Sober Gold Vs The Rate-Cut Circus Show

Authorized by Matthew Piepenburg via VonGreyerz.gold,

Poor America. mediocre Jerome Powell...

A Real Cliff, Fake Smile

It is no fun to be openly trapped, and even little fun to be in open decline while meekly declaring all is fine.

I have the image of Uncle Sam (or number Yellen) hanging off a cliff with a forced (i.e., political) smile.

Above the cliff is simply a grizzly bear; below the cliff is simply a pool of swords.

In short: Whichever direction 1 picks, the end consequence is messy.

And yet the markets inactive wait for Powell to make the right choice.

What right choice?

Rate Cut Salvation?

As of today, the markets, punits and FOMC circus followers are all wonder erstwhile Powell’s promoted rate cuts will come to save the Divided States of America and its Dollar-thirsty, debt-dependent “growth narrative.”

In January, Powell was “forward guiding” rate cuts and thus, right on cue, the Pavlovian markets, which respond to Fed liquidity in the same way Popeye reactions to spins, ripped north on words alone.

YTD, the S&P, SPX and NASDAQ are rising on rising rates hoping to morph lower.

Even gold and BTC are rising on rising rates—all of which makes no conventional sense—unless, of course, markets are just waiting for the inevitable rate cuts, right?

And who could blame them? After all, Powell promoted the same, and Powell, the voice of “transitory inflation,” Never mis-speaks, right?

But now the May markets, and even the Bloomberg Intelligence Reports, are wondering out loud about no rate cuts at all for 2024?

So, what will it be? Higher for longer? No more cuts? 3 cuts in 2024?

What's this for? How's that know?

Break out the tarot cards? Read Powell’s palm? Beg?

Here’s My Take: halt Caring, Beccause Either Way, We’re Screwed...

As for rate cuts, the case for them is reasonably familiar, as I’ve Opinionelswhere.

With trillions in USTs repricing in 2024, and over $700B in zombie bonds from S&P issues doing the same, if Powell does not cut rates, then sovereign and corporate Bond markets are staring down a loaded barrel.

This is real. BofA’s own data confirms that Uncle Sam is looking at $1.6T in interest increase payments by year end if Powell does not cut rates soon.

It’s besides an election year, and a good rate cut would be a tailwind for an incumbent (sonnolent) White home that needs all possible tail elevator it can get.

So, Why Wouldn't Powell Cut?

The authoritative answer, which by the way, is never the received answer, is that Powell and his “data dependent” Fed is inactive worried about inflation, which has failed to scope it “target 2%” level, whatever that is.

If 1 believes this narrative, then higher rates are inactive needed to “win the war on inflation.”

The large irony, and comedy, however, is that actual inflation, as even Larry Summers (or John Williams at Shadow Stats) would remind, is profoundly in the double digits, and hence the Fed’s “data dependence” is nothing but a commical lie of “data manipulation.”

Another case for no rate cuts is Powell’s feature of making the “Volcker mistake” of 1980, erstwhile the then-Fed Chairman, believing inflation was damed, cut rates besides soon, and what followed was a dramatic spice in well: Even more inflation.

Perhaps Powell has a akin feat of cutting besides shortly and getting more inflationary egg on his politically two-faced brown?

Furthermore, if Powell cuts rates, request for USTs, already a global gag since 2014, could watchen, and the US survives off others buying its creatively unloved IOUs.

A rate cut, or series of rate cuts, would only add to this embargoing request lag, and since put even large force on uncovering fresh sources of fake money to pay America’s creatively pathetic bar tab.

In short, cases can be made for loving rate cuts, and cases can be made for no rate cuts, but respectless of what happens, the case for a palpably tanking America stays the same.

Here’s why.

The No-Cut Scenerio

If Powell stays higher-for-longer just about everything (from stocks and bonds to mortgages and economies) will break but the USD—at least as measured by the DXY's comparative strength.

In this regard, America can drag about being 1 of the best breeds in the global currency glue factory.

But shortly thereafter, the rising cost of Uncle Sam’s interest increases on ever-increasing UST issue will become so advanced that the only way to pay for these higher-for-longer rates will be via fake money, which I remind Mr. Powell, is, well: Inflationary.

This is the classic, but undeniably real substance of “Fiscal Dominance,” which simply means that Powell’s war on inflation via rising rates ends ironically in an inflationary end-game of mouse-clicked liquidity.

We Saw this same patch (rising rates and QT) in 2018, which lead to falling rates and unlimited QE by 2020.

