Tag: Economics

Ep. 598 – Is This System Overload?
The Kapital News
The Kapital News
Ep. 598 - Is This System Overload?
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In September of 2019, there were some shockwaves that were being felt within and throughout the plumbing of the financial system. This was most apparent in the overnight lending market or repo facility. These overnight loans are supposed to have an accompanying interest rate that mimics the Federal Funds Rate, which is set by the Federal Reserve. In essence, these rates have a ceiling because they are controlled by the Fed, or at least they are supposed to be. However, what occurred that shook the markets was that typical market participants were hesitant to make overnight loans while charging such small interest. In order to make a loan, institutions were demanding much higher rates, which in turn nearly brought down the overnight lending market. Higher rates were likely charged because the lending party must have believed that the borrowing party was a default risk. This caused the Fed to get involved. At first, they told us it was all temporary and just a little volatile because it was the end of the quarter and had to do with tax obligations. Then they said it would be a few more weeks, then it was a month, and then it was into the first quarter of 2020. You get the picture.

Now, the opposite is occurring. Before, there was not enough liquidity in the system, and now the markets may finally be coming to terms that there is too much liquidity in the system. The reverse repo market is now nearing all-time high volumes. These transactions seemingly came out of nowhere as only a couple of months ago, there was virtually no action in this market. And now, we are near all-time highs. Something is definitely afoot and the last thing we will hear about this matter is the truth. Yet, this could turn out to be one of the biggest stories that is not getting enough attention. Is this a point or the point of system exhaustion? And if so, what, is anything, can be done about it? This serves as further evidence that the Fed is trapped and running out of options. If they attempt to draw liquidity out of the system, then it is lights out for the equity markets and quite possibly the bond market as well. This whole house of cards is being kept afloat by these artificial liquidity injections. Remove them and it is look out below. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Fraud #Gold #Silver #EndTheFed

Ep. 597 – Policymakers Getting Nervous?
The Kapital News
The Kapital News
Ep. 597 - Policymakers Getting Nervous?
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Politicians and central bankers the world over have been boxed-in for some time. The road to responsibility, accountability, and leadership is not one they want to take. Therefore, they continue to implement the same asinine policies that led us to this point. And despite all of these artificial attempts to prop up the system and despite how powerful these institutions may be separately or combined, they are not larger than or more powerful than the markets. This means the day of reckoning awaits us. The question is when does this happen? Policymakers know this, but will never admit to it. However, by reading between the lines and listening carefully to their remarks, it is quite clear that they are getting nervous. They know the global economy is extremely fragile right now, as are whole countries from a political and societal perspective. They know this will not end well and they know they will be the ones who will be blamed.

Initial jobless claims for the week ending 15 May came in at 444,000. The lowest reading since the pandemic. The prior week was revised higher by 5,000 to now stand at 478,000. In aggregate, there remains nearly 16 million Americans that continue to claim some form of unemployment insurance. This gives us a de facto unemployment rate of 11.5 percent. The official rate is 6.1 percent.

The Federal Reserve’s balance sheet has hit a new all-time high at $7.922 trillion! This is a week-over-week increase of $90 billion. This is a sign that the Fed is worried about the recent price action in the equity markets that has been trending lower, and this is a clear attempt at cushioning the blow in the least and sparking a rally at best. The Fed remains committed to their QE program of purchasing at least $120 billion per month in US Treasuries and mortgage-backed securities. The Fed is also starting to admit that they are paying closer attention to crypto and digital currencies, and announced that they will be publishing a report on this matter in the summer months.

In other news, the 11 day conflict between the Israelis and Palestinians has come to halt, at least for now as both sides have agreed to a cease-fire that went into effect early Friday morning. The deal was brokered by Egypt. At least 232 Palestinians, including 65 children have been killed. On the Israeli side, twelve people were killed, including two children. Let us pray that the ceasefire holds and turns into a more peaceful situation between the two sides. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Jobs #Gold #Silver #FoodPrices #Protests #USA #Israel #Palestine #Commodities #Riots #Peace #Liberty #EndTheFed #bananarepublic #FireCongress #Leadership #Debt #Revolution

Ep. 596 – Bitcoin or Bitcon?
The Kapital News
The Kapital News
Ep. 596 - Bitcoin or Bitcon?
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The price of Bitcoin is known to be volatile with large swings to the upside and the downside. Currently, it is swinging to the downside where it is trading at $39,300 per coin. Not long ago it was trading around $65,000 per coin, which translates into a loss of over 40 percent in a very short timespan. This type of volatility does not lend itself well for those who advocate that Bitcoin is a store of value. In fact, with such volatility it is quite the opposite. It is a speculative play whereby people are hoping to catch their lottery ticket that is going to give them eternal financial freedom. Markets just simply do not work this way. Some of the recent downside volatility has been a direct result of comments made by Tesla CEO, Elon Musk, and statements from several Chinese regulatory agencies.

