1. Don’t Fall for the Latest Chinese Head Fake. The Trade War Will Roll On

    Last week, China and the U.S. announced they were resuming trade talks in early October. Right on cue, the stock market rallied, bonds and gold fell and the euro came roaring back from interim lows. It was as if they were playing “Happy Days Are Here Again” on CNBC.

    By the way, the early October date was not random. It follows the Oct. 1, 2019, celebration in Beijing of the 70th anniversary of the Communist victory over the Nationalists for control of China and the beginning of the regime of the Communist Party of China that continues until this day. President Xi did not want messy trade talks, let alone failed talks, to muddy the waters on this big celebration.

    That aside, the question is whether the stock market rally was justified and whether anything really changed in the China-U.S. trade wars as a result of these new talks. The short answer is no.

    Talking is certainly better than not talking and much better than fighting. But the issues are still irresolvable.

    China cannot give up its theft of U.S. intellectual property because it depends on that theft to propel growth. China cannot amend its internal laws to provide enforceability of any agreement because that involves a major loss of face and erodes Xi’s power. Trump cannot let the Chinese trade surplus with the U.S. persist because it’s a major drag on U.S. growth and it steals U.S. jobs.

    None of the big issues are any closer to a solution and that state of affairs may last for years. Despite the temporary euphoria, the market will realize sooner than later that the resumption of trade talks is just part of China’s strategy of delay and Trump’s strategy of propping up the stock market. When that realization sinks in, probably in late October, stocks will reverse course and bond and gold prices will resume their long-term climb.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  2. Easy to Find Global Warming if You Put Thermometers Near Heat Ducts

    The so-called “climate crisis” is one of the greatest public policy hoaxes ever perpetrated. That said, the hoax is not ending soon.

    Investors and concerned citizens need to see through the fog of false science and rigged data if they really want to understand what’s going on. First of all, climate change is real, but it’s not the critical crisis the alarmists would have you believe.

    I lived a decade on Long Island Sound. Ten thousand years ago the sound was a glacier. Today, you can sail, fish or paddle board on it and it’s a major water transportation pathway. That’s climate change, but it played out over thousands of years and was caused not by internal combustion engines (there weren’t any) but by solar cycles, volcanos, ocean warming and cooling and other factors that defy easy measurement and modeling.

    The best evidence with regard to carbon dioxide (C02) is that it does not cause warming (in fact, the opposite is true, warming causes C02 release). Of course, C02 is needed for plant growth and survival.

    This article shows that the climate alarmist deception is even deeper than we expected. Many data collection points that were suitably located when they were set up in 1923 have since been invaded by fast-food restaurants, heat exhaust fans and asphalt parking lots that make ambient temperatures higher in ways that have nothing to do with global warming. In fact, newly improved measurement techniques show that there has been no warming for the past 14 years, and a slight cooling trend has been detected.

    It’s also the case that U.S. C02 emissions have declined sharply and are now back to the levels of 1985. Alarm about climate change and the Green New Deal are frauds perpetrated by those who want to seize control of the economy for their own purposes. The data in this article (and many other sources) show this fraud for what it is.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  3. New York Fed Chief Says Low Inflation Is a Problem. He’s 10 Years Too Late

    For over 10 years, beginning with my first book, Currency Wars, I’ve consistently maintained that the Federal Reserve has no idea what they are doing when it comes to monetary policy and economic forecasting. I don’t consider that a controversial position; the evidence is overwhelming in the form of highly erroneous forecasts, policy reversals (from QE to QT and probably back again) and rate reversals (from cuts to increases and back to cuts), all without any significant changes in macroeconomic performance.

    The U.S. economy has been stuck in a persistent rut of annual growth around 2.2% for over 10 years regardless of whether the Fed is printing or burning money, raising or cutting rates. Long-term trend growth has been around 3.2%, so underperformance the past 10 years has cost the economy over $5 trillion in lost output. Thank you, Fed.

    Now comes the latest evidence for my thesis. In this article, New York Fed President John Williams says, “Low inflation is indeed the problem of this era.” He’s right, but he’s about 10 years too late with the observation.

    In Currency Wars(2011) I wrote, “The Fed is attempting to inflate asset prices, commodity prices and consumer prices to offset the natural deflation that follows a crash. It is basically engaged in a game of tug of war against the deflation that normally accompanies a depression… This is the essence of the Fed’s gamble. It must cause inflation before deflation prevails; it must win the tug of war.”