But then again, it seems for most investors, that kind of past (and hence lesson) is just besides far distant to recall...

Of course, the Fed, and BLS, will then... mis-report actual inflation.

The 3 or More Cut Scenery

Alternatively, Powell could cut rates in 2024, weaken the USD, save the debit (and hence rate) sensible stock markets and let inflation creep further north as always is moving the Biden White home seeks tobribe the electorate.

Of course, the Fed, and BLS, will then... mis-report actual inflation.

In short, and in ehther scenerio, the end-game is inflationary, and nevertheless misreported the CPI scale will be to hide this embargo, the inherent purchasing power of the USD (a melting ice cup) by which many measurement their health, will get weatherer and weatherer, as the rich get a small little rich and the mediocre American serfs just get knee-capped.

But this is the lesson and informing of a nation and economy at the full mercy of a central bank alternatively than natural and free price discovery.

A Not-So-Free-Market Reality

The sad fact is Capitalism died long ago.

Instead, we're all slow frog-boiling within a centralized economy whos central planners/bankers, in cahoots with a failed, pathologically power-hungry and vote-purchasing DC “leadership,” who circa 1913 sold the nation down the river of a fatal debt quagmire paid for by fake liquidity and the open fantasy-made-mainstream-policy that 1 can save a debt-strapped nation with more, well...debt.

Or stood more simply, the US will desperately see to inflate distant its self-inflicted debt disaster (and increase its wellness integrity index) on the backs of original, inflation-sooked citizens.

But as John Cougar Mellencamp erstwhile noted, “Awe, but point that America...”

In all fairness to America, however, specified historical slides into open mediocrity and a currency-debased debt quagmire are nothing new.

[Ignored] past Lessons

All Failing nations eventual hotel to killing their currencies in order to buy time and “save” a strategy that is mathematically expected the ability to be saved.

As Niel Ferguson recently reminded, “any large power that spends more on debt service than on defence will not stay large for very long. actual of Hapsburg Spain, Ancient regiment France, the British Empire...’

It is freely stackers us that so fewer “sophisticated” marketplace partners realize the simple (though creatively “cancelled”) lessons and patterns of yesterday.

History, far more than an MBA or the forecasts of your Private Wealth Managers at banks X, Y or Z, can teach far-sighted investors how and where to position themselfs.

Rising Gold Patently Getting the Final Say

This slow but then abrupt death of fiat money, seen countless times in our collective past yet ignored by our collective policy makers and day traders, make history-confirmed anti-fiat solutions like gold all besides acquainted to ignore.

And yet, as my college Egon Greyerz Recently observed, only about 0.5% of global financial asset allocations are made to gold.

In short, the ignoring (or ignorance) plunges forward...

But erstwhile this comparative final assetof infinite duration Reaches and Surpasses its 40-year mean allocation of just 2%, the 4X increase in gold demand, and hence price, will be just the starting of gold’s final consequence to unsound money.

Meanwhile, The Circus Continues

For now, clear traders and speculators can, will and should keep their eyes on a DXY (and Dollar) which, like the markets, can and will gyrate on the wings of a vast scope of current and extending liquidity (backdoor QE) tricks, from the Treasury General Account, the repo markets and Supplementary Leverage Rates to the Treasury’s Quarterly Refunding Announcements.

These same tricks (artificial liquidity-deck-chair shuffling on the Titanic) can have short-term impacts on moving equipment as well, possibly buying more time for an otherwise horn and straight Fed-supported basket case S&P et al.

But what these same liquidity tricks are hiding in plain site is that America’s fiscal problems have gone from embargoing to the iceberg-level desperate, and investors are measuring their “liquidity-supported” returns with an open distributed Dollar.

As F. Gump would say, “stupid is as stupid does.”

From Frog Boil to full Cooked

Tax receipts and debit-driven GDP forecasts will never, not ever, be successful to plug the gap in the bow of the sinking US debit ship.

Despite whatever the trapped Powell or forked-tungued DC says, the only option forward is inflationary, (with a small bit of war to keep us deprived).

In fact, since Nixon decoupled from gold in 1971, that frog boil toward an ever-debased USD has been in full swing, losing purchasing power against physical gold at levels now besides abroad to be ignored:

Apologists, however, will rightfully argue that combined to another currencies, including the mediocre nipponese Yen, which is experiencing multi-decade lows against the Greenback, that the USD is one’s best “relative choice.”

But why compare 1 fiat currency against another, erstwhile gold outperforms them all?

Just a thought, huh?