War on Cash Kicking Into Overdrive

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In the depths of the 2008–09 financial crisis, Obama’s first chief of staff, Rahm Emanuel, remarked that one should never let a good crisis go to waste. You probably recall him saying that.

He was referring to the fact that crises may be temporary but hidden agendas are permanent.

The global elites and deep state actors always have a laundry list of programs and regulations they can’t wait to put into practice. They know that most of these are deeply unpopular and they could never get away with putting them into practice during ordinary times.

Yet when a crisis hits, citizens are desperate for fast action and quick solutions. The elites bring forward their rescue packages but then use these as Trojan horses to sneak their wish list inside.

The War on Cash Is Decades Old

The USA Patriot Act that passed after 9/11 is a good example. Some counterterrorist measures were needed, of course. But the Treasury had a long-standing wish list involving reporting cash transactions and limiting citizens’ ability to get cash.

They plugged that wish list into the Patriot Act and we’ve been living with the results ever since, even though 9/11 is long in the past.

Obviously, the effort to eliminate cash is hardly new. It has been going on for many years and in many forms.

The U.S. discontinued the use of large-denomination bills in the late 1960s. Until 1969, $500, $1,000, $5,000 and even $10,000 bills were issued, even though they were printed decades earlier.

Today the largest bill is a $100 bill, but it has lost 80% of its purchasing power since 1968, so it’s really just a $20 bill from those days. Europe has ended the 500-euro note and today the largest note in euros is 200 euros.

Ignore the Official Reasons

Harvard professor Ken Rogoff has a book called The Curse of Cash, which calls for the complete elimination of cash. Many Bitcoin groupies say the same thing. Central banks and the IMF are all working on new digital currencies today.

The reasons for this are said to include attacks on tax evasion, terrorism and criminal activity. There’s some truth to these claims. Cash is anonymous, so it can’t be tracked.

But the real reason is because the elimination of cash would allow elites to impose negative interest rates, account freezes and confiscation.

They can’t do that as long as you can go to your bank and withdraw your cash. That’s the key.

In other words, it’s much easier for them to control your money if they first herd you into a digital cattle pen. That’s their true objective and all the other reasons are just a smokescreen.

And now, predictably, the latest attack on cash comes courtesy of the COVID-19 pandemic.

Crisis Meets Opportunity

This crisis is even larger and scarier than the 2008 crisis, which gives elites even more opportunity to ram their agendas through without serious opposition. They don’t intend to let it go to waste.

Sure enough, government agents and tech vendors are now claiming that cash is “dangerous” because it could contain traces of the coronavirus.

While that’s not impossible, it’s highly unlikely and no more likely than getting the virus from 100 other sources including package deliveries and shopping carts.

Should we ban cardboard boxes and shopping carts too?

If you’re really concerned about getting coronavirus from cash, it’s simple to wear sanitary gloves during any transactions (I do). Then put the cash to one side. The virus cannot live more than 10 hours or so on an inorganic surface. After a while, your cash is safe.

But if you get scared into giving up cash because of COVID-19, then don’t complain when you find that your financial freedom is also gone when the world moves to 100% digital money.

Because that’s the endgame here.

How to Protect Your Wealth

The time to protect yourself is now. The best way is to keep a portion of your wealth outside of the banking system.

I strongly recommend that you own physical gold (and silver). I recommend you allocate 10% of your investable assets to gold. If you really wanted to be aggressive, maybe 20%. But no more.

Just make sure you don’t store it in a bank, because it would be subject to confiscation. That defeats the whole purpose of having this sort of protection in the first place.

One Small Positive

As bad as the COVID-19 crisis is, and it is that bad, there’s one small positive to come out of it: It’s finally snapped investors out of their complacency regarding gold.

I recommended gold at $1,100 per ounce, $1,200 per ounce, $1,300 per ounce, $1,400 per ounce, $1,500 per ounce and so on… you get the picture.

But few people cared. They just yawned. Now that gold is $1,750 per ounce (up 75% since 2015), everyone wants gold!

There’s only one problem. You may not be able to get any.

