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Debt Accumulation Is The Dagger For Currencies…

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A Pfennig For Your Thoughts May 18, 2020 * Currencies lose ground last week…  * Gold & Silver are gapping higher…  * And Chuck changes his mind….  Good Day… And a Marvelous Monday to you! It was a long weekend for me, but then weekends are meaningless to me these days, as all days seem the same to me… At least before COVID-19, I could look forward to Fridays, when I would meet my friends at my local watering hole… We’ve tried to hold happy hour on Zoom, but it’s just not the same… So…. How was your weekend? HA! We’ve had nothing but rainy weather in the past couple of days, and hopefully this run of rainy weather will end soon! The Rolling Stones greet me this morning with their song: Can’t You Hear Me Knocking… Really quick here… the currencies lost ground on Friday, even in the

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A Pfennig For Your Thoughts
May 18, 2020
* Currencies lose ground last week… 
* Gold & Silver are gapping higher… 
* And Chuck changes his mind…. 
Good Day… And a Marvelous Monday to you! It was a long weekend for me, but then weekends are meaningless to me these days, as all days seem the same to me… At least before COVID-19, I could look forward to Fridays, when I would meet my friends at my local watering hole… We’ve tried to hold happy hour on Zoom, but it’s just not the same… So…. How was your weekend? HA! We’ve had nothing but rainy weather in the past couple of days, and hopefully this run of rainy weather will end soon! The Rolling Stones greet me this morning with their song: Can’t You Hear Me Knocking…
Really quick here… the currencies lost ground on Friday, even in the face of worsening data here in the U.S. But Gold and Silver are firmly on the rally tracks and not only had good days late last week, but Gold is up another $19 in the early trading today… And Silver has gapped higher and trades with a $17 handle this morning…  And, the price of Oil has jumped higher and trades with a $31 handle this morning. The Shale Producers are opening up wells again… 
Well…. This is going to be tough for me to spit out this morning, so please do not have a knee-jerk reaction, and fire me off an email. Please read what I’m saying and see where I’m going here… That’s all I ask…
Global debt is at levels that it should never have reached in a million years, but it’s there, and there’s no paying back, in the traditional sense of paying off a debt…. So, how are the countries around the world (except Russia, who’s debt IS manageable) going to deal with this ever-growing debt? I’ve thought long and hard about this folks, and in my heart of hearts, I know what the answer is, and I’ve fought saying it, for so long, because, well, I just didn’t want to believe it could happen….
And it’s not just because of the virus that this is the way it is… At the end of 2019, Global Debt stood at $255 Trillion… Once the dust settles on all the debt accumulated during the economic shutdowns, the Global debt will be greater than $300 Trillion… With no ability to pay it down….
A month or so, I talked about the IMF’s SDR’s (special Drawing Rights), and how they used by Central Banks, and not suitable for individual use…. I almost went down the rabbit hole then that I’m ready to go down now….
I truly feel that with all this debt, and Central Banks going nuts with one alphabet plan after another, that they’ve all backed themselves into a corner… 
To me, it seems, the only way out of this debt mess is for countries, including the U.S. to take haircuts, in other words, default on some of their debt…. What this will do, is have every trader in the book, out to sell the currency of a country taking the haircut, and buy the currency of a country that hasn’t announced they would be taking a haircut. But soon, they will all have announced it, and at that point is when I believe currencies, as we know them today, will no longer be…
I thought I would be long gone by the time this all unfolded, for it’s been in the cards for years. I never would have thought that during my time on earth, that would see these kinds of debt levels… I always thought that somewhere, someone with their head screwed on right, would figure out that we kept accumulating debt, that a default had to come eventually… I always figured, Japan was first, then Greece, then the U.S. But instead, what I view happening is there would be a meeting of finance ministers where the coordinated announcement was made….
Things have gotten so bad overseas that they’re selling their Treasury bond reserves. Here was a news headline from late last week: “Foreign holdings of Treasuries slumped in March by the most this century, falling $256.6 billion to $6.81 trillion. This likely stemmed from nations liquidating US debt positions to defend their currencies amid huge capital outflows.”
