Saturday, July 20, 2019


by Egon Von Greyerz, Gold Switzerland:

In 2019 the investment world will start to realise that asset markets don’t grow to heaven as stocks, bonds and property start their long journey down which will eventually lead to declines of 75% to 95% in real terms. But the major risk is not just investment markets. Just as important is counterparty risk which too few investors are concerned about.

Anyone who wants to protect their wealth should not be invested in any of the bubble asset markets as I have stated in many articles. But to also avoid counterparty risk is a lot harder.

It is clear that it will be extremely hard to navigate investment markets between Scylla and Charybdis (a rock and a hard place). For the few investors who early on get out of the risky asset markets fuelled by credit expansion and money printing, many other dangers remain.

I’m in Awe of How Carmageddon Continues in Houston at Financial-Crisis Levels


by Wolf Richter, Wolf Street:

Where the heck is the hyped “replacement demand” from Hurricane Harvey?

Auto dealers in the Houston metro sold 23,720 new vehicles in May, down 9.2% from the dismal oil-bust levels of May last year, with car sales plunging 17.6% and with even truck sales – SUVs, pickups, vans, and compact SUVs (crossovers) — dropping 4.9%.

Even used vehicle sales plunged 13.5% in May from a year ago, to 67,239 vehicles. This is not a propitious indication. If there had been a shift from new to used, it would have been a different scenario. But both declined.

Falling Dollar Propping Up China’s Foreign Exchange Reserves?


by Wolf Richter, Wolf Street:

Stiffened capital controls help.

The weak dollar, China’s complex web of capital controls, and its efforts to crack down on its huge and over-leveraged conglomerates to invest overseas are having an impact:

China’s foreign exchange reserves – the largest such pile of foreign-currency-denominated securities in the world – rose by $21 billion in December to finish the year at $3.14 trillion, according to the People’s Bank of China today. It was the highest level since September 2016 and the 11th month in a row of gains since the panic-moment in January 2017, when reserves had fallen below $3 trillion. Clearly, at $3 trillion, authorities drew a line (chart via Trading Economics):

Over the 12-month period, foreign exchange reserves rose by 4.6%, or $129 billion, the first annual increase since 2014, which was the year when forex reserves peaked at nearly $4 trillion before starting into a downward spiral as Chinese individuals and companies were trying to get their money out of the country, as the yuan was sinking against the dollar, and as a little while later, Chinese stocks crashed from astonishing bubble highs with astonishing speed.

In 2017, as authorities were trying to stem capital outflows, the yuan, which is pegged against the dollar, also rose for 11 months in a row against the dollar.

Seen another way, the dollar fell against the yuan in 2017, but it also fell against other currencies. 2017, based on the broad trade-weighted dollar index, was the worst year for the dollar since 2003. It currently takes 6.49 yuan to buy a dollar. A year ago it took about 6.97 yuan.

The falling dollar has reduced the heat from under Chinese individuals and companies trying to get their money out – which might have helped slowing the outflows.

But how much, if any, of the 4.6% increase in the foreign exchange reserves last year is due to actual increases in foreign exchange instruments, and not just due to the decline in the dollar?

Authorities have already admitted that at least some of the rise of the reserves last year is due to the decline in the dollar against other currencies. The values of non-dollar currencies in the reserves are translated into US dollars. So a decline of the dollar against those currencies would increase the dollar level of those non-dollar holdings.

For example, the euro soared 14.5% against the dollar in 2017, the Canadian dollar rose 7%, and the Japanese yen nearly 4%. Even if the level in China’s reserves of those currencies has not changed in absolute terms, it would have risen sharply because the dollar, into which they’re translated for publication purposes, has tumbled.

So the rise of China’s foreign exchange reserves is a mixed bag: perhaps an indicator of the effectiveness of the capital controls and certainly an indicator of the tumbling dollar.

And for now, China does not appear to be relenting in its controls to stem capital outflows. On the contrary.

In December, for example, the State Administration of Foreign Exchange announced that individuals are allowed to withdraw a maximum of 100,000 yuan ($15,400) a year from their Chinese bank accounts while overseas, in total, spread over however many separate bank accounts or ATM cards they may have. Until then, they could withdraw 100,000 yuan per card. So if they had multiple cards and accounts with several banks, they could convert a lot of yuan into USD while overseas. This no longer works.

