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April 20 2018
Jim Rickards Forecasts New Financial Crisis & Makes Prediction About Gold
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my great privilege now to be joined by James Rickards. Mr. Rickards is Editor of Strategic Intelligence, a monthly newsletter and Director of the James Rickards Project, an inquiry into the complex dynamics of geopolitics and global capital. He's also the author of several bestselling books including The Death of Money, Currency Wars, The New Case for Gold and The Road to Ruin. In addition to his achievements as a writer and author, Jim is also a portfolio manager, lawyer and renowned economic commentator, having been interviewed by CNBC, the BBC, Bloomberg, Fox News and CNN, just to name a few. And we're happy to have him back on the Money Metals Podcast.
Jim, thanks for coming on with us again today. We really appreciate your time as always and how are you?
Jim Rickards: I'm doing great Mike, great to be with you. Thank you.
Mike Gleason: Well Jim, I figure a good place to start here is with one of your most recent books. We want to get your take on the state of the world economy. In your book titled The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis, you make some very interesting comments. Now while the financial media is talking about booming stock markets and accelerating GDP growth, you aren't quite as optimistic. We both know that most of the growth we've seen in recent years has been built with huge amounts of central bank stimulus and the fundamental problems that drove the last financial crisis have hardly been resolved. In fact, you think the next financial catastrophe isn't too far away and many among the elite are getting ready for it. If you can, briefly lay out some of what you've been seeing.
Jim Rickards: Sure Mike, you touched on two different threads. One is, let's call it the short to intermediate term, which is how's the economy doing? What would the forecast be for the year ahead? What do I think about stocks and so forth? That's one part of the analysis, but the other one is a little bigger and a little deeper, which is what about another major financial crisis, a liquidity crisis, global financial panic and what would the response function be to that.
Let me separate. They're related because, I mean the point I always make is that there's a difference between a business cycle recession and a financial panic. They're two different things. They can go together, but they don't have to. For example, October 29, 1987, the Stock Market fell 22% in one day. In today's Dow terms that would be the equivalent of 5,000 Dow points, so we're at 26,000 or whatever, as we speak, a 22% drop would take it down about 5,000 points. You and I both know that if the Dow Jones fell 500 points that would be all anybody would hear about or talk about. Well, imagine 5,000 points. Well, that actually happened in percentage terms in October 1987. So, that's a financial panic, but there was no recession. The economy was fine and we pulled out of that in a couple of days. Actually after the panic, it wasn't such a bad time to buy and stocks rallied back. Then, for example in 1990, you had a normal business cycle recession. Unemployment went up. There were some defaults and all that, but there was no financial panic.
In 2008, you had both. You had a recession that began in 2007 and lasted until 2009 and you had a financial panic that reached a peak in September-October 2008 with Lehman and AIG, so they're separate things. They can run together. Let's separate them and talk about the business cycle. I'm not as optimistic on the economy right now. I know there's a lot of hoopla. We just had the big Trump Tax Bill and the Stock Market's reaching all time highs. I mean, I read the tape. I get all that, but there are a lot headwinds in this economy. There's good evidence that the Fed is over-tightening.
Read/Listen to the full podcast (here)
April 18 2018
Trump’s bellicose rhetoric contrasts sharply with his prior posture
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome Forbes Magazine columnist George Leef. George is a hard money advocate and a law graduate who has dedicated his professional life to teaching and education rather than practicing law, and over the past fifteen years has worked at the James G. Martin Center for Academic Renewal, a free market think tank that takes a critical view of higher education. Underneath George's byline on any of his Forbes.com columns, you'll find the words, "I write on the damage big government does, especially on education." And today, we're going to get into just how uneducated many are when it comes to the government's heavy-handed role as to our money.
George, thank you very much for taking the time to visit with us today. How are you?
George Leef: I'm very good, and my pleasure to be on with you, Mike.
Mike Gleason: I'm excited to cover this topic with you and first would like you to brush up our listeners on the role the US government was originally designed to play vis-à-vis our money. And contrary to popular belief, nowhere in the Constitution do we find anything about granting our governmental overlords a monopoly power in the creation of money, do we?
