The Miles Franklin Newsletter |
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From The Desk Of David Schectman |
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David's Commentary (In Blue)
Most of us live in the suburbs. Unless you happen to live in New York City, or Chicago or downtown LA, or Portland, the chaos is something that is happening in another world. It is happening to other people. It’s not much different than reading about what is going on in Beirut. The reality of what is happening escapes us. That’s because we are in the top 50%, or more likely, the top 10% or top 5% of the population. We are fortunate enough to have a job and a roof over our head and a hot meal waiting for us in the evening. Most of us are making money hand over fist in the stock market, so it is easy to believe President Trump when he says the economy is fine. We are comforted when he says that a vaccine for the Coronavirus is right around the corner. We are upset because we cannot eat at our favorite restaurant or go to the gym or a concert. This is all very inconvenient. It’s not fair. But there is nothing to worry about.
Most of the people I know and who I grew up with are very liberal. I am not trying to be political here, I am simply stating a fact. Off hand, I can’t think of a single one of them, apart from myself and my son Andy, who even owns a gun or would allow one in their house. Why should they? Guns kill people and there is no reason for anyone to own one. That’s what they tell me. None of them have a large stockpile of food and water and medicine on hand – or if they do, it’s only because of Covid-19 and the shortages that followed. It’s not because they fear there will be shortages from chaos or supply chain issues due to the depression that we are in. They all have plenty of toilet paper. It will come in handy when that’s all they have to throw at the angry, hungry mobs that come marching down their street, breaking windows and starting fires. But that couldn’t happen to us, they say.
But soon, they may get a little worried when they see BLM march into their part of town. How dare they come out here! Shoo, go away!
When I graduated college I considered joining the Peace Core. Hunger and disease and unemployment were things that happened in third world countries, not here in America. That thought didn’t last very long. I got married three months after graduating college and have been working ever since. Take a close look at what is going on here, in America now. Our big cities are starting to look like a third world country now.
Listen, the BLM movement is about much more than a statement about police brutality. That is simply awful and cannot be justified, but it is only the match that ignited the protests. In Portland they are marching into the suburbs and shouting through a bull horn, “We want your houses.” In March I wrote that we are in for a long, hot summer. I wrote that the income inequality would bring people into the streets. When the top one percent have 38.5% of the wealth and the bottom 50% have 1.6% this causes anger and frustration. We are seeing it unfold, right before our eyes. But, there is that old saying: “None so blind as those who refuse to see.”
So far, all of my liberal friends and family members have a job. Most of them have a solid portfolio of common stocks, which probably include some Tesla and Amazon and Apple and Facebook. They have a hard time accepting the fact that we are in a recession - let alone a Depression. They believe that the stock market will keep going up forever and refuse to take profits off the table and buy some “financial insurance” like gold and silver. They believe our politicians who tell us that the “V” shaped recovery is here. “It’s better than expected” is what the press reports when discussing unemployment or the economic numbers that are released every week. Yup, going from horrible to just awful is “better than expected.”
I feel for the tens of millions of Americans who are unemployed and are facing eviction. I fear for the idealists who think this can’t happen to them. Let me be frank. This is just the beginning of the most difficult period in our history since the 1930s, and it will probably be much worse. We don’t have bread lines, instead people line up for miles in their cars waiting in line for a bag of groceries to feed their kids.
How bad is it? Let me tell you, since the media isn’t.
There are a record number of gun and ammo sales taking place. The shelves of my favorite gun store are almost empty and they will only allow the purchase of one box of ammunition per person. My liberal friends and family members cannot understand why this is happening. I’ll tell you why. It’s a bell weather. There are plenty of people who understand that something very dangerous is coming to America. Over the weekend 110 people were shot in Chicago, 13 dead. Crime is running rampant in New York, Philadelphia, Washington D.C. and L.A.
A headline in Zero Hedge: New York City is Dead. It’s only going to get worse.
Check out this video.
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Apr 24, 2020 - Uploaded by VOA News
In New York City people are asked to Shelter in Home and Quarantine and the streets of NYC are empty ...
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There are massive crime waves now, up triple digits, and it’s happening in all our big cities. This is going to be a trend. And it’s only going to get much, much worse. Look what’s happening in Wisconsin right now. |
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"Private citizens stand guard with guns...
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They are brutalizing police. Violence is erupting across the country. Mobs are assaulting police officers with bricks, They are shooting police officers, and lighting cars and building on fire. Do you think the police will be there to help you when the mob moves into your neighborhood? You will be on your own. People want to hear what they want to hear. This doesn’t even look like America anymore. It looks like a third world country.
