We continue our analysis of the Great Depression and the striking similarities between the rhetoric and policies adopted then and the rhetoric and policies we are witnessing today. The government’s heavy-hand in attempting to “save” the economy and to “do something,” created the Great Depression. It is therefore, of great concern to The Kapital News that another Great Depression, if not the Greatest Depression, is now underway. History, in our opinion, is to be studied and taken seriously. Why? Because as the saying goes, those who do not understand history, are doomed to repeat its mistakes. And if we analyze what the government and the Federal Reserve have been doing over the last few months, and will continue to do for the foreseeable future, then we are repeating these mistakes of the 1920s and 1930s, to the Nth degree. Perhaps, “this time will be different,” but we think not. The only difference is likely to be that this time will unfortunately be worse. However, when a nation lives well beyond its means for generations, then what would one expect on the other side whence the pendulum comes swinging back? Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Depression #USA #Bailouts #Debt #Gold #Congress #EndTheFed
What a difference 100 years makes as we near the centennial anniversary of the Great Depression. As we continue our discussion from yesterday’s podcast, ” A Tale of Two Depressions,” we were highlighting the similarities between the economic and political climate of the 1920s and 1930s to today. The only major difference between then and now, are the numbers! If it was millions then, it’s billions now, and if it was billions then, it’s likely trillions now! This is true whether we’re referring to the policies of the Federal Reserve or the Congress in conjunction with the White House. It’s a one-two punch of monetary and fiscal “stimulus” today, just like back then. Unfortunately, it was these very policies that turned a would be severe recession into the Great Depression – and it appears we’re heading down the same path.
As we make our way through these trying times, when we observe the economic data, we’re witnessing numbers that we have not seen since the Great Depression, and some numbers are even worse. And despite the optimistic notes from some in DC, of how the economy is going to come roaring back to life, then one must ponder why Congress and the White House are once again contemplating another major spending package. If everything is going to be better than before, then why another massive bill? Of course this would be spending even more money that we do not have! Right now, we’re borrowing about 50 cents for every dollar that we spend. The more we do, the worse this ratio will become and we’ll have very little to show for it on the other side, except for a ballooning national debt and deficit – that will saddle future generations with the tab. The further along in time we go, the more it appears that we’re standing still – yet the fashion, music, faces, and names change. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Depression #Bailouts #USA #Debt #Recession #Gold #Congress #Jobs
While the historians and economists have written plenty about The Great Depression of the 1930s, the pages mainly remain blank as to how this depression will unfold. However, if history is any guide, and it’s usually one of the best, then it may be prudent to study the 1920s-1930s in greater detail.
When reading Murray Rothbard’s, “A History of Money and Banking in the United States,” Rothbard paints a vivid picture of the players, the policies, and the outcomes that existed during this historic time. What is quite an eerie feeling as one reads his pages when covering The Great Depression, is how similar the policies of the late 1920s-1930s coincide with today’s policies from both the government and the Federal Reserve. Whether it’s central bankers standing at the ready to do whatever it takes and willing to expand the money supply, to Congress and The White House, strongly supporting public programs – the only thing(s) that change are the names and the size of the facilities – and sometimes even the names do not change.
A simple exercise can be conducted where one would simply exchange millions for billions and billions for trillions to see how similar The Great Depression is to the here and now. What may be even more disconcerting is that these very policies were the cause of The Great Depression. Had the “authorities” allowed the market to self-correct then what would have been experienced was a recession, perhaps a severe one, but no depression. And this is not simply an intellectual thought experiment. Rather, look at the recession of 1920-1921 and the policies undertaken by the government and the Federal Reserve. More correctly, it would note the lack of policies and intervention. This is because only a decade earlier, the American people, as well as their elected officials, understood the prudent tenants of free-market capitalism and simply allowed for the markets to self-correct. What occurred was a recession and not a depression. But a lot changed in ten short years and books are written not of the 1920-1921 recession, but they surely are for The Great Depression. Want to understand the present and future, then know the past. We discuss this during today’s podcast.
