Dollar Reserves Fall To 2010 Levels…

April 5, 2021

* Currencies begin the week flat… 

* Gold & Silver start the week down a bit… 

Good Day… And a Marvelous Monday to you… Easter Monday at that! Yes, a lot of the world takes this day as a holiday, but not me… Unfortunately! I could have easily gone back to sleep this morning, but being the writing soldier that I am, I conquered the sleepy feeling!  Aren’t you proud of me? HA! Sad news last week, when I read that one of my all-time favorite Cardinals players, Kenny Reitz, aka The Zamboni, had died… I have one of his baseball cards hung on my pictures wall that faces me as I write the Pfennig.. Not the greatest hitter, but boy could he play 3rd base! He set the record for least errors by a 3rd baseman 2 times… with 9 one year and 8 on the other…  I guess as I go along in years, I’ll have to deal with many of my younger life faves… UGH!  The Grass Roots greet me this morning with their song: Let’s Live For Today…  Now that’s some good advice, eh?

Well, last Friday was Good Friday, and for the most part, markets were closed… Except the currency markets! Gold & Silver weren’t traded, so the charge on the dollar was left to the currencies. And well, they didn’t charge too hard, because the Dollar Index gained 9 BPS to finish the week at 93.02…  The euro fared better than most currencies on the day, gaining about 10 BPS Vs the dollar, which is, in reality, a pretty muted move… 

In the overnight markets last night… There’s really not been much movement in the currencies, as the Dollar Index has fallen about 6 BPS, which really indicates that everything here is flat…  Gold & Silver are back to trading this morning, and maybe they should have stayed on the sidelines, because Gold is down $7.80 this morning and Silver is down 10-cents…  Those losses could very well be turned around easily today, so I’ll be watching for that!  

So, since there was little in the markets to talk about from Friday and last night, I’m going to got out on a limb and talk about some things going on that really get my goat… And throw it up against the wall to see if it sticks…  ready? OK, let’s go!

Last week I told you that the dollar’s ratio of currency held as foreigner reserves had fallen to a low that hadn’t been seen since 2010, which was before the hidden debts of Club Med countries of Europe was exposed, and the dollar’s long time weak trend turned on a dime…  That’s a Big Development folks… I can’t begin to express how BIG this is…  But let me just give you this bit of information to see if it gets your mind thinking about how big this news is…   The share of Chinese renminbi in foreign reserves hit an all-time high!  

The dedollarization that was started by Russia, and then joined by China appears to be catching on around the world… China and Russia have stared a clearing facility like SWIFT, that they say anyone in the world can use, and won’t be used to punish countries, like SWIFT does… (of course the U.S. runs SWIFT, so you get what the new facility is saying)…  This means that countries that join the new facility will be able to trade with another country using the facility in their home currencies, and not have to buy dollars in the terms of the transaction…   

Add to this the fact that China’s digital currency is ready for prime time, and I can’t even begin to express how important this is in the future for the dollar…  I do explain it in an interview that will be running in Dennis Miller’s soon… So, if you aren’t already a subscriber to his free letter, and you want to know what I said… well, go to the site and sign up!  You’ll be glad you did!

Ok, switching gears here…  Ok. Last week President Biden presented his latest deficit spending bill… It was a $2.3 Billion so-called infrastructure bill…   So, here’s the skinny on how that $2.3 Billion will be spent… courtesy of Bill Bonner’s… get out your calculators to check my math if you want….  “Most of the $2.3 trillion will buy votes rather than infrastructure, including $400 billion for “elder and disability care,” $213 billion for “green and affordable homes,” $174 billion for electric vehicles, $137 billion for “school and childcare infrastructure,” $100 billion for “job training” and so forth.

It’s a smorgasbord for Democratic Party urban constituencies that leaves $180 billion for “R&D in tech of the future” and $300 billion in manufacturing subsidies as an afterthought.” – Bill Bonner… 

As Bill points out…”You may wonder why $2.3 trillion would be needed. After all, roads are supported by gasoline and road taxes… And except for the Interstate highway system, they’re a local matter.

Bridges, too, are paid for by users – either via tolls or taxes.

Ports? Same story, paid for by the shippers who use them. And airports, by ticket sales.

Railroads? Except for the money-losing Amtrak, they are privately owned. If they need more track or rolling stock, they can apply their profits or raise more money honestly.

If a new airport is needed, it is easily funded by the people who use the airport. And if it can’t be paid for in such a reasonable and obvious way, why is it being built?

If the Port of Long Beach, for example, needs more capacity, wouldn’t it make sense to charge the ships that come into port with their containers… and the railroads and trucks that haul it away?