    The Fed spent 10 years (2009–2019) worrying about inflation that never appeared. The Fed consistently failed to achieve even the modest goal of 2% inflation. They should have been targeting 3% inflation (which would provide some debt relief in real terms) by working with fiscal authorities instead of wasting time printing money that banks wouldn’t lend and customers wouldn’t borrow.

    Now the disinflation and deflation may be too deeply ingrained to reverse. The U.S. is like Japan with one “lost decade” under our belts and another one on the way. The Fed has discovered this far too late.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  4. Google and Amazon Are Spying on You

    We’ve just gone through a three-year knock-down, drag-out fight between the Trump administration and the deep state over allegations of collusion by Trump with Russia and counterallegations of spying on Trump by the deep state. There’s no need to recite that history; we’ve all heard enough already. But what if you were being spied on not by the deep state but by the device in your pocket or on the kitchen counter?

    According to this article, that’s happening every day with innocuous and convenient devices like Alexa from Amazon, Assistant from Google and Siri from Apple. Most people who have these devices think of them as a one-way street where they can order pizza, buy products and get information by voice command. That they can do. But these systems are really a two-way street.

    They’re listening to your private conversations, tracking your whereabouts and talking amongst each other (robot to robot) about your behavioral patterns and whether you might be some kind of threat to society. Even that can sound benign if the “threat” is a possible mass shooter. But how good are the algorithms? (Not very good, in my experience.)

    And what if that “threat” comes to be defined as your religious beliefs, political beliefs, family size or thoughts on climate change that happen to be at odds with what’s considered acceptable by the engineers and thought police at Google? I don’t have Alexa (ever since I smashed mine with a sledgehammer) and I don’t use Assistant. I have Siri (can’t seem to get rid of it) but I leave it in the “off” position and disable all other apps from communicating with it.

    I’m not exempt from this kind of Big Brother surveillance (no one is) but I do try to keep it to a minimum. Other techniques (none infallible) are to leave your phone off whenever possible and leave it home if you’re just walking to do routine tasks.

    Good luck with all of the above; it can seem like a losing battle. The only thing worse than deep state surveillance and Silicon Valley surveillance is when the two join forces. I’ve seen that firsthand also. It’s not coming; it’s already here.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  5. Bond Kings Are Wrong Again About Another Bubble

    I was around when the greatest bull market ever in bonds began in 1982. The U.S. economy was in the midst of the then-worst recession since the Great Depression. It was the second of two “back-to-back” recessions in 1980 and 1981–82. The U.S. was just emerging from a period of sky-high inflation (over 15% annually) and equally high interest rates (over 20%).

    Suddenly, the bottom was in and long-term interest rates started to come down. As you know, bond prices move inversely to bond yields. As the yields came down, bond prices went up. The bull market had begun and it has continued to this day albeit with dips and rallies along the way.

    The U.S. 10-year Treasury note just traded near a 1.550% yield to maturity, not far from its all-time low of 1.367% on July 5, 2016. Slowing growth and the Fed’s new rate-cut cycle offer good reason to believe a new low yield below 1.35% will be hit in the months ahead. So why are the bond kings yelling “Bear market ahead!” at the top of their lungs?

    According to this article, three of the greatest bond traders on the scene today — Jeff Gundlach of DoubleLine, Dan Ivascyn of PIMCO and Scott Minerd of Guggenheim — are all warning of a coming bear market in bonds. There’s no denying the past success of these “bond kings,” and in fairness their warnings apply as much to corporate bonds as government bonds (it’s possible for credit spreads to widen, producing gains on government bonds and losses on corporate bonds at the same time).

    Yet they explicitly see a bear market in government bonds as well. I’ve seen this pattern repeated many times in the past 10 years. Yields hit a new low, some bond maven yells, “The bear market has begun” and then they suffer huge losses when the next leg down in yields commences.

    Their reasoning is that yields are so low they can’t go much lower, so they have to go up (and prices down). That’s fallacious. The would-be bears are not distinguishing between nominal yields (the ones you hear about) and real yields (nominal rates minus inflation). It’s true nominal yields are low, but real yields are not. That’s because inflation is also low and getting lower.

    Central bankers have told me privately that nominal yields have to come down a lot to get real yields into negative territory to provide stimulus. They’re right. This bull market has much further to run.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  6. The New World Order Begins With “Climate Change”

    Fires in the Amazon have put climate change back in the headlines (although there was already a heavily orchestrated campaign of climate change articles in the media prior to the fires).

