Wednesday, October 17, 2018



Silver Bullion: Once and Future Money


by Mark O’Byrne, via SilverSeek:

– “Silver is as much a monetary metal as gold” – Rickards
– U.S. following footsteps of Roman Empire which collapsed due to currency debasement (must see table)
– Silver bullion is set to rally due to a combination of supply/demand fundamentals, geopolitical pressures creating safe haven demand, and increasing inflation expectations as confidence in central banking and fiat money erodes

– “Silver is ripe for a major breakout to the upside in 2018″ – analyst Samson Li of Reuters
– Investors can still buy 99.9% pure one ounce silver bullion coins

– “Secular rally in silver bullion is in its early days” and “will be sustained and amplified in the months and years to come”

Silver Denarius of Marcus Aurelius via Wikipedia and Silver Eagles (2018) of U.S. Mint

Text by Jim Rickards via Daily Reckoning

The Roman Republic and the later Roman Empire had gold coins called the aureus and solidus, but they also minted a popular silver coin called the denarius. One denarius was the daily wage for unskilled labor and Roman soldiers.

Of course, in the late Empire, the aureus, solidus and denarius were all debased by mixing the gold and silver with base metals. The decline of the Roman Empire went hand in hand with the decline of sound money.

In the early ninth century AD, Charlemagne greatly expanded silver coinage to compensate for a shortage of gold. This was successful in stimulating the economy of the predecessor of the Holy Roman Empire. In a sense, Charlemagne was the inventor of quantitative easing over 1,000 years ago. Silver was his preferred form of money.

Under the U.S. Coinage Act of 1792, both gold and silver coins were legal tender in the U.S. From 1794 to 1935, the U.S. Mint issued “silver dollars” in various designs. These were widely circulated and used as money by everyday Americans. The American dollar was legally defined as one ounce of silver.

The American silver dollar of the late eighteenth century was a copy of the earlier Spanish Real de a ocho minted by the Spanish Empire beginning in the late sixteenth century. The English name for the Spanish coin was the “piece of eight,” (ocho is the Spanish world for “eight”) because the coin could easily be divided into one-eighth pieces.

Until 2001 stock prices on the New York Stock Exchange were quoted in eighths and sixteenths based on the original Spanish silver coin and its one-eight sections.

Click to enlarge. Currency debasement as seen in falling silver purity of the Antoninianus (Wikipedia)

Until 1935 U.S. silver coins were 90% pure silver with 10% copper alloy added for durability. After the U.S. Coinage Act of 1965, the silver content of half-dollars, quarters and dimes was reduced from 90% to 40% due to rising price of silver and hoarding by citizens who prized the valuable silver content of the older coins.

The new law signed by President Johnson in 1965 marked the end of true silver coinage by the U.S. Other legislation in 1968 ended the redeemability of old “silver certificates” (paper Treasury notes) for silver bullion.

Thereafter, U.S. coinage consisted of base metals and paper money that was not convertible into silver; (gold convertibility had already ended in 1933).

Let’s hope that the U.S. is not following in the footsteps of the Roman Empire in terms of a political decline coinciding with the substitution of base metals for true gold and silver coinage.

In 1986, the U.S. reintroduced silver coinage with a .999 pure silver one-ounce coin called the American Silver Eagle. However, this is not legal tender although it does carry a “one dollar” face value. The silver eagle is a bullion coin prized by investors and collectors for its silver content. But it is not money.


Who in their right mind would pay a full ounce of silver for goods or services worth only a buck?

In short, silver is as much a monetary metal as gold, and has just as good a pedigree when it comes to use in coinage. Silver has supported the economies of empires, kingdoms and nation states throughout history.

It should come as no surprise that percentage increases and decreases in silver and gold prices denominated in dollars are closely correlated.

Silver is more volatile than gold and is more difficult to analyze because it has far more industrial applications than gold. Silver is useful in engines, electronics and coatings.

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Um, Is the US Treasury “Yield Curve” Steepening or Flattening?


by Wolf Richter, Wolf Street:

And how would the housing market digest these kinds of mortgage rates?

