Saturday, June 6, 2020

Chaos is the Only Way Out of Interest Rates Normalisation

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by Michael Pento, Market Oracle:

The prevailing fiction pervading Wall Street right now is that economic growth is picking up in a sustainable fashion and that interest rates will merely rise slowly. Then, soon level off at historically low levels. In other words, they are selling a fairytale; and a dangerous one at that.

This premise is blatantly false. The Fed’s reverse QE program, Government debt levels and Nominal Gross Domestic Product, all dictate that the 10-year Note Yield should be now swiftly on its way to at least 4.5%, from the artificial level of 1.4% found in July of 2016.

Therefore, there is no perfect outcome for the market and the economy and no safe path for the Fed to normalize rates. If they stop raising rates, or just move too slowly, inflation picks up even more steam, and long rates will mean revert rather quickly by rising another few hundred basis points from where they are now. On the other hand, keep on hiking short-term rates, according to the Fed’s dot plot there will be three to four increases this year and several more scheduled for 2019–along with the draining a couple of trillion dollars from the balance sheet–and the yield curve will invert much sooner rather than later.

Congress quietly formed a committee to bail out 200 pension funds

by Simon Black, Sovereign Man:

The US pension system has gotten so bad, Congress is actually planning for its failure.

As the government was working on the recent, new budget deal and subsequent boost in government spending, Congress quietly snuck in a provision that forms a committee which would use federal funds to bail out as many as 200 “multiemployer” pension plans – where employers and labor unions jointly provide retirement benefits to employees.

As is often the case, this rescue “plan” is too little too late. The US pension system is beyond repair. And if you’re depending on pension income to carry you through retirement, it’s time to consider a Plan B.

Before explaining how dire the situation actually is, let’s take a step back…

It’s All Starting To Make Sense: The MOST SOUND Currency In The World RIGHT NOW Is?

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from Silver Doctors:

Hint: They’re evil people who meddle in everything and cause myriad ruckus around the world, but talking finances, they’re king of the hill, and it will matter…

So it’s all starting to make sense now.

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We keep hearing the terms “global reset”, ‘monetary reset”, and “financial reset”, but resetting what to what, and how would that look?

First, why would there be a reset?

Resets happen quite regularly for reasons such as hyperinflation, default on debt, break-down of the system, and loss of confidence, etc.

Central Bank Money Rules the World

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by Nomi Prins, DailyReckoning:

Central bank credit that supports markets — is not just creation of the Fed, but by central banks and institutions around the world colluding together. Global markets are too deeply connected these days to consider the Fed in isolation.

Since last month’s correction, the world has been watching the Fed because its policies have global implications. And worldwide sell-offs sent a clear sign to Fed Chair Powell to relax with the rate hikes.

When fears arise that central bank QE will recede on one side of the world, we see more volatility and rumors of hawkishness. To counter those fears, there will be a move toward dovish policy on the other side of the world.

GOLD UP $9.65 TO $1321.80 COMEX CLOSING TIME AND THEN ADDS ANOTHER 10 DOLLARS IN ACCESS TRADING

by Harvey Organ, Harvey Organ Blog:

SILVER UP 21 CENTS TO $16.41 AND ANOTHER 14 CENTS TO $16.55 IN ACCESS TRADING/STRONG GOLD EFP ISSUANCE AT 10,200 CONTRACTS/STRONG SILVER EFP ISSUANCE : ALMOST 5,000 CONTRACTS/TOTAL EFP ISSUANCE THIS YEAR IN SILVER: 662 MILLION OZ/TOTAL EFP ISSUANCE IN GOLD: THIS YEAR TO DATE: 1743 TONNES/CHINA SET TO RETALIATE AGAINST TRUMP TARIFFS BUT IT WILL NOT BE BIG/ DEUTSCHE BANK IN TROUBLE AGAIN AS THE STRONG EURO IS KILLING THEM/FOMC: USA RAISES RATES BY .25% BUT GUIDANCE DOVISH

A Glimpse Of Precious Metal Mining’s Future: Hecla Buys Klondex For 59% Premium

by John Rubino, Dollar Collapse:

Big gold and silver miners have a problem: They’re evaporating. Each year they take more metal out of the ground than they discover, which brings them ever-closer to the end of the road. They know it and their shareholders know it, which means their stock prices tend to languish in the shadow of falling production and depressed future earnings.

The solution? Buy out junior miners sitting on resources big enough to arrest the majors’ decline. There aren’t that many such juniors, which points to a bidding war as the best are snapped up and the rest rise in sympathy.

Here’s an example that was announced a few hours ago:

China Is Days Away From Killing the Petrodollar

by Nick Giambruno, International Man:

Not long ago, there was a popular joke in China that went something like, “Who is Xi Jinping?”

The answer was, “The husband of Peng Liyuan,” the famous singer Xi is married to.

Today, Xi is China’s president. He leads 1.4 billion people. And he’ll likely be the most powerful person in the world soon.

As I mentioned last Wednesday, Trump’s new steel and aluminum tariffs are part of a larger, escalating battle between the US and China.

China is rapidly displacing the US as the dominant global power. This shift is inevitable. China’s economy will be twice as large as the US economy by 2030.

Why the World’s Central Banks hold Gold – In their Own Words

by Ronan Manly, BullionStar:

Collectively, the central bank sector claims to hold the world’s largest above ground gold bar stockpile, some 33,800 tonnes of gold bars. Individually within this group, some central banks claim to be the top holders of gold bullion in the world, with individual holdings in the thousands of tonnes range.

This worldwide central bank group, also known as the official sector, spans central banks (such as the Deutsche Bundesbank), international monetary institutions (such as the Bank for international Settlements) and national monetary authorities (such as the Saudi Arabian Monetary Authority – SAMA).

These institutions hold gold as one of their reserve assets. Any gold held by a central bank as a reserve asset is classified as monetary gold. In addition to monetary gold, central bank reserve assets include such things as foreign exchange assets (such as US Dollars) and IMF Special Drawing Rights (SDRs). In general, reserve assets held by central banks are managed according to the criteria of safety, liquidity and return.

Solutions Only Arise Outside the Status Quo

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by Charles Hugh Smith, Of Two Minds:

Solutions are only possible outside these ossified, self-serving centralized hierarchies.

Correspondent Dan F. asked me to reprint some posts on solutions to the systemic problems I’ve outlined for years, most recently in How Much Longer Can We Get Away With It? and Checking In on the Four Intersecting Cycles. I appreciate the request, because it’s all too easy to dwell on what’s broken rather than on the difficult task of fixing what’s broken.

I’ve laid out a variety of solutions to structural problems in my many books, and I’ll attempt a brief synthesis in this post.

1. The dynamics of stagnation are built into the system. Centralized systems optimize specific solutions to a specific set of problems that prompted the development of the system.