Stimulus Doesn’t Always Stimulate – Pushing On A String

According to the dictionary,  stimulus is “a thing that rouses activity or energy in someone or something; a spur or incentive”.
Besides spur and incentive, other synonyms for stimulus are boost, impetus, prompt, provoke, etc.
Much discussion recently has centered on ‘stimulus’ checks to individual citizens and taxpayers. Within a nine-month period, two specific rounds of stimulus checks were issued.
The legislation that authorized the issuance of stimulus checks to individuals also included liberal increases in unemployment benefits and financial aid for small businesses.
The checks, increased unemployment benefits, and aid for small businesses are forms of financial stimulus; but, the legislation is referred to as an “economic stimulus package”.
The distinction between the terms financial and economic should not be overlooked.
The purpose of the financial incentives included in the legislation is to promote economic activity. It was a response to the horrendous decline in economic activity that was precipitated by the response to the Covid-19 pandemic.
Very literally, though, the financial incentives were an attempt to stave off economic collapse; or at least buy some time. This is true notwithstanding attempts by politicians of all stripes to justify the measures in more humane terms.

21st CENTURY – SLOW GROWTH, NO GROWTH

The first fifteen years of this century were spent in reverse and recovery modes. The trillions of dollars that have been created and spent were reactions to financial and economic catastrophe, which continue to increase in volatility.
Which brings us back to the title of this article. With artificial stimulants, such as certain drugs, there is an expectation of desirable positive effects from its use.
Over time, the positive effects of the stimulus become muted and lose their potency. It takes higher doses and more frequent use of the stimulus to create the same original results. Remember how long it took to bring the economy back to a level reasonably commensurate with its activity prior to the credit collapse in 2007-08?
Some were expecting an overwhelming inflationary surge due to the (at that time) historically large amounts of money and credit creation. Some even expected runaway inflation, but it did not happen.
Also, over time, the cumulative negative effects of the stimulus take their toll. For example, the Federal Reserve has been inflating the supply of money and credit intentionally for more than a century.
The cumulative negative effects of that intentional inflation have resulted in a loss of purchasing power for the US dollar of ninety-nine percent.
An excellent example of the declining effects of continued money and credit creation by the Fed is seen on the chart (source) below:

DEBT TO GDP RATIO HISTORICAL CHART

debt-to-gdp-ratio-historical-chart-2021-01-12-macrotrends

It is clear on the chart that each dollar of increasing debt provides for less and less economic output (GDP, Gross Domestic Product).  The results of debt stimulus for the economy have grown weaker and weaker since 1980.
Noteworthy is the fact that it now takes more than one dollar ($1.27 in October 2020) of debt to produce one dollar of GDP. Anything in excess of 100% (a 1:1 ratio Debt/GDP) is a losing effort; the losses are growing.

PUSHING ON A STRING

Sometime after the distribution of stimulus checks to individuals last April and since then, there has been a growing resistance to sending out additional stimulus checks. When the recent checks were authorized, the amount ($600) was significantly smaller than the first ($1200) checks.
Some of our representatives did not think that the first round of stimulus checks to individuals had their desired impact. It was hoped, and intended, that recipients would spend the money; but evidence indicated that much of it was held or saved.
The huge amounts of dollars and cheap credit gifted to us by the Federal Reserve and the US government seem more illustrative of emergency patchwork rather than stimulus. We should all hope it works as good as Flex Seal.

Stocks, Bitcoin, Gold – How Much Are They Worth?

For the entire year 2020, however, stocks were up a more modest sixteen percent (S&P 500) and only seven percent for the Dow Jones Industrial Average.

However, the outsized performance of the Nasdaq was even more apparent on a full calendar year basis. For 2020 the Nasdaq was up forty-three percent. Relative to its peers, the average Nasdaq stock was up more than three to four times as much as non-Nasdaq stocks.

Maybe more impressive is that the Nasdaq Composite gain of forty-three percent in 2020 came on top of a thirty-five percent gain in 2019. The Nasdaq’s total gain for the full two years was ninety-three percent.

The last time we saw increases in back-to-back years of similar or greater magnitude for the Nasdaq was in 1998 (up 39%) and 1999 (up 85%); for a two-year gain of two hundred fifty-seven percent.

Those euphoric years were followed by three years of negative results: 2000 (down 39%), 2001 (down 21%), and 2002 (down 31%). At one point, the Nasdaq had dropped eighty percent from its peak in 1999.

The three-year cumulative loss for the Nasdaq of sixty-seven percent would seem to say that stock prices had increased beyond any point that was reasonable. But what is reasonable?

Have we reached that point again for the Nasdaq and stocks in general? What about other assets (bitcoin, gold, etc.)? Further, how much is anything worth?

WHY PEOPLE BUY STOCKS

People invest in stocks because companies, in general, provide goods and services of a productive nature that add value to our economy –  today, and in the future. Over longer periods of time, it becomes value added. Which means that there can be profit potential, even without price discrepancies.

We place a value on things by setting a price for them. A new dress, a haircut, our homes, stocks, etc., all have a perceived value that is measured by the price affixed to it.

The price of a specific item or asset at any given time is a reflection of varied opinions. Some are based on fundamentals, some are based on technical factors. Sometimes there don’t seem to be any reasons of consequence for the price quoted (Bitcoin?).

The combination of all the opinions, and the resulting expectations (some expect the price to go up, others expect it to go down or remain the same), plus all of the other known factors at the time that might possibly impact the price, provide us with the clearest possible indication of current value for the item in question: its market price.

An item’s value comes from its use and consumption, or the added convenience, efficiency, comfort, satisfaction, and complimentary benefits to our standard of living.

So, the question is “Are stock prices today a reasonable indication of their true value; or are they underpriced/overpriced?”

Probably overpriced, given that most of the impetus behind their recovery since April was due to Fed largesse. Stock fundamentals have not improved since last year at this time. If anything, they have deteriorated.

BITCOIN AND GOLD

Owning Bitcoin (see Does Bitcoin Have Value? Is It Money?) is not a matter of investing. It is synonymous with bubbles and gambling. Whatever value (a process for the private transfer of money) there is has been obscured by fever-pitch price speculation.

It may seem trite and it has been noted by others already, but Bitcoin seems to be the 21st Century’s version of tulip bulb mania. The price for Bitcoin is likely far ahead of any imputed value.

Gold is real money (see Gold Is Real Money). Its value is in its use as money. That value is constant and unchanging.

Its price in dollars is a reflection of the value of the US dollar. Since the dollar has been in a long-term decline for more than one hundred years, the price of gold has risen commensurately over that time.

Currently, gold is fully-priced and reflects a ninety-nine percent loss in the US dollar’s purchasing power over the past century.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT  and  ALL HAIL THE FED!

Consumer Prices Are Not Reflecting Higher Inflation; Neither Is The CRB

When the Federal Reserve responded to the financial crisis of 2007-08 with hugely unprecedented monetary expansion efforts, many thought that it would lead to runaway inflation and collapse of the U.S. dollar. It didn’t; and the expected higher inflation rates did not occur.

What did happen is that consumer prices remained reasonably stable and we even saw lower prices in 2009 and 2015.

Noteworthy is the fact that the CPI rate of increase has trended lower ever since the summer of 2008. In other words, since the Fed began large scale bond purchases in 2008 and engineered lower interest rates, the expectations for much higher rates of inflation have gone unfulfilled.

That seems to be the case now, as well. Even in light of huge money creation by the Fed during 2020, consumer prices are not signaling inflation to any worrisome degree, if at all.

Inflation rates have actually been trending down for more than forty years. The last double-digit rates of increase for the CPI occurred in 1979, 1980, and 1981. Also, the average annual rate of inflation has declined in every decade since the 1970s.

COMMODITY PRICES DOWN FOR 2020

Commodity prices are a barometer for higher rates of inflation. Below is a chart of the Commodity Research Bureau Index (CRB) reflecting price action for the past twenty-five years…

After peaking in 2008, the CRB has trended down in a series of lower highs and lower lows.

Some facts for consideration:

1. At its low point earlier this year in April, the CRB was down seventy-five percent from its peak in 2008.

2. Even though commodity prices have increased significantly since April, the CRB is still down thirteen percent for 2020.

In general, higher prices are a reflection of the loss in purchasing power of the US dollar. The loss in purchasing power of the US dollar and the higher prices are the effects of inflation.

At this point in time, both the CPI (consumer prices) and the CRB (commodity prices) indicate that the effects of inflation are not meeting expectations. No wonder the Fed is concerned. The money drug is losing its potency.

(Also see Fed Inflation Is Losing Its Intended Effect)

Kelsey is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Bitcoin And Beyond – Price Vs. Value

Today’s investor seems oblivious to whatever it was that brought us to this point in world civilization.  Economic fundamentals have taken a back seat to fantasy and hyperbolae.

Case in point: Bitcoin

When fantasy takes hold, the sky is the limit. There is no logic to the price that bitcoin and other cryptocurrencies command. The arguments made in favor of these supposed “monies of destiny” may sound plausible to some. But the expectations for price exceed all fathomable rationale.