Here are a few pictures from my city, Minneapolis, known as The City of Lakes, and one of the most beautiful cities in America.
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People don’t want the truth. They just want to feel good. These pictures are the truth. This is why I own guns and stockpile food and have gold and silver. My favorite psychic used to say, “Forewarned is forearmed.” Please, wake up to what is happening to this country now. Don’t be fooled by the stock market. Don’t be fooled by the pre-election rhetoric.
The State of California is unable to pay the $100 necessary to enable the unemployed to get the $300 stimulus check from the US government because they are broke. Yes, California is broke; they are the largest economy in America and they are broke.
Rent forbearance expired yesterday and thousands of people will be evicted. We will see an explosion in homelessness. If you don’t have family or friends to fall back on, where do you go? People are having their car repossessed and have no savings whatsoever. What are they going to do? Many people had zero savings before the shutdown and now we are in the worst economic collapse in U.S. history. What are they going to do? As things get worse, we are going to see things socially really unravel here in America.
It’s crazy. It’s like a Grateful Dead acid trip out there.
(My son Andy and his boy Josh love the Grateful Dead and they go to Dead concerts together. That was pre-Covid 19.)
The Dow was up almost 400 points yesterday and the NASDAQ and S & P 500 set new all-time records. This leads people to believe that the economy is doing just fine. But we just lost another million jobs last Thursday and will lose another million jobs this Thursday. This has been going on for 21 weeks in a row. Six months ago, if we lost 200,000 jobs it would have been a big deal. “V” shaped recovery? What recovery? This is far from normal.
I would like to introduce you to one of my favorite YouTube channels. This is the real take on the economy in a most entertaining format. Check out J Bravo’s latest, “Financial Ruin.” I watch him every night with my wife Susan. She loves him. Me too.
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Peter Shiff wrote an interesting article in which he points out that Main Street’s Pain is Wall Street’s Gain.
The very thing that is helping the Wall Street boom is crushing Main Street. How can the stock market be going up with the economy shut down and businesses boarded up and tens of millions of people unemployed? We just saw the worst ever mortgage delinquencies. Bankruptcies are at a 10-year high. Americans owe billions in back rent. There is a retail apocalypse. There is a rising number of zombie companies and a tsunami of defaults are on the horizon. Auto sales have collapsed. Think about it. The Fed can only stimulate the stock market. Stimulus doesn’t help Main Street. The rich get richer. Printing money doesn’t do anything for the real economy but it works magic on Wall Street. Every time the stock market runs into trouble, more stimulus comes to help. We are sacrificing the future to indulge in the present. The stock market doesn’t reflect the earnings of the economy. It reflects the earnings of the companies that are part of the stock market like Target and Costco and Walmart and Amazon. But the vast number of businesses in America are not publicly traded. They are privately held companies. They are the backbone of America. They are going by the wayside as a handful of mega-companies are gobbling up everything in sight. They are benefiting from the overall weakness of the economy. They have no competition. Meanwhile, the little mom and pop restaurants and salons are closed. The weaker the economy gets the better it will be for the stock market. Main Street gets the stimulus crumbs while Wall Street gets billions.
We are heading into the longest, hardest hitting depression in our history and most Americans are unaware of what is coming. They are unprepared for it and will pay an ultimate price for it.
Hunter interviews Hemke
Recently, Greg Hunter interviewed Craig Hemke. Hemke pointed out that something new is taking place that will cause the price of gold to explode. Here is the essence of what Hemke had to say.
The CME Group, trying to retain some legitimacy, turned the COMEX into a delivery vehicle back in April, where it never had been before. The important thing to understand is that the fundamental stuff that has driven gold and silver higher in the past month, none of that has changed.
You get speculative excesses that get rung out once in a while. Recently, they traded 1.75 billion ounces of pretend, fake digital silver on the futures exchange in one day. In a normal, non-Covid world, the entire world, including China, mines about 850 million ounces in a year. In one day’s trading in the phony baloney paper exchange they traded two times the entire global annual mining supply.
It’s important for you to understand why this is happening. Yes, they can trade two times global mine supply in a day, to shake out speculative excesses, but that just positions the metals to move higher. But the main thing to understand is there are
real fundamental reasons why gold and silver took off in the first place.
Everything changed on July 17th. That’s the day it all changed.
This is really important and it explains what has happened since. Early in the morning a story hit Bloomberg, and it said, “A major policy change was coming from the Fed.” We are entering a period of “Stagflation”, After what has already taken place, because of Covid-19, the economy has been devastated. The Fed knows this and they have already promised that they are going to maintain zero interest rates on the short end through 2022, that’s two and a half years. And then the news story hits.
