Dollar Reserves Held By Central Banks Fall To 59%…

A Pfennig For Your Thoughts

May 12, 2021

* Currencies drifted on Tuesday… 
* Gold fights back on Tuesday to erase an intraday loss! 

Good Day… And a Wonderful Wednesday to you… As the group Chicago sang many years ago, I’m feeling stronger every day…. The pain in my stomach from the pulled muscle, is not as sharp of a pain, but still painful… I’ve got a ton of stuff to talk about today, so the markets will be playing second fiddle to all my thoughts today… That sure was a nice win for our Blues on Monday night, in L.A. after sleeping all day I had no problem staying up for that late game! My beloved Cardinals are in Milwaukee, to play the Brew Crew… And last night they won 6-1, with some 11th inning home runs… Crosby, Stills, & Nash greet me this morning with their love song: Suite: Judy Blue Eyes…

Well it was a real strange day on Tuesday in the currencies and metals… At one point in the day, Gold was down $18 and I thought, “oh no, here we go again, another engineered takedown”, but then Gold’s fortunes turned around and the shiny metal ended the day up $1.90, to close at $1,838.90, and Silver fought through some short selling too, and wound up 36-cents on the day to close at $27.73.

The currencies kind of drifted on the day… there were some that lost a little ground and some that didn’t… And that leads me to my first discussion of the day… Ok, after all my complaining about the Dollar Index yesterday, former colleague, Neil George, sent me a note and told me I should use the Bloomberg Dollar Index, which includes the Chinese renminbi/ yuan. I looked into it, and saw the weightings in the index, and saw the inclusion of renminbi, and also saw that euros make up 32% of the index, so not as much as the Dollar Index I currently use… So, from now on the Dollar Index I refer to will be the Bloomberg Dollar Index (BBDXY). It will take some time to get used to it, but over time I do believe it will give us a better illustration of what the dollar is doing on a trade weighted basis… 

So, the BBDXY ended the day yesterday at 1,119.20, after starting the day at 1114.14, so you can see that the currencies lost a little ground to the dollar yesterday. But just like the metals, the currencies were down by a larger amount early only to comeback strong at the end of the day. Hopefully that will be a harbinger for the overnight & today’s price action…

In the overnight markets…Well hope springs eternal I guess… But the dollar kept up the pressure on the currencies overnight, and the BBDXY rose to 1,120.33 in the overnight trading. Gold is down $3 this morning, and Silver has lost 23-cents in the early trading. I find these down figures for the metals to be something that could very easily be reversed, given that today we’ll see the color of the stupid CPI which even with all its hedonic adjustments, should show inflation rising, which should be a good thing for Gold & Silver. 

Well, recall last month when there was all the talk of a stock market collapse on a certain day, but the collapse never happened… On Monday this week I had planned to talk about the newest call for a collapse but with me being sick didn’t help that discussion along… Yes, Monday, May 10th, was supposed to be the latest armegeddon day for the stock market… And while the Dow actually lost a percentage point or two, it certainly wasn’t a collapse… So, to me these people are doing nothing but crying wolf… yes, the wolf exists, as everyone and their brother knows that the stock market is overvalued by lengths… So, the possibility of a stock market collapse is reality, but calling it on a certain day to happen? Well, eventually, it will happen, and they will be the ones that said, “I warned you”…  

Ok, so all this talk of a market collapse on Monday, must have gotten the folks at www.wallstreetonparade.com looking into the possibilities… And you won’t believe what their research showed, but don’t worry, I have it for you here…

“The data shows that just prior to the dot.com bust on December 31, 1999 that resulted in the Nasdaq stock market losing a stunning 78 percent of its value from peak to trough, the total stock market value was 1.77 times GDP.

At year-end 2007, prior to the greatest Wall Street collapse since the Great Depression, the total stock market value was 1.34 times GDP.

As of December 31, 2020, total stock market value represented 2.10 times U.S. GDP. Siblis Research further shows that as of March 31 of this year, total stock market value in the U.S. stands at a breathtaking $49.1 trillion. (That includes U.S. based public companies listed on the New York Stock Exchange, Nasdaq Stock Market or OTCQX U.S. Market.)

A $49.1 trillion stock market is larger than the combined GDP of the four largest industrialized nations (U.S., China, Japan and Germany) according to International Monetary Fund data.”

Chuck again… So… maybe the end is near, but again, it’s long overdue, but being able to say it’s going to bust a button on X day, is getting a little too much for me…

But what it does do for us is to remind us to update our stop losses… These are very important in you retaining profits you have in stocks folks… Because when the bottom falls out getting your stock sold at your price will be quite difficult…

Deficit spending has been a bane of mine for as long as I can remember… I remember yelling at walls for Bush’s deficit spending, then Obama’s, then Trump’s, and now Biden’s… I find this all to be worthless spending on boondoggles, and bonuses… The misallocation of tax payer funds, has continued down a long path of good money chasing bad programs… And to highlight what I’m talking about here’s longtime friend, and publishing guru, along with best selling author, Bill Bonner…

“And while the feds have been wasting resources for generations, the rate of loss has recently gone much higher than usual.

In the 1970s, Washington reliably frittered away about 27% of GDP. Now, it’s over 40%. That doesn’t count the trillions in private waste and malinvestment caused by the proliferation of regulations and edicts, not included as federal spending.