The problem is that most investors today do not understand the difference between price and value. As much as this is true of investments in general, it is exceptionally true of Bitcoin.

What is the value of a Bitcoin? Is it the gold content of a single coin at the center of a labyrinth of computerized code? Or is it something else?

In order to determine a value for something, we must be able to define what it is we are valuing. For example, a share of stock in Amazon (or any other company) represents a proportionate ownership in a business operation.

Expectations for growth and profitable operation of the company are based on need and desire for the service and convenience that it offers to consumers. The more successful and profitable the company is in meeting those expectations, then the potential exists for its stock price to rise accordingly.

What is it that investors think they are purchasing when they invest in Bitcoin, or other cryptocurrencies? Some argue that Bitcoin is a new form of money, but that is not the case.

In order to be used as money, Bitcoin must be able to function as a medium of exchange and a measure of value.

“Bitcoin is a digital creation which has no value in and of itself. As such, it can never be used as a measure of value for anything else. Think of it this way: How many Bitcoins is your house worth? How many Bitcoins will your next car cost? If you can answer those questions without any calculations, you will know that Bitcoin has become ‘a generally accepted form of money’.” (see Does Bitcoin Have Value; Is It Money?)

Bitcoin is a process for the transfer of money. It is the transfer process and its privacy which give value to Bitcoin and other cryptocurrencies. The problem is to determine the real value of that transfer process and affix a reasonable price to it.

I don’t see any fundamental difference between Bitcoin and other cryptocurrencies. It is probably more a case of being the first one in the pool. You enjoy it all to yourself and control things – until others start showing up.
A bigger issue might be “what do people really think Bitcoin is and why are they buying it?”. Some people are buying it because the price is going up; not for its fundamental value as a process for transferring money between buyers and sellers privately.
If analysts and investors have any inkling at all as to the true fundamental value of Bitcoin and other cryptocurrencies, then the price differential between Bitcoin and its competitors will eventually narrow considerably. Also the overall valuations will come down.
Price action in Bitcoin is indicative of a desire to own what is going up right now; and hope that the fundamentals justify the gamble.
Various forms of money are NOT investments. Money is a medium of exchange and a measure of value. Bitcoin cannot be a measure of value until goods and services have their own Bitcoin price. 
In addition, real money, i.e., gold, is a PROVEN store of value. Bitcoin cannot be a store of value because it has no intrinsic value and no history to support that kind of claim. For that it would take at least several centuries. 

 

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT  and  ALL HAIL THE FED!

Big Down Day For Gold And Silver; More To Come?

The movement in both gold and silver is evident of a decided shift in trend direction to the downside. What happens after prices return to their recent lows could prove interesting; or downright discouraging if you are expecting a resumption of the trend to higher prices.

Silver at its recent reaction high point yesterday reached $24.80. At that point it was still down $5.00 per ounce from it August intraday high of $29.80. When silver touched $21.80 last week it represented a loss of more than twenty-five percent from its August peak.

Gold’s percentage changes are more moderate but still, at its recent low of $1760, gold was down three hundred dollars per ounce from its August peak.

So, what can we expect ahead? Below is a chart (source) of silver prices for the past one hundred years.

Between July 1982 and April 1983, a period of only nine months, the price of silver tripled from just under $5 per ounce to almost $15 per ounce.  Can you imagine the froth associated with that move?

Silver had fallen ninety percent from an intraday high of $49 per ounce to an intraday low of $4.90 per ounce over the preceding two years. What seemed like the beginning of a new uptrend in silver prices was not that at all, however.

After topping at $14.67 per ounce, the price of silver began a three-year slide culminating with a low of $4.85. That decline completely erased the tripling of prices that had occurred.

Then, silver began another “new uptrend” which took prices to almost $11.00 less than a year later. It didn’t last long, though, as silver almost immediately began moving lower. Four years later in 1991, silver had broken to new subsequent lows at $3.55.

Another example of silver’s “flash-in-the-pan” performance happened more recently. After reaching its price peak of $49 in April 2011, silver fell to a low of $13.70 in December 2015.

Barely seven months later, in July 2016, silver was up to $20.70, an increase of more than fifty percent. Over the next four years, silver fell forty-three percent to a subsequent new low of $11.77 in April 2020.

WHAT ABOUT GOLD?

Below is a chart (source)of gold prices for the past one hundred years…

Movements in gold prices are seemingly similar to silver. Gold prices, however, do not reflect the wide-eyed fantasy that underlies most of the the bullish sentiment for silver.  Higher gold prices reflect the ongoing loss in purchasing power of the US dollar, which takes place over decades; therefore, changes in its price are much less extreme than those in silver.

When both gold and silver hit recent highs a few months ago, gold had exceeded its 2011 peak by about nine percent. Silver, on the other hand, was still down forty percent from its 2011 peak.

Historically speaking, silver’s upward price spikes have been met with equally violent reactions to the downside. There are no fundamentals to support expectations for something different this time.

Since higher gold prices are indicative of declines in US dollar purchasing power that has already occurred, then there must be obvious and decisive weakness in the US dollar going forward, in order to expect higher gold prices from this point.

For a look at all of today’s economic events, check out our economic calendar.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT  and  ALL HAIL THE FED!

Silver is Trapped Below $30

Below is a chart (source) showing a 10-year history of silver prices. The prices are adjusted for inflation…

As you can see, the price of silver today is well below its peak price in 2011. At $24 per ounce, silver is down fifty-six percent since August 2011.

When the silver price collapsed almost forty percent in just a few weeks earlier this year, its price briefly broke below $12 per ounce. That was its lowest point since the August 2011 peak. Silver then rallied strongly to new recovery highs of just under $30 per ounce, at $29.26.

The $30 stopping point for silver was not random or arbitrary.

The chart (source) below is a 100-year history of silver prices. The prices date back to 1915 and, again, are adjusted for inflation…

The dashed line on the chart at $30 per ounce shows that nearly all of silver’s price action for the past century has been below that mark. Of the 105 years shown, the silver price only traded above $30 on two occasions totaling slightly more than four years.

If you are bullish on silver, what is it that you expect to change so radically in the future that will wipe away the past century of consistently lower prices for the white metal?

We may very well have seen the lows for silver at $11.77 earlier this year. but consider this.

In February 1991, silver traded at $3.55. At that price, it had fallen ninety-three percent from its high of $49.45 in January 1980.

The $3.55 price proved to be the absolute low for silver at that time and it traded as high as $7.81 in 1998. Unfortunately, it also traded as as low as $4.07 in 2001, which is ninety-two percent less than its peak more than twenty years earlier.

The implication is worse when you look at the chart immediately above. The nominal price of $3.55 was the absolute low, but the $4.07 inflation-adjusted price in 2001 was cheaper by seventeen percent – nearly eleven years later.

When silver dropped to $11.77 in March this year, that price was silver’s lowest since its peak in 2011. If you bought at that price, congratulations! You have doubled your investment in six months time. But what do you do now?

Except for the two brief occasions noted above, silver has traded below $30 for more than 100 years. There is very little profit potential for silver at its current price and plenty of room on the downside.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

RESERVE BANKING – THE ELEPHANT IN THE ROOM 

The expression “elephant in the room“…

“…an important or enormous topic, question, or controversial issue that is obvious or that everyone knows about but no one mentions or wants to discuss because it makes at least some of them uncomfortable or is personally, socially, or politically embarrassing, controversial, inflammatory, or dangerous. (source)

Lets’s start with some history. The following is an excerpt from an earlier article of mine…

The warehouse proprietors (‘bankers’) decided they needed to find a way to increase their profits. Earning fees from their depository and safekeeping services wasn’t enough. Since most of the gold remained in storage and most transactions involved exchange or transfer of paper receipts for the gold on deposit, they decided to issue ‘loans’ of the gold/money to others and charge interest. The cumulative amounts of gold loaned out could not exceed the amount of gold held in storage. And, hopefully, not too many depositors would ask to redeem their physical gold at the same time. 

It seemed to be a workable system. But apparently the ‘bankers’ were not content. They soon started issuing more loans/receipts for gold which did not exist. Of course they saw no need to inform anyone of their actions and the receipts still stated that they were redeemable in fixed amounts of gold. And when someone wanted to take possession of their gold on a physical basis they could still do so. Up to a point. (see History Of Gold As Money)

If any of this sounds familiar to you, it should. Fractional-reserve accounting by warehouses/banks was a starting point for the credit expansion that now funds our world economy.

As we become more dependent on credit, we also become more vulnerable to events similar to that which happened twelve years ago. Another credit collapse isn’t just a possibility, nor is it only highly likely. Rather, it is inevitable.

A PRIMER ON FRACTIONAL-RESERVE BANKING

On a personal, retail level, here is an example of how fractional-reserve banking works today:

Your brother-in-law pays you the thirty thousand dollars that he borrowed three years ago. You decide to put the money in a time deposit (one year CD, etc.) at your bank. At the end of the day when your banker balances his books he finds that deposits at the bank exceed the funds which are currently loaned out/invested by an amount in excess of the ten percent US Federal Reserve requirement.

