More asset inflation to come; Bloomberg says the U.S. Fed is empowering the poor

As long as the central bank propaganda spreads, the markets will move higher

While we know that it has been the government deficit spending and the U.S. Fed’s enabling policies that have decimated the working class, while enriching the elites, we wouldn’t know it if we read the business press. According to Bloomberg, the Fed is working to empower the previously disenfranchised.

Federal Reserve Chairman Jerome Powell probably will kick off his post-meeting press conference on Wednesday the same way he’s begun every one this year. The Fed, he’ll tell reporters, has “one over-arching goal: to sustain the economic expansion.’’

Behind that anodyne mission statement lies a grand ambition. Powell is effectively taking on a task that many of his inflation-wary predecessors shunned: extend the fruits of a growing economy to those who rarely benefit, from struggling African-American families to poor rural white people.

The improvement in the jobs market has “started to reach communities at the edge of the workforce,” Powell told lawmakers this month. “It’s just so important for us to continue that process [maintain dovish policy] for a couple of years.’’

“I can’t remember a Fed chair who was as emphatic about the benefits of this high-pressure labor market to people who have long been left behind,’’ said Jared Bernstein, a one-time adviser to former Vice President Joe Biden who’s now at the Center on Budget and Policy Priorities.

Fed Chair Jerome Powell Likes the Economy Hot – Bloomberg, July 28th

Racial Inequality? The propagandists are inventing excuses for the Fed’s dovish policies

The Fed’s monetary policies, which have enabled the federal government to continue spending with reckless abandon, are directly to blame for skyrocketing asset prices and the true cost of living. These policies have widened the long-term, secular income and net worth disparities, and reduced the average person’s standard of living. But according to the propaganda pieces that pose as news, the Fed is working to help out when the government fails. Here, Bloomberg tells us to thank the Fed for helping to address racial inequality.

Powell has said repeatedly that it’s up to Congress and the White House to tackle such deep-rooted ills as income inequality and racial disparities in the labor market.

But he acknowledged this month that the Fed has a role to play, too. “What we can do,” he told lawmakers, “goes back to taking seriously the job you’ve given us, which is maximum employment.”

Economist Laurence Meyer said central bankers rarely talked about the labor market’s impact on minorities or inequality when he was a Fed governor from 1996 to 2002.

Now, officials talk about those topics all the time. And they think they’re having an effect as the stretched labor market draws in workers from the sidelines.

“One could say, ‘Thank the Fed,’” said Meyer, who heads his own Washington-based consulting firm. “At least somebody is doing something about inequality.”

Fed Chair Jerome Powell Likes the Economy Hot – Bloomberg, July 28th

I cannot even make this stuff up. But as long as a large percentage of the investing and trading populations believe it (which they do), asset prices will continue to climb higher on the wall of lies.

The very monetary policies that have decimated the average person are supposedly being employed to help the average wage and debt slave.

Talk about the Stockholm syndrome….

A response to an email; Never rely on others who do not have your best interests in mind

Ray Dalio has another agenda, and we are not part of it; While he warned of calamity, we went bullish
Ray Dalio; Don’t listen to what I say, because I am not here to help you

Jim Cramer on Tuesday warned viewers about the risks of relying on other people’s advice to invest in the stock market.

The “Mad Money” host suggests understanding your own investing goals and priorities before deciding to follow the lead of a big-time money manager, pointing to the bearish outlook and “terrifying statements” Bridgewater Associates founder Ray Dalio offered in January.

The renowned hedge fund manager’s then-assessments on politics, the economic cycle and Federal Reserve’s moves in monetary policy “was scary stuff that made you want to sell everything,” Cramer said. Nobody’s perfect and even the top investors often get it wrong.

“As it turns out, though, that would’ve been a great time not to sell but to buy. And when you look at Dalio’s flagship fund at Bridgewater, its performance in the first half was reportedly down 4.9% …,” he said. “And that’s fine for him: he’s already one of the richest men in the world, he will not miss it.”

Cramer Remix: Don’t rely on another’s viewpoint when managing your portfolio – July 23rd CNBC

Beware of the disingenuous shill

You’re right, Chris, about Ray Dalio bashing the U.S and propping up China.  He’s starting a new Chinese hedge fund.

You read his motives correctly.

V – Toronto

Here was my response (edited for grammar):

I think I understand why Dalio speaks Western calamity all the time. I think it jibes well with the people with whom he wants to curry favor (e.g. ChiComms).

It is amazing how many in the alt-financial press are playing up how China will rule over the financial world. They talk up a regime that killed at least 100mm during their ChiComm purge and who do not tolerate true Christianity or Islam. They look for anything other than the dollar.