George Leef: No, we don't. The Constitution sets forth the powers that the government is supposed to have. In Article 1, Section 8, the powers of Congress are enumerated and that includes the power to coin money and regulate the value thereof and also the power to punish counterfeiting of US securities or US money. As I note at the beginning of my article, which is available on Forbes.com, that does not include the power to create a governmental monopoly in the creation of money. There would be no reason to think that the founders would have wanted such monopoly for several reasons. They had been unhappy with British monopolies like the East India Company that tried to sell them overpriced tea, and we know what happened to that tea.
We also know that at the time prior to the founding and after the ratification founding, there was lots of non US-produced coinage in circulation. There were coins in circulation that had been minted by the Spanish government. That's where we got the idea that the “piece of eight” and “two bits”. The colonists liked to cut the Spanish eight-real piece up into smaller pieces and they used that in trade. There were also privately minted coins in circulation. The people who wrote the Constitution knew about this and it didn't bother them in the slightest.
What they had in mind as the monetary system of the new country would be based on gold and silver. In fact, they wrote that into the first Coinage Act in 1792. They couldn't have cared less who minted gold or silver coins. All they were intent upon was that the coinage of the United States not be counterfeited. That, of course, was also written into law early in the country that it was illegal to counterfeit. They did not by any stretch of the imagination envision that the federal government would have monopoly on the production of money.
Mike Gleason: It was a certain amount of gold and silver grains, I guess, made up a dollar. They did have the ability to change that metric if they needed to, but that was the true backing.
Read/Listen to the full podcast (source)
April 17 2018
Global Silver Scrap Supply Falls To 26-Year Low
Global silver scrap supply fell to its lowest level in 26 years. World silver recycling in 2017 dropped by nearly 50% since its peak in 2011. According to the 2018 World Silver Survey, global silver scrap supply declined to 138 million oz (Moz) compared to 261 Moz in 2011. While the lower silver price is partly responsible for the large drop in silver recycling, there are other market dynamics.
For example, silver recycling from the photography sector has declined since consumption peaked in 1999. The photography industry was using 228 Moz of silver in 1999 compared to the 44 Moz last year. Thus, silver consumption in photography has declined by 80% in nearly two decades… and along with it, a great deal of recycled silver supply.
Furthermore, a lot of silverware was recycled during the period of rising prices (2007-2012). A lot of Millennials who inherited their parent’s (and grandparents) silverware decided it was much easier to pawn it rather than spending a lot of time polishing it for holiday gatherings. Which means, a lot of available stocks of silver scrap have already been recycled.
As we can see in the chart above, even though the $17 silver price in 2017 was four times higher than in 1991 ($3.91), global silver scrap supply is less than it was 26 years ago. Moreover, world silver scrap was over 200 Moz a year (2005-2009) when the average annual price was much less than it was last year.
Continue reading (source)
Investor Alert: How to See Through the Fog of War
The U.S. fired 105 Tomahawk missiles into Syria on Friday night.
In other times, the salvo would have put Americans on edge over the prospect of war with nuclear-armed Russia. Our former Cold War adversary is actively defending the Syrian regime and warning the U.S. to mind its own affairs.
But, these days not much can command the attention of the complacent public.
The President quickly declared “mission accomplished” and markets may begin discounting the likelihood of further conflict.
After decades of warfare in the Middle East, the launch of several dozen Tomahawk missiles in the general direction of Russian forces in Syria does raise the stakes. It’s the second time President Trump has authorized missile strikes there in the past year, almost no one remembers the missile attack in April of 2017 at all.
Americans spent a few years on high alert following the 2008 financial crisis. They were lulled back to sleep when the Fed and their allies on Wall Street reassumed total control of the markets.
Continue reading.. (source)
April 16 2018
April 11 2018
April 09 2018
Silver May Be Getting Ready to Shine Again
The setup for higher silver prices is so good it’s scary. The relative positioning of speculators versus the bullion banks in the futures markets is extraordinarily lopsided.
