A June interest rate hike is the talk of the town. Jim Rickards doesn’t think it will happen, but if it does, he says, “Look out below.”
Rickards appeared on RT’s Boom Bust to explain why. First, he makes the case that we shouldn’t listen to every word that comes out of every Fed regional bank president’s mouth. He suggests they are likely “testing the waters.” As for the constant harping on jobs numbers, Rickards agrees with what we’ve been reporting. The employment outlook isn’t really all that good:
It’s nowhere near full employment because obviously a lot of the jobs are part-time. Some of the people are working two jobs, so they get counted twice. Labor force participation went down in the last jobs report. So there is plenty of slack in the economy.”
So, Rickards doesn’t think the economic factors warrant a rate increase. But he says if the Fed does make the move, it will send the stock market into a spiral and spark another round of currency wars:
We’ve said before that the growing level of debt in the US is the elephant in the room we are going to have to address at some point. We’ve talked about the massive government debt and the drag it puts on the US economy. We’ve talked about the crushing weight of student loan debt – increasing at a rate of about $2,726 per second. We’ve talked about the mounting corporate debt, doubling since 2008.
And then there is personal debt.
Americans are burning up the plastic. Credit card balances are on track to hit $1 trillion this year. That is getting close to the all-time peak of $1.2 trillion hit in July 2008, just as the financial crisis was intensifying.
All of the talk lately is about a Federal Reserve rate hike in June. In fact, in many circles, it has become a forgone conclusion. On Monday, Philadelphia Fed Bank president Patrick Harker said he could see up to three hikes before year’s end.
But Steen Jakobsen, chief economist and CIO of Saxo Bank, says if the Fed does move forward with a hike, it will be a huge mistake. He said the data the Fed is using to justify the rate hike doesn’t indicate an increase in economic momentum. In fact, Jakobsen argues the US economy continues to perform significantly below its potential. He believes the Fed is talking rate hike so they can cut them again.
As Fed is now communicating this willingness to hike despite these economic circumstances, it seems like that Fed is trying to manage something else, which in my opinion is the fact they want some ability to be able to hike rates now in order to take them down later. Basically the Fed knows – the Fed acts as if they are in a corner, and they’re trying to increase the amount of tools available to them.”
This article was submitted by JD Bauman, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
One of the common questions we hear from gold buyers is, “Is it possible that the government might come after my gold and confiscate it?”
In a time when the governments are waging a war on cash, it’s not hard for people to imagine that a war on gold is next.
There is some precedence for this, after all. On April 5, 1933, Franklin D. Roosevelt’s Executive Order 6102 “[forbade] the Hoarding of gold coin, gold bullion, and gold certificates within the continental United States.” Americans who owned gold were told to deliver their gold to the bank and in exchange receive paper dollars of equivalent value, $20.67 per ounce at the time.
To be very clear though, contrary to common belief, the government did not conduct a widespread seizure of gold, nor did it go door-to-door nor systematically raid safety deposit boxes. While a $10,000 fine and ten year prison sentence threatened the masses into obedience, only a handful of sting operations were conducted against a few offenders to serve as an example.
Jim Rickards recently appeared on CBC News’ The Exchange and made the case for $10,000 gold.
He said the recent jump in the price of gold represents a world-wide vote of no-confidence in central bankers.
The increase in the dollar price of gold is just a reflection of the decline of the dollar. So, it’s sort of a vote of no-confidence in central bank policies. Investors are looking around saying. ‘We’re losing confidence in central bank money. We’d like another form of money, thank you very much.’ It’s called gold. So, that’s part of the reason gold is going up.”
Rickards went on to explain why he thinks gold will ultimately hit $10,000. He said it’s not a guess, and he doesn’t just throw that number out to get attention or to be provocative. He actually has mathematical calculations behind his assertion. Rickards explains his reasoning in this video.
Policies create by Congress helped break Puerto Rico. Now it’s wrangling over over how to fix it, as time seems to be running out on the US territory.
Congress has struggled to find solutions acceptable to both Republicans and Democrats. The House Natural Resources Committee released a compromise bill around midnight Wednesday, hoping to bring the various sides together. Earlier this month, the Puerto Rican Government Development Bank defaulted on a $422 million payment. A $1.9 billion debt payment looms in June. Meanwhile, as Reuters reports, the island is hurtling toward a full-blow humanitarian crisis:
Puerto Rico has already defaulted on some of its roughly $70 billion in debt while trying to cope with a 45% poverty rate among its 3.5 million US citizens. In addition, it is reeling from a Zika virus outbreak that is hurting its critical tourism industry.”
Apparently, it’s a lot easier for government to create a debt crisis than it is to fix it.
Jobs, jobs, jobs!
We’ve been hearing about strong jobs growth for months. And it’s true. There are lots of new jobs. It’s a good thing too, because a lot of people need two or three to make ends meet in today’s economy.
The Fed is hinting strongly at an interest rate hike in June. In fact a lot of people have taken it as a foregone conclusion that the US central bank will definitely hike rates next month.
But as Peter Schiff pointed out on his recent podcast, the Fed didn’t say it is going to raise interest rates in June. Fed officials said they would consider a rate-hike appropriate if certain things fell into place.
One of the factors the Fed relies heavily on in its “data-dependent” decision making process is the employment picture. As Peter said – it isn’t good. The April numbers were not encouraging:
With the release of the Federal Reserve’s April meeting minutes, it’s all of a sudden a forgone conclusion that the Fed will raise interest rates in June.
Marc Faber, publisher of the Gloom Boom & Doom Report, thinks it’s all a bunch of hot air. He appeared on Kitco News yesterday and argued that the Fed isn’t going to raise rates. Instead, it will end up engaging in even more extraordinary monetary policy:
My impression is that the Fed will not increase rates any further this year – my impression is that the economy is actually weaker than the statistics would suggest and that they will refrain from increasing rates. My impression will also be that eventually there will be some type of helicopter money in the US, or the launch of QE4.”
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.”