All together, directly and indirectly, half of U.S. GDP is probably misallocated… or misspent.”

Chuck again… I find this all to very likely ruin, our future folks… Yours, mine, your kids and grandkids, my kids and grandkids, and I try to sit them down and talk to them about this stuff, and it all falls on deaf ears, like deer caught in headlights, but one day, when the lights go out, they’ll call me on the phone and ask me why I didn’t warn them….   

And finally…. Yesterday, I mentioned the article that will have episode 1 from Dennis Miller, will run tomorrow, and how we explore what it will be like when the dollar isn’t the reserve currency any longer… And to that, another good friend of mine, Craig, sent me this link to an article on Kitcom.com, that talks about how Central Bank reserves around the world are seeing their dollar holdings drop… Here’s an excerpt from that article:

“The reach of the U.S. dollar as the global reserve currency is declining as central banks around the world reduce the share of U.S. dollar reserves, according to the International Monetary Fund (IMF).

“The share of U.S. dollar reserves held by central banks fell to 59 percent—its lowest level in 25 years—during the fourth quarter of 2020,” IMF cited its own Currency Composition of Official Foreign Exchange Reserves (COFER) survey.”

Chuck again… And in my opinion, we will continue to see the percentage drop even lower… As the currency printing continues, thus debasing the value of the current stock of dollars… When the drop in reserves comes to a crescendo… We will probably wake up to find a digital currency had taken over our dollar balances at the bank…. 

The U.S. Data Cupboard yesterday showed that their were a record number of job openings in the U.S. The number was 8.1 Million… So, do the reverse math on that, and you get over 8 Million people not interested in working any longer, as long as the Gov’t keeps sending them stimmy checks, and tax credits for children, etc.

Today’s Data Cupboard will have the stupid CPI (consumer inflation) will print for April… Don’t expect this index to reflect the items I showed you yesterday that had increased… That’s not what this index is geared to do… Instead it’s geared to lie to you… And tell you there is no inflation to be fearful of… I didn’t pay attention to any of the Fed head speakers yesterday, for I’ve been told enough lies to last a lifetime!

For What It’s Worth… Ok, when this article first came to my attention, I blew it off because it was behind a paywall at the tellegrapch.uk.co website… But then Ed Steer came to my rescue with a snippet of his own of the article in his letter yesterday, and so unless you pay for a subscription to the Telegraph.Uk.co, this snippet will be it for this article by Ambrose Evans Pritchard…

Here’s your snippet: “The U.S. Federal Reserve and Treasury are repeating one of the most disturbing episodes of the 1940s and risk stoking a destructive inflationary boom, a leading monetary watchdog has warned.

The Center for Financial Stability (CFS) in New York says U.S. money supply data is flashing a red alert and that excess reserves in the banking sector threaten to set off an “explosion of lending” as the recovery accelerates.

The Fed is riding a tiger by the tail and may have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits.

The CFS said its “divisia” measure of the broad M4 money supply rose 24 percent in March from a year earlier, and narrow its M1 variant rose 36.9 percent. “Those monetary growth rates are potentially alarming,” said Professor William Barnett, the institution’s director.

Barnett said de-facto collusion between the Fed and the Treasury is much like that of the 1940s, when the Fed served as a fiscal agent for Democratic administrations and mopped up the vast bond issuance needed to pay for the Second World War and its aftermath.

Inflation reached 17 percent by mid-1947 and creditors were gradually expropriated in what amounted to a stealth default stretched over several years.”

Chuck again… For all the work that Ed Steer puts into his letters each day, I salute him, and would recommend signing up for his letter to anyone! You can find him at www.edsteergoldsilver.com

Market Prices 5/12/2021: American Style: A$ .7806, kiwi .7234, C$ .8176, euro 1.2135, sterling 1.4137, Swiss $1.1068, European Style: rand 13.9938, krone 8.2641, SEK 8.3291, forint 294.67, zloty 3.7415, koruna 21.0396, RUB 74.12, yen 108.75, sing 1.3283, HKD 7.7661, INR 73.45, China 6.4146, peso 19.97, BRL 5.2256, Dollar Index 1,120.33, Oil $65.54, 10-year 1.61%, Silver $27.50, Platinum $1,243.00, Palladium $3,000.00, Copper $4.83, and Gold… $1,835.90

That’s it for today… Thanks again for all that sent along get well wishes… I haven’t had a cold like this in many years, and with today being the 9th day of the cold, means that it’s just about to give up haunting me… And I’ll say good riddance! What a strange game last night for my beloved Cardinals. The Cardinals hitters couldn’t find their way out of the infield for 10 innings, and then in the 11th inning they exploded for 5 runs! Good thing the Cardinals pitching was up to the task… What’s up with the cool temps here in the Midwest? We won’t see 70 degrees this week, and we’re in the 2nd week of May! I had requested that we turn the heat back on in the house, as I sit here each day with a hoodie on, and wrapped in a heavy blanket! But as usual my requests fell on deaf ears… And so I await warmer weather to return to the Midwest… Linda Ronstadt takes us to the finish line with one of the saddest songs ever: Long, Long Time… So sad… Well, I hope you have a Wonderful Wednesday, and will Be Good To Yourself! 

Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts