June 21, 2023
* dollar is bought overnight again, not in U.S. session
* Gold & Silver get taken down again… When will it end?
Good Day, and a Wonderful Wednesday to you! 4 in a row! After all the losses this year, 4 wins in row, feels like my beloved Cardinals have turned corner, and are now ready to go a real win streak! The Cardinals won last night and go for the sweep in a day game today before jetting off to London, to play the Cubs 2 games this coming weekend… The Cubs too have been playing better baseball lately, so the 2 upcoming games should be quite interesting… I sat outside by myself last night watching the game, it felt wierd, to be going solo… But when everyone around you goes to their lakes, it makes for solo games… Our StL City SC team plays tonight, and when I was telling my wife that I was having problems finding a seat buddy, she said, “I’m available Wednesday night, and I would like to go”… I said, “Ok, it’s a date!” Brewer & Shipley greet me this morning with their great 70’s song: One Toke Over The Line…
Well, once again yesterday, we saw the dollar get bought in the previous night’s sessions, but fail to make any headway in the U.S. session… The BBDXY started the day at 1,226, and ended the day at 1,226… The euro seems to be having a little piece of it taken away every night. The single unit still traded above 1.09 at the end of the day yesterday, but a far way from where it traded on Friday of last week… Gold & Silver started the day yesterday on a down note, and continued to be traded in the red all day… Gold lost $14.30 to close at $1,937.50, and Silver did no better, losing 78-cents on the day, to close at $23.24… I had read an article the other day about how the writer thought that Silver had capitulated, and was ready to move steadily higher… Of course, he didn’t say when that might happen, because it sure isn’t happening now!
This morning, Ed Steer said in his early morning letter (www.edsteergoldsilver.com) “As Ted has always said, one must never underestimate the treachery of the big shorts in the COMEX futures market — and they were certainly in our faces yesterday.
Both gold and silver were closed at prices not seen since the previous low back on May 25. Gold’s 200-day moving average is a very long way down below its Tuesday close…but silver’s is less than a dollar now. Is that what they’re gunning for? Who knows.”
Chuck again… The “Ted: that Ed refers to is none other than the Silver guru, Ted Butler, who’s no relation of mine that I’m aware of…
The price of Oil is range bound between $70 and $71, and bumps higher to $71, then back to $70… Just biding its time until the next leg up comes… I don’t know that for a fact, I just feel it in my bones… And the buying of the 10-year continued with the yield on the bond falling to 3.76%
In the overnight markets last night… Mom! He’s doing it again! Well, the dollar got bought again in the overnight markets, this time the buying was watered down, with the BBDXY gaining just 1 index point. Now, we’ll see if the U.S. market is the same-o, same-o, and not even budge a smidgen today… I find that Ed Steer’s comment about we don’t know what the price manipulators are gunning for, is very spooky… We don’t know, and that’s something I don’t like to say… But when they are finished taking down Gold & Silver, the two metals will pick up the pieces and begin to rally again, that’s been the case since the very first day of price manipulation…
The price of Oil is steady Eddie and within the range I talked about above, and the 10-year has given up another 2 Basis Points of yield as we start today with the 10-year trading 3.74%…
Well, I was thinking of something that I wrote about 10 days or so ago, and that is that the BRICS announced that their new combo currency would be issued in August of this year… The thing that was missing though was how this new currency would compete with dollars, euros, sterling, etc. And then it I found it! This new combo currency is going to be backed by some percentage of Gold… Now, haven’t I aways told you that in my thought the Chinese would back their renminbi with a percentage of Gold and then it would be the most valued currency in the world? Well, this is a way the Chinese can achieve that without the problems on a larger scale… The BRICS combo currency will contain, Real, Rubles, rupees, renminbi, and rand… So, that piece of renminbi will be backed by a percentage of Gold…
That looks to be game over for the rest of the fiat issued currencies… That means dollars will suffer, but so too will euros, and the other currencies… It’ll all be about the BRICS… it’s coming to a theater near you, soon… Are you ready? of course the next step for the BRICs is to announce how it will deliverable, and traded… I’ll be on the watch for that news, you can bet your sweet bippie on that!
The FWIW article today is quite long, so I’ll get through the rest of the stuff I want to talk about quickly…
The U.S. Data Cupboard has really been lacking this week, so far… But today is day one of Jerome Powell’s testimony to Congress on the economy, tomorrow is day two… These testimonies don’t usually have any market moving material in them, and to me it’s all pomp and circumstance, with a few lies thrown in… We’ll also see the US. Capital Account… This used to be the one debt figure that ruled the markets, but it is no longer, as the current debt has exploded to the upside and take over everyone’s attention…
To recap… The buy the dollar overnight markets, and not buy any more U.S. markets continued for another night last night with the dollar getting bought again… Gold & Silver have been seeing their share of short paper trading, as in my opinion, the short paper traders are scared that without their short trades, Gold & Silver would be soaring right now… And their one job is to keep Gold & Sliver from attaining attention, and taking it away from the dollar… And Chuck finally figured out that the BRICS are going to back their combo currency with a percentage of Gold… OMG! Will other countries try to mimic the BRICS, or just suffer the losses they will incur when there is a Gold weighted currency as their competition?
