Unless Trees Grow to the Sky and Debt Doesn't Matter

November 21, 2019

The Miles Franklin Newsletter

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From The Desk Of David Schectman

Our analysis still shows that $1,650/oz gold next year is in the cards, once the weak longs get shaken out and as modest global growth assure a low rate environment and continued Fed monetary accommodation.

Another central driver for gold will remain increased central bank buying, which has served as a major demand pillar for the last two years.

Central banks are buying the metal at a record clip so far this year and it is likely that equity market correction risk may get higher as well, all trends which should drive interest in gold again. – TD Securities

"Investors Are Now Back Drinking Vast Amounts of Kool-Aid" pretty much sums up the current euphoria surrounding the biggest 'Everything Bubble' that the world has ever known. And how much longer the Fed and Wall Street can or will keep this bubble inflated, remains to be seen. But it can't be forever. – Ed Steer

David's Commentary (In Blue):

Will the stock market continue its upward trend? It could, for a while. As long as the Fed keeps flooding the market with virtually free money (most of it going to Wall Street) there are sufficient funds to keep it afloat or rising. But long-term- NO. That is unless trees grow to the sky and debt doesn’t matter. And that would be a first.

It seems that everyone has an opinion on where gold and the stock market are headed. Here is my take. Like all “opinions” mine is just that – an “opinion.” As long as gold stays in its current trading range, say $1,450 to $1,550 and the stock market is flat or gently rising, then interest in gold will be minimum. One of two things must happen. Either the stock market has to fall hard, or gold has to rise a lot, to at least $1,600. Now I do believe that both of these things will happen, and the odds are within the next 12 months. But the media and Wall Street have the typical investor (and investment advisor) lulled into the state of mind that the economy and the stock market are set to perform well into the future. There is no risk. No need for gold or silver. It doesn’t matter what is actually happening, just listen to us. As Richard Prior said, “Do you believe me or your lying eyes?”

The trade war, soon to be a cold war, with China is not going to go away. The global economy is sinking. The central banks are printing money like there is no tomorrow. Maybe if they stopped there would be no tomorrow. The Fed is back to buying bonds and adding huge amounts of new dollars via their “Repo” plan and it all goes to a handful of the largest NY City banks. No doubt, a big chunk ends up in the stock market.

I believe this is how it will play out. The Fed will join Japan and the ECU and start directly buying stocks as soon as the stock market starts to pull back. Confidence is the name of the game and the stock market is the foundation of the confidence. Once the smart big money sees that the Fed is holding everything together with unlimited new money creation they will start accumulating gold. Then, even though the stock market may still be rising, gold will be rising faster, and nothing helps a young bull market like rapidly rising prices.

The retail buyer will be the last to join the party, but they will return. The easy money is the first money and only the true gold and silver bugs, who know how the game is played and will be rewarded for going all in early in the move.

The following comments by John Rubino sums up why I own gold and silver.

John Rubino

Civil Unrest is The New Normal Out There

This is getting ridiculous. Every few days another country blows up, as their citizens take to the streets with little warning and no apparent interest in a quick settlement. Here’s the first part of the “War…Civil Unrest” section of today’s DollarCollapse.com links list . As you can see the peasants have grabbed their pitchforks and besieged their betters on four continents over a wide range of issues, which implies that the stated cause in each case is just an excuse.

The real grievance is the sense that an unresponsive elite are sucking up all the available wealth, leaving the vast majority with (at best) zero upward mobility and at worst a return to the servitude their parents only recently escaped. To test the truth of this, watch what happens when a chastened government caves on the initial issue — and instead of heading back home the protesters ramp it up.

Who even remembers what pulled France’s Yellow Vests into the streets? The Macron government has spent months apologizing and offering big new spending programs aimed at the protesters’ stated concerns. Yet today’s headline is about water cannons and flipped cars. Hong Kong repealed the law that ignited its riots back in June, yet today the story is protesters shooting police with arrows (!) and Chinese soldiers deploying to help “clean up the streets.” Uh huh.

Why is this happening now? Because artificially easy money enriches the people who own the stocks, bonds and real estate that rise in value when interest rates go down. This expands the already painfully wide gap between rich and poor and turns the already high level of background resentment into a powder keg. Then it’s just a matter of a provocation. And there’s always another provocation coming.

Looked at this way, the current wave of unrest is not easily fixed because the immediate remedy is even more easy money. In other words, reinstate the gas price subsidy and borrow whatever is necessary to cover the cost. Or increase welfare spending to make life slightly easier for protesters, at the cost of higher deficits. Then cut interest rates to finance all the new debt.

The result? Even more new money flowing into the elite via rising financial asset prices. Which further widens the gap between rich and poor.

Not a single government is responding to protests with “Ok, we’ll take a bunch of real wealth from the oligarchs and give it to the protesters.” That solution obviously won’t fly with the various versions of deep state/military industrial complex that are in charge out there. Easy money, in contrast, 1) is technically doable, 2) appears at first glance to help the 99%, and 3) actually further enriches the 1%. So no one objects, the problem gets worse, and the next round of unrest is even bigger.

This may not be immediately apparent, but most people will get it eventually, by which time a peaceful solution will be far out of reach. Civil unrest is our new normal.

So who is getting the trillions of new dollars that the Fed gifted to the marketplace? Sounds like Ben Bernanke’s “Helicopter Dollars” doesn’t it? Check out the second paragraph of the following article and decide whether you want to laugh or cry.

