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Michael Maharrey

Articles by Michael Maharrey

Fun on Friday: Should We Just Cancel Independence Day?

2 days ago

Independence Day has always been one of my favorite holidays. I love the food, the fireworks and the parades. And the message of independence has always resonated with me – ever since I was a little kid.Unfortunately, Fourth of July festivities have been canceled in most cities and counties  – by governments. Which is painfully ironic.Should we just go ahead and cancel the whole thing?Last year around this time, Peter Schiff did a podcast and argued that they should probably change the name of the holiday to “Dependence Day.” He’s not wrong. That seems to be the American way in 2020. Peter said, “I’m sad that we no longer have the nation our founders created for us, that we have lost all that it means to be an American.”He’s right. And not just in the sense that a lot of Americans no

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Gold Has Charted Gains for Seven Straight Quarters

3 days ago

Gold just had its best quarter since 2016 and finished at its highest level in over eight years. But Q2 2020 wasn’t an anomaly. Gold has charted gains for seven consecutive quarters.That represents the longest quarterly run of gains for the yellow metal since the 2008 financial crisis.Looking at the price chart, it’s clear gold actually began its bull run in the final quarter of 2015 as it became apparent the Fed wasn’t going to be able to quickly normalize rates or shrink its balance sheet. But things really took off in the final quarter in 2018.It’s important to state the obvious here: that was before the coronavirus pandemic and corresponds with the Federal Reserves monetary policy 180 that happened around the same time.In other words, the Fed was already engaged in extraordinary

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Fed Minutes Show No Sign of Backing Off Monetary Hail Mary

3 days ago

Don’t expect the Federal Reserve to pull back on its monetary Hail Mary anytime soon.The central bank released the minutes from the June meeting yesterday. There were no big surprises, but they did reaffirm the Fed’s commitment to continuing its unprecedented monetary policy into the foreseeable future.And it truly is unprecedented. It’s not just zero percent interest rates and QE infinity. The Fed is buying everything but the kitchen sink. It’s now even become a player in the corporate bond market.According to the Fed minutes, the current unprecedented trajectory “remains appropriate.” The minutes noted a need for “highly accommodative monetary policy for some time.”The minutes emphasized that the central bankers aren’t particularly optimistic about a fast recovery.Participants

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Fun on Friday: Trust Me…

9 days ago

So, I’m just going to throw this out there. If you get an email from a couple of veterans who claim they rescued a sultan’s son and got a big payout in gold, it might be a scam.Maybe.And by maybe, I mean it’s a scam.This is actually a thing. I ran across it on a Chicago police blotter.According to the report, an elderly man received an email supposedly from two veterans claiming they received a delivery of gold for rescuing the sultan’s son. But of course, they couldn’t afford to store their windfall prior to returning to the US. They said they just needed $12,000.The report doesn’t say, but I’m sure our intrepid vets offered the old feller a handsome payout in gold for his trouble.Thankfully, bank employees questioned the old man’s request for 12-grand and explained that the email was

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Fun on Friday: Oops!

16 days ago

Confession: I am prone to lose things.I spend an inordinate amount of time looking for my glasses. I had to put a big lanyard on my keys to help me keep up with them. There’s even a running joke with one of my best friends about the frequency of losing my car in the parking lot.But in all my years of losing stuff, I can’t match some poor soul in Switzerland. Last October, somebody left a package of gold bars on a Swiss Federal Railways (SBB) train valued at about $190,000.So, yeah, big oops!If you’re reading this and you’re missing a bunch of gold — that might be where it is.You’re welcome.Swiss police reportedly tried to track down the owner of the gold, but didn’t have any luck. According to CNN, the bars were then confiscated by the public prosecutor’s office.So, this is basically

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Who Is Buying All This US Government Debt?

