Who’s Going To Buy Our Treasuries?

June 27, 2022

* the dollar continues to show chinks in its armor…

* are digits instead of folding currency in your future? 

Good Day… And a Marvelous Monday to you! UGH! My beloved Cardinals lost 2 of 3 to the Cubs this past weekend, I would say, “talk about playing to the level of your competition” but that would be a jab at the Cubs’ won-loss record, and that wouldn’t be fair, they won 2 of 3 this past weekend and that’s that! I’m all along again this week, as Kathy left to be with her retired teacher friends on Saturday… The weather saw a major change on Saturday night, and Sunday we were left with warm temps, not hot temps, and something close to what normal June weather is here… I went for a drive last night, and put my window down, and the A/C off… That’s how nice it was! Nowhere special, I just love driving in the state of Missouri, it has beautiful rolling hills, and a plethora of streams and creeks, rivers, lakes etc. The price of gas is what it is, and I don’t let that stop me from taking drives! And just to tick off the administration and their green deal hopes, I’ll drive my gas guzzling car until it dies! Doucette greets me this morning with his song: Mama Let Him Play… don’t know that one? YOUTUBE it if you love great guitar work!

OK front and center this morning…Well, I made a major faux pas in my letter on Thursday, that I take full responsibility for… The S in BRICS is not South America, it stands for South Africa… I know that, I knew that, but still in my very tired state, I typed the wrong country… Sorry, for that faux pas! I hope it doesn’t happen again… Notice I didn’t promise that it wouldn’t happen again!

The dollar got sold on Friday, the selling wasn’t something to write home about, but it was selling nonetheless! The BBDXY lost 3 index points on the day to end the week at 1,253.43… I don’t know if you’ve noticed or not, but the dollar has recently been subject to selling, and while it hasn’t been HUGE chunks taken from the dollar’s armor, it has been noticeable from the cheap seats where I live… Gold was able to eke out a small gain of $4 on Friday to end the week at $1,827.40, and Silver gained 20-cents on the day to end the week at $21.24.. The price of Oil gained on Friday and ended the week trading with a $107 handle.. ( it cost me $90 to fill up my gas tank on Friday, thanks POTUS, AOC and the green deal nuts. And Bonds didn’t gain for the first day all week on Friday, as yields rose, leaving the 10-year at 3.14% to end the week…

Did you hear this news? Reuters reported that U.S. shale oil producers are returning to existing wells and giving them a second, high-pressure blast to lift output for a fraction of the cost of a finishing a new well. These ‘re-fracs’ are taking hold as shale oil producers look to take advantage of $100 a barrel crude without making big investments in new wells and fields.

I’ve been on record as being against fracking, but… fracking did allow the U.S. to become energy independent, so there’s that… 

In the overnight markets last night… the dollar has slide further in the red, and Gold is up $8 in the early trading! The BBDXY has lost nearly 1 index point overnight, to continue the selling of the dollar. Bonds got sold overnight, and the 10-year yield has risen to 3.17% this morning. The price of Oil is steady Eddie this morning, at $107, and Silver is up 30-cents to start the day… So, our Monday is getting off on the right foot for once in a blue moon.. 

OK, do you all recall me going out on a limb in May of 2021, and talking about hos the next crises in the U.S. would bring a change in our financial system, and remove folding currency? I said that negative interest rates would probably lead to the change, but it now appears that the powers that be want to see the U.S. economy collapse an that would then allow them to introduce the change to Central Bank Digital Currencies… Which is a misnomer, in that the digits will be the furthest thing to a currency that can be! These digits are going to change the way we live… It’s really scary to me, and therefore it should get your off your seats and look to see what you can do about this… Which is nothing, because it’s too late! It’s too late baby now, it’s too late… I will go through some of the ways that this change will make your life a living hell…

The Gov’t will issue the Central Bank Digital Currencies (CBDC’s) and therefore the Gov’t will control all that you do… If you buy something that’s not on the Gov’t’s green deal list, they can negate the buy, or put you a list of “bad people”, that will affect you when trying to buy airline tickets, or a new car, etc. The Gov’t needs you to spend, spend, spend, to finance their deficit spending shenanigans, and if you don’t spend to their liking, they’ll penalize you and take digits out of your account! And Banking fees? OMG, they’ll be so many banking fees you won’t be able to count them with a calculator! What are you going to do about it? Change Banks? Oh, like the bank down the street will be different! As if! Shoot Rudy, they may even be worse!