The Fed has a “Dual Mandate.”
It’s 2% inflation, because they have to increase the money supply to service the debt, and the idea of full employment. The policy change has to do with the dual mandate. They are going to let inflation over-shoot 2%. They will hike it if necessary. They will do it until at least 2022 because the repercussions of Covid-19 will last at least that long. They are going to let inflation go past 2%, to 3% or 4%. The reason they do that is because you can pay off all that accumulating debt with less valuable currency tomorrow. This is how it’s always worked.
In the Bloomberg article, that said they were going to make this policy change, most likely on September 15 and 16, the next FOMC meeting, when they make that change and make that announcement they will most likely announce that they will combine that with “Yield Curve Control.” That means the Fed will not allow interest rates to move above or below a certain level. The Fed will buy bonds or sell bonds on the open market to keep the rates at the number they wish, say 1% on the 10-year bond. If the rates go above 1% they will aggressively buy bonds to push the rate back to 1%. And if it falls below ½% they will sell bonds and push it back up. That’s Yield Control. They’ve done that before. They did it between 1942 and 1951, which was the last time Debt to GDP was as extreme as it is now. Powell has admitted that they are studying it, they are looking at it. They have been putting out papers on it.
They go together: Yield Control and letting inflation rise. Why? Because in a normal environment, when inflation rises, interest rates rise. If investors are losing purchasing power they will demand a higher rate of interest on their investment so they at least break even. So, if inflation is 3% they might demand 4%. Negative “Real Rates” is when inflation is 3% but interest rates are only 1%. That’s a guaranteed loser of 2%.
They have to hold interest rates down. They have said they will hold them down until 2022. So these two policy changes go hand in hand. They are going to let inflation run, and they are going to lock in steeper and steeper negative real interest rates.
When that showed up on July 17, the metals took off. Then in early August the same exact article appeared on CNBC. That this was coming, likely in September. It’s been confirmed. Maybe not in September, maybe in October, but it’s coming. The All-Time lows in “Real Interest rates” (adjusted for inflation) occurred in the first week of August when gold topped out near $2,100 and silver was near $30. “Real” interest rates were NEGATIVE 1.1% off the 10-year treasury and the CPI. What’s gold going to be at negative 2.1% or 3.1%? The Fed is going to do it. They have already told us.
In the 70s when gold went from $100 to $900 in three years, negative rates got to about 5%. Who’s is to say that won’t happen again? We are now experiencing STAGFLATION where the economy has collapsed and the politicians have to continue to keep printing. The Democrats are asking for another $3 trillion in stimulus. What’s going to happen if Biden wins? If Covid-19 continues through next year, how much larger will the deficits become? The Fed is going to have to monetize it all. The money will get out into the economy and inflation will pick up. Do you think the recent pullbacks even matter?
This is very important for you to think about. Go back to March. What happened in March? Real interest rates went up and the bond market went down and gold and silver just got crushed. Silver was $12. Then on March 21, the Fed announced QE to Infinity. The big banks like JPMorgan and Citi Group and Goldman Sachs, they all know what’s coming. They tried to cover as many shorts as possible. They had to smash prices as much as they can to flush prices back down to get as many of the speculators back out, When speculators are selling the banks are buying. They are taking the other side of the trade and covering up their shorts. They are all trying to position themselves better before the major policy change, that’s coming. And when it does – it’s pedal to the metal.
I’m already fully invested. I’ve been buying for the last 20-years and I’m not selling anything. And when this happens, that’s your green light and never look back. We will have a choppy August but come September, it’s a game changer.
When they crashed the price of silver, in March, down to $12, you couldn’t buy physical silver for under $25. That’s the real price, not the fake paper price on COMEX. So what’s the real price? Is it the COMEX price where they trade two times the world’s production in phony paper derivative contracts in a day, or is it the price you have to pay to get real silver?
Now that they’ve turned the COMEX into a delivery vehicle, JPMorgan has a choice. Stop shorting or lose your physical silver position. The Commercials are in an untenable position. They can either deliver the silver that they have, and parcel it all out, over the next eight or ten delivery months, or whatever it takes, or they can try and cover all their short contracts, buy them back at a loss, so they don’t have to deliver and then they can keep their physical silver. Either way, that eliminates a lot of the selling pressure that’s been in the derivative market for years.
None of those fundamentals have changed either. Couple that with the new Fed policy and things are setting up for an explosion in gold and silver prices. The Fed is going to be dealing with inevitable inflation. The Fed knows that. Go to any store. You see already there’s price inflation. It’s a perfect storm. And that puts us right back to the 70s. If gold rises 9 times like it did in the 70s gold will hit $18,000. Jim Richards predicts gold will rise to at least $15,000. Are these numbers crazy? No. That’s what happened the last time we experienced stagflation in the 1970s.
