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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
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Friday, April 8, 2022, 9:25 am ET
It's nearly impossible to describe the level of economic insanity that is occurring throughout the world, but Money Daily is committed to give it a try.
One look at the longer-dated maturities on the current US Treasury curve yields is all that's needed for an honest assessment that speaks of a broken system. Given the choices, lending to the US government for three years at 2.66% or 30 years at 2.69% would seem an easy and obvious selection. Why would anybody in their right mind lend money for 27 more years for an additional 0.03%?
Yet, that is the condition. Unless one had absolutely no use for their money (currency) until 2052, it makes no sense whatsoever. Bond speculators understand the implications of an inverted yield curve and of interest rates that are unreflective of reality. The US government, being more than $30 trillion in debt already, is about to run out of funders for their capricious, reckless spending unless investors demand much higher rates of return for the longest-dated maturities.
Making matters even more complex for those who wish to fund the government over long periods of time are two enormous points of contention. First, inflation is running at seven percent or higher. Secondly, one is able to earn an addition 21 basis points by lending for ten fewer years, i.e., the 20-year bond yielding 2.87%. These factors turn the calculus on its head. Not only will these rates of return yield far less than current inflation causing investors to actually lose capital and purchasing power in real terms, but the longest duration of 30 years offers comparatively insufficient yield.
At issue is the government's ability to service the enormous debt it has built up over the past 50 years, and even more to the point, over the last 20. While the Federal Reserve may have blundered into a serious and possibly destabilizing policy error, their hand was forced by the congress and Treasury department, the bodies mainly responsible for the ongoing crisis in funding and the soon-to-develop liquidity catastrophe.
The Fed has embarked on a path of raising interest rates in order to slow down inflation. The problem with that is higher rates will only increase the government's dependence on borrowing, and spending more to service the growing debt, the cost of which is quickly approaching $400 billion a year. That's why the Fed, being the lender of last resort, has to keep a lid on the 30-year bond. They and their primary dealers are the main buyers of these losing propositions. The chance of them threading this multi-faceted needle approach nil.
Yield on the 30-year bond should be seven, eight, or even 10 percent, but that would cause interest payments by the government to skyrocket out of control and contribute to the worsening of the destructive financial cycle.
Pwe Research offers some interesting statistics on the federal government's national debt burden, not the least of which, in this nearly three-year-old article, is how rapidly the debt has grown recently. In 2019, when the article was penned, the debt was $22 trillion. In less than three years, it's ballooned to over $30 trillion, a 36% increase that is fully unsustainable. It's enough for a competent economist to consider a career in woodworking or some other less-challenging occupation.
For the past 40 years, the federal government has been the main beneficiary of interest rates that have gone in only one direction: lower, allowing them to borrow, spend, and grow well beyond their necessary functions. Now that rates are rising, congress and the executive branch must either cut spending or borrow less. In all likelihood, considering their record over the past 20-30-40-50 years, they will do neither, positioning themselves at the apex of financial illiteracy approaching an existential exsanguination which will drain the lifeblood of the US and global economies of essential capitalization and prudent money management.
Destruction of the US dollar, and with it, the security and well-being of the entire global financial system has been in progress, earnestly for the past 20 years. Thanks to factors such as uncontrolled spending, inflation, reckless Fed policies, government sanctions against unfriendly countries (or those targeted as such), crony capitalism, enormous trade deficits, and more, de-dollarization by the rest of the world is galloping forward at a quickening pace.
Blind to all of this is the bulk of the American public, which has unwittingly allowed this travesty to occur, voting in the same grifters and dunces year after year after year. In many ways they are helpless victims of a malignant, upside-down system which operates only to strip away the wealth of the many to enrich the few, but they are gradually awakening - every day - to an unfair system that is ruining their nation and threatening the rest of the world.
There are no quick fixes for the normal public; no escape for the average Joe or Jane. Americans can only try as best they can to extricate themselves because they will get little to no help from the authoritarians.
Even as this becomes clear, stocks continue to aim higher, despite countless warnings and lately, an overt statement by former Fed president William Dudley that wealth must be destroyed. The last suckers, the greatest fools, will be tasked to turn out the lights when it all comes crashing down.
At the Close, Thursday, April 7, 2022:
Thursday, April 7, 2022, 9:22 am ET
Deservedly, stocks got whacked a bit on Wednesday as the economy continues to disintegrate.