Ed Steer

These Are the Banks that Own the New York Fed and Its Money Button

The New York Fed has now pumped out upwards of $3 trillion in a period of 63 days to unnamed trading houses on Wall Street to ease a liquidity crisis that has yet to be credibly explained. In addition, it has launched a new asset purchase program, buying up $60 billion each month in U.S. Treasury bills. Based on the continuing escalation of its plans, it appears to be testing the limits of what the public will tolerate. We thought it was time to answer the question: who exactly owns the New York Fed and its magical money spigot that can pump trillions of dollars into Wall Street at the press of a button.

The largest share-owners of the New York Fed are the following five Wall Street banks: JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley, and Bank of New York Mellon. Those five banks represent two-thirds of the eight Global Systemically Important Banks ( G-SIBs ) in the United States. The other three G-SIBs are Bank of America, a share owner in the Richmond Fed; Wells Fargo, a share owner of the San Francisco Fed; and State Street, a share owner in the Boston Fed.

G-SIBs have the ability to inflict systemic contagion on the entire global banking system (as happened in 2008) and thus must be monitored closely for financial stability. JPMorgan Chase, Citigroup, Goldman Sachs, and Morgan Stanley are also four of the five largest holders of high-risk derivatives. (Bank of America is the fifth.)

These same Wall Street banks also participate in various advisory groups with the New York Fed where they hash out "best practices" for their industry. Those "best practices" were not sufficient to prevent JPMorgan Chase from becoming a three-count felon, Citigroup a one-count felon, and four of the banks (all but Bank of New York Mellon) from actively engaging in creating and selling subprime investments that blew up the U.S. financial system, the nation's economy and a good swath of Wall Street in 2008.

This very interesting commentary showed up on the wallstreetonparade.com Internet site on Tuesday sometime -- and the first reader through the door with it was Richard De Graff. Another link to it is here .

I guess there are large sovereign wealth funds and central banks who still believe getting a percent or two on massive pools of money, with a degree of safety and liquidity is a worthwhile investment.

U.S. National Debt Spiked by $1.3 Trillion in 12 Months, to $23 Trillion. But Who Bought This Pile of Treasury Securities? -- Wolf Richter

The U.S. Gross National Debt has jumped by $1.28 trillion as of today, compared to 12 months ago, to $23.04 trillion. And these are the good times. The economy is rocking and rolling, we're told. How will this debt balloon during the next economic downturn? Yes, that was a rhetorical question. It's better to not even think about it. And no one is thinking about it:

Every dollar of this debt exists in form of Treasury securities that someone must have bought and must own. In terms of foreign holders, we got some answers in the Treasury Department's TIC data today, which shows how much of this debt was held, bought, or dumped by foreign investors through the end of September. And we can glue the other pieces together from the Fed's balance sheet and from the Treasury Department's disclosures.

All foreign investors combined - "foreign official" holders such as central banks and foreign private-sector investors of all stripes - dumped $84 billion in U.S. Treasury securities in September. But compared to September 2018, their holdings were up by a massive $551 billion.

In the prior month, August, foreign holders had set a record with $6.86 trillion in Treasuries! September was just tick-down from that record -- and remains the second highest ever.

Who to blame for this theft of Middle-Class wealth? The Supreme Court and the Fed go to the top of the list.

Executive Order 6102 Led to the Fall of America's Money System -- Bill Bonner

The Supreme Court has been derelict in its duty for the last 80 years. For years, the Court has looked the other way as the feds robbed one class of citizen (ordinary, working people) and rewarded another (the elite).

As a result, the American empire faces a catastrophic money crisis... probably accompanied by internal schisms, social breakdowns, and dangerous political scuffles.

Let's begin by looking again at the connection between time and money.

Losing Time

If you work by the hour, the guy with money can buy your time. That's what it really means to say someone is "rich" - he has more time because he can control not only his own, but yours, too.

The guy who had $1,000 worth of stocks in 1971 could buy approximately 260 of the average working man's hours. Today, that $1,000 worth of stocks is worth about $32,000... which, at today's $28-per-hour average, will buy 1,140 hours of the typical working man's time - about four times as much as in 1971.

In other words, compared to the wage earner, the capitalist is four times as rich.

Invert it, and you see about the same thing. A working man would have had to labor for 224 hours to buy the 30 Dow stocks in 1971. Today, his time is much less valuable; he has to sweat for 1,000 hours to buy the Dow.

That's why the liberals whine about "inequality"... and probably why Donald J. Trump was elected.

Few people may have done the math, but a lot of people suspected a rat.

And they were right.

The link to it is here .

Keep Buying Gold to Brace for Crisis, Serbian Leader Tells Bank

Serbia needs to further increase its gold reserves even after recent purchases pushed its stash to a record, President Aleksandar Vucic said on Tuesday, saying the Balkan nation has to fortify itself against a looming economic crisis.

The biggest former Yugoslav republic added nine tons of the precious metal in October to increase its stockpile to more than 30 tons, heeding Vucic's advice. Serbia followed Hungary and Poland in boosting gold reserves to create an economic bulwark.

"I think we'll continue doing that because of what we see in which direction the crisis in the world is moving," Vucic told reporters in Belgrade on Tuesday. He cited slowing growth in the euro area, Serbia's top trading partner and main sources of investment.

Central bank Governor Jorgovanka Tabakovic said that Serbia paid about $434 million for the gold it bought last month, or $1,503 an ounce, raising its holdings to 10% of total reserves. It was the latest in a series of moves by the country to shore up financial stability, including through changes of the structure of its foreign debt and increasing the share of dinars and euros.

The link to it is here .

I don’t much care for Martin Armstrong, but here is a topic that is worth your time .

What’s Really Wrong with the Repo Market? with Martin Armstrong

The game is on. Martin Armstrong believes that gold's recent advance was just the opening salvo. He wouldn't be surprised to see it take a hit for now and then come screaming back to start making new highs. As Martin says, people are starting to wise up to the monetary debasement game. Confidence in the Government …