18 days ago

The national debt pushed above $26 trillion last week. In just a little over two months, the US government has added over $2 trillion to the debt. The budget deficit has already set an all-time record with four months left in the fiscal year. In April, the US Treasury sold $1.287 trillion in additional US debt.So, who is buying all of this debt?Foreign investors are actually shedding US Treasuries. According to the latest data, “foreign official” holders, including central banks and foreign private-sector investors, dumped $44 billion in US Treasury securities in April. China alone unloaded $19 billion in April.US government funds dumped $91 billion in Treasuries in April. This includes the Social Security Trust Fund and pension funds for federal civilian employees and the military.US

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A Big Oops in the Government Unemployment Numbers

19 days ago

When the May jobs report came out with 2.5 million jobs added a drop in unemployment to 13.3%, I told several friends the numbers seemed implausible.It appears I might have been right.The Department of Labor’s Bureau of Labor Statistics survey takers mistakenly misclassified about 4.9 million people as employed, although they were unemployed. Shockingly – and by shockingly I mean as you would expect – this little oops was not widely reported. But it actually was mentioned at the very end of a 1,000 word story. According to the report, “Had the mistake been corrected, the unemployment rate would have risen to 16.1 percent in May, while the corrected April figure would have been 19.5%, rather than 14.7%.”But the Department of Labor doesn’t fix mistakes in its job reports “for fear that

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Fed Ups Stimulus Ante, Now Buying Individual Corporate Bonds

19 days ago

Just when you thought the Federal Reserve couldn’t possibly stimulate any more, it launches a new stimulus program.On Monday, the central bank announced it would begin buying individual corporate bonds through its so-called Secondary Market Corporate Credit Facility (SMCCF).This is yet another unprecedented move even as the central bank makes “unprecedented” mundane.The Fed put its feet in the corporate bond market back in May when it started purchasing exchange-traded funds (ETFs) holding a mix of corporate bonds. According to , the Fed has bought about $5.5 billion in ETFs so far. Now it will begin to prop up individual companies.Historically, the Fed has limited its purchases to government bonds, primarily US Treasuries and mortgage-backed securities. But the central bank has taken a

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Fun on Friday: Somebody Finally Found the Buried Treasure

23 days ago

You can stop looking now. It took 10 years but somebody finally found the treasure.A decade ago, millionaire art dealer Forrest Fenn hid a real-live treasure chest full of gold nuggets and precious stones in the Rocky Mountains. Then he invited the world to go on a treasure hunt.The world obliged.Three years ago, Fenn estimated that at least 250,000 people had actively looked for the stash.The only clues he left were a map and a poem.“The ornate, Romanesque box is 10-by-10 inches and weighs about 40 pounds when loaded,” NPR’s John Burnett reported in 2016. “Fenn has only revealed that it is hidden in the Rocky Mountains, somewhere between Santa Fe and the Canadian border at an elevation above 5,000 feet. It’s not in a mine, a graveyard or near a structure.”The treasure was reportedly

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Fun on Friday: 2-Dimensional Gold?

June 5, 2020

If you have ever handled gold leaf, you know it’s pretty thin. Paper-thin, in fact. But did you know we can go thinner?In fact, scientists can take gold and silver into two dimensions. Sounds crazy, eh? Like flat earth or something. But the research team of Ulrich Starke and his former doctoral student Stiven Forti have successfully created a gold layer only a single atom thick. It’s two-dimensional gold, so to speak.I have to wonder how they do this. An article in Phys Org says it’s “not easy.” This seems like an understatement. Maybe it’s a really heavy hammer. But it’s probably more sciencey than that. Actually, the article explains the process, but I don’t understand it, and you probably won’t either. But by all means, if you’re interested, click the link!At any rate,

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QE Infinity: Money Supply Grew at Record Rate in April

May 18, 2020

The money supply growth rate surged to an all-time high in April as the Federal Reserve created cash at an unprecedented rate through quantitative easing and other money-creating monetary policies.According to Ryan McMaken at the Mises Institute, the only time the Fed has come close to this level of money creation was in the 1970s – the era of stagflation. It was expected that money supply growth would surge in recent months. This usually happens in the wake of the early months of a recession or financial crisis. The magnitude of the growth rate, however, was unexpected.”The year-over-year money supply growth in April came in at 21.3% based on TMS*. That nearly doubled March’s healthy 11.3% expansion. To put it into historical context, the percent growth in April 2019 was 1.94%. The M2

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Fed Chair Powell’s Solution Is the Root of the Problem

May 14, 2020

Federal Reserve Chairman Jerome Powell went negative in a webcast speech on Wednesday, May 13.I’m not talking about negative interest rates, although that could be coming down the pike as well. Powell went negative on the prospects of a quick economic recovery.He’s right about the prospects for the economy, but he’s wrong about the solution. That’s because he doesn’t even realize it’s Fed policy at the root of the problem to begin with.A lot of pundits and politicians have assumed that the economy will just snap back to normal once governments open things back up. Powell dumped cold water on that notion warning that the US could face a “deep, prolonged” recession. He said, “The scope and speed of this downturn are without modern precedent, significantly worse than any recession since

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Are Negative Interest Rates in Our Future?