That just means the Fed will have to up the ante on the amount of Treasuries they buy, since foreigners aren’t buying them like they used to. The Fed’s Balance Sheet will begin to show signs of stress, and the whole shootin’ match (the financial system) would feel the weight of the world on it, and that would be just another reason to call off the ballgame….
And the next downward move in stocks, which is coming, the Central Banks will run to the rescue, and those Countries that already don’t have negative rates, will be reaching in their quivers, and finding no arrows, and will then have to go negative with interest rates…. I laughed until I cried last week, when Jerome Powell, the Fed Chairman, denied that negative rates are being discussed…. Or that he thinks there will be a need for them…. To me, that’s akin to when the General Manager or Owner gives a vote a confidence to the manager…. We all know what comes next, right?
The going negative with interest rates is going to set off a chain of events that will change the world and the global financial systems…. Here’s the playbook on how I believe with will all play out…. The Fed goes negative with rates, and banks begin to charge account holders for holding their balances. Being the hotblooded Americans that we are, we won’t sit still while the bank charges us for holding our money, and soon there will be runs on banks for withdrawal of cash holdings…
Well, seeing this, the Gov’t won’t stand for the banks being run on for cash withdrawals, and a plan that’s probably already in the works. And that plan will be to pass a bill that prohibits cash in the hands of individuals…
And the next day, when you check your bank account, the dollars will have been replace with digits…. Or a Gov’t crypto-currency, but dollars will cease to exist…. And other Countries will follow suit…. Thus eliminating the currencies of the world that we know of…
The IMF will increase distribution of their SDR’s, and banks around the world will revert to using SDR’s to settle trade balances… SDR’s that have a different mix, because the currencies that used to make up SDR’s will be gone…. Probably to a very large component of Gold…
You see, I’ve through this through, and I see no other alternative…. The good news in all of this is that Gold will be soaring and probably gapping higher each day by $100 or so….
So, with no currencies in the world to talk about…. An end of the Pfennig is near… But…. At the request of the Aden Sisters, I will continue to write about economies, mainly the U.S., Gold, The Fed and other things that come to my mind, and the letter will be renamed…. And it might not be done ever day…. But that’s all secondary, folks…. The main thing is that your last civil right will have been taken from you in the blink of an eye, and now banks can charge you for everything under the sun and moon….
I know that for over 25 years, I’ve told people that the way to diversify their investment portfolios is with currencies and metals… But the situation has changed, and I will also have to change…. But Gold will still be viable, and like I said will most likely be gapping higher each and every day, and the price manipulators will have been sent home with HUGE losses, and never to be seen again!
What should you do if you own currencies? Well, nothing…. You could sell them and buy Gold/ Silver, but to do nothing would be like when you owned Spanish Pesetas, or German D-Marks, etc. They were all converted to a different form at a set conversion price… Your current euro balance will be converted to whatever replaces the dollar, and that’s that….
12 years ago, a fellow by the name of Aaron Stevenson, interviewed to work in St. Louis on the EverBank World Markets Desk, that I was the President of, He asked me the about the future of the currency business, and I told him, “ Eventually, Aaron, the currencies will all go away, but I hope that happens years from now when I’m retired”…. Well, I’m retired now…. I’m just saying… 
And with all this debt accumulation how’s it going to get paid? More money printing all over the world, thus debasing each and every currency that has debt as its partner. Central Banks, like the Fed are going to keep printing currency to pay for Sovereign bonds (treasuries in the case of the Fed) and soon, with all this debt accumulation, no one will be willing to buy our debt, or Germany’s debt, or Japan’s debt, you see where I’m going with this? All that currency printing, and still the only entity to step forward to buy bonds will be the Central Bank…. And when each Central Bank’s balance sheet begins to overstay its welcome, that’s when things will change folks….