A bet on silver moving higher from here looks a lot like a no-brainer. So much so that David Morgan, publisher of The Morgan Report and silver guru is advising just a bit of caution, as he told listeners in an exclusive interview on this past Friday’s Money Metals Weekly Market Wrap Podcast.
The bullion banks (Commercials) are almost certainly now betting for higher silver prices and have relinquished their concentrated short position.
Meanwhile, the large speculators are positioned increasingly short. The good news for silver bulls is the bullion banks dominate the futures markets, by hook or by crook, and they generally win versus the speculators.
In the chart below from Zachary Storella (Investing.com), the red line represents the “Commercials” which are the bullion banks and miners. It shows their collective position virtually even, or neutral. It is the first time this has happened since the Commodity Futures Trading Commission began publishing the more detailed Commitments of Traders report in 2009.
One could argue that if the commercials are neutral, that isn’t exactly the same as the bullion banks being positioned long
.
Continue to the full article: (source)
Two Mines Supply Half Of U.S. Silver Production & The Real Cost To Produce Silver
Just two mines supply the United States with half of its silver production, and both are located in Alaska. It’s quite amazing that Alaska now produces half of the silver for the U.S. when only 30 years ago total mine supply from the state was less than 50,000 oz per year. The silver produced in Alaska comes from the Greens Creek and Red Dog Mines. One is a primary silver mine and the other a zinc-lead base metal mine.
Even though Hecla’s Greens Creek Mine is labeled as a primary silver mine, 56% of its revenues come from its gold, zinc, and lead metal sales. However, Teck Resources, that runs the Red Dog Mine doesn’t even list its silver production in its financial reports. Because Red Dog produces one heck of a lot of zinc and lead, their silver production doesn’t amount to much in the way of revenues.
For example, the Red Dog Mine produced 542,000 metric tons (1.1 billion pounds) of zinc and 110,000 metric tons (222 million pounds) of lead, while its estimated silver production was 6.6 million oz (Moz). According to Teck’s 2017 Annual Report, total revenues from the Red Dog Mine were $1.75 billion. With the estimated silver price of $17 in 2017, total revenues from 6.6 Moz of silver were $112 million, or just 6% of the total.
In addition, Hecla’s Greens Creek Mine in Alaska produced 8.4 Moz of silver this year, down from 9.2 Moz in 2016. As I mentioned, the Greens Creek Mine also generated a lot of gold, zinc, and lead, equaling $182 million of the total revenues of $326 million (including treatment costs).
The USGS just came out with their final Silver Mineral Industry Survey for 2017, reporting that the U.S. produced 33 million oz (Moz), down from 37 Moz the previous year. U.S. silver production declined due to the union strike and the shut down of Hecla’s Lucky Friday Mine. As we can see, Greens Creek and Red Dog accounted for 15 Moz of the total 33 Moz of U.S. silver production:
While Greens Creek and Red Dog supplied nearly half of U.S. silver production last year, the next two largest mines provided 21% of the total. Coeur’s Rochester Mine in Nevada produced 4.7 Moz of silver while the Bingham Canyon Mine, the country’s largest copper mine, supplied 2.2 Moz. Almost 7 Moz of silver came from these two mines alone.
Continue to the full article (source)
April 06 2018
CHILE, WORLD’S FOURTH LARGEST SILVER PRODUCER: Mine Supply Down 20%
Silver mine supply from the world’s fourth-largest silver producer fell significantly at the beginning of 2018. According to Chile’s Ministry of Mines, domestic silver production in January declined 20% versus the same month last year. Chile’s silver production has been falling considerably since its recent peak in 2014.
In just three years, Chile’s domestic silver mine supply fell 10 million oz (Moz) from 50.1 Moz in 2014 to 40.4 Moz last year. Interestingly, Chile’s silver production is down 20% since 2014 while the country’s copper mine supply is only down 5%. Because most of Chile’s silver supply comes as a by-product of copper mining, it’s surprising to see such a significant decline in their silver production.
