Tuesday , November 24 2020
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A New Era of Fiscal Spending and Socialism

Summary:
It’s hard to label the markets ether “risk on” or “risk off” this week. Stocks were up and Treasuries were down but silver and gold were up. The hydro-carbon-heavy Rogers Raw Materials Fund was down. But what strikes me is how sensitive the stock market is, not as to earnings or fundamentals that drive the markets but as to whether there will be more fiscal stimulus compliments of Nancy Pelosi. That brings me to my discussion with Lyn Alden last Tuesday on my radio show. Lyn pointed out that the only thing policymakers can do now that we have had four major debt cycles since the 1930s is to use fiscal policy that will be funded with money printing and the debasement of the dollar. While I shudder to think of the harm that will do, there is nothing in the world that is more bullish for gold

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A New Era of Fiscal Spending and SocialismIt’s hard to label the markets ether “risk on” or “risk off” this week. Stocks were up and Treasuries were down but silver and gold were up. The hydro-carbon-heavy Rogers Raw Materials Fund was down. But what strikes me is how sensitive the stock market is, not as to earnings or fundamentals that drive the markets but as to whether there will be more fiscal stimulus compliments of Nancy Pelosi.

That brings me to my discussion with Lyn Alden last Tuesday on my radio show. Lyn pointed out that the only thing policymakers can do now that we have had four major debt cycles since the 1930s is to use fiscal policy that will be funded with money printing and the debasement of the dollar. While I shudder to think of the harm that will do, there is nothing in the world that is more bullish for gold and silver and other tangibles, because as Ray Dalio pointed out recently on Bloomberg, without another suitable currency for global markets, investors by default begin to use gold and other tangibles as a store of value. And so, I think it’s really important to put the miniscule average decline in the price of gold during September shown in the chart below into perspective. In August 2020 a new monthly average high of $1,969.22 was recorded representing a 33.5% rise from the December 2019 average.

So, the September decline to this month to $1,922.24 is a nonevent especially when you glance at the depression level GDP of negative 31.4%. The number of jobs lost permanently and massive losses to businesses are really only the beginning of a real depression that harkens back to the 1930s when, as Lyn pointed out, the U.S. entered a new era of fiscal spending and socialism. Socialism comes at a cost and, as Lyn noted, that will have to be paid for by destroying the dollar. Again, I can’t think of anything more positive for gold and silver and very likely some other commodities starting with copper, which, after gold and silver, is the third-best monetary metal. But to the extent the world continues to function and socialists like AOC get their way toward structuring a Green New Deal, copper will have to play a major role. So as always, it’s important to keep our eyes open to turn what may appear to be negatives into positives.

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