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China's bullion market has surged, with gold prices in Shanghai rising sharply over international rates. Due to a declining yuan, a slumping property market, and capital control measures, Chinese investors are flocking to gold as a safety measure. This contrasts with earlier in the year when economic uncertainties had people conserving cash.
S&P's former chairman, John Chambers, suggests the U.S. is in a worse fiscal state than during its 2011 credit downgrade. With an imminent threat of a government shutdown due to deepening political divisions, the nation's credit is at risk. Current data reveals a U.S. deficit of over 7% of GDP and soaring government debt at 120%. The unstable political climate, marked by past shutdowns, debt ceiling crises, and a recent failed coup, further darkens the outlook. Internal disputes within the Republican party may jeopardize House Speaker Kevin McCarthy's position, adding to the instability.
The Fed people insist the economy is strong. They upped their GDP growth projections at their last meeting. Joe Biden thinks the economy is strong. He keeps bragging about the marvelous achievements of "Bidenomics." Mainstream economists keep telling us the economy is strong.
But the average American isn't buying any of it. (Perhaps price inflation makes it too expensive?)
U.S. government bond prices have plummeted, unsettling the stock market. Treasury yields have surged to 16-year highs, negatively impacting stocks, with tech giants like Amazon and Apple seeing notable declines. The robust U.S. economy and Federal Reserve's rate hikes contribute to the instability. The S&P 500's growth has been stunted, and the persistent rise in bond yields, driven by changing demand dynamics, paints a grim outlook.
July's durable goods orders were revised downward to a -5.6% MoM drop, the most significant since COVID lockdowns. August saw a slight rise of 0.2% MoM, against an expected -0.5%. Excluding transports, orders increased by 0.4% MoM, after July's revision from +0.4% to +0.1%. Core capital goods orders, a measure of equipment investment, grew 0.9% in August after a 0.4% decline in July. This metric has been revised downward five times in the past six months. It's worth noting these values are in nominal dollars.
Economic momentum is dwindling. With this, we can anticipate decreased economic activity and potentially falling asset prices. High leverage and soaring interest rates might trigger a significant crisis, possibly worse than last March's banking situation. Historically, the Federal Reserve's interventions, such as reducing interest rates and implementing quantitative easing, haven't always accurately addressed financial system challenges. Notably, in 2008, amidst evident financial strain, the Fed's overly optimistic GDP projections missed the mark.
Retail crime increased in 2022, leading to a loss of $112.1 billion in inventory, a jump from $93.9 billion the previous year, according to the National Retail Federation. The rise caused retailers to adapt: many heightened security measures, increased employee training against violence, and modified store operations. A notable reaction was Target's decision to close nine stores. This escalation in theft and associated violence has alarmed the retail industry nationwide.
Interest rates continue to push relentlessly higher. As Peter Schiff explained in his podcast, that's a big problem when the entire economy is built on a foundation of cheap money. But most people in the mainstream don't seem to grasp the gravity of the situation. They don't realize that we are at the beginning of the end of this whole phony economy.
While the bears were calling for weak energy prices in the second half, oil hit a new high this year as the world struggles with supply issues.  Unfortunately, this is just the beginning for much higher oil and natgas prices in the future as the world hits the Energy Cliff...
    Presenting The iPhone/Gold Ratio 2023: Incrementum
Sep 26, 2023 - 13:05:44 PDT
Comparing gold only to fiat currencies can only capture its properties so far. This is why we are comparing it to the iPhone. In the realm of tech and economics, the iPhone 15 Pro costs 0.78 oz. of gold, a notable drop from the iPhone 14 Pro's 0.87 oz. and the first iPhone's 0.92 oz. in 2007. For gold investors, it means a cheaper iPhone in gold terms, even though its USD price has increased by 150% since 2007, averaging a 5.9% yearly inflation rate. This highlights the interesting relationship between technology, economics, and gold.
    Entering the Next Phase of the Commodities Supercycle
Sep 26, 2023 - 12:56:49 PDT
Since 1791, there have been six significant Commodities Supercycles, each spanning 12 to 24 years. We're currently navigating the seventh, which started in March 2020. The previous cycle from 1999 to 2011 witnessed remarkable price escalations: oil jumped from $10 to $150 a barrel, copper rose from 60 cents to $4.60 a pound, gold leaped from $250 to $1921 an ounce, and corn surged from $2 to $8 a bushel. The current trends closely mirror those of the past.