If we look at three of the top four silver producers in the world, Mexico’s silver mine supply in January increased 7% while Peru declined 6%:
According to the official data, Mexico’ silver production increased 29 metric tons (mt), Peru fell 20 mt and Chile dropped by nearly 21 mt. Thus, overall silver mine supply from these top three producers fell 13 mt in January versus the same month last year. Even though Mexico will likely experience an increase in silver mine supply in 2018, declining production from other leading countries may curtail overall world supply.
Continue reading (source)
April 05 2018
MARKET MELTDOWN CONTINUES: Gold & Silver Prices Begin To Disconnect
As the BLOOD continues to run on Wall Street, gold and silver were the few assets trading in the green today. As I have mentioned in past articles and interviews, investors need to get used to this sort of trading activity. Even though the Dow Jones Index ended off its lows of the day, it shed another 458 points while the Nasdaq declined 190 points and the S&P fell 60.
As the broader markets sold off, the gold price increased $15 while silver jumped by $0.25. However, if we look at these markets during their peak of trading, the contrast is even more remarkable:
At the lows of the day, the Dow Jones Index fell 730 points or 3%, while the S&P 500 fell 3.2% and the Nasdaq declined by 3.8%. Also, as I expected, the oil price fell along with the broader markets by dropping 2.7%. If individuals believe the oil price will continue towards $100, due to supply and demand fundamentals put forth by some energy analysts, you may want to consider one of the largest Commercial Net Short positions in history. Currently, the Commercial Net Short position is 738,000 contacts. When the oil price was trading at a low of $30 at the beginning of 2016, the Commercial Net Short position was only 180,000 contracts.
Furthermore, if we agree that supply and demand forces are impacting the oil price to a certain degree, does anyone truly believe oil demand won’t fall when the stock market drops by 50+%??? I forecast that as market meltdown continues, the oil price will decline as oil demand falls faster than supply.
Continue reading (source)
April 04 2018
April 02 2018
Silver Price Best Setup In Years & Update On Continued Meltdown In Stock Markets
This update is by far one of the most important as the silver price setup is the best I have seen in years. According to the data, the silver price is by far in much better position to outperform gold when the precious metals market takes off. Also, I do an update on the stock market as well as the continued disintegration of the U.S. Shale Oil Industry.
While most investors will be interested in what is taking place in the silver market, it’s very important to understand how much the situation is deteriorating in the U.S. Shale Oil Industry. Without cheap and abundant oil, the value of most stocks, bonds, and real estate would collapse. Unfortunately, falling stock and real estate prices are precisely what is going to happen to 99% of the public’s investments as only 1% hold precious metals.
The reason I believe the gold and silver prices will start to take off when the stock markets begin to really plunge lower is due to the setup of these assets since the Fed’s Q3 policy at the end of 2012. Because the precious metals sold off from 2013 to 2016 and are still close to their lows, they are ripe for much higher prices. However, the real estate and stock markets are near their highs. Thus, we are going to experience one hell of a disconnect between the stock and real estate market and precious metals.. quite the opposite that took place after 2012.
Continue reading (source)
March 27 2018
Physical Gold Production May Be Peaking, But There Is No Shortage In Paper Gold
Gold production numbers for 2017 are still being compiled but estimates call for the first annual decline in mine output since 2008.
The gold price fell dramatically in the months following the 2011 peak in prices. It has languished at, or near, the cost of production for years. Low gold prices are having a predictable effect on mine output.
Many projects with marginal ore deposits were rendered uneconomic. High cost operators went out of business. Exploration budgets got slashed dramatically. And all of these factors compound a larger underlying issue. It is increasingly difficult to find gold deposits that make sense to mine. New discoveries are less than a fifth of what they were in 2006.
Much higher gold prices will drive more exploration and should boost discoveries. Some projects which have been mothballed due to higher costs will become feasible once again. But the trend seems clear – the drought in discoveries, which began more than a decade ago, looks likely to persist regardless of the gold price. And the struggle to find economic deposits will translate to a serious decline in production in the years ahead.