    The notion is that the Amazon rainforest produces a substantial portion of all the oxygen on the planet as well as absorbs a substantial part of all the carbon dioxide produced. Both claims are true.

    The story was that Amazon forest fires would diminish the capacity of the Amazon to perform these dual functions of carbon dioxide absorption and oxygen generation. In turn, this would make the climate change crisis even worse because the carbon dioxide would build up in the atmosphere and accelerate global warming. That story is pure nonsense.

    First of all, there is no evidence that carbon dioxide causes global warming. There is some correlation, but warming causes carbon dioxide release, not the other way around. Moreover, a mild global warming episode appears to have ended around 1998. Claims of “record” temperatures since then are based on dubious measurements (including putting land-based thermometers in asphalt parking lots; satellite infrared measurements show no warming), and the results are within the margin of error.

    Sea levels are not rising at a pace that would inundate any island nations; they’re rising at a rate of seven inches per 100 years and even that rise is likely to reverse long before 100 years have passed. For that matter, the Amazon fires are not at all unusual; it would be unusual if there were no fires.

    Climate does change, but not because of carbon dioxide and not in ways that humans can control. Since that’s the case, what’s behind the climate hysteria? What’s the elite hidden agenda using climate alarmism as a Trojan Horse to advance? The answer is contained in this article. 

    Since climate does not respect political borders, any response to climate change must ignore borders also. In short, climate change is an excuse for global governance, global taxation and intervention in the internal affairs of sovereign states by unelected global bureaucrats.

    In effect, the climate change agenda is a form of neocolonialism in which multilateral organizations such as the G7 tell developing economies how to behave. Real climate change is slow and driven by sun cycles. Political “climate change” is fast and driven by the elites’ desire to tell the rest of us what to do.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  7. A New Kind of Counterfeit Gold

     

    There’s nothing new about counterfeit gold. The usual technique is to create a tungsten bar or round (because tungsten is very close in weight to gold, 19.250 grams per cubic centimeter for tungsten compared with 19.284 grams per cubic centimeter for gold) and then coat the tungsten with gold and apply whatever stamps or etchings needed to match a real gold coin or bar. From the outside, it appears to be solid gold but on the inside it’s not.

    There are ways to detect these counterfeits that involve highly precise scales, drilling through the core, magnetic scales, a “ping” test (judging by the sound) and other methods. One problem is that applying some of these tests to real gold can damage the bullion and hurt the resale value. Still, the tests are effective.

    Now comes a new kind of counterfeit as described in this article. The new counterfeits are actually pure gold. The fake part involves the stamp on the bar. These pure gold counterfeits are made in refineries in China but are stamped with the name and logo of more prestigious refineries in Switzerland such as PAMP, Argor-Heraeus, Metalor or Valcambi.

    Several of these “solid gold” fakes have turned up in the vaults of J.P. Morgan bank recently. The purpose of such counterfeiting is not to fake the gold (since the bars are solid gold) but rather to hide the provenance.

    Major refiners are committed to using gold only from conflict-free zones and not from mines where slave labor or harsh working conditions are found. The Chinese refiners don’t care. They buy gold from the least reputable sources and then try to hide the source by faking the refinery name on the bar.

    While these fakes are solid gold, the purity of the gold may be slightly lower than that produced by the top refineries. The new world standard is 99.99% pure (so-called “four nines”) whereas these fakes may be only 99.0% pure or lower. That’s still high-quality gold, but not the purity standard expected by buyers and sellers in the legitimate market.

    The way to avoid fakes is easy: Just restrict your purchases to the actual top refineries or to highly reputable dealers and mints. In all other cases, it’s caveat emptor.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  8. Trump Prepares to Take the Trade Wars to a National Emergency Level

    In the late Roman Republic, the constitution permitted the Senate to name a “dictator” in times of emergency and external threat. Contrary to today’s meaning, the dictator was not considered power-hungry or illegitimate. Instead, the dictator was a sensible response to the threat because he could override the normal legislative processes and respond quickly. Roman dictators even had a two-year term limit!

    Many Americans don’t realize that the Congress has already granted similar dictatorial powers to the U.S. president to respond to certain emergencies. These powers are not peculiar to Donald Trump but have been used by presidents as far back as George Washington.

    Abraham Lincoln declared martial law and suspended the writ of habeas corpus during the Civil War. Woodrow Wilson nationalized many U.S. industries during World War I. Franklin Roosevelt confiscated Americans’ gold bullion during the Great Depression.