That’s also something I predicted. I said years ago that when you most want your gold, you won’t be able to get it because everyone will want it at the same time and the dealers will be back-ordered and the mints and refiners will shut down.

Now it appears that’s exactly what’s happening.

The U.S. Mint at West Point is closing. That mint produces 1-ounce American Gold Eagle coins, so this will add to the shortage of Gold Eagles. The Royal Canadian Mint also closed for coin production temporarily a few weeks ago.

Gold refiners in Switzerland are either closed or are operating on reduced hours. Gold logistics firms like Brink’s are also cutting back hours and reducing distribution of gold bullion.

You Still Have a Chance

It’s still possible to find some gold bars or coins from dealers who have inventory, but delays are long and commissions are high. The scarcity factor will only get worse as gold prices continue their rally in this third great bull market in history that began in 2015.

Gold is difficult to get now but not impossible. If you don’t have yours yet, don’t wait any longer.

If you have to pay a bit of a premium for physical gold over the officially listed gold price, don’t worry about that. It means nothing in the long run.

I see gold going to at least $10,000 an ounce ultimately, so paying a little more right now is not an issue. It’s just an indication of the skyrocketing demand for physical gold right now.

When the next panic hits, and it will hit, there won’t be any gold available at any price.

Regards,

Jim Rickards
for The Daily Reckoning

The post War on Cash Kicking Into Overdrive appeared first on Daily Reckoning.

Investing Is Now Simple

This post Investing Is Now Simple appeared first on Daily Reckoning.

The raging pandemic has served one high and worthy purpose:

It has made obvious — to all with open eyes — that the stock market is a crook’s game, a vast swindle.

How else could the stock market regain so many of its initial pandemic losses… while 16 million Americans file unemployment claims… and second-quarter GDP may contract 40%?

The Federal Reserve has expanded its balance sheet some $1.6 trillion these past four weeks.

There is your answer.

All vestiges of fair and honest markets have gone whooshing down the chute.

A Tremendous Gambling Racket

The Federal Reserve heads a tremendous gambling racket. It deals dishonest cards. It weights the dice. It tinkers the slots.

Anything and everything it will do to rook bears out of their rightful jackpots.

And so we ask:

Where would the stock market presently sit without the Federal Reserve’s massive fixing?

The numbers men at One River Asset Management have tackled the question.

Their conclusion shortly.

First we look in on the blackjack table…

A Touch of Reality

The Dow Jones shed 445 points today. The S&P gave back 62; the Nasdaq, 122.

Why today’s setback?

We learn this morning that March retail sales plunged a savage 8.7% — a record jolt to business. No previous figure approaches it.

We further learn that United States industrial production plunged 5.4% month over month.

That represents its steepest monthly fall since January 1946… not long after the nation began beating its belligerent swords into peaceful plowshares.

Meantime, earnings season is once again upon us. And corporate earnings are presently dropping away…

Bank of America claims first-quarter profits plummeted 45%. Citigroup profits went 46% backward. Goldman Sachs also reported a violent 46% retreat.

Quincy Krosby — Prudential Financial’s chief market strategist — drips icy sweat as he canvasses the numbers:

If this is a precursor to what we can expect throughout the U.S.… there’s no word for it. This reflects the complete shutdown of the economy.

Yes it does. Yet the abysmal numbers were all but guaranteed. And still the stock market jumped for weeks.

Yes, the market was down today.

Yet we suspect further pledges of Federal Reserve trickery will coax stocks up again — for a time at least.

The New Investment Strategy

BlackRock is the largest asset manager on Earth. It is also in command of the Federal Reserve’s asset-purchasing program.

This is the program that is lifting creaky debt off corporate balance sheets… and dropping it into taxpayers’ laps.

And what is BlackRock’s present investment strategy?

To simply hitch its cart to whichever assert the Federal Reserve purchases. Explains Mr. Rick Rieder, director of BlackRock’s global allocation unit:

We will follow the Fed and other [developed market] central banks by purchasing what they’re purchasing, and assets that rhyme with those.

That is, the central banks will ultimately select BlackRock’s investments. What kind of capitalism is this?

And is there not something uniquely swinish about this arrangement… perhaps even unlawful?