Mainstream media wants you to believe everything is just dandy, though former Fed President William Dudley suggested policymakers will have to target the stock market to rein in inflation.
"One thing is certain: To be effective, [The Fed] will have to inflict more losses on stock and bond investors than it has so far," Dudley said.
Does it have to be more obvious? The Fed is going to make sure the stock market goes down.
Full retard clown world is now not only live, but straight in your face. Wake TF up.
Google is warning publishers that exploiting, supporting or dismissing the war in Ukraine would get them de-monetized.
Here's the actual warning Money Daily received on Wednesday:
Due to the war in Ukraine, we will pause monetization of content that exploits, dismisses, or condones the war.
At the Close, Wednesday, April 6, 2022:
Wednesday, April 6, 2022, 5:37 am ET
In what was perhaps a harbinger of what is to come, Tuesday offered no place to hide for investors, as everything, stocks, bonds, cryptos and metals was sold off.
Prompted by ongoing geo-political conditions and general malaise in global markets, the selloff across all asset classes was accelerated by comments from Fed Vice Chair, Leal Brainard, who said the central bank could begin reducing its balance sheet as early as May and that an aggressive tightening of monetary policy would be required to control inflation.
Brainard said the Fed "will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting."
Her mid-morning hawkish sentiment quickly erased gains in stocks and sent bond yields sharply higher. Selling in all asset classes continued throughout the day. Yield on the 10-year treasury note rose to a multi-year high of 2.567 percent and further exacerbated the inverted condition, with 3s, 5s, and 7s all higher than the 10-year note.
Gold fell from a high of $1945.80 to as low as 1926.10. Silver's month-long slide continued, closing at $24.29/ounce at the NY close. Even oil was not spared. As US equity markets closed, WTI crude hovered just above $100/barrel.
Bitcoin continues to traverse between $45,000 and $47,000, key support and resistance levels. Cryptos were mostly down on the day.
As the Fed embarks on quantitative tightening (QT), markets are reacting negatively, looking well beyond the immediate cycle to a possible recession in months ahead, caused mostly by the Fed and US government's free-handed money explosion over the past two years. Reigning in consumer inflation is going to crush any signs of recovery and likely send stocks lower over the coming months as interest rates are expected to soar, affecting everything from mortgages to credit cards.
Looking ahead to Wednesday's trade, which includes a release of the Fed's FOMC meeting minutes from March, Asian and European markets are a seas of red, with losses ranging from a half percent to more than 1.5% in Hong Kong and Tokyo.
US futures are headed lower, with the Dow futures down more than 120 points and NASDAQ futures off by nearly 100 at 5:30 am ET.
Conditions may not yet have reached a grim enough stage for a widespread panic, but it's difficult to see any positive resolution in Ukraine or inflation, the two drivers of disdain.
This week is already shaping up as a bumpy one, as stocks soared on Monday and soured on Tuesday.
At the Close, Tuesday, April 5, 2022:
Tuesday, April 5, 2022, 8:40 am ET
In the latest ploy by the United States to eliminate Russia from the global economy, the US Treasury blocked a pair of payments due on dollar-denominated debt obligations.
Prior to this most recent action, Russia was able to make payments on bonds from money already frozen by the US government on a case by case basis. Russia was to make a $552.4 million principal payment on a maturing bond and an $84 million coupon payment on a 2042 dollar bond.
The US Treasury blocked J.P. Morgan, Russia's foreign correspondent bank, from processing the payments due on 2022 and 2042 bonds late Monday.
The United States and allies in the EU and UK are turning up the economic pressure on Russia after President Vladimir Putin and the Central Bank of Russia (CBR) announced last week that all gas purchases from "unfriendly" nations were to be made in rubles, and that Russia would buy gold on international markets at a peg of 5000 rubles per gram.
Western economies are trying to force Russia into default or worse by issuing sanctions and seizing assets in what can only be described as financial warfare. Meanwhile, US and Ukrainian negotiators continue to stall and balk at serious Russian proposals to end the military operations in Ukraine, just as they did prior to Russia's invasion on February 24.
Tactics being employed by the US, IK, and NATO/EU nations indicate that they are unwilling to negotiate on reasonable terms. The Western allies have continued to supply arms and weapons to Ukraine and gin up false stories of war crimes, the most recent fiasco that of a "genocide" of civilians in the Kyiv suburb of Bucha.
