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Fred Hickey: Why A Lifelong Technology Expert Favors Owning Gold

Fred Hickey: Why A Lifelong Technology Expert Favors Owning Gold

It’s the safest & most undervalued asset today

Fred Hickey, frequent cited expert on Bloomberg News and Barron’s Roundtable, has been publishing his author extremely well-respected investment newsletter, The High-Tech Strategist, for 31 years. And he is more worried about the state of the financial markets today than he’s ever been.

While his primary focus has been on analyzing Tech stocks, over the years he has expanded into macro trend analysis as the central banks starting increasingly intervening in world markets and distorting the price of money.

He now finds asset prices dangerously overvalued (within Tech and without) and worries — as we do — about the risk of a major market correction and possible currency crises.

Ironically, this lifelong expert in “all things technology” has concluded that gold (the “barbaric relic”) is the sanest asset to put one’s capital in these days — both due to its safety factor and it’s current level of undervaluation. He expects the precious metals to fare well during the downward market volatility he foresees, and he is now tracking the mining stocks closely as he predicts they will experience dramatic appreciation from here.

What’s happening to gold mining stocks right now is an amazing story. They’re extremely undervalued. Just this year, we’ve seen the price of gold hold up during this market decline, yet the miners have been getting slaughtered.

One of the things we look at is the HUI-to-gold ratio, or the gold miner index to gold. That is down to 0.133. Now, that’s lower than it was at the 20-year bear market bottom in 2000. It was slightly lower than that at the end of 2015, but we’re talking about near record lows here when the price of gold is up. It looks to me that gold is in a bull market.

…click on the above link to read the rest of the article…

‘No Cash’ Signs Everywhere Has Sweden Worried It’s Gone Too Far

  • Cash usage declining both as share of GDP and in nominal terms
  • Riksbank committee could publish report on issue in summer
Sweden ‘Most Cashless’ Society in the World
The value oof notes and coins in circulation are the lowest in nearly 30 years. Bloomberg’s Amanda Billner reports.

“No cash accepted” signs are becoming an increasingly common sight in shops and eateries across Sweden as payments go digital and mobile.

But the pace at which cash is vanishing has authorities worried. A broad review of central bank legislation that’s under way is now taking a special look at the situation, with an interim report due as early as the summer.

Going Cashless: Bad for Tax Cheats, Privacy, the Poor: QuickTake

“If this development with cash disappearing happens too fast, it can be difficult to maintain the infrastructure” for handling cash, said Mats Dillen, the head of the parliamentary review. He declined to give more details on the types of proposals that could be included in the report.

Sweden is widely regarded as the most cashless society on the planet. Most of the country’s bank branches have stopped handling cash; many shops, museums and restaurants now only accept plastic or mobile payments. But there’s a downside, since many people, in particular the elderly, don’t have access to the digital society.

“One may get into a negative spiral which can threaten the cash infrastructure,” Dillen said. “It’s those types of issues we are looking more closely at.”

Last year, the amount of cash in circulation in Sweden dropped to the lowest level since 1990 and is more than 40 percent below its 2007 peak. The declines in 2016 and 2017 were the biggest on record.

…click on the above link to read the rest of the article…

Financial Markets Definitely Destabilizing – Charles Hugh Smith

Financial writer and book author Charles Hugh Smith has been watching the extreme movements in financial markets closely. Is he nervous?  Smith says, “Oh yeah, it’s definitely destabilizing.  In other words, it’s becoming not just more volatile, the whole underlying structure of our economy is destabilizing.  What I mean by that is it’s becoming more brittle or fragile.  That is fundamentally why we are seeing these wild swings.  People are swinging between . . . keeping the money machine like it is for another nine years, and the other side of the coin says wait a minute, we have already had a weak expansion for nine years.  It’s almost the longest expansion in U.S. history.  A normal business cycle doesn’t run in one direction forever. . . .If you don’t allow your economy to have a business cycle recession, then you are simply making it more fragile by encouraging really marginal and risky investments, and that’s where we are now.”

One very big problem is a dramatic loss in buying power of the U.S. dollar, but it’s not just the dollar. According to Smith, “All these currencies, there is nothing backing the currencies except the government’s force.  That’s the yen, the euro, the dollar and the Chinese yuan.  They are all going to have a catastrophic drop against real assets because they are all based on too much leverage, too much debt, too much money being pumped into the financial system that ends up in unproductive speculation.  You can’t grow your debt at six times the rate of your economy.  In other words, if you are creating $6, $8 or $10 of debt to eke out $1 of low productivity growth, you are dooming your currency, and all currencies are doing the same thing.  All the currencies are going to take a big drop at some point . . . relative to real stuff.  Real stuff is commodities we need:  water, grains, food, oil, natural gas and, of course, precious metals.  Everybody knows they have been money for 5,000 years, and I personally feel there is a role for crypto currencies.”