Here is my observation of China taking over the world. They will never rule over more than their direct sphere in Asia. If this plays out, we will have spheres of influence like in Orwell’s 1984; three super-regions duking it out.

If people think the U.S. cannot be trusted, ChiComm puts them to shame. The Muslim nations will only take their money, but will only view China as a counterbalance to the Anglo/American establishment. I think most nations are downright scared of ChiComm and what they are capable of doing.

[The globalists can try all they want to rewrite history and portray China as a benevolent dictatorship, a centrally-planned economic miracle, and the future financial go-to, but that can never change reality. The West propped up and promoted this brutal Communist dictatorship after WW II, and the globalists picked China to be the manufacturing powerhouse before Kissinger visited China in 1971.]

[In order to get the next phases of the new world order implemented, the globalists knew that monetary printing would go into hyper-drive post 1971, and thus chose to offshore production to low cost nations. China was the direct beneficiary. If it weren’t for this decision, China would be in a much more inferior position today.]

I can figure out how the western governments work. They are broken socialist states, and are propped up with central bank intervention. It actually is straightforward. Good luck figuring out how China’s financial system works. It’s a centrally managed mess that only benefits the well-connected.

Besides, the global, privately-run central banking monetary system was developed by Western nations and the Anglo-American/European powers. All the nations are operating within a Western construct. China, Russia, Asia, India, Africa, etc. all operate within an Anglo/American/European system. What will happen when China gets the power that its rah rah shills are saying? Perhaps China will not operate within the system anymore, but the Western nations will never operate with whatever China proffers.

China doesn’t trust the United States and the U.S. doesn’t trust China. It’s in the DNA and this will never change. The two systems, while merging into a Socialist/Communist hybrid will never reconcile. The Martin Armstrong’s of the world are just hoping for societal and economic collapse in the West, so they can be vindicated.

July 22nd Update – A social commentary and why there will be no collapse for now

To download the podcast – Right mouse click here

-Zero Hedge began posting on Twitter back in January 2009. Almost to the month of the market bottoms. Was this by coincidence? Hardly.
-A commentary of the false Christian prophets who are very influential over the unwitting Christians who think we need a collapse and war to get the new world order in place.
-These false prophets could be Freemasons who redirect their followers into looking for a catastrophe, while the real catastrophe has been degrading humanity daily for decades.
-The central banks will keep things moving forward. Their owners are achieving more by maintaining this illusion of prosperity. Besides, they will get the blame.
-I look for higher asset prices. Regardless of whether the Fed lowers by 25 bps or 50, the trend is higher. Don’t kid yourself. If the Fed drops by 50 bps, look for the Dow to pop 500 higher.
-All nations are looking to the Fed. Even the African nations are desperate for the Fed to drop rates.
-I never read in the Bible that we need an economic collapse to get the end time government in place. In fact, I read biblical descriptions of the last day’s economy and they read like what we are currently experiencing.
-Real estate bargains still are around. Don’t buy in the bubble areas. Nations like Canada and Australia have allowed foreigners to more easily launder money into real estate than in the U.S. Here, price/income multiples and price/rent numbers domestically still look reasonable, if you can tune out the likes of Zero Hedge and Steve Quayle. I can still buy condos that generate a cap rate of at least 10%, with tenants making 100k/year.
-At some level, I have to conclude that based on their behavior and Delphi techniques, the internet prophets are doing the work of their father, the devil. Many must be Freemasons. I am sure that many of my readers know who they are. They have been wrong for years, yet they have a following who possess a hard-to-break confirmation bias.
-This unwitting base has gotten poorer and poorer. It has little to do with the fact that they follow Jesus, and more with the fact that they are being duped by charlatans.

Response to email; What’s the chances of this whole thing blowing up?

The financial lives of the majority are already imploding

What do you think the chances are of this whole thing imploding up with defaults, and we get higher rates.

The article with Ben Bernanke was interesting. They picked the right guy for the manufactured crisis in 08. Made me think of Jerome Powell, what his role going to be with Trump. Trump is a master of bankruptcies.

I give an implosion from rising rates a one-in-six chance per year.

If I were placing bets; as of right now, I would give the likelihood of a financial market implosion from rising interest rates a one in six chance per year. That’s right; it’s not a high probability. Even if the markets imploded, that would just provide the central banks with all the excuses they would need to buy up everything that the scared sellers were dumping onto the marketplace.

If you think home prices are expensive now, just wait another few years after this upcoming round of QE gets going. Imagine how much more sovereign debt will be taking up space on the collective asset balance sheets. These low-yielding assets will need to be deployed as collateral, which will just continue to bid up prices. If the N.Y. Yankees are worth $4 billion now, I guess in another several years, they will be worth $6-7 billion. Nobody can import the Yankees from a low cost nation.

