“The US dollar’s strength isn’t so much a function of the strength of the US economy or US political leadership, but rather, the fact that we’re competing in a horse race against a bunch of other horses that are completely lame.”
Rick Rule – Rule Investment Media
The former President and CEO of Sprott, was last on the show at the beginning of February, so it’s an understatement to say he and GoldCore TV host Dave Russell had a few things to catch up on!
From US dollar strength (it’s all relative) to the price of gold through to how Rick is advising investors right now, Dave asks the former President and CEO of Sprott all the questions to help you better navigate these trying times.
https://youtu.be/_Sy6c4fFjQw
If you enjoy this interview then perhaps you’d like to watch The M3 Report, our flagship show on all things metals, markets and money. Our latest episode features Mr Rick Rule himself and the GoldCore team ask why current UK financial policy is an absolute ‘clusterfudge’, these days.
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Founder and CEO Todd Bubba Horwitz joins GoldCore TV’s Dave Russell to discuss the Great Reset, physical gold investment forthcoming stagflation . This is Bubba’s first appearance on GoldCore TV , and we’re delighted to welcome him.
When Dave spoke to Bubba, they covered a lot of ground: from the rock and a hard place that the Fed finds itself in, to the impact on the housing market, the Green New Deal, the oil price and, of course, the price of both gold and silver.
Click on the Link to Watch Now
Show highlights include:
The Fed is stuck between a rock and a hard place
The impact on the housing market
What are the implications of the Green New Deal?
Are we going to see higher oil prices?
Might there be a gold backed currency on the horizon?
What is going on with the price of gold and silver?
Buy gold coins and bars and store them in the safest vaults in Switzerland, London or Singapore with GoldCore.
Learn why Switzerland remains a safe-haven jurisdiction for owning precious metals. Access Our Most Popular Guide, the Essential Guide to Storing Gold in Switzerland here
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The post Physical Gold & Why I Hold it – Bubba Horwitz appeared first on GoldCore News.
This week we ask if the wobble experienced by UK pension funds, last week, was just the canary in the gold mine for the global economy. If not for other central banks then this was certainly a reminder for individuals, who were prompted to ask about the levels of counterparty risk their savings and pensions were exposed to, and how they might better protect themselves in the coming months and years.
UK pension funds’ lack of liquidity is only the first fault line in a crumbling financial framework. UK pension funds came under major distress after the plummeting price of gilts triggered margin calls totaling more than £100 million (US$107 million) last week. Also, the Bank of England was there to save the day. See our post- Ross Geller inspires Bank of England policy.
The BoE’s bond-market rescue, to the tune of £65 billion (US$69 billion), came after gilt prices plummeted, along with the pound, after the new government’s announcement of unfunded tax cuts.
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At the center of the pension, a meltdown is a derivative-based strategy, that like most plans, started with good intentions. The ‘good intentions’ were from UK regulators that pushed private pensions into investments called liability-driven investments, aka LDIs. These are linked to the returns of UK government bonds.
These investment strategies worked great until the surge in UK government yields sent everyone to the exit at the same time.
“The regulator thought that LDI was a virtually zero risk strategy and encouraged schemes to adopt it.
The Pensions Regulator challenged funds that refused to use derivatives or used them sparingly, according to the pension trustees and consultants. In conversations with trustees, the regulator would tell funds they needed to lower their risk to big swings in the markets.This is by increasing exposure to U.K. government bonds, known as gilts.
Gilts are considered safe, like Treasurys. But because yields on them were low in the slow-growth years after the financial crisis. Holding more of them exacerbated the shortfalls pension plans forecasted to pay retirees far in the future.
A solution was to own LDIs instead. They invest in interest-rate swaps and other derivatives that are tied to gilts. But because they typically use leverage, they free up the pension fund’s balance sheet to invest in other higher-yielding investments such as stocks, private equity or real estate…
… The Pensions Regulator saw the strategy as a way of helping pensions manage their assets better. Reducing the risk that pension plans would have to be bailed out by a public fund meant to be a backstop for failed employer schemes, the pension trustees and consultants said”, (WSJ, 10/4).
