February 2021 - Week 3 Edition
Silver Keeps Rising
Silver keeps rising, in part because the industrial metals are mostly stronger – including copper, platinum and palladium – in anticipation of a global recovery after the COVID pandemic winds down. Copper is up from $2.10 to $3.80 in the last year. Silver has more than doubled since last March. Meanwhile, gold is treading water while the U.S. debt bomb and a potential resurgence of inflation are providing the kindling fuel to push gold much higher later this year. Take this opportunity to buy more silver and gold.
The “Worst Budget in History” Will Create a “Pandemic Spending Hangover”
Economist Steve Moore says President Joe Biden’s current $6.1 trillion budget is “the worst budget in American history.” It authorizes $4 trillion in borrowing in a single year. “That is more debt than was allowed, adjusting for inflation, to finance the Revolutionary War, the Civil War, the Great Depression, World I and World War II, combined,” said Moore. The bill includes a $15 minimum wage, a $400 billion blue-state bailout to fund “leaky pensions,” $130 billion for closed schools, $400 per week to not work and billions for the New York subway – despite $1 trillion of unspent money in five previous bailouts totaling $3.7 trillion.
Democrats apparently fear the crisis will end before they get all their favorite pork barrel bills passed.
These massive bailouts will cause trillions of new dollars to be printed and spread like “helicopter money” throughout the nation causing inflation to likely grow at double-digit rates once the economy returns to normal growth rates next year. Then, gold should rise to heights never seen before.
Despite all the sideshows of a second Impeachment trial and political infighting, the high level of deficit spending is creating a huge time bomb of debt and inflation that we will inherit when the economy eventually recovers. According to The Wall Street Journal (in “Pandemic Spending Hangover,” February 12), the Congressional Budget Office (CBO) says federal spending reached $6.55 trillion in fiscal 2020, a record $2.1 trillion increase in a single year. causing a record deficit of $3.13 trillion, a record 14.9% of GDP.
This year, spending remains at 26.3% of GDP and the deficit is scheduled to be only slightly smaller, at $2.26 trillion or 10.3% of GDP. That’s still more than twice the size of President Obama’s largest deficit.
The CBO projects spending to average 21.9% of GDP over the next decade, but the shocking fact about this projection is that it does not include any of Biden’s big plans – his $1.9 trillion COVID bill or his other projected promises. (The Democrats are already promising another trillion-dollar “green” public works bill later this year, as well as a $1.6 trillion plan to forgive or reduce student loans and up to $1.3 trillion in mortgage or rental bailout plans.) This is “Modern Monetary Theory” in practice – the belief that it doesn’t matter how much money is printed, as long as inflation doesn’t raise its ugly head again.
The federal debt has already broken above 100% of the annual GDP. The only other time that happened in our history was 1945-46, after we fought a World War on two fronts. That caused inflation to shoot up to 20% in 1946, but we quickly paid off more than half that debt in peacetime and brought inflation back to very low levels. Now, there is not as great an excuse – like a world war – for running up so much debt, and seemingly no strategy for paying down the debt, so we are in uncharted territory of rapidly rising debt in times of peace.
Global Mints are Forced to Ration Production
Due to high demand and insufficient production, almost every major global Mint has depleted their inventory and been forced to ration their new production sold to dealers. This is causing delays and increased premiums of bullion coins and other bullion products. By late January and into early February of 2021, many dealers were not even accepting orders on some products at any price since they could not estimate availability or cost.
In early February, the United States Mint said that it was unable to meet surging demand for its gold and silver bullion coins, due partly to pandemic-driven demand and plant capacity issues. Heavy buying was squeezing supplies, which were already tight as the coronavirus affected some mints’ production. Then came a social media-driven buying spree on silver futures which pushed silver to an eight-year high on February 1.
At the same time, the U.S. Mint is already in the midst of changing the designs for its American Eagle Gold and Silver Bullion coins, so this amounted to a “Perfect Storm” of events – a crush on both year’s supply of coins in the midst of historical demand surges in a time of pandemic, not to mention cruel snowstorms!
The U.S. Mint has a limited window to produce its current supply of gold and silver coins, with new redesigned coins expected to debut this summer. Then they have to build up a stack of the new reverse design coins.
The shortage of authorized bullion coins from major mints has also caused an increase in counterfeit coins flowing into America, primarily from China, so you need to beware when you see offers of bullion coins at or near spot prices when all other dealers are forced to sell above spot value. Remember, the Mint is charging dealers well above spot prices for authorized Gold and Silver American Eagles. Be sure that you only deal with a dealer who is capable of spotting counterfeits. I have taught classes in grading and authentication of coins for over 20 years, including work with law enforcement agencies in spotting counterfeit products, so our firm is one of the first places you should check if you see a coin deal that looks too good to be true. Our premiums and prices on bullion products are typically better than competitors we survey. Call us first when you want to buy bullion or classic gold and silver coins. You will be glad you did!
Our Staff and Many Others are Helping the Homeless Avoid Freezing
We’ve seen record low temperatures in Texas this week, with frigid weather not seen in several decades. Most of the state has suffered power and water outages, with pipes bursting, huge collisions on roads impossible to navigate and multiple deaths by exposure. It’s hard enough for families to deal with rolling blackouts but it’s much harder on the homeless. Fortunately, we have many charitable organizations already in place to meet natural disasters – like hurricanes and floods – so these people immediately made their gyms or conference centers available for food and shelter to the homeless in our communities.
I couldn’t be prouder of our staff for taking time away from their own comfort to help others in need.
The rest of the nation needs to make sure we take care of these, “the least of our brethren,” the powerless among us and we also need to see more of these positive stories reported in our nightly news, because it both picks up our spirits in hard times and also encourages people in far-flung areas to do the same thing.
The Wall Street Journal reported Thursday, February 18, that wind turbines froze up between February 7 and February 11, cutting the percentage of the wind power share in the state from 42% down to 8%, and wind power fell by 93%. Gas (increased to 450%) and coal (increased to 47%) came to the rescue, but not fast enough, causing power shortages. Cold weather also adversely affected the delivery of natural gas. Politicians have “made the grid too fragile,” in order “to please the lords of climate change,” the Journal said. Maybe it is time to make pragmatic choices that help all the people.
Important Disclosure Notification: All statements, opinions, pricing, and ideas herein are believed to be reliable, truthful and accurate to the best of the Publisher's knowledge at this time. They are not guaranteed in any way by anybody and are subject to change over time. The Publisher disclaims and is not liable for any claims or losses which may be incurred by third parties while relying on information published herein. Individuals should not look at this publication as giving finance or investment advice or information for their individual suitability. All readers are advised to independently verify all representations made herein or by its representatives for your individual suitability before making your investment or collecting decisions. Arbitration: This company strives to handle customer complaint issues directly with customer in an expeditious manner. In the event an amicable resolution cannot be reached, you agree to accept binding arbitration. Any dispute, controversy, claim or disagreement arising out of or relating to transactions between you and this company shall be resolved by binding arbitration pursuant to the Federal Arbitration Act and conducted in Beaumont, Jefferson County, Texas. It is understood that the parties waive any right to a jury trial. Judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. Reproduction or quotation of this newsletter is prohibited without written permission of the Publisher.
Metals Market Report Archive