So, I’m just not in the mood to keep talking about diversification with currencies… There’s only one or two countries that makes sense any longer, rubles and Singapore dollars. And their markets are not big enough to weather this storm that all these other countries have stirred up… Gold & Silver will still be great diversification tools…. Silver has industrial uses (solar panels, wiring etc. ) and Gold has intrinsic values. Both are a store of wealth, and should be held as such….
Just keep in mind this quote from Winston Churchill… “When the facts change, I change my mind. What do you do?” Yes, the countries have done this to their currencies, and so I’m changing horses in the middle of the stream… I don’t see a future for the currencies, including the dollar… 
Well…. I’ll head to the Big Finish today, as today’s letter was like no other before, and I want to return to some normalcy….
OK, here’s a rundown on the data from late last week…. Leading off, on Thursday, for the week ending 5/9, another 3.46 Million former workers signed up for Unemployment Benefits, which brings the total for the last 8 weeks to 33 Million… The U.S. normally employs 120 Million people… That’s an Unemployment Rate of 27.5% folks… And then on Friday, we saw April Retail Sales print -16/4%. And without auto sales, Retail Sales were negative -17.25%… The print for April was worse than the experts had forecast which was -12.5%… Industrial Production for April was negative -11.2% Vs the -4.5% in March, and Capacity Utilization fell from 73.2 in March to 64.9% in April…. And to top off all this negative data, the preliminary May Consumer Sentiment rose, yes, I said rose, to 73.7 from 71.8 in April…. Don’t ask me how the folks that were polled could feel more confident, unless, they’ve been glued to MSNBC where they keep telling people that this is not going to last, and it will be over with soon…. (I don’t watch MSNBC, so I’m just imagining what they are saying… )
So, not a good week for data last week… And, there’s really not much in the data Cupboard to look at this week, except for Leading Indicators which will print on Friday, and of course the Weekly Jobless Claims on Thursday…
Or, here’s your snippet: “Even as retailers begin reopening in much of the country, a dark cloud hangs over much of the industry.
Simply put, the U.S. already had far more stores than it needed, and the coronavirus pandemic accelerated a shift toward online shopping. Rather than don a facemask to go to the mall, many consumers will open a web browser instead.
Add in the heavy debt load carried by many national chains, often the result of buyouts by private equity firms, and you have a recipe for a retail apocalypse.
“When we come out of this you are going to have fewer players, fewer square feet of retail space, and the strong are going to gain market share from the weak players,” says Brian Yarbrough, a retail analyst at Edward Jones.
Three prominent retailers — J. Crew, Neiman Marcus and Stage Stores, owner of Gordman’s — have filed for bankruptcy this month and the venerable J.C. Penney reportedly may join them soon.”
Chuck again… A retail apocalypse is what Mr. Nicklaus is calling this, and I couldn’t agree with him more!
Prices today: American Style: A$.6455, kiwi .5965, C$ .7111, euro 1.0811, sterling 1.2125, Swiss $1.0286, And European Style: rand 18.4606, krone 10.1563, SEK 9.8329, forint 326.91, zloty 4.2191, koruna 25.5361, RUB 73.52, yen 107.28, sing 1.4260, HKD 7.7514, INR 75.44, China 7.1010,  peso 13.76, BRL 5.8553, Dollar Index 100.34, Oil $31.87, 10-year .65%, Silver $17.36, Platinum $825.12, Palladium $1,963.02, and Gold… $1,762.99
That’s it for today… I know this hit you like a ton of bricks, so I’ll just end this for today, and give you time to reread it Things are going to change folks… And a wise man that once worked for told me many years ago, Chuck, in change lies opportunity… I guess we’ll have to see where that opportunity exists when it comes, eh? REO Speedwagon takes us to the finish line today with their song: Golden Country…. Golden country your face is so red, with all of your money, you’re poor can’t be fed. Gary Richrath is a very underrated guitar player…. I hope you have a Marvelous Monday, and well please go out there and Be Good To Yourself!
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts

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