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The circus continues in the Colony to the south, or as some call it the 51st state of the USAThe Albanese government admits it needs to rein in the National Disability Insurance Scheme after revealing its cost will blow out by almost $9 billion over the next four years, putting further pressure on the already-ravaged federal budget.With the policy now among the top five demands on spending, despite being less than a decade old, next week’s budget will forecast its annual cost to surpass $50 billion by 2025-26. This is about $20 billion more than the Productivity Commission estimated in 2017 when the scheme became fully fledged...thats a ~70% blow out or blow UP. AND THERE IS NO END IN SIGHT IF WE ALL BE VERY HONEST.if it wasn't so serious, it would be hilarious.https://www.youtube.com/watch?v=Zl0aEz34A4oGo Goldthe Gnome

Bank of America strategy guru Michael Hartnett says: “The inflation shock that caused a rates shock, which now threatens recession shock and credit event … reflects painful regime change, as bullish deflationary era of peace, globalisation, fiscal discipline, quantitative easing, zero rates, low taxes [and] inequality gives way to inflationary era of war, nationalism, fiscal panic, quantitative tightening, high rates, high taxes [and] inclusion.”

There’s clearly something very attractive – intellectually and, dare we say, morally – about the idea that what we are seeing now on global markets is the bill for 15 years of financial repression and excess coming due, and this is simply a return to a more “normal” world, where capital has cost and risk is actually priced.

The pain is not pleasant, but it is necessary.

But highly respected Macquarie strategist Viktor Shvets has a very different view.

He argues that such a “normalisation is neither probable nor perhaps even desirable” because economies are so indebted that to suddenly “starve the beast of liquidity with a determined but futile attempt to raise the cost of capital” would be to risk the sort of carnage that “usually involved a massive economic and social dislocation, and were preceded and/or followed by revolutions and wars”.

Well it does appear we are there now. How many wars, and what will gold do

the Iranian Revolution in 1978, the Iran-Iraq war in 1979, the Soviet Union’s invasion of Afghanistan in December 1979, and the Iranian hostage crisis in 1979. .....this period saw heightened activity in gold prices. Gold prices rose 23% in 1977, 37% in 1978, and an incredible 126% in 1979.

During the first Gulf War, when Iraq invaded Kuwait in 1990, gold prices soared again.

After September 11, 2001, attack on the United States, gold prices surged. This move was followed by the US invasion of Iraq in 2003. This also resulted in an uptrend in gold prices.

and so on

BUT this time it will be different (don't you like it ?). We have ludicrous levels of debt without doubt. How does the debt play out.

Gold will shine through

best
the gnome

Another day and a quick reversal of well thought through policy, giving investors confidence in robust decision making by the Chancellor and the new PM, ...

and how are the banks going...instilling confidence

June 2022, "Handling bags of cash for a wrestler-turned-cocaine-trafficker is the kind of business you shouldn’t do as an international wealth manager. Credit Suisse Group AG’s criminal money-laundering conviction in Switzerland this week for exactly this is an embarrassment, though not a costly one with total penalties of little more than $20 million. "

Well what goes around comes around. Now Suisse are trying to instill confidence that they are well run? LOL

And in Deloittes we see another fiasco. Letting clients runtheir own audiot..LOL
Global accounting giant Deloitte has been fined $US20 million ($31 million) for asking audit clients to conduct their own audit work in a move the US corporate watchdog said fell “woefully short” (!!???) of professional requirements (OF ONE OF THE LARGEST ACCOUNTING FIRMS IN THE WORLD!).

The US Securities and Exchange Commission (SEC) found that auditors in Deloitte’s China arm asked clients to select samples of financial reports to be reviewed and to prepare audit documentation that falsely claimed the firm had obtained and assessed supporting evidence for certain accounting entries.

Well you could well question how solid and robust the banking and accounting system is.

