Powell Makes Clear That There Will Be No Rate Hike Before 2023!

June 23, 2021

* Currencies rally on the Powell testimony to Congress

* Is Silver’s new line in the sand $26? 

Good Day… and a Wonderful Wednesday to you! Man do I love the cool down that we’re experiencing this week here in the Midwest… The days are still very warm, but not HOT! I sat outside to read yesterday for 2 hours, and then came inside, sat in my recliner, and next thing I knew, I had slept for 3 hours! Reading is like taking a sleeping pill for me…  Well, my beloved Cardinals got back on the ball field last night, only to embarrass themselves, losing to the rebuilding Tigers, by a large margin. UGH! I’m going to play manager here, and shake up the lineup… And fire the hitting coach! He’s been here for 3 years, and in that time our offense has gotten worse, when you would have thought that the only way to go was up from where they were… But noooooo!   One of my all-time fave bands, and songs, greet me this morning, as Chicago plays their song: Beginnings… 

Well… Fed Chairman, Jerome Powell, spoke to Congress on Tuesday, and basically spoke out of both sides of his mouth, with no one calling him out on that… Did anyone in Congress take an economics course or two in college? Powell, said things like: “The overshoot of inflation comes from categories like used cars and trucks that are directly affected by the reopening of the economy.” And then would follow that up with: “That inflation could turn out to be more persistent than expected.” 

I also found it interesting that he only highlighted cars and trucks as inflationary items… Hey Jay! How about food, clothing, housing, insurance, health care, and the list could go on, and on, of inflationary items right now, but he chose to mention only two… which tells me he has no idea whatsoever of what is happening in the real world…

I have a ditty on inflation in the FWIW section today… so you won’t want to miss that!

So, that was a long intro to tell you that the currencies found solace in Powell’s words, and rallied on the day.. As he made sure the markets heard that the Fed is NOT going to raise rates until 2023… The euro climbed back over the 1.19 figure, the BDDXY which began the day at 1,143.96, ended the day at 1,138.48, and the Dollar Index was 92.04 yesterday morning, and closed at 91.75… So, you can see that there was definitely slippage in the dollar yesterday…  So, we’re back to having the dollar at risk… we were here about 10 days ago, and then voila! We weren’t there any longer. The Plunge Protection Team did their thang and pushed the dollar higher for over a week of trading, and now we’re back to having the dollar at risk… That doesn’t mean that the dollar will be weaker every day, but the general direction will be downward… Until it’s not…

But it wasn’t a good day for Gold & Silver… It was NOT as bad of a day as, pick any day last week, but Gold ended the day down $4.60 to close at $1,779.80, and Silver ended the day down 19-cents to close at $25.86… I have no idea why Gold was getting sold yesterday, when the dollar was getting sold… But it was….   I truly expect the price of Gold to be choppy for the next few weeks… The summer months are usually a time when Gold does drift, as investors have other things on their minds…

Ed Steer of www.edsteergoldsilver.com titled his letter this morning: Silver Not Allowed To Close Above $26….   yeah, remember before the debacle that was last week, I talked about how $28 seemed to be the line drawn in the sand for Silver?  And now it’s $26?  Yikes! Well, a quick look at Silver this morning shows that it has moved past $26 in the early trading today, so now the question is will it be allowed to close above $26? Well, only the shadow knows…. 

Another thing that was surprising to me yesterday with the selling of Gold was that Bitcoin had an absolutely horrible day, and traded below $30,000…   I would have thought most investors that have taken part in the scam that is Bitcoin, would be taking their Bitcoin sale money and buying Gold, but stranger things have happened these days, and this is one of those strange things…

In the overnight markets last night… When I was getting ready to retire last night, I did a quick check of the currencies & metals, and they didn’t appear to be doing well… But in checking the figures early this morning I see that the memo finally got through to the overseas traders, that the dollar buying was over, and the currencies & metals turned around and headed north…  

The BBDXY which closed yesterday at 1,138.48, is just a tad below that figure this morning at 1.38.40, and the Dollar Index is in the same boat, slipping only a tad this morning.  So, we start today with the euro trading up VS the dollar, and Gold up $4.40, and Silver up 19-cents in the early trading…  There’s no data again today to move the markets, so if these asset classes are left alone with no outside interference, they should be just fine today… 

The U.S. Data Cupboard is still basically empty today.. The 1st QTR Current Account Balance will print, but it’s old news… And instead of saying “Balance” I should just say “Deficit”…  The so-called experts are looking for the Current Account Deficit to widen in the 1st QTR to $205 Billion from $188 Billion in the final quarter of 2020… The markets used to watch this data like a hawk watches over its young, but not any longer, and so it qualifies as being a non-market moving data print…

To recap… Fed Chairman Powell, spoke to Congress using contracting statements that no one in Congress called him out on… But the one thing he did do is make sure the markets were listening to him, when he said that the Fed will not hike rates before 2023… That news got the currencies in gear, and they started beating back the dollar bugs, to end the day with some nice gains VS the dollar. Gold & Silver weren’t allowed to party with the currencies yesterday… Chuck thinks it’s very strange that Gold was sold on a day when Bitcoin fell below $30,000…  But stranger things have happened… 