Join Greg Hunter as he goes One-on-One with Charles Hugh Smith, author of the new book “Money and Work Unchained” and the founder of the popular site OfTwoMinds.com.

Hackers Used SWIFT To Steal $6 Million From Russian Bank

In the latest revelation about the Society for Worldwide Interbank Telecommunication’s vulnerability to hackers – who’ve stolen tens of millions of dollars from banks and central banks mostly by stealing the special private keys used to sign off on transactions – Russian authorities revealed that hackers had made off with about 340 million rubles ($6 million) during an attack carried out last year,according to Reuters.

While that’s not the largest sum ever stolen by infiltrating SWIFT (indeed it pales in comparison to the more than $80 million stolen from the Bank of Bangladesh’s reserve account at the New York Fed back in 2016) the news comes just days after Russian authorities said the country’s banking system would be ready to abandon SWIFT if the US and European Union tried to cut off its banks.

In a report about the incident, the Russian authorities said hackers had gained control of a computer at a Russian bank and used SWIFT to transfer the money to their own accounts. Of course, the bureaucrats who run SWIFT from Brussels insist that the SWIFT system itself has never been infiltrated – and that the vulnerabilities exploited by hackers are solely the responsibility of the participating institutions. The irony here is that this is the same excuse advanced by bitcoin evangelists and others who wax about the “immutable” blockchain and its security features, only to overlook that hundreds of millions of dollars in cryptocurrencies have been stolen by hackers over the past few years.

To be sure, SWIFT officials have warned that hacking attacks are becoming “increasingly prominent” after the theft of the Bangladesh funds, which disappeared after landing in accounts based in the Philippines and then Macau.

…click on the above link to read the rest of the article…

The Dollar–From Bohemia to Bust

THE DOLLAR – FROM BOHEMIA TO BUST

Virtually no investor studies history and the few who do always think it is different today. The most important lesson is that people never learn. If they did, they wouldn’t be invested in a stock market that on any criteria is now at a bubble extreme. And they wouldn’t be invested in a global debt market which has grown exponentially in recent decades and which will become worthless in the next few years as debtors default. Nor would anyone hold paper money which is down 97-99% in the last 100 years and which is guaranteed to soon fall the final bit to take the value to zero.

The history of money clearly illustrates that “Plus ça change, plus c’est la même chose” (the more it changes, the more it is the same thing). The most constant factor in the history of money is the cycle of boom and bust or euphoria and despair. Cycles are part of nature just like the change of seasons.

But throughout history, mankind has always believed that they know better than previous generations and can eliminate the cycle of boom and bust. This is what the British prime minister Gordon Brown proudly declared before the economy collapsed in 2007. And the Nobel Prize winner in Economics, Paul Krugman, also believes that eternal prosperity can be generated by creating endless debt and printing unlimited money.

But history has time and time again turned hubristic know-it-alls into humbled has-beens.

FOR 6,000 YEARS GOLD HAS OUTLIVED ALL CURRENCIES

Whenever mankind has deviated from sound money, the consequences have without fail been catastrophic. The only money which has survived since it first came into use around 6,000 years ago is gold. All other money has been destroyed by greed and economic mismanagement. I believe I have quoted Voltaire for over 20 years and will continue to do so: “Paper Money Eventually Returns to its Intrinsic Value – ZERO”.

…click on the above link to read the rest of the article…

Red Screen At Morning, Investor Take Warning

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Red Screen At Morning, Investor Take Warning

It’s time for safety. And it’s beginning to pay better, too

Growing up as I did in coastal New England, this old rhyme was drilled into us as children:

Red sky at night, sailor’s delight;

Red sky at morning, sailor take warning.

Because many of the people in town still made their living on the sea, the safety of person and property depended on being able to recognize the signs of approaching danger.

A notably red sky at morning is usually due to sunrise reflection off of moisture-bearing clouds, signifying an arriving a storm system bringing rain, wind and rough seas. Those who ignored a red sky warning often did so at their peril.

Red Sky In The Markets

I’m reminded of that childhood rhyme because the markets are giving us a clear “red sky” warning right now. One that comes after (too) many years of uninterrupted fair winds and smooth sailing.

The markets have plunged nearly 8% over just a single week. And the losses are across the board. Nearly every asset class from stocks to bonds to commodities to real estate are participating in the pain. Market displays are a sea of red.