And since that surplus amount is now available for new loans and additional investments, your bank’s loan committee and investment department are busily engaged in efforts to allocate those funds on a – hopefully – profitable basis. After due consideration, it loans twelve thousand dollars to Jane, who wants to buy a car and fifteen thousand dollars to a local entrepreneur.

Jane pays the twelve thousand dollars to Mr. Smith who is selling the car to her (private transaction). Jane drives away in her new car and Mr. Smith deposits the money in his bank which subsequently loans out ten thousand eight hundred dollars to a local dentist who is expanding his practice.

The local entrepreneur deposits the fifteen thousand dollars in his business account which is at the same bank that loaned him the money. Voila! The same bank which made the two loans now has fifteen thousand dollars in ‘new’ deposits of which it can lend out or invest another thirteen thousand five dollars. It promptly does so.

Where are we now? The original deposit of thirty thousand dollars has  grown to $81,300! How? By lending/investing a majority of the same money over and over again.

US Federal Reserve regulations require banks to keep on deposit an amount of money equal to ten percent of the deposits they take in (checking, savings, CDs, etc.). The remaining ninety percent can be loaned out or invested. (There are exceptions, allowances, and variations to the requirements depending on deposit type, amount, etc.  There are also ways to meet the requirement other than just holding cash reserves.)

Once the money is deposited, the process is ongoing and continually adds to the amount of dollars in the system.

TOO MANY BOBS

Here is a story to help illustrate the risk involved in fractional-reserve banking.

Bob has ten thousand dollars that he doesn’t know what to do with so he gives it to his best friend, Sam, for safekeeping. Bob tells Sam that he does not expect to need the money anytime soon, but he may want to get some of it from time to time. And, of course, if the unexpected happens (it always does) he may need to have access to more – or all – of it.

Since Sam is a specialist in financial matters and has considerable investment expertise he decides to invest four thousand dollars of Bob’s money in US Treasury notes. Sam also loans five thousand dollars to a friend of his who is a homebuilder. Sam will earn interest on the construction loan in addition to a modest return on the US Treasury notes he purchased. Not bad. Especially since he does not have to pay Bob more than a pittance for ‘watching’ his money for him. Maybe Bob should pay Sam something for the good job he is doing (think negative interest rates).

Sam has decided to keep one thousand dollars of Bob’s money available in case it is needed. Good thing, too. After one week, Bob asks Sam for one thousand dollars of his money back in order to take care of some ‘unexpected’ expenses. Sam promptly pays Bob his one thousand dollars.

Sam now feels that the likelihood of Bob needing more of his money anytime soon is a remote possibility. Hence, he pledges the US Treasury notes as collateral and borrows four thousand dollars. He keeps one thousand in cash and loans another three thousand dollars to his friend, the home builder.

Bob sees the success the builder and others are having and decides that he wants to invest his remaining nine thousand dollars in real estate. So he goes to see Sam.

Sam only has one thousand dollars of Bob’s money available and gives it to him right away. He tells Bob that he will have the rest of his money shortly.

Sam calls his builder friend right away. The builder tells Sam that a couple his homes have not sold yet and the money to repay Sam isn’t available until the homes are sold.

Sam could sell the four thousand dollars in US Treasury Notes in order to access part of the money needed to pay Bob. But the proceeds would have to be used first to pay off the loan for which they are pledged as collateral. Since the loan amount is nearly identical to the market value of the US Treasury notes, no additional funds would be available.

Bob, meanwhile, decides that he won’t start investing in real estate as he had planned. Therefore, he won’t need the rest of his money right now.

Except that when his wife gets home from work, he learns that one of their kids needs braces on her teeth. Also, the interest rate reset on their home mortgage has taken effect.  The new monthly payment will increase by several hundred dollars. He decides that he might need to draw from his money (that Sam has charge of) after all.

When he calls on Sam the next day, Bob is shocked to find out that his money is not available. And Sam doesn’t know when it will be available.

Do you see the risk in fractional-reserve banking? If too many Bobs want their money at the same time or can’t make their mortgage payments, what do you think will happen?

CREDIT ADDICTION STARTS WITH US TREASURY

All of the credit expansion explained in the illustrations above is after the fact. The original credit expansion starts with the United States Treasury.

You may have heard the term “robbing Peter to pay Paul”. Among other things, the meaning is “to take from one person or thing to give to another, especially when it results in the elimination of one debt by incurring another. ” (source)

This is how US Treasury debt is paid. New Treasury securities are issued to pay off those that have matured.

The total debt continues to grow because it is never paid off; only replaced with more debt. In addition, new debt offerings must be enough to pay interest on existing debt and continue to fund day-to-day operations of the government.

Referring to fractional-reserve banking, fund manager and investor Bill Gross said:

“It still mystifies me…how a banking system can create money out of thin air, but it does. By rough estimates, banks and their shadows have turned $3 trillion of “base” credit into $65 trillion + of “unreserved” credit in the United States alone…”  

Mr. Gross’s quote above is from several years ago. The numbers today are so much larger as to be nearly unimaginable. And the risk of systemic financial crisis looms ever greater.

Fractional-reserve banking is ongoing.  It is at the core of the Federal Reserve’s efforts to expand the supply of money and credit. Hence, the number of US dollars continues to increase and their value continues to erode.  Their value at any given time is always suspect.  How can we possibly know what a dollar is worth when there is an unlimited supply and no constancy?

What is truly amazing is the extent to which our banking system can hold itself together.  And, to whatever extent the Fed’s efforts have kept the system from imploding, it is noteworthy that we continue to look to and depend on the perpetrator of the crime to rescue us. Even worse, the solution(s) offered are the very same actions that led to the current predicament.  Spend more and borrow more.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

A Depression For The 21st Century

The Depression Of The 21st Century will likely end up being the new singular event of discussion and comparison for all financial and economic catastrophes. Questions of how much worse and how long it will last are difficult to answer. Predictions about the type and strength of potential recovery could be premature.

THE GREAT DEPRESSION

After the stock market crash in October 1929, the situation was bleak. Formerly wealthy investors literally lost everything. Unemployment surged, especially with the layoffs on Wall Street.

The onset of the new year, 1930, brought new-found optimism. Banks and brokerage firms began hiring again, confidence increased and stocks recovered a majority portion of their previous losses.

Unfortunately, things didn’t get better. The new-found optimism was lost, stocks collapsed again, and the layoffs continued. Over the next two years, stock prices declined by more than ninety percent.

What if something like that happened today? A similar percentage drop in the Dow Jones Industrial Average would take it from 29,000 to 2900. There is not much allowance for confidence to reassert itself in the face of stocks dropping to a level last seen in November 1991. A nearly 30-year period of higher and higher stock price gains would be wiped out in two short years.

Taking only two years to find a bottom might be the best news. It took the stock market (DJIA) twenty-three more years (twenty-five years in all) to regain its all-time price peak from August 1929. That is in nominal terms. In inflation-adjusted terms, the stock market did not regain and exceed its previous all-time high until May 1959 – thirty years after the crash.

As bad as the stock market numbers sound, other events and circumstances reflect a clearer picture of the financial and economic turmoil which followed the crash.

The ranks of unemployed grew to more than twenty-five percent, then declined to approximately twenty percent and remained at that level until dropping sharply with the concurrent rise in manufacturing and industrial activity associated with the United States involvement in World War II.

Homeless people on the streets, long lines at soup kitchens, beggars, and tent cities were obvious indications of the depressed state of the economy. Week after week, month after month, year after year, the Great Depression lingered on.

The conditions accompanying the bleak economic environment were exacerbated by bank failures. People who thought they had some money safely deposited at their local building and loan institution or commercial bank saw their hopes and dreams dashed. Bank failures became an almost common threat to financial stability.

How much more difficult would it be for us today to deal with similar events and circumstances? Probably much more difficult. We might not be able to cope with it.

As a society today, we are far removed in experience and memory from hard times. We have become accustomed to being taken care of. Part of that coddled feeling is due to the extreme level of government guarantees and our expectations that ‘Big Brother’ will always be there to do something.

Investors and consumers like guarantees; and they want to see evidence that a guarantee is more than just an empty promise.

During the 1930s, with the alarming numbers of bank failures and the Great Depression at its full-blown worst, confidence was almost nonexistent. Bank runs and depressed stock prices had created an atmosphere of financial panic.

President Roosevelt’s answer was a bank “holiday”. Not too long afterwards, Congressional legislation authorized the formation of the Federal Deposit Insurance Corporation (FDIC) and the Federal Savings And Loan Insurance Corporation (FSLIC).

Use of the terms ‘federal’ and ‘insurance’ in the names of the new institutions was meant to help restore lost confidence and maintain it. Apparently it worked. Confidence in the banks improved.

The money wasn’t really there to back up the guarantees. It was an empty promise, but people felt better; and that seemed to be good enough. Fragile as the banking system was – and still is – people preferred having their money in the bank.

That preference did not in any way, shape, or form, translate to investor participation in the stock market. Still reeling from the collapse in stocks, people would sooner lend or give money to family members. If someone had any money to invest they usually bought bonds. It took almost two generations for stocks to become fashionable again.