Of course, it would. They know what is needed and how much it is worth. The feds do not. ” – Bill Bonner

The big take away here is that another $2.3 Billion of money that the Gov’t doesn’t have will be spent, which means that $2.3 Billion new dollars will be printed…  And one wonders why the share of dollars as reserve currency has dropped to a decade low?  Hmmm… 

OK… here’s another thing that’s been on mind… And that is… that we as a country have passed the $28 Trillion in Debt mark like a car passing a picket fence… Now, that didn’t take too long now did it?  Well, actually it was just 13 months since we passed $27 Trillion…   And during that time we’ve added $4.2 Trillion of money supply…  And again one wonders why the dollar’s share of reserves has fallen to a decade low?  Well, I don’t wonder, because I know! 

Friend, Dennis Miller, sent me an article that talks about the debt increase, and I have it for you as our FWIW article today, so stay tuned, don’t touch that dial! 

Well, if we’re looking for any direction from the U.S. Data Cupboard this week, we’ll be disappointed… There’s really not much to speak of in the cupboard scheduled for this week. We will see the Fed’s FOMC Meeting Minutes on Wednesday from their last meeting…  Those are always good for some rogue comment… So, we’ll have to wait-n-see that on Wednesday… 

To recap… The markets for the most part have been closed since Thursday evening, as the Good Friday and Easter Monday holidays that surround the holy day of Easter, have seen little to no trading…  So, Chuck goes out on a limb and talks about some things on his mind… Not all things on his mind, for he doesn’t have the time or space to empty his brain!  HA!   Gold & Silver are down a bit this morning, and the currencies are flat to start the week… 

For What It’s Worth…  Ok, I gave a teaser above about this article and so to finish that, this is an article that really gets into the debt rise above $28 Trillion, and it can be found here: US National Debt Passes $28 Trillion, +$4.7 Trillion in 13 Months. General Treasury Account Down by $480 Billion in 2 Months, $620 Billion to Go | Wolf Street

Or, here’s your snippet: “It finally happened, that glorious moment, when, after teetering on the verge for weeks – for reasons we’ll get into shortly – the incredibly spiking US gross national debt, after kissing the line a couple of times for a moment, finally, and suddenly by a big leap, jumped over the $28-trillion mark, with a $143-billion leap in one day on Wednesday, March 31, following some big Treasury sales. It gave some of that up on Thursday as some bonds matured. And it now amounts to $28.08 trillion, as per US Treasury Department on Friday.

The US gross national debt has now spiked by $4.7 trillion in 13 months since the end of February 2020, in the days before this show started.

During the final months of the Mnuchin Treasury, it was decided to start spending down the balance in the checking account by borrowing a little less, and by early January, the GTA had dropped to $1.6 trillion.

Early on in the Yellen Treasury, the drawdown was formalized. In early February, a schedule was announced: the balance would be brought down by $1.1 trillion to $500 billion by June. And they’re now well into it.

The drawdown has the effect that the government spends money it doesn’t have to borrow at the moment because it already borrowed it last spring when the Fed was still monetizing essentially all of the borrowing. This has some implications for the markets.

The government’s TGA is at the Federal Reserve Bank of New York and is reported weekly on the Fed’s balance sheet as a liability (banks report deposit accounts as liabilities) because this is money the Fed owes the government.”

Chuck again.. Basically what’s happening here folks is that the Gov’t now spends the proceeds from debt sales last spring that the Fed had monetized back then?   I really don’t know how the markets will take this development, but, in my mind I believe that the markets should punish the dollar for these monetary crimes… 

Market prices 4/5/2021: American Style: A$ .7629,  kiwi .7046,  C$ .7969, euro 1.1759, sterling 1.3866, Swiss $1.0610, European style: rand 14.6130, krone 8.5421, SEK 8.7510,  forint 306.61,   zloty 3.9004,   koruna 22.1271, RUB 76.39, yen 110.51, sing 1.3440, HKD 7.7758, INR 73.32, China 6.5660, peso 20.26,  BRL 5.7060,  Dollar Index 92.96,  Oil $59.71,   10-year 1.73%, Silver $24.92, Platinum $1,197.00, Palladium $2,696.00, Copper $3.97, and Gold… $1,723.50

That’s it for today… Well, a fantastico day, weather wise yesterday, led to a huge backyard Easter celebration with family yesterday…  My little Evie, was so darned cute and is getting around free and easy these days! It was great seeing some family members that I hadn’t seen in 3 months…  The grandkids hunted eggs, and the food was great! A grand time was had by all! Well, my beloved Cardinals started the season on the right foot, and then stumbled the next two games, and now head to Miami after losing 2 of 3 to the Reds… Deep Purple takes us to the finish line today with their rock classic song: Smoke On The Water…   I hope you have a Marvelous Monday, and will be Good To Yourself!

Chuck Butler