We’ve written so often and recently of the dangerous level of over-valuation in asset prices (caused by years of central bank intervention) that to re-hash the premise again feels unnecessary.

But the chart below is worth our attention now, as it really drives home just how dangerously over-extended the markets have become. It’s a 20-year chart of the S&P 500, showing how it has traded vs its 50-month moving average (the thin green line).

Importantly, the chart also plots the Bollinger bands for this moving average. These are the thin red (upper) and purple (lower) lines above and below the green one.

…click on the above link to read the rest of the article…

From the Moneyness Blog: Electronic Money Will Only Save Central Banks From Subjugation if it is Anonymous

50 SEK banknote issued by the Riksbank in 1960

“Do we need an eKrona?” asks Stefan Ingves, the Governor of the Riksbank, Sweden’s central bank. The Riksbank is probably the central bank that has advanced the furthest in discussions surrounding the introduction of a central bank-issued digital currency (CBDC)—a new form of risk-free digital money for use by the public. CanadaNew ZealandAustraliathe ECB, and China are also dissecting the idea, with more central banks to come in 2018.

Sweden is approaching the issue from a unique angle, says Ingves. It is the only country in the world showing a consistent decline in cash and coin usage. I’ve written about this interesting pattern herehere, and here. Below is a chart:

Ingves floats two theories. Either the Swedish public no longer wants central bank money, or alternatively they do want central bank money but not the type that is “made of pieces of paper,” preferring instead an as-yet non-existent digital alternative. If so, then it may be the Riksbank’s duty to provide that alternative, says Ingves.

Duty is an admirable motivation, but let me propose another reason for why the Riksbank is exploring the idea of an eKrona—self preservation. I think Sweden’s central bank is terrified that it will become powerless in the future. It is desperately casting around for solutions to resuscitate itself, one of these being an eKrona. This fear is rooted in the fact that declining cash usage has led to a collapse in the resources that the Riksbank believes that it needs to function.

These worries about powerlessness are shared by central bankers around the world, many of whom expect advances in private payments technology to lead them to the same cash-light world that Sweden is currently entering.

…click on the above link to read the rest of the article…

Really Bad Ideas, Part 6: Money That “Rots And Rusts”

Really Bad Ideas, Part 6: Money That “Rots And Rusts”

In the next downturn (which may have started last week, yee-haw), the world’s central banks will face a bit of poetic justice: To keep their previous policy mistakes from blowing up the world in 2008, they cut interest rates to historically – some would say unnaturally — low levels, which doesn’t leave the usual amount of room for further cuts.

Now they’re faced with an even bigger threat but are armed with even fewer effective weapons. What will they do? The responsible choice would be to simply let the overgrown forest of bad paper burn, setting the stage for real (that is, sustainable) growth going forward. But that’s unthinkable for today’s monetary authorities because they’ll be blamed for the short-term pain while getting zero credit for the long-term gain.

So instead they’ll go negative, cutting interest rates from near-zero to less than zero — maybe a lot less. And their justifications will resemble the following, published by The Economist magazine last week.

Why sub-zero interest rates are neither unfair nor unnatural

When borrowers are scarce, it helps if money (like potatoes) rots.DENMARK’S Maritime Museum in Elsinore includes one particularly unappetising exhibit: the world’s oldest ship’s biscuit, from a voyage in 1852. Known as hardtack, such biscuits were prized for their long shelf lives, making them a vital source of sustenance for sailors far from shore. They were also appreciated by a great economist, Irving Fisher, as a useful economic metaphor.

Imagine, Fisher wrote in “The Theory of Interest” in 1930, a group of sailors shipwrecked on a barren island with only their stores of hardtack to sustain them. On what terms would sailors borrow and lend biscuits among themselves? In this forlorn economy, what rate of interest would prevail?

…click on the above link to read the rest of the article…

QE…The Gift That Just Kept Giving…Is Now Taking 

QE…The Gift That Just Kept Giving…Is Now Taking 

I know the Federal Reserve doesn’t effectively create money or directly monetize.  I know this because then Fed chief, Ben Bernanke, told us so (HERE).  But still, something has me wondering about that exchange, now almost a decade ago.  The simplest of math.

The plan to utilize quantitative easing and avoid direct monetization went like this.  The Fed would digitally conjure “money” to buy the US Treasury bonds and Mortgage Backed Securities (remove assets from the market) from the big banks.  However, the Fed would force those banks to deposit the newly conjured “money” at the Federal Reserve.  This would avoid the trillions of newly created dollars from going in search of the remaining assets (particularly levered from somewhere between 5x’s to 10x’s…turning a trillion into five to 10 trillion…or more).