The whole system is centrally managed from stem to stern. This manufactured crisis talk provides the fertile ground to introduce new and novel concepts on the sleeping populace. Under such manipulated conditions, the dazed and confused debt-slaves will be more accepting of central bank asset accumulation and the jettisoning of national currencies in favor of centralized electronic assets like the Libra. As powerless bystanders, they will view it all as a fait accompli.

Chris Pirnak

Here is a typical article that spells out the sad state of owning owner-occupied real estate. This is why I always say to buy rental properties. All these costs offset your rental income. Your financial adviser will never tell you to directly buy investment properties, because he can’t manage that money and take a cut. He can’t control that money, so he will always recommend investing in REITs and buying a home to live in. Here’s a piece of advice; I rented my whole life until only a few years when I moved in with my wife. I deployed all that capital on rentals.

The reality of owner-occupied housing

If I bought an owner-occupied millstone, my financial life would have already imploded and I would have had to go back into the workforce and profess my love of this world to my employer. But I haven’t had to work since 2001, because I know how to game this system.

The conflict of interest that is rampant in the financial industry, whether it’s from the broker/dealer or the alt-financial shill with a subscriber service, will almost guarantee a debt-slave existence. To many who do not understand this system, their financial lives have already imploded. The ZeroHedge and alt-financial followers, along with the partisan fools, keep looking around for a financial implosion. The problem is that the financial system that they thought they knew has been imploding and transforming itself into the desired outcome for decades. Implosion? That ship has sailed.

Are cryptos the answer? Will Facebook ever use outside cryptos?

Notice the tried and true method the globalists are employing to get their agenda pushed through. If the elite’s media kept proclaiming Facebook’s virtues, more people would catch on to the new world order. So, by controlling its opposition, the illusion of free choice is maintained and the people never really catch on to how they are stuck in a closed system.

Facebook’s stock climbs a wall of manufactured opposition, while about 3 billion people use its set of apps. Despite the fines and fake political criticism, Facebook’s usage continues to grow. It’s too expensive to play this game and only Facebook can afford it. Hurry up and log in to your account; Facebook needs your clicks to pay for its fines and lobbying.

The manufactured Facebook opposition appears to be overwhelming, but that is just a diversion to fool its observers into thinking the regulatory authorities are looking out for its users.  The Libra will go through and become reality. It will, because it is the clear response to the manufactured dollar and national currency crisis. It has been ingeniously positioned to be the only viable alternative to the dollar hegemony.

IMF says electronic currencies are the real threat

In a paper published Monday titled “The Rise of Digital Money,” IMF authors Tobias Adrian and Tommaso Mancini-Griffoli said the two most common forms of money today, cash and bank deposits, will “face tough competition and could even be surpassed.” While banks are “unlikely to disappear,” they face growing threats from big tech companies and fintech start-ups, the paper said.

The research was published as central bankers and policymakers debate the role that tech companies and digital currencies will play in the banking and payments system.

Facebook’s announcement that it will launch Libra has been met with skepticism from many officials around the world. In congressional testimony last week, Federal Reserve Chairman Jerome Powell said Libra raises “serious concerns” around privacy, money laundering, consumer protection and financial stability.

Within this backdrop comes a warning to my readers; Facebook and the Libra system will never be allowed to use third-party cryptos like bitcoin and etherium, because in order for Libra to be approved, its infrastructure will have to operate within the confines of the current global hierarchy. By the time Libra gets approved in its final form, it will be fully sovereign debt-backed, while its blockchain will be fully centralized and regulated.

This is why the cryptos are really tanking; large investors realize that they may be on the losing end of the blockchain battle. It reminds me of the tech wreck in 2000. There were some excellent technologies, but most of the early entrants went the way of the buggy whip.

The whole system is centrally managed from stem to stern. This manufactured crisis talk provides the fertile ground to introduce new and novel concepts on the sleeping populace. Under such manipulated conditions, the dazed and confused debt-slaves will be more accepting of central bank asset accumulation and the jettisoning of national currencies in favor of centralized electronic assets like the Libra. As powerless bystanders, they will view it all as a fait accompli.

Knowing what will happen before it does will make our financial lives so much more manageable and successful, regardless of the market outcome. I am prepared for an implosion. We all should be; just not by how the alt-financial media recommend.

