Silver Price: Eyes on $28 as Demand Exceeds Supply

Silver price is higher as its industrial and safe-haven demand rises. Investors are now keen on FOMC meeting minutes on Wednesday.

silver price

Inflation concerns

On Friday, silver price was higher as a reaction to the stagnation of April’s retail sales. Analysts expected a reading of 1.0% compared to March’s 10.7%.  Besides, Fed officials like Governor Christopher Waller and Vice Chair Richard Clarida have downplayed inflation fears. In the ensuing sessions, investors will be keen on the FOMC meeting minutes scheduled for Wednesday. Fed maintained a dovish tone in its recent interest rate decision.    

Industrial demand

Unlike its lustrous cousin – gold, silver is more than a hedge against inflation. Due to its durability and electrical conductivity, it has various technological, electrical, and industrial applications. The reopening of economies and shift towards the green economy has heightened silver’s industrial demand. According to the Silver Institute, the metal’s industrial demand in the current year is significantly beyond its supply. On the supply side, it is risen by 8% in 2021 compared to the prior year’s -4%. In comparison, its demand has soared by 15%, which is significantly higher than 2020’s -10%. A continuation of this trend is likely to push silver price higher.

Silver Price Technical Outlook

Silver price has continued with its uptrend on Friday’s session. On a larger scale, the uptrend has continued since late March. On 30th March, the precious metal had its price drop to the lowest level since mid-December 2020. Subsequently, it been on a rebound journey characterised by several pullbacks and sideway trading moments. Over the past one-and-a-half months, it has risen by about 16.61%. At the time of writing, it was up by 0.74% at 27.60.  

On a daily chart, silver price is trading above the two and four-week exponential moving averages. Besides, it is within an ascending channel, which substantiates the bullish outlook. I expect the precious metal to rise further as bulls target 28 in the short-term and 30 towards the end of the second quarter.

In today’s session, the price is likely to rise to past the psychological 28 to 28.38. At that point, it will find resistance along the channel’s upper border. It may then pull back and trade sideways along 28 before moving higher. Notably, that has been an important resistance level since August 2020.  

Article originally featured here

Inflation: More Evidence

Recall the definition of inflation: “Any Increase in the economy’s supply of money not consisting of an increase in the stock of the money metal.” ~Murray N. Rothbard, Phd from “What Has Government Done to Our Money?”

After understanding the definition of inflation, review the chart listed here in this article. It shows the growth of the monetary base since January 2008. Clearly, the trend for monetary base expansion demonstrates an upward trend since 2008. This can be explained by all the bailouts, repo agreements, stimulus packages, and etc that have been done during this time period by the Federal Reserve and US Government.

People conflate the notion of increase in prices as inflation. The increase in prices occur after the monetary base has been expanded beyond the amount of money metal. Note: Prices can rise due to other factors, such as increased scarcity for a resource. That is not the focus of the article.

As more monetary base units are printed, beyond the money metal in storage, each unit in circulation becomes less “valuable”. At this point, it requires more monetary base units to purchase goods and services. This is why prices rise from the increase in the monetary base.

This is why Gold, Silver, and Bitcoin is so appealing to investors. These assets allow for investors to hedge against inflation, and store value for future consumption across time. Their current amounts can not be increased by a governing body.

Source: St Louis Federal Reserve

USD Purchasing Power and Current Issues with Inflation: Why buy Gold, Silver and Bitcoin

Featured below is a graph showing the “Purchasing Power of the Consumer Dollar”. This graph shows the output of the purchasing power of the dollar since November of 2006. Notice the downward trend of the purchasing power of the dollar.

This should be a concern for savers of dollars, and it should be a wake up call to action to make moves to insure their assets are beating the trend of inflation.

Recall: Inflation is the expansion of the monetary base(money supply) that is greater than the actual amount of metal stored. In this case, the metal considered would be gold or silver.

Consider all the stimulus packages, bailouts, monetary injections, repurchase agreements, and other monetary/fiscal policy measures that have been done since 2006. While that is under consideration, think about the growing United States Government debt. If any economist is telling you inflation is low, they are not being honest. Per the definition of inflation, it is here.

This is why the smart money is on Gold, Silver, and Bitcoin. This is why serious investors, who are concerned with inflation, need to look at these assets to hedge against inflation.