The push towards LDIs has increased the investment class to a total of nearly £1.6 trillion (US$1.79 trillion). This is more than two-thirds the size of the British economy—no small feat to bail out if the market continues to implode.
This is reminiscent of the no-fail, no-loss, no-risk strategy of the US housing market mortgage-backed derivatives that led to the 2008 financial crisis. It works only until the price falls and the counterparty risk is exposed!
Are the problems in the UK pension funds only the canary in the mine?
The United Nations (UN) warns that there are more widespread financial meltdowns on the horizon if the Fed and other Central Banks continue to raise interest rates.
The UN warns that the result will be a global recession following prolonged stagnation – high inflation, high unemployment, and low growth.
The UN report estimates the rapid increase in interest rates has reduced economic output in emerging countries. This is by over US$360 billion over the next three years. Additionally, tightening will do even more harm.
The report suggests that instead of central banks hiking rates, which aim to stifle demand, policymakers should target high prices directly through price caps. This should be on large profits by energy companies.
India’s central bank (The Reserve Bank of India, RBI) also warned that the aggressive monetary policy tightening will cause the third major global shock to the economy in three years. Following the shocks of covid and the Russia invasion of Ukraine.
RBI has raised rates four times since May to try to bring inflationary pressures down. The RBI has also drained close to US$100 billion in foreign-exchange reserves. This effort to defend the rupee from slumping further against the US dollar.
Both the UN and RBI governor Shaktikanta warned that the spill-over effect of aggressive tightening. This is not only slowing growth but increasing financial instability.
A storm Brewing for Emerging Markets
A storm is brewing for emerging markets which are now facing slowing economic growth on top of a higher commodity (especially energy and food prices) along with declining currency values. This is culminating in distressed debt, often priced in US dollars.
The financial problems of raising interest rates in today’s climate of high leverage and debt are starting to crack open. As central banks stumble through what comes next we refer readers back to our post in March Even Volcker Couldn’t Volcker in Today’s Economic Conditions.
As always, we remind readers the reason to own physical metals is that counterparty risk is zero. Counterparty risk at zero means you don’t rely upon some regulator or bank to confirm what you own.
Certainly, there is no regulator pushing you to own derivatives when interest rates are artificially low. There is also no chance of someone deciding to create millions of tonnes of gold or silver at the push of a button, at the whim of a central banker or inexperienced Chancellor.
If events in the UK and elsewhere have you wondering how to reduce the level of counterparty risk your portfolio or pension is currently exposed to, why not contact a member of the GoldCore team to discuss how to buy gold or how to hold gold in your pension?
Events in the UK economy and its wider implications is something we also explore in the latest episode of The M3 Report, with Rick Rule and Ed Steer. Conversations with both guests offer up some new insights as well as discussions around the importance of owning gold. Watch now: Rick Rule Interview on The M3 Report.
Rick Rule Interview on The M3 Report
From The Trading Desk
Market Update
Some calm has returned to the markets this week.
The USD has eased back off its recent highs. GBP is up over 10% from its lows on 26th September and equity markets have put in a small bounce.
Some institutional traders are speculating that the Federal Reserve could ease its aggressive rate hike policy earlier than expected.
We will get a bit more colour on Friday when the US unemployment numbers are released.
If unemployment grows, it could signal the Fed may ease back on further rate hikes.
However, if it remains low bond prices could fall again, and yields will rise which will raise the borrowing cost for the government.
One thing for sure is we can expect a lot more volatility over the coming months.
Gold & silver have put in strong performances over the last week.
Gold is up over USD 100 from its weekly intra-day low last Wednesday and silver’s up over 10% on the week.
On Monday alone Silver popped by 9%.
GoldCore have seen a notable uptick in new account openings over the last month, with new GBP accounts up over 30% as clients look to protect themselves from records high UK inflation and the falling GBP.
Stock Update
Gold Brittania’s & Silver Brittania’s are available again for the UK and Irish Investors. Gold Britannia’s start at 6.5% over Spot
GoldCore have excellent stock and availability on all Gold Coins and bars. Please contact our trading desk with any questions you may have.