Mr. Musk, through Tesla, purchased around $1.5 billion worth of Bitcoin earlier this year. As one would imagine, it caught the attention of the media and the markets and Bitcoin would eventually go on to make new all-time highs. Yet after only a few shorts months of being on the balance sheet of Tesla, Musk tweets out the flaws that pertain to Bitcoin, namely the energy consumption that is used to mine Bitcoin and to use it for transactions. This was a rather shocking statement, only because these facts have been well-known for years and Musk is supposed to be all about the “green” economy. Yet here he was supporting Bitcoin, at least temporarily, despite the inefficient nature of Bitcoin and the energy usage associated with it. Was this a pump and dump scheme? Because it is virtually impossible that Musk did not know those facts prior to adding it to Tesla’s financials.

Another issue to contend with are the Chinese regulators that are prohibiting institutions and their citizens of engaging with cryptocurrencies. Now it is interesting to note that China, along with many other countries and their respective central banks are planning, building, or testing their own versions of central bank digital currencies (CBDCs). So it should come as no surprise that governments want to be the only game in town. After all, they can tax, fine, and imprison you if you do not comply with their orders. Bitcoin and other cryptos, or any private institution or individual lacks that power. It is therefore likely that more governments will start to come out and limit, restrict, or outright ban the use of cryptos other than their own. This speculative mania will without question be remembered in the history books, especially after it all comes tumbling down. Stay diversified, stay vigilant, and stay with The Kapital News. #Bitcoin #Inflation #Gold #Silver #Protests #Liberty #USA #Leadership #Economy #bananarepublic #EndTheFed #Revolution #FireCongress #Debt

Ep. 595 – Gold + Silver About to Shine?
The Kapital News
The Kapital News
Ep. 595 - Gold + Silver About to Shine?
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The yellow and white metals put on solid gains today and have been slowly taking out one level of technical resistance after the next. Both gold and silver are on the brink of breaking through some larger resistance levels and if they should bust through to the upside, then it is likely that gold may flirt with its all-time high seen last summer, and silver may finally break the $30/oz. level. If silver should gain ground above $30/oz. then it may very well make a move to test its all-time highs, which was close to $50/oz. Regardless, The Kapital News believes that the precious metals market is in the early stages of a long-term bull market. Gold and silver are sniffing out inflation and quite possibly global turmoil as well. These are some of the oldest markets on Earth and they have survived one empire after another. This is far from being the first rodeo for gold and silver. They may also know that global conflict may be well underway or is about to be. These actions have not yet been priced into global equity markets as they remain a stone’s throw away from all-time highs. Should there be global conflict on a large scale, oil prices would likely spike, panic would ensue, and equities would sell-off. Of course there may be some plays in equities, such as energy and defense companies, but the broader market would likely feel the downside pressure.

Another issue to contend with that supports higher gold and silver prices is that of the twin-deficit, which is getting worse by the day. The twin-deficit is comprised of the budget deficit and the trade deficit. The former is now in the multi-trillion dollar range and the latter is nearing the one trillion dollar mark at $850 billion! This historically, has not been good for the US dollar, which is a variable that can weigh down gold and silver should it be moving to the upside. Couple the twin-deficit with the reckless policies of the Federal Reserve and you have a recipe for economic disaster and an opportunity to capitalize on gold, silver, and other commodities. The inflation is already here, as it is an increase in the money supply. This has happened and it continues to be the policy of the Fed and other central banks. The higher prices that result from such inflationary policies are being felt and to an even greater degree globally and will continue to strain societies and governments the world over. This environment is ripe for social unrest and conflict. Let us hope and pray that it does not come to pass, but unfortunately, if history is any indicator, and it is, then get prepared. Stay diversified, stay vigilant, and stay with The Kapital News. #Inflation #Gold #Silver #Economy #Debt #bananarepublic #FireCongress #EndTheFed #Revolution #Liberty #Protests #Leadership #USA

Ep. 594 – Markets Overnight
The Kapital News
The Kapital News
Ep. 594 - Markets Overnight
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A brief recap of market performance last Friday along with some economic data, and then a look at where markets are trending overnight and into Monday. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Gold #Silver #Liberty #USA #Leadership

Ep. 593 – Jobless Claims Down, Producer Prices Up
The Kapital News
The Kapital News
Ep. 593 - Jobless Claims Down, Producer Prices Up
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The initial jobless claims figure for the week ending 8 May, came in at 473,000. The lowest figure in over a year and continuing its downward trend as the economy reopens. Data from the prior week was revised upward by 9,000 to now stand at 507,000. The Pandemic Unemployment Assistance program saw 104,000 Americans file for the first time, also during in the week ending 8 May. In aggregate, across all forms of unemployment insurance, some 16.9 million Americans continue to file claims. This is for the week ending 24 April and gives us a de facto unemployment rate of 12.8 percent, which is more than 2x the official rate. The official unemployment rate is now 6.1 percent.