BlackRock is directly involved in the Federal Reserve’s asset purchases. It therefore knows which assets will get a lift. It can place its wagers accordingly — before all others.

Where is the Securities and Exchange Commission to investigate insider trading?

Ecstatic Markets

But markets are “ecstatic,” says Rabobank’s Michael Every.

That is because they need only lean back on their oars… and drift with the Federal Reserve’s gravitational tide:

Markets are ecstatic because there is no need to actually do any thinking at the moment. The Fed has made clear that there are to be no losers — or at least that one does not have to bother trying to pick the winners.

And so the Federal Reserve has quieted capitalism’s mighty gales of creative destruction. These are the gusts that push progress along, that push society along.

They blow away the inept and inefficient… and sweep in the new and improved.

Improved mousetraps, superior widgets, better living — these come out of capitalism’s destructively creative gales.

But the Federal Reserve has hushed them down.

Each Intervention Adds More Unproductive Debt

Each intervention piles up additional debt within the system. Thus the system sags under the added weight.

Progress slows as the laggards absorb capital that could have flowed into worthier hands. Yet the inefficient know they will not sink under. They realize the authorities will keep them up.

Deutsche Bank strategist Jim Reid:

The authorities have been so reluctant to see the creative destruction that’s so important to successful capitalism that they had to make another stunning major intervention.

Ever since the Fed of the late 1990s decided to bail out the financial system post the Long Term Capital Management collapse, we’ve had rolling state-sponsored capitalism and large moral hazard. This has meant that each subsequent default cycle (or mini market cycle) has been less severe than the free-market parallel-universe version would have been and has left increasingly more debt in the system as a result and meant that the intervention necessary to protect the system has got greater and greater. In my opinion, it also helps lock in lower productivity as you keep more low/no growth entities alive.

This fellow cites productivity. Productivity is the source of authentic long-term prosperity…

No Productivity, No Growth

Productivity growth averaged 4–6% for the 30 years after WWII. But average productivity has languished between 0–2% since 1980.

Meantime, labor productivity averaged 3.2% annual growth from World War II through the end of the 20th century. But since 2011?

A mere 0.7%.

The United States government borrowed perhaps $12 trillion since the financial crisis — even before the latest debt delirium.

But the American economy expanded only $5.1 trillion over the same space.

That is, GDP increased 35%. But the national debt increased 122%.

Where Will Productivity Originate?

We presently confront spiraling debt… and diminishing growth. The unfolding cataclysm will only deepen the trend.

Concludes Michael Lebowitz of Real Inve‌stment Advice:

“Given the finite ability to service debt outstanding… future economic growth, if we are to have it, will need to be based largely on gains in productivity.”

If we only knew the source of that productivity.

But we conclude by returning to our question of the day:

Where would the stock market presently sit without the Federal Reserve’s mammoth manipulations?

One River Asset Management has taken up the question. Here is their answer:

Down 50–80%…

Regards,

Brian Maher
Managing editor, The Daily Reckoning

The post Investing Is Now Simple appeared first on Daily Reckoning.

Rickards: It’ll Get Worse it Before It Gets Better

This post Rickards: It’ll Get Worse it Before It Gets Better appeared first on Daily Reckoning.

We’re well into the coronavirus pandemic at this point. As of this writing, there are 360,765 reported infections and 15,491 deaths worldwide.

Over the next few days, you may be certain that those numbers will be significantly higher.

That’s how pandemics work. The cases and fatalities don’t grow in a linear fashion; they grow exponentially.

It’s widely acknowledged that this pandemic will get much worse before it gets better. There’s no doubt about that.

It didn’t take long for the coronavirus crisis to turn into an economic and financial crisis.

The Worst Collapse Since the Great Depression

The U.S. is falling into the worst economic collapse since the Great Depression in 1929. This will be worse than the dot-com collapse of 2000–01 and worse than the Great Recession and global financial crisis of 2008–09.

Don’t be surprised to see second-quarter GDP drop by 10% or more and for the unemployment rate to race past 10% on its way to 15% or higher.