(source: FRED.St Louis Federal Reserve. Time expressed in number of months)

The Edict of Diocletian: A Case Study in Price Controls and Inflation

By Murrary Rothbard

Citizens of the old Roman Empire distrusted paper currency and refused to accept anything but gold or silver coin as money. So the rulers found themselves barred from inflating the money supply by the unobtrusive method of printing additional currency.

But the Roman emperors soon discovered an ingenious device. They proceeded to call in the coins of the realm, ostensibly for repairs. Then, by various means, such as filing off small parts of the coins, or introducing cheaper alloys, they reduced the silver content of the money without changing its original face value. This devalution enabled them to add many more silver coins to the Roman money supply. The practice was started by Nero, and accelerated by his successors. By Diocletian’s time, the denarius (standard silver coin) had been reduced to one-tenth of its former value.

The result was a steep rise in prices throughout the vast Roman empire. As has happened throughout history, the public indignantly accused merchants and speculators of causing the rise in prices. It was generally agreed that the only remedy was stringent maximum price controls by the government.

Accordingly, Emperor Diocletian, a “friend of the people,” issued his famous Edict in 301 A.D. setting ceiling prices on all types of commodities, and maximum wages for all occupations. A few typical examples: Beans, crushed, 100 denarii; beans, uncrushed, 60 den.; beans, dried kidney, 100 den. Veterinary, for clipping hoofs, 6 den. per animal. Veterinary, for bleeding heads, 20 den. per animal. Writer, for best writing, 25 den. per 100 lines. Writer, for writing of the second quality, 20 den. per 100 lines.

Diocletian’s proclamation introducing the Edict bears marked resemblance to modern exhortations:

We must check the limitless and furious avarice which with no thought for mankind hastens to its own gain. This avarice, with no thought of the common need, is ravaging the wealth of those in extremes of need. We — the protectors of the human race — have agreed that justice should intervene as arbiter, so that the solution which mankind itself could not supply might, by the remedies of our foresight, be applied to the general betterment of all.

In the markets, immoderate prices are so widespread that the uncurbed passion for gain is not lessened by abundant supplies. Men whose aim it always is to profit, to restrain general prosperity, men who individually abounding in great riches which could completely satisfy whole nations, try to capture smaller fortunes and strive after ruinous percentages. Concern for humanity in general persuades us to set a limit to the avarice of such men. Profiteers, covertly attacking the public welfare, are extorting prices from merchandise such that in a single purchase a soldier is deprived of his bonus and salary.

Therefore, we have decreed that there be established a maximum so that when the violence of high prices appears anywhere, avarice might be checked by the limits of our statute. To ensure adequate enforcement, anyone who shall violate this statute shall be subject to a capital penalty. The same penalty shall apply to one who in the desire to buy shall have conspired against the statute with the greed of the seller. Also subject to the death penalty is he who believes he must withdraw his goods from the general market because of this regulation.

We urge upon the loyalty of all that a law constituted for the public good may be observed with obedience and care.

If anyone could force people to trade at the ceiling prices, Diocletian was the man. Yet the absolute emperor of the civilized world, a veteran general with myriads of secret police at his command, was soon forced to surrender. After a short interval almost nothing was offered for sale, and there was a great scarcity of all goods.

Diocletian was obliged to repeal the price-fixing Edict. Prices were finally stabilized in 307 A.D. when the government stopped diluting the money supply.

Types of Money

Robert Kioysaki discusses the different types of money, gold, silver and Bitcoin. He also mentions why individual savers are losing money by saving fiat currency in their bank account.

Many economists in the past have written about the ills of fiat currency. Robert’s points are supported by well respected economists such as, Murray Rothbard, Phd, Ludwig Von Mises, and many more. Both Rothbard and Mises(Mises was Rothbard’s mentor) wrote extensively regarding the social ills of the use of fiat currency.

This video covers some of the reasons why individuals should use Gold, Silver, and Bitcoin to save money for the future.

Who Bought the $4.5 Trillion Added in One Year to the Incredibly Spiking US National Debt, Now at $27.9 Trillion?

Someone had to buy every dollar of this monstrous debt. Here’s Who. The Fed isn’t the only one. But China continues to unwind its holdings.

by Wolf Richter of Wolf Street

So we’ll piece together who bought those trillions of dollars in Treasury Securities that have whooshed by over the past 12 months.