Continue reading (source)
March 19 2018
Larry Kudlow Toes Wall Street’s Anti-Gold Company Line
Gary Cohn resigned as President Donald Trump’s Chief Economic Advisor on March 6th. He and Trump didn’t see eye to eye on the recently imposed tariffs and the President selected CNBC commentator Larry Kudlow to replace him Wednesday. Perhaps it was Kudlow’s experience on television that got him the job.
It doesn’t look like he was chosen for his intellectual honesty. Kudlow was quite vocal with his own opposition to tariffs.
He has suddenly done an about face and now says he can “live” with targeted tariffs. However, it gets worse than simply flip-flopping on trade.
In one of his very first interviews after accepting the post, Kudlow offered this bit of advice to investors: “I would buy King Dollar and I would sell gold.”
The dollar went on a dramatic losing streak during Trump’s first year in office – one of its worst annual performances in decades. Of course, that is just a single year.
The fiat dollar has been in almost continual decline versus real assets since the Federal Reserve’s establishment 105 years ago. It has lost 98.5% of its purchasing power relative to gold since then.
Kudlow must have seen the forecasts which show federal deficits spiking higher as the combination of tax cuts and higher spending wreak havoc on the budget. The tariffs should further weigh on the U.S. dollar as higher steel and aluminum prices drive inflation.
Continue reading...(here)
New Sound Money Public Policy Breakthroughs Occur in the States
Well now, without further delay, let’s get to this week’s featured interview between Money Metals president Stefan Gleason and Pete Fetig during a recent summit on all things precious metals.
Pete Fetig: Stefan, I would like to start with what are precious metals and why should someone even own something like that?
Stefan Gleason: Thanks Pete. That is obviously the most fundamental question to this entire conversation. Is what are precious metals and why should you care? And this is something that has been driven out of the public consciousness to a great extent over the last 80 or 90 years and especially in the last 40 years. And that is that the role the precious metals play in our society and in our monetary system and as an investment. First and foremost, I would say that people should understand gold and silver is money. It is true money. It is been chosen throughout time as a medium of exchange, a store of value, and has been used in trade ever since several thousand years B.C. So gold and silver is first and foremost money. It has been chosen as money for a lot of reasons and those reasons are still in existence today.
First of all, it is tangible. It’s an actual asset. It cannot be created from nothing. Like paper money today is created from nothing or even electronic equivalent of paper money. It is private. It is something that you can exchange between people and it is not tracked or traced. Like so many things are in our electronic monetary system today. It is highly liquid. It is accepted by all people or governments at least. Certainly, private individuals understand that it has value. Always going to have value. It has always been accepted. Ultimately, even central bankers view it as that. Even though, they have waged a war against gold and silver and gold and silver ownership, particularly in the last several decades, they hold it as a reserve asset. They understand that it is the ultimate form of payment. It’s a form of payment that has no counterparty risk. It is not also someone else's liability at the same time, like the dollar is. And so central banks, while they do not talk about it, are holding gold and silver as reserve assets because they know that it has timeless value.
More immediately gold and silver are precious metals that are really a form of financial insurance. It’s a non-correlating asset. It does not move necessarily with the stock market, the bond market, the real estate market. It’s something that you should have as a part of your asset allocation because when everything else falls apart, gold and silver typically does very well. Just like an insurance policy that you do not necessarily want to have to cash in. You still have it. You have an insurance policy in your house. You probably have one on your car. You should have an insurance policy against your financial asset. Gold and silver is that insurance policy. It is also of an excellent hedge against inflation. It is really the ultimate hedge against inflation.
That is today, in the last 40 years in particular, since the United States and really the whole world, went off the gold standard. You’ve had an explosion in debt. You’ve had an explosion in the creation of fiat money. We now have really a competition going around the world to devalue fiat money. It’s a race to the bottom. That is done with the creation of new debt and the printing of new money to sort of prop up the economy, prop up the bond market, the stock market. And as result of that, as a result of more paper money and electronic money being created, it has caused data reduction in the purchasing power of these other currencies. Gold and silver have maintained and even increased their purchasing power, over time.