Also released today was the Producer Price Index Summary, which showed that producer prices for the final demand index rose by 6.2 percent in April on a year-over-year basis. This is the highest figure since records were kept on a yearly basis going back to November of 2010. Stripping out food, energy, and trade services, the index stands at 4.6 percent, which is also a record-high going back to August of 2014. As we witnessed yesterday in the CPI report, these figures released today were higher than market expectations. The question becomes just how long these price increases will continue. Will they be transitory as the Federal Reserve claims, or will they be longer-lasting and more structural for a few years or more to come? This is a crucial question, as markets, economies, political processes, and societies will all be greatly impacted.

The Federal Reserve’s balance sheet has hit a new all-time high and now stands at $7.83 trillion. This is a week-over-week increase of $20 billion. The Fed remains committed to their QE program of purchasing at least $120 billion per month of US Treasuries and mortgage-backed securities. So far, the Fed has brushed off the recent higher than expected inflation figures, as they continue with their transitory remarks. They also appear to want to wait and see what future data points suggest is underway throughout the economy. Chances are they will be too late to respond to any structural problem and thus their efforts will likely prove futile. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #FoodPrices #Bitcoin #Bitcon #EndTheFed #bananarepublic #FireCongress #Gold #Silver #Commodities #Liberty #USA #Leadership #Jobs #Bailouts #Protests #Riots #Revolution #Peace

Ep. 592 – There’s No Inflation, But There IS!
The Kapital News
The Kapital News
Ep. 592 - There's No Inflation, But There IS!
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The Bureau of Labor Statistics, BLS, released their Consumer Price Index Summary for the month of April. The headline figure came in at 4.2 percent on a year-over-year basis, which was above market consensus. This is the highest reading since September of 2008. Speaking of no inflation, used cars and trucks saw an increase of 10 percent in the month of April! With people moving out of the cities and into the suburbs, they are also bidding up the prices of new and used vehicles. Also, with the impact of the pandemic, many people may also be concerned with utilizing public transportation and are thus opting for their own vehicles. This one-month increase of 10 percent is the highest on record since the series began in 1953. Also, notable was the all items less food and energy category rose by 0.9 percent, which was the largest monthly increase since 1982.

On a year-over-year basis, some of the notable increases were the following: food is up 4.2 percent, energy is up 25.1 percent, gasoline is up 49.6 percent, utilities (gas) is up 12.1 percent, new vehicles are up 2.0 percent, and used vehicles are up 21.0 percent. Speaking of vehicles, Q4 2020 average prices for new and used vehicles came in at $40,107 and $27,689, respectively. Down payments also increased, but still puts the average monthly payment at $581! And here you were thinking that all that free money from Uncle Sam was actually free – well, bless your heart. There is no free lunch and this is one of the worst economic policies that has ever been implemented and on a global scale to boot. Now some may say that this is all transitory. Perhaps the degree to which these prices are rising may be transitory, but the overall inflation and its effects, are anything but temporary. This is a structural shift that is going to wreak havoc around the globe for years to come. Pay attention! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #FoodPrices #CarPrices #Debt #Spending #Gold #Silver #Commodities #Oil #Liberty #EndTheFed #bananarepublic #FireCongress #Leadership

Ep. 591 – The Ever-Changing Narrative
The Kapital News
The Kapital News
Ep. 591 - The Ever-Changing Narrative
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In the 24/7 news cycle, there is always a moving target. So it is not uncommon for there to be a new narrative from week to week or even day to day to hold the attention of their viewers. The Kapital News does not play this game and has called out most, if not all of these narratives as of late for being what they are – phony. The main narrative to focus on with respect to markets is the liquidity injections by central banks into the system. It is the funny money that is conjured up out of thin air that continues to prop up these markets. Simply ask yourself where would bond prices, bond yields, interest rates, and equity prices be if it were not for these actions undertaken by central banks? The answer is quite simple, yields and interest rates would be higher, and bond and equity prices lower. This is a house of mirrors and one which is built upon a foundation of sand. Nonetheless, the markets continue to buy into this narrative and policy and so they march onward and upward to new highs. Yes, there have been some minor pullbacks here and there, but they then go on to make new highs. As long as this is the case, then markets move higher. But once this relationship breaks down, and The Kapital News believes that it is only a matter of time, then these liquidity injections will no longer matter and will be impotent in propping up the markets. This will likely result in a great unraveling, whose force cannot be stopped by any kind of monetary or fiscal intervention. At this juncture, market forces are in complete control and they will rid the system of malinvestments and fraudulent businesses. Look out below.

