September 23, 2020

* the dollar bugs continue to dance in the streets… 

* Gold has been brought down below $1,900 this morning… 

Good Day… And Wonderful Wednesday! Not so wonderful yesterday for all asset classes, but I don’t want to talk about that now…. First, my beloved Cardinals finally hit the ball, somewhat, and won in Kansas City last night… There are only 6 games left in the reg. season, with the chance of having to add 2 games in Detroit, if the teams all end up tied… I have a solution for avoiding the ties…. Win the remaining 6 games, and then head to Atlanta, to begin the playoffs…. Easier said than done, for sure! OK, then win 5 of 6! I really stirred up a hornet’s nest on Monday, but after reading all the responses, I found that most of the readers agreed with me!  So, I have that going for me, eh?  The Strawbs greet me this morning with their song: Autumn…  Hold on to me… I’ll hold on to you… All winter long I will always be with you….

Well, I didn’t want to get into this front and center this morning, but, I’ve got nothing else cued up to talk about first, so no beating around the bush for me this morning!  The dollar bugs have continued to dance in the street, and now they’re inviting their friends, and neighbors to join them! I don’t know who’s buying all these dollars to push the euro below 1.17, and Gold below $1,900, But they are getting whatever it is that they’re after taken care of…  SERENITY NOW!  I’ve said this over and over again, that this dance is gonna be a drag… no wait! What I’ve said over and over again, is that there is no rhyme or reason to buy dollars right now, but someone or some group is doing just that, and to me I find that to be so moronic…. But it is what it is, and there’s nothing I can do about it… So… I’ll move on…

In the overnight and early morning trading, Gold has suffered more losses to the dollar bugs, and Silver has followed along…  For the record, Gold closed yesterday at $1,900, down $12.30 on the day, and this morning, the dollar has won back $18 more dollars to put Gold at $1.882.80. Silver closed yesterday at $24.37, down 31-cents on the day, and this morning Silver is down $1, to trade at $23.37…  UGH!  

There are two currencies that have bucked the trend…. The Chinese renminbi has been inching higher in value VS the dollar on a near daily basis, and whenever the renminbi moves the Singapore dollar follows because, as I’ve explained before, Singapore competes with China for exports, so they can’t allow the currencies to get out of alignment… 

The things I have to put up with! SERENITY NOW!  OK, lets move slowly away from the markets… SLOWLY I said! 

OK… I do have new eye glasses ordered, so it couldn’t have been the weaker lenses in my current eye glasses, but I checked it twice, and then a third time to make sure I was actually seeing what I was seeing. And there it was in BIG BOLD letters, the title of an article on… “Here’s why top economists are not worried about the national debt, now worth over $26 trillion”

So, of course I read it, having to hold back my immediate reaction to these dolts….  Here’s an example of the stuff in the article: “When asked about the staggering number, Nobel laureate Esther Duflo told CNBC, “That is not something that the general public should be worried about for the time being at all.” She continued, explaining that American credit is one of the safest assets to hold, so in a sense, it is unlikely that the government will ever have to repay this debt.”

Chuck again… Wait, What?  “It is unlikely that the government will ever have to repay this debt”  Really? I do believe that you meant to say… “the government will NEVER be able to repay this debt”…. 

OK, there are some real economic points in the article, like when economic function slows, along with capacity, the government needs to step in to provide those missing parts…  But… I would argue that this deficit spending has been going on during good times, and bad times… So, don’t give me that argument that this is just a pandemic response!  What a bunch of dodo brains! 

And this economic point is something that used to get me in trouble with professors… I see the NEED for the government to step in when things are bad, BUT! I do not see reason we have to do that? If Corporations are in trouble, let them fail! It’s how economies work, when they’re not manipulated like ours has been, for over two decades…   

I would argue my point of view with those professors, and they would get so upset with me, and say, “Can’t you see that when the economy bottoms there is a need to give it a boost?” And I would say, “well yes, but why does it have to be with taxpayer money?  (Back in those days, deficit spending was minimal and there was never talk of helicopter money, until Big Ben Bernanke decided it was time to unleash that phrase)   These professor would just throw up their hands in the air, and walk away from me, mumbling… 

So, one night a few years later, when I was at Mark Twain Bank, and getting schooled on economics from the great Hy Minsky, I asked him about this, and he said, ” You’re right, Chuck”  But, when the Gov’t has surpluses why not allow them to use them to boost the economy?   I still don’t see the need for the Gov’t to be involved in boosting the economy, other than jawboning it up….  That’s my thought and I’m not going to change it so don’t try! 

And the other day, I mentioned the debt to GDP ratio in Japan at 253%… But what I failed to mention is that their debt is somewhat different than ours, in that a large portion of the debt is held by Japanese citizens, so self financed if you will….  Here, in the U.S. even with the Fed buying Treasuries by the boat load, we still rely on the kindness of strangers, like Blanche in a Street Car Named Desire…. 