In this cycle, the Fed has hiked its target range for the federal funds rate only after meetings that were followed by a press conference. There are four of them scheduled this year – the first one on March 14-15. So, next time the Fed may nudge up its target range (currently 1.25%-1.50%) is 6 weeks away.

The one-month yield of US Treasury securities has vacillated around 1.25% since the last rate hike in December, closing on Friday at 1.24%. The three-month yield has vacillated above 1.4% for a month, closing on Friday at 1.41%. So this end of the curve is waiting till the propitious decision on March 15 gets closer:

About $14.8 trillion of the US government’s $20.5 trillion in debt is publicly traded (the remaining $5.7 trillion is held by internal accounts of the US government, such as Social Security). This makes the Treasury market the most liquid bond market in the world, and its benchmark yields underpin a number of other markets, including the mortgage market.

And unlike Treasuries with shorter maturities, Treasuries with longer maturities have moved in recent weeks, with prices falling and yields rising.

The two-year yield jumped 5 basis points to 2.13% on Friday, the highest since September 2008, continuing the spike that started on September 8, 2017, shortly before the Fed announced the QE Unwind start-date:

The whole mid-range of the yield curve has moved up. The five-year yield jumped 6 basis points to 2.47% on Friday. The seven-year yield rose 5 basis points to 2.60%, up from 2.33% at the end of December.

The chart below shows the “yield curves” as they occurred on these four dates:

  1. Yields on Friday, January 26, 2018 (red line)
  2. Yields on December 29, 2017 (black line)
  3. Yields on August 29, 2017 (green line) two weeks before the QE unwind was detailed.
  4. Yields on December 14, 2016 (blue line) when the Fed stopped flip-flopping, raised its rates, and became a clockwork.

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Dollar Destruction and Inexpensive Commodities


by Gary Christianson, Miles Franklin:

Americans buy groceries with dollars. Most of the world buys crude oil with dollars.  World trade depends upon dollars. That is changing but for now, it’s a fact.


If dollars weaken against other fiat currencies and against commodities, it takes more dollars to buy the same stuff. That extra-hot, sugar free, half-caf, soy latte for five bucks could be priced at seven bucks next year.  Gasoline in the U.S. was $0.25 fifty years ago and now it’s ten times more expensive. Slow or fast, dollars devalue!

The problem is not the gasoline, the oil companies or coffee shops … it’s the dollar. “Print” too many dollars (euros, yen, pounds) and they buy less.

The Fed has “printed” an excess of dollars, and global debt has skyrocketed into uncharted territory. There will be consequences.

The dollars are invested, many in stocks and bonds. Continuously rising stock prices since 2009 and the 35 year bull market in bonds (lower yields) are a consequence of massive debt creation and dollar (euros, yen, pounds) devaluation.

Cycles and Consequences Exist:

Examine the Thomas Reuters Commodity Index (similar to the Goldman Sachs Commodity Index).  Note the lows in early 2016, and seven years before in 2009, and seven years before in 2002. The index in late January 2018 is 29% higher than the 2016 lows.

Examine the dollar index. The Index is measured against other “over-printed” fiat currencies so it measures relative strength and weakness against other paper currencies.  The index is counter-cyclical with commodities.  Note the highs in late 2016, 2009, 2001 and 1993.

The dollar has been falling against commodities and other currencies for two years. What can we expect for the dollar?

  1. The value of the dollar will weaken for many reasons.
  2. Congress and the Administration have no incentive to reduce expenditures on wars, social programs, bureaucracies or graft. Expect continuously increasing debt.  That means more dollars will be created and every existing dollar will be devalued.
  3. The dollar is slowly losing its status as the global reserve currency.
  4. While the U.S. is obsessed with military presence in 175 countries, China is building the One Belt One Road. If successful, their enhanced trading will strengthen the yuan and weaken the dollar.
  5. Western countries are selling gold and shipping bullion to China, India, Russia and Turkey. They recycle devalued dollars into gold – a sensible policy.
  6. US. foreign and domestic policies have not inspired confidence in the dollar or the U.S. government for many administrations. The value of the dollar declines along with decreasing confidence.

