You Have Ten Years or Less

I don’t have much confidence in economic forecasts, but here is one anyway:

Here’s why economists are so worried about soaring US debt levels (msn.com)

Technically, the government could print money to pay off its dues, but that would result in hyperinflation as the money supply skyrockets.

Robust economic growth can make debt more sustainable, but the debt is growing way faster than the economy — the national debt balance rose 86% over the last decade, while GDP grew by 63%, according to Fed data.

Economists are uncertain of when exactly the national debt will become a true problem for the US. If the pace of borrowing doesn’t slow, Rubin anticipates a crisis of some sort materializing within the next decade.

“It starts slowly and then it accelerates rapidly. Right now I don’t think anything is imminent. I would say we have 10 years or less to fix this problem. I think that may be the optimistic scenario,” Rubin said.

I question how he, or anyone can put a number on this. Perhaps by comparison to other nations with similar problems but that doesn’t take into account things like the U.S. Dollar being a reserve currency, the state of our technology development. After all, where is the case history where there was no need to physically print the money, the government could just change a few 1’s and 0’s in a computer file someplace.

It was about 15 years ago that Chet and I started talking about the imminent risk of U.S. hyperinflation. And it still hasn’t happened. How many times does one get to cry “wolf” before no one listens to you any more?

Still, ten years or less? You and I might be able to build our underground bunkers by then.

Debt Jubilee? No!

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A debt jubilee is certainly appealing to debtors and those who see the cliff ahead, but recall that all debt is an asset that is holding up an asset class far larger than the debt itself: mortgage debt is what props up the entire global real estate market, and what happens to valuations when debt ceases to exist?

Those who see jubilee as a solution also tend to ignore that all this debt is an asset of which 90% is owned by the wealthy class who run the status quo. Every bond, every mortgage-backed security and every bundled student loan / auto loan is an asset owned by someone or some entity who depends on that asset and its income stream for their wealth and thus their political power.

To hazard a guess based on human history, the wealthy / powerful will probably not be too keen to surrender the vast majority of their wealth and thus their power in the laudable pursuit of eliminating all debt and starting over.

CHARLES HUGH SMITH
April 19, 2024
Living on Uneasy Street

Emphasis in the original.

I see the only way out of things is for hyperinflation to “cancel” both private and government debt. Hold on, it is going to be a bumpy ride.

Prepare appropriately.

Gold Price Forecasts

We live in interesting times.

Gold is shining ‘bright like a diamond’ and could hit $3,000 says Citi (cnbc.com)

“We project $3,000/oz gold over the next 6-18m,” said Citi’s analysts led by Aakash Doshi, Citi’s North America head of commodities research. The financial gold “price floor” has also moved higher from around $1,000 to $2,000 per ounce, Citi said.

On Friday, Goldman Sachs referred to the gold market as an “unshakeable bull market” and revised upward its price target for the yellow metal from $2,300 per ounce to $2,700 by the end of the year.


BRICS: China Drives Gold Price Up By Buying Supply (watcher.guru)

BRICS founder China is currently driving up the price of Gold by swooping in to buy more supply of the precious metal. As the US dollar plummets, alternatives are growing more important within the global reserve. Thus, gold has experienced significant price growth recently, rising to record highs of 2,342.43. According to economists, the People’s Bank of China is leading the way, actively investing in the asset.


Why is Gold Ignoring Higher Rates and a Stronger Dollar? (msn.com)

Since Russia and China shook hands on a “no-limits” alliance in early 2022, many international transactions have circumvented the dollar. Saudi Arabia and other oil-producing countries have sold oil to China and India for non-dollar currencies.

Gold’s ascent with a strong dollar and high interest rates is a sign of the shift in global leadership in trade. Moreover, rising gold prices could be telling us that inflation is eroding all fiat currencies, including the U.S. dollar. The dollar index is a mirage as it only measures the U.S. currency against the euro, pound, yen, Canadian dollar, Swedish krona, and Swiss franc. Gold is telling us that all these currencies are losing value as inflation and a significant global financial shift are changing the worldwide economic landscape.

The trend is always your best friend in markets, and gold’s bullish trend is now twenty-five years old. High interest rates and a strong dollar have not stopped gold’s rally, which is a significant sign that the strength of the precious metal’s bullish price action will continue. Even the most aggressive bull markets rarely move in straight lines. With gold over the $2,400 level and the critical psychological support at around $2,000, a pullback to that support would not threaten gold’s long-term bullish trend. Moreover, the dramatic shifts could support a continuation of higher highs in 2024.


Central bank buying a driver of golds surge (bankingday.com)

The majority of purchases were made by central banks in emerging economies. The People’s Bank of China was the biggest buyer, with an increase of 225 tonnes in its reserves last year.