Silver coins are now available for delivery or storage in Ireland and the EU with the lowest premium in the market.
Starting as low as Spot plus 38% for Silver Philharmonics.
Buy gold coins and bars and store them in the safest vaults in Switzerland, London or Singapore with GoldCore.
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The post Were the UK pension funds just the canary in the gold mine? appeared first on GoldCore News.
Our guest this week is Ed Steer, expert gold and market analyst and author of the Gold & Silver Digest.
We invited Ed onto GoldCore TV to get his take on what is concerning him most in financial markets, movements in SLV and sanctions against Russia. He also draws our attention to central bank purchases of gold.
Ed’s interview serves as a reminder that those who currently do own gold and silver are just the tip of the iceberg when it comes to the number of people who are going to be looking to insure their savings when the proverbial really does hit the fan.
If you enjoyed Dave’s chat with Ed Steer then be sure to subscribe to GoldCore TV and watch our flagship show, The M3 Report. Featuring bonus material from guests such as Jim Rickards and Jim Rogers, as well as commentary from our own team and chart analysis from Gareth Soloway, this show really is at the forefront of alternative market and economic commentary.
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The post Ed Steer Gold And Silver – We Ain’t Seen Nothing Yet! appeared first on GoldCore News.
This morning the UK pound slumped as one of the world’s oldest central banks pressed hard on the panic button. The Bank of England was seen to be shouting ‘Pivot! Pivot! Pivaat!’ as they announced they would temporarily suspend their programme to sell gilts and will instead buy long-dated bonds.
In a statement, the bank said that they would be embarking on a “temporary and targeted” bond buying operation.
Although we expect it to be about as temporary and as targeted as a toddler with a paint gun. Unsurprisingly the markets did not see this as a vote of confidence in the British economy and almost anything associated with the former Empire has taken a beating.
What caused the Bank of England to act so hard and so fast?
Unsurprisingly, markets were unimpressed. According to Tradeweb data, the 30-year gilt rates had their largest one-day decline ever as they dropped 0.75 percentage points to 4.3% from an earlier 20-year peak above 5%.
Yields decrease when prices increase. Ten-year rates decreased from 4.59 percent to 4.1%.
What caused the Bank of England to act so hard and so fast? An attempt to prevent the wholesale equivalent of the run that destroyed Northern Rock in 2008. It now seems to be common knowledge that there was a ‘run dynamic’ on pension funds.
Following severe declines in the value of the pound and the price of gilts, UK pension funds have received variation margin calls totaling up to £100 million ($107 million) each.
As a result, mark-to-market valuations on derivatives and leveraged repo positions have been heavily skewed against them. Such margin calls were set to cause mass liquidation on pension funds had the central bank not intervened.
This, along with the U.K. government’s proposed tax cuts on the heels of the Federal Reserve increasing its projections for interest rate increases are the latest three things in a long string of central bank and government actions that have markets dizzy with uncertainty.
However, the Bank of England’s announcement today gives its first-mover status as a central bank that has done what many of us saw as inevitable – take an about turn from QT to QE.
Today’s moves by the Bank of England might set it as the first to stop QT, but it certainly won’t be the last. Central banks around the world are struggling with a major dilemma: should they fight inflation risking a global depression like we’ve never seen before, or work to support economic recovery with hyperinflation a constant backdrop?
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This was the second move by the UK, in less than a week to try and stave off total currency and economic collapse. Markets reacted swiftly to the U.K. government’s announcement on Friday to cut taxes and provide energy subsidies.
The plan, right out of the Reaganomics textbook of the 1980s, among other things scraps the highest income-tax rate and is aimed to stimulate stagnating U. K. growth to try and avoid a deep recession.
The combination of the Bank of England not matching other central bank interest rate hikes and the tax cuts have increased inflation expectations.
UK Gilt 10- Year Yield Chart
The surge in yields has close to a third of U.K.’s safest bonds sending off distress signals. It’s a sign of just how troubled a market is when the price of roughly a third of the safest sterling corporate bonds drops into distressed territory, compared to just one at the end of last year …
Most of the jump in the number of distressed bonds happened in the two days through Monday, triggered by the government’s plan to fund the nation’s biggest tax cuts in 50 years through more borrowing.