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Dig In, Harden Defenses, And Prepare For The Cartel Bombing Runs


from SilverDoctors:

SD Outlook: This week is going to be one heck of a battle for gold & silver. Here’s why…

On the fundamental front this week, it’s going to be a tough one.

The week starts out seemingly normal on the calendar:

But what is not shown on the economic events is the President’s first State Of The Union Address which is on Tuesday, January 30th at 9:00 p.m. EST.

Recall that last week the president moved markets (especially the dollar and the metals) when he talked up the dollar and talked down Stevie’s “weak dollar” comments.

When the president addresses the nation of Tuesday night, that will be after-hours trading, and the market will be fairly thin, so if President Trump says some “dollar bullish” things, prepare for a paper bombing of the gold & silver markets.

It is hard to imagine that anything he says is “dollar bullish”, such as engaging in a trade war but wanting a strong dollar all the same, cause that dog don’t hunt, but that is the spin the MSM and especially the mainstream financial media will put on the speech if necessary.

For now, the cartel is riding the “everything is awesome” meme, and they will do so until they can make more money on the collapse. For now, however, the market’s are raking in plenty of fiat so they are content to keep it going as is.

A working theory of mine is that between the C.I.A. controlled media abroad, colluding central banks around the globe, and a dumbed-down population in general, all of this praise for such a good U.S. economy is not directed inward, but outward, so as to maintain the illusion of U.S. dominance in the markets.

While the dollar amount for total size of the economy and economic activity may show dominance for the time being, on the fundamental front, we’re no where near the top of the pack.

Speaking of fundamentals, there is no let-up on Wednesday with the January FOMC:

Better than 95% of the market, according to CME Group, is expecting the Fed to hold on interest rates.

Additionally, there is no press conference on Wednesday, so basically the Fed gets a free pass as this is Janet Yellen’s last official FOMC meeting as Fed Chair.

The next FOMC in March will be Powell’s first as Fed Chair, and that one is showing over a 75% chance of a rate hike, but for now, the Fed is able to convey whatever message they want. Between the State Of The Union Address and Janet surely getting praise in the form of a mainstream financial press “lifetime achievement” love fest, not many eyes will be directed towards the Fed’s inaction anyway. Eyes will be on the bond market, yes, but on the Fed, they’ll just get their free pass.

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“There’s Anger Building Out There” – One Man’s Message To Davos Elites


from ZeroHedge:

One man went to Davos and dared to say what Pepe Escobar thought no one would – that “it’s the inequality, stupid.”

Amid all the back-slapping exuberance of record high global stock markets and record high global net worth, John McDonnell, the U.K. opposition Labour Party’s spokesman on finance, came to the World Economic Forum in Davos with an uncomfortable message for the global elite

“I just warn the Davos establishment: There’s an anger building out there that you need to recognize and deal with,”

As Bloomberg reports, most delegates in Davos have adopted an upbeat tone this week — reflected in the optimism of top bankers at JPMorgan Chase & Co. and Deutsche Bank AG who told Bloomberg they see a continuation in a global boom in dealmaking.

But as McDonnell warns, there’s an “avalanche of discontent” out there among the masses.

But in the Swiss resort, “there’s almost a sense of euphoria, it is extraordinary, and I think there’s a sense of complacency.”

McDonnell’s warning carries weight because he would be chancellor of the exchequer if Labour came to power — something investors are preparing for.

“Out there, beyond the Davos compound, many people — we saw it in the Oxfam report — feel the markets have been rigged against them, not for them,” McDonnell said.

“When they’re told we’re coming out of that recession, growth is returning and they don’t feel they’re participating in the benefits of that growth, that’s when people become really alienated and angry.”

Bloomberg reports that McDonnell then laid out a recipe for regaining the trust of the masses, including:

  • Paying workers a “real living wage” and allowing them to share in the profits of the companies they work for.
  • Recognizing trade unions and appointing workers to company boards.
  • A new “Hippocratic oath” for accountancy firms to tackle tax avoidance rather than encourage it.
  • The rich and those in power should publish their income tax returns.
  • A “Robin Hood” tax on financial transactions that would be used to fund public services and international development programs.

