Yellen Talks About The Threat Of A Default…

A Pfennig For Your Thoughts

June 29, 2021

* Currencies drift on Monday… 
* Choppy trading in metals continues… 

Good Day… And a Tom Terrific Tuesday to you! Rain, rain please go away, Chuck wants to go outside and play! We’re stuck in a weather pattern that keeps these Thunderstorms popping up at any time, and brother have they brought the rain! And according to my trusty weather app, we’ve got 3 more days of this weather pattern. Well, my trip to the oncologist yielded the news that I’ve lost another 9 lbs in the last month since last seeing her… I told her, “I was wondering why my pants keep falling down!” I’m waiting for the scheduling dept. to call me to give me the appt. to have an MRI of my brain… (spoiler alert: they won’t find one! HA!) No seriously, I’ve been experiencing really bad head aches for a week now, so the MRI will tell us why… I won’t beat around the bush here, with my history of cancer popping up like those Thunderstorms, anywhere and any place, I’m concerned about what the MRI will find… Most likely I’ve pinched a nerve in my neck that’s causing the head aches… Recall, I told you I had done something to the trap muscle in my neck about 10 days ago? One of my fave guitarists, Alvin Lee, and his band Ten Years After greet me this morning with their song: I’d Love To Change The World….

Well, we ended last week with the currencies moving higher VS the dollar, and Gold rising $7 on Friday, with Silver adding 18-cents to its value to end the week. The Data on Friday was interesting, as Personal Income in May was down -2.0%, and Personal Spending was flat… Which told me that the stimmy checks have all been spent, and now there’s no more dinero to spend…

Yesterday we saw the currencies drift on the day, the BBDXY which when I last wrote to you last Thursday, was 1,137, and yesterday at the close it was 1,137… So no movements to speak of… And Gold lost $3.10 yesterday while Silver lost 2-cents! Gold closed yesterday at $1,779.40, and Silver at $26.19… There’s really no impetus for Traders to sell or buy dollars at the start of this week, as there’s really no economic data to speak of until we get to Friday, when we get the June Jobs Jamboree…

Tomorrow will bring us the ADP Employment Report, but considering the large gaps between the ADP jobs report that the BLS jobs report, I’m beginning to get the feeling that the markets are no longer thinking that the ADP is the precursor of the BLS report… Shoot Rudy, I could have told them they had no relationship a long time ago, if you’d only had asked me! There’s no telling what the BLS will pull out of their magic hat when it comes to the jobs report each month…

In the overnight markets… mainly the European session, we’ve seen some dollar buying, not much, but some, as the BBDXY has risen to 1,138.79 and Gold is down $9.90 in the early trading, with Silver following suit and losing 19-cents… I really didn’t expect to see Gold & Silver losing ground this morning when I turned on my laptop… I’ll have to do some searching later to find out what caused that selling… No time right now to do so, and besides, that kind of news doesn’t break as the asset is trading… No time left for me, no time… (Guess Who) 

The Petrol Currencies remain well bid, and we have a new front runner of the Petrol Currencies, and that is the Brazilian real… The real has really been on a run of late, and is trading below the 5 handle, which I don’t recall seeing for a few years now… About 10 years ago, when interest rates around the world were pretty much normal, the real put in the best year of performance of any currency… But that was then… No reason to believe that it could do that again, given today’s mess of interest rates, etc. But, for now, the real is for real…. HA!  

Well, last Thursday I gave you a dissertation on the U.S. Debt… And then I came across this article on Reuters about how Janet Yellen is banging the drum for an increase to the debt limit, of which I didn’t think even existed any longer… It has all been a show to complain about the debt ceiling and how the Gov’t was going to shut down, etc, etc., and then it would get increased… But everyone had gotten comfortably numb about the debt limit that I hadn’t seen nor heard of any talk of a debt ceiling for years! But apparently it’s still around, and Janet Yellen is fearful of it… let’s listen in…

“U.S. Treasury Secretary Janet Yellen on Wednesday warned Congress that the United States risks a debt default and a new financial crisis as soon as the August recess if lawmakers fail to act quickly to suspend or raise the federal borrowing limit.

Yellen said defaulting on U.S. debt obligations would be “unthinkable” and “would have absolutely catastrophic economic consequences.”

Yellen said that to avoid uncertainty for financial markets, Congress should pass new debt limit legislation – allowing the Treasury to continue borrowing – before the latest suspension expires on July 31.”

Chuck Again… Joe Cocker did a song in the 70’s called Cry Me A River… That’s when he was doing his Mad dogs and Englishmen bit with the great Leon Russell… But that’s what I’d tell Yellen, Cry Me a River, Janet….

“I was treated this past weekend to a link to a YOUTUBE video with the author of Rigged, Stuart Englert, who’s book came out in 2020… I recommended the book at that time, because it gave a very good layman’s explanation of how and why the Gold price is manipulated… So, this video has the author explaining Basel 3, and what could come of it, IF it is adopted and adhered to by the Central Banks of the West… And I have that link for you today… It’s a 20 minute long video, so make sure you reserve enough time to hear what Mr. Englert has to say… Stuart Englert: Basel III and Gold — What Does it Mean, Why Does it Matter? – YouTube

Spoiler alert: he’s like me in this understanding of what Basel 3 could be, it could be good for Gold, or it may mean nothing…

OK.. onto other things… Talk that the Federal Reserve should develop a “digital dollar” is everywhere, but a top U.S. central banker today signaled he isn’t on board.