Other big buyers were central banks in Poland, Singapore, Libya, the Czech Republic, India, Iraq, Qatar and the Philippines.

The council has reported previously that the growth in central bank gold buying reflects a “rebalancing to a more preferred strategic level of gold holdings” amid concerns about increasing financial market risks and the persistence of high inflation.

A small number of the central banks it surveyed said they were pursuing “de-dollarisation” policies. The US dollar accounted for 51 per cent of central banks reserves at the end of 2022.

Central banks in emerging markets tend to be more pessimistic about the US dollar’s future as a reserve currency and more optimistic about gold.

When asked about gold’s future share of global reserves, 62 per cent of advanced economy respondents said it will remain unchanged over the next five years, while 68 per cent of central banks in emerging markets said gold’s share of global reserves will rise.

Gold Sales Go Mainstream

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Gold has turned into money for Costco, where yellow metal sales begun last year have turned into a cash cow for the big-box retailer.

In fact, sales are so brisk that analysts at Wells Fargo expect revenue “may now be running at” $100 million to $200 million a month, a rapid acceleration since bullion hit the warehouse club late in the summer of 2023.

Jeff Cox
April 9, 2024
Costco selling up to $200 million in gold bars a month, Wells Fargo estimates (cnbc.com)

I wonder if this has been a significant factor in the recent price of gold. At $2,300/oz that is something like 40k to 65K ounces a month.

Maybe We Should Listen To an Expert

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The EVERYTHING BUBBLE, stocks, bonds, real estate SET to CRASH. US debt increasing by $1 trillion every 90 days. US BANKRUPT. Save your self. Please buy more real gold, silver, Bitcoin.

Robert Kiyosaki @theRealKiyosaki
Posted on X April 6, 2024

Kiyosaki appears to be well respected.

Some people even collect his quotes:

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Maybe we should listen to an expert rather than try and figure out complex things like on our own.

Gold Price Rally is a Complete Mystery

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The rally is defying a lot of normal thinking, especially when it comes to still-elevated rates. I think the narrative is changing towards sticky inflation and perhaps a hard landing, spiced with a lot of geopolitical uncertainty and de-globalization driving central bank demand.

Ole Hansen
Head of commodity strategy at Saxo Bank AS
April 7, 2024
Gold price rally to record highs is a complete mystery | Fortune

I’m concerned it is not actually a mystery. I suspect it is a reality nearly everyone does not want to believe.

Types of Marxism

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Economic Marxism wants to destroy your property.

Cultural Marxism wants to destroy your civilisation.

Environmental Marxism wants to destroy your species.

Progress!

Alice Smith (@TheAliceSmith)
Posted on X April 6, 2024

Alice Smith claims to be the great-great-great-granddaughter of Adam Smith.

It would be trivial to get multiple quotes of high quality each and every day from her X feed.

Forecasting a Downturn in Gold

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Gold prices achieved new heights last week, closing at record levels, with central banks’ interest and geopolitical tensions as key factors. Yet, we’re advising traders to be cautious, as the current rally might not be as robust as it seems.

Last week, XAU/USD settled at $2330.160, up $97.04 or +4.35%.

The market appears ripe for a downturn, and those holding positions near the peak might face significant losses. Therefore, the short-term forecast leans towards a cautious bearish outlook for gold.

James Hyerczyk
April 6, 2024
Gold Prices Forecast: Was a Bull Trap Set on Friday? | FXEmpire

Perhaps. That was Saturday But gold closed at $2,358.09 on Tuesday. That is up another 1.2% in two days.

Predictions are tough. Especially those predictions about the future.

“Changes in Methodology” for Inflation Numbers

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In the past few months, political strategists have marveled at the fact that the economy under Biden was growing (at 3.2pc in the fourth quarter of 2024) but polling on Biden’s performance on the economy was dismal.

A recent paper led by former treasury of the secretary Larry Summers has helped clear up the discrepancy. Summers and his co-authors show that if we adjust American inflation data to consider changes in methodology that have taken place over the past few decades, we see inflation not peaking at 9pc, as the official data indicates, but rather at 18pc. The paper also suggests that inflation measured in line with historical norms would have been 8pc at the end of 2023, not the 3pc shown in the official statistics.

Philip Pilkington
April 5, 2024
The US Fed may kill the Biden presidency (msn.com)

As I suspected, the price of gold is a better measure of inflation than official government numbers.

Prepare appropriately.

$1 Trillion in Debt Every 100 Days

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Currently, the US national debt stands at an unprecedented $34 trillion, fueled by extensive spending and escalating debt-servicing costs. Bank of America’s estimates, indicating that the US is accumulating an additional $1 trillion in debt every 100 days, underscore the urgency of the situation.