Western media propagandists have been unified in their reportage of military operations in Ukraine, claiming absurdities such as 21,000 Russians killed, Putin being isolated from the military and other false flag claims, all the while having most correspondents reporting from Lviv, near Ukraine's Western border, far removed from the actual fighting.
Better and more accurate reporting is being transmitted on the internet by independent sites such as SouthFront, which is funded entirely by donations. The site has been the victim of various cyberattacks, the most recent early Tuesday, which temporarily shut down the operation.
The organization features articles and videos relating to the conflict in Ukraine and elsewhere around the world, primarily in the Middle East and Eurasia. SouthFront urges supporters to send donations via cryptocurrencies, favoring Monero recently.
With the Western nations continuing their assault on the senses in their home countries and abroad, it's imperative that people seek out alternative news outlets. The financial war will continue to escalate, including everything from dollars to euros to gold and cryptos. Resolute to defeat Russia in any conceivable manner, Western nations will stop at nothing to retain their economic hegemony over most of the world.
As such, dollar and euro-denominated assets are no longer considered a safe haven. The events of the past few months - and to Russian sanctions dating back to 2014 - have demonstrated that the governments of the US, UK and EU willingly seize, freeze, and confiscate assets of their enemies, while sanctioning individuals, companies, and entire nations who are unwilling to bend to their wishes. These actions are setting up a divided world and potential for the economic war to spill over into a shooting war.
All the while, Western countries continue to perform as if nothing is happening that might cause economic pain in their own countries, though there are continuing signs that the sanctions, seizures, and freezes are worsening conditions as inflation spirals out of control, fuel prices skyrocket, and the discontent from citizens is becoming apparent. Leaders of the Western nations promise fairness and stability, but recently have delivered neither. Conditions are nearing breaking points from Paris to London to Washington, Berlin, and Ottawa.
This is an historic time that is likely to cause severe financial and physical damage to millions of people. Making sure the conflict does not come to you requires planning and execution of self-preservation strategies.
Gold, silver, bitcoin.
At the Close, Monday, April 4, 2022:
Sunday, April 3, 2022, 11:07 am ET
Forget about the war in Ukraine. That's a sideshow. The real war is being waged on economic fronts.
Despite Western media's constant barrage of bombings, Russian war crimes, heart-rending stories on refugees, and insistence that you must "Stand with Ukraine," the propaganda machine isn't giving you even an inkling of the monumental changes in the global economy that took place this past week.
Russia, in addition to re-positioning and re-orienting its military forces in Ukraine, proceeding along a path towards a cease-fire and eventual negotiated peace, announced a number of economic policies, two of which have the potential to change the global economic landscape monumentally, in ways that will be more influential to your standard of living, your investments, and your financial security than anything that's happened in the past 50 years.
That's not idle hyperbole. What Putin and Russia are doing will change the financial landscape for just about everybody in the world.
Here's what they did.
The Central Bank of Russia (CBR) announced that it would be buying gold on global markets at a set price of 5000 rubles per gram.
Putin announced, beginning April 1, all gas purchases by "unfriendly nations" (EU, USA, UK) would have to be paid for in rubles.
It was no April fool's joke. Putin was deadly serious and the leaders of all the "unfriendlies" know exactly what he was doing. In essence, and in the most simplistic terms, Russia set a floor on the price of gold, strengthened its currency, the ruble, and tied its economy to gold, of which they have plenty.
In an article published on RT, Ronan Manly offers the best explanation of why this could be a "game-changer" for the West.
RT (Russian Times) is still widely available in the United States, but readers in the UK or EU may not be able to access it, due to bans. A reprint of the article is available to those readers on ZeroHedge.com, if that's not already banned and censored as well. It's also published at bullionstar.com.
Because of these developments, countries that rely on Russian natural gas exports are now forced to pay for them in rubles, which increases demand for rubles, and, since rubles are now linked to Russia's gold purchases, a rising ruble will also cause the price of gold to rise, exactly the opposite of what the riggers of the LBMA and COMEX futures exchange desire.
For now, COMEX can try to continue their policy of shorting and subverting the price of gold (and silver). Once the ruble starts rising, as it already has (briefly back above pre-invasion levels), so will the price of gold.
The alternatives for gas buyers - particularly Germany, France, Italy, Hungary, Bulgaria and others in the EU - is to go without heat or fuel, shut down factories, and crush their economies. That is not a choice most countries in the European Union will accept. They'll pay for gas in rubles, like it or not.
