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.
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.
Bill Gross took a peek into the future in his most recent Monthly Investment Outlook for Janus Capital, and he saw money raining from the sky.
Gross said he believes the structural changes currently occurring in the US economy will ultimately lead to so-called helicopter money.
Of course, choppers wouldn’t literally drop cash from the sky. But helicopter money is the ultimate stimulus program. The newly printed cash goes directly into the hands of the people themselves. Basically, the government hands out money – or figuratively drops it from a helicopter. A recent Guardian article explained the policy this way:
As the Deutsche research makes clear, the most basic variant of helicopter money involves a central bank creating money so that it can be handed to the finance ministry to spend on tax cuts or higher public spending. There are two differences with QE. The cash goes directly to firms and individuals rather than being channeled through banks, and there is no intention of the central bank ever getting it back.”
Basically helicopter money is stimulus that isn’t paid for with private borrowing or taxes. It’s “free money.” Kind of.
Silver demand hit a record high in 2015 and it shows no sign of waning.
GFMS, in collaboration with the Silver Institute, released its annual silver survey last week. Coin, bar, jewelry, and photovoltaic sectors boosted silver sales to a record 1.17 billion ounces.
High demand coupled with shrinking supply resulted in the third consecutive annual silver deficit. The gap between silver supply and demand was 60% larger than 2014. According to the report, mine production growth slowed to 2% last year. Scrap sales were also weak.
Well, that didn’t take long.
In February, we reported that a former Obama economic adviser/ex-Treasury Secretary had floated the idea of eliminating the $100 bill and the 500-euro note in the escalating war on cash.
On Wednesday, the European Central bank announced it will stop producing and issuing 500-euro notes around the end of 2018. Once the bank stops issuing the notes, those remaining in circulation will remain legal tender – at least for the time being.
In a press release, the EBC said it made the decision to eliminate the 500-euro note due to “concerns that this banknote could facilitate illicit activities.”
Billionaire investor Stanley Druckenmiller didn’t mince words when asked for recommendations at the Sohn Investment Conference.
Sell US stocks. Buy gold:
The conference wants a specific recommendation from me. I guess ‘Get out of the stock market’ isn’t clear enough.”
Druckenmiller went on to sing gold’s praises:
This Silver Institute has released its April issue of Silver News. This edition highlights exceptionally strong silver jewelry sales in the US.
Silver jewelry sales in the United States were solid in 2015 with 60% of jewelry retailers reporting increased sales, according to a survey conducted on behalf of the Silver Institute’s Silver Promotion Service (SPS). This marked the seventh consecutive year of growth for silver jewelry sales and confirmed that silver jewelry is an increasingly important category for many retailers”
The average growth in jewelry sales for 2015 was 15%.
