Central Banks Produce Dire Consequences for the Free Market

Todd “Bubba” Horwitz has recently produced a podcast with our friend Claudio Grass of Global Gold, which we can be called up further below. Bubba has provided a summary of the topics discussed, an edited version of which you find below as well.

 

Global Gold CEO Claudio Grass, tireless advocate for free markets, sound money and liberty.

Photo via Global Gold

 

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Money Supply and Credit Growth Continue to Falter

The decline in the growth rate of the broad US money supply measure TMS-2 that started last November continues, but the momentum of the decline has slowed last month (TMS = “true money supply”).  The data were recently updated to the end of April, as of which the year-on-year growth rate of TMS-2 is clocking in at 6.05%, a slight decrease from the 6.12% growth rate recorded at the end of March. It remains the slowest y/y growth since October of 2008, when the Fed had just begun to pump quite heavily.

 

US money supply and credit growth keep slowing.

 

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Papal Delusions

The purported pope of the Catholic Church recently attacked “libertarianism.”  As a number of theologians have ably shown, Jorge Bergoglio, a.k.a Pope Francis, cannot be a legitimate pope, since he was neither ordained as a priest or consecrated as a bishop in the traditional Catholic rite of Holy Orders.  And since he is not a bishop, he cannot be “Bishop of Rome” – a prerequisite for being the head of the universal Church.

 

The collectivist pope Francis – what a contrast to the revered John Paul II, who not only tirelessly argued in support of individual liberty, but had a firm grasp of economic issues as well (we have contrasted their economic views in “A Tale of Two Popes”). John Paul II realized that the Church had to stand up in defense of the free market economy if it really wanted to help the poor – and when he spoke of these things, one had the distinct impression that he really knew what he was talking about (by contrast, Francis often pontificates on things he knows nothing about, see e.g. his infamous “climate change” encyclical). As an aside: during the Nazi occupation of Poland, the then 22 year old Karol Wojtyla, who would one day become Pope John Paul II, worked as an actor in a clandestine, subversive theater. He evidently held on to this subsersive streak as he grew older – those standing up for liberty have always been the “subversives”, as they must by the very nature of their calling be opposed to the State. [PT]

 

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How to Earn Money that Will Soon be Worthless Real Quick

There is a often-promoted plan to grow your wealth. Here’s the background. The dollar is going to be worthless. Soon! The reason is because [their peeps in high places tell them / the Chinese / end of the petrodollar / historical fiat currencies / Rothschild Jekyll Island Master Plan Private Fed / Fed printing] will cause the dollar to collapse and gold will rocket to $50,000.

 


The many ways of getting rich quick… sometimes it a bit takes longer than anticipated, as the panel to the right indicates. Getting rich off inflation is not impossible of course, but pulling it off in practice it is actually a lot more tricky than is generally believed. [PT]

 

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India Reverts to its Irrational, Tribal Normal (Part XIII)

Over the three years in which Narendra Modi has been in power, his support base has continued to increase. Indian institutions — including the courts and the media — now toe his line.

The President, otherwise a ceremonial rubber-stamp post, but the last obstacle keeping Modi from implementing a police state, comes up for re-election by a vote of the legislative houses in July 2017.  No one should be surprised if a Hindu fanatic is made the next President. India is rapidly entering a new phase.

 

Indian Prime Minister, Narendra Modi on the cover of an Indian magazine in 2002, when he was the Chief Minister of the Indian province of Gujarat. During his reign in Gujarat, a civil-war like situation erupted, which seriously segregated the province’s society. It brought Hindus into a state of trance and excitement and provided them with the fake-security of the collective. Alas, wealth and civilization are created by an intense focus on value-addition, not from the short-term escapist excitement of mobs expressed through riots and rape. Destructive endeavors are a major vulnerability of poor societies, given their irrationality and lack of foresight and planning, and their short-sighted focus on high time-preference, pleasure-centered activities.

 

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When Mount Vesuvius Blew

 

“Injustice, swift, erect, and unconfin’d,
Sweeps the wide earth, and tramples o’er mankind”

– Homer, The Iliad

 

Everything was just the way it was supposed to be in Pompeii on August 24, 79 A.D.  The gods had bestowed wealth and abundance upon the inhabitants of this Roman trading town.  Things were near perfect.

 

Frescoes in the so-called “Villa of the Mysteries” in Pompeii, presumed to depict scenes from a Bacchus cult (Bacchus is the Roman version of the Greek god Dionysus, essentially a party god, responsible for alcoholic supplies, fertility and the arts). He was thought to bring divine joy and ecstasy, but also blind rage (reflective of the dual nature of what happens when people get high on wine). Bacchus and his followers could not be fettered. The spread of Bacchus worship could be seen as a subtle sign of the increase in hedonism and debauchery that often becomes evident in high civilizations as they reach their zenith of power and prosperity. That was certainly true of Rome at the time these frescoes were created. Although the empire would eventually become even larger in terms of territory, it reached its cultural high point around the time Caesar and Augustus did away with its Republican form of government.

 

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A Minor Derailment

GUALFIN, ARGENTINA – Yesterday, stocks fell.

And volatility shot up.

 

When too many people have too many knives out at once, accidental cubism may result

 

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Selling in May, With Precision

If you “sell in May and go away”, you are definitely on the right side of the trend from a statistical perspective: While gains were achieved in the summer months in three of the eleven largest stock markets in the world, they amounted to less than one percent on average. In six countries stocks even exhibited losses! Only in two countries would an investment represent an interesting proposition, as I have shown in the last issue of Seasonal Insights via back-test calculations for the time period 1970 to today.

 

The perennial stock market question: when is the right time? [PT]

 

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Chugging along in Nosebleed Territory

Last Friday, both the S&P 500 and the Nasdaq composite indexes closed at record highs in the US, with the Dow Jones Industrial Average only a whisker away from its peak set in March. What has often been called the “most hated bull market in history” thus far continues  to chug along in defiance of its detractors.

 

Can current stock market valuations tell us something about the future trend in gold prices? Yes, they actually can.

Image source:  The Neatest Little Guide to Stock Investing

 

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The Problem with Mining

If you can believe the screaming headline, one of the gurus behind one of the gold newsletters is going all-in to gold, buying a million dollars of mining shares. If (1) gold is set to explode to the upside, and (2) mining shares are geared to the gold price, then he stands to get seriously rich(er).

 

As this book attests to, some people have a very cynical view of mining…  We would say there is a time for everything. For instance, when gold went  from $270 to $320 in 2001-2002, the HUI index went from 35 points to 150 points, in a show of rather noteworthy outperformance (something similar happened in 2016).  The “sweet spot” for gold mining shares is usually early in gold rallies, before input prices catch up (empirically, gold has a habit of leading price moves in the main mining inputs) [PT]

 

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Bernanke Redux

Somehow, former Federal Reserve Chairman Ben Bernanke found time from his busy hedge fund advisory duties last week to tell his ex-employer how to do its job.  Namely, he recommended to his former cohorts at the Fed how much they should reduce the Fed’s balance sheet by.  In other words, he told them how to go about cleaning up his mess.

 

Praise the Lord! The Hero is back to tell us what to do! Why, oh why have you ever left, oh greatest central planner of all time. We are not worthy.

 

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Correlation vs. Causation

A very good visual correlation between the yearly percentage change in the consumer price index (CPI) and the yearly percentage change in the price of oil seems to provide support to the popular thinking that future changes in price inflation in the US are likely to be set by the yearly growth rate in the price of oil (see first chart below).

 

Gushing forth… a Union Oil Co. oil well sometime early in the 20th century

 

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