NO RESERVATIONS FOR TODAY’S STOCK INVESTORS

The almost casual attitude towards selloffs in the stock market that exists in this century is the result of assuming that the market will right itself and go right back up in short order. Or, if things are serious enough, the Federal Reserve Cavalry will ride to the rescue – every time.

The expectation that the Fed will always bail out the banks and the financial markets has muted the word ‘caution’ when it comes to investing. Some people seem to fancy themselves as smart investors because they bought stocks this past spring and are now feeling the euphoria from the effects of the Fed’s injection of the money drug into their financial veins.

We seem to have forgotten how difficult it was to extricate ourselves from a similar mess little more than a decade ago. The financial markets may have recovered more quickly this time but the economic backdrop is more characteristic of a patient that is “terminally ill but resting (un)comfortably”.

The Fed is very aware of how precarious the situation is. They have pulled out all the stops in their quest to “bring back inflation”. They are fighting an uphill battle. The chart below shows the declining effects of the inflation created by the Fed over the last half-century…

Capacity Utilization Rate – 50 Year Historical Chart

This chart shows capacity utilization back to 1967. Capacity utilization is the percentage of resources used by corporations and factories to produce finished goods.

As you can see in the chart, the capacity utilization rate has been trending down in regular stair-step fashion for more than fifty years. A possible reason could be an increase in the efficient use of the available resources. Rather, though, the declining capacity utilization rate is more reflective of an ongoing decline in the demand for finished goods.

Neither of those reasons are consistent with the expectations from ongoing inflation that the Fed creates. The actual results are indicative of a multi-decade decline in the demand for finished goods; a long-term slowdown in economic activity.

Here is another chart. This one shows the relationship of gold’s price to the monetary base…

Gold’s Price To The Monetary Base – 100 Year Historical Chart

In the chart immediately above, we see that the ratio of gold’s price to the monetary base is in a long-term decline that has lasted for over one hundred years. This seems somewhat contradictory when compared to what some think they know about gold.

Gold’s higher price over time is a reflection of the ongoing decline of the U.S. dollar. The decline (loss of purchasing power) in the value of the U.S. dollar is the result of the inflation created by the government and the Federal Reserve.

The increase in the monetary base is an indicator of the extent to which the government and the Fed have debased the money supply. The continual expansion of the supply of money and credit leads to the loss in purchasing power of the dollar.

Some gold analysts and investors believe that increases in the monetary base lead to similarly proportionate increases in gold’s price. But that is not what is happening.

Gold’s price increase for the past one hundred years does not correlate with the increase in the monetary base. The price of gold reflects the actual loss in purchasing power of the U.S. dollar.

Inflation created by the Fed is losing its intended effect. It’s resulting effects on the economy are similar to those of drug addiction. Over time, each subsequent fix yields less and less of the desired results.

THE FED KEEPS TRYING

Jerome Powell’s announcement of a ‘major policy shift’ is borne out of fear and frustration. The intention of moving towards “average inflation targeting” while allowing inflation to run higher than the standard 2% target is meaningless.

If you continually fall short of your original 2% target, how can you possibly “allow inflation to run higher”? That is like saying that your car will only go forty mph but you want it to go fifty mph. Nothing you have done so far has been successful in getting your car to go fifty mph. As a result, you announce that you are going to allow you car to go sixty mph for awhile. Huh?

Mr. Powell’s statement is an admission that the Fed has lost control. This does not mean that they necessarily had much control over things in the past, either; but the Fed definitely can influence the financial markets. For example…

“…as the Fed slashed interest rates to nearly record lows from 2001 until mid-2004, housing prices climbed far faster than inflation or household income year after year. By 2004, a growing number of economists were warning that a speculative bubble in home prices and home construction was under way, which posed the risk of a housing bust.” (source)

Fed Chairman Alan Greenspan’s response to the potential threat of a housing bust was that housing prices had never endured a nationwide decline and that a bust was highly unlikely.

Even after the fact, during his testimony before the House Committee on Oversight and Government Reform, Greenspan referred to his own reaction to the credit crisis and its economic destruction as one of “shocked disbelief”. The former Fed chairman is blamed by some for the credit crisis of 2007-08.

The Federal Reserve has a history of implication regarding causes of financial and economic disaster; and, on occasion, they have admitted their part:

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”…Remarks by Governor Ben S. Bernanke (At the Conference to Honor Milton Friedman, University of Chicago -Chicago, Illinois November 8, 2002)

Three years later, Mr. Bernanke had succeeded Mr. Greenspan and was at the helm as Chairman of the Federal Reserve when storm-tossed seas amid waves of financial debt threatened to destroy the ship completely – again.

I wonder if Mr. Bernanke regrets his public admission in behalf of the Federal Reserve; he seemed to be in a hurry to leave his post at the end of his initial term as Chairman.

As The Depression Of The 21st Century unfolds, here are some charts of various economic indicators that bear watching…

Continued Jobless Claims Historical Chart

The chart above shows that the current level of continued jobless claims is twice as high as it was at its peak in June 2009; and that is after declining forty percent from its peak earlier this year in April.

Housing Starts Historical Chart

The above chart of Historical Housing Starts puts into perspective the action and attention in today’s market for new homes. It is true that housing starts are nearly back to their peak from just before economic fallout from the Covid-19 response. Nevertheless, they are still thirty percent lower than their peak in 2006 prior to the mortgage crisis associated with the Great Recession. In addition, the activity level of new housing starts for the past decade is lower than any decade as far back as the 1960s.

Durable Goods Orders – Historical Chart

As the above chart shows even at their post-pandemic recovery highs, durable goods orders are still lower than at any other point dating back to the early 1990s (the exception being the brief spike downwards in 2009).

5 Year 5 Year Forward Inflation Expectation

The chart above measures the expected average inflation rate over the five-year period that begins five years from today. Expectations for the future rate of inflation continue to decline and reached their lowest point since December 2008, and lower than any other point in this century.

Expectations for lower rates of inflation are consistent with the trend of actual rates of inflation shown on the chart below…

Historical Inflation Rate by Year

Inflation rates in this century are lower than any comparable period of time going back to the 1950s-60s.

We spoke earlier in this article about declining demand for finished goods. Raw goods have been affected by lack of demand, too. One of these is crude oil.

Below is a chart showing the phenomenal increase in oil reserves that has occurred over the first two decades of the 21st Century…

U.S. Crude Oil Reserves – 110 Year Historical Chart

The huge increase in crude oil reserves depicted above (May 2008 – current) corresponds perfectly with the huge decrease in the price of oil over that same time period.

In May 2008, crude oil peaked at $145 bbl. In March of this year, it posted a low price of $11 bbl. There are reports that the immediate spot price for crude oil on tankers and ready for delivery actually approached zero. However, $11 bbl still represents a decline in its price of ninety-two percent.

Demand in luxury goods markets has suffered, too. The World Gold Council announced that jewelry demand in the U.S. fell 34%, compared to the second quarter of 2019; and for the first six months of the year jewelry demand fell 21% to an eight-year low.

The World Gold Council said that jewelry demand also fell to historic lows in European markets, dropping 42% in the second quarter and for the first half of 2020 was down 29%.

CONCLUSION

The upshot of all this is that the effects of inflation are growing more muted over time. More and more stimulus has less and less impact.

Also, the demand for money is increasing. People need money – not more credit. Inflating the prices of financial assets might make it look like things are getting better, but the reality of it all is that while financial asset prices recover and go to new highs, the economy never regains its full health.

The relative difference between stocks at all-time highs and the current state of the economy is growing larger. Some might think that higher stock prices are an indication of expectations for the eventual full recovery of the economy; but that is not the pattern of the economic cycle this century.

For the past twenty years, and longer according to some of the charts above, economic activity is stagnating and weakening. Each bout with financial catastrophe leaves the economy weaker overall, and it never fully recovers. It just continues to muddle along.

Wall Street, the banks, and some investors seem to do well enough; but the comfort and overall good feelings associated with a rising stock market seem disproportionate to the disappointing level of well-being and optimism emanating from the general public and small businesses.

At this time, the economy is a better indicator than stocks and bonds (house prices, too) of our financial health. We are currently in poor financial health and before we can get better, we will experience a healing crisis of immense proportion. (also see Supply And Demand For Money – The End Of Inflation?)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT

Goldman Sachs Gold; Buffett Sacks Goldman

Is Ms. Mossavar-Rahmani not aware that the U.S. dollar has already been debased by ninety-nine percent? And, that gold at $2000 per ounce (a one-hundred fold increase from $20 per ounce) already reflects that debasement?

On the other hand, Mossavar-Rahmani is correct in saying that gold isn’t a great deflation hedge. She also said that the case for higher gold prices hinges on the expectation that current U.S. dollar weakness will lead to something more severe; including a possible change in its role as the world’s reserve currency.

Since she does not share the expectation for severe U.S. dollar weakness going forward, it is not difficult to understand why she says gold has no role in the portfolio of wealthy clients:

So all this excitement and brouhaha about gold is not something that we buy into.”