On the economic front, the Fed’s balance sheet now stands slightly above $7 trillion – representing a week-over-week increase of some $103 billion. With respect to initial jobless claims, an additional 2.4 million Americans filed for unemployment insurance during the prior week – taking the nine-week total to around 38.5 million Americans. With a workforce population of 206 million, this would represent about 18% of the workforce. These are staggering numbers that are consistent with April’s jobs report, and also consistent with an economic depression – and more is likely to follow. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Depression #Bailouts #Debt #USA #Recession #EndTheFed #Jobs #Gold
This is of course a direct criticism of the multi-trillion dollar monstrosity known as the CARES Act. The bill that was passed by Congress with bipartisan and Presidential support in response to COVID-19. Well, just like any title of a bill – it’s usually the exact opposite that transpires – so in this case, it’s the Nobody CARES Act.
Today via a virtual Senate hearing, Treasury Secretary Mnuchin, and Fed Chairman, Jay Powell, gave their testimony as to the progress of the CARES Act. During today’s podcast, we highlight a few of the key points. These pertain to: not all of the money that has been appropriated has been spent, the Fed will utilize leverage if and when they put this money to use, the base case of the US Treasury is that on a net-net basis, there will be losses, questions asking if there will be conditions to receiving any funds, especially by large corporations, such as guaranteeing that employees are kept on payroll and/or brought back from being laid-off, the money supply, limitations to the Fed’s balance sheet, discussion of Treasury issuing 50 and/or 100 year bonds, and asking how the Fed’s purchases of junk bonds, is a help to the people…all this and more as we dissect this new banana republic. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Bailouts #Jobs #USA #Depression #Gold #Protests #EndTheFed
The economic hits just keep on coming with two dismal reports being released. The first was retail sales – plunging 16.4% for the month of April. This is the worst reading ever and was well below market expectations of a decline of 12%. All categories were harshly hit, primarily driven by the lock-downs due to COVID-19. Some of the worst hit, and no surprise, were clothing and accessories, electronics, appliances, and furniture, and restaurants and food service. On the back of this data, we also have JC Penney filing for bankruptcy this evening. This is another blow to the retail sector, as well as commercial real estate, and adds to a list of other big name retailers filing for the protection. Another notable report pertains to industrial production, which collapsed by 11.2% for the month of April – also the largest monthly decline since records have been kept. On a year-over-year basis, the decline is over 15% – this kind of decline has not been seen since the GFC, the end of WWII, and the Great Depression. Nonetheless, the DOW, the NASDAQ, and S+P 500 all closed the day in the green. However, what also had a very strong performance was that of gold and silver. Are the precious metals starting to sniff out the effects of money printing, deficit spending, geopolitical uncertainties, and the realization of the true economic and financial damage that likely lies ahead? Time will tell, but it is most definitely worth the time to pay some attention to the precious metals.
This evening in the House, Nancy Pelosi’s, “HEROES Act,” was passed along party lines and will now head to the Senate where it is all but certain to be voted down. However, it is also likely that there will be another round of spending – the question will be, when, and how much does it cost? Also in Washington, this afternoon, the President announced that the US will have a vaccine ready for use by the end of this year. This blows past all previous comments that the earliest possible would be 12-18 months, which would have taken us into 2021. Nevertheless, “Operation Warp Speed,” as it is to be known, is underway to develop a vaccine in record time and the President has also made comments that the military is to administer the vaccine. We don’t like the sound of that and this is well deserving of further explanation. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Bailouts #EndTheFed #Debt #Gold #Recession #Depression #USA #COVID19
Of course this has a couple of meanings, but we are mainly referring to the Fed’s balance sheet, (BS). It is Thursday, so the Fed has updated their BS figures and we now stand at $6.9 trillion! This is up some $200 billion for the week and is unfortunately not shocking. Also, since it is Thursday, we received the initial jobless claims for the prior week and sadly, another 3 million Americans have filed for unemployment insurance. This takes us to nearly 36 million Americans losing their jobs over the last two months. Certainly, some of these jobs will be returning and some of them have. But it would be prudent to be mindful that some of these jobs may have “come back” due to SBA loans that require employers to bring back their employees and place them all on payroll – a condition to make the loan(s) forgivable. So it’s quite possible that even though people are back on payroll, it does not necessarily mean that they are in fact working. It will be interesting to see how this plays out in the coming months of economic data releases.