The Fed’s top overseer of the banking system — Fed Vice Chairman Randal Quarles — said he doesn’t see the benefits for a digital dollar and that the new product would “pose considerable risks” to the financial system.”

I got that info from the good Folks at GATA who took it from a story on MarketWatch.com

Before I go on… Let me say that I see what Quarles is doing here… He’s just putting up a smoke screen to be able to say when the whole financial system comes crashing down that he was against digital dollars… But this one person won’t put a stop to the charge to digital dollars, folks… It’s coming… are you ready? 

So… with little in the Data Cupboard this week until we get to Friday, I would think we’ll go through the week really drifting around with the currencies, and Gold & Silver being choppy at best… 

Oh, and there was one other piece of economic data last week that was interesting… The PCE (personal consumption expenditures) a key inflation indicator that the Federal Reserve uses to set policy rose 3.4% in May, the fastest increase since the early 1990s… Yes April 1992.. Where were you in April 1992? That’s a long time ago in my book… But again, the Fed heads were quick to sweep the number under the rug, and say “move along, nothing to be seen here”…

To recap… The end of the week last week brought about some currency, and metals gains, nothing to write home about, but gains nonetheless. Yesterday, was a day of drifting for the currencies, and Chuck thinks that’s what we can expect the rest of this week as there is no real economic data to print this week until we get to Friday. Gold did lost a bit yesterday, and Silver was basically flat, down 2-cents on the day.

For What It’s Worth… I was reading Ed Steer’s Saturday letter on Saturday, and came across this article that he had highlighted in his letter that can be found here: www.edsteergoldandsilver.com He pulled it from zerohedge.com, and that’s where you’ll find this article from Kyle Bass, about inflation, and that can be found here: Kyle Bass Slams Fed, Sees Inflation Everywhere He Looks | ZeroHedge

Or, here’s your snippet: “With U.S. stocks back at all-time highs as the market seemingly shrugged off the FOMC’s reaction to the latest inflation numbers, Hayman Capital’s Kyle Bass returned to CNBC for an interview with the “Closing Bell” crew on Thursday, where he offered a dramatically different vision of the present economic scenario vis-à-vis inflation.

In an interview where he expounded upon his claim that the U.S. is already grappling with real inflation rates above 10%, the billionaire investor proclaimed that “in every single aspect of life, I see inflation.”

Why? Because during the past year and a half, the Fed has introduced more broad money into the American economy in the shortest time than we have seen at any point in American history.

“I think look we’re going to see a short-term turn-down in inflation because the initial inflationary burst was enormous…this transitory comment may play out to be true for a short period of time but I think Sarah when you look at the the money supply the broad money in the US system from 1980 to 2010 it it vacillated between 50% and 60% of GDP and post the global financial crisis it moved up from roughly 60% to 68% 69% of GDP now that we’re approaching 90 so in the one year period one and a half year period since COVID started we have introduced 34% more broad money in our system in the shortest time period in the history United States so we’re going to see prices stay high and move higher over time if the fed continues to expand its balance sheet,” Bass said.

Even as the financial press prattles on about the significance of the Fed finally starting to consider tapering its asset purchases, Bass believes that the central bank won’t be able to shrink its balance sheet so easily.

“If you’re in the market place you want to own commodities if you’re in the real world you want to own productive real estate you even want to buy rural land in front of major demographic moves in the U.S…I’d rather own hard assets than equities today because I think we’re only seeing just the beginning of population moves in the U.S.”

Chuck again… I agree with Kyle Bass here… we may well see a pullback of inflation this summer, but… and like Rickards and Rosenberg keep saying, inflation is a 2022 story…

Market Prices 6/29/2021: American Style: A$ .7530, kiwi .7000, C$ .8085, euro 1.1907, sterling 1.3841, Swiss $1.0860, European Style: rand 14.3482, krone 8.5690, SEK 8.5223, forint 295.04, zloty 3.7965, koruna 21.4072, RUB 71.17, yen 110.60, sing 1.3441, HKD 7.7635, INR 74.17, China 6.4559, peso 19.86, BRL 4.9342, BBDXY 1,138.79, Dollar Index 92.04, Oil $72.51, 10-year 1.48%, Silver $26.00, Platinum $1,078.00, Palladium $2,758.00, Copper $4.20, and Gold… $1,769.50

That’s it for today… Well the month of June can’t get over fast enough for my beloved Cardinals who have only won 8 games during the month… The June Swoon… UGH! Daily readers will recall me saying back in March, during Spring Training that “This team can’t hit”… I thought we would win games with pitching and defense… But pitching has been bad, except for one pitcher… And well, we haven’t won many games! Little Evie was here this past weekend on Sunday, and she and I have become good buddies… She gets away with some attitude with her Mimi, mom and dad, but not me… I forgot to mention last week when I was talking about Alex’s birthday on Monday, that it was also the wedding anniversary of Daughter Dawn and Jerry… I do believe it was their 18th… I remember the crowd at the reception all singing happy birthday to 8 year old Alex… OK… Charlie Daniels takes us to the finish line today with his country rock song: Long Haired Country Boy…  Which I Identified with in my youth! I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

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A Pfennig For Your Thoughts