Recession and More Debt

Paper assets like stocks and bonds and other make-believe wealth assets like Bitcoin provided “good” inflation this past week. That is the kind of inflation that makes the rich get richer so it’s deemed good by the establishment. On the other hand, “bad” inflation like oil, copper and silver were down last week. So, with stocks and bonds rising so strongly this week there are dreams from the establishment of a soft landing. And this strong performance took place despite some horrific earnings reports this week like that of Intel which lost $0.10 in Q4 with revenues falling 25% over the like quarter of 2022. On the other hand, Tesla had fantastic news. It reported 4^th quarter revenues of $24.32 billion or $1.19 per share. That compared with revenues of $17.72 billion in the like quarter of 2022 with earnings of $0.85 per share. That along with some better-than-expected economic news helped bolster the dream of a soft landing. But last evening I attended a debate between Lawrence White (a proponent of getting rid of the Fed) and Frederic Mishkin, a former federal reserve board member. Mishkin said there is zero chance of avoiding a recession this year which echoes Peter’ Boockvar’s view and that of most other rational analyst. And as the economy heads into a recession we can count on a lot more Federal Government Red ink at the same time when the number of global savers who want to own U.S. Treasuries is drying up very rapidly. This week I found no fewer than three essays pointing out that Russia, China, as well as the other BRICS are all moving rapidly away from dollars used for international trade. Alasdair’s article which you can find at GoldMoney.com is absolutely brilliant. If you read that you will have not trouble seeing that on a global scale the dollar is or soon will be heading on a very sharp downward trajectory as foreigner’s. While the U.S. is fighting a hot war against Russia, Russia and other anti-dollar countries are fighting an economic war even as the U.S. is digging itself into a deeper death inducing debt trap.    

Despite some good economic news this past week, Intel’s sales decline may be hinting at a sharp economic decline. Companies can cut costs but they can’t stop revenue declines in recession. Chairman Powell seems to understand that if he lets up on monetary policy now, he will likely be engaged in the same mistake as Arthur Burns in the 1970s when a slowdown in inflation left him goose the money supply once again which lead to double digit inflation. Last week was discouraging for gold and gold shares. But one week does not spell a trend. I continue to believe 2023 will be a very positive year for the yellow metal and shares covered in this letter that are on the hunt for gold which is real money.