A new study by the Evans School of Public Policy and Governance shows Seattle’s minimum wage increase has also increased unemployment. No surprise there given what happened in Puerto Rico. Basic economics states the higher the price of something, the less that something will be purchased. In the case of Seattle’s experiment of increasing their minimum wage to $15 an hour, it seems that something was low-skilled jobs.
Admittedly, Seattle has experienced an economic boom since the city first instigated its stair-stepped wage increase. One of the city’s biggest growth sectors is in the labor market. However, according to the Seattle Times, “Much of that success, though, can be attributed to trends separate from the minimum-wage law itself, such as the growth of Seattle’s tech sector and its construction boom.”
Over the last year, we’ve reported extensively on the growing influence of China on the world gold market, and the flow of gold from the West to the East. But with uncertainty created by Brexit, economic stagnation, and the proliferation of negative yielding bonds, it appears investors in the West have rediscovered the beauty of gold.
Western gold demand hit unprecedented levels through the first half of 2016, and according to a major precious metals research firm, that trend will continue through the second half of the year.
The highly-anticipated Rio Olympics begins next week (August 5th), and with it, a race for the gold. Soon, Olympic winners will be standing on the podium donning their gold, silver, and bronze medals and waving towards a roaring crowd. Nothing is more iconic of the Games than these medals draped around the winners’ necks. But have you ever wondered if the Olympic medals are actually made of gold at all? It turns out today’s gold medals actually contain very little gold at all.
Gold Medal History
During the Ancient Olympic Games, winders didn’t receive medals at all. Instead, they won a wreath made from olive leaves from a sacred tree near the temple of Zeus at Olympia. It wasn’t until the 1896 Summer Olympics that winners were awarded with actual hardware. However, at that time top performers didn’t win gold; they took home silver. Second place received bronze.
Between Jan. 1 and July 11, the price of silver increased 44.7%. But can the white metal maintain its bull run?
A prominent mining CEO thinks it can – and will.
Mining, Inc. CEO Mitchell Krebs told Kitco News that he expects the precious metals sector to attract even more investor interest through the second half of this year. Krebs, who also serves as president of the Silver Institute, went on to say he thinks silver sits in a unique position to outperform as it benefits both as a monetary metal and an investment metal:
I think, right now, silver is in this sweet spot and I think this trend can continue.”
After a brief pause in May, the Chinese and Russian central banks resumed their gold buying spree in June.
The People’s Bank of China added about 15 tons of gold to its stash last month. The Chinese central bank now officially holds about 58.62 million ounces of gold. China has bought gold in 11 of the past 12 months and has increased its hoard about 165 tons over the past year.
A year ago this month, the Chinese central bank announced its gold holdings had grown by 57% to about 1,658 tons. It was the first official update to China’s gold reserves since 2009. Many analysts believe the Chinese actually own more gold than the official numbers indicate – possibly a lot more.
As the saying goes: “Keep your friends close, and your enemies closer.” Here’s a quick look what the Fed’s been up to this week.
Philly Fed Shows Drop in Manufacturing
This week the Federal Reserve Bank of Philadelphia released the results of its Manufacturing Business Outlook Survey. The Survey of regional manufacturers showed general activity falling from 4.7 to -2.9 for July. According to Market Watch, this is the “ninth month of declining activity of the past 11 months and the slowest pace in six months” for the region. These numbers represent what Peter’s said about the economy in the past: “The Actual picture [the Fed paints] is an economic recovery that is over, if it ever happened.”
Fed Officials Tell WSJ Rate Hike Likely this Year
Some centrist Fed officials told the Wall Street Journal a rate hike is likely this year if the economic outlook continues to look positive. Timelines were thrown out, with a possible hike as soon as the September meeting. But that’s eight weeks away, and there are two job reports and other economic data to consider. A slim majority of surveyed economists are betting on a December hike instead.
Peter Schiff recently participated in a panel discussion in Las Vegas with Goldmoney co-founder, Josh Crumb and CEO Darrell MacMullin, along with best-selling author George Gilder.
During the discussion, Peter got down to the very basics, answering the question: what is money? He explained the important distinction between currency and money, pointing out that gold is money. Paper backed by gold is true currency. The government prints fiat currency – which is nothing but paper backed by nothing.
Peter said the time to return to gold has arrived:
Today, in the 21st century, this is going to be the real century of gold. And it’s not going to be because governments decide to go back to the gold standard…but because the public rebelled against fiat money and reclaimed honest money – money that holds its value and in fact gains value.”
Efforts to solve the Puerto Rican debt crisis have already run off the rails.
Late last month, Congress passed a bill allowing Puerto Rico to restructure its debt. Under the plan, the US territory essentially declared bankruptcy. The US government won’t expend funds to bail out Puerto Rico, but will allow the island’s government to pay back debtors at less than 100%. Although the bill doesn’t say so explicitly, for all practical purposes it created a bankruptcy process for the island.
Even with the agreement, Puerto Rico still defaulted on a $1.9 billion payment in principle and interest that was due July 1. Under the Puerto Rican constitution, bondholders were supposed to get first claim on government funds. At the time, Puerto Rico Governor Alejandro Garcia Padilla said the commonwealth could not raise enough money to cover the payment even if he completely shut down the government.
Fast forward to today and we find the Congressional fix has already started to unravel. The congressional plan put Puerto Rico under the guidance of a federal oversight board. But the law featured a built-in lag of at least two months before the board is put in place. Meanwhile a group of hedge funds have sued the country. They claim Gov. Alejandro García Padilla is exploiting the lag by spending hundreds of millions of public dollars on “purposes that apparently enjoy political favor,” According to the New York Times:
When we talk about gold and its future prospects, we tend to focus on the latest event, economic news, or central bank pronouncement. We debate whether the Fed will raise or lower rates. We try to project the impact of Brexit on the price of gold. And we pour over the latest job numbers and other economic data to gauge the health of the economy.
Of course, all of these things do affect the price of gold, but oftentimes these factors only have short-term impacts. There are fundamentals that affect the price of gold in the long-term that often get drowned out by the noise of squawking talking-heads.
The gold supply is one of those fundamentals often lost in the shuffle. Every indication is that it’s poised to shrink, and that could be more significant for the future price of gold than whatever latest news we’re obsessing over.
It’s hard to remember a time when the press wasn’t talking about Hillary Clinton or Donald Trump. The US two-party system is sustained by one-sided media coverage. However, Presidential candidate and Libertarian Party nominee, Gary Johnson may be forcing his way onto the political stage.
Also a candidate in the 2012 election, the former New Mexico governor saw few opportunities for sharing his views via public debate. However, recently he and running mate, Massachusetts Governor Bill Weld had made significant gains. A CNN/ORC national survey puts Johnson at 13%, just shy of the 15% that would secure him a podium at the national debates.
Peter Schiff has supported Johnson since his 2012 run and recently endorsed him at Freedom Fest 2016:
I think if people really want change that makes sense, they might support Gary Johnson who has the Libertarian Party nomination, who really embraces more of the philosophy that I stand for.”
Some are seeing Johnson’s popularity as a sign of voter dissatisfaction with Clinton and Trump. One could also say not enough people have been given the chance to hear Johnson’s platform, which emphasizes economic policies like lower taxes, banking deregulation, and balanced budgets.