The questions for economists are whether the lost output will be permanent or temporary and whether U.S. growth will return to trend or settle on a new path that is below the pre-virus trend.

Some lost expenditure may just be a timing difference. If I plan to buy a new car this month and decide not to buy it until August, that’s just a timing difference; the sale is not permanently lost.

But if I don’t go out for dinner tonight and then do go out a month from now, I’m not going to order two dinners. The skipped dinner is a permanent loss.

Unfortunately, 70% of the U.S. economy is based on consumption and the majority of that consists of services rather than goods. This suggests that much of the coronavirus impact will consist of permanent losses, not timing differences.

More important is the question of whether growth returns to trend by next year or follows a new lower trend. (Bear in mind that “trend” for the past 11 years has been 2.2% growth compared with average growth in all recoveries since 1980 of 3.2%; any decline in trend growth would be from an already low base.)

This is unknown, but the result will be as much psychological as policy driven.

The Fed’s Bazooka Is Empty

In situations like this, the standard policy response is for the Fed to cut rates, which it has certainly done.

The Fed has also launched massive amounts of quantitative easing.

In addition, they have guaranteed or offered credit facilities to banks, primary dealers, money market funds, the municipal bond market and commercial paper issuers so far.

Now the central bank has taken the unprecedented step of committing to buy as many U.S. government bonds and mortgage-backed securities as needed to keep the market functioning.

The problem is that the Fed’s programs won’t work as a form of stimulus. We’re seeing a supply shock as the economy grinds to a standstill. What’s everyone going to buy with all the money?

Still, they may have done things exactly backward.

Mohamed El-Erian, chief economic adviser at Allianz, says that the Fed should have focused on payment system problems and liquidity first but should not have cut rates.

Interest rates were already quite low. Once the Fed goes to zero as they did, they are incapable of cutting rates further (leaving aside negative rates, which also don’t provide stimulus).

El-Erian argues the Fed should have saved their rate cuts in case they are needed more acutely in the weeks ahead. Too late now. The interest rate bullets were fired. Now the Fed’s bazooka is empty at the worst possible time.

No Stimulus Bill

Meanwhile, Congress is working to pass a “stimulus” bill to fight the economic effects of the coronavirus pandemic.

Negotiations stalled this morning as Democrats want to insert provisions that would give tax credits to the solar and wind industry, give more power to unions and introduce new emissions standards for the airline industry.

“Democrats won’t let us fund hospitals or save small businesses unless they get to dust off the Green New Deal,” said Senate Majority Leader Mitch McConnell.

Once again, I need to emphasize the point: The economic impact of coronavirus could be devastating.

If consumers get used to not spending and decide that increased savings and debt reduction are the best ways to prepare for another virus or natural disaster, then velocity will fall and growth will be weak no matter how much money the Fed prints or the Congress spends.

The bottom line is that these spending bills provide spending but they do not provide stimulus. That’s up to consumers. And right now consumers are hunkered down.

It may be that the last of the big spenders just left town.

Gold Roars $75

Markets were down again today, what a surprise. The Dow lost another 600 points, finishing the day at 18,591.

Meanwhile, gold was up about $75 today. Physical supply is drying up and dealers are running out.

That’s why I’ve been warning my readers for years to get their gold before the crisis hits. Once it does (and it has), you won’t be able to get any.

What about silver?

You Should Get a “Monster Box”

Silver’s dynamics are a little bit different than gold because there are some industrial applications, but there’s no question that it’s a monetary metal.

And I always recommend that people have a “monster box.” A monster box is 500 American Silver Eagles, fine pure silver that comes directly from the Mint. It comes in a green case and is sealed.

The 500 coins at retailer commission will run you about $12,000 right now, but everybody should have one.

You ought to have a monster box of silver because if the power grid goes down, which could happen for a lot of reasons, the ATMs won’t work and neither will credit cards.

But if you walk into a store with five or six silver coins, you’ll be able to get groceries for your family.

Believe me, that’ll be legal tender when the time comes, so I definitely recommend silver.

Regards,

Jim Rickards
for The Daily Reckoning

The post Rickards: It’ll Get Worse it Before It Gets Better appeared first on Daily Reckoning.