May 11, 2020

Are negative interest rates in our future?The markets are starting to think so.On Thursday, Fed fund futures contracts began pricing in negative interest rates. They were initially priced in for December but then shifted to early 2021. This doesn’t guarantee negative rates, but it does indicate markets are beginning to expect them.Practically speaking, if rates go negatives, financial institutions must pay to deposit excess reserves at the Fed. Normally, the central banks pay interest on funds deposited there. In effect, negative rates penalize banks for holding cash and incentivize them to lend cash out. Negative rates are designed to stimulate more borrowing to help prop up the economy.This indicates a number of things. In the first place, it undercuts the narrative that the economy

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National Debt Climbs Above $25 Trillion

May 7, 2020

Twenty-eight days.That’s how long it took to add another $1 trillion to the national debt.On April 7, the debt pushed above $24 trillion. On Tuesday, May 5, it eclipsed $25 trillion.It’s impossible to grasp just how big these numbers are. Consider that the debt is growing at an average of about $1.2 million per minute. Every day, Uncle Sam goes another $1.7 billion in hock.According to the National Debt Clock, the debt to GDP ratio has risen to over 117%. Studies have shown that a debt to GDP ratio over 90% retards economic growth by about 30%.And there is no sign that it’s going to slow down any time soon. Peter Schiff tweeted a poignant question.The last trillion of debt was added in less than one month. How many more years do you think it will take for the National Debt to double to

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Enjoy Your Future; We’re Spending It Now

May 5, 2020

Welcome to your future. Your government is spending it right now. And your children’s and grandchildren’s future to boot.The US Treasury plans to borrow $2.99 trillion in the second quarter. The Treasury also plans to borrow another $677 billion in the July-September quarter, bringing the total fiscal 2020 debt to $4.48 trillion.It’s a level of borrowing that’s difficult to even wrap your head around. To put it into some perspective, before the pandemic, the CBO projected that the federal deficit would come in at just over $1 trillion in fiscal 2020. The government is set to borrow nearly three times that in just three months. And the one-year total borrowing will nearly equal the total of the four biggest yearly budget deficits on record. The level of government borrowing will crush

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What Is the NFL Telling Us About the Economy?

April 30, 2020

What is the NFL telling us about the economy?The conventional wisdom seems to be that the economy will quickly recover once governments open things up again. But recent moves by the National Football League indicate its leadership isn’t so confident.On Wednesday, NFL Commissioner Roger Goodell announced deep cost-cutting moves for the league, including employee furloughs and pay cuts.“It is clear that the economic effects will be deeper and longer-lasting than anyone anticipated and that their duration remains uncertain. The downturn has affected all of us, as well as our fans, our business partners, and our clubs,” Goodell wrote in the memo. “We hope that business conditions will improve and permit salaries to be returned to their current levels, although we do not know when that will

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They’re All High on Fed Fairy Dust

April 30, 2020

Everybody realizes the US economy is in a bad spot. But most people still seem to believe it will bounce right back once we deal with the coronavirus.They’re all high on Federal Reserve fairy dust.US GDP contracted by 4.8% in the first quarter. It was the first negative GDP reading since a 1.1% decline in the first quarter of 2014 and it was the lowest level since the 8.4% plunge in Q4 of 2008.And the worst is yet to come.The Q1 GDP number only captures the first couple of weeks of coronavirus-inspired government lockdowns of the economy. In fact, in January Donald Trump and others were telling us that it was the best economy in the history of the world. That was also in the first quarter.The first-quarter GDP print came in even worse than expected. Economists were projecting a

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A Did Not Cause B

April 28, 2020

A = coronavirus. B = economic meltdown.A caused B.That’s the mainstream narrative when it comes to the economic pain we’re feeling right now.But in reality, A did not cause B. B was in the works long before A came along.Of course, the mainstream never recognized the rot in the economy a few months ago. In fact, everything thing looked glowing on the surface. As economist Mark Thornton reminds us in an article published on the , on February 10, a mere 10 weeks ago, stock markets were at all-time highs. The unemployment rate was at an all-time low.With interest rates near zero for an entire decade, the value of stocks, bonds, real estate, land, and virtually any asset was artificially inflated. As a result, total household net worth doubled, increasing from $60 trillion to $120