Rahul Kumar
April 5, 2024
Wharton Professor Warns Swelling US Debt Could Trigger Market Crisis by Next Year (msn.com)

On April 1st one ounce of Gold would buy an all time high of $2,264. On April 2nd it reached another all time high of $2,268. Yesterday it closed at the all time high of $2,341.49.

Prepare appropriately.

Outpacing Inflation

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Gold surged to a new record on Tuesday, as geopolitical tensions and interest rate speculation drove a rally in the yellow metal.

The commodity rose to as high $2,141.79 per ounce, eclipsing its December all-time high of $2,135.39, according to Bloomberg data.

Gold’s rise is in part due to its safe-haven status, which investors are increasingly seeking out amid ongoing international turmoil. With the Ukraine war and the Gaza Strip conflict still raging, the asset’s spot price has risen 3.2% year-to-date.

But the metal saw a much sharper increase since mid-February, and has added around $100 in the past week.

Filip De Mott
March 5, 2024
Gold Price Hits New All-Time High on Rate-Cut Hopes, Geopolitical Turmoil (businessinsider.com)

That was March 5th. This is the last 24 hours (as of about 9:00 PM PDT):

Screenshot_20240401_210330

The all time high referenced in the article has been eclipsed by nearly 6% with the all time high of yesterday morning and yet a new one this morning ($2,268.26).

Gold is either outpacing inflation or inflation is much greater than the Fed is telling us.

I would think that in general gold should be essentially in sync with inflation.

I’ve been asking people, chat bots, and reading articles trying to find a reason I am satisfied with which would account for the rapid rise in the price of gold relative to the dollar in the last month. Nothing is particularly convincing. The following are in the order I find most likely to least likely:

  1. China is buying gold.
  2. Non-U.S. markets are doing poorly.
  3. Fighting in Gaza.
  4. War in Ukraine.
  5. Speculation the Federal Reserve will cut interest rates in the coming months.
  6. People are concerned Trump will win the election and are buying gold because of the chaos he will bring.

Unless China is buying at a greater rate than previously none of those things are new in the last month.

See also:

Prepare appropriately.

A Thin Veneer of Civilization

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Unlike so many people around the world, those of us that live in the United States were fortunate enough to grow up in a relatively civilized society.  Unfortunately, we have turned our backs on the values that our forefathers handed down to us, and so now we are starting to find out what is beneath the thin veneer of civilization that we have all been taking for granted all these years.  Our society is absolutely teeming with predators, crime rates are soaring all over the nation, millions of Americans are afraid to leave their own homes, and hordes of drug addicts are literally pooping in the middle of our streets whenever they feel like it.

Michael Snyder
December 4, 2023
We Are Starting To Find Out What Is Beneath The Thin Veneer Of Civilization That We Have All Been Taking For Granted (theeconomiccollapseblog.com)

It is not just a thin veneer of civilization, admittedly they are not orthogonal, but it is also a thin veneer of rationality as well.

Prepare appropriately.

I want an underground bunker in Idaho.

Gold Price Forecasting

This is the price of gold forecast from J.P. Morgan on January 17, 2024:

Infographic depicting gold price forecasts for each quarter of 2024 and 2025.

It has not been below $2000 mid December and the asking price today was briefly over $2100. Via Gold Price Today | Gold Spot Price Charts | APMEX®:

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I’m reminded of Dad and Brother Doug talking to grain buyers about selling crops from the farm. The buyers would explain, in great detail and confidence, why the price would go up/down and encourage the farmers to hold/sell accordingly. Almost without exception you could count on their advice being exactly backward to the best interests of the farmer.

Statewide Rent Control Being Considered in Washington

Five things to know about WA proposal to limit rent hikes | The Seattle Times

Isn’t rent control one of the most studied economic experiments? And hasn’t it been shown to be, over the long term, a disaster for everyone involved?

This is the deliberate destruction of Washington state.

I want my underground bunker in Idaho.

If it Has Never Happened, Will it Ever Happen?

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There is currently much debate about the health of financial markets. Can prices remain detached from the fundamentals long enough for the economic/earnings recession to catch up with prices?

Maybe. It has just never happened.

Lance Roberts
January 30, 2024
“Theory Of Reflexivity” And Does It Matter? – RIA (realinvestmentadvice.com)

Prepare appropriately.

Ending the Federal Reserve from the Bottom Up

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Since its inception, the U.S. Federal Reserve’s monetary policies have led to a decline of over 95% in the purchasing power of the U.S. dollar. As a result, there have been several attempts to curtail or eliminate the Federal Reserve’s powers (e.g., the efforts of Rep. Louis T. McFadden in the 1930s; the efforts of Rep. Wright Patman in the 1970s; the efforts of Rep. Henry Gonzalez in the 1990s; and the efforts of Rep. Ron Paul since the 1990s).