DIFFERENCE IN OPINION AT GOLDMAN RE: GOLD

However, others at Goldman are “buy(ing) into” gold. Prior to the interview with CNBC, a team of commodity analysts at Goldman raised their 12-month forecast for gold to $2300 from $2000.

They cited “a potential shift in the U.S. Fed toward an inflationary bias against a backdrop of rising geopolitical tensions, elevated U.S. domestic political and social uncertainty, and a growing second wave of COVID-19 related infections”.

The expectation of higher prices for gold may or not be correct. Only time will tell. But the reasons cited for the expected higher prices have nothing to do with gold. They are false fundamentals. (see Gold – A Simpler And Better Explanation)

Maybe the experts in Goldman’s commodity department should have consulted Mossovar-Rahmani before increasing their price target for gold. She is correct that “gold is only appropriate if you have a very strong view that the U.S. dollar is going to be debased.”

In this case, we might add the words ‘further’ and more ‘rapidly’ to the end of her statement.  Those qualifying terms are necessary because gold’s price at $2000 fully reflects the effects of inflation that has already occurred.

Its price only moves higher after cumulative losses in U.S. dollar purchasing power become apparent; gold is not forward-looking.

The difference in opinion by fellow team members and experts at Goldman Sachs provides a backdrop for some other news about Goldman and gold.

BUFFETT SACKS GOLDMAN; BUYS GOLD

Investor Warren Buffett sold his entire position in Goldman Sachs stock during the pandemic earlier this year. This was in addition to large sales of his holdings in other bank stocks such as JPMorgan Chase, Wells Fargo, and PNC.

That might not seem too unusual on its own, given expectations of large potential loan defaults on the horizon. Buffet also sold significant positions in other industries and is known for being a highly cautious investor.

The curiously interesting fact emerging from all of this is that Warren Buffet, while he did add to his positions in a few stocks, he added only a single new stock to his portfolio – Barrick Gold.

If gold’s price goes higher, that increase will make winners of Goldman’s commodity team and those who follow them. But will that increase be reflected in a higher price for Barrick Gold stock? Not necessarily; so we cannot say for sure whether Mr. Buffett would do well with his investment.

If the price of gold declines, then the apparent winner would be Goldman’s private wealth investors; at least for the fact that they would not own an asset that is declining in price.

On the other hand, Buffett could be deemed a winner if Goldman’s stock declines along with other bank stocks, even if Barrick goes down.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

The Federal Reserve vs. Judy Shelton And Gold

A letter published and signed by former Federal Reserve officials and staffers called on the Senate to reject her nomination, stating that “Ms. Shelton’s views are so extreme and ill-considered as to be an unnecessary distraction from the tasks at hand…”

Her “extreme” views were referred to in a general statement of condemnation:

Ms. Shelton has a decades-long record of writings and statements that call into question her fitness for a spot on the Fed’s Board of Governors”. This was followed by a citation of the specific issues:

“She has advocated for a return to the gold standard; she has questioned the need for federal deposit insurance; she has even questioned the need for a central bank at all.” 

FED CONDEMNATION OF SHELTON IS MOTIVATED BY FEAR

Would these specific views have been considered extreme a century ago? No. Are they extreme now? No. Then why all the fuss?

The statement by former Fed officials has been published openly and is prompted out of fear. Fear of discovery and exposure; and fear of a possible end to the biggest Ponzi scheme of all time.

If someone with Ms. Shelton’s views were to be sitting on the Federal Reserve Board of Governors, that individual would have a platform to call attention to the facts at hand. More public recognition of those facts could change measurably the current perception of the Fed. In addition, it might also signal the possible end of the central bank.

It was established in 1913 by congressional vote. It is, ostensibly, an institution that is responsible for, and actively pursues management of the economy. The goal is economic stability.

PURPOSE OF FEDERAL RESERVE

But that is not its true purpose. The Federal Reserve is a “banker’s bank”. As such it facilitates and orchestrates a financial environment that allows banks to do what they do best – loan money.

On a retail basis, this “power” to create and loan money is best illustrated by the system of fractional-reserve banking. The system of fractional-reserve banking fosters an unending expansion of the money supply via loans. That is what banks do: create money, loan it to others, and collect interest. (see: Origin And Danger Of Fractional-Reserve Banking)

The Fed’s expansion of the supply of money and credit, along with additional creation of money in the form of loans granted via fractional-reserve banking, is inflation. The loss of purchasing power of the US dollar and the higher prices you pay overtime for all goods and services are the effects of inflation that has already been created by governments and central banks.

If Judy Shelton was confirmed as a member of the Federal Reserve Board, maybe she would say more about this publicly in her new role. Or maybe she would become silent.

More than forty years ago, a former Fed chairman, who at the time was an economist and private consultant, received some similar attention because of some not entirely dissimilar viewpoints, particularly about gold and the gold standard. After his appointment as Chairman of the Federal Reserve Board of Governors in 1987, Alan Greenspan said very little about gold.

As a board member, Ms. Shelton will not be in control; but she might be a disruption to ‘business as usual’ at the Fed. Maybe this is what is meant by the reference to Ms. Shelton’s views as “an unnecessary distraction from the tasks at hand”.

Probably the most blatant condemnation of Judy Shelton comes in an article by Steven Rattner, titled “God Help Us If Judy Shelton Joins The Fed”.

For some people, it might make more sense to say “God Help Us If Judy Shelton’s Nomination Is Not Confirmed”. On the other hand, it might not make any difference.

Mr. Rattner said that “The Federal Reserve is an indispensable player in managing our economy”. That cannot even scarcely be considered a true statement when the facts are known and acknowledged.

The truth is that the Federal Reserve has been mismanaging the economy for over one hundred years. The effects of their infinite money creation have destroyed the value of the US dollar which is now worth only $.01 cent compared to $1.00 when the Fed assumed command.

Since the effects of inflation are volatile and unpredictable, the Federal Reserve spends most of its time now trying to manage the ill effects and unintended consequences of its own actions.

GREAT DEPRESSION – FED MADE THINGS WORSE

Regarding Ms. Shelton’s views on gold, Mr. Rattner referred to the gold standard as “a significant culprit in deepening the Great Depression” which is not true.

The length and depths of the Great Depression were the results of government attempts to fight the necessary purging that was taking place. If it had been allowed to run its course without public works programs, wage supports, and a national government who tried to “spend” us into recovery and wellness, the Great Depression would have been over much sooner

Under a gold standard, accompanied by convertibility, gold acts as a restraint on a free-spending government. The reason all nations have abandoned a gold standard is that they do not want to be limited in their desire to create limitless amounts of fiat money. (see Gold, US Dollar And Inflation)

As it appears now, Judy Shelton brings a refreshingly different perspective to central banking; and offers the potential for positive change – from the inside.

If that were not the case, it is doubtful that so many of those with influence within that domain would be so open in their attempts to stop her.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Gold And The Rip Van Winkle Caper

The “spoils” happened to be one million dollars in gold bullion (bars) which they had recently misappropriated, i.e., stolen.

The entire plan was orchestrated by one of the men, who hired the others to perform specific tasks which depended on the execution of their respective and infamous talents. Now, they were in a cave located somewhere in the desert in the southwestern United States.

A CAVE AND FOUR COFFINS

The cave was a hiding place for the truck they had used to accomplish the heist of the gold bars. Also in the cave were four coffin-like beds with glass tops which would provide a comfortable place to rest for the next one hundred years.

The presumed motivation for the elaborate precautions was the expectation that by the time they awoke, their crime would have been long forgotten; any and all persons alive at the time of the crime would be dead. Hence, they could spend and enjoy their ill-gotten gains without fear of being discovered, imprisoned, etc.

Having recently been reminded of the show by a close friend during one of our casual discussions about gold, and after watching it again on DVD, I knew I needed to write an article about it.

Among the things  worthy of our attention is to determine today’s equivalent of one million dollars in gold bullion sixty years ago.

In 1961, the price of gold was $35 per ounce. Today it is approximately $1750 per ounce. That is a fifty-fold increase; meaning that one million dollars in gold bullion in 1961 is today worth FIFTY MILLION DOLLARS.

WHAT IF…

If the thieves were to have awakened today, forty years ahead of schedule, how would they fare? Marvelously so, when looking at the numbers.

The cost of living since 1961 has increased somewhere between ten and fifteen-fold. Back then, a gallon of gas was $.25, a loaf of bread was $.21, and a postage stamp was $.04. For both a gallon of gas and a loaf of bread at $2.00-2.50 today, that represents a ten-fold increase since 1961. With the price of a postage stamp today at $.55, the increase is close to fourteen-fold.

The cost of a new automobile is even higher. At an average price of  $38,000 today, the increase is sixteen-fold compared to 1961’s $2275.

Finally, the average annual income in 1961 was $5300.  At $48,000 today, that is a nine-fold increase, which is on the low side. At $60,000 today, the increase is eleven-fold. (Average income numbers are indicative of the fact that wages for most people have not kept up with the increase in the actual cost of living.)

Assuming that the thieves in the 1961 TV show would need fifteen million dollars today to live the lifestyle they were expecting nearly sixty years ago, that leaves an additional thirty-five million dollars to play with.

