Jim Grant recently interviewed former Ronald Reagan Officer of Budget and Management David Stockman on his Grant’s Interest Rate Observer podcast.
Their conclusion?
America is broke.
And central bank free money broke it.
“As a dog returns to its vomit, so fools repeat their folly.” – Prov. 26:11
It appears there is some repeat folly brewing.
Remember subprime mortgages? Well, they’re back.
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
The Federal Reserve bumped up interest rates another 25 basis points this week. The target federal funds rate now stands at 1.75%.
“Well, OK,” you might be thinking. “But this is just a bunch of wonkish policy stuff. What’s it to me?”
In a nutshell, it means your debt is going to cost you more. And that’s not good in an America where household debt has spiraled to record levels.
Expectations that the Fed will continue and perhaps even quicken the pace of interest rates hikes have created headwinds for gold. But there another side to the rising interest rate phenomenon that a lot of people in the mainstream seem to be missing. According to a recent Bloomberg report, the prospect of a higher interest rate environment is feeding signs of financial stress among debt-laden consumers.
This doesn’t bode well for the US economy and could spur safe-haven demand for gold.
Could we be on the verge of a retail apocalypse?
February marked the third straight month of declining retail sales. Analysts had not expected another drop, but they got one nonetheless. Sales fell 0.1% in February. Analysts had expected an uptick of 0.3%.
This is not good news for a retail sector that is already teetering on the brink.
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
China, Japan and some other countries have a nuclear option they could use in the pending trade war.
If deployed, it could serve as the pin that pops the stock market bubble. At the same time, it could put the US government in a nasty spot as it tries to fund its profligate spending and upward spiraling debt.
What is this nuclear option?
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
Earlier this month, we reported that American household debt increased to a record $13 trillion in the last quarter of 2017. If you spread that out evenly, every man woman and child in America would owe about $40,000. Add to that their portion of the US government debt – $63,000 – and every American, on average, is carrying a six-figure debt load. As U.S. Global Investors CEO Frank Holmes put it, the level of debt in America is a “head-spinning sum.”
It’s easy to look at these numbers and say, “Yeah, yeah, there is a lot of debt out there. But does it really matter? We’ve been talking about debt for years now and it hasn’t really made a difference.”
But the truth is, all of this debt is a ticking time bomb. The question is will the Fed let it blow?