The counter argument to some of this (not all) is hidden by the nature of the press. “Journalism by its very nature hides progress,” Pinker argued in a recent interview, “because it presents sudden events rather than gradual trends … the press is an availability machine. It includes the worst things to happen on Earth at any given time.” But, he adds, “human progress is an empirical fact.”

“If it bleeds, it leads,” is an old newsroom adage for good reasons.

So we just recognise the bias, and get on with life ...

The trend is your friend but what si the trend, when its soemtimes a little difficult to see through the endless negativity of the press..., and the even the mighty can be totally wrong in readingt he trends even when they spend a large pportion of their life analysing them-supposedly. “Cash is trash,” is how Dalio has summed up his view in interviews. But the US dollar has been one of the big winners of the past year. The DXY dollar index is up 18% year to date. Relative to the dollar, gold is down 10%, the Chinese yuan 13%, the euro 15%, the pound and the yen 20%, Bitcoin 60% and Ethereum 65%....

Whats the trend, whats the events ...?

Some would argue the trend in the USD has been up since 2008...but there have been soem serious deviations, and my bet is we will see another big deviation...
https://tradingeconomics.com/united-states/currency
best
the gnome

THE POWER OF THE INTERNET? Incredibly powerful today, more than when I was a young gun [living in a 3,000 person town in rural Australia], that one can access intelligent life forms on the internet. Of course there are plenty of the other people around as well.

Some very big discussions In and about Oz, not making it into the main stream mass hysteria,
China debate: John Mearsheimer | Hugh White | Tom Switzer

For years, Australian policymakers have balanced China’s desire for an enhanced regional role (whatever this is, but it might be that China has a large population, that devours [our] natural resources, or produces more engineers in a year than there have been engineers in the history of Australia or whatever) with our desire for U.S. protection (this generally means buying nucelar submarines, f99 air fighters etc). However, contrary to the Canberra consensus, there is going to be an intense strategic rivalry between our major trading partner and our major strategic ally.

According to John Mearsheimer, one of America’s leading foreign-policy thinkers, Washington will not let China become the dominant military power in the region without putting up a serious fight (and of course where there is a fight there will be US products and services and a buck to be made, but lets move on and sweep $10's billions under the fog of threats, real and made up)). In these circumstances, it’s naïve to think that Australia can sit on the sidelines and get the best of both worlds: unconstrained trade with China while keeping the U.S. security umbrella over its head. Canberra must support Uncle Sam. And why not ...?

However, Australia’s future will be dominated by China, says one of Australia’s leading strategic thinkers Hugh White..we have been there for a long while now. Treasury forecasts show that the Chinese economy will be about 80 per cent bigger than America’s within a dozen years...and so the sun is setting, giving out its last flashes of whatever. In this environment, Canberra must prepare for the new strategic terrain in the wake of America’s declining (declined) leadership, and we would be unwise to support Washington in a confrontation with China that America probably cannot win...but of course we will do whatever America wants ...

Have a listen, think critically, and form your own opinion (s)
https://www.youtube.com/watch?v=oRlt1vbnXhQ

And lets not mention Russia again, at least for a few days

best
the gnome

Thanks Damo

I read from a very wide range of sources, including funadmental data sources
https://www.gold.org/goldhub/data/gold-reserves-by-country
https://data.worldbank.org/indicator/FI.RES.TOTL.CD?locations=US
https://www.usgs.gov/faqs/how-much-gold-has-been-found-world
https://www.federalreserve.gov/data/intlsumm/current.htm

There are interesting professional papers, written pre-1970 (ruff estimate), when they were worth something, and not biased towards non professional ends
https://www.jstor.org/stable/1914508
https://fraser.stlouisfed.org/files/docs/publications/FRB/pages/1945-1949/30033_1945-1949.pdf

and others
https://www.newyorkfed.org/data-and-statistics

A few things to keep in the back of your mind

IMF economist Prakash Loungani : “The record of failure to predict recessions is virtually unblemished.”
...
Galloway asked: “Has there been another point in economic history where we’ve had full employment, an inverted yield curve and interest rates rising this fast?”
Tyler Cowen (Economist) responded: “I have never seen this configuration of economic numbers and variables in economic history, ever. It is unique and I think we are poorly positioned to make very dogmatic predictions for that reason… So I think we are flying blind and hoping for the best.”