It's impossible to predict the price as something per ounce, because we have no idea how many ounces there are. Gold has been re-hypothecated so many times, with estimates as high as 100 to 1 (the same ounce of gold has been sold/promised 100 times for every ounce available. Geoff Christian even said that and he is one of the biggest shills for the current system you will find). So if we don’t know how many ounces of gold there are in the world that are accessible, it is not possible to predict a price per ounce.
August is always a volatile month. The traders go on vacation. If you have less volume you usually get more volatility. We should have a much better picture of where gold is headed in the next three weeks. $26 is important for silver on a closing basis, but as we go into the end of the year, $34 maybe? $36? And gold? When you make higher highs, on a weekly and monthly basis, and close there above the previous highs, that’s when prices really start rising. In gold, once we got above $1,920, which was the old high, look how quick we went to $2,080. We have pulled back a bit, but the next time we get above $2,000 and the next time we make even higher highs, which, if we are correct about the Fed’s coming announcement, we could easily go to $2,300 or $2,400 really quick.
Is this the time to buy gold and silver?
Do you think gold and silver will cost more in six months or a year? If you do, then yes, this is the time to buy gold and silver. Every pullback is met by the “buy the dip” buyers. All the technicals indicate that the bull market is alive and well. Gold and silver are building a solid base to move up from. The risk is in holding dollars and holding stocks, not in buying gold and silver.
Premiums are still high, but they have come down. Inventory is difficult to source, but we still have most items for immediate delivery. I fully expect prices to rise after this week’s big event: Fed Chair Jerome Powell will use the virtual Jacksons Hole conference to announce “average inflation” targeting.
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The Central Banks are trapped in promises to do “whatever it takes”, and low interest rates forever (whatever inflation does)...
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I also expect premiums to rise even higher and product availability to become even more uncertain. The “big money” has discovered gold and silver. Yes, this market has changed.
Don’t be concerned that gold has come down $140 from its recent high of $2,067 just three weeks ago. It was exactly one month ago that gold was around $1,750. If I would have told you then that gold would rise by nearly $200 in a month you would have been ecstatic.
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And how about silver? Sure, its come down from its August 1st high of $29.14, but two months ago it was selling for $17.53. If I told you in late June that silver would be $26.50 you would have told me I’m crazy.
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Yes, this is, in my opinion, a very good time to buy them. I don’t give financial advice. This is what I am doing. Don’t listen to me. Do your own research. In the last two months I have added substantially to my gold and silver holdings and will to continue to buy them and I will ship them to my storage account at Brinks in Montreal. There is a good chance that prices will start to move up again soon. |
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History will remember Paul Volcker and Jerome Powell as standing on the opposite ends of the inflation canyon, with the former taking desperate actions to try to tamp it down and the latter expected this week to announce an unprecedented effort to crank it back up.
Volcker, the Federal Reserve chairman from 1979-87, ushered through a series of inflation-busting interest rate hikes that dragged the country into recession but won the fight against pricing pressures and spurred a powerful economic recovery.
Powell, the central bank chief since 2018, is likely to detail a set of measures aimed at pushing inflation higher amid a coronavirus pandemic that has dragged the U.S. economy into one of its darkest hours.
While the average consumer might find it absurd to want to raise the cost of living, central bankers and economists see too little inflation also as a problem. It often reflects a slow-moving economy with a low standard of living. On top of that, the accompanying low interest rates give policymakers little wiggle room when crises happen and there's a need to loosen policy.
Fractional reserve banking doesn't work in a deflationary environment -- and I suspect that the "Inflate, or die" scenario is about to go into Hyper-drive on the inflation side.
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Stagflation is coming
And finally, I want to take issue with the following article. Yes, it does discuss how money is created – by the fractional reserve process of banks making loans. It is correct as far as it goes, but it does not address two of the important drivers of inflation.
When foreigners start dumping our bonds, due to the unprecedented amount of new dollar creation by the Fed, which is watering down the dollar - as the dollar falls, prices of all of our imports will rise. (That is what most people think inflation is. I have told you many times before, inflation is an increase in the money supply which leads to rising prices. Rising prices are not a cause of inflation, they are the effect of inflation.)
And second, when the Fed buys government bonds (monetizing the debt) to the tune of five or six trillion dollars this year alone, a lot of the newly created money will flow into main street in the form of stimulus and unemployment and all forms of aid, bypassing the banking system. More money – more demand – rising prices.