While the UK credit market was already having a difficult year, the selloff recently, particularly in the pound and government debt, put sterling notes at the center of the world’s worst bond selloff in decades.
The moves this past week have dragged the overall index price to within a few pence of distress, but it’s worth noting that not a single bond’s spread is above 1,000 basis points, another measure of distressed debt. (Bloomberg, 09/27).
UK Pound Sterling Chart
The pound was already in a steady slide against the dollar before last week. This was mostly due to the combination of pressure from high energy prices widening the U.K. trade deficit and more aggressive Federal Reserve rate hikes drawing investors towards U.S. dollars.
Even prior to the UK’s reactionary announcements in the last week, it was already declining against the dollar.
But, it is not the only currency doing so, however. Japan intervened in the currency markets last week for the first time since the 1998 Asian financial crisis in order to help prop up the declining yen.
The euro and Chinese renminbi have also declined against the dollar since the Fed started hiking interest rates in March. Note that gold has held its value in the surging U.S. dollar environment since March better than other currencies!
Currencies in US Dollars Chart
The U.S. dollar (DXY index) has surged 19% since the beginning of 2022 and more than 25% since May 2021. Large surges in the U.S. dollar have ended in crisis or taken international agreements to bring down.
The rise in the U.S. dollar from 1995 to 2002 coincided with the Asian financial crisis in 1997 and the Dot-com bubble bursting in 2000.
The early 1980s major surge in the dollar resulted in the Plaza Accord in 1985 (named for the signing at the Plaza Accord hotel in New York City).
The Plaza Accord was an international agreement between France, West Germany, Japan, the U.K., and the U.S. to depreciate the U.S. dollar. Under the Plaza accord leaders of the five governments promised to carry out a policy that would bring down the U.S. dollar’s value.
For its part the U.S. promised to reduce its deficit, Germany promised tax cuts, and Japan promised looser monetary policy. Not all of the promises were kept of course, but the agreement did result in a decline in the U.S. dollar.
The U.S. dollar declined so much in fact that in 1987 the Louvre Accord then replaced the Plaza Accord.
Under the Louvre Accord, which also included Canada, governments set ranges and promised to intervene if their currencies moved outside of those ranges.
Many analysts attribute the agreements as the main cause of Japan’s asset price bubble that built from 1986 to 1991 and then the subsequent crash in 1992.
US Dollar Index Chart
As economic growth slows, competing interests between central banks and governments are going to come to the forefront as governments scramble to support growth and central banks battle inflation.
Why did the dollar rise in the 80s?
So, what caused the rise in the U.S. dollar in the 1980s in the first place? – the competing policies of a Paul Volcker led Fed tightening policy and the expansionary policies of the U.S. Administration, lead by none other than Ronald Reagan.
The slowdown in economic activity has not raised the unemployment rate in the U.S. yet. However, when it does the U.S. administration is likely to follow the U.K. government’s lead and announce stimulative measures to support the economy. Especially as the 2024 election approaches which will then put even more upward pressure on the U.S. dollar.
It seems unlikely in today’s climate to get governments to come together for a Plaza Accord-type agreement, which leaves a currency war as the likely outcome.
Keep holding physical gold and silver while the storm is brewing!
As expected, the price of gold reacted positively to the drop in the pound, so intuitive it is to central bank disaster policies. To hear more of our insights into the gold price and the geopolitical environment, why not check out the latest episode of The M3 Report where we discuss the energy crisis and the impact of sanctions on Russia.
The Real Causes of the Global Energy Crisis Watch Steve St. Angelo Only on GoldCore TV
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A $3 gold coin? During the period the $3 Indian Princess gold coins were minted, from 1854-1889, that represented a hefty sum for everyday Americans.
So, why did the U.S. Mint choose to produce a $3 coin? Numismatic experts believe the reason can be found at the post office. When this coin was first minted a U.S. postal stamp cost 3 cents. The $3 coin created a convenient way for businesses to purchase 100 stamps in a single transaction.