Since the Federal Reserve System in the United States was created a little over 100 years ago, the US dollar has lost over 97% of its purchasing power. In the 100 years prior to that, except for a short period of time during the Civil War when they went off the gold standard, the purchasing power of the dollar was relatively the same, but then declined dramatically since the Federal Reserve system was created. So you have this massive devaluation of currencies happening all across the globe, and gold and silver are tangible assets that are a hedge against that, that benefit from really the devaluation as they rise in price. We have seen that, gold and silver, have reached all-time highs in recent years. They got a little overheated and pulled back in dollar terms since 2011, but at the end of the day you want to own a certain amount of gold and silver as a hedge against inflation and financial turmoil.
Read/Listen to the full podcast (here)
March 15 2018
March 12 2018
Trump Says the U.S. Will Win Any Trade War; Our Debt Load Says Otherwise
Donald Trump fired off some major new shots in the global trade wars. With the exception of imports from Canada and Mexico, steel entering the U.S. will be subject to 25% tariff and aluminum will be taxed at 10%.
The president’s trade policy has been applauded by people seeking to protect domestic industry and criticized by free marketeers. There is no shortage of disagreement over the policy, but some of the outcomes seem easier to predict.
Higher price inflation is one probability.
Domestic manufacturers who use steel and aluminum are going to pay more for those metals and will need to raise prices. A wide gamut of goods ranging from airplanes and automobiles to steel building materials will soon cost more.
Unfortunately, the higher costs will put domestic manufacturers who must buy steel and aluminum at a disadvantage.
While they pay more for imports from Europe or Asia, the cars and appliances manufactured elsewhere and shipped into the U.S. aren’t affected.
Goldman Sachs estimates the steel tariffs will cost Ford and General Motors each $1 billion in profits. Imported models suddenly get a major cost advantage in the U.S. marketplace.
There is also the possibility of higher inflation driven directly by the foreign exchange markets.
Disgruntled trading partners may choose currency warfare as their response to tariffs. This would involve liquidating dollars they hold as reserves. In the case of China, Japan, and the EU, those stockpiles are enormous.
Continue to the full article (source)
March 06 2018
SILVER INVESTMENT: The Lowest Risk, Highest Return Potential vs. Stocks & Real Estate
While silver is completely off the radar to most investors, it will turn out to be one of the best investments to own as the massive amount of leverage in the stock and real estate market evaporates. Unfortunately, investors, today are no longer capable of recognizing when an asset displays a HIGH or LOW risk. Thus, fundamental indicators are ignored as the investors continue the insane strategy of “Buying the Dip.”
A prudent investor is able to spot when an asset becomes a high risk and then has the sense to move his or her funds into one that is a lower risk. However, the majority of investors do not follow this practice as they are caught by surprise when a Market Crash occurs… again and again and again. Even worse, when investors are shown that the indicators are pointing to assets that are extremely risky, then ignore it and continue business as usual.
Today, complacency has turned investors’ brains into mush. They are no longer able to discern RIGHT from WRONG. So, when the market really starts to correction-crash, they will hold on to their stocks waiting for Wall Street’s next BUY THE DIP call.
Regardless, if we can understand the fundamentals, then we would be foolish to keep most of our investment funds in Stock and Real Estate assets. The following chart follows the KISS Principle – Keep It Simple Stupid:
You don’t need to be a highly-trained financial or technical analyst to spot the HIGH vs. LOW-RISK assets in the chart above. Hell, you don’t even need to see the figures in the chart. If we understand that all markets behave in cycles, then it’s common sense that asset prices will peak and decline. We can plainly see that both Real Estate and Stocks asset values are near their top while the silver price is closer to its bottom.
Thus, assets that are near a top are HIGH RISK, and those near a bottom are LOW RISK. It’s really that simple.
Continue reading... (source)
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