With the support of the far left fringes of Labour, both McDonnell and Labour Leader Jeremy Corbyn have firmed up their grip over the party, appointing allies to the party’s National Executive Committee in recent months after fending of an attempted coup by moderate lawmakers in 2016.

“There has to be a radical new agenda where people share in the growth, share in the wealth, share in the benefits as the economic cycle turns,” McDonnell said.
“I think there’s an avalanche out there of discontent and resentment and alienation if we don’t address these issues.”

Still, as Pepe Escobar previously notedthis year’s Davos theme was “Resilient Dynamism.” As a definition of the current woes of turbo-capitalism, a five-year-old in a favela, or slum, in Rio could come up with something more meaningful. 

But then, Davos is a one-trick pony. “Resilience” remains a euphemism for the ever-expanding markets and low pay for workers syndrome. In a nutshell, globalization driven by huge multinational corporations.

We should scrap “Resilience” as the name of their game is “Inequality.” Davos, of course, does not do “inequality.” 

In a study released by UC Berkeley, the wealth of the top 1% of Americans accrued by 11.6% in 2010, while for the other 99% it was a mere 0.2%. This is what is at the heart of hardcore neoliberalism and capitalist.  

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Don’t Fight the Fed! Or the Rest of the World’s Central Banks

by Michael Pento, Market Oracle:

On March 9, 2009, The Wall Street Journal’s Money and Investing section posed this ominous question: “How low can stocks go?” The stench of economic malaise was suffocating as the Dow Jones Industrial Average (DJIA) rounded off its fourth straight week of losses, and the S&P 500 touched below 700 for the first time in 13 years. Goldman Sachs cautioned the S&P could fall to 400, while CNBC’s Jim Cramer was busily calculating the stock valuations of the DJIA components based on balance sheet cash levels. 

Yet miraculously, as the market pundits stood despondently believing there was nothing positive on the economic horizon and that no stock was worth buying at any price, investors stared into the abyss and took a leap of faith. And just like that, the market had bottomed. Dow 6,440.08 was a buying opportunity, and with the Fed’s QE spigot operating on full throttle, the Dow was poised for a historic take-off.

Oh, what a difference nine years make! Today, the Dow has now crossed the then unimaginable level of 26,000. The rationalizations abound; lower corporate taxes, less regulation and sizzling business and consumer confidence all scream “happy days are here again!” With nothing but blue skies ahead, the only question left for Wall Street to ponder is the uncertainty of how many days it will take before the Dow crosses another 1,000-point milestone.

But not so fast…Remember, the stock market climbs a wall of worry, and in 2009 that wall was seemingly insurmountable. Back then the sentiment was that nothing could go right–yet the market endured as economic and financial Armageddon loomed around every corner. Today, the exact opposite scenario is evident. The belief prevails that nothing can go wrong. However, hiding in plain sight there is one gigantic cliff the market has already started to head down. But the real reason behind the next violent crash in the equity market is the current bursting of the worldwide bond bubble.

The stock market now resembles an unstable uranium 235 isotope. The splitting catalyst will be the result of slamming $10 trillion worth of negative-yielding sovereign debt and $230 trillion worth of total global debt into the reversal of central bank money printing and unprecedented interest rate suppression.

Remember this truth: If the market can rise on sluggish growth, it can also fall when growth seems fine. 

Investors must determine what has already been priced into shares and what lies ahead for growth. It is essential to keep in mind that the market is over-priced according to almost every metric. For instance, even if all the rosy economic projections pan out for the tax cuts, the market is still trading at 18.6 times forward 2018 earnings, according to FACT SET–the market trades typically closer to 15 times earnings. The trailing PE ratio is now at its highest going back to 2009.

In addition to this, we have cash levels at all-time lows and margin debt at all-time highs. Mutual funds and ETFs that focus on stocks just recently raked in $58 billion in new money, according to Bank of America Merrill Lynch. And at 150%, the total market capitalization of equities has never been higher in relation to the underlying economy.