Despite its odd denomination, many consider the $3 Indian Princess the most beautiful gold coin struck in the 19th century.
The U.S. Mint’s chief engraver, James B. Longacre designed this coin. In fact, the $3 gold coin was the first time he had been given the freedom to create a design of his own imagination. Longacre wrote that previous to the $3 gold coin, he had been directed to adapt Roman or Greek features into U.S. coins. For the $3 gold coin, Longacre was determined to create something uniquely American.
“From the copper shores of Lake Superior to the silver mountains of Potosi, from the Ojibwa to the Araucanian, the feathered tiara is a characteristic of the primitiveness of our hemisphere as the turban is of the Asiatic,” Longacre wrote.
He was inspired to feature an “Indian Princess” on the obverse of this stunning coin. A lustrous orange-gold color, the coin shows a gorgeous Indian Princess adorned with a feathered headdress, with the words UNITED STATES OF AMERICA circling her. On the reverse, the date and denomination is surrounded by an agricultural wreath celebrating corn, tobacco, cotton, and wheat.
Minted in Philadelphia of 90% gold and 10% copper, a total of 82,304 were produced in 1878. Survival estimates for all grades totals 25,000, yet for grades 60 or better only 6,000.
Blanchard recently placed an 1878 $3 Indian Princess MS64. While the 1878 issue is one of the more commonly available dates in the series, it is known from its deep frosty luster. See this attractive gold coin now. In today’s market, rare coin inventory is moving fast. If you see something you like, call Blanchard today. Tomorrow it may be gone.
Collecting Tip
Historically, one of the best ways to invest in rare coins is to build a set. Often sets become more valuable that the sum of the individual coins. If you are interested in starting a gold coin set or are looking for an elusive coin to complete a set, contact a Blanchard portfolio manager today for guidance. Over the past 40 years, we have helped clients build simple and elaborate sets to help meet their financial goals.
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Is the energy crisis something that can be resolved? Was it always inevitable? Will renewable energy make it all OK? Are Western financial policies to blame?
All this and more in today’s The M3 Report! If you’re not already subscribed to GoldCoreTV then click here right now to make sure you’re all set to watch the fifth episode of our flagship show.
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Featuring Mr. Energy himself Steve St. Angelo as well as a short explanation from Brent Johnson on the Dollar Milkshake Theory.
Plus our do-not-miss feature Chart Watch! This week we look at major shortages in the SLV and ask what’s driving the silver price right now.
Our theme this week is gas (in case you hadn’t guessed). Our team looks at gas, what is affecting the price right now and wonder how easily it can be resolved. We also look at Putin’s motives and wonder if the gas issue is a distraction from his ultimate arsenal.
Let us know your thoughts on the show, as ever we welcome feedback whether on Youtube, by email or on Twitter. Snail mail also an option!
Watch episode five of The M3 Report now.
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Today’s guest on GoldCore TV thinks it’s very likely that in the next ten years we will be moving onto a new gold standard.
It is of course, not uncommon for gold market commentators to say something along these lines. But Jan Nieuwenhuijs is a gold analyst, who is bringing the chat around gold demand firmly into the 21st Century. His analysis and relentless questioning has put him on the map as the go-to expert when it comes to gold reserves, the movement of gold and the international role of gold.
We welcomed him onto the show to ask him about the investigative reporting he does on the movement of gold and how he thinks money-printing central bankers will make the seismic shift to a new Gold Standard.
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Next week we bring you the latest episode of our flagship show, The M3 Report. We look at the energy crisis and ask what chain of events brought us to where we are today. Steve St Angelo joins us to give us his invaluable insight and stay tuned for his appearance in Chart Watch when we look at the massive shortage in the SLV. If you’re not already, then why not Subscribe to GoldCoreTV channel now so you don’t miss the show’s release!
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Americans face rising prices, shortages of everyday goods, falling stock and bond prices and rising interest rates. Today, the Federal Reserve moved with it’s fifth super-sized interest rate hike of the year to try to tamp down the scorching hot 40-year high inflation that is eroding your wealth.