The chart below shows the Federal Reserve balance sheet (red line) and the quantity of those newly created dollars that the recipients of those dollars, the banks, deposited at the Federal Reserve (blue line).  But the green line is the quantity of newly created dollars that have “leaked” out…also known as “monetized”.

The interplay of QE and excess reserves resulted in the peak QE impact taking effect long after QE was tapered and had ceased (chart below).  The trillions in assets remaining with the Fed, but the new cash no longer under lock and key at the Fed.

The impact of $800+ billion of pure monetization from late 2014 through year end 2016 was spectacular.  In the hands of the largest banks (multiplied by “conservative” leverage somewhere between 5 to 10x’s) easily amounting to trillions in new cash looking for assets.  A “bull market” beyond belief should not have been surprising.

…click on the above link to read the rest of the article…

The Rowboat (Wages) and the Yacht (Assets)

The Rowboat (Wages) and the Yacht (Assets)

As I keep saying: the status quo has divested the working and middle classes.

The reason why the status quo has failed and is fragmenting is displayed in these three charts of wages, employment and assets: wage earners (labor) are in a rowboat trying to catch the yacht of those who own assets (capital).

Here is a chart of weekly wages of those employed fulltime: up a gargantuan $4/week in the 18 years since 2000. Let’s see, $4 times 52 week a year–by golly, that’s a whole $208 a year. Brand new Ford F-150, here we come!

If we go back 38 years to 1980–an entire lifetime of work–we find real (adjusted for official inflation, which seriously understates big-ticket expenses such as rent, healthcare and college tuition/fees) wages have notched higher by $10/week–a gain of $500 annually.

If we adjusted wages by real-world income, we’d find wages have declined since 1980 and 2000.

Here’s employment by age group since the year 2000. THose who can’t afford to retire are still dragging their tired old bones to work while employment for the under-55 cohort hasn’t even returned to the levels of 2000.

Meanwhile, asset valuations have soared. Those who own capital (assets) have done very, very well, those who trade their labor for dollars–they’ve gone nowhere.

Households with two regular jobs could afford to buy a house in Seattle, Brooklyn, or the San Francisco Bay Area in 1995. By 2005, they were priced out. Can a household with median income ($59,000 annually) afford a crumbling shack in any of the white-hot housing markets? You’re joking, right?

The cold reality is wage-earners are tugging on the oars of a water-logged rowboat, trying to catch up with the sleek yacht of asset owners. The system has been rigged to reward those who own assets (capital) or who can borrow immense sums of nearly-free money (credit) to buy assets.

…click on the above link to read the rest of the article…

Economic Collapse and Dollar Hegemony – How Did This Start?

Economic Collapse and Dollar Hegemony – How Did This Start?

Economic Collapse and Dollar Hegemony – How Did This Start?

In the previous article I explained why bitcoin should be considered a reaction to US dollar hegemony and how other nations and central banks are facing the crisis of the dollar brought on by de-dollarization. In this article I will go into how we came to this point and what mechanisms helped to bring about a debt-based society. In the third and last article we will examine the nature of the future geopolitical and geo-financial transition as well as the signals we need look out for in the immediate future.

From Gold to Paper

To understand what is happening today we must look back to simpler times, back when people bartered with each other. The utility and availability of commodities determined their value. Gold in particular represented a finite good that was difficult to find and was useful in various fields. For this reason gold has always been considered the highest example of a valuable good, together with diamonds, platinum, silver and other elements that are difficult to find but have a common or daily use. For example, the importance of utility transformed uranium, an otherwise worthless element, into a valuable commodity following the discovery of atomic energy. Returning to gold, one can understand how in the era of barter, gold was the reference element with which to price the value of everything. Little by little, gold was joined by silver and then bronze in simplifying the exchange of goods and increasing convenience of use.

Gold had its own intrinsic value and was valid in every empire around the world; the same with silver and bronze. Gold had become not only a means of exchange and a measure of value but also a reservoir of value to be bequeathed to heirs. Above all it was a means of payment.

…click on the above link to read the rest of the article…

Energy, Money and Technology–From the Lens of the Superorganism

Energy, Money and Technology–From the Lens of the Superorganism

During Nate Hagens’ #WEP2018 keynote, he discussed how all of our lives will be influenced by how we react to the coming era of harder to extract and more costly fossil fuels that will be combined with cleaner but more stochastic energy types.

