One of the most important reasons is a new worldwide phenomenal: negative interest rates.
History doesn’t record the successes of any financial regimes or monetary systems based on negative interest rates. Ever. That’s because there aren’t any.
Negative interest rates are so utterly foreign to any kind of normal human economic behavior that they can only be the creation of delusional central bankers.
Or madmen. But pardon me for repeating myself.
In a negative interest rate regime, you lend your hard-earned money, for example by depositing it in a bank or buying a bond. And then, when you withdraw your deposit or cash in your bond, you get back less than you loaned. You pay the borrower for the privilege of using your money. A cartoon character like Wimpy might say, “I will gladly pay you $900 tomorrow for $1,000 today.”
Make sense? Of course not! But there is now a total of about $17 trillion in negative-yielding debt – both government and corporate bonds – around the world. And it just keeps growing.
To make matters worse, it looks like negative interest rates are headed to the US. Every time the Fed cuts rates it moves the US closer to negative rates. And now, says Alan Greenspan, the longest-serving Federal Reserve chairman in history, they will inevitably show up here. “You’re seeing it pretty much throughout the world,” he says. “It’s only a matter of time before it’s more in the United States.” Ron Paul agrees negative rates are headed here. He identifies this massive build-up of negative interest rates as a symptom of “the biggest bubble in history.”
No wonder that as negative interest rates spread, informed people turn to gold. We have noted that as the reported amount of negative interest rate debt has climbed from $12 trillion to $13 trillion to $14 trillion, and now to around $17 trillion, gold has marched higher.
That’s not hard to understand. If you had to choose between some unreliable borrower who offered you a negative interest rate for the use of your money, or gold, which would you choose?
The question answers itself. In the words of Greenspan, “Gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.”
The negative interest rate phenomena will end in a crash. Such madness always does. The world has been through episodes of monetary lunacy before, but usually, they are limited to one or two countries at a time. A Venezuela here or a Zimbabwe there. But this time the derangement has gone global.
The best possible safe haven – in fact probably the only safe haven for a monetary calamity of this global scale – is gold.
RME is here to help you avoid being victimized by unsustainable monetary fads and the central bank’s ruination of the dollar.
Nations around the world continue to demonstrate that they want more gold reserves and fewer dollars.
This shift away from dollars and into gold is a harbinger of things to come for two reasons.
First, if one central bank decides to upgrade its reserves with the world’s most enduring money, it may only represent a political statement. It is perfectly understandable if a heavily sanctioned state like Iran or Venezuela decides to avoid dollars for political reasons. (Note, though, that US sanctions have proliferated to so many countries that the US is forcing the world’s turn to dollar alternatives.)
But those jumping on the gold-bandwagon include friendly countries like Hungary and Poland. Most recently Poland has been ratcheting up its gold reserves, purchasing 125 metric tons over the past two years. At the same time Poland is repatriating gold. This week Poland announced that it has brought home to Warsaw 1oo tons of gold that had been held on its behalf by the Bank of England. This is not a sign of long-term confidence in the post-war dollar reserve monetary order.
Central banks need to hold reserves against which they issue their own currencies. Central banks can be described as strong hands; having made the decision to make gold a foundation of their monetary systems, and adding gold reserves at rates measured in hundred of tons, they can be expected to maintain that position.
To sum up, confidence in the global dollar-based monetary system is beginning to crack. This loss of confidence is justified by trillion-dollar deficits, ballooning debts, both corporate and governmental, politics driven by giveaways, vote-buying, and spending sprees, and finally by a new surge in reckless Fed money printing.
At the same time, gold is moving into strong hands, holders not prone to liquidate their holdings. There has been a years-long subterranean flow of gold from the West (the US and Europe) to the East (mostly China), also strong hands.
We would like to see our friends and client protect themselves and profit from advance knowledge of these trends. Simply call or visit an RME professional to implement a sound strategy for the times ahead.
We believe everyone should own gold and silver. But we encourage people to use best practices in both buying and selling precious metals.
Said differently, we encourage people to use common sense.
We just don’t think it’s a good idea to buy gold and silver from boiler room operators or to send your money somewhere across the country to a voice on the phone. Even worse- to a place you know nothing about.
And then wait for weeks to get your gold.
You should be able to buy with confidence. Face-to-face. Getting your gold and silver right then for most of the commonly traded products. On the spot upon receipt of good funds. That’s how we do business. Best practices.
