Continuing a trend that started last year, central banks around the world are dumping US debt at a record pace.
Central banks sold off a net $17 billion in US Treasury bonds in March. Sales set a record in January, hitting $57 billion. China, Russia, and Brazil led the way, each dumping at least $1 billion in US debt in March alone.
So far in 2016, global central banks have jettisoned $123 billion in US debt. Last year, they sold off $226 billion. According to the Treasury Department, central banks are selling US Treasuries at a pace not seen since at least 1978.
China is serious about gold and continues to expand its influence on the world gold market.
On Monday, China’s largest bank announced the purchase of one of Europe’s biggest gold vaults. Reuters reported the sale:
ICBC Standard Bank is buying Barclays’ London precious metals vault, giving the Chinese bank the capacity to store gold worth more than $80 billion in the secret location. The vault is one of the largest in Europe, with a capacity to hold 2,000 tons of gold, silver, platinum and palladium. It has been operational since 2012. ICBC Standard Bank said on Monday it has signed an agreement to buy the vaulting business and transfer the associated contracts, subject to consent. The deal is expected to complete in July.”
This article was submitted by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
Despite some good numbers in April, a look at the fundamentals indicates the rout in retail will likely continue long-term.
Mainstream media wants us to think that our economy is still humming along. With the stock market recovering from a recent drop, unemployment numbers staying steady, and other areas of the globe dealing with much greater issues than the US, most people can be forgiven for nodding their heads in agreement.
But there are clearly serious issues plaguing the economic health of this nation. Take for instance the area of retail.
The retail sector has suffered mightily, as this so-called recovery, the weakest on record, has not delivered as advertised. Consumers are clearly in no mood to spend these days. Instead, they are tightening their belts and paying off credit cards.
These are not normal economic times.
Interest rates have remained artificially low, plunging into negative territory in many places. Central banks continue to inflate the money supply with quantitative easing. Some policy-makers have even floated the idea of helicopter money. Worldwide money printing is reportedly approaching $100 trillion.
There is no end to this crazy monetary policy in sight. This led billionaire investor Stanley Druckenmiller to recommend selling US stocks to buy gold. Well-known hedge fund manager Paul Singer said the recent surge in gold is just the beginning. And Bank of America said gold is entering a new and long bull market.
In a recent episode of his video broadcast Myth Busters, Ron Paul and Chris Rosinni talked about how government destroys markets by tampering with prices. After discussing the ways government intervention has destroyed the market for health care and education in America, and looking at the negative impacts of tariffs and price supports in agriculture, they dove into the most destructive price manipulation there is – central bank manipulation of interest rates.
Paul called the Fed the “king of price fixers” and said its policy of setting interest rates is ultimately responsible for most of the economic problems we face today.
St. Louis Federal Reserve Bank Chairman James Bullard recently said he was undecided on the right path for interest rates. Paul thinks this offers a glimmer of hope
This it tremendous news because the Federal Reserve is starting to recognize something it should have recognized 100 years ago: they have no idea what the interest rate should be and it’s only going to cause trouble if they do get involved.”
Peter Schiff appeared on Fox Business this week and the first thing he did was talk about how good gold investments are doing, saying they are “the best…doubled or more.”
He then launched straight into the reason why. The economy is a mess.
If this economy wasn’t a disaster, Trump wouldn’t have the support that he does. Neither would Bernie Sanders. This is a phony recovery.”
Peter pointed to the horrible year retailers are having to boost his case, hit on the “auto bubble,” and went on to talk about what’s going to happen when the Federal Reserve is finally forced to acknowledge that we are in a recession.
Gold demand hit near record levels in the first quarter of 2016.
Despite the price rising nearly 17%, the demand for gold surged 21% in the opening quarter of the year. It was the second largest quarter on record, according to the World Gold Council.
Gold demand hit 1,290 tons in Q1. Concerns about economic instability and an uncertain financial landscape drove the increase. Investors flocked to gold, and ETFs saw a huge inflow of the yellow metal. Total investment demand hit 618 tons, up 122% from the same period in 2015:
Last week, we reported that billionaire investor Stanley Druckenmiller is publicly advising investors to sell United States stocks and buy gold. Druckenmiller is now joined in his gold recommendation by an equally legendary hedge fund manager – Paul Singer.
In a client letter at the end of April, Singer wrote:
It makes a great deal of sense to own gold. Other investors may be finally starting to agree. Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies… We believe the March quarter’s price action could represent something closer to the beginning of such a move than to the end.”
Recently, we reported on the rapid collapse of pension systems, both public and private, across the United States. This is not only jeopardizing Americans’ retirement. Failing government pension systems are pulling several states down into a black hole with them.
When we talk about government debt, we tend to focus on the US national debt. But a lot of states are deep in the red as well. A George Mason University study highlighting the most bankrupt states reveals an interesting commonality – a pension crisis. Topping the list: California, Kentucky, New York, Connecticut, Massachusetts, New Jersey, and Illinois.
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Student loan debt continues to balloon. Data released in March revealed that 46% of student loans are not currently being repaid. That doesn’t even include debt held by students still in school or those within the six-month grace period after graduation.
Clearly, this has major implications on the financial futures of Americans saddled with this debt. It could mean putting off major purchases like homes and cars, further dragging down an already sluggish economy. And what happens when these debtors begin to default? Everyday Americans are on the hook. Total taxpayer exposure to student loan debt, including government guarantees for private loans, stands at more than $1.3 trillion and is increasing at about $2,726.27 every second.