    One of the most powerful tools a president possesses is the ability to declare a “national emergency” under the International Emergency Economic Powers Act of 1977, IEEPA, signed by President Jimmy Carter. This allows a president to freeze and seize assets and order U.S. companies to take specific steps in response to threats to national security having origins abroad.

    As reported in this article, President Trump has said he may use his IEEPA powers to order U.S. companies to end operations in China and shift production back to U.S. plants. Trump critics have suggested Trump is going overboard by using IEEPA in this way. That’s not true.

    IEEPA has been used extensively in connection with sanctions and asset freezes going back to the Iranian Revolution in 1979, including sanctions on Russia for Crimea and other sanctions on Syria, North Korea, Venezuela and Iran again. Free market advocates, libertarians and Trump-bashers would all do well to study the vast array of economic weapons at the hands of the president that do not need congressional approval, including the Patriot Act, CFIUS, the Trading with the Enemy Act of 1917 and many other statutes.

    When it comes to markets and the economy, the president has the powers of a dictator. Congress has said that’s a good thing.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  9. The Rise and Fall of Economists. Let’s Hope They Stay Down This Time

    Not that long ago, economists were nerdy academics who were consulted on a short list of technical issues but otherwise not included in the inner circles of power. This changed in the mid-1960s when economists claimed they could “fine-tune” the economy with their “econometric models.” They couldn’t.

    The U.S. suffered four recessions between 1969 and 1981 and stocks moved sideways over that 12-year period; the 1969 stock market high was not surpassed until 1982. In the 1970s, President Nixon followed the advice of Milton Friedman to abandon gold and move to floating exchange rates. This resulted in the worst U.S. inflation (1977–1981) since the end of World War I. Persistent failure by economists did not impede their rise to power in the 1980s and 1990s.

    The failures of risk management and modern finance led to the Tequila Crisis (1994), the Russia-LTCM collapse (1998), and the dot-com crash (2000). Still, the economists marched on. But as this article describes, this ascent was arrested by the 2008 financial crisis.

    Economists (by then in positions of power in the White House, the Federal Reserve and other central banks) did not see the panic coming, underestimated its impact when it did arrive and bungled the crisis management by bailing out insolvent banks at the expense of savers and taxpayers. Today, economists are far more humble in their claims to expertise.

    The two most powerful central bankers in the world, Jay Powell at the Fed and Christine Lagarde nominated to head the ECB, are not economists; they are both lawyers. That’s some progress.

    The article poses the questions of whether economists will move back to center stage or be confined to their ivory towers as they were until the 1960s. We should hope for the latter, but beware of the former.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  10. The Impact of the Fed’s Jackson Hole Meeting Is Just Beginning

    As if the Fed didn’t have enough on their plate, they’ve now been dragged unwillingly into the currency wars and trade wars raging around the world.

    As we know, the Fed’s main jobs are said to be price stability and low unemployment. That’s the famous “dual mandate” legislated in the Humphrey-Hawkins Act of 1978. The reality is that the Fed has one and only one mission, which is to bail out the banking system from time to time when banks are failing due to bad lending, overleverage or failed proprietary trading.

    Still, the dual mandate makes a nice talking point for Fed chair speeches and congressional testimony. Two things are clear. The Fed is not supposed to interfere in currency markets (that’s the Treasury’s job, although Treasury can use the New York Fed trading desk when they wish to intervene), and the Fed should not be involved with trade issues at all (that’s the job of the White House and the U.S. Trade Representative).

    But market factors are so interconnected today that the Fed can’t keep out of trade and currency fights even if they want to. Lower interest rates can make the dollar weaker (unless foreign central banks cut rates even faster than the Fed, in which case the dollar can get stronger). A weaker dollar resulting from Fed policy can make U.S. exports more competitive and help the U.S. trade position.

    Major trading partners and emerging-market economies all watch the Fed to see what they should do with their interest rate policies to help their own export positions. As this article explains, the Fed has now been drawn into practically all global economic struggles because of its control over U.S. interest rates, and, indirectly, the values of the dollar, bonds, stocks and other major asset classes.

    This predicament is made worse by the fact that the U.S. is in a presidential election cycle. The Fed might appear to favor Trump’s reelection by cutting interest rates, a perception it wants to avoid. Yet it may have to cut interest rates anyway to avoid a recession and higher unemployment.

    The Fed would like to be nonpolitical, but it has been drawn into the eye of a major political storm.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.