Ed. note: The video starts in the middle of the presentation. You will need to adjust the player to go back to the beginning of the talk.

Why the Dollar is the Mainstay of the World Economy

QUESTION: A friend told me the one pound coins I have from a trip to Britain last year were canceled. How can a government simply cancel its money?

KL

ANSWER: Oh yes. Britain canceled the one pound coins last October. They estimated that £400-450 million pounds became worthless overnight. Europeans routinely cancel their currency. This is another reason why the US dollar is the RESERVE CURRENCY in the world. While you have these people who hate the dollar all the time in the USA, outside, it is the mainstay. The dollar is used worldwide because it is trusted while other countries routinely cancel currencies. India made headlines last year cancelling their high denomination notes overnight. This may force people to pay their taxes and prevent them from hoarding cash. But it is also why the US Treasury and Board of Governor’s staffs estimate that nearly 60% of all U.S. banknotes in circulation, or close to $500 billion, is held outside the United States. There are more dollars outside the USA than inside. This is also why the USA is not pushing the electronic currency as hard as you see in Europe. There, they just want to cancel all the currency to get more taxes.

There was a 1996 article on this they called the Money Plane when everyday planes full of $100 bills were flying to Russia. They were shipping $100 million per day. This is why the dollar is the world’s RESERVE CURRENCY. The majority of it is used outside the country because everyone else cancels their currency routinely. The US currency has NEVER been canceled so the very first note from 1863 can still be spent although its value is way beyond its face.

…click on the above link to read the rest of the article…

Can an Economy Advance Without Savings?

Can an Economy Advance Without Savings?

According to Frank Decker, Honorary Associate at the University of Sydney Law School, it certainly can. Not only that, but eschewing savings in favor of “monetisation of assets” will yield better results! I refer to his article in Economic Affairs–Volume 37, Number 3, October 2017–, a publication of the Institute of Economic Affairs, London.

Mr. Decker purports to answer the question “Central Bank or Monetary Authority? Three Views on Money and Monetary Reform.” The three views examined are commodity money, state money, and money as a derivative of property. All three views are explained very well, and a beginner to the study of the role of money will learn a lot in a short period of time.

Commodity money is the name Decker aptly gives to money backed by gold or some other widely accepted medium of indirect exchange. Commodity money’s proponents see two major advantages–that it ends inflation and the business cycle. He quotes Mises and Rothbard to good effect.

State money, or money as a state liability, is fiat money that all the world knows today. Its two most famous proponents are Keynes and Friedman. State money’s main advantages, as seen by Decker, are that the state can engage in countercyclical spending and the state can fund itself by printing all the money that it needs for current expenditures.

Decker’s third type of money–money as a derivative of property–sounds no different than fractional reserve banking, except that the fraction of reserves required to be held by the lending banks is so low that it is not a factor of lending restraint. Decker gives the example of a business that uses its assets as loan collateral. According to Decker, the money that the bank creates is NOT created out of thin air, because it is backed by private property; i.e., the loan collateral.

…click on the above link to read the rest of the article…

Fever Pitch

In case you’re worked up about the looming federal government shut-down, this is exactly how we’re supposed to roll in the long emergency: everything organized at the gigantic scale is going to wobble and fail. It’s nature’s way of saying, “get smaller, get realer, scale down, and get local.” The catch is, we probably won’t listen to nature. Instead, we’ll just behave like bystanders and do nothing until the full force of failure is upon us, just as we’re doing with climate change — the tragedy of the commons at planetary scale.

The failure of national party politics is deep and systemic, as you would expect from activities nurtured in a shit-hole called Washington, corruption being the manifestation of sepsis. The lethal vector of this illness is money. There’s the money flowing into the “campaign funds” (so-called) of congressmen and senators, of course, but there’s also the “money” that is flowing in and out of the leviathan government — a whole lot of it is not really there. It’s a figment of promises to pay back loans on top of a monumental heap of past promises that will never be kept. The threatened government shutdown is just a symptom of the illness: a society doing things out of scale, trying to run its excessive activities by check-kiting and accounting fraud. What could go wrong?

Not the stock and bond markets, I’m sure. Though… wait a minute… that hockey-stick surge in equities looks a little bit like the action of a thermometer measuring the rising body temperature of a very sick patient. From 25,000 to 26,000 on the Dow — in what? seven days? — is kind of like the flu victim going from 98.6 to 105 after onset. And we know what happens to humans up around the 105 Fahrenheit body temperature level: the brain starts to sputter and smoke. Soon, it’s lights out and don’t let your karma smack you on the butt going through the exit.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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