The Babylon Bee captured the current state of the Republican Party in all of its hypocritical glory. The satirical website proclaimed “Republicans announce plan to pretend to be fiscally conservative