It is as if the thieves would have received a seventy percent bonus of $700,000 in 1961 dollars, for agreeing to defer their gratification for sixty years.

DEATH IN THE DESERT

In case you are wondering, there are no necessary considerations for aging and physical condition. Being in a state of suspended animation, the participants awoke (three of them, anyway; one was already dead) a century later, mentally and physically competent to take up where they left off a hundred years earlier.

The fifty-fold increase in the price of gold over the past sixty years is a matter of fact. It is not science fiction, or fiction of any kind. But, as phenomenal as the numbers sound, it would be wise to look at them more closely. It might make a difference in our perspective.

For the entire sixty years (59 years, 3 months), the increase from $35 per ounce to $1750 per ounce is a total gain of forty-nine hundred (4,900%) percent. The average rate of return, however, is a relatively modest 6.83%.

That’s good, but not great. In order to come up with the fifteen million dollars needed to keep pace with inflation, the rate of return needed is 4.68%. The real rate of return, then, is only 2.15% (6.83% – 4.68%).

However, almost half of the fifty million dollars came in the first nineteen years. In January 1980, the gold price peaked at $850 per ounce. At that price, the one million dollars in gold in 1961 was worth more than twenty-four million dollars. The average rate of return for the nineteen year period is 18.56%. Now that’s something to crow about!

On the other hand, waiting for the next forty years wasn’t profitable. The annual rate of return for another four decades of slumber would be only 1.78%. And, when inflation is factored in, the real rate of return is negative.

Had the thieves awakened ten years later, in April 1971, they would have lost considerable purchasing power as the price of gold remained fixed for most of that time. After President Nixon refused to allow other nations to redeem the gold to which they were legally entitled, the market price for gold began a decade-long increase which reflected more than thirty years of declining purchasing power.

The January 1980 peak price of $850 per ounce accounted for several decades of US dollar decline since the Great Depression years. It also included a factor for heightened anticipation about further declines in the dollar’s purchasing power. Suddenly, everyone had become inflation-conscious.

But, on an inflation-adjusted basis, the gold price has never exceeded its price peak from January 1980. After forty more years of money and credit creation by the Federal Reserve, the price of gold has never been higher in real terms since that auspicious date.

It did not exceed it in August 2011, and it is currently below both its January 1980 and August 2011 peaks.

The three criminals who did awake from their long sleep exhibited immediate mistrust of each other and one of the underlings killed his cohort and sent the body over a cliff in the truck.

Forced to carry what gold they could in canvas knapsacks, the two survivors alternately played a game of cat-and-mouse with each other until one killed the other, and the lone survivor expired from exhaustion and dehydration. At the time of his death, he was carrying only one gold bar (probably a kilo bar – 32.15 oz).

We learn at the end of the show that gold was worthless because someone had “figured out how to manufacture it”.

A nice twist, but I don’t think that makes any difference. The actions of the criminals – their duplicity, their desperation – occurred under the assumption that they were rich. If the gold they had stolen were worth fifty million dollars (or more) they wouldn’t have known it; hence, their actions would have been the same.

In the final scene, the survivor (and ringleader) is reduced to trying to buy water using his remaining gold bar (he had cast the other bars aside from time to time because the weight became too much to carry) from a passing motorist(s) in a futuristic automobile who stopped to help. I have no idea what they were doing out in the desert, since there had been no other signs of people or civilization before that point.

Regardless of whether it is gold, federal reserve notes, or a million dollars sitting in a checking account; money has value only if you can exchange it for something else you want or need.

If you are dying of exhaustion and dehydration in a desert wasteland, you probably won’t care about much else – other than staying alive.

For a look at all of today’s economic events, check out our economic calendar.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Gold Market Manipulation And The Federal Reserve

Assertions are made that the manipulation takes place in a shroud of secrecy; and the unexpected lower prices for gold, or prices that don’t meet wildly bullish expectations, are cited as evidence of conspiratorial activity.

The claim is made that the price of gold would be much higher if this manipulative trading activity were exposed, acknowledged, and prohibited. But…

ALL MARKETS ARE MANIPULATED

I don’t disagree that there are forces at work in the gold market that can be disruptive; and may even be described as manipulative. However, the same is true of all financial markets – stocks, bonds, commodities, etc.

It is worth pointing out that gold and silver bulls are one-sided in their arguments against manipulation and its presumed effect on prices.

When prices don’t meet expectations on the high side, or an  ‘unexpected’ drop in price occurs, finger-pointing at shadow figures is heightened.

Long-side investors in all assets, including precious metals, ‘benefited’ from the manipulative efforts of the Federal Reserve twelve years ago and again just recently.

The recent recovery in prices for stocks, bonds, oil,  gold, and silver has been almost unbelievable. It is literally jaw-dropping, but nobody is complaining. Nobody cries foul when markets are manipulated for the purpose of driving prices higher.

Only a couple of years ago, JP Morgan Chase’s accumulation of silver was assumed to be bullish for silver prices. On the other hand, they have also been subject to scrutiny about price manipulation. Would silver bulls care about price manipulation if prices went up?

ALL HAIL THE FED

When prices of most assets dropped sharply in 2008, the Federal Reserve stepped in with both guns blazing and pledged incalculable amounts of money and credit creation. Their efforts led eventually to significant increases in previously beaten down stocks and bonds. The benefits to gold were more immediate and more spectacular. Nobody complained.

At first, the Fed’s actions were expected to cause a surge in the effects (i.e., higher prices for most/all goods and services) of the inflation that had just been created. Some experts predicted “runaway” inflation.

The condition referred to as runaway inflation is a reflection of an accelerated drop in the purchasing power of the currency in use bordering on repudiation. In this case, negative sentiment for the US dollar increased and its weakness was reflected in higher prices for gold.

However, the expected huge increase in prices for most goods and services did not occur. With the realization that runaway inflation wasn’t on the front burner and that US dollar weakness had run its course – at least temporarily so – the gold price fell.

Gold had already increased four-fold between 2001 and 2008 when the credit collapse threatened the integrity of our financial system. Prices of financial assets, including gold, fell sharply.

During a period of approximately six months from spring to fall in 2008, the price of gold declined by more than thirty percent. After that, it was off to the races again.

For the next three years, the price of gold climbed one hundred seventy percent, reaching $1895 per ounce in August 2011. All assets benefited from the Fed’s hugely inflationary, gift-giving propensity, but none more so than gold.

Then, after the realization that 2 plus 2 does not equal 10, the gold price declined to more reasonable levels. This decline occurred against the backdrop of a continually strengthening US dollar.

Of course, after the gold price declined, claims about manipulation and price suppression began anew; and continue.

The recent year-long bounce in the gold price has again sparked dreams of wealth coming from expected higher gold prices. If someone accepts price suppression of gold as factual and evidential, then they must also recognize that no institution has done more to pave the road to higher gold prices than the Federal Reserve.

GOLD PRICE VS VALUE

However, the previous statement is by no means laudatory of the Fed.

The Federal Reserve has destroyed the US dollar over the past century by continually expanding the supply of money and credit. That debasement of the US dollar has led to a decline of more than ninety-eight percent in its purchasing power; and that decline in purchasing power is the reason for gold’s higher price over time from $20 per ounce to $1700 per ounce.

Some gold investors are way too price-conscious; nay, price-dependent is a more accurately descriptive term. They seem to be constantly in need of higher prices to justify their predictions for gold.

The purpose of the article is to point out how each time higher price expectations aren’t met, the price predictors trot out the price suppression argument. If they understood and accepted the argument for everything it implies, then they would already own physical gold and they wouldn’t have to defend their errant price predictions.

The case for gold is not about price. It is about value. Gold’s value is in its use as money and its value is constant and stable.

Gold is the original measure of value for all other goods and services. Gold’s price tells us nothing about gold. It tells us what has happened to the US dollar; nothing else.

For a look at all of today’s economic events, check out our economic calendar.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Silver’s Apparent Recovery – 3 Charts

The chart below is a one-year history of daily prices for SLV:

http://www.bigcharts.com/

As of this writing, SLV is up forty-eight percent since striking its most recent low of $10.86 two months ago. It would not be excessive to call it an impressive rally of magnitude.

There are, however, some items of note that might dampen one’s enthusiasm if you are looking for an infinite extension of the current rally.

The rally has come immediately on the heels of a nearly forty percent decline in silver over the preceding four weeks. As such, it is, at this point, merely a retracement of previously lost ground.

In addition, silver is still more than two dollars per ounce lower than it was when the price peaked earlier this year. This means that silver needs to increase by another fourteen percent just to get back to its February price point just before it collapsed.

Let’s remember – when silver was at $18+ three months ago, we were being told it was the last call to own silver below $20 per ounce; and the silver bullet train was supposed to be fueled by an impending stock market crash.

The stock market crashed; and silver crashed faster and harder. What will happen to silver prices when stocks crash again?