Inflation and deflation, lower interest rates, and the prices of assets

It’s hard to bid up consumer prices when taxes and debt obligations eat up much of a person’s paycheck

I had a question for you regarding inflation/deflation as it relates with the decreasing interest rates. If I understand you correctly, you’re saying that when rates fall, it’s deflationary. However, you’re also bullish on housing (for higher rents and higher asset prices to continue with weak rates). I’ve also seen a continuing uptick in food prices. Minimum wage keeps rising although it seems like there is pressure on real wage growth in Canada – maybe there’s growth in the US employment market. Is your yardstick for inflation commodities (ie gold & oil) and real non-governmental manipulated wages (ie wages set by the market and not by government?) or how would you define it particularly in light of rising house, rent & food prices.

N – Canada

The higher taxes, the lower real GDP growth

Relation between the tax revenue to GDP ratio and the real GDP growth rate (average rate in years 2013-2018, according to List of countries by real GDP growth rate, data mainly from the World Bank). European Union. Source: Wikipedia
This chart displays the same relationship as above, but includes nations outside the EU. The US (27.1%), Australia (27.8%) and Canada (31.7%) have lower tax revenue to GDP ratios than all the larger EU nations. Source: Wikipedia
Household debt is gobbling up more of people’s income. Lower interest rates help to mask the payment burden, but the total debt households are accumulating continues to grow

This person asks some very reasonable questions and I hope to clarify them.

When I speak of price inflation, I speak strictly of consumer prices as reflected in the government data. Of course, these numbers tell only a small part of the picture, and that is done by design. For most of my discussions, I stick to the published government data as these data points are what largely determines central bank monetary policy.

Certain items will always reflect the true rate of monetary inflation

With this said, there are many necessities and “fixed” items (e.g. healthcare, housing, education, debt payments, and taxes) whose cost burdens continue to escalate higher than the general rate of inflation, and their amounts have been taking up a larger percentage of a person’s income over time. This helps to keep the published inflation numbers lower, as people have less available to spend on consumable and durable goods.

Certain items like house prices and rents reflect true monetary inflation and cannot be imported

There is one primary reason why the costs of these items rise higher than other prices; these items cannot be imported and their prices cannot be arbitraged between nations, like consumables, which can be produced and sourced from low cost countries. This is the primary reason why the governments of high cost nations promote free trade at the expense of the average worker; it helps to maintain the illusion of low inflation. This is why government tends to intervene in sectors like housing and healthcare. These are the areas of the economy that are highly susceptible to the damage that government spending largesse causes. In other words, the price increases of housing, education, and healthcare more accurately reflect the rate of monetary inflation (not general inflation) over time.

This is why we are seeing a surge in social program spending; it is being done out of necessity. As long as this monetary system is in existence, the governments will have to keep covering up their profligate ways, which were made possible by their central banking enablers.

So, rents cannot be arbitraged between nations nor different regions in a country. I may buy clothes that were produced in Vietnam, but I cannot pay the same rent as someone living in Hanoi. You may live in Toronto, but you will not pay the rent of someone living in Medicine Hat. Thus, I am bullish on rents.

As long as the central banks stand ready to buy all that is needed to keep rates moving lower over time, so governments can spend without a thought of national bankruptcy, I will be bullish long-term on housing, rents, stocks, and bonds. The costs of these items cannot be transferred from overseas. The key point that underpins this whole dynamic is the ability of the nation-state to remain in business without any debt repudiations. The central banks have made this certain and they will make sure that all sovereign debt will remain and be serviced. This is the deflationary drag I discuss. If any type of default looks imminent, all bets are off and the loss of confidence will cause bond yields and inflation to rise. That would put an end to this monetary experiment.

The prices of commodities can be sourced from all over the world. I just wrote an article discussing my thoughts on where I think commodity prices are moving. Although I believe the longer trend is definitely higher, this does not mean I want to establish a large bullish macro-position on commodities in general. The U.S. used to be the largest producer of many commodities, and if it remained that way, commodity prices would be much higher. But many developing nations are growing in importance as commodity producers, and as long as interest rates remain low, the supply side of the equation will continue to produce more than normal, as their costs of capital is less.

The only commodity I currently recommend is gold. It will always be the first to move when uncertainty reigns. If Fed Chair novices like Jerome Powell make mistakes, which I see as probable, gold will reflect this. Mr. Powell seems to be a simple-minded monetary scientist and he does not engender my confidence. I had more conviction in Ben Bernanke’s abilities. It is just difficult for me to imagine a world of higher spiraling commodity prices when so much of the world’s income is spent on housing, taxes, and debt payments.