For What It’s Worth… Ok, this is from the Fed St. Louis’ website, and the FRED data base… And even the economists at the Fed St. Louis, think the U.S. Debt is getting out of hand, and they talk about that and what it will result in, and it can be found here: Fiscal Dominance and the Return of Zero-Interest Bank Reserve Requirements | St. Louis Fed (stlouisfed.org)
Or, here’s your snippet: “”Under current policy and based on this report’s assumptions, [government debt relative to GDP] is projected to reach 566 percent by 2097. The projected continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.”
—Financial Report of the United States Government, February 16, 2023
INTRODUCTION
The above quotation from the Treasury’s Financial Report admits that the current combination of government debt and projected deficits is not feasible as a matter of arithmetic because it would result in an outrageously high government debt-to-GDP ratio. But when exactly will the US hit the constraint of infeasibility, and how exactly will US policy adjust to it? This article considers whether fiscal dominance is a serious possibility for the United States in the near future and discusses how various policies (especially those related to the banking system) likely would change if fiscal dominance became a reality.
Fiscal dominance refers to the possibility that the accumulation of government debt and continuing government deficits can produce increases in inflation that “dominate” central bank intentions to keep inflation low. The article begins by showing that the prospect of this occurring soon in the United States is no longer far-fetched. Indeed, if global real interest rates returned tomorrow to their historical average of roughly 2 percent, given the existing level of US government debt and large continuing projected deficits, the US would likely experience an immediate fiscal dominance problem. Even if interest rates remain substantially below their historical average, if projected deficits occur as predicted, there is a significant possibility of a fiscal dominance problem within the next decade.
The essence of fiscal dominance is the need for the government to fund its deficits on the margin with non-interest-bearing debts. The use of non-interest-bearing debt as a means of funding is also known as “inflation taxation.” Fiscal dominance leads governments to rely on inflation taxation by “printing money” (increasing the supply of non-interest-bearing government debt). To be specific, here is how I imagine this occurring: When the bond market begins to believe that government interest-bearing debt is beyond the ceiling of feasibility, the government’s next bond auction “fails” in the sense that the interest rate required by the market on the new bond offering is so high that the government withdraws the offering and turns to money printing as its alternative.
As the money supply is forced to grow by fiscal dominance, inflation rises, which creates a new means of funding government expenditures via “inflation taxation.” Inflation taxation has two components: expected and unexpected inflation taxation. Both are limited in their ability to fund real government expenditures. The expected component of inflation taxation (per period) is the product of the nominal interest rate and the inflation tax base, which consists of all non-interest bearing government debt. (Typically, this consists of currency and non-interest-bearing bank reserves at the central bank.) Total real government expenditures that can be financed by the expected inflation tax are limited because the tax base of this inflation tax is determined by the demand for money. The inflation tax earned per period is the product of the nominal interest rate (the inflation tax rate) and the amount of real demand for currency and zero-interest reserves. Unexpected inflation taxation occurs when the nominal value of outstanding government debt falls unexpectedly (thereby taxing government debtholders), and this component is also limited by the ability of government to surprise markets by creating unanticipated inflation”
Chuck again… The article is quite long, and I tried to snippet it as best as I could, but if you have the time, I would certainly click the link above and read it in its entirety… The gist of this is that I can’t believe the Fed St. Louis is writing this article….
Market Prices 6/21/2023: American Style: A$ .6714, kiwi 6160, C$ .7557, euro 1.0921, sterling 1.2727, Swiss $1.1143, European Style: rand 18.3681, krone 10.7533, SEK 10.7597, forint 339.00, zloty 4.0597, koruna 21.7770, RUB 84.27, yen 141.84, sing 1.3438, HKD 7.8278, INR 82.03, China 7.1873, peso 17.15, BRL 4.7882, BBDXY 1,227.11, Dollar Index 102.58, Oil $71.13, 10-year 3.74%, Silver $23.07, Platinum $957.00, Palladium $1,365.00, Copper $3.86, and Gold… $1,934.71
That’s if for today… Today is the Summer Solstice, and it will occure at 9.57 CDT this morning… I noticed last night that the baseball game was over, and it wasn’t even dark out… I love the summer hours that are longer each day with sunlight… But then I’m a HUGE fan of the Sun… But it’s all downhill from here… One more week and then we’ll be heading into the 4th of July holiday! WOW! That snuck up on me quickly! Not that I do anything on the 4th of July…. The Byrds take us to the finish line today with their song: Eight Miles High… I hope you have a Wonderful Wednesday today… And Please, oh pleae remember to Be Good To Yourself!
Chuck Butler