While you are thinking about that, lets look at two more charts (source) The first is a five-year history of physical silver prices.

https://www.macrotrends.net/

 

As you can see, viewing silver’s recent move within the context of a longer-term time frame, alters our perception. The potential for additional volatility in the silver price is evident.  However, the slope of the pattern, along with the overhead line of resistance, seems to indicate that the price of silver is well contained under $20 per ounce.

Finally, viewed within the context of a ten-year time frame, it would appear that silver’s recent rally is just a hiccup in its decade-long price decline since its peak in 2011.

In conclusion, not much has changed; silver’s potential for higher prices is quite limited.

With the winds of deflation howling ominously, it is more likely that the price of silver is headed lower.

As we have said before, it is prudent to own some silver coins (see my article on silver coin premiums) for exchange and barter against the possibility of a breakdown in the financial system and complete repudiation of the US dollar.

Other than that, your best bet for wealth preservation is gold; as long as you are not chasing the price.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT

Gold-Silver Ratio And Correlation

From Investopedia:

Correlation is a statistic that measures the degree to which two variables move in relation to each other. Correlation measures association, but doesn’t show if x causes y or vice versa, or if the association is caused by a third–perhaps unseen–factor.”

For example, there is a possible correlation between localized, bad weather and crop failures. But how do you predict the timing and extent, or the effects, to a degree that can be profitable?

And there certainly is a correlation between the price of labor and materials vs. the finished cost of building a new home. But there is no correlation between the price of labor and materials vs. the number of new housing starts.

We can find patterns and rhythm that might appear to be correlation (or inverse correlation) by plotting the price differential of any two items but it still does not imply correlation.

So, are gold and silver correlated?

ARE GOLD AND SILVER CORRELATED?

Being literally specific according to the above (“correlation measures association…”) then, the question becomes “Is there association between gold and silver?”

The answer is yes, strictly speaking. But, only as it pertains to their use as money.

The association is blurred by the fact that silver’s primary role is industrial, and its role as money is secondary to its use in industry; whereas gold’s primary role is in its use as money, and its industrial use is secondary.

“The basic value of either gold or silver stems from its primary fundamental. This means that gold is valued for its role as real money and silver’s primary value stems from its use in industry. And the primary fundamental for each metal will always be the same, even though there can be changes in the relative relationship of primary and secondary uses.” (See Gold And Silver – Fundamentals Be Damned)

Below is a chart of gold prices for the past one hundred years. The prices are adjusted for the effects of inflation…

http://www.macrotrends.net/

As a result, we can see that gold’s value has increased considerably over the past one hundred years. Nearly all of that increase has come in the past fifty years.

Gold’s increase in price and value are inversely correlated to the decline in value of the US dollar over the same time frame.

This makes perfect sense because gold is real money and the original measure of value for all goods and services; whereas, the US dollar is a substitute for gold (i.e., real money).

There is an established association between gold and the US dollar. Gold’s higher price over time reflects the ongoing loss in value (purchasing power) of the US dollar. The more the US dollar loses value, the higher the price of gold will go.

Now let’s look at a similar chart for silver prices, also adjusted for inflation…

http://www.macrotrends.net/

Here we can see that silver has declined in value over the past one hundred years and is cheaper now than it was a century ago.

The inflation-adjusted price of silver and its real value has stayed below its price point of one hundred years ago for eighty-four out of the past one hundred years.

The two times which silver prices moved generally in tandem with gold came when gold was responding – and catching up – to ongoing and accumulated losses in purchasing power of the US dollar.

After briefly exhibiting extreme volatility on the upside, silver prices quickly dropped back to their historically evident trading range below $20 per ounce, inflation-adjusted.

Any association/correlation between silver and gold is limited in nature because each metal has a fundamental role which is considerably different from the other. Gold price history is indicative of its association and inverse correlation with the US dollar. Silver prices reflect the white metal’s primary use as an industrial commodity.

GOLD-SILVER RATIO FAVORS GOLD

Let’s look at one more chart. This one is the ratio of gold prices to silver prices, the gold-to-silver ratio…

In this chart we see more evidence of what we saw in both charts above. In both price and value terms, gold continues to increase relative to silver.

Referring to the same point of focus as in both charts above, the gold-to-silver ratio is nearly three times higher than it was one hundred years ago. It has continued to move higher, favoring gold, over the past fifty years.

As we said before, we can calculate a ratio of prices for any two different items; but, those ratios will not imply correlation UNLESS there is measurable association.

As far as gold and silver are concerned, any association is strictly limited. It is not that the ratio cannot move lower, in favor of silver. It can. And, it probably will at some point. But it will likely be very short-lived.

The ratio cannot and does not tell us when such a situation might occur. Ironically, after looking at these charts again, it might be more reasonable to entertain a prediction that IF  the ratio dropped to a significant degree in favor of silver, one might load up on gold and sell silver, with the expectation of quick resumption of the currently established clear trend of an ever higher ratio, favoring gold.

For a look at all of today’s economic events, check out our economic calendar.

(also see Gold-Silver Ratio: Debunking The Myth)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Silver’s Apparent Recovery – 3 Charts

SLV

The chart below is a one-year history of daily prices for SLV (Silver ETF)

As of this writing, SLV is up forty-eight percent since striking its most recent low of $10.86  two months ago. It would not be excessive to call it an impressive rally of magnitude.

There are, however, some items of note that might dampen one’s enthusiasm if you are looking for an infinite extension of the current rally.

The rally has come immediately on the heels of a nearly forty percent decline in silver over the preceding four weeks. As such, it is, at this point, merely a retracement of previously lost ground.

In addition, silver is still more than two dollars per ounce lower than it was when the price collapsed in late February. This means that silver needs to increase by another fourteen percent just to get back to its February price point just before it collapsed.

Let’s remember – when silver was at $18+ three months ago, we were being told it was last call to own silver below $20 per ounce; and the silver bullet train was supposed to be fueled by an impending stock market crash.

The stock market crashed; and silver crashed faster and harder. What will happen to silver prices when stocks crash again?

While you are thinking about that, lets look at two more charts (source) The first is a five-year history of physical silver prices.

Silver Prices 2016 – 2020

As you can see, viewing silver’s recent move within the context of a longer-term time frame alters our perception. The potential for additional volatility in the silver price is evident.  However, the slope of the pattern, along with the overhead line of resistance, seems to indicate that the price of silver is well contained under $20 per ounce.

Finally, viewed within the context of a ten-year time frame, it would appear that silver’s recent rally is just a hiccup in its decade-long price decline since its peak in 2011.

Decade Long Decline in Silver Prices

In conclusion, not much has changed; silver’s potential for higher prices is quite limited. With the winds of deflation howling ominously, it is more likely that the price of silver is headed lower.

As we have said before, it is prudent to own some silver coins (see my article on silver coin premiums) for exchange and barter against the possibility of a breakdown in the financial system and complete repudiation of the US dollar.

Other than that, your best bet for wealth preservation is gold; as long as you are not chasing the price.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis

The Federal Reserve announced that they were ready to support the stock market and provide backup for financial institutions that might encounter difficulties.

The big day arrived and, other than an occasional glitch that seemed to be unrelated to the heightened global fears, the birth of the new century was pretty much uneventful. Overall, the markets remained relatively quiet. However, trouble was still brewing.

The hyper-bullish technology stock sector was about to reverse its nearly decade-long run to unsupportable and overly optimistic highs. At the center of the hype and fascination were new companies, headed by twenty-something geniuses. They were referred to as startups.

The multiples of earnings that normally applied in order to assess value of these companies was thrown aside. That is because most of them did not have any earnings.

Nevertheless, they were attractive enough to garner huge crowds of support.  Just the hint of a revolutionary idea could boost an unknown, small private company into the spotlight of the new issue market with oversubscription being commonplace.

Technology stocks collapsed in 2000 and were eventually joined by the broader stock market which began a two-year descent that saw the S&P 500 lose fifty percent of its value.

With sugar daddy Fed at the helm, prices recovered. Then, in 2006-07, real estate prices peaked and cratered. Most of the obvious damage was in residential real estate.

Foreclosures were rampant and an entire cross-section of the population was in transit, moving from their recently acquired new homes and into rentals if they could find one.

Economic fallout spread to major investment banks and the stock market. Financial institutions with household names like Lehman Brothers, Merrill Lynch, Washington Mutual, and AIG were skewered.

The stock market finally recognized how bad things were. Beginning in August 2007, and continuing for the next eighteen months, stock prices declined with a vengeance. The overall market, as reflected by the S&P 500, lost nearly two-thirds of its value.

In February 2009, a bottom was reached. The past ten years has seen the market surge to new all-time highs, seemingly much higher than could have possibly been anticipated just a few years ago. All of it has come with ‘help’ from the Fed.

In the most recent example of huge volatility and financial turmoil, the stock market dropped by one-third in three short weeks. It was worse than the initial crash of the stock market in 1929.

Some say that fear and economic dislocation due to the COVID-19 pandemic was the culprit. I don’t think so. All asset prices were artificially elevated due to previous Fed reflation efforts. A lack of fundamental underpinnings had left the stock market extremely vulnerable to a selloff of considerable magnitude, regardless of the specific trigger event.