The Fed hiked its benchmark rate by 0.75 basis points to 3 – 3.25%. Gold moved slightly higher with the news, which was largely expected and priced into the markets
The recent August inflation reading confirmed what economists have long feared – inflation is broad, sticky and still rising. That means the Federal Reserve must continue to aggressively hike interest rates this year – furthering weakening the economy, as the central bank tries to choke off consumer demand for goods and services.
Higher Fed interest rates are actually designed to slow down economic growth. Higher rates mean borrowing to buy a house, a car, or even a new washer or dryer is more expensive. The Fed is deliberately trying to slow the economy.
Can the Fed hit the brakes on economic growth to bring inflation down without triggering a recession? History is not on the central bank’s side.
Yet, this bad economic dream is far from over.
Deutsche Bank economists recently said that a Fed interest rate near 5% could be needed to see meaningful improvement in inflation. Last week, billionaire investor and Bridgewater Associates Ray Dalio warned that a 4.5% fed funds rate could mean a 20% drop in equity prices.
Are you positioned for another big leg down in the stock market?
It is indeed enough to make you want to take a long nap, like our friend Rip Van Winkle, who slept for 20 years, according to the Washington Irving short story. We don’t have the luxury of sleeping through this unprecedented economic period. Fortunately, there are actions you can take today to protect and preserve your wealth in these unsettled economic times and that includes increasing your allocation to gold.
Gold is a proven portfolio diversifier, hedge against inflation and asset that is non-correlated to the stock market. Increasing your allocation to physical gold today is a strategic method to protect your portfolio from further dislocation and declines as the Fed continues its aggressive interest rate hike campaign. If you’d like a personalized portfolio consultation to review your current portfolio and how gold ownership can help you achieve your long-term financial goals, call a Blanchard portfolio manager today.
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We last spoke to Jim Rogers way back in January. He told us then that we were set to see the ‘worst bear market’ in his ‘lifetime’.
Since then, a lot has changed. Russia has invaded Ukraine, inflation has gone on a tear, Europe is facing a major energy crisis and the US has been sabre-rattling in Taiwan. To say things have stepped up a gear could be considered an understatement.
So, we decided to invite him to GoldCoreTV to catch up with our host Dave Russell and to ask his thoughts on a few things. As ever this is a thought-provoking interview but we especially recommend you listen to his final answer at the end, when he is asked about his thoughts on the US-Taiwan-China situation.
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If you enjoy this interview, then please let us know either in the comments below the video, or why not tweet us? And don’t forget to subscribe to our YouTube channel, to make sure you don’t miss any of our upcoming interviews.
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Realising that you need to protect your portfolio from financial systemic risks is a tricky thing. Because, not only have you identified that all is not well in the economy but you now need to make a decision about how best to protect your investments.
In all likelihood, this is why you own or are thinking about owning gold bullion.
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Have you ever asked yourself?
What problem does gold solve in today’s environment?
Should I own gold ETFs or gold bullion?
What is and how can you reduce counterparty risk?
GoldCore founder and CEO Stephen Flood answers these questions and more in his chat on The Capital Club podcast. Podcast host Brian Adams does a great job asking Stephen the key questions about the need to hold gold, what kind of gold we should hold and what allocation to gold we should have.
Whether you enjoy your podcasts in the car, in the bath or when you’re walking the dog this is a great listen for anyone who is interested in gold ownership and the state of the financial system.
If you’d like to hear more great content about gold, silver and the financial system then why not sign up to our YouTube channel, where we release market-leading commentary and interviews every week.
Buy gold coins and bars and store them in the safest vaults in Switzerland, London or Singapore with GoldCore.
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The California gold rush became an industry of its own soon after the discovery of gold in the American west. Like any industry, the gold rush needed a system of trade. Developing such a system required the creation of California fractional gold. Some believe that before the creation of California fractional gold people would make daily purchases with a pinch of gold dust. It wasn’t long before those traveling west realized that a better system was needed.
Pioneers and others needed coins of small denominations. These smaller value coins were necessary for executing the daily sale and the purchase of everyday items. Between 1849 and 1856, various assayers minted gold coins in values of $0.25, $0.50, $1, $5, $10, $20, $25, and $50. It is likely that the majority of minters were jewelers who had experience working with small pieces of metal.