This is only the beginning. The Central Bank of Russia has committed to buying rubles at the price of 5000 per gram through June 30, at which time they will re-evaluate their position. Bear in mind that a troy ounce consists of 31.1034768 grams.
Thus, an ounce of gold, at 5000 per gram, is 155,517.384 rubles. At the Friday closing exchange rate of 83.25 rubles per US dollar, Russia would be buying gold at $1868.08 per ounce, setting up some serious arbitrage opportunities in not just gold, but natural gas and probably oil, wheat and other commodities. There are multitudes of players, nations, commodities, and currencies. Having solid math skills is now more important than ever.
To illustrate, look at what small changes in the exchange rate of the RUB/USD or USD/RUB can have on the price of gold at Russia's preferred rate of 5000 rubles per gram.
RUB/USD = 1/0.01133 (FX close 4/1): $1762.01
Now, look at the price with the ruble at its high a day earlier (3/31):
RUB/USD = 1/0.0123: $1912.86
Finally, here's the price of gold at the exchange rates from January 9,2020 (pre-plandemic):
RUB/USD = 1/0.01637: $2545.82
Prepare. Trade. Or Die.
Russia has already begun pricing other commodities and contracts in rubles, but not oil. Not yet.
The dollar index fell from 99.09 to 98.57 by week's end, but was as low as 97.79 on March 30. Since the dollar index is a measure of the strength of the US dollar in comparison to other fiat currencies - primarily euro, yen, yuan, pound, franc - it is going to become proceedingly worthless as a measure of anything.
Over the course of the week, treasury yields were tamped down on the long end (7s, 10s, 20s, 30s), but continued to rise in shorter maturities (1s, 2s, 3s, 5s).
Yield Curve Rates
Superficially, this looked good to long-term issuers, but scary for short-term issuers, further inverting the curve at various points from 3 years out to 10 years. Presently, one can lend money to the US government at the same rate for two years or 30 years (2.44%).
What does the inversion at 20 years to 30 years now 16 basis points suggest? The US only has 20 years of good life left? Or is it just two years before the whole system implodes? Seeing that inflation is running at impossible rates and Russia's gambit on gold, oil, gas, and other commodities, one might lean towards a shorter investment horizon overall.
It's getting downright crazy out there and looking like it's going to get even crazier.
WTI crude peaked on March 8, pricing at $123.70 per barrel. Since then, it's been straight down, with the price dropping from $113.90 last Friday, March 25, to $99.42 at the close on Friday, April 1. This was quite the drawdown (13%), though the effect on gas prices at the pump were not immediately impacted. US national average for unleaded regular stands at $4.190/gal presently, down just four cents from a week ago.
Should the US price of WTI crude remain below $100, motorists can expect some relief at the pump, which would be welcome. A 13% reduction (about 54 cents) from current levels would put the national average around $3.65, and closer to $3.25 a gallon in states where it's normally cheapest (Southeast, Midwest).
Most experts do not expect gas prices to fall very much if at all. The changeover to the mandated summer blend will cause prices to rise anywhere from 15 to 30 cents by June 1. But, since it's only early April, motorists may see a temporary easing in fuel prices.
Once again, focus on just Bitcoin, not the myriad of thousands of other cryptos which are functional at best, sketchy at worst. Hitting a high of $47,414 on March 29, bitcoin has eased off through Sunday, currently trading at $46,363.20, a gain of 9.18% over the past month. With the confusion and speculation surrounding gold, oil, gas and just about every other commodity on the planet, some of the focus that used to be spent by governments on dismissing or disparaging bitcoin and cryptos in general may shift away and allow bitcoin to appreciate while other prices gyrate up, down sideways and in unexpected ways.
Gold price 03/20: $1,921.50
Silver price 03/20: $25.14
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) dropped insignificantly over the course of the week, to $40.74, a drawdown of $0.37 from the March 27 price of $41.11. The price remained above $40.00 for the third consecutive week.
Over the course of a week that saw stocks relatively flat - only the NASDAQ gained anything more than a very minuscule fraction - the disturbing practice of "painting the tape" has become commonplace over the past few months. It is the process of either buying or selling in the final minutes of a session, causing the price to rise or fall dramatically. Lately, it's been used to prop up stocks at the close, and the ramifications of this practice are plain to see in daily and weekly measures.
At the Close, Friday, April 1, 2022:
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