Other news discussed pertained to updates on the Colonial pipeline situation, the Israeli and Palestinian conflict that has been intensifying, and an update on the tensions between Russia and Ukraine. Much of these geopolitical events are not receiving the news coverage they deserve and furthermore, the equity markets do not seem to be pricing in the types of risks that can rapidly develop if any of these global issues escalate more seriously than where they currently stand. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Fraud #FoodPrices #Debt #Spending #EndTheFed #bananarepublic #FireCongress #USA #Israel #Palestine #Russia #Ukraine #Protests #Riots #Peace #War #Gold #Silver #Commodities #Liberty #Leadership

Ep. 589 – April Fools Jobs Report
The Kapital News
The Kapital News
Ep. 589 - April Fools Jobs Report
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The market consensus was looking for a gain of one million jobs in the month of April. Instead, the figure came in at +266,000. This was quite the miss. However, it certainly gives at least another month of cover for fiscal and monetary authorities to continue with their narrative that more policy intervention is needed. From the White House, both the President and Treasury Secretary were stating how there is still a long road ahead. They also mentioned how the extension of unemployment benefits has no impact on this dismal jobs number. Instead, they cite the effects of the pandemic and the costs and lack of availability of child care. Interesting to note, however, is that members of the Federal Reserve did mention that the extension to unemployment benefits likely did impact the jobs number for April. As many people are getting paid just as much to stay home as compared to actually working. This belief by some Fed members was stated because, first of all, it is true, and then secondly, those extensions are a fiscal measure, not a monetary one. So the Fed is more than happy to throw a fiscal policy under the bus and shift the blame from themselves onto Congress and the White House, even though they are the ones financing such fiscal policy nonsense.

Clearly, both fiscal and monetary policy authorities want the “gravy-train” to continue as do the markets. And despite this dismal number, markets rallied and made new highs on the DJIA and the S&P500. This is a function of central bank liquidity, which continued to march higher this week and with it equity prices. This is the true narrative to monitor. If markets continue to buy into the rising liquidity injections, then they climb higher, if they cease to buy these actions, then it is game over, as this is the only thing that is propping these markets up. And it is not just the equity markets, but the bond market, and others as well.

The fiscal and monetary policies introduced last year and this year will continue to drag future economic growth downward, while also leading to increased costs across the board in commodities, and items needed to live. Housing and rents continue climbing higher, as do construction and building materials, as do commodities, from base metals, to agricultural products. These price increases will translate into great economic, political, and social strife in the coming months and years and this will be a global phenomena. Some of this fallout is already being witnessed in smaller countries, where they are near collapse or are already there. This trend will continue to make its way up the chain impacting larger economies and countries. This funny money coming from Uncle Sam is anything but a gift from the government, and it is anything but free. The costs of which will be some of the most expensive in human history in terms of price increases, social and political impact, lower living standards, and lost opportunities. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Inflation #USA #Liberty #Protests #FoodPrices #EndTheFed #bananarepublic #FireCongress #Bailouts #Debt #Spending #Revolution #Leadership

Ep. 588 – Jobless Claims Below GFC
The Kapital News
The Kapital News
Ep. 588 - Jobless Claims Below GFC
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It has been over a year, but finally the initial jobless claims figure is below that witnessed during the depths of the GFC. In aggregate, regular state unemployment and PUA claims came in at a combined 599,000 for the week ending 1 May. The peak during the GFC was around 660,000. The prior combined figures for around an entire year stood north of 900,000 on a weekly basis! Regular state claims came in at 498,000 and the prior week was revised upward by 37,000 to stand at 590,000. The Pandemic Unemployment Assistance claims came in at 101,000. In aggregate, amongst all forms of unemployment insurance, some 16.2 million Americans continued to file claims. This gives a de facto unemployment rate of 11.6 percent. The official unemployment rate is currently at 6 percent. The jobs report for the month of April will be released tomorrow by the BLS.

The Federal Reserve’s balance sheet stands at $7.81 trillion, which is a week-over-week increase of $30 billion, and is just shy of a new-all time high. The Fed remains committed to purchasing at least $120 billion of US Treasuries and mortgage-backed securities per month. This will take the balance sheet to around $8.5 trillion by the end of the year, and The Kapital News expects that number to be closer to $10 trillion. This policy of QE continues onward despite record high equity prices, record high housing prices, sky-rocketing commodity prices, rising food prices, et cetera. If the jobs report provides a strong number, then the Fed is going to find themselves to be trapped even more than what they currently are. How can they continue to justify their policies and interventions if everything is looking healthy? Of course things are not healthy. It is a smoke and mirror show provided to us via trillions in fiscal and monetary policies. But the Fed will never admit to this, so they will continue with some made up narrative to justify their reckless actions. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Inflation #Protests #FoodPrices #EndTheFed #bananarepublic #FireCongress #Liberty #USA #Leadership #Gold #Silver #Commodities #Debt