These pieces were not recognized as government-issued legal tender because they were minted independently. Therefore, while commonly referred to as coins, they are, strictly speaking, more accurately classified as “coin-like ingots.” Those pieces that are non-denominated are referred to as “tokens.”
California gold coins were a solution to the challenge of using silver coins for trade in the west. Many of these silver pieces were foreign which made them impractical. There were many varieties and often the intrinsic value of the coin was worth less than their trading value.
Today, there are 450 known California gold coin varieties. Many of these have no mint marking or are marked only with a set of initials, and are round or octagonal. Despite the anonymity of these coins, many believe that the majority were minted in San Francisco, and Leavenworth, Kansas. The process of making the coins was imprecise because they were minted without the industrial equipment found in the east coast mints of the US at that time. Assayers used the hammer method. This was a crude, but effective approach in which the minter simply used a sledgehammer to strike the die into the blank coin.
Many of these coins are highly sought after among collectors. In 2021, one collector holding 124 different varieties of California fractional gold sold his entire set. Among these varieties was the Defiant Eagle $0.25 coin minted in 1854. The highest recorded auction of this coin is $59,800 earned in 2009.
By 1864 the US government decided to make the practice of producing coins like these illegal with the passage of the Coinage Act.
For many collectors, the allure of the coins is not only their rarity but the industrious spirit they represent. The coins are an example of how the American west was developed by people, as much as it was the government. California fractional gold coins enabled the emerging economy that gave rise to what are some of the biggest economies in the world today. Moreover, these pieces were the currency of the “everyman” rather than the wealthy elite. They were used for basic purchases that were part of everyday life.
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One of the reasons people choose to invest in gold bullion or to buy silver coins is because they are simple and they are finite; basically the opposite of fiat currency. The complexity of fiat-driven markets and infinite possibilities to create money works to the advantage of central banks.
And they particularly like to take advantage when asked by the general public a very obvious question… Central banks are on the defensive over printing too much money during the pandemic. One of the latest examples is a post from the Bank of Canada on Twitter (August 25) stating #YouAskedUs if we printed cash to finance the federal gov’t. We Didn’t.
The Twitter feed went on with an explanation that the Bank of Canada bought bonds from banks in the open market. This was to help unblock frozen markets at the start of the pandemic. This lowered the cost of borrowing to help Canadians get through the pandemic.
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Then the BoC Twitter thread states We bought the bonds with settlement balances – a kind of central bank reserve – not with bank notes.
And finally, the Bank of Canada states Settlement balances don’t permanently add to the money supply. Unlike cash, we can remove those reserves from the system. And you can see that we’ve been doing just that (with the chart below as their evidence.)
Let’s take a step back and look at the BoC’s Balance sheet. Starting with assets.
Bank of Canada Assets
The reason that the Bank of Canada started purchasing assets in 2020 was to provide liquidity to markets in the wake of covid-induced government lockdowns.
The bank provides liquidity to markets by purchasing assets from its primary dealers and from the public.
Although the main asset it purchased was Government of Canada Bonds it also purchased mortgage bonds and other assets. For very short liquidity it purchases assets Under Resale Agreements. This is an agreement between the Bank of Canada and the Primary Dealer that the Primary Dealer repurchases the assets back on a specified date.
All of these purchases are added as assets to the BoC’s Balance sheet. The Bank of Canada expanded its assets from just over CAD$100 billion in assets in mid-March 2020 to CAD$550 billion by July of 2020.
The Bank held these assets until March 2021 when it started selling them back into the market. However, the assets on the BoC’s balance sheet currently still stand at almost $400 billion.
Bank of Canada Assets Chart
When the BoC purchases securities these become an asset on its balance sheet. However, this means that there must be an offsetting liability.
In other words, the BoC has to pay for this asset somehow. Also, the most efficient way for the BoC to do this is to ‘credit’ the primary dealer’s account electronically.
This then becomes part of the settlement balances on the liability side of the BoC’s balance sheet (settlement balances are referred to as excess reserves by other central banks).
This is how the money supply is created from the Central Banks’ monetary base.