Speaking of the kindness of strangers… That “kindness” is really getting stretched a bit with all supply of Treasuries needed to finance the ever expanding deficit spending… China has noticeably reduced their Treasury holdings… Russia has already cleaned their house of Treasury holdings, and now I read the other day that Iran is reducing their Treasury holdings…  You see, these countries don’t have to sell their Treasuries which would really upset the apple cart, instead, choosing to not show up at the  auction window for new Treasury issuances… Of if they show up at all, they show up with less to spend…. And all that means is that the Fed has to take on more treasuries to add to their currently bulging balance sheet…

So, why doesn’t the Fed just buy the whole auction, and no longer have to depend on strangers? Because that’s called monetizing the debt… And currencies usually get rocked to the core when a country goes that route….  But in my mind, I see  the Fed, or illegal central Bank, whatever you want to call them, going this route eventually. 

And I think it all goes hand in hand with the use of digital currencies… Yes, I’m still of the belief that this is the direction we’re headed…  I have Bill Bonner’s thought on this in the FWIW section today, so you won’t want to miss that!  Because…. like I said in a previous Pfennig… I talk to you most days and give you my thoughts, and sometimes it helps to get another adult to talk to you….  Sort of like with kids… you harp and harp at them about something, but if some other adult mentions it, your kids immediately react….  I’m just saying… 

The U.S. Data Cupboard today has the Markit versions of PMI (manufacturing indexes) for the current month, which no one really pays much attention to…. And then we have 5 more Fed Head speeches today, with Fed Head Chairman Jerome Powell, batting lead off speaking about the COVID-19 virus…. Other than that, it’s a nothing day for the Data Cupboard…

To recap… Chuck just does not get it…. All the signs, point to a weak dollar, and a soaring Gold Price, and what we getting is the complete opposite… Chuck wants to know who’s buying all these dollars, so they can have their, collective, heads examined!  Chuck goes all nine yards on an article on yesterday, so you won’t want to have missed that!

For What It’s Worth… OK… So, I gave you a teaser above on who’s going to visit us today for the FWIW article…  It’s longtime friend, and publishing guru, and author of many books, Bill Bonner… And he’s going to talk about digital currencies, and this can be found here:

Or, here’s your snippet: “Crypto/digital money might turn out to be the money of choice for governments more so than for their citizens.

It is no secret to us that current levels of debt growth and money-printing are leading to trouble. By 2030, the feds will probably owe about $40 trillion, not counting their unfunded obligations under Social Security, Medicare, etc.

That debt is only sustainable as long as the dollar floats. When it sinks, the whole ship goes down with it. The feds know this as well as we do. And they, like we, are already making plans.

No, they are not making plans to right the ship by balancing the budget, cutting the deficit, or reducing the Federal Reserve’s balance sheet. They know that is politically impossible.

More likely, they’re planning to abandon ship.

Who would benefit most from the collapse of the dollar? The world’s biggest debtor, of course – the U.S. government.

At 50% inflation (the current rate in Argentina), half of the feds’ debt disappears in a single year. In three years, it is almost all gone.

Then, they can introduce a new dollar. Our colleagues at Tradesmith report:

The Bank of International Settlements, or BIS for short, is known as the central bank for other central banks. In January 2020, the BIS published a new research paper – not its first one – on central bank digital currencies (CBDCs).

Eight months ago, the BIS found that 80% of all the central banks they surveyed were investigating CBDCs, and 40% had moved from the research stage to the concept and design stage.

Meanwhile the U.S. Federal Reserve and European Central Bank (ECB) have expressed interest in digital currency and research, and the People’s Bank of China (PBOC) is potentially years ahead of the competition in rolling out an e-yuan, with mass trials underway involving real-world commercial use.

So you see, Dear Reader, there is no reason for despair. The feds will get to start the scam all over again!”

Chuck again…  Yes, that’s right! I can always count on Bill to set the record straight…  And don’t forget that a month or so ago, I told you how the U.S. was investigating digital currencies… They should be well into configuring a way to introduce them by now… 

Market  Prices 9/23/20: American Style: A$ .7113, kiwi .6588, C$ .7496, euro 1.1694, sterling 1.2731, Swiss $1.0856, European Style: rand 17.0398, krone 9.3990,  SEK 8.9240,  forint 311.85,   zloty 3.8473,  koruna 23.0444, RUB 76.06, yen 105.14, sing 1.3678, HKD 7.7497, INR 73.55, China 6.7818, peso 22.05,  BRL 5.4333,  Dollar Index 94.10,   Oil $39.83,  10-year .67%, Silver $23.48, Platinum $866.00, Palladium $2,242.00, and Gold… $1,882.80

That’s it for today….  Yes, it’s not you… The Pfennigs have been going out later this week…  I have found that I have to rely on an alarm, which I never had to do before, and when the alarm goes off I instinctively turn if off, and…. Well, you guessed it… go back to sleep!  Oh, well… as they say… Better late, then never! HA!  LinkedIn sent me a note yesterday, that said they found a job for me, and then went into a diatribe about the benefits of the job were…. I responded to them that they needed to look at my profile, it says that I’m retired!  And that’s how I will remain!  Besides I would miss too many days of work with my schedule of appts. The Guess Who takes us to the finish line today with their song: No Time…  I was always a Big Fan of the Guess Who, and Burton Cummings… And with that, I hope you have a Wonderful Wednesday, and will Be Good To Yourself! 

Chuck Butler