A brief follow up to yesterday’s podcast, “Negative Rates Are Coming,” we wanted to highlight a point we did not mention in our discussion and that pertains to Jay Powell making reference to “putting away” all of their tools once the crisis is over. Oh, really? Didn’t former Fed Chair, Ben Bernanke, say the same thing in relation to QE during the GFC? Yes, yes he did. So again, we do not trust these central bankers to hold the line, get tough with Congress, buck what the markets want, or much anything else for that matter. That is why it’s only a matter of time before negative rates are here.
And then lastly, we discuss a couple of cases that were before the US Supreme Court where they heard arguments pertaining to the release of the President’s tax returns and other financial papers. The lower courts for both cases ruled that these papers needed to be turned over to Congress and to a DA’s office out of the state of New York. The President obviously appealed these lower court decisions and it is now in the hands of the Supreme Court Justices and they will likely render a verdict sometime this summer – right in the heat of the 2020 Presidential election race. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Debt #Bailouts #USA #EndTheFed #Recession #Depression #Protests #Gold
It is all but certain that negative rates will be here in the United States in short order (within a year). Despite the many voices of protest from several members of the Federal Reserve regarding the adoption of negative rates – it’s sad to say, but we don’t trust them as far as we can throw them. This is the same group that claimed only 1 1/2 years ago that the Fed’s balance sheet was on autopilot with respect to shrinking their balance sheet. Well fast forward to today and we have had several interest rate cuts, two of which transpired during emergency meetings that have taken us back to the zero bound. And what of the balance sheet? Oh yes, over the last two months the Fed has added over $2T in assets to its books. So excuse us if we do not believe the rhetoric from the Fed. After all, it’s no big secret that the Fed follows the market, especially during these types of events. Now of course, the Fed also tries to lead the markets with their rhetoric, which they claim is an effective tool in the kit – but the question remains, how effective and for how long? If the markets are always expecting the Fed to do more and the Fed can’t live up to the hype and the promises, then how will markets behave? Are we setting ourselves up for one of the biggest “buy the rumor and sell the fact” events?
The reason for today’s topic is because Jay Powell, Chairman of the Federal Reserve gave an interview this morning and so we thought it prudent to cover his remarks in greater detail. Some of the key takeaways were the following remarks from the Chairman: there is no bubble to pop, the usual suspects are not to blame, it is all the fault of COVID19, above and beyond what the Fed can do by law as outlined in their charter, will only take place with the direct approval of the Treasury Secretary (thus potentially shifting the blame to the government and not the Fed), once the crisis is over all of their tools will be put away, highlighted the important difference between a liquidity crisis and a solvency crisis, and how the Fed can only do so much and mainly on the liquidity side of that ledger, and lastly, how the fiscal side of the equation will likely have to carry more weight – thus calling out Congress to do more, but stopping short of giving them any recommendations. So there you have it – delusional comments about no bubbles and no issues prior to COVID19 – an unlimited amount of money to be printed, and seemingly an unlimited amount of federal spending is likely required and is perfectly fine with those soaring deficits and debts. We did tell you this is now a banana republic – enjoy the rum! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #EndTheFed #Bailouts #Debt #USA #Recession #Depression #Jobs #Gold
A truly historic jobs report was released today by the Bureau of Labor Statistics (BLS). In today’s podcast, we take the time to read the report in its entirety. A few of the takeaways: the headline unemployment rate (U-3) was 14.7% and the broader measure of (U-6) was 22.8% for the month of April. For the full month of April 2020, some 20.5 million jobs were lost and spanned the spectrum of industries. The hardest hit was leisure and hospitality that lost some 7.7 million jobs. With respect to several data points, one would have to go back to the 1970’s, 1940’s, or 1930’s to find a comparable number while still others were the worst on record. Further broader measures of unemployment such as the labor force participation rate declined by 2.5 percentage points over the month to now sit at 60.2% – this is the lowest reading since January 1973. The employment-population ratio now rests at 51.3%, dropping some 8.7 percentage points over the month. This would constitute the lowest rate and largest month-to-month decline in the series’ history, dating back to January 1948.