Although we think everyone should own gold for many reasons including wealth preservations, financial privacy, and insurance against monetary crises, we know that sometimes people will want to sell their precious metals. As we’ve said many times, making good old-fashioned profits are just one good reason to invest in gold and silver. And there are life situations and opportunities that mean people will want to sell their precious metals in a safe and secure manner.
That’s why we offer same-day payment on most liquidations. Even if you didn’t buy your gold and silver from us. You don’t have to pack and box up your precious metals, go off to the post office or shipping service, buy special insurance, and send them someplace far away to someone you’ve never met, just a voice on the phone.
At RME, you’ll get the most competitive prices whether buying or selling. And as a courtesy to our clients, we provide on-site security facilitated by the Phoenix Police Department. Our officers provide round-the-clock surveillance, so customers can feel safe during all business transactions. Best practices.
Call and make an appointment to see us. And deal in person with a knowledgeable Republic Monetary Exchange precious metals expert.
Buy and sell gold and silver face-to-face. Safe. Convenient. Secure.
Republic Monetary Exchange. We’ve been here for a long time.
The Fed can’t stop printing money.
Now it has discovered that the trillions of dollars it already “printed” can’t be neutralized or rolled back.
The genie can’t be put back in the bottle.
The Fed tried that. It tried to undo some of the trillions of dollars of funny money it created in Quantitative Easing. That’s because even Fed officials know that if those trillions of dollars aren’t somehow unwound before they work their way into the general economy, they will eventually create a real Third World-style inflation here in the US.
Worse than that, the Fed not only can’t undo what it did in its QE money printing spree, it now is scrambling to print more money to replace what it tried to roll back last year.
The Fed is in a real bind. A mess of its own creation. And since we are all helpless victims of its policies, we are in a mess, too.
Here’s the story. It can be seen in the chart below.
The Federal Reserve reacted to the mortgage meltdown in 2008 by creating almost $4 trillion. It was all just made up digital money. It did this so that it could buy toxic mortgage and other bonds from the crony banks. To help them out. And, boy oh boy, did it ever help the crony banks out!
The spree lasted from 2008 to 2014.
This chart shows the assets on the Fed books after QE ended. It had assets bumping along close to $4.5 trillion dollars.
Recognizing the inflationary potential of that liquidity when, under certain circumstances, it starts finding its way into the commercial banks and into the consumer economy and sets off a nightmare inflation, the Fed decided to undo what it had done.
It didn’t go well. We’ll tell you what happened then and why it matters to you and the gold market in our next post, Inflate or Die, Part II.
Before the trillions of dollars of made-up digital “money” it created in 2008-2014 does its real damage, driving consumer prices to the moon, the Fed started to reduce its assets with a program called Quantitative Tightening. They didn’t discuss it much, and the mainstream press didn’t say much about the risk overhanding the economy from QE either, but even the Fed knew that had created a huge problem with trillions of dollars of money it made up out of thin air in its Quantitative Easing program. You can see on the chart below that Fed assets began to move lower in 2018 as the Fed targeted reducing its holdings by $50 billion a month
But by last fall, the stock market threw a fit. Since it had been climbing for years on the backs of free money for Wall Street, as the Fed tightened and reduced its assets, the market began to collapse. The S&P500 had traded as high as 2941 points in late September; by Christmas Eve it was 2350, a staggering 20 percent loss in only three months!
Wall Street was on strike! More free money, it told the Fed, or we’ll bring the whole stock market house of cards down.
The Fed got the message. By Labor Day, as you can see on the chart, the Fed’s balance sheet began to grow once again. Fast!
Not only did the Fed reverse gears, but it also stomped on the money printing accelerator!
Notice that the blue line, Fed assets, is now climbing faster than it came down. The upward trajectory is steeper than the rate at which it declined in the first nine months of the year. This illustrates the fact that with the new QE the Fed is printing at least $60 billion a month, which is more than the original QE that began in 2008.
Fed chief Jerome Powell says the new QE (which he refuses to call QE) is an interim measure. But is it?
The Fed knows it has to print money or the stock market will go into free-fall. The Fed has become the guarantor of stock market profits. The Fed has become Wall Street’s “Hey, boy!” It is inflate, or die!
Eventually, a critical mass of investors will figure that out. Discovering that the market is only held aloft by the Fed, they will head for the door all at once. And there is nothing the Fed can do at that point.