In the same vein, earlier in 2017, the National Development and Reform Commission, China’s economic planning agency, has increased its scrutiny of outbound acquisitions by private Chinese firms and has brought their overseas subsidiaries under its oversight.

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The Deflation/Inflation Debate


by Alasdair Macleod, GoldMoney:

“Naïve inflationism demands an increase in the quantity of money without suspecting that this will diminish the purchasing power of the money.” ― Ludwig von mises, The Theory of Money and Credit

It is hardly surprising that with equity indices stalling, the financial community is increasingly worried that the long, steady bull market is coming to an end. Naturally, this makes investors look for reasons to worry, and it turns out that there are indeed many things to worry about.

In fact, there are always things to worry about. Ever since the Lehman crisis, the Four Horsemen of the Apocalypse have been casting long shadows across the financial stage. But as financial assets have continued to rise in value over the last nine years, bearish fund managers, spooked by systemic risks of one sort or another and the perennial threat of a renewed slump, have been forced to discard their ursine views.

Warren Buffett Explains Bubbles: But He Doesn’t Know We Are In One

by Mish Shedlock, The Maven:

Buffet explains bubbles: “People see neighbors ‘dumber than they are’ getting rich.”

Warren Buffett explains Why Bubbles Happen

Buffett was asked by CNBC’s Andrew Ross Sorkin if he is worried another crisis will happen again.

“Well there will be one sometime,” Buffett said in an interview for CNBC’s “Crisis on Wall Street: The Week That Shook the World” documentary. The documentary airs Wednesday night at 10 p.m. ET/PT.

Global Synchronized Economic Slowdown

by Michael Pento, Market Oracle:

Not too long ago the overwhelming consensus from the perennial Wall Street Carnival Barkers was that investors were enjoying a global growth renaissance that would last for as far as the eye can see. Unfortunately, it didn’t take much time to de-bunk that fairy tale. After a lackluster start to 2018, the market’s expectations for global growth for the remainder of this year is now waning with each tick higher in bond yields.

U.S. economic growth displayed its usual sub-par performance in the first quarter of 2018; with real GDP expanding at a 2.3% annual rate, which was led by a sharp slowdown in consumer spending. The JPMorgan Global PMI™, compiled by IHS Markit, fell for the first time in six months, down rather sharply from 54.8 in February to a 16-month low of 53.3 in March. The index point drop was the steepest for the past two years. To put that decline in context, the February PMI reading was consistent with global GDP rising at an annual rate of 3.0%. However, the March reading is indicative of just 2.5% annualized growth. Therefore, not only is global growth already in the process of slowing but the insidious bursting of the bond bubble is gaining momentum and should soon push the economy into a worldwide synchronized recession.

We MUST Use A.I. & Blockchain Technologies RESPONSIBLY — Anthony Lacavera

from SGTreport:

I heard a recent interview with Anthony Lacavera on X22 Report and noticed that the top comment stated “Resist the beast system as long as possible”. It is clear now that the words “blockchain” and “AI” have become triggers for thoughts of the darkest of scenarios for many who are following these technologies. So I invited Anthony Lacavera, the Chairman and CEO of Globalive Technology to join me for a discussion about the future and Elon Musk’s warning about the existential threat artificial intelligence poses to humanity. Is it possible for blockchain and AI be used responsibly, for the good of all?


by Harvey Organ, Harvey Organ Blog:



from SGTreport:

On Friday gold and silver popped IN TANDEM, the Dollar dropped and mining stocks rocked. The Fed has thrown in the towel and hyperinflation cannot be stopped says Trade Genius founder Bob Kudla who joins me to discuss this and the latest insanity from the liberal lunatic Left.

Not All Hard Assets Are Created Equal – Jeff Nielson

by Jeff Nielson, Sprott Money:

A familiar refrain in many previous commentaries is that fiat currencies – especially Western fiat currencies – are fundamentally worthless . These currencies are backed by nothing, the definition of a fiat currency.

Typically, these currencies have been borrowed into existence. This makes such notes de facto IOU’s of our governments. However, Western governments are bankrupt. Their currency IOU’s are just as void of value as their bonds. Compounding this fundamental worthlessness, these Western currencies (especially the U.S. dollar) have been conjured into existence in unprecedented quantities in recent years.