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Message from Planet Japan: The good times never last forever

by Simon Black, Sovereign Man:

After having traveled to more than 120 countries in my life, the only person I know who’s been to more places than I have is Jim Rogers.

Jim is a legend– a phenomenal investor, author, and all-around great guy.

(His book Adventure Capitalist is a must-read, chronicling his multi-year driving voyage across the world.)

Some time ago while we were having drinks, Jim remarked that he occasionally tells people, “If you can only travel to one foreign country in your life, go to India.”

In Jim’s view, India presents the greatest diversity of experiences– mega-cities, Himalayan villages, coastal paradises, and a deeply rich culture.

My answer is different: Japan.

To me, Japan isn’t even a country. Japan is its own planet… completely different than anywhere else in ways that are incomprehensible to most westerners.

(Watch my friend Derek Sivers explain it to a TED audience here.)

On one hand, this is a culture that strives to attain beauty and mastery in even mundane tasks like raking the yard or pouring tea.

Everything they do is expected to be conducted to the highest possible standard and precision.

They start the indoctrination from birth; Japanese schools typically do not employ janitors and instead train children to clean up after themselves.

Later in life, the Japanese salaryman is expected to practically work himself to death (or suicide) for his company.

Obedience and collectivism are core cultural values, and the tenets of Bushido are still prevalent to this day.

One of the most remarkable examples of Japanese culture was the aftermath of the devastating 2011 earthquake (and subsequent tsunami) in the Fukushima prefecture.

It was the worst natural disaster in Japanese history, causing nearly as much damage as the atomic bombs over Hiroshima and Nagasaki in 1945.

Yet rather than panic and pillage, the Japanese sat patiently outside of their ravaged homes waiting for direction from the local authorities.

Then again, this is also the place that brought us ‘Hello Kitty,’ and where men have to be admonished to not grope young girls on the subway.

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Ken Starr: Trump Can Fire Mueller If He Wants [VIDEO]


by Saagar Enjeti, Daily Caller:

President Donald Trump has full authority to fire special counsel Robert Mueller if he wants to for any reason, former special prosecutor Kenneth Starr told Fox News Monday.

“The president has very broad powers. Article II of the Constitution of the United States vests the executive power in the president,” Starr said. “We have elected the president, he has all this power.”

He added that the president is “at liberty” to fire the special counsel even “including just saying i think this guy is not doing a good job or it is interfering with my conduct of the presidency.” 

Starr also reacted to recent reports from The New York Times that Trump ordered the firing of Mueller in June but reneged after White House counsel Don McGahn threatened to quit.

“Everybody says, oh, my goodness, this is armageddon,” the former special prosecutor continued. He specified the fact that “the president followed, according to these reports the advice of the counsel,” as a key point.

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FBI Deputy Director McCabe Steps Down, Forced To Retire Early


from ZeroHedge:

Update:  According to Fox News and CBS News’s Pat Milton just answered the question of why McCabe stepped down Monday when he would become eligible for his full pension benefits n March: McCabe was reportedly forced to step down. According to Fox News, McCabe was “removed” from his post as deputy director, “leaving the bureau after months of conflict-of-interest complaints from Republicans including President Trump.”

In both cases, his early departure suggests that he was forced out.

Several media outlets reported that McCabe is using his remaining vacation days to go on “terminal leave” and that his official retirement from the agency won’t happen until March, allowing him to collect the full pension.

As we noted last week, FBI Director Wray threatened to resign after being pressured by AG Jeff Sessions.

* * *

In a move that was widely expected (although not for another month or so), Deputy FBI Director Andrew McCabe is stepping down effective Monday, NBC reported.

McCabe, who briefly served as acting director last year after Trump fired Comey, first let it slip to the Washington Post late last year that he would be retiring in the coming months as Congressional Republicans targeted him for criticism surrounding his pro-Clinton bias (McCabe’s wife even secured campaign funding from Clinton ally Terry McAuliffe, something he initially failed to disclose).

Around the time of the reports of his impending retirement, McCabe had spent several marathon sessions answering questions from Congressional committees behind closed doors.

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