Tuesday afternoon, the Treasury Department released the Treasury International Capital data through  December 31 which shows the foreign holders of the US debt. From the Fed’s balance sheet, we can see what the Fed bought. From the Federal Reserve Board of Governors bank balance-sheet data, we can see what the banks bought. And from the Treasury Department’s data on Treasury securities, we can see what US government entities bought.

Share of foreign holders falls to 25% for first time since 2007:

In the fourth quarter, foreign central banks, foreign government entities, and foreign private-sector entities such as companies, banks, bond funds, and individuals, reduced their holdings by $35 billion from the third quarter, to $7.04 trillion. This was still up from a year ago by $192 billion (blue line, right scale in the chart below). But their share of the Incredibly Spiking US National Debt fell to 25.4%, the lowest since 2007 (red line, right scale):

Japan (blue line), the largest foreign creditor of the US, reduced its holdings in Q4 by $20 billion, to $1.26 trillion. But compared to a year earlier, its holdings were still up by $102 billion.

China (red line) continued on trend, gradually reducing its holdings. In Q4, its holdings ticked down just a tad, and over the 12-month period fell by $8 billion, to $1.06 trillion:

Japan’s and China’s relative importance in the Incredibly Spiking US National Debt continues to decline, with their combined total ($2.32 trillion) now down to a share of 8.4%, the lowest in years:

Read the rest here….

The Most Splendid Housing Bubbles in America: Nov. Update

Author: Wolf Richter

Date: Nov 24, 2020

A pandemic of house price inflation.

House prices jumped 7.0% across the US, according to the Case-Shiller Home Price Index released today. Other indices have indicated similar price surges. House prices are going nuts despite a terrible economy. They’re being fired up by low interest rates, $3 trillion in liquidity that the Fed threw at the markets, fear of inflation that drives people into hard assets, work-from-home that causes people to look for a larger place, the urge to-buy-now before putting the current home on the market, and a shift from rental apartments and condos in high-rise buildings to single-family houses. And condos, as we’ll see in a moment, are not universally hot.

Los Angeles House Prices:
House prices in the Los Angeles metro in September jumped by 1.3% from August and by 7.7% from September last year. They’re now 12.9% above the peak of the totally crazy Housing Bubble 1, have nearly doubled (+93%) since early 2012, and having more than tripled since January 2000 (+209%):

The Case-Shiller index was set at 100 for January 2000 across all 20 cities it covers. Today’s index value for Los Angeles of 309 means that house prices have surged 209% since January 2000. This makes Los Angeles the most splendid housing bubble on this list.

For Los Angeles, the Case-Shiller Index provides sub-indices for condos, and for high-, mid-, and low-tier segments of houses. In the low-tier segment (black line) – where people can least afford price increases – prices shot up 10.2% from September last year, having nearly quadrupled since January 2000 (+280%). During Housing Bubble 1, the low-tier surged the most, and during the Housing Bust, it plunged the most, -56% from peak to trough. High-tier prices (green line) have risen 7.6% year-over-year and are up 186% from January 2000:

The Case-Shiller Home Price Index avoids some of the distortions inherent in median-price and average-price indices because it is based on “sales pairs,” comparing the sales price of a house that sold in the current month to the price of the same house when it sold previously, and it does so going back decades. Today’s release for “September” is a rolling three-month average of closings that were entered into public records in July, August, and September. So that’s the timeframe we’re looking at.

San Diego House Prices:
The Case-Shiller Index for the San Diego metro jumped 1.8% in September from August and was up 9.5% from a year ago:

This is “House-Price Inflation”: Loss of purchasing power of the dollar.
Because the Case-Shiller Index compares the sales price of a house in the current month to the price of the same house when it sold previously, it tracks how many dollars it takes over time to buy the same house. In other words, it measures the purchasing power of the dollar with regards to houses. This makes the Case-Shiller Index a measure of “house-price inflation.” And that’s all this really is – the loss of purchasing power of the dollar with regards to houses.