Well, there is one thing. The Fed can begin printing money and buying stock itself. That is a real endgame scenario. Seriously, if that happens, it’s the end of American free enterprise. Get out of the way!
One more thing. And this is the reason for telling the whole story. When the Fed prints new money, it reduces the value of every other existing dollar. That’s inflation. It’s a stealth tax, voted for by no one. It appears to make everything cost more, but in reality, the dollar buys less and less.
That’s one of the reasons people buy gold.
And in fact, you may remember when the market figured out last summer that the Fed was going to start a new round of inflation, the new gold and silver bull market was born. Gold and silver prices took off!
Here’s a chart that shows what happened.
The Inflate or Die Fed is in a fix. The only beneficiaries of its dilemma are people with gold. By its own logic, the Fed must continue to print more dollars. That will drive gold higher. Much higher. If it stops printing money, the stock market will plummet. And stock investors will rush into gold.
Either way, your best choice is to own gold.
Many of our clients are buying silver.
Today we’d like to share with you one reason they are doing so and why we think it is a very good idea right now for you, too!
It is because silver today is very inexpensive.
Many of our clients probably know that silver has been used as money around the world, in fact that it has served as money longer and in more places than gold itself. And silver is always prized in a crisis.
Our clients are also taking advantage of the growing silver demand in high-tech applications.
But the message that we would like to impress upon you today is this:
About 40 years ago, at the beginning of 1980, silver was $50 an ounce.
In today’s dollars – because the Federal Reserve has sharply eroded the purchasing power of the dollar – that would be more than $156.00!
At today’s prices, silver would have to triple to reach $50 an ounce. But to reach the purchasing value in today’s dollar that silver had in 1980, it will have to increase more than nine times!
Another way of putting it is that silver today is only a third what it sold for 4o year ago.
And it is only about 11 percent of the dollar value it had in 1980.
Oh, and by the way, silver came close to $50 again eight years ago. It reached $49.80 in 2011.
We think silver is really underpriced today. Many of our clients agree.
Don’t miss out at these prices!
Find out more by calling RME and speaking with one of our precious metals specialists. 602.955.6500.
Money printing jumps… World debt dangers… US deficit balloons… Consumers grow wary… Rich investors prepare for stock market troubles. Here’s some of the latest news about the fundamentals that drive gold and silver prices higher over time.
With two months to go, 2019 M2 growth is on track to easily exceed 2016’s record $854 billion expansion. Recent M2 growth is nothing short of spectacular. M2 has jumped $329 billion in ten weeks, about an 11.5% annualized pace. Over 26 weeks, M2 surged $677 billion, or 9.3% annualized.
–Credit Bubble Bulletin (11/9/19)
Ratings agency Moody’s has issued a debt downgrade warning to the entire world…. It cut its global sovereign outlook to “negative” from “stable” for 2020, cautioning that “disruptive and unpredictable” politics was worsening the slowdown in growth.
The federal government, which ended the 2019 budget year with its largest deficit in seven years, began the new budget year with a deficit in October that was 33.8% bigger than a year ago as spending hit a record.
The Treasury Department said Wednesday that the deficit last month totaled $134.5 billion, up from a shortfall in October 2018 of $100.5 billion.
–Money and Markets (11/14/19)
Despite stocks soaring to record highs, The Bloomberg Consumer Comfort index fell last week to 58.0 from 59.1 a week earlier, and has now plunged 5.4 points in three weeks, the biggest such drop since 2008…
Even as the market ascends to new heights, wealthy investors are bracing for a turbulent period that could produce a “significant drop” in equity benchmarks in the near term.
That is according to a recent survey produced by UBS Wealth Management that finds that some 55% of deep-pocketed investors are preparing for a drop in the market before the end of the 2020.
Wealthy investors hold 25% of their portfolios in cash, far higher than the roughly 5% that UBS recommends on average.
Market bubbles don’t just happen. They are the result of the government or its financial arm artificially creating excesses money and credit conditions. Fractional reserve banking, policies like Quantitative Easing, outright money printing, and interest rate manipulations are the tools they use to create these excesses, sending misleading signals to investors and businesses alike.
The pain of bubbles popping – the unemployment, the impoverishment of millions, the bankruptcies, the loss of families’ hard-earned financial security, even the loss of freedom and the ruin of entire countries – seem like they should be reason enough for bubble policies to be avoided in favor of sound, gold based monetary systems. But the inevitable suffering of the people is never enough to stop the bubble-blowers.