The reason I bring this up again, is to 1. Remind you that I first talked about this a long time ago, and 2. Because it’s getting pretty darn close to crisis time… Got Gold?

When you wake up one Monday morning, you’ll find that your dollars in your bank account have all been changed to digits… And when that happens people will rush to buy Gold (Silver) and when everyone is rushing to buy something, what happens? The supplies become nil, and the price to buy goes through the roof… And that’s why I keep telling you that the price of Gold and Silver are raging buys right now… But you can say, “Oh, Chuck you’re full of it, as usual, and that’s never going to happen In these United States of America!” And that’s your prerogative, go right ahead and go blindly into this economic crisis that we’re about to experience, and then don’t come crying to me…

Speaking of Gold… The good folks at GATA sent me this note from Ainslie MacLeod : “Since 2001, Gold has outperformed any other mainstream asset class, although that’s not what you are likely to hear from the mainstream. While gold lagged in 2013 and 2015, for long term investors, the yellow metal is up 553% in USD terms and 360% in AUD. Over the last fifteen years, gold has outperformed every other mainstream asset class in Australia, making gold ‘best of class’ in the new millennium. “

Yes, even I was late to the Gold rally, first buying Gold in 2005… But the ride has at times been frustrating, it has also be exhilarating, and I’m not interested in selling… Got Gold?

Did you hear that China had secured a liquidity life preserver from the Bank of International Settlements, and not just for themselves, but for the entire Pacific region? Here’s the skinny: “China’s central bank said today it had signed an agreement with the Bank for International Settlements to establish a Renminbi Liquidity Arrangement that will provide support to participating central banks in times of market fluctuations.

The People’s Bank of China said the arrangement’s first participants, in addition to the PBOC, would include Bank Indonesia, the Central Bank of Malaysia, the Hong Kong Monetary Authority, the Monetary Authority of Singapore, and the Central Bank of Chile.”

And that got me thinking… UH-Oh, I hear you saying, Chuck is thinking again! HA! No seriously, I was thinking that China is in a bind, Japan is in a bind, and the European Union is in bind, who’s going to buy our Treasuries that we need to sell to finance our deficit spending? If no one shows up at the auction window, what will happen? Well, the U.S. could very easily default… or they could authorize that yields be brought much higher to attract buyers…

Or, and I hope to the heavens that this never is discussed in the hall ways of the White House… And that is that an executive order could be signed to require all future purchases of personal 401K plans to be in Treasuries… This plan has been discussed and proposed previously during the administration of 2 presidents ago… And any mention of this becoming a law would really send Gold soaring in my humble country boy opinion!

OK, I had better start sounding more optimistic, because when the CBDC’s are in place, the Gov’t will shut down my bank account because of the things I talk about in the Pfennig! So, just to give you ample warning… when the CBDC’s are issued the Pfennig will be no more, for if I can’t be free to say what I want to say, then I won’t say anything!

The Swedish Central Bank, hiked rates last week, and made it perfectly clear that they are in this fight against inflation for the long run… The Swedish krona actually saw some buying after the rate hike acouncement…

Last week, we had the old Humphrey- Hawkins, House and Senate testimonies of the Fed Chairman … The Humphrey-Hawkins requirement ended years ago, but in keeping with the spirit of the bill, the Fed Chairman goes to give his take on the economy to the both the House and the Senate on back to back days… During his talk at the House last week, Jerome Powell told congressional lawmakers Wednesday that the central bank is determined to bring down inflation and has the ability to make that happen.

“At the Fed, we understand the hardship high inflation is causing. We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so,” the Fed chief said in remarks for the Senate Banking Committee. “We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses.”

