Hammers and Nails and Golden Vaccines

Miles Franklin sponsored this article by Gary Christenson. The opinions are his and are not investment advice.

Things appeared normal, and then everything changed…

Breaking News:  The DOW rose 2,463 for the week ending March 27. It looks like a bottom, but for how long? COMEX gold rose $140 and silver rallied $2.15 for the week, while bullion and coins spiked higher. Politicians passed a coronavirus stimulus bill that includes bailouts and support for individuals and businesses. Reportedly the bill was 1,000 pages long and no member of congress read it. Our political process in action…

U.S. COVID-19 official cases on March 7: 338.

U.S. COVID-19 official cases on March 28, three weeks later: over 120,000. Exponential growth in sickness, debt, and expenditures are “killers.”

The economic, emotional, and physical scars from the virus will torture us for a long time. Disneyland and Disneyworld are closed indefinitely.

Meanwhile, back at the Eccles Building in D.C., politicians at the FED accelerated digital “printing” of dollars to WARP (Wacky, Arrogant, Ridiculous, Preposterous) speed. QE4ever pushed The Fed balance sheet beyond $5 trillion, up $900 billion in a few months.

Someone, somewhere, probably claimed that Fed and congressional intrusions into the economy were beneficial. We’ll see…

THE NEWER NORMAL:

• In 1941, the United States entered WWII. We descended into a global war, and life for millions of people changed.

• In 1964, President Johnson escalated the U.S. into the Vietnam War via the “Gulf of Tonkin Incident.” Our world was forever changed.

• In 1971 President Nixon torpedoed the US economy by separating gold from the dollar, allowing the dollar and other fiat currencies to collapse, and inflation to skyrocket. Debt, government expenditures and financialization expanded exponentially.

• In 2000, the Internet Bubble burst and destroyed savings, retirement accounts and dreams. Many did not recover.

• After 9-11, the world was more dangerous, and governments became increasingly intrusive.

• After the virus catastrophe of early 2020, the world became… The Newer Normal.

The Newer Normal in our post virus experience includes isolation, recession, depression, unemployment, business failures, personal bankruptcies, and never-ending Fed and government bailouts. The world changed in early 2020, as it did after 1941, 1964, 1971, and 2001.

HAMMERS AND NAILS:

When your only tool is a hammer, everything looks like a nail.

The Fed’s tools are interest rate policy and monetization of bonds—QE4ever. The economy will be hammered with low rates (already happened) and Fed purchases of Treasury debt, mortgage-backed securities and other debt.

THE NEWER NORMAL AND VACCINES:

Gargantuan debt. Our $23 trillion in national debt will explode higher. $30 trillion is coming soon.

A Fed balance sheet of $10 trillion. Central bankers might claim the first $5 trillion is the hardest. The next $5 trillion will soon be “printed.” Government will spend, and the Fed will monetize.

Growing realization: Creating $5 trillion was easy. One should ask, what will the next $5 trillion be worth? A virus can destroy people’s confidence, and printing can weaken confidence in the purchasing power of dollars.

Rescue: The Fed will “print” to rescue stocks and bonds. They will sacrifice the dollar’s purchasing power.

Shortages: Gold and silver dealers are mostly sold out, and the economic crisis is only beginning. Mines will close, people will panic to escape increasingly worthless dollars and want real assets. Supply will fall, demand will rise. Premiums over spot prices (COMEX paper prices) are at or near the highest in history. Higher spot prices and much larger prices for real coins and bars are inevitable.

Confidence and credibility: The Fed lost credibility. People are unhappy with government officials, hospital costs, the CDC, and congress. Fear, lost jobs, deaths, foreclosures, and bankruptcies make it worse. Government checks will buy time, but not enough.

Vaccines: A vaccine for COVID-19 will be immensely profitable for “Big Pharma” so it will become available. But a vaccine to counter the disease of central banking is available now! We call it GOLD!

MMT (AKA Magic Money Tree) economic theories, UBI (Universal Basic Income), continuous bailouts, and hyperinflation are “on-deck” waiting for their opportunity to remake our economy.

Craziness:

“Singapore is set to punish people who stand too close to strangers with 6 months in prison…”

Blaming Others:

“It’s all Trump’s fault because she thought it was ‘safe’ to go ahead with Mardi Gras which likely infected hundreds…” From the Mayor of New Orleans.

From Bill Bonner:

“There’s no natural calamity that the feds can’t make worse.”

Read:

Schectman: “You Will Not Understand the Future.”

Christenson: “The Four Horsemen of the Apocalypse.”

CONCLUSIONS:

We have transitioned into a Newer Normal, as happened after Pearl Harbor, Nixon’s decree in 1971, and 2001.

The Fed can buy bonds, do QE4ever, and drop interest rates, but they can’t fix structural problems, lack of supply, decreased demand, and viral infections. Read: “The Fed Can’t Fix What’s Broken.”

Printing dollars does NOT create wealth. Printing dollars creates mal-investments and inflation.

Governments will bail out individuals and businesses. More debt will be heaped onto an existing mound of toxic, never-to-be-repaid, debt.

Stocks often blast higher during bear markets. Bonds rise when central banks promise to buy bonds. But such rallies are not sustainable. Our economic and political responses to the virus damaged a weak economy.

Bonds and stocks carry counter-party risk. If Company A can’t pay Company B, then your trust in Company B might be rewarded with default and bankruptcy.

If an employee is laid off, he may not pay his bills. The second and third-order consequences are huge and long-lasting. Think bankruptcies, foreclosures, lost homes, closed businesses, massive unemployment, human misery, social unrest, anger at the elite, and rage against the machines of government and Wall Street.

Gold and silver coins and bars have no counter-party risk. They are universally valued and hold their purchasing power. The same is not true for dollars, stocks, sovereign bonds, commercial paper, mortgage paper, real estate investment trusts, student loans, and so many more.

Gold and silver coins and bars have been difficult to source in the past two weeks. There is no fever like gold fever. Fear and panic are huge motivators.

Many stocks will rise a little and fall a lot. Gold and silver will fall a little and rise huge. Take your choice.

In times of fear and panic, over three thousand years, people have found security in gold and silver bullion. This time is NOT different. Read: “There’s No Gold!”

Buy silver. Buy gold. The gold to silver ratio exceeded 125 in March, an all-time high. That ratio will fall to 50 or maybe 20 as silver rises to all-time highs in coming years. The Dow to gold ratio peaked over 44 in 1999 and peaked again in 2018 over 22. It is now 13.3. That ratio will fall below five and might reach two or one as gold rockets higher.

Miles Franklin can’t lower interest rates, supply toilet paper, manufacture vaccines, change Fed policies, send bailout checks to individuals or devalue the dollar. Other businesses, agencies, and central banks perform those functions. Government and The Fed will do their things, even if they kill the economy and the dollar’s purchasing power.

Miles Franklin sells gold and silver—the real stuff. You may experience delays receiving your product, but prices are confirmed. Call 1-800-822-8080.

Gary Christenson

The Deviant Investor