The Federal Reserve Will Inflate the Economy Further 

Source: Bonner/Bonner And Partners

“‘Inflation’ refers to an increase in the supply of money. People use it colloquially to refer to consumer price increases. But increasing the supply of money doesn’t necessarily increase consumer prices. It depends on where the money goes and how it gets there. Following each of the two bubble blow-ups this century, the feds decided to ‘stimulate’ the economy with fake money….In 2008, the feds had a choice. If they wanted to stimulate the economy, they could use monetary policy (lowering interest rates… and using quantitative easing (QE) to buy bonds)….Or they could use fiscal policy. Instead of buying bonds, for example, they might have taken their $3.6 trillion QE program and used it to send taxpayers a rebate check. Each taxpayer could have gotten a check for about $27,000 – tax free, of course. The money would have been almost immediately spent on consumer items. The economy would have boomed. Of course, this boom, too, would have been fake. And it would have ended as soon as the fake money stopped flowing. That is the insight embedded in Richard Russell’s dictum: Inflate or die. Once you have a fake-money boom going, you can only keep it going by giving it more fake money. Otherwise, it dies. When you pump money into the economy via the monetary channel, you raise prices for stocks, bonds, and property. When you pump it via the fiscal channel, consumer prices rise….The only way the feds can keep the Wall Street boom alive is to inflate more. That is the real meaning of the Fed’s turnaround. Fed chair Jerome Powell has paused his rate hike program, and is now looking at more cuts. The Fed has to inflate the financial sector with more cheap credit, or the boom will die….Yes, we’re on our way… to Venezuela… Argentina… and Hell. Whee!”

 

Gold Could Have More Buyers At $1,400 Than At $1,300 

Source: Scotiabank/Kitco

“Gold’s most recent move to $1,400 an ounce could attract more buyers than the metal’s previous key $1,300 level, Scotiabank said in the latest update. The yellow metal rallied to six-year highs last week following a dovish Federal Reserve announcement, which kept rates unchanged but opened a door for future rate cuts. ‘Overall, there is a growing ‘FOMO risk’, where Gold could attract more buyers at $1400, than $1300, reaffirming the belief of some well-known investors that if $1400 breaks, $1700 will happen ‘very quickly’,’ Scotiabank commodity strategist Nicky Shiels said in a note on Thursday. Gold has been ‘quietly’ outperforming most G-10 currencies since the trade war began, noted Shiels, describing the latest rally as ‘standalone gold breakout’ that excludes the metal’s usual direct correlation with the U.S. dollar.”

 

Stocks are now offering the best selling opportunity in 10 years, thanks to the Fed 

Source: Marketwatch

“They’re right. It is different this time. It’s worse. Much, much worse. What is? Everything, in terms of preparedness for the next U.S. recession. Debt is higher than ever, be it corporate debt, government debt or global central banks’ balance sheets. Limited ammunition to deal with a new recession, wealth inequality, the social divisions and political extremes, and now trillion-dollar deficits – everything points to a more fragile system. Here we are, with the great collapse unfolding in front of us. With Wednesday’s Fed statement, we continued to witness an utter capitulation to market realities that are forcing central banks to commence new easing cycles. No, this is not a temporary rate-cut event they are promising; it’s a new cycle. The Federal Reserve offered a three-rate-cut outlook, which is precisely what markets had been pricing in. The Fed is bowing before market demands. Give us drugs. Yes, whatever you want, you got it….It’s not good news for the economy and ultimately not good news for stocks either….Pouring money into stocks on the premise of yet more cheap money may set up a valley of tears. Therefore, we may be looking at the biggest selling opportunity in a decade….Cutting rates again is making wealth inequality even greater, is again punishing savers, is again pushing wealth toward asset-class holders and again encouraging more debt accumulation. In short: Make the bubble even bigger.”