Chuck again… Good to know that he’s all-in on combating inflation… I have gone on record saying that I doubted his commitment to combating inflation… But as my dad taught me years ago… Money talks, and B.S. walks… So, we’ll see just how committed he is to combating inflation in a couple of weeks, when the FOMC meets again…

The U.S. Data Cupboard in recent weeks has been lacking at best, and this week we get back in the game of printing real economic data. Like today’s printing of Durable Golds and Capitals Goods Orders for May… These two have been weak lately, and I see no reason to think that they would turn around… We’ll, see other real economic prints this week, but for today, we have to settle for the Durables, and Capital Goods Orders…

To recap… The dollar got sold on Friday to end last week… The dollar has seen recent chips at its armor, and eventually those chips will turn into big chunks should this selling persist… The Riksbank hiked rates last week, and falls in line with the other Central Banks claiming to combat inflation… China secured line of liquidity from the BIS, for the Pacific Region… And Chuck questions what will happen will no one turns up at the auction window for Treasuries? Gold & Silver ended the week on the positive side, and sill looks cheap to Chuck…

For What It’s Worth…. Well, have you ever heard a “retired CEO” diss his former company? That’s what this article is about, as Bill Dudley, former Fed Head, talks about the hard landing the U.S. economy is heading for, and it can be found here: The US Economy Is Headed for a Hard Landing – The Washington Post

Or, here’s your snippet: “The U.S. Economy is Headed For a Hard Landing — Bill Dudley

If you’re still holding out hope that the Federal Reserve will be able to engineer a soft landing in the U.S. economy, abandon it. A recession is inevitable within the next 12 to 18 months.

In their latest set of projections, Fed officials laid out a benign scenario, in which the economy keeps growing at a moderate pace and unemployment increases only slightly, even as the central bank raises interest rates significantly to get inflation under control. While the Fed’s forecasts have become more plausible over time, I see several reasons to expect a much harder landing.

First, persistent price increases have forced the Fed to shift its focus from supporting economic activity to pushing inflation back down to its 2% objective. The central bank’s employment mandate is now subservient to its inflation mandate. This can be seen both in Chair Jerome Powell’s performance at last week’s press conference and in the June FOMC statement, which removed language that the labor market would “remain strong.”

Second, the new focus on price stability will be relentless. Fed officials recognize that failing to bring inflation back down would be disastrous: Inflation expectations would likely become unanchored, necessitating an even bigger recession later. From a risk management perspective, better to act now, whatever the cost in terms of jobs and growth. Powell does not want to repeat the mistakes of the late 1960s and the 1970s.

Third, the current economic expansion is uniquely vulnerable to a sudden stop. In the short term, payroll growth, economic reopening and healthy balance sheets (supported by the vast fiscal stimulus of 2020 and 2021) should support demand, which in several sectors exceeds supply. For example, the two-year cumulative supply shortage in the motor vehicle sector likely amounts to several million units.
As a result, it’ll take time and a considerable monetary policy tightening to reduce demand and for that to translate fully into weaker production of goods and services.

But when that time comes, the production adjustment is likely to be abrupt, due to tight financial conditions, restrictive fiscal policy and tapped-out household savings.”

Chuck Again… Well, if anyone has a grasp on what the Fed is doing here, it’s Bill Dudley, so we should all pay attention to what he’s saying…

Market Prices 6/27/2022: American Style: A$ .6920,  kiwi .6297,  C$ .7751, euro 1.0575, sterling 1.2266, Swiss $ 1.0424, European Style: rand 15.9113, krone 9.8400, SEK 10.0846,  forint 379.65,  zloty 4.4454,  koruna 23.3668, RUB 54.14, yen 135.84, sing 1.3850, HKD 7.8463, INR 78.34, China 6.6895, peso 19.87, BLR 5.2426,  BBDXY 1,252.71,  Dollar Index 104.01, Oil $107.85, 10-year 3.17%, Silver $21.46, Platinum $914.00, Palladium $1,928.00, Copper $3.77, and Gold… $1,825.21

That’s it for today… Congratualtions to the Colorado Avalanche, this year’s Stanley Cup Winner!  I was of the opinion that Colorado was the best team going into the playoffs, but thought it would take a lot to be the defending Champions, Tampa Bay… I would have liked for the series to go to seven games, but we still received 6 great hockey games! The Young Rascals take us to the finish line today with their song: Groovin’. Groovin’, on a Sunday afternoon, really couldn’t get away too soon… I hope you have a Marvelous Monday today, and please remember To Be Good To Yourself!

Chuck Butler