Bank notes in circulation are also liabilities on the BoC’s balance sheet. (Note that both the Settlement balances and the Bank notes in circulation shown in the BoC’s Twitter post above are both liabilities of the Bank of Canada.)
This ‘electronic payment’ now becomes an asset on the primary dealer’s balance sheet that they either use to purchase other assets or use to make loans. This then expands the money supply.
The central bank, in this case, the BoC, creates what is known as the monetary base – or high-powered money. However, it is the banks that then use this base to create and expand the money supply.
They do this through taking in deposits and then making loans against those deposits. Canada, like the UK, does not have an ‘official required reserves’ requirement of 10% like the U.S.
Federal Reserve does, however, Canadian banks still need to have enough reserves to ensure smooth settlement at the end of each day. In general, this is around 10% of their M1 liabilities.
Using the 10% reserve requirement as an example. This means that when a bank receives a deposit that it only has to hold 10% of that deposit. It can lend out or purchase other assets with the other 90%.
An example of this is if Consumer A makes a deposit of $100, then the bank can lend $90 of that to Consumer B. Once Consumer B deposits that loan with their bank then Consumer B’s bank now can lend out $81 dollars and so on.
Jim Rogers and Patrick Karim on Metals, Markets and Money
This is how the money supply is created and expanded by banks from the Central Banks’ monetary base.
If consumers A through F all use their new bank loans to buy homes, then we have liquidity fueled debt driven housing boom.
Canada’s M1 money supply, which includes all banknotes and coins in circulation plus chequable deposits held in commercial banks. This has been increased by more than 50% (CAD$500 billion) since 2020.
Canada M1 Money Supply Chart
Bad News for Central Banks?
Bottom line is that there is CAD$500 billion more money in the Canadian economy than there was pre-covid.
The money supply also surged in other countries. The UK has 630 billion more pounds. The U.S. has added more than 3 trillion in dollars to its money supply for example.
So it seems clear that the Bank of Canada, one of the central banks, is deflecting valid criticism rather than openly and clearly answering reasonable questions put to it by the public.
Instead of saying ‘yes we added more currency to buy bonds’ they actually said ‘we did not print money’ in the hope that no one notices the semantics difference. The staff at the BoC is trying to be too clever by half.
Canada is a mediocre economy with an uninspired central bank. So, if their staff is bold enough to be super cute with words instead of forthright today… just imagine what baseless claptrap they will attempt to pedal when things really get rough.
We note that physical gold does not need to tweet. Physical silver does not need to take questions from the public!
Over time the price of metals rises precisely because the metals are entirely outside the shenanigans of the central banking system!
From The Trading Desk
Market Update
Earlier today the ECB raised rates by 75bp, at the higher end of expectation with some forecasters suggesting that the ECB may have gone with a 50bp hike instead due to Europe struggling with record high energy prices.
This will tip the block into a recession as we go into the final quarter of the year.
The higher print was also needed to shore up the Euro which is trading below par against the USD at a 21-year low.
Indeed, the ECB went further to say rates may go higher again in October and December as they raised their inflation expectations again for 2023 & 2024.
An interesting note from the World Gold Council (WGC) earlier this week, noted that central banks have continued to add gold to their reserves, with 37 tonnes added to global reserves in July.
The net increase was lower than what was added in June but over the last 6 months, central banks have added 270 tonnes to their reserves for 2022.
What was more interesting when looking more closely at the figures released from the WGC was the central banks that were active in July, were active in size.
Qatar Central Bank was the largest buyer, adding 15 tonnes to its reserves which were their largest monthly increase on record.
The Reserve Bank of India added also to its reserves, with 13 tonnes added, which is its highest monthly purchase since September last year.
Stock Update
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The post We Didn’t Print Money… Honest We Didn’t And More Baseless ClapTrap from Central Banks appeared first on GoldCore News.
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UK Gilt 10- Year Yield Chart
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US Dollar Index Chart
Americans.
with it’s fifth super-sized interest rate hike of the year to try to tamp down the scorching hot 40-year high inflation that is eroding your wealth.
Canada M1 Money Supply Chart