 

An Open Letter to Patriotic Billionaires 

Source: Editors/Wall Street Journal

“Nineteen uberwealthy Americans posted an open letter Monday calling on ‘all candidates for President’ to support a ‘moderate’ wealth tax. Signatories include the investor George Soros, Berkshire Hathaway scion Molly Munger, Mickey Mouse heiress Abigail Disney, Facebook co-founder Chris Hughes, and a couple of Hyatt Hotel progeny from the Pritzker family. ‘America has a moral, ethical and economic responsibility to tax our wealth more,’ they say. Revenue squeezed from the top 0.1% could fund ‘smart investments,’ such as ‘clean energy innovation,’ ‘infrastructure modernization,’ ‘student loan debt relief,’ and ‘public health solutions.’ The letter brushes by the arguments against a wealth tax, calling them ‘mostly technical and often overstated.’…Instead of seriously grappling with these objections, the letter tries to sweep readers along in sheer patriotic fervor. The rich ‘should be proud to pay a bit more,’ the authors say. ‘Taking on this tax is the least we can do to strengthen the country we love.’ Well, what’s stopping them? If billionaires see themselves as a threat to ‘the stability and integrity of our republic,’ they could cease being billionaires any day. Maybe they’re intent on routing their largesse through the government, since it already does such a bang-up job of setting priorities and spending prudently. Again, though, why wait for legislation? They could start contributing more today…The Treasury accepts ‘Gifts to the United States’ at P.O. Box 1328, Parkersburg, W.Va….The point is that if they think government will perform more good with more funds, they should put up the cash now, without waiting for Congress to make them. If a wealth tax is patriotic, a self-imposed one would be doubly so. ‘It is not in our interest to advocate for this tax,’ the letter says, ‘if our interests are quite narrowly understood. But the wealth tax is in our interest as Americans.’ In that case, billionaire, tax thyself.”

 

Gold Goes Boom as High Trend Resistance is Bulldozed by Bulls 

Source: Yahoo Finance

“Taking a step back and viewing the wider perspective of the yellow metal’s history within the technical analysis, we can see that in 1999 a slow inclination was present stretching across the period of just over a decade, reaching its peak in 2011. The topside run was then posed by a 50% pullback over the next eight consecutive years following the high of 2011, prompting Gold to spend many recent years in a state of consolidation. This was until we hit 2019 where Gold has seen highs reminiscent of eight years ago….This week bullish efforts have been able to bulldoze through Gold’s resistance and for the first time since 2013 Gold was trading at huge highs of above $1400. So why has Gold gone boom and is this trend set to continue? Events in the headlines clearly contributed to the events of last week and continuing onto this week, with the Fed and the Central Banks clearly holding onto a dovish posture…this could indicate that there is a further top side to come for Gold in the up-and-coming weeks if the trend is to continue with similarity.”

 

America’s Fake Money Will Get Fakier 

Source: Bonner/Bonner And Partners

“Last week, Fed chair Jay Powell and European Central Bank president Mario Draghi both affirmed their resolve to provide more stimulus in the months ahead. In other words, the guardians of the world’s most important measures of value said they would lend more fake money at even fakier interest rates. This, of course, caused hearts to flutter in the markets. Investors are pretty sure that an already nutty situation is going to be even nuttier in the future. And they’re probably right. But there’s no guarantee they’re going to like it…We rub our eyes in wonder at the nuttiness of it. How could it be? Bond investors own $13 trillion worth of loans… and pay for the privilege by making negative interest payments. The U.S. stock market hits an all-time closing high while the economy actually slows down. And people are so desperate for an honest currency that they turn to bitcoin… which they can’t see, can’t touch, and can’t understand. How could it be? We squint and look closer. And out of the fog emerges a hypothesis… an explanation almost as strange as the picture itself: Americans have allowed the feds to censor their markets.”

 

Low interest rates and sluggish growth may lead to currency wars 

Source: Buttonwood/Economist

“In 2010, as the euro zone’s sovereign-debt crisis escalated, the euro fell sharply, from $1.45 to $1.19. Soon the talk in America was of a second round of quantitative easing by the Federal Reserve. Was this a coincidence? Many in euro land thought not. QE2, as it came to be known, seemed to them to be mostly a means to a weaker dollar. The grumbles went beyond Europe. That September Guido Mantega, Brazil’s finance minister, said his country was under fire in an international currency war. Now the bellyaching comes from America. On June 18th Mario Draghi, the president of the European Central Bank (ECB), said at a conference in Sintra, Portugal, that the bank stood ready to relax its monetary policy further if the euro-zone economy did not improve. Bond yields fell. So did the euro. President Donald Trump took to Twitter to denounce Mr Draghi for ‘unfair’ currency manipulation. Earlier this month Steven Mnuchin, Mr Trump’s Treasury secretary, had fired a warning shot in the direction of Beijing on currency policy. If China stopped trying to support the yuan, that could be understood as an effort to weaken it. The prospect of a pow-wow between Mr Trump and Xi Jinping, China’s president, at a G20 summit in Osaka later this month has raised hopes that the trade war between their two countries does not escalate. A trade truce ought to cool the war of words over exchange rates, too – but not for long. Interest rates are low. The use of fiscal policy is constrained by either politics or debt burdens. A cheaper currency is one of the few ways left to gin up an economy. A world of sluggish GDP growth is one that is primed for a currency war….In the slow-brewing currency war, America is both victim and perpetrator. If you start a trade war with your biggest trading partners, they get a weak currency and you get a strong one. If Mr Trump wants a cheaper dollar, declaring trade peace might be the best way to get it. Otherwise, America risks waging a currency war on itself.”