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Cashflow Crisis Could Sink Small Businesses Even After the Economy Reopens

April 20, 2020

A lot of people still seem to think the economy will fire right back up and things will snap right back to normal when the government-imposed coronavirus lockdowns end. I don’t believe we’re going back to normal for a number of reasons – primarily because things weren’t normal before coronavirus. The economy was a big, fat, ugly bubble. Coronavirus was a pin that popped the bubble.But even if things were normal before the pandemic, the economy still wouldn’t just fire back up and restart on a dime.The forced shut down put tremendous stress on businesses – particularly small businesses that operate on thin margins. Many of them were forced to take on more debt due to the pandemic and the ensuing lockdown. The federal program to help small businesses quickly ran out of money. And even

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We’re Not Going Back to Normal

April 16, 2020

Turn the key and the economy will restart.That’s a myth a lot of people in the mainstream have peddled since governments started shutting down the economy in response to the coronavirus pandemic.That’s not going to happen. We’re not going back to normal.In fact, things weren’t “normal” before the pandemic.As Peter Schiff has been saying, too many mainstream pundits and prognosticators have focused exclusively on the pin and ignored the economic bubble that it popped. They argue that since the economic damage due to the COVID-19 shutdowns was self-inflicted, it’s not a recession. It’s not a economic collapse. It’s not that businesses are closing because the economy is bad. We just decided to shut them down. Therefore, we can just decide to open everything back up and everything will be

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Consumer Debt Was Already Surging Before Coronavirus

April 15, 2020

The solution to the coronavirus economic meltdown is to borrow our way out of it. The Federal Reserve slashed interest rates to zero and the stimulus bill makes all kinds of loan programs available to pretty much anybody and everybody. But American consumers were already up to their eyeballs in debt before the coronavirus lockdowns. In fact, consumer debt spiked again to yet another record in February, according to the latest data from the Federal Reserve. Total consumer debt increased by $22.3 billion in February to a record total of $4.23 trillion.The Fed consumer debt figures include credit card debt, student loans and auto loans, but do not factor in mortgage debt.Revolving debt, primarily made up of credit card balances, rose by $4.2 billion. At the end of February, Americans owed

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National Debt Tops $24 Trillion

April 9, 2020

The US national debt pushed above $24 trillion on Tuesday.The US government was already running massive budget deficits long before the coronavirus pandemic and the debt was piling up at a dizzying pace. Response to the outbreak has put spending and debt in hyperdrive.The US government added $1 trillion to the national debt in just six months.It’s easy to just brush off the spending spree. Virtually everybody agrees the stimulus is necessary to deal with the economic impacts of coronavirus. But the Trump administration was stimulating long before this emergency. Uncle Sam was already on pace for a trillion-dollar shortfall long before the pandemic. That’s the kind of budget deficit one would expect to see during a major economic downturn.The federal government has only run deficits over

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What’s the Exit Strategy??

April 7, 2020

As the coronavirus lockdown drags on and governments at every level enact more and more draconian measures, nobody seems to have an answer for what I believe is a most crucial question.What’s the exit strategy?Because clearly, we can’t go on like this forever.The dirty little secret is that COVID-19 isn’t going to just go away.  There will always be a risk of catching the virus. Trump health advisor Dr. Anthony Fauci said the world may never get back to “normal,” even if scientists find an effective vaccine.  He said gradually, we’ll be able to “function as a society. But you’re absolutely right, if you want to get to pre-coronavirus, that might not ever happen in the sense that the threat is there.”Are we going to lock down the entire world every time virus cases surge?If so, at what

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The Myth of the Non-Essential Business

March 31, 2020

As the coronavirus-induced economic lockdowns have tightened across the US, we’ve seen the emergence of a government-inspired fantasy – the myth of the nonessential business.Government officials across the country have forced the closure of these so-called non-essential businesses while allowing “essential” enterprises to soldier on. Politicians and bureaucrats have developed arbitrary criteria to determine which businesses are and are not essential.I say arbitrary because there is really no objective way to make such a determination.In the first place, every business is essential to the owners and employees who depend on it for their livelihood. Try telling the owner of a “non-essential” craft shop that her business is non-essential when her mortgage comes due.As I wrote last week, the