San Francisco Bay Area:
House prices in the five-county San Francisco Bay Area – the counties of San Francisco, San Mateo (northern part of Silicon Valley), Alameda and Contra Costa (East Bay), and Marin (North Bay) – rose 1% in September from August and 6.0% from a year ago. The index has more than doubled since 2012 and nearly tripled since 2000:

But condo prices in the five-county Bay Area fell for the fourth month in a row and are down 2.3% from a year ago, and are back where they’d first been in March 2018. Condo prices in San Francisco itself have fallen much further amid a historic all-time record condo glut, with the median price down 12.8% year-over-year. But the Case-Shiller Index covers a vast area around the Bay, including those where San Francisco refugees are moving to, and some of them are seeing rising condo prices:

Read the rest of the article here: https://wolfstreet.com/2020/11/24/the-most-splendid-housing-bubbles-in-america-november-update/

While Household Income Falls, Central Bankers Are Pushing for Higher Prices

Date: 11/16/2020

Author: Daniel Lacalle, Phd


Central banks continue to be obsessed with inflation. Current monetary policy is like the behavior of a reckless driver running at two hundred miles per hour, looking at the rearview mirror and thinking, “We have not crashed yet, let’s accelerate.”

Central banks believe that there is no risk in current monetary policy based on two wrong ideas: 1) that there is no inflation, according to them, and 2) that benefits outstrip risks.

The idea that there is no inflation is untrue. There is plenty inflation in the goods and services that consumers really demand and use. Official CPI (consumer price index) is artificially kept low by oil, tourism, and technology, disguising rises in healthcare, rent and housing, education, insurance, and fresh food that are significantly higher than nominal wages and the official CPI indicate. Furthermore, in countries with aggressive taxation of energy, the negative impact on CPI of oil and gas prices is not seen at all in consumers’ real electricity and gas bills.

A recent study by Alberto Cavallo shows how official inflation is not reflecting the changes in consumption patterns and concludes that real inflation is more than double the official level in the covid-19-era average basket and also, according to an article by James Mackintosh in the Wall Street Journal, prices are rising to up to three times the rate of official CPI for things people need in the pandemic, even if the overall inflation number remains subdued. Official statistics assume a basket that comes down due to replicable goods and services that we purchase from time to time. As such, technology, hospitality, and leisure prices fall, but things we acquire on a daily basis and that we cannot simply stop buying are rising much faster than nominal and real wages.

Central banks will often say that these price increases are not due to monetary policy but market forces. However, it is precisely monetary policy that strains market forces by pushing rates lower and money supply higher. Monetary policy makes it harder for the least privileged to live day by day and increasingly difficult for the middle class to save and purchase assets that rise due to expansionary monetary policies, such as houses and bonds.

Inflation may not show up on news headlines, but consumers feel it. The general public has seen a constant increase in the price of education, healthcare, insurance, and utility services in a period where central banks felt obliged to “combat deflation”…a deflationary risk that no consumer has seen, least of all the lower and middle classes.

It is not a coincidence that the European Central Bank constantly worries about low inflation while protests on the rising cost of living spread all around the eurozone. Official inflation measures are simply not reflecting the difficulties and loss of purchasing power of salaries and savings of the middle class.

Therefore inflationary policies do create a double risk. First, a dramatic increase in inequality as the poor are left behind by the asset price increases and wealth effect but feel the rise in core goods and services more than anyone. Second, because it is untrue that salaries will increase alongside inflation. We have seen real wages stagnate due to poor productivity growth and overcapacity while unemployment rates were low, keeping wages significantly below the rise of essential services.

Central banks should also be concerned about the rising dependence of bond and equity markets on the next liquidity injection and rate cut. If I were the chairperson of a central bank I would be truly concerned if markets reacted aggressively on my announcements. It would be a worrying signal of codependence and risk of bubbles. When sovereign states with massive deficits and weakening finances have the lowest bond yields in history it is not a success of the central bank, it is a failure.

Inflation is not a social policy. It disproportionately benefits the first recipient of newly created money, government and asset-heavy sectors, and harms the purchasing power of salaries and savings of the low and middle class. “Expansionary” monetary policy is a massive transfer of wealth from savers to borrowers. Furthermore, these evident negative side effects are not solved by the so-called quantitative easing for the people. A bad monetary policy is not solved by a worse one. Injecting liquidity directly to finance government entitlement programs and spending is the recipe for stagnation and poverty. It is not a coincidence that those that have implemented the recommendations of modern monetary policy wholeheartedly, Argentina, Turkey, Iran, Venezuela, and others, have seen increases in poverty, weaker growth, worse real wages and destruction of the currency.

