In the last 12months, the World economy, has taken a distinct turn for the worse…Starting last summer, the Federal Reserve announced it would begin normalising interest rates. (read: raising them, by baby steps)
They intimated in FOMC minutes, last year that they expected to increase rates by 4 times in the next twelve months. As it is, some nine months later, they have managed to raise by just 0.25% and they now feel that they will manage only 2 increments by year end.
As the Fed Funds rate was raised by 25 points last year, the DJIA fell from its new all time high at almost 18,300 in early May 2015 to 15,670 in August 2015, and early February this year, before bouncing higher on interest rate movement
However, several commentators – Doug Casey, Jim Rickards, Bill Bonner, James Dale Davidson and others have commented that many large corporations are actually borrowing money at low interest rates to buy back their own shares, to maintain the illusion of prosperity, by reducing the number of shares in issue, which increases the value of those shares that remain.
The FT100 which peaked at just over 7,100, for only the second time since 2000, in 2015, has generally bounced around in a downward direction, reaching 5,500 in February this year, before some of the Brexit talk began in earnest, in recent weeks, and bouncing up to 6,400 mark in April. However, recent Brexit fears have again driven markets down towards 6,250 (6,262.85 as I write), and the trend appears down.
Indices around the world rose yesterday, except in Turkey, Argentina, China and Colombia where they continued their downward slide. Several Economies in the Americas – notably Brazil and Venezuela, are experiencing rising inflation. Indeed, a Sky News report, quoting the IMF suggested inflation in Venezuela, could rise to 4,500% over the next 3 years, unless something is done to change things.
Socialism, is once again being proven to be a failure. This has echoes of the 1970s, when Britain too faced its own crisis. And America too seems to be heading down this road.
A Letter to America… Don’t follow the European model… Daniel Hannan – MEP.
(A warning also to Remainians?)
In Venezuela, as Britain then, they have huge reserves of oil, but as new exploration, and fracking – particularly in American states, raised production, their levels last seen 30-40 years ago, at around 9-10 million bopd.
Prices went from $121 bbl to $28, over the winter period, but as the traditional summer driving season begins in America, coupled with rising vehicle numbers in India and China, and some slacking off of production, as several American oil producers have succumbed to the lower prices, oil has bounced back to the $48/barrel mark, and should remain in this $50-70 region for the foreseeable, unless, some of those new producers collapse even at these prices, and demand remains firm.
Both Brazil’s and Venezuela’s oil industries have suffered partly to corruption issues, but also there appears to be some involvement by America’s dark state, at least according to Nomi Prinz, ex Goldman-Sachs employee, and now author of several books as she appeared with Max Keiser, on the Keiser Reporton Tuesday.
All it will take is one large domino to fall in the next few weeks, and the prediction by James Dale Davidson (See Pic) will no doubt come to fruition.
The IMF appears to be very concerned about world events spinning out of control, as the chief plate spinner extraordinaire – Madame Lagarde – appears to be struggling to keep all the world’s plates from crashing. She will undoubtedly have to run to keep all these increasingly unstable plates on the top of their poles.
Talk in the markets has also begun discussing QE4… Is this likely, as Gold has stumbled at the $1300 level, and pulled back? From a trading perspective, the Gold (AU) RSI (Relative Strength Index) hit 70, which suggests a temporary over-bought status, but this pull back will prove ephemeral too – perhaps lasting until the end of summer.
As George Soros, Hank Paulson, China, India, and many American Billionaires wiith their finger on the pulse, sense the mode shift, and begin buyng Gold again, while mainstream buyers sit on the sidelines – for now. However, the World Gold Council reported the strongest first quarter on record for Global Gold Demand. And the COMEX ratio of owners to ounces hits an new all time high – 500:1, meaning only the first person in 500 will get physical possession of their physical ounces, if they demand delivery. The rest will go begging.
When the general public gets involved, in this new gold bull, this will translate into direct increases to the bottom line for Gold miners, and the sector that gains most on such moves are the juniors. One such junior producer in Africa, has already experienced an almost 100% improvement over the last 5months from its extreme lows.
Although four nations already have taken steps down the road of Negative Interest Rates (NIRP) – Japan, Switzerland, Sweden and Denmark, with the U.S. also now considering this, if this happens, the rush to Gold (And by association – silver) will ensue, and the rise I predicted some years previously to happen in the 2018-19 period will come true..
I will be discussing the above miner in more detail in a future post.
But Jim Rickards latest prediction for the Gold price is over $14,400 per ounce.( See below)
I think he may be slightly over pessimistic, but not by much.
And all other commodities will rise in similar fashion. If you haven’t got Gold, then your Dollars, Pounds, Yen or Yuan, or whatever currency you use, will be worth concomitantly less. and even a median income will feel like serfdom.
Time to put circa 20% of your wealth into precious metals. (in my humble opinion.)
But here Daniel Hannan, explains how the English speaking peoples made the world. (Even if some of them, are out to steal it from us)
Until next time.
This entry was posted in Geo-Politics, Investing, Money, Politics, Finance and Economics., Political Economy & Finance, Precious Metals and tagged Bankers, Central Banks., Economics., Federal Reserve, Gold, Silver.