overnight selling of the dollar on Tuesday night into Wednesday finally had some follow through in the U.S. Markets. The dollar saw selling all day, and the BBDXY lost 4 index points to end the day at 1,265.91. Gold carved out a nice gain of $15.30, to close at $1,787.50, and Silver gained 53-cents to close at $22.81. I read Brian Lundin’s newsletter about Gold, and he points out something that has taken shape, here in Gold trading… First he pointed out that since March Gold and U.S. stocks have traded lock step in tandem, with the correlation hitting up toward 1 (a perfect correlation) a lot. But… then he goes on to point out “the drop in the correlation between gold and the S&P, but it’s also evident that this is not yet a well-established trend. It’s still early days, and perhaps I’m jumping the gun by pointing it out.”
No, it’s not too early Brian… no worries, we would rather be aware of these things to make timely purchases when they are available, as you have made them here… Thank you!
The euro remains above 1.05, and like I said yesterday, I expect that the euro has seen the worst of it bad times, now that the ECB has gone away from negative rates…
The price of Oil dropped another $2 bucks yesterday, and now trades with a $72 handle. Oil has given back all its gains that it had made this year, so far. $72 is a far cry from the $90 handle price for Oil that the OPEC members were calling for… Makes you wonder about all this doesn’t it? Well, if everything else in markets is manipulated why not Oil? I’m just saying… On the forefront is the release of our strategic Oil Reserves by the POTUS, 3 previous times this year… That’s manipulation if I ever saw it!
In the overnight markets last night… The trading was null and void… it disappeared right before your eyes! The dollar didn’t move, Gold and Silver are flat this morning to up a buck, and the currencies are trading in yesterday’s clothes. I get it…. The foreign traders of currencies decided that they were at a fork in the road, and one path takes them to further dollar selling, and the other path takes them to being on the watch for the PPT propping up the dollar. So, they sat there at the fork and didn’t make a decision… I get it… I would have too, I guess, no knowing what’s up the PPY’s sleeve, is not conducive to major selling of the dollar. And what have I always taught you? The markets do not like “unknowns”…
I guess the biggest news overnight is that China is really removing most of the restrictions of their COVID-ZERO policy, which means that the economy will begin to open up again, at least for now, until another out break occurs… This news brought some love to the price of Oil overnight, as it is up $2, and trades this morning with a $74 handle.
You know, I said that “until another out break occurs”… Look, these people have been shut up in their homes for 2 years and more, and haven’t been exposed to any germs… So their systems are going to be at risk immediately after going back out and meeting with people… I mean look at what’s going on here in the U.S. the news last night told me that the flu outbreak in the U.S. is the earliest it has ever been and putting hospitals in a bind. Same thing here in the U.S. these people hadn’t gone out of their homes for some time, then get back into the swing of things, and voila! A flu out break occurs…
I’m not a doctor, and I don’t play one on TV or did I stay at a Holiday Inn Express last night, I don’t work for Dean Witter, and all that… I’m just saying what it looks like to me, and my view on things usually comes to reality…
I’ve been saving this discussion about the rail strike, for a few days, and now it seems appropriate to bring to the forefront. Since when does the Gov’t get involved in private business negotiations? I just didn’t like the smell of that, did you? Yes, it does seem to be something that needed outside negotiation, but isn’t that what we have mediators for? The rail workers were told that HAD to accept the contract, even if it didn’t address their biggest concerns… Like paid sick leave… So, that’s just great, from now on when you board a train, you’ll be exposing yourself to sick workers… I’m just saying…
The potential of a rail strike would have ended up costing the U.S. economy up to $2 Billion a day… That’s HUGE, and I somehow get it that the Gov’t stepped in, but in the end, I just don’t like the smell of that…and that’s all I have to say about that!
The U.S. Data Cupboard yesterday had the stupid 3rd QTR Productivity, which showed an increase.. so the workers that are working are working longer harder hours… The Unit Labor Costs declined in the 3rd QTR, and not by a penny or two… it went from a 3.5% gain in the 2nd QTR to just a 2.4% gain in the 3rd QTR.. so together those two reports tell us that People are working longer, and making less…
Then we saw the Consumer Credit (read debt) gained another $1 Billion to $27 Billion in Rocktober… And that leads me to talk about what 1 Billion is… A dear reader sent me this, and it’s great, but it’s much too long for the Pfennig, so I’m just going to borrow a snippet: “ A. A billion seconds ago it was 1959.
- A billion minutes ago Jesus was alive.
- A billion hours ago our ancestors were Living in the Stone Age.
- A billion days ago no-one walked on the earth on two feet.
- A billion dollars ago was only 8 hours and 20 minutes, At the rate our government Is spending it.”
Chuck again… That’s a Billion with a capital B…
Tomorrow’s Data Cupboard will not have much for us, but will give us piece of information that will tell us a lot… the data is called: Real Household Wealth, which had declined 21% in the 2nd QTR, so it will be interesting to see what it did in the 3rd QTR.
