Daily Digest 7/31 – Federal Borrowing Soars as Deficit Fear Fades, Markets Get Ready For The Great Unknown

Economy

A Fed Reversal Will Store Up Trouble (Saxplayer00o1)

Will the world’s currencies face a reckoning in 2019? This year gold has risen 10% against the U.S. dollar. Alternative currencies like bitcoin have risen about 160% against the dollar. All other major currencies have also fallen by similar magnitudes against both gold and bitcoin—troubling signs. The larger story is that an unnecessary return to fiscal and monetary stimulus, signaled over the past few weeks by the Federal Reserve and the European Central Bank, may produce a crisis of confidence in fiat currencies, including the U.S. dollar.

Companies are ramping up share buybacks, and they’re increasingly using debt to do so (Saxplayer00o1)

U.S. companies are on pace to break another record for share repurchases in 2019, using a combination of cash and debt to push the total to close to $1 trillion.

Federal Borrowing Soars as Deficit Fear Fades (Saxplayer00o1)

The Congressional Budget Office estimated last week the budget deal would add $265 billion to federal deficits over the next decade, though projected deficits could be as high as $1.7 trillion during that time if spending continues on the same trajectory.

The Undeclared Currency War: How the ECB Is Forcing the Fed’s Hand (Saxplayer00o1)

The European Central Bank’s policy rate, at minus 0.4%, is already nearly 3 percentage points below the Fed’s. And last week ECB President Mario Draghi strongly hinted it will soon go further into negative territory. Fed officials have concluded they cannot permit U.S. rates to deviate too far from their foreign counterparts’. So even though the U.S. economy is in much better shape than Europe’s, the ECB is helping to force the Fed’s hand.

Markets Get Ready for the Great Unknown (Saxplayer00o1)

The Institute of International Finance said earlier this month that the mountain of global debt expanded by $3 trillion in the first quarter to just more than $246 trillion. That increase compares with the $3.3 trillion expansion for all of last year. The just-signed budget deal in Washington shows it will only get worse, with the deficit forecast to expand to $1 trillion or more in the U.S. The Treasury Department said Monday that it expects to issue $433 billion in net marketable debt from July through September, $274 billion more than it estimated in April.

Negative Interest Rates: Someday The Bank May Pay You For Your Mortgage (Saxplayer00o1)

Would this drive up debt levels? You bet. But in this environment, you could pay off your debt more easily … by taking on more debt.
Say you have $100 of debt and you’re paying 5 per cent on it, or $5 per year. You borrow another $100, this time at minus-1 per cent, and make $1 for carrying that debt. That reduces the cost of the first $100 you borrowed to $4.

Asset Bubbles to Zombie Companies: The Dark Side of Rate Cuts (Saxplayer00o1)

Even some junk bonds now trade at levels where investors have to pay for the privilege of holding them. The number of such securities denominated in euros and trading with a negative yield now stands at 12, according to data compiled by Bloomberg. At the start of the year there were none.

Watch out, America: China and Russia are stockpiling gold (Saxplayer00o1)

And there’s an obvious reason for China to buy gold. It wants to break up the global hegemony of the U.S. dollar — the hegemony that former French President Charles de Gaulle called America’s “exorbitant privilege.” It wants to make its own currency, the renminbi, a world player. And Odey argues that buying gold bullion is a natural move. Gold reserves should add to world confidence in the Chinese currency.

Milton Friedman: The Forgotten History of the Godfather of Conservative Libertarianism (Alex)

Friedman came from humble beginnings, the son of two Jewish immigrants from an area of the Kingdom of Hungary currently located in Ukraine. His family soon moved to New Jersey. And at 16, he won a scholarship to Rutgers University, where he studied mathematics and economics with an eye toward becoming an actuary. He was offered two different scholarships: One to Brown University to study math, the other to the University of Chicago to study economics. He opted for the latter. It is here that he met his future wife, Rose Director, also an economist.

YouTube needs ‘new set of rules and laws’: executive (Sparky1)

“We want to make sure that YouTube remains an open platform because that’s where a lot of the magic comes from, even though there may be some opinions and voices on the platform that I don’t agree with, that you don’t agree with.”

Tech giants are facing increased scrutiny, with some political leaders calling for a breakup of the dominant players and others seeking tougher privacy and content moderation rules.

Pfizer to combine off-patent drug business with Mylan (Sparky1)

Bresch was at the helm when the company was skewered for its massive price increases for the EpiPen emergency treatment, one of several issues that has dogged Mylan in recent years.

Analysts at Morningstar characterized Mylan as “one of the most controversial publicly traded healthcare companies,” citing charges of “price gouging” for EpiPen and a high debt load, among other issues.

Cambodia buying ‘tens of thousands’ of Chinese weapons: PM (Sparky1)

China has lavished billions of dollars in soft loans, infrastructure and investment on the poor Southeast Asian kingdom, which has tilted away from the US amid Hun Sen’s increasingly authoritarian rule.

3 Things to Watch as Summer Heat Bakes the Arctic (newsbuoy)

Arctic sea ice levels have been far below average so far this season. According to the National Snow and Ice Data Center (NSIDC), the ice extent this month has been nearly on par with the levels seen in July 2012, a summer marked by high rates of ice melt.

Sea ice typically falls to its lowest point of the year in September, at the end of the summer. September 2012 saw the lowest sea ice extent since the satellite record began. This year’s similarities raise the question of whether the season is heading for a new record.

Farmers struggle to find hay for animals as wet spring creates shortage (Sparky1)

“I normally sell to horse farms,” said Karl Gearhart, the owner of Gearhart Farms, which grows and sells hay in central Ohio. “In the last four months, I’ve sold more to dairies and beef cattle than I have in the last 17 years I’ve been in business.”

Gold & Silver

Click to read the PM Daily Market Commentary: 7/30/19

Provided daily by the Peak Prosperity Gold & Silver Group

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