The BLS also notes that had they accounted for those still on payroll but absent from work, then the headline unemployment rate would have been 5 percentage points higher. Nonetheless, BLS kept the number at 14.7%. Revisions were also made to the prior months of February and March and the BLS noted that those months were over-counted, thus an additional 214,000 jobs were lost and/or gains did not occur during those two months. Nonetheless, the major stock indexes could not care less as they rallied over 1% and the futures market is now pricing in a Fed Funds Rate in negative territory by January of 2021. The banana republic is here! Also, if we simply take into consideration just the $3T that the US Treasury will be issuing in Q2 of 2020 and dividing by 33.5 million (representing the jobs losses since COVID19 lock-down), we come to approx. $89,500/job! The vast majority of people who lost their job(s) did not make near this amount, yet this is what the government is spending to keep it all afloat. And this does not count all money spent, printed, and/or yet to be spent or printed in response. Now do you understand why we say that “Free Was Never So Expensive.” Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Bailouts #Debt #Deficits #USA #Depression #Recession #BananaRepublic
With deficits and debts off the charts and with little to no signs of slowing, coupled with the increasing mentions of Modern Monetary Theory (MMT), we thought it prudent to put together a Kapital Economics presentation that highlights the growing deficits and debts. This is Part I of a to be determined numbered series where we discuss in greater detail the causes and effects of deficits and debts. The numbers are black and white, but their causes and effects will prove to be rather nuanced. Part I showcases the levels of debt and how it relates to GDP and its year-over-year percentage changes. #Economy #Debt #Deficit
Remember the golden rule – those with the gold makes the rules. This of course is not the moral version of the true golden rule, but nevertheless, it’s one that the world has operated from for quite some time.
In today’s podcast we highlight the economic and financial news with initial jobless claims hitting 3.8 million in the prior week – taking the six week total to over 30 million Americans having filed for unemployment insurance. The Fed also updated their balance sheet and it’s week over week change was an additional $82B. This figure is well below that of the last several weeks as the Fed has added over $2T to its balance sheet over the past month.
The crux of today’s discussion is centered around the political blame game that is both coming and underway, especially as it relates to COVID19. We mention how this heated rhetoric may lead to conflict that may likely take the form of proxy war(s). A couple of strong candidates would be that of Iran and Venezuela. Over the last couple of days, news agencies have been noting how Venezuela has sent about $500 million worth of gold to Iran in exchange for Iran’s assistance with one of their refineries. Also, Venezuela has been asking the Bank of England, which stores some of Venezuela’s gold reserves, to sell some of their gold and give the proceeds to the United Nations. This would be to serve the purpose of assisting the UN so that in turn the UN may assist Venezuela combat COVID19 as well as their many economic woes. The Bank of England is refusing to comply with Venezuela’s request because the UK does not recognize the Maduro regime as the legitimate government. So now as a result, even more people will become refugees and/or suffer from starvation, energy shortages, and a myriad of economic problems.
So in short, when gold starts getting moved around (or is prohibited) and when it also pertains to a couple of countries that are both under harsh US sanctions, while at the same time both of these countries are heavily reliant on oil and gas – it makes us wonder here at The Kapital News as to what is truly going on and where me may be headed. In addition, US naval and military forces are around both countries. We do not want war, but if history is any indicator, we’re likely headed in that direction. Stay diversified, stay vigilant, and stay with The Kapital News. #Gold #Oil #War #Economy #Recession #Debt #Bailouts #USA #Venezuela #Iran #Peace
