October 2023 - Week 5 Edition

My Interview with Steve Forbes Will Be Available Soon

At the IMEX Coin Show in Nashville (October 26-28), I was able to interview former Republican Presidential candidate Steve Forbes for 20 minutes. It was recorded and we are editing the footage now. We will report more from the interview with Steve Forbes in future Metals Market Reports over the next few weeks.

Steve Forbes also spoke to the full convention and signed his recent book, “Inflation: What It Is, Why It’s Bad, and How to Fix It,” co-written with Elizabeth Ames and Nathan Lewis. He signed copies in person, and I asked him to sign some extra copies for our clients. For the first 100 people who call their representative, you can receive a copy of Steve Forbes’ book, autographed by Steve Forbes and myself, plus a PCGS-certified one-ounce American Silver Eagle coin for just $55.

Steve and I covered a wide variety of subjects besides inflation, including the history of the gold standard in the world and America, the latest increase in deficit spending, the recent political upheavals at home and abroad, and his outlook for the 2024 election. (No, he will not run again.)

Steve has a great sense of humor and a keen wit in his answers. You won’t want to miss this great autographed book and one-ounce American Silver Eagle! Call your representative and reserve your order.

The U.S. Goes Deeper into Debt While the European “PIIGS” Went on a Diet!

A decade ago, nearly everybody was making fun of the European “PIIGS” (Portugal, Italy, Ireland, Greece and Spain), with their massive deficits and slow-growth or no-growth economies. They were dragging Europe down into a second recession from 2011 to 2013 after the Great Financial Crisis of 2008-09, while America was recovering fairly well and bringing deficits down. But nobody seemed to notice the fact that two of those PIIGS – Ireland and Portugal – currently have balanced budgets and the worst of those five sick euro-economies, Greece, actually balanced its national budget four years in a row, 2016-19, before COVID struck. Now it has very low deficits, well below America’s deficit levels. As a whole, the eurozone has budget deficits at 3.2% of its GDP this year, half of America’s 6.4% deficit level and they continue to improve. The International Monetary Fund (IMF) predicts the eurozone deficits will shrink to 2.7% while America will grow to 7.4% deficits in 2024.

This goes a long way to explain why U.S. stocks are down so far in the past three months and gold is up.

The problem was explained in a July 16, 2023, The Financial Times article taking an unusual slant on the concept of “American exceptionalism,” titled “The Trouble with American Exceptionalism,” which began by saying: “The U.S. has started to look exceptional in a bad way…. During the pandemic, the U.S. budget deficit tripled to more than 10 percent of gross domestic product, more than double the peak in other developed economies. In the coming years, the U.S. deficit is expected to average close to 6 percent of the Gross Domestic Product (GDP) – well above its historic norm – and a full six times the average in other developed economies.”  

Most countries ended their COVID stimulus spending quickly, after their limited pandemic-induced lockdowns, the article explained, “But all the $6.7 trillion in new spending from the Biden administration came after 2020 was over. Most of it had nothing to do with pandemic relief.

“Instead, Joe Biden used the sense of crisis to launch a latter-day New Deal…” 

The article concluded with these chilling words: America is “now one of the most fiscally irresponsible nations. Its deficit has climbed the ranks to worst in the developed world.”

Two weeks after this article was published, the stock market peaked on July 31 and Fitch, the rating agency, downgraded U.S. debt the next day, August 1. After that, the S&P 500 fell by almost 10%:

In retrospect, it looks like Washington DC’s chronic overspending, with no intention of addressing that overspending, is the source of the recent rapid rise in the benchmark 10-year Treasury bond yields and the resulting collapse of the housing market, the slowdown in the auto and EV market and the decline of the major stock market indexes after the downgrading of U.S. Treasury bonds three months ago this week.

It’s amazing that Europe has quietly adopted the old-time religion of balancing their national budgets while America has moved in the opposite direction.  The U.S. federal government’s fiscal year ended on September 30 with $1.7 trillion in red ink, 23% higher than FY2022, and the new fiscal year will undoubtedly push that deficit higher, with a new overseas war to fund and higher interest rates to service the debt. The U.S. Treasury is scheduled to make an announcement of new funding requirements on November 1, and the lack of willing bond buyers has pushed the Treasury bond rates higher.

Now we enter the last 12 months before a Presidential Election Day, when gold performs well – especially in gold’s greatest bull market surges – when Democrats fight for re-election with high deficits or debt ceiling debates, like President Jimmy Carter in 1979-80 and President Barak Obama in 2011-12!

Gold topped $2,000 on Friday, October 27, up from $1,830 three weeks earlier, before the war in Israel began. The Friday surge was mostly based on an escalation of the Israeli counterattacks against Hamas terrorist group. For the first time this year, gold has surpassed the S&P 500 +10.2% vs. +8.5% and GOLD has long surpassed the Dow. For the month of October, gold is up 8.4% and silver is up 4.9%, vs. a decline of 7.7% for the small-stock Russell 2000, and -2.8% for S&P 500 in October alone. Gold’s price on Tuesday’s open remained above $2,000 for the third day in a row. If you haven’t contacted your sales representative about adding gold to your portfolio, you should do so quickly and consistently. By the way, Steve Forbes told me recently that he predicts gold could hit $2,500 an ounce sometime in 2024.

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