Before we head to the Big Finish today, I wanted to highlight something that longtime reader Bob, sent me from Bill Sardi…  I’ll set this up by talking about how I keep saying that we all know there’s something not right in America… Well Bill Sardi has listed them, and of course his list is not conclusive, but it’s a good start… let’s listen in has he lists them:

Reality is scoffed at, and illusion is usually king.”  – Dr. Stan Monteith

It appears, in the very near future, Americans are going to wake up to an America:

  • Where money is nearly worthless due to intentionally-induced inflation;
  • Where there are contrived shortages of gasoline, food, water and electricity;
  • Where those who don’t comply with mandatory vaccination will have to be crated to re-education camps to save the rest of us;
  • Where guns will be taken away to save the people from themselves.
  • Where the masses must be placed on a guaranteed basic income and be thankful their government saved them from the consequences of a capitalist/racist society.
  • Where a man-made mutated virus is racing through the population that cannot be controlled by vaccines.

And it will never even cross the minds of naïve Americans this was all staged… 

Chuck again…  This has been a public service announcement, now you can go back to our regular programming… 

For What It’s Worth…  Well, good friend, Dennis Miller of www.milleronthemoney.com sent me this link to the article in our FWIW section today… It’s an article that shows how even IF the inflation we are seeing right now is transitory, it’s still damaging, and it can be found here: Why Even “Transitory” Inflation Permanently Erodes Your Savings (birchgold.com)

Or, here’s your snippet: “Inflation might be transitory, but its damage is permanent

Here’s why inflation is forever…

Consider our imaginary friend Arthur. He nets $100 per month. After year of 5% inflation, Arthur’s monthly money buys 5% less. Next year, it turns out the inflation spike really was transitory, so the inflation rate goes to 0%.

Here’s the thing: Arthur’s monthly income STILL buys 5% less.

It’s as if Chairman Powell reached into Arthur’s pocket and stole $5 every month. Forever.

That’s why we called inflation the Federal Reserve’s tax that no one voted for and everyone pays.

Wolf Richter laid out the ugly scenario that plagues our savings right now:

Inflation is a game of Whac-a-Mole. One pops up as another backs off. So it could very well be that CPI inflation may be 4% next May, down from 5% now, and we’ll be celebrating that the 5% was “temporary,” and was replaced by 4%, hahahaha. But the purchasing power of the dollar that is lost every month is lost permanently. [emphasis added]

Of course this is nothing new. The dollar’s buying power has been on a downhill slide overall since June of 1913, with the exception of a notable four-year recovery from September 1929 to May 1933. (Another interesting correlation is the Federal Reserve was also established in December of 1913.)

Wolf also believes the dollar’s descent hasn’t reached the bottom yet, and that it never will. With a Federal Reserve that’s so terrified of deflation they’ll do anything to prevent it, there’s not much of a chance that any of that lost buying power will return.

Remember, even if inflation reaches zero, it will be too late — you will have already been robbed.”

Chuck again… Well nothing here that I haven’t told you over and over again about inflation and your loss of buying power, but just like when you have kids that don’t listen to you, but will listen to someone else, I thought having someone else explain it here, would do a world of good…

I had a dear reader ask me if the increase in price of a sandwich at her local bodega would come back down if inflation is only transitory? I explained that this is the problem with even transitory inflation… once the prices increase, they don’t come back down… On a sidebar here; Did you ever notice how when a restaurant has new menus, the new menus reflect new prices?  Funny how that works, and not funny ha-ha, either! 

Market prices 6/23/2021: American Style: A$ .7572,  kiwi .7036, C$ .8138, euro 1.1950, sterling 1.3969, Swiss $1.0902, European Style: rand 14.1833, krone 8.5279, SEK 8.4780,  forint 291.69,  zloty 3.7834,  koruna 21.2796, RUB 73.04, yen 110.78, sing 1.3445, HKD 7.7655, INR 74.13, China 6.4729, peso 20.28, BRL 5.0009, BBDXY 1,138.40, Dollar Index 91.74,  Oil $73.43, 10-year 1.46%, Silver $26.02, Platinum $1,086.00, Palladium $2,668.00, Copper $4.21, and Gold… $1,784.20

That’s it for today…  The Moody Blues sing a song titled: Lost In A Lost World, and that’s were the markets seem to be these days… We all know in our heart of hearts that something’s not right, and yet stocks keep rising, I do believe at this point the stock market is seeing a bad case of FOMO by investors… And that’s not a good thing…  But… no one seems to care… I almost didn’t answer the bell this morning, Man, I wanted to continue to sleep… But… I rationalize with myself that I could go back to sleep after I finished writing, and that got me up and going! HA!  It appears to be another Chamber of Commerce Day today, weather-wise, and what do I have here?  The Rascals take us to the finish line today with their song: A Beautiful Morning….  I was singing this song to Evie on Saturday morning, and she just looked at me like I had three eyes…  But I never let a kid looking at me like that deter me! I just kept singing!  I hope you have a Wonderful Wednesday, and Please Be Good To Yourself!

Chuck Butler