Upholding a Well-Worn Tradition

Not surprisingly, Donald Trump has followed in the infamous footsteps of his presidential predecessors in the transition from candidate to chief executive.  Invariably, every candidate for the presidency makes a whole host of promises, the vast majority of which are horrible and typically only exacerbate the problems they attempt to resolve.

 

With respect to trade, Donald Trump has adopted a position that is essentially indistinguishable from the 17th century French Mercantilism of Jean-Baptiste Colbert. It is a sure way to enrich a selected few to the detriment of the masses. At the same time, protectionism seems to superficially “make sense” to many people whose understanding of economics is not exactly the best, to put it politely (admittedly, in order to fully grasp how utterly fallacious protectionist arguments are, one has to do some reading and thinking, which is not everybody’s cup of tea). It also has a strong emotional component, as assorted foreigners are made out to be villains in its standard narrative (their “crime” consists of serving consumers by offering them win-win deals). Mainly it is a case of confusion: the ills of the fiat money system with its incessant credit expansion are erroneously blamed on free trade. [PT]

Photo credit: Gage Skidmore

 

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Driven by Credit

The jobs report was disappointing. The prices of gold, and even more so silver, took off. In three hours, they gained $18 and 39 cents. Before we try to read into the connection, it is worth pausing to consider how another market responded. We don’t often discuss the stock market (and we have not been calling for an imminent stock market collapse as many others have).

 

NYSE margin debt has reached new record highs this year, dwarfing previous peak readings by an impressive margin. At some point this is bound to generate many long faces, gnashing of teeth and loud wailing. And overtime for margin clerks. [PT] – click to enlarge.

 

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One Ear to the Ground, One Eye to the Future

Treasury yields are attempting to say something.  But what it is exactly is open to interpretation.  What’s more, only the most curious care to ponder it. Like Southern California’s obligatory June Gloom, what Treasury yields may appear to be foreshadowing can be somewhat misleading.

 

Behold, the risk-free tide…

 

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The 11th Annual In Gold We Trust Report

This year’s Incrementum In Gold We Trust report by our good friends Ronald Stoeferle and Mark Valek appears about one month earlier than usual (we already mentioned in our most recent gold update that it would become available soon). As always, the report is extremely comprehensive, discussing everything from fundamentals pertaining to gold, to technical analysis to statistical studies on the behavior of gold under different economic scenarios.

 

August gold, daily – gold itself continues to look fairly strong recently, but its rally is currently not confirmed by precious metals stocks.  Silver is lagging the advance as well – click to enlarge.

 

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Tremendous Flop

GUALFIN, ARGENTINA – Now comes a report from the Financial Times that tells us the nation’s No. 1 industry – home building – has been backing up for a quarter of a century.

According to the newspaper, U.S. home builders “started work on the same number of houses in the past year as they did a quarter of a century ago, even though there are 36% more people working as residential builders now than then.”

 

Moat contractors have been particularly bad. Incidents like the one depicted above are reportedly increasingly frequent.

Image credit: Gary Larson

 

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Returns One Can Only Dream Of

When I heard about Bitcoin for the very first time in May of 2011, it traded at eight US dollars.

As I write this, almost exactly six years later on May 20 2017, it has broken through the USD 2,000 barrier for the first time [ed. note: since then it has streaked even higher].

 

Bitcoin, daily: just four trading days after breaking through the USD 2,000 level, Bitcoin reached a peak of USD 2,760 – click to enlarge.

 

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Keeping it Simple

We recently (on Thursday last week to be precise) put together a few gold-related charts based on the “keep it simple” principle. The annual Incrementum “In Gold We Trust” report is going to be published shortly and contains a quite thorough technical analysis section, so we will keep this brief and just discuss a few things that have caught our eye.

 

Going for the gold: The two gentlemen on the left are standing at what is officially the deepest below-ground spot humans have ever stood on. It is more than 4 kilometers or approx. 2.5 miles below the surface, at the very bottom of the Mponeng deep level gold mine in South Africa. The rock face with the grid painted on it is about to blasted to smithereens (the giant rock drill to the right drills holes into it, which are then filled with explosives). The people working in this tunnel, we kid you not, are referred to as the “mine deepening team”. That’s right – they are drilling down another 7,000 feet to reach an ore body at a depth of 3 miles – or more than 4.8 kilometers deep.  Where they stand right now, the rock face has a surface temperature of more than 66 degrees C, or about 151 degrees F. The gold-bearing reef that is eventually going to be mined when the tunnel reaches it has a thickness of only about one meter, or 3.3 feet – but it will lengthen the mine’s life until around 2030.

Photo credit: Discovery World

 

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Numeraire Extraordinaire

The price of gold went up $12 last week, and that of silver $0.50. That’s not bad for gold and silver owners, and not good for the vast majority who are all-in on the dollar (though they don’t think of it that way).

 

“All in”: A legendary scene from “High Stakes Poker”. This was a straddled hand, with three players pumping up the pot to $14,900 pre-flop (Sammy Farha was in there too, with the ace of hearts and the three of spades as his hole cards). Guy Laliberte (the owner of the Cirque du Soleil) was first to act after the above flop was dealt and checked his top two pair hand. Farha bet $13,000 with his pair of threes, upon which former tennis pro turned poker pro David Benyamine quickly raised his nut-flush draw to $43,000, so as to thin out the field (this is known as a “semi-bluff”). Laliberte responded (also not thinking very long about it) by raising his two pair to $168,000, prompting Farha to insta-muck. As Gabe Kaplan (the most entertaining poker commentator of all time) noted while Benyamine mulled things over: “It’s hard to just call”. It took Benyamine 57 seconds before muttering “I’m all in” and shove $600,000 into the middle – at the time equivalent to approximately 500 ounces of gold. Laliberte thereupon announced “I have to think about it” and called precisely 30 seconds later (yep, he’s a fast thinker).* And so a 1,000 gold ounces poker hand came into being. [PT]

 

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Labors with No Fruits

It’s been a long row to hoe for most workers during the first 17 years of the new millennium.  The soil’s been hard and rocky.  The rewards for one’s toils have been bleak.

 

Ma and Pa farm worker lean against one of their recent productions to mug for the  daguerreotypist. Their happiness at a job well done is marred by misgivings about their remuneration in real terms.

Photo credit: Maple Valley Historical Society

 

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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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