The “Bernanke doctrine” – What seemed extraordinary in 2002 is routine today

Ben Bernanke was chosen as Fed Chair, because his advanced grasp of the unconventional was ahead of his time

Note to reader: The preservation and perpetuation of the Federal Reserve and the private central banking cartel is the primary objective of the elites. By the early 2000’s, it became clearly evident that under its normal routine of operation, the existing monetary system was reaching its denouement. The elites knew that unconventional actions and policies would need to be promulgated to move the existing monetary system forward. With his vast understanding of the unconventional, I have to conclude that Ben Bernanke was specifically chosen at the time to not only transform the Federal Reserve’s operations and policies, but to help frame the entire global central banking system for decades to come. There was no other candidate with the in-depth knowledge, and no other Fed Chair has had the capabilities that Mr. Bernanke possessed. We need to comprehend that Bernanke’s role was to preserve the existing hierarchy, and while those on the outside view his tenure as a disaster, I view it as a success.

I received an email from a reader:

Have you heard of the Bernanke doctrine?

https://en.wikipedia.org/wiki/Bernanke_doctrine

Art

Indeed, I have… On November 21, 2002, then Federal Reserve Governor, Ben Bernanke, delivered a speech before the National Economists Club in Washington, D.C. The speech was titled Deflation: Making Sure “It” Doesn’t Happen Here, and you can still read the transcript of this now-famous speech on the Federal Reserve’s website. At first, the speech did not receive much publicity, but it helped to quantify what would eventually be known as the “Bernanke doctrine.”

In 2005, this 2002 speech received renewed interest when President George W. Bush selected Bernanke as the chairman of the Council of Economic Advisers. After several months of grooming, President Bush nominated him for Federal Reserve Chairman. Ben Bernanke was sworn in as Fed Chair early 2006. This gave him time to prepare for what was coming – the manufactured crisis that would work to transform the entire central banking system. This auspiciously timed crisis provided the opportunity for Mr. Bernanke to spin his magic.

Here is an excerpt from his 2002 speech;

So what then might the Fed do if its target interest rate, the overnight federal funds rate, fell to zero? One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure–that is, rates on government bonds of longer maturities. There are at least two ways of bringing down longer-term rates, which are complementary and could be employed separately or in combination.

One approach, similar to an action taken in the past couple of years by the Bank of Japan, would be for the Fed to commit to holding the overnight rate at zero for some specified period. Because long-term interest rates represent averages of current and expected future short-term rates, plus a term premium, a commitment to keep short-term rates at zero for some time–if it were credible–would induce a decline in longer-term rates.

A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields. If this program were successful, not only would yields on medium-term Treasury securities fall, but (because of links operating through expectations of future interest rates) yields on longer-term public and private debt (such as mortgages) would likely fall as well.

Lower rates over the maturity spectrum of public and private securities should strengthen aggregate demand in the usual ways and thus help to end deflation. Of course, if operating in relatively short-dated Treasury debt proved insufficient, the Fed could also attempt to cap yields of Treasury securities at still longer maturities, say three to six years. Yet another option would be for the Fed to use its existing authority to operate in the markets for agency debt (for example, mortgage-backed securities issued by Ginnie Mae, the Government National Mortgage Association).

Remarks by Federal Reserve Governor, Ben S. Bernanke
Before the National Economists Club, Washington, D.C.
Deflation: Making Sure “It” Doesn’t Happen Here,
November 21, 2002

The seven tenets of the Bernanke doctrine

According to Wikipedia (which was just an edit of Bernanke’s 2002 NEC speech), to combat deflation, Bernanke provided a prescription for the Federal Reserve to prevent it. He identified seven specific measures that the Fed can use to prevent deflation.

1) Increase the money supply (M1 and M2).

“The US government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost.” “Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation.”

2) Ensure liquidity makes its way into the financial system through a variety of measures.

“The U.S. government is not going to print money and distribute it willy-nilly …”although there are policies that approximate this behavior.”[1]

3) Lower interest rates – all the way down to 0 per cent.

4) Control the yield on corporate bonds and other privately issued securities. The Fed could lend to banks at 0% and take corporate bonds as full collateral.

5) Depreciate the U.S. dollar.

6) Execute a de facto depreciation by buying foreign currencies on a massive scale.

7) Buy industries throughout the U.S. economy with “newly created money”.

My concluding thoughts

Although central bank sovereign debt purchasing is deflationary, by nature, it will not actually cause deflation. Rather, the highly inflationary conditions that normally prevail under perpetual sovereign debt creation and currency debasement are tempered by the deflationary forces that are caused by the growing debt servicing costs. The more debt that is outstanding, the more of a deflationary effect it has on  the economy. As long as government default risk is removed from the equation, there is little reason to experience the inflationary conditions that a loss of confidence would engender. As the amount of outstanding debt balloons past normal GDP measures; if the central banks can maintain low interest rates (as Bernanke theorized), the monetary system can be maintained.

As long as the central banks stand ready to buy up assets as needed to keep interest rates low, the higher asset prices will rise and the lower the general level of price inflation the economy will experience.