BRICS nations are aggressively divesting from U.S. Treasury bonds in a move against the U.S. economic policies. They dumped $18.9 billion just this month, totaling a staggering $122.7 billion in 2023. China, leading the trend, offloaded $117.4 billion of U.S. debt this year. Other members like Brazil and India have also reduced their holdings, with India even abandoning the U.S. dollar in forex markets. The collective action aims to undermine the U.S. dollar's dominance in favor of local currencies.
    Fiat Paper Currency And The Damage Done
Sep 26, 2023 - 12:18:23 PDT
The decades-long fiat paper money system has led to global economic instability. Central banks' manipulation of interest rates since 1981 has caused surging debts, devaluation of savings, and promoted speculation over hard work. This has also fueled wars and birthed unsustainable businesses, while exacerbating societal wealth disparities and inflating prices. Gold offers a potential solution as a stable, resistant alternative to such manipulation.
American consumer confidence took a concerning hit this month, more than analysts anticipated, suggesting gloomier economic prospects ahead. The Conference Board highlighted a sharp decline in consumers' outlook for the future, often an early warning of an impending recession. Factors like escalating interest rates and dimming job prospects have raised concerns. Moreover, notable retailers like Target are already feeling the pinch, with sales dwindling for the first time in six years.
Reading between the lines reveals the Fed's desperate wish for inflation to subside to a politically palatable level without further rate hikes or a looming recession. Yet, their strategy seems rooted in mere "hope" rather than clear foresight. The FOMC members' hesitancy to forecast rate reductions before the end of 2024 speaks volumes, hinting at their underlying concerns about persistent, politically perilous inflation. It's striking, given the FOMC's typical aversion to hinting at further tightening.
August witnessed a drastic 8.7% MoM drop in new home sales, the steepest since September 2022. With the median sales price of new homes slightly declining to $430,300, it's still alarmingly higher than pre-pandemic rates. A Redfin report revealed a worrying trend: about 60,000 home deals, or 16% of homes under contract, fell through. Veteran agents report unprecedented deal cancellations. As homebuilders struggle to bridge mortgage rate gaps, and investors grow wary, the housing market's stability is under serious threat.
A year ago, the UK bond market saw upheaval. Now, there's growing unease over the $25tn US government bond market. The Bank for International Settlements and the US Federal Reserve are alarmed by increased hedge fund bets, especially the high-leverage basis trade. With leveraged positions nearing $900bn, any disruption to the US Treasury market could have global repercussions. Past interventions by the Federal Reserve might be fueling these risky bets, raising concerns among regulators.
The push for a cashless society is growing, backed by digital payment conveniences. However, there's a risk of losing control and privacy. Central bank digital currencies (CBDCs) amplify these concerns by granting governments direct oversight of transactions. Citibank's "Citi Token Services (CTS)" mirrors these CBDC features, signaling an accelerated move towards this model. Protecting oneself involves diversifying assets, like holding physical gold and silver.
    The Meltdown of the World’s Biggest Crypto Firm
Sep 26, 2023 - 06:42:48 PDT
Binance, once the dominant force in the crypto world after FTX's crash, is now facing challenges. U.S. agencies' enforcement threats have led to over a dozen senior executives departing and the layoff of 1,500 employees. Binance's market share has decreased from 70% to 50% this year. With the SEC suing both Binance and Coinbase, there are concerns about the future of the crypto industry. If Binance collapses, it could cause a short-term market liquidity crisis, potentially driving crypto prices down significantly. Some traders are even preparing for a potential Binance meltdown.
JPMorgan Chase has controversially moved significant securities into the held-to-maturity (HTM) category, resulting in an unrealized loss of $36.7 billion. Many of these transfers weren't initially designated as HTM. Despite these alarming practices, CEO Jamie Dimon challenges federal regulators' efforts to increase capital levels for large banks. Widespread unrealized losses across the banking sector total $558.4 billion, with the 25 biggest banks also experiencing a $920 billion decline in deposits, intensifying concerns about the stability of the U.S. banking system.