To recap… The currencies & metals rallied on Wednesday, with the dollar getting sold throughout the previous night, and during the U.S. market hours. Gold gained $15 on the day, and Brian Lundin tells us that it appears that Gold has broken the correlation with the stock market… And in the overnight markets last night… It was a dud.. for the currencies and metals… But China has reopened their economy, and that has everyone stirring wondering what comes next…
For What It’s Worth… Ok this article was sent to me by longtime reader Bob, but… I had already received it from GoldSwitzerland… So, when Bob sent it, I thought, OK, this is a good FWIW article for today, and it’s about the U.S. debt, global debt, and how defaults are the only outcome that can come from this, and it can be found here: IN THE END THE $ GOES TO ZERO AND THE US DEFAULTS – Matterhorn – GoldSwitzerland
Or, here’s your snippet: “With US and Global debt exploding prior to both assets and debt imploding, let us look at the disastrous consequences for the US and the world.
Debt explosion leading to the currency becoming worthless has happened in history for as long as there has been some form of money whether we talk about 3rd century Rome, 18th century France or 20th century Weimar Republic and many many more.
So here we are again, another monetary era and another guaranteed collapse as von Mises said:
“There is no means of avoiding the final collapse of a boom brought about by credit expansion”
This disastrous borrowed prosperity, with ZERO ability to repay the surging debt, will lead to one of the three consequences below:
- THE US$ GOES TO ZERO
- A US DEFAULT
- BOTH OF THE ABOVE
The most likely outcome is number 3 in my view. The dollar will go to ZERO and the US will default. The same will happen to most countries.
Many people say that the US can never default. That is of course absolute nonsense.
If a country prints worthless debt that nobody will buy in a currency that no one wants to hold, the country has definitely defaulted whatever spin they put on it.
In the next few years, not just US but all sovereign debt will only have one buyer which is the country that issues the debt. And every time a sovereign state buys its own debt, it has to issue more worthless debt that nobody will touch with a barge pole.
Printing more money to pay for previous sins has never worked and never will.
And this is how money dies, just like it has throughout history.
The current monetary era started with the foundation of the Fed in 1913 and the acceleration of debt and currency debasement since 1971 when Nixon closed the gold window. With just over 100 years into this era, it is now approaching the end, like they all do.
Global currencies are already down 97-99% since 1971 and we can now expect the final 1-3% decline for all money to become virtually worthless. This is of course nothing new in history since every single currency has always gone to ZERO. We must of course remember that the final 1-3% move means a 100% fall from today. The final collapse is always the quickest so it could easily happen in the next 2-5 years.
DEBT, DEBT AND MORE DEBT
Let’s look at how it has all evolved.
Although US debt has increased virtually every year since 1930, the acceleration started in the late 1960s and 1970s. With gold backing the dollar and therefore most currencies UNTIL 1971, the ability to borrow more money was restricted without depleting the gold reserves.
Since the gold standard prevented Nixon to print money and buy votes to stay in power, he conveniently got rid of those shackles “temporarily” as he declared on August 15, 1971. Politicians don’t change. Powell and Lagarde recently called the increase in inflation “transitory” but in spite of their bogus prediction, inflation has continued to rise.”
Chuck again… yes, the article is much longer and makes more sense than this snippet can, but a teaser is all you get, if you want more, then click on the link above! This article reminded me of the Pfennig I wrote in May of 2021, when I explained that the Global Debt was too high, and that defaults would be the outcome of all this debt accumulation. And that it would lead to digital currencies… Don’t ask me how I came to that conclusion, but I did… I saw it Happening, and thought what would a country do that was faced with a declining currency and default? Collapse the currency monetary system, and come out with a brand new one… This has all been planned in my humble opinion, folks… I could go on, but I won’t, this could take me down a deep rabbit hole that I wouldn’t be able to climb out of!
Market Prices 12/8/2022: American Style: A$.6745, kiwi .6355, C$ .7349, euro 1.0518, sterling 1.2189, Swiss $1.0639, European Stye: rand 17.1420, krone 9.9736, SEK 10.3703, forint 396.42, zloty 4.4534, koruna 23.1270, RUB 62.63, yen 136.67, sing 1.3558, HKD 7.7849, INR 82.43, China 6.9722, peso 19.67, BRL 5.2195, BBDXY 1,265.65, Dollar Index 105.41, Oil $74.78, 10-year 3.46%, Silver $22.84, Platinum $1,007.00, Palladium $1,864.00, Copper $3.85, and Gold… $1,788.21
That’s it for today… And this week… I went all day yesterday without any OTC meds to stop my coughing and other stuff, and I survived, so that means, I’m good to go! Those were some scary days last week, but that’s water under the bridge now… Tomorrow I go for scans, bright and early in the morning, which means arriving at the hospital 2 hours before, so I get to drink that barium stuff that make me sick, every time! Tigers/ Jayhawks on Saturday! Should be a real barn burner… I wish I was there for that one! My beloved Tigers are 9-0 so far this year… It would be great to see them at 10-0! At least scare the bejeebers out of the Jayhawks!
Chuck Butler
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