With Mr. Bernanke’s guidance, the elites have developed techniques to keep the national governments spending with reckless abandon, while keeping the general price level low.

Mr. Bernanke was ahead of his time in 2002. He set the guide path for future monetary policy and it was his through his unconventional mindset, specifically with respect to asset acquisition, that we now see negative interest rates in many areas of the world.  Future policies will now be set by what the elites can imagine.

Are commodity prices about to move higher with low interest rates?

Are commodity prices about to move higher?
Soy production from the United States could be down by as much as 10% this year. But global production may only be down by about 1.6%.

Chris….

Do you see commodity inflation arising in this era of low interest rates? I have casually been reading the business press and there are more articles arising about commodity prices rising, and, henceforth, an appreciation in the Australian and Canadian dollars.

Thank you,
Gary – United States

Farming technology continues to improve alongside production, and localized weather problems like in the U.S. are muted
The adverse weather in the U.S. has cut its total corn production estimates by as much as 10%, but global production is set to fall by about 3%
Crop prices near their multi-year lows; The last time crop futures traded near their all-time highs was when traders thought the Fed’s QE experiment would result in hyperinflation and a collapsing dollar. The opposite happened. All this debt needs to be serviced and that is deflationary. It also bolsters the USD.

Despite the talk of agricultural calamity, global crop yields are still elevated and the effects of the weather in the U.S. have been minimized. We see crop prices rising on the futures exchanges, but their increases have not been as much as originally feared. Swine prices have tapered off after the large rise in the wake of the China Swine flu scare. Cattle prices struggle along multi-year lows.

AUD/USD; There is a high positive correlation to commodity prices. Those who believe commodities are about to rise should be bullish. I do not see anything with which to be bullish. If you think the central banks are out of control, then perhaps go long here. I will sit this one out.
USD/CAD; Same logic applies to the CAD, but with its exposure to better-performing economies, I am slightly more bullish on the CAD overall.
What caused the spike in commodity prices about 10 years ago?
The broad price-adjusted U.S. dollar index published by the Federal Reserve. If investors determine the USD will fall, then commodities will take off again.

Recall about ten years ago when the global economy and financial markets were on edge. The U.S. dollar had been sinking into the abyss and looked ready to take out multi-decade lows and fall further. Commodities of all kinds increased and gold, especially, were telegraphing the fears of investors at the time. Recall the peak oil scam that preoccupied business media, while the preppers were warning of impending societal collapse. That was at the same time the USDX was tanking.

Moreover, there were tremendous worries that Ben Bernanke and the Fed were going to fail with their unconventional monetary experiments and QE. From 2009 to 2011, recall that gold reflected this concern, and it was during that period that gold had its blow-off top. Gold’s price movement coincided exactly to the global investor worries of this possible failure in central bank policy. By the end of 2012, it was clear to me that QE and the other central bank programmes were going to succeed, at least in the eyes of the globalists.

These QE programs were built on uncertainty, and while the great majority of the alt-financial analysts deemed QE to be a disaster, I saw things differently. I understood the agenda and marveled how the banks were able to pull off the stimulus programmes without inflation and loss of investor confidence. As a result, I turned bearish on commodities in general, and specifically, precious metals. As we can see, commodities and commodity-based currencies have been falling ever since.

So where do we go from here?
Commodity bulls should be concerned that gold’s breakout is in isolation.

Once again, the central banks need to resume their monetary stimulus and the Fed mouthpieces have been vocal in its intentions since the market nadir in December 2018. Recall how we discussed that the dollar would be well supported, regardless of Fed easing, because the Fed was undertaking new stimulus due to global uncertainty and not from domestic concerns. The other central banks, especially the ECB and PBOC, desperately needed to commence further dovish and unconventional policy. Soon after the Fed announced its intentions to begin buying up US Treasuries once again, the ECB, BOJ, BAC, RBA, and PBOC “surprised” the markets with announcements of more bond buying, money injections, and short-term rate cuts.

The U.S. economy can withstand higher rates, as the dollarized debt can be spread far and wide. And although the USD should be falling with dovish policy on tap, the other nations are racing to be first. So, I see the USD being well supported here and into the indefinite future.

Debt generation and QE are deflationary

Recall my prior research that lays out all the reasons why this exploding debt generation is not inflationary, but, in fact, deflationary. All this debt generation has produced massive amounts of future obligations for the nations and all this will produce a drag on future economic vitality. It doesn’t matter how low interest rates move, the outstanding principal will continue to explode for future generations. How can the people in these nations bid up prices if the debt obligations continue to grow? Even if everyone gets a universal income stipend, if that payment is as a result of higher sovereign debt and taxes, inflation will continue to fade. People are just taking money from one source and giving it to another, with a cut of it going to bank profits.

