Silver just had its biggest monthly gain in nine years.
The spot price of the white metal went into May at $14.96 per ounce and closed on May 29 at $17.98, a 20.7% increase. Silver futures did even better, with the price of silver for July delivery hitting $18.50 per ounce Friday.
On Friday afternoon, Federal Reserve Chairman Jerome Powell did a Q&A session with Princeton economist Alan Blinder. Powell admitted that the central bank had “crossed a lot of red lines,” but insisted he was comfortable with the actions given “this is that situation in which you do that, and you figure it out afterward.”
In his podcast, Peter Schiff called it the Nancy Pelosi version of monetary policy. “We need to print the money to see where it goes.”
I have a love-hate relationship with social media.
On the one hand, I now have a number of really close friends that I would have never met without Facebook. I’m talking people I connected with on the social media platform and now hang out with in real life. It’s pretty amazing to be able to interact with like-minded people across the US, and even around the world.
The Dow Jones is back of 25,000 and despite increasing tensions with China, people seem pretty optimistic about the economic future as states begin to open back up. SchiffGold Friday Gold Wrap host Mike Maharrey says people should know better. He makes his case by digging into some of the long-term ramifications of the economic shutdown and the government/central bank response to it. He also recaps the last month in the gold and silver markets.
The economy was booming. The stock market was setting records. Then coronavirus came along and governments shut things down to minimize the pandemic. That led to massive layoffs and a nasty recession. But once states open up, things will spring back to life and the economy will go back to being great again.
That’s the mainstream narrative. But it’s not based on reality.
Sometimes you need to look back at where we come from to understand where you’re going. Peter Schiff does just that in his May 27 podcast. He analyzes the stock market surge of last year and concludes the mainstream might be a little over-optimistic on where we’re heading. The recent surge in stocks isn’t based on economic reality. The economic reality is we’re an insolvent zombie nation. We’re just on a giant Fed-induced sugar high.
During a recent 60 Minutes interview, Federal Reserve Chairman Jerome Powell said there is “no limit” to what the Fed can do. Indeed, the central bank has pulled out all the stops.
But while the actions of the central bank are extreme, we’ve seen them operate out of this playbook before, if not at this level.
The Federal Reserve and the US government are rerunning the exact same policies they turned to in the wake of the 2008 financial crisis, but on a much grander scale. We have bigger QE, more money printing, more government spending and bigger deficits. Case in point — the money supply grew at a record rate in April with no sign of slowing down.
There seems to be mounting optimism that the US economy will rebound relatively quickly as states begin opening up and there is progress toward a coronavirus vaccine. But the optimism ignores deep problems in the US economy that existed before the pandemic – chief among them staggering levels of debt and the proliferation of zombie companies.
In the last couple of years, corporate debt has blown through the roof. So much so that the Federal Reserve issued warnings about the increasing levels of corporate indebtedness late last year.
For years, I have been warning that during the age of permanent stimulus (which began in earnest with the Federal Reserve’s reaction to the dotcom crash of 2000), each successive economic contraction would have to be met with ever larger, increasingly ineffective, doses of monetary and fiscal stimulus to keep the economy from spiraling into depression. I have also said that the enormity of the asset price gains over the last 10 years had increased the danger because reflating the bloated stock, real estate, and public and private debt markets would bring on doses of stimulus that could prove lethal for the economy. But even though I expected that the next financial crisis would be catastrophic, I thought that it would come into the world in the usual way, as a credit crisis triggered by over-leverage. But the Coronavirus ripped up those stage notes, and instead ushered in a threat that is faster and deeper than I imagined, and I imagined a lot. It’s a perfect storm, a black swan with teeth.
The Federal Reserve and the US government are rerunning the exact same policies they turned to in the wake of the 2008 financial crisis, but on a much grander scale. We have bigger QE, more money printing, more government spending and bigger deficits. During his podcast, Peter Schiff said it was a mistake then, but they got away with it. They won’t get away with it this time.