Notwithstanding their broken record of bailouts, lower interest rates, and credit expansion, the Fed responded similarly again.

It was not exactly an about-face. After a half-hearted attempt to return interest rates to more normal levels, the Fed had already begun lowering interest rates incrementally.

Several years ago, the Fed began raising interest rates because they were concerned that continued easing could again trigger huge declines in the US dollar. On the other hand, raising rates raised the possibility that the system would not tolerate the restrictions well enough to get better, and another collapse might ensue.

The collapse came anyway. If you think it doesn’t matter what the Fed does anymore, you might be correct.

The Federal Reserve doesn’t know what to do. That’s too bad. For all of us.
The bigger problem is that it probably doesn’t make much difference what they do – or don’t do.” (see The Fed’s Dilemma)

Almost all Federal Reserve activity is comprised of reactions to problems that resulted from their own actions. And it has been that way ever since the Fed opened for business in 1913. (see Federal Reserve – Conspiracy Or Not?)

Over the course of the last century, the Federal Reserve has destroyed the value of our money. The U.S. dollar today is worth less than 2 cents compared to its purchasing power in 1913, when the Fed began its life on earth. This is a direct result of the inflation which the Fed creates continually by expanding the supply of money and credit.

Their initial attempt at controlling the financial markets ushered in the most severe depression in our country’s history beginning with the stock market crash in 1929. Former Fed chairman, Ben S. Bernanke agrees:

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”…Remarks by Governor Ben S. Bernanke at the Conference to Honor Milton Friedman, University of Chicago Chicago, Illinois November 8, 2002

Promises, promises. Six years after his speech, Governor Bernanke presided over absolute catastrophe in the financial markets. Cheap credit and ‘monopoly’ money had blown bubbles in the debt markets that popped.

The beat goes on. Federal Reserve policy and actions are an abuse of fundamental economics. The effects of their actions are hugely volatile and unpredictable. Their actions and effects have spawned problems that are nearly insurmountable.

Knowing these things doesn’t help much. The Fed can only react to the same news and headline statistics that we all see and hear.

Fed policy, special funding efforts, infinite money, and credit creation – all of them combined may temporarily appease the dragon; but they will never slay it.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Potential Highs And Lows For Gold In 2020

DOWNSIDE POSSIBILITIES FOR GOLD PRICE

There is a correlation between gold’s increasing price relative to the declining value of the US dollar. The chart below shows this inverse relationship clearly.

https://www.macrotrends.net/

Over time, as the US dollar continues to lose value, the price of gold continues to increase.  Seemingly, it would be worthwhile to just buy gold and wait for the inevitable decline of the dollar.

It is not that simple. Here is the same chart with a long-term uptrend line added.

https://www.macrotrends.net/

The angle of the uptrend is fairly steep, yet it is possible for the gold price to fall back to as low as $1000 per ounce without violating that long-term uptrend, which dates back to 1970.

That possibility may be too extreme for most of the gold bull riders to accept, but how would you feel if gold reversed and fell back to $1400?

That is just slightly higher than where it peaked four years ago and where it broke above decisively just over one year ago.

It happens to be about halfway between the 2011 high of $1900 and the post-2011 low of $1040 in December 2015. Without getting overly technical, a fifty percent retracement in gold’s price relative to its total increase of approximately $700 since its low in December 2015 ($1750 minus $1050 = $700) puts it right at $1400. That seems to me to be a very real possibility.

Nobody really cares much about the downside, though. It’s the upside that gets the most attention, so let’s take a look at that.

UPSIDE POSSIBILITIES FOR GOLD PRICE

How high can gold go? Some say $10,000; some say as much as $25,000, maybe more. Theoretically, there is no limit to how high the price of gold can go as long as the US dollar keeps declining in value, i.e., losing purchasing power.

The Federal Reserve and the US Government are not likely to voluntarily stop inflating the money supply, so it is reasonable to expect further deterioration of the US dollar and higher gold prices over time. This would show up as a continuation of the long-term trend which is evident in both charts above.

Practically speaking, though, there are some potential limits to gold’s price rise.

Referring again to either of the charts above, we can see that the price of gold declined for twenty years between 1980 and 2000. We might be in the middle of a similar period right now; in which case, gold might be headed lower first, for several more years.

Another potential limit to higher gold prices is the threat of deflation. During deflation, the supply of dollars would shrink and the dollar would gain in value/purchasing power. Under those conditions, the price of gold would decline, reflecting newfound strength for the US dollar.

Finally, please see the chart below, which is a 100-year history of gold prices adjusted for inflation…

https://www.macrotrends.net/

As you can see, the price of gold at its peak in 2011 was actually lower than its peak price in 1980 on an inflation-adjusted basis. (see Gold And The Elusive Chase For-Profits)

What this means is that one ounce of gold today at $1700 has less purchasing power than one ounce of gold in 1980 at $800.

Eventually, the price of gold will approach and exceed its previous price peak from August 2011. But, in inflation-adjusted terms, it will not exceed either that peak or its 1980 high.

That is because the real value of gold is constant and unchanging. Gold is the measure of value for everything else.

No matter how high the price of gold goes, it will only be indicative of how weak the US dollar gets. And, however high that price is, gold will not exceed its previous peaks of 1980 and 2011 on an inflation-adjusted basis.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Gold Prices – Expected Inflation Has Already Occurred; Effects Are Unpredictable

That sounds logical, but it is not that simple.

There is a relationship between higher gold prices and inflation, but the two are not directly related. The confusion results from a misunderstanding about inflation and its effects.

“Inflation is the debasement of money by government. The inflation is accomplished via the expansion of the supply of money and credit. It is intentional and ongoing. All governments inflate and destroy their own currencies.”… Kelsey Williams

The debasement (inflation) leads to a cheapening of the value of the money in circulation, which results in a loss in purchasing power.  The loss in purchasing power translates over time into higher prices for most goods and services.

What people usually mean when they refer to inflation, or higher inflation, is another matter. For most people, inflation simply means higher prices.

The higher prices, however, are the effects of inflation. Those effects are volatile and unpredictable. This makes it difficult to rely on simple financial and economic statistics, complicates ordinary business decisions, distorts financial planning projections, and skews the economic cycle.

The skewing of the economic cycle is what the Federal Reserve has been trying to do for more than one hundred years. They don’t call it that, though. They call it managing the stages of the economic cycle.

In plainer terms, managing the stages of the economic cycle is the Fed’s attempt to avoid recessions and depressions. They do not do a good job of it, and they don’t really care; because it provides a cover for their use of inflation.

Inflation is a tool used by central banks to create conditions that allow for all banks to continue to loan money and finance activities of particular interest to them. Whatever the situation or cause, the money center banks are there to loan money, and profit from it, continually.

Right now people are expecting inflation to get a lot worse because of the Fed’s latest response to financial and economic catastrophe. The inflation, however, has already happened.

What most are expecting is the higher prices, maybe even to the extent of what is mistakenly called runaway inflation. Again, those higher prices are the effects of inflation; and that inflation has already been created.

The higher prices attendant to previous inflation creation occur as a reflection of a weaker US dollar. As the US dollar continues to lose purchasing power, we pay more and more for ordinary goods and services.

We said earlier that the effects of inflation are volatile and unpredictable, which is true. That is due in large part to the subjective judgement involved.

For example, ask yourself: How much value has the dollar lost already? Are current prices accurately reflective of that depreciation? Has the Fed’s latest action altered your opinion? Have you allowed for forthcoming effects of those latest actions?

Small business owners, large corporations, laborers, hairdressers, restaurant owners, etc., all make subjective determinations about how much to charge for the goods and services we all buy and use.

Investors allow for the effects of inflation when making decisions regarding the purchase and sale of securities, real estate, etc.

In other words, the US dollar’s current level of purchasing power; its standing in world markets; and its degree of acceptance in domestic and international markets; are the result of billions of individual choices and decisions that are subjective in nature and always changing.

Now throw into the mix that for several decades, the inflation created by the Fed is losing its intended effect. Even the Fed seemed baffled by the lack of impetus after their actions to revive financial markets and restore economic growth just over a decade ago. (see The Fed’s 2% Inflation Target Is Pointless)

Finally, lets look at the US dollar itself. Whatever else some say about the dollar, whatever are the expectations of certain writers and investors, the US dollar is NOT falling apart. It is not now, nor for the past nine years, shown the weakness that some have expected and predicted.

Over the past couple of months the US dollar has shown signs of further strength. Liquidity problems in the repo markets, slowdown and stoppage of economic activity, risk of another credit collapse, and the potential of a calamitous depression accompanied by deflation, all point to a stronger US dollar.

This means a dollar that will buy more – not less; more food, more gas, cheaper housing. Unfortunately, the supply of dollars could shrink by half or more.

Conditions like these are exactly the opposite of those which correlate with “much higher inflation and much higher gold prices.”

All of this means that we will need to see renewed, significant weakness in the US dollar, manifest in the form of much higher prices for everthing we buy and sell, IF gold prices are going to move higher to a degree that matches the fantasies of some investors and advisors.

The article was written by Kelsey Williams,  KelseyWilliamsGold.com