Interesting little piece, that provides the expose on the dilemna.
https://www.imf.org/external/np/exr/center/mm/eng/sc_sub_3.htm

The Central Banks adopted the position of being able to print as much currency (IOU's) as possible, so they can do what currency is meant to do. Circulate and be a means of efficient and effective exchange to allow businesses to operate.

This leads into confusion of currency and assets. Currency is not an asset, but rather a depreciating "efficiency" for transactions. Simply perhaps the best they could do at the time. BUt we have the internet now, and a lot of business has moved into the internet. The most successful is Alibaba, not surprisingly Chinese. It is an interesting business model, v different from those much lauded US business models. Personally I think it is a far more sustainable business model. And there is blockchain...

I suspect something far more efficeint in terms of financial structure and efficiencies are being constructed in China. You have to dig to find these out, as best not to shine too brightly(until it is time). The US is v concerned about the strength of China, and of course you will see endless rhetoric negative to China. Human rights etc...speaking fo which the uS should not attempt the high ground?

best
the gnome

Thast just what we know ...

Remember there are numerous other state bodies besides the central bank that own gold: the army, the State Administration of Foreign Exchange and China Investment Corporation, the sovereign wealth fund. Precious metals analyst Bron Suchecki, formerly of the Perth Mint, says 55%.

Even at 50%, the implication is that China owns more than 16,350 tonnes – double the US figure. I can’t see how its national holdings are anything like the 1,948 tonnes they say they are. To declare markedly larger holdings would cause an unwanted surge in both the yuan and the gold price.

The state’s US dollar reserves would be devalued. It would be a direct challenge to US supremacy. China is probably not yet ready for that. For now it follows Deng Xiaoping’s doctrine: “We must not shine too brightly.”

But if that Russia-China axis wants to weaponise money, as the US has done, all China has to do is declare its gold holdings, and perhaps even partially back the new currency it plans to launch, a central bank-backed digital yuan, with them.

Unbacked Western fiat money risks losing a great deal of its purchasing power in such an event. It could create chaos in the West. But that is the card China now has with its 20 years of relentless accumulation.

In short, any new money whose aim is to get SCO trading with each other outside of a US-controlled banking system is going to need to involve gold for it to work. It wouldn’t surprise me to see them attempt the Glazyev system described above and for it not to work because of the trust problem, and because most of those nations are going to want to retain the right to print.

They could then try a second time, giving gold a more prominent role, and this time it might work better.

It seems obvious to me, that China has the capacity, and the influence to force a better global currency, one that is more inclusive and less exclusive to the domain of one country. If they include Russia and Inida, and Asia, then the custmer bases starts to look very solid. If they start to wiedl positive influence in countries, like they are by buidling infrastructure, and meddling endlessly with governments, endless debt issuance (the worst being where debt is issued to a government, whose poilitical elite syphon off inot bank accounts in the Treasure Islands, leaving the liability to the people)

China may still not be shining too brightly yet, but its time cometh, ... and ... “Let China Sleep, for when she wakes, she will shake the world,” (Napoleon Bonaparte). ONE EYE IS OPEN NOW ...

best
the gnome

We know that many countries in the SCO have plenty of gold and have been increasing their holdings. In the 14 years between 2006 and 2020, Russia’s central bank more than quintupled the country’s gold holdings, from around 400 tonnes to today’s 2,300 tonnes or so. It’s now world’s fifth-largest gold owner.

Then there is China. It has been quietly de-dollarising. Since 2021 China has lowered its holdings of both dollars and US Treasuries by 10%. Its holdings in US Treasuries have dropped by over $100bn since 2021, and it now has less than $1trn in US debt for the first time since 2010.