Lower rates increase supply and is deflationary

Furthermore, recall my research that indicates that lower interest rates distorts the supply/demand equation. Under a regime of consistently falling rates, equilibrium supply will remain elevated as marginal players remain in business, while established and well-capitalized players enjoy lower costs of capital and can produce additional output profitably at lower prices. We see this in oil and many other industries. With lower costs of capital, equilibrium supply will always be higher. If interest rates rose, producers, in aggregate, would produce less. Higher rates would result in a supply shock and that would be inflationary.

Now, let’s turn to gold’s recent rise. Its higher price above $1,400 was not followed up with any sizable increases in silver and platinum. Gold’s break out has been in relative isolation and it is as a result of investor concern over the central banks’ new policies and experiments with deeper negative rates, which will spread as time moves forward.

Here is the bottom line for those who are looking for a commodity bull run; If you believe that the central banks are going to lose control, longer-dated bond yields will increase, and that inflation will finally surface, then you should buy commodities and gold, and short the USD to the benefit of the commodity-based currencies. If, on the other hand, you are concluding that we will see more of the same and that the central bank programmes are working as intended (not for our benefit, but for the benefit of those at the top), then I would leave commodities alone.

I see more of the latter, so be careful about the commodity perma-bulls who have this next leg-up in commodity prices pegged. If after the recent floods, this is the best farm prices can do, then what will it take for commodity prices to rise. The only answer at this point would be for the central banks to print the money and directly give it to you and me without any offsetting debt creation, and that will never happen.

Americans have it easy when compared to the rest of the world (See how your city stacks up and try not to cry)

If you can believe it, most Americans have it easier than those outside the country

If the good ole U.S has an affordable housing crisis, then your neighbors to the north have it much worse. An example we discussed, Niagara Falls, Canada has much higher home prices than Niagara Falls, N.Y.

You can buy a fixer upper on the U.S side for around 40k [the cheapest price is 240k CAD on the Canadian side]. Up here that won’t get you a garage. Wages are not that much different from one side of the Niagara River to the other to justify the house price difference.

Canada, Australia, New Zealand are basically unaffordable places for the middle class to have any kind of normal life like in the 60s and 70s.

Besides the healthcare the majority of Americans are living an easier middle class lifestyle than the other commonwealth nations. Consumer goods, utilities, and most food items are much cheaper in the U.S.

Either way the middle class is disappearing in the majority of the English speaking countries. Like you said Chris, all done by design.

V – Toronto

For the average American, life is easier than elsewhere. Perhaps this is why the U.S. population has grown by 47 million since 2000

I definitely agree as the U.S. can ship off much of its inflationary dollar printing to the rest of the world.  The alt-media focus on the bubble cities here in the United States, but on a relative basis, house prices and the costs of living here in the U.S. are cheaper than in most other places around the globe when compared to incomes.

While expats leaving the United States to move to Central America view housing down there as dirt cheap, to those who have always lived in those nations, housing ratios are astronomical when compared to the numbers of American cities (look at the detailed sortable infographic below). For instance, to an American expat, the typical house in Lima, Peru may be cheap. But to the average Lima resident a house has a price/income ratio of 15.38. That means it takes over 15x the average household’s income to buy an average house in Lima. If you are an American moving down there, you will not gain any friends as the locals see you as responsible for those high prices.

Look at this difference. Houses in Rochester, NY are priced at 2.08x household income. I have been to Rochester and it is a decent city on the south side of Lake Ontario. In contrast, Toronto, which is situated on the north side of Lake Ontario, carries a housing stock price/income ratio of 13.91. If I lived in upstate NY, I would be buying as many properties as I could.

Look at the chart below to see how cities around the globe stack up to one another. Pay careful attention to the American cities. Even houses in the Washington D.C. area (price/income ratio of 4.3) are inexpensive when compared to other areas. The ranking of the 325 cities are based on price/income ratios. Click on each header to sort.

I already know how cheap housing is in many areas of the U.S. I have always believed that real estate investing in the United States can be one of the most profitable avenues still available to investors. Here in the United States, traditional investment analysis can still make sense. Imagine how low the capitalization rates and IRRs must be in many areas of the world with low affordability indexes. Even here in the Washington D.C. area I can still easily make positive cash flow on a property with a 4% mortgage and a 25% down payment.

July 6th Update – S&P & Dow futures break 3k and 27k; Markets holding despite strong jobs report; All eyes on Powell next week; new ECB crew to carry on stimulus

To download the podcast – Right mouse click here

S&P futures briefly traded above 3,000 before Friday’s report. Higher prices later this year. The Fed and TPTB need them rising.

-As predicted, the S&P futures broke 3,000. Despite Friday’s strong domestic employment report, they remain very close to that number.

