In a recent Bloomburg article Chinese Officials talking about what they were going with respect to foreign currencies and what they were going to do with the US Treasuries. It spooked the markets and gave a boost to the precious metals.
The 10 year Treasury doesn’t represent a good value. However it is the deepest and most liquid security in the world against which all other world currencies are measured.
The 10 year treasury is a 10 year lie, but it is the deepest and most liquid lie on the planet. Although many in the US might focus on it’s weaknesses of the 10 year treasury in terms of the world it is a trusted lie.
As others have said, “The US Treasury is the prettiest mare at the slaughterhouse. So it is really not a true measurement of inflation.
The CPI has nothing to do with the deterioration of the purchasing power of the dollar. The CPI, when it is inconvenient, doesn’t include, fuel, food or taxes.
When you look at the 10 year Treasury you will see the yield is 2.5% and the purchasing power of my dollar is deteriorating at 4%
Given the 10 year Treasury yield and the real depreciation in the purchasing power of the dollar, a US Treasury is a “Certificate of Guaranteed Confiscation.”
If we were to see a liquidity squeeze in the next 10 months the 10 Year Treasury is the most liquid security. There would be a flight to security.
Demand for precious metals doesn’t have to win the war against bonds but we don’t have to we just have to lose less badly.
Rick /rule givea a wide ranginf interview on US Treasuries, China, the real rate of inflation, the government CPI, oil and much more.
As an investor you have to look at the markets. The 10 year Treasury has been in a 36 year bull market so we are much closer to the end of the bull market in Treasuries.
From a historical point of view that would also seem to indicate we are closer to the beginning of the precious metals bull market.
We see some concern about rising inflation trends.
Supposition in the market as interest rates go up gold will go up. If inflation goes up because people need more to cover their purchases.
I don’t think you will see the Chinese dump the Treasuries they hold.
The Chinese have said they want to maintain strong export economy while growing their domestic economy. It’s not in the best interest of the Chinese to increase unemployment caused by a higher Chinese value of their currency and decrease exports
Low oil prices lead to less investments. Less investment leads to a loss of production. So the price of oil going up has nothing to do with increased demand caused by improving business conditions. It has more to do with destruction of production capability and the inability to ramp up production quickly.
Inflation vs deflation. There is lots of liquidity but lack of solvency. Companies are hiding debt in offshore balance sheets.
At the Federal level we have 120 billion in on the book debts and three times that in off book debts.
However because of printing, otherwise known as counterfeiting, we have lots of liquidity.
So from a solvency point o view we have a problem that will loom even larger in coming years. Underfunded pension liabilities, underfunded municipal bonds,etc.
Politicians and voters prefer to default upon our debts on the installment plan.
So rather than telling old folks that we are not going to give you your social security or not going to give it to you in the amount you expected we will depreciate the value of the dollar through inflation.
In commodities largely because of the destruction of production we have increasing prices
People with money seem to have realized the fix is in with the Trump tax plan. People around the world look at the way that we dealt with our financial problems, basically spending today and who cares about the debt tomorrow. We’ve handed off the problem to our children who will be faced with a much bigger debt problem.
Gold is not a “promise to pay” like the US Dollar or a US Treasury it is payment.
Rick Rule is President and CEO of Sprott US Holdings, Inc. It is a holding company made up of three separate and distinct companies Sprott Global Resource Investments, Ltd., Sprott Asset Management and Resource Capital Investment Corporation. He is an expert in natural resources investing. You can find out more about Rick Rule and the company by visiting http://www.sprottglobal.com.
This interview originally on https://www.silverdoctors.com/
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