Believing that prices must rise at any cost because, if not, consumers may postpone their purchasing decisions is generally ridiculous in the vast majority of purchasing decisions. It is blatantly false in a pandemic crisis. The fact that prices are rising in a pandemic crisis is not a success, it is a miserable failure and hurts every consumer who has seen revenues collapse by 10 or 20 percent.

Central banks need to start thinking about the negative consequences of the massive bond bubble they have created and the rising cost of living for the low and middle classes before it is too late. Many will say that it will never happen, but acting on that belief is exactly the same as the example I gave at the beginning of the article: “We haven´t crashed yet, let´s accelerate.” Reckless and dangerous.

Inflation is not a social policy. It is daylight robbery.

Sound Money Is Key to Defending Our Liberties

By Thorsten Polleit from: Mises Institute

The title of this article epitomizes what the Austrian economist Ludwig von Mises (1881–1973) called the “sound money principle.” As Mises put it:

The sound-money principle has two aspects. It is affirmative in approving the market’s choice of a commonly used medium of exchange. It is negative in obstructing the government’s propensity to meddle with the currency system.

And further:

It is impossible to grasp the meaning of the idea of sound money if one does not realise that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of right.

Mises tells us that sound money is an indispensable line of defense of people’s liberties against the encroachment on the part of the state and that sound money is a kind of money that is not dictated by the state but is chosen by the people in the free marketplace. The world we find ourselves in is a rather different place. Our monies—be it the US dollar, the euro, the Chinese renminbi, the yen, or the Swiss franc—represent fiat currencies, monopolized by the state.

Fiat money is economically and socially destructive—with far-reaching and seriously harmful economic and societal consequences, effects that extend beyond what most people would imagine. Fiat money is inflationary; it benefits a few at the expense of many others; it causes boom-and-bust cycles; it leads to overindebtedness; it corrupts society’s morals; and it paves the way toward the almighty, all-powerful state, toward tyranny.

Central Banking Is Marxist
It is certainly no coincidence that “the state” has been expanding ever since the world adopted an unfettered fiat money regime back in the early 1970s, and that as a result individual liberties and freedoms have been under pressure ever since. The state feeds itself on fiat money. It simply issues new debt, which is then monetized by the its central bank, which is at the heart of the fiat money regime.

Perhaps you will find it surprising that I believe that the concept of central banking is truly a Marxist concept. (I am not saying that central banking is only favored by Marxists. Not at all! There are also many other ideologies which approve of central banking.)

In their Communist Manifesto of 1848, Karl Marx (1818–83) and Friedrich Engels (1820–95) compiled a list of measures necessary to establish communism. Measure number 5 reads as follows:

Centralisation of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.

Against this backdrop there should be no doubt that once the state has become the absolute ruler of fiat money, the door is open for it to grow bigger and bigger, eventually turning into the dreaded deep state. And the deep state, as we know well from history, has little regard for individual freedoms and liberties.

Making Money Great Again: Returning to Sound Money
What needs to be done? Well, the challenge at hand is “Making Money Great Again”! This requires, first and foremost, ending the state’s money production monopoly and opening up a free market in money. A free market in money means that people have the freedom to choose the kind of money they wish to use and that people have the freedom to provide their fellow men with alternative goods that may serve them well as money.

As things stand, however, a final solution to the “money problem” has not arrived yet—even considering the emergence of the cryptocurrency space. This is because the financial intermediation problem is still unsolved in the cryptocurrency ecosystem; we will come back to this issue in a moment.

But first let us address the question: How can we get from a state-controlled fiat money regime to a free market in money?

The first strategy is monetary enlightenment—informing the widest possible audience about the evils of fiat money and how it affects their personal lives, families, and communities. This also includes explaining to people that there is a superior and practicable alternative to a fiat money regime, namely a free market in money.

The second strategy is making progress in the field of alternative currencies and payment systems, especially in terms of technological disruptions and their economic profitability. This is the activity space for those among us who are propelled by entrepreneurial spirit.