 

Why Gold Price Is Likely To Touch $1,550 

Source: Forbes

“The shine is back for the precious metal which is trading up nearly 11.4 percent year to date. Most of these gains have occurred fairly recently, precisely speaking, the price started to rally on May 30th. Since then, the price is up nearly 12.87 percent. This is mainly due to the following factors: Feeble global economic growth, Uncertainties due to geopolitics, A massive change in the Feds monetary policy stance. Let’s start with the monetary policy first. The dollar index is set to record the biggest monthly loss since 2018…Investors have been largely worried that the US economy may fall into a recession and economic data started to support this argument to some extent….Another reason for the gold price to move higher is the heightened geopolitical uncertainty in the Middle East. The recent conflict over the shooting of a US drone in Iranian territory, according to Iranian officials, has escalated the tensions between the US and Iran…Iran has said at the door is shut for any diplomatic path and this means the uncertainty may well continue to rise. This is likely to keep pushing the gold price higher and it can easily cross the level of $1,500. An important factor which investors should be paying attention to is the correlation between the gold price and the size of the negative-yield debt…Given the current monetary policy adopted by the European Central Bank and the Federal Reserve bank, it is likely that the gold price may actually touch $1550 in the next few months.”

 

Trader: All-Time Highs Are No Valid Reason To Celebrate 

Source: Zero Hedge

“It’s hard to tell whose bluff was called last week, but the end result is that almost every systemically important central bank did more than blink. They caved. The question is, did they do so to keep the fun alive? Because they know something that they are loathe to tell us? Or have they finally and totally given up faith in their government counterparts? Whatever the reason, and despite equity markets and related risk assets having a field day, there isn’t a great deal to celebrate. There should be no comfort taken that a Fed president argued for a 50 basis point rate cut and wasn’t laughed out of the room. That 10-year Treasury yields are back down to current levels is a clear sign that the battle is being lost….Efforts are being made to lower market expectations for the outcome of trade talks at the G-20 meeting. That’s a shame. Rate cuts are worse than an inadequate substitute for real progress. The dollar is trading horribly…data showed an out-sized rotation out of the U.S. currency and into the euro and yen. That helps no one…this year’s sell-offs in the Dollar Index puts the next technical target is 95.75.”

 

The Real Reason for Facebook’s New Cryptocurrency 

Source: New York Times

“Facebook says its new cryptocurrency, Libra, is a tool for financial inclusion and disrupting the world’s cumbersome payment systems. In reality, there is a deeper motivation behind it, although not the one its critics imagine: Libra is the last, best hope to re-establish trust between Facebook and the world. Facebook harnessed billions of users to the engine of artificial intelligence and steered unerringly toward advertising riches. Privacy, civic discourse and even democracy were crushed beneath the wheels as Facebook rolled toward global domination. Now it faces angry legislators around the world, huge fines, hostile investigations and punitive regulations aiming to rein it in….Facebook is smart enough to recognize that without the bond of trust, all relationships are merely contingent and transactional. Lack of trust creates a heavy debt that eventually comes due…There is nothing Facebook can say to rebuild the trust it lost. And there is little it can do….This is where cryptocurrency comes into the picture…What makes cryptocurrencies revolutionary is that they create the foundation for a new form of trust. A blockchain is a decentralized ledger, meaning that every participant in the network can be confident in the accuracy of transactions, without relying on an intermediary such as a bank or clearinghouse to verify them…If Facebook can establish Libra as a trusted way for users make their transactions, it will go a long way to rebuilding trust in Facebook itself….Facebook today talks a good game about privacy and combating abuse of its platform, but those words have time and again proven hollow.”

 

 

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