Dow futures hit 27,000. A bullish base is ready to lift prices higher. Lower global rates will be nearly impossible for bears to overcome.

-The Dow futures briefly traded above 27,000. More to come. Now that the S&P futures hit 3,000, I see Dow 28,500 as likely by the end of the year.

Global 10-year yields remain stable despite strong U.S. job report

 

Bonds across the globe traded lower as yields rose. This shows how big of an influence the Fed’s actions have on the rest of the world. Despite the strong employment report, yields did not rise as much as I feared.
Jerome Powell speaks three times next week. Traders will take note of his House and Senate testimony on Wednesday and Thursday.
-The FOMC minutes come out on Wednesday afternoon, but I do not see them as a huge market mover. All will be paying attention to what Powell says about the employment report and his current path.
-Despite the strong employment numbers on Friday, the market traded off their lows. If the Fed doesn’t make a big deal about them, the markets will shrug them off and higher highs will come soon.
Gold didn’t react as poorly as usual to a strong employment report. Rather than trading down all day, it rebounded $10 off its lows. This sets it up to trade higher tomorrow evening.
-Futures COT reports are delayed due to July 4th holiday.
Bitcoin putting in a daily bullish pennant flag. I am still long here.
-Christine Lagarde has only one option available; carry on the same program of lower rates and bond buying. We said three years ago that the central banks can never stop stimulus. Although higher asset values lessen the immediate need to lower rates, eventually they have to step back in. The ECB can never stop, regardless of whatever Lagarde says.
-I feel bad for those who are trapped in their economic-collapse confirmation bias. Trying to fight this secular trend in interest rates will be nearly impossible. TPTB want higher asset values and will get them.

Housing “experts” whitewash the real causes behind the affordable housing crisis

Affordable housing advocates never look at the two elephants in the room

Check out this article from Inman News titled, Why It’ll Take A Village To Solve Housing Affordability Woes (I downloaded the article as a pdf, as it is behind a paywall). The author argues that “everyone needs to engage in the search for the formula that creates affordable housing.” She even goes as far as to call the affordable housing issue a “complex problem.”

I do not see the problem as being a complex one. The problem is actually very easy to solve.  The author says that we all need to help out. But I ask; is this my responsibility? Is it yours? No, not anymore. I tell people all the time about how to cure this housing crisis, but most want no part of the conversation. Many of the people who disagree with my assessment stand to lose if we overturn the status quo. You and I are not causing the problem, but we are being held as its victims and perpetrators at the same time. Talk about new world order double-mindedness.

The pressure is growing as we see more homeless people on our streets and as more middle- and upper-class families realize their children can’t afford their own housing. This new level of urgency has encouraged corporate giants like Wells Fargo, Google and Microsoft to throw their weight behind the problem.

Yet a complex problem requires a complex solution, and the question remains: Is this enough to solve our housing problem?

The U.S. has a shortage of 7 million homes for renters whose household incomes are at or below the poverty guideline, according to the National Low-Income Housing Coalition’s annual report. Despite this, the majority of houses built over the past five years have catered to the mid-high and high-end of the market.

Cost burdened Americans are sacrificing their health for their homes: Nearly a third of U.S. households paid more than 30 percent of their incomes in 2016.

Why it’ll take a village to solve housing affordability woes – Inman News, July 2nd

The experts are compromised, so no real solutions will ever be proffered
Subsidies and social spending only increase prices for everyone else

Imagine if this housing “expert” discussed the real issues behind the affordable housing crisis. What would happen to the author’s standing if she criticized the government’s spendthrift ways, which were enabled by the owners of the Federal Reserve? The resulting fiscal and monetary policies have been a disaster to the working class, and are the primary causes of the explosion in asset values. This has driven up house prices, rents, and property taxes. Owner-occupied real estate has become nothing more than a costly millstone for ten of millions of households.

Imagine if this author contemplated how the nation’s open-borders policies have worked to crowd out many wanna-be home owners. These people who were born in the country can no longer afford to own a home.

I know what would happen to this housing “expert” if she spoke the truth about what is causing the affordable housing debacle. She would lose all her funding and would never be hired anywhere in the real estate industry. Her money depends on her being willfully ignorant of the real causes behind the affordable housing crisis. Instead, she is trying to solicit corporate sponsors, while claiming the whole dynamic is a complex matter.

I have an easy solution. We discuss them everyday, but they will never see the light of day. The owners of the central banks want it this way. Their compromised experts and shills will never discuss the real causes and the problems will grow so large that government socialist policy will eventually take over and control the entire sector. I see the existing solutions to the housing crisis only making it worse, which is the plan all along. Welcome to the new world order.