The Limits of Cryptocurrency
The cryptocurrency community, the bitcoin community in particular, and also precious metals–based payment system providers have been making some headway in this area in recent years, but unfortunately victory has not yet been achieved.

For instance, bitcoin still has some scalability and performance issues. Currently, the bitcoin network settles a peak of around 350,000 transactions worldwide every day, and given its present configuration, it is presumably running at almost full capacity. By comparison, the German fiat money payment system alone processes more than 75 million transactions on average every business day. From the payment processing viewpoint, bitcoin cannot outshine fiat currencies yet.

What is more, a currency in a modern economy must provide for the possibility of financial intermediation (an issue I mentioned earlier). People typically demand payment or storage services for their money, or they want to lend and borrow money—irrespective of the kind of money they actually use. Often peer-to-peer is not enough, a third party is required.

Providing intermediation services outside existing state regulation is difficult. In fact, it would put an upper limit on the financial sophistication of any cryptocurrency. This is a heavy drag on their competitiveness compared to fiat currencies. And if a cryptocurrency comes out into the open space, it will have the state breathing down its neck, drowning it in business-destroying regulations and restrictions. Because the financial intermediation problem is still unsolved, one has reason to remain skeptical that—given the current circumstances—existing cryptocurrencies will succeed in pushing aside the state and replacing its fiat currency just like that.

Precious metals suffer from similar problems. In many countries, the state subjects gold and silver to value-added taxes and/or capital gains taxes. This makes them uncompetitive versus fiat currencies in terms of using them in daily transactions.

The Key to Free Market Money Is Deconstructing the State
In fact, is it possible that a free market in money can ever emerge as long as there is the kind of state we know today? The state is, as most of you probably know, the territorial monopolist of ultimate decision-making with the right to tax its citizens. We can rightfully expect that this kind of state will do its best to crush any competitor to its fiat money and prevent a free market in money from emerging.

So if we want a free market in money, the sobering logical conclusion is this: we need to reform, to deconstruct, the state (as we know it today).

Now the uncomfortable truth is out, because the state is possibly the fiercest adversary you could choose. How can we hope to achieve victory?

Well, there is certainly no magic spell. One possible and straightforward strategy might be appealing to people’s inner self, and that is their right to self-determination.

The right to self-determination is inalienable and it is an indisputable truth. Each and every individual is the owner of his or her body and the owner of goods acquired in nonaggressive ways (without violating the physical integrity of someone else’s property). We cannot dispute these words without causing a logical contradiction.

The right to self-determination implies that the citizens of a state have the right (1) to make it known, by a freely conducted plebiscite, that they no longer wish to be members of the state and (2) to form an independent state or to attach themselves to some other state. In other words: the right to self-determination includes the right of secession, that is, people’s right to break up the big state and to deconstruct it into smaller units.

Smaller political units are less powerful, more peaceful, and free market oriented. They keep taxation low, or may even go without it and become wealthier. Just think of, e.g., Shanghai, Hong Kong, Switzerland, Liechtenstein, or Monaco. This is because small political units must compete for capital and talents with other political units. They must behave themselves nicely. Otherwise, people and capital will leave their territory. Given a great number of small political units, there is a good chance that some of them will allow for, even encourage, a free market in money, setting an example that creates emulators.

Conclusion
It is hard to say which route would be the most effective in “Making Money Great Again.”

Perhaps the cryptocurrency community will somehow succeed in ending the state (as we know it today), leaving a truly free market in money in its place.

In the meantime, however, it certainly would not hurt if we (1) kept educating the wider audience about what good money is and what bad money is and also (2) kept unmasking the state (as we know it today), showing that it is incompatible with and a violation of the inalienable right to self-determination of each and every human being.

In any case, it is of the utmost importance to wrest the money monopoly out of the hands of the state. Otherwise, there is indeed little hope that the free society (or what little is left of it) can survive.

(The complete article, with footnotes, is located here)

10 Myths About Government Debt

Antony Davies, Phd goes through a listing of 10 Myths about Government Debt. For future blog posts, I will attempt to expand on each of these 10 myths. This growing debt is a huge issue, not only for current generations, but for those to come in the future. As mentioned in the video, Dr. Davies does provide a “solution” to handle the Government Debt. It is a must see. Take copious notes.

Cheers,

Robert