Read the following article. It is very educational, but I still say, we will soon see inflation. It will resemble the 1970s “Stagflation,” where we had a stagnant economy, rising prices and a bull market in gold and silver.
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Zero Hedge
On Inflation (& How It's Not What Happens Next)
Everyone is convinced the dollar is going to inflate because more dollars are entering the system.
But are they really?
That is the question that sparked a succinct Twitter thread by Travis K (@ColoradoTravis) explaining why inflation is not what happens next (emphasis ours):
Let’s take a look at how dollars are born and how they die.
A dollar is 'born' when a loan is made against collateral on a bank's balance sheet. Banks can issue multiples of dollars for every dollar of collateral they have.
It's this multiplication effect that expands the amount of total dollars.
Generally, banks are limited in how much they can lend - let's say it's 10x their collateral. So for every dollar of collateral they have, they can lend 10 dollars.
By so lending, they 'birth' new dollars into the system.
As banks lend more, more dollars are created and the money supply increases. This multiplicative lending is the chief driver of total dollars in the system.
Banks lending a lot → more total dollars and inflation.
When do dollars die?
Dollars 'die' when debts are paid back. This reverses the multiplication effect of lending, leading to less total dollars in the system and a contraction of total dollars in circulation.
So what is the Fed 'printer' doing - creating dollars, right? Actually no, not really.
The printer only increases the collateral banks have to lend against. It does not directly 'birth' dollars, only *potential* dollars.
Banks are still the midwives, and the only ones who birth dollars into the system by lending.
The Fed can increase collateral by 1000x but unless the banks lend against that collateral, dollars will not enter circulation for you and I to interact with.
Assume for a moment bank collateral was infinite - then what would drive total dollar amount?
1) Banks' appetite for lending.
2) Bank customers' appetite for borrowing.
That’s it.
Now let's observe that collateral effectively IS infinite, because banks have so much excess reserve capacity they haven’t been near their limits for years.
Total dollar amounts are, right now, only a function of bank and customer debt appetites.
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The Fed has made a big show of radically increasing collateral levels, but it doesn't matter -- at least right now.
Not if banks feel weird about lending. Not when people feel weird about borrowing.
Why, then, does it look like inflation out there right now? Two reasons.
First, we just had a brief, manic borrowing pulse as corporates panic-borrowed out of fear.
This borrowing was a bit inflationary (more dollars born).
Second, and maybe more important, the government decided people could put debt payments on pause.
This 'froze' the dollar death process for a time. Because those dollars haven't died yet, we have more of them around right now.
But, you see, that dollar death process is beginning to thaw.
Loans need to be paid again soon as the forbearance ends.
A lot of dollars are about to die.
Record numbers of people are losing their jobs, which means in aggregate customers' appetite for fresh debt is decreasing by a lot.
So the dollar birth rate will decline.
Banks also aren't really feeling like lending because the economy looks pretty dicey.
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This also is not good news for the net dollar birth rate moving forward.
So while, yes, we have just experienced a bit of an inflationary pulse from panic borrowing and freezing the dollar death process that looks like it's about to reverse in a big way.
When it does there will be less total dollars.
The Fed can't do anything about this. Banks are already swimming in collateral, more of that won't do anything at all.
The only thing that can make more dollars now is banks lending more.
So as you watch asset prices go nuts as everyone rushes to get rid of their dollars for fear of inflation, remember - the dollar birthrate looks like it'll be decreasing for some time to come.
And that means the whole economy will be running on incrementally less of them until banks want to lend and we all want to borrow.
What the Fed did in three or four months, what it took them to do in three to five years during the so-called financial crisis, that is an extraordinary amount. Then you combine it with fiscal stimulus because the Fed is now buying the Treasuries . . . and the Treasury is sending checks out to Main Street. We are seeing that money going into the economy that is extraordinarily inflationary.”
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Here are a few worthwhile articles culled from Zero Hedge. |
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"Gold hedges our clients against two scenarios: a weaker US dollar and the debasement of all currencies (the dollar declines and so do other currencies)..."
Tedros' dire comments came just as Biden indicated "I would shut it down" if scientists recommended...
Misguided lockdowns have destroyed the global economy and the impact is likely to last for years...
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Private Safe Deposit Boxes
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Unencumbered / Segregated Storage
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About Miles Franklin
Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.
We are rated A+ by the BBB with zero complaints on our record. We are recommended by many prominent newsletter writers including Doug Casey, Jim Sinclair, David Morgan, Future Money Trends and the SGT Report.
For your protection, regardless of where you live, we are licensed, regulated, bonded and background checked per Minnesota State law.
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