Denominated in these worthless currencies, the “price” of any hard asset is effectively infinite. Why have the exchange rates of these various forms of worthless paper not already priced in this worthlessness?

There is a general answer and a specific to this question. The general answer goes as follows. The plunge of a currency to worthlessness is almost always “a confidence event”. What does this mean?

It means that such fiat currencies almost always become worthless from a fundamental perspective well before the official exchange rate descends to zero. The reason for this is quite simple.

A currency that has been in use for a significant period of time acquires the faith of the population that uses it. Few members of any population have the economic savvy to understand when a currency has become worthless from a monetary standpoint. Thus there is a honeymoon period.

A currency continues to have a relatively normal exchange rate even after it is fundamentally worthless because it still enjoys the confidence of that population. At some point (generally when the currency becomes even more extremely diluted), the population realizes that their currency has been debauched.

The paper loses the confidence of that population, and the descent in the exchange rate to near-zero quickly follows. We are currently in this “honeymoon period” with Western fiat currencies. They are fundamentally worthless, but very few people are aware of this.

There is also a second, specific reason why these various forms of worthless paper have not already begun their final death-spiral. The banking crime syndicate, better known as the One Bank , uses this paper to fund its criminal operations.

It has a very, very strong motive to delay this final death spiral. It has two powerful tools that it uses to extend this delay: propaganda and currency manipulation .

The propaganda is as constant as it is absurd. The central bankers (and their media lackeys) pretend there is no connection between the increase in supply of these currencies and the decrease in their value – the basic fundamentals of supply and demand.

In the fantasy world of Western central banks, the concept of dilution essentially does not exist. The laughable propaganda goes as follows.

With their reckless money-printing, these central bank charlatans are “trying” to create inflation (i.e. reduce the value of these currencies) but supposedly failing to do so. It’s the equivalent of a magical lemonade stand, where no matter how much water is added to the lemonade it cannot be diluted – it remains as strong as ever.

The other tool that the banking crime syndicate uses to delay the end of, in particular, the U.S. dollar is currency manipulation. The Big Bank tentacles of the One Bank have been criminally convicted of manipulating all of the world’s currencies.

With a potent propaganda machine, near-omnipotence in manipulating markets, and no meaningful law enforcement, the One Bank has added extra years to the life of its fraudulent fiat currencies. But their days are numbered.

What then?

All hard assets would have an effective “price” of infinity denominated in the various forms of this worthless paper. In that scenario, readers have asked: why should they be giving preference (now) to holding gold and silver?

It is because all of these hard assets are not equal. They are not equal in absolute value. Perhaps more importantly, as the bankers have manipulated most of our markets, prices have become severely skewed. The relative value of various hard assets has become even more unequal.

In terms of absolute value, gold and silver are “precious” metals. Silver, in fact, is even more aesthetically brilliant than gold. This means that when the fiat paper goes to zero, these are assets which (historically) are always valued highly.

However, the real reason why people should gravitate towards these assets is relative value. Many readers know that in monetary terms, gold and silver are “canaries in the coal mine”. They are supposed to alert us to precisely the sort of currency debauchment that has swept the Western world.

As a further means of delaying the end of this fraudulent paper, the One Bank has made the price suppression of precious metals one of its overriding obsessions. The price of gold has been held to a small fraction of its real value in order to make the bankers’ fiat paper appear to have retained its worth.

The price of silver has been suppressed even more ruthlessly. In real dollars, it was driven to a 600-year low, and has effectively remained at that level. Compare the relative value of these hard assets with real estate.

Year after year of near-zero interest rates has fueled real estate bubbles of unprecedented proportions across major urban centers. In relative terms, real estate has never been more expensive. Real estate is theworst place to attempt to shelter our wealth as we flee the bankers’ paper currencies.

Various other classes of hard assets fall somewhere in between these two extremes. Almost all commodities are at relatively depressed levels. Soaring commodity prices are a secondary warning of imminent hyperinflation, so the bankers have suppressed most commodity markets.

This may confuse the issue in the minds of some. If all commodities are suppressed, then any commodity becomes a suitable haven for our wealth as we flee fiat currencies. Not so.

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