Its US dollar foreign-exchange reserves have come down from $3.25trn to $3trn over the same period. Having seen what happened to Russia, China will not want to be too vulnerable to a banking system that is run by the West.

Then there are China’s gold holdings. I consider this the most important story in world finance, yet it is largely ignored. China has far more gold than it says. China’s stated reserves are 1,948 tonnes of gold (barely 3% of its foreign exchange reserves). America’s are 8,100 tonnes (over 65% of national reserves).

Now we consider Chinese mining and its imports. China is the world’s largest producer of gold. This past decade it has produced about 15% of all the gold mined in the world. Since 2000, China has mined roughly 6,830 tonnes. China keeps the gold it mines. Over half of Chinese gold production is state-owned, and the export of domestic mine production is not allowed.

Given 6,830 tonnes of production, its official 1,948 figure already looks dubious. Chinese mining companies have also been buying assets across Africa, South America and Asia, and international production now exceeds domestic production (by approximately 15 tonnes in 2020).

China is also the world’s top importer of gold. Imports via Hong Kong alone, never mind Switzerland or Dubai (for which we don’t have numbers), have amounted to more than 6,700 tonnes since 2000.

Most of the gold that enters China goes through the Shanghai Gold Exchange (SGE), so the SGE is a proxy for demand. We know that since 2008, 22,000 tonnes of gold has been purchased by and delivered to physical gold buyers in China.

There is also gold that enters China that isn’t accounted for by SGE withdrawals. The central bank oversees the SGE, but its purchases do not go through it. It likes to buy 12.5 kilogram (kg) bars, which do not trade on the SGE, and it often uses dollars on exchanges in London, Dubai and Switzerland, while the SGE sells its gold in yuan. So there is plenty of tonnage we cannot account for.

Add to this gold held in China, whether as bullion or jewellery, prior to 2000 – the World Gold Council estimates 2,500 tonnes in privately-held jewellery – plus domestic mining and official reserves, you get a figure of around 4,000 tonnes. Cobble it all together – cumulative production, imports and existing stock – and you arrive at a figure around 32,700 tonnes. That’s ju

In a flurry of central-bank meetings from Norway to South Africa, many raised rates by larger-than-expected margins in a day that analysts at ING billed as “Super Thursday.”

One of many to come, and where this ends no one knows

Many central-bank officials struggling with a crisis of public confidence (never had much in the first place?) after initially arguing that inflationary rises would be temporary, are now racing to raise interest rates to catch up with soaring prices, but not so fast that they trigger unnecessary economic pain...Hmmm ...

Until this week, officials had projected what has been dubbed “immaculate disinflation”: Inflation, now running above 8%, would fall sharply to around 2%, with virtually no increase in unemployment. And on the 7th day the officials rested LOL

It is unprecedented for the Fed to predict so steep a rise in unemployment “before a recession has already begun,” Derek Tang of LH Meyer/Monetary Policy Analytics, a financial-research firm, wrote on Twitter. “They are trying to tell us there will be a hard landing; there is no other way.”

So how, then, does inflation fall to 3.1% (excluding food and energy) in a year, as Fed officials project? They implicitly assume much of it will happen painlessly as supply-chain disruptions ease and rising labor-force participation reduces wage demands.

Still waiting for the productivity word. Do they know what happens when wages go up, and productivity does not? Have they done a lot of international travel, like me. I am still trying to find out where my bags are, and I have been on the road for 10 days now. Getting a bit on the nose. Wonder how the poor people are going shipping around bucket loads of goods. Have any of the Fed and central banks ever run a business or worked in the real world. Think: margins go down, companies run kean, and run very exposed to uncertainties and shocks which we have in abundance!

The central bankers live in a rarefied world, quite divorced from the real world. a world of PhD economists with various theories and wonderfill financial models, that neglect human behaviour and other unpleasantries.

Going to be some tough times, and we do not have the leadership, nor the well engineered financial systems to cope is my cynical take.

good luck, and go gold ...

the gnome

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