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Stimulus Bill Throws Veil of Secrecy Over the Federal Reserve

March 30, 2020

Last week, Congress passed a $2 trillion stimulus bill in an effort to offset the economic impacts of the coronavirus. Most people have focused on the $1,200 checks to Americans and bailouts for industries hard-hit by the economic shutdown. But the 883-page bill does a lot more than that, including empowering the Federal Reserve to hand out billions of dollars in complete secrecy.The stimulus bill authorizes the Fed to create $454 billion out of thin air and loan it out. The provision gives the central bankers complete autonomy when it comes to deciding who gets the money.Not more than the sum of $454,000,000,000…shall be available to make loans and loan guarantees to, and other investments in, programs or facilities established by the Board of Governors of the Federal Reserve System

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With Heroes Like This, Who Needs Villains?

March 26, 2020

According to Owen Ullmann in an op-ed published by , there are some unsung “heroes” in the battle against the coronavirus pandemic – the brave and courageous bankers at the Federal Reserve.I think Ulmann misspelled “villains.”Ulmann writes that the Fed “has taken extraordinary steps to prevent the global economy from crashing into irreversible catastrophe as business around the world grinds to a virtual halt.”This is like praising the arsonist for trying to put out the fire he set by throwing more gasoline on it.The Fed certainly has taken extraordinary steps. Just a few days ago, it announced QE infinity. It committed to buy an “unlimited” amount of US Treasury bonds and mortgage-backed securities. It also announced a new program to buy corporate bonds for the first time ever.In

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Federal Reserve Announces QE Infinity

March 24, 2020

We now have QE to infinity and beyond.On March 23, the Federal Reserve announced it will purchase an “unlimited” amount of US Treasuries and mortgage-backed securities. The called the move “unprecedented” and said that it goes “much further than what the central bank did in the 2008-2009 crisis.”Back then, the Fed injected nearly $4 trillion into the financial system over several years. Analysts say the Fed’s effort now could dwarf that in a matter of weeks.”The Fed also announced it will buy certain corporate bonds for the first time in history.Gold skyrocketed on the news of this unprecedented monetary stimulus, but stock markets were less impressed. Despite the Fed announcement, the Dow Jones dropped 582 points.When you strip away all of the technicalities, the Federal Reserve will

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Fun on Friday: Sometimes You Have to Laugh at the Absurdity

March 20, 2020

Last Thursday, we embarked on a journey through the Southeast for business purposes and to check up on our kids who live in Kentucky. In case you were wondering, it is as crazy out there as you might imagine if you’re sequestered in your home following events through the news or social media.Don’t worry; we practiced social distancing…mostly. And there was a lot of hand-washing.Honestly, it was a bit surreal seeing empty store shelves and watching restaurants shut down. As I have discussed, this whole thing is going to have significant economic ramifications, on top of the health issues. But there were also quite a few funny things out there. And sometimes, you just need to sit back and laugh at the absurdity.First, let’s talk about masks. There are varying opinions on the effectiveness

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You Will Sacrifice and It Will Hurt

March 19, 2020

Many people have likened the battle against coronavirus to a war and invoked imagery of the US fighting World War II. President Trump has even deemed himself a “wartime president.”The president told reporters at a White House briefing that fighting the virus would require a sacrificial national effort just like it took to defeat the Axis in the Second World War.Every generation of Americans has been called to make shared sacrifices for the good of the nation. To this day, nobody has ever seen like it, what they were able to do during World War II. Now it’s our time. We must sacrifice together, because we are all in this together, and we will come through together. It’s the invisible enemy. That’s always the toughest enemy, the invisible enemy.”But listening to all the rhetoric coming

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Extraordinary Federal Reserve Policy Began Over a Year Ago

March 16, 2020

On Sunday evening, the Federal Reserve announced additional extraordinary emergency measures in an attempt to keep at least some of the air in the bubble economy. But in fact, the Fed has been engaged in extraordinary emergency monetary policy for over a year.“The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses,” the FOMC said in a statement.In other words, “We are desperate to keep people spending money they don’t have to prop up the economy just a little while longer.”The measures announced Sunday include a 100 basis-point rate cut that sets interest rates effectively at zero. Interest rates are now at the same level they were at the height of the Great Recession. The Fed apparently plans to keep rates at zero

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