However, none have proven successful to date, due mainly to the constraints of strong political opposition at the national level. In contrast to these “top-down” attempts at the national level, this paper proposes an alternative approach to ending the Federal Reserve’s monopoly on money: the “Constitutional Tender Act,” a bill template that can be introduced in every state legislature in the nation, returning each of them to adherence to the U.S. Constitution’s “legal tender” provisions of Article I, Section 10.

This approach would have a greater likelihood of success for a number of reasons. First, it is decentralized: rather than facing concerted political opposition at a single Federal level, it attacks the issue at the State level, where strategies and tactics can be adapted to the types and amount of political opposition they encounter.

Second, it is diffused: it can be attempted in any number of States, which can cause the opposition to spread its resources much more thinly than would be necessary at the Federal level. Finally, it is legally sound: it relies on the U.S. Constitution’s negative mandate in Article I, Section 10, that “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.” Therefore, in contrast to “top-down” attempts to “end the Fed,” a “bottom-up” approach using “constitutional tender” laws will find greater success.

Under this Act, the State would be required to only use gold and silver coins (or their equivalents, such as checks or electronic transfers) for payments of any debt owed by or to the State (e.g., taxes, fees, contract payments, etc.). All contracts, tax bills, etc. would be required to be denominated in legal tender gold and silver U.S. coins, including Gold Eagles, Silver Eagles, and pre-1965 90% silver coins. All State-chartered banks, as well as any other bank that is a depository for State funds, would be required to offer accounts denominated in those types of gold and silver coins, and to keep such accounts segregated from other types of accounts such as Federal Reserve Notes.

Bill Green
April 4, 2017
Ending the Federal Reserve from the Bottom Up

It is an interesting thought.experiment. But will it work? It’s been almost seven years now and how much progress has it made?

Perhaps after the big crash people will give it more serious consideration.

Gold is currently tickling the $2,100/oz price as I type this… Prepare appropriately.

Gold and Silver

Interesting:

Gold Forecast – Prices Could Soon Signal a Historic Breakout (fxempire.com)

Gold is very close to a historic breakout and sub-$2000 prices will be a distant memory. Gold miners are undervalued and could be the best performing asset in 2024

But, as always, be highly suspect of the claims made by someone who has something to gain from convincing you to part with your money.

In their favor the predictions on October 20, 2023 seem to be close:

GOLD DAILY: The final washout I warned investors about ended quickly, and prices are back above the downtrend line. Gold could consolidate around $2000 for a few days, but a breakout above $2090 is becoming increasingly likely before year-end.

SILVER DAILY: The final washout in precious metals triggered a false breakdown in silver below the 1-year trendline. Prices have recovered, and we expect a bullish breakout above $26.00 before year-end.

The End of Times

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The biggest elephant in the room is the US Fiscal Doom Loop. To refresh: US Government spending is out of control, and there appears to be very little political will to stop it. As the chart below shows, Government spending is up 14% yoy and tax receipts are down 7% yoy.  Fiscal year ended September 2023 is projected to have a deficit of over $2 Billion (or roughly 8% of GDP). In the past, deficits of this magnitude only materialized during significant downturns like the bursting of the Dotcom Bubble, the 2008 GFC and the COVID crisis. It is unprecedented to have deficits of this magnitude with the economy and employment being relatively strong.

Lawrence Lepard
October 2023
This “Unprecedented” Fiscal Doom Loop Is Getting Worse

A volcano in Iceland is expected to erupt in hours or days and destroy a town of 4,000 people, Japan has a new island, a super volcano is flexing, U.S. military bases are being attacked almost daily, and the U.S. debt is over 33 trillion and rapidly increasing.

We live in interesting times. Some might even claim it is the end of times. Prepare appropriately.

I want my underground bunker in Idaho.

Gas Tax Loophole

You may have heard Washington state has the highest gas prices in the nation. A huge contribution to this is the state gas tax.

As I frequently drive to and from Idaho this is rather painful. However, I have found a loophole. The difference in the price of gasoline in Idaho versus the Seattle area is so great than I can buy ethanol free gasoline in Idaho for approximately the same price as I can purchase the 10% ethanol blended unleaded in Bellevue.

Ethanol free gasoline gives my car a noticeable boost in gas mileage. On my last return trip from Idaho I was able to demonstrate that I can fill up in Moscow, just over the border from Washington, and, driving at or under the speed limit, I make it back to Bellevue on a half tank of fuel.

That means that if I bring back a five or six gallon can of ethanol free gas I can drive around town a little and still make it all the way back to Idaho without giving the commie Washington state government a single penny of gasoline tax.

Oh, and I can buy all the standard capacity magazines and guns I want in Idaho while I’m there too. All 100% legal*.


*I am legally required to leave any such newly purchased items in Idaho until the courts overturn the illegal gun laws in Washington. But that is what the armory in my underground bunker is for.