It never is.
Why do governments and central bankers alike engage in bubble economics and oppose sound, gold based monetary systems? The answer is simple enough: A gold-based monetary system disempowers them. Since the government or the central bank can’t simple create gold out of nothing, in imposes an unwelcome discipline on governments and politician. They are no longer free to buy votes in the way the have grown accustomed to, or to fund unaffordable foreign wars, or to enrich powerful cronies.
We are well past the days of a financially disciplined state. For evidence, look no further than our trillion dollar deficits and $23 trillion in national debt.
Two Fed bubbles have already burst in this young century. When the dot com bubble burst in 2000, the Nasdaq market lost 80 percent of its value. When the housing bubble popped, it didn’t just cost millions of Americans their homes; between October 2017 and March 9, the stock market fell by over 50 percent.
But, lessons never learned, now the Fed is inflating the biggest bubble of all.
But it’s not the “Mother of All Bubbles” because we say so. It’s because it’s bigger than any bubble that has gone before.
In any case, Joe Zidle, a chief investment strategist at Blackstone, trotted out the “Mother” term for our current bubble the other day, observing that global sovereign (government) debt is set to join a long list of historical bubbles.
The end of a cycle comes with ample warning, observes Zidle. “Many seemingly unrelated signs appeared during the housing bubble: skyrocketing property prices and excess speculation on raw land, the failure of auction rate securities, a money market fund breaking the buck (i.e., when its net asset value falls below one dollar) and the failure of an asset-backed hedge fund. In retrospect, the role that each of these phenomena played in the ensuing meltdown was obvious.”
Now Zidle surveys some of the warning signs in our current bubble. They include $13 trillion in negative interest rate debt, the failure of the overnight repo market that the Fed keep inflating, the collapse of manufacturing, and an ongoing trade war.
These aren’t random and unrelated events. “Every cycle ends with excesses. The warnings are normally subtle and usually dismissed.”
Among all the warning signs of this cycle’s excesses, sovereign debt stands out, says Zidle. “Every cycle ends with excesses. The warnings are normally subtle and usually dismissed. This cycle’s excess is sovereign debt.”
He calls the bubble in sovereign debt, which is now approaching $70 trillion, the Mother of All Bubbles.
To invest in gold and silver safely now, call or visit with a knowledgeable RME Gold professional. Don’t be caught up short when the Mother of All Bubble bursts.
We talk a lot about buying gold for safety. To protect your wealth, with governments out of control, running huge deficits and printing money like crazy, we recommend people move to safety with gold, the world’s most enduring form of money.
After all, the world has been through governments and episodes like this countless times. We know from experience that gold always come out on top.
But people buy gold for a lot of different reasons.
Many of our clients buy gold and silver for good old-fashioned profit!
They have had a great year! And we think next year will be even better!
Now we’ve had a pullback in both gold and silver prices, one we welcome. Since we are in a primary bull market that promises much higher prices ahead, we look at any correction or pullback as a gift, a buying opportunity.
But first, let’s look at how both gold and silver have done over the last 12 months.
Gold finished on Friday (11/8) at $1463. A year ago, it was $1200. Over the last 12 months gold has gained almost 22 percent.
Silver finished Friday at $16.82. A year ago, it was 14.25. That’s an 18 percent gain.
For comparison, the DJIA closed Friday at 27,681. That’s a 5.7 percent gain for the past 12 months. The S&P 500 has done a little better, up about 10 percent. But note that neither have shown the appreciation over the past year of gold and silver, and both stock market indices are at all-time highs.
We think it makes much more sense to invest in gold and silver, both in new bull markets and both well below their earlier highs, than to buy stocks at the top of a long and exhausted expansion.
The price of gold is well below its high of $1900 set eight years ago; it will have to climb an additional 30 percent just to reach its prior high.
Silver will have to almost triple before it reaches its prior high of $50.
Gold has retraced almost exactly one-third of the powerful summertime breakout that took it to $1566 in September. That would be a rather typical correction and creates an attractive entry level for buyers.
There are a lot of reasons that people buy gold, not the least of which is for profits. The fundamental of debt, deficits, international de-dollarizaition, and renewed and aggressive “money printing” remain the background upon which gold will chart far higher prices. But for those positioning for profit opportunities in 2020, now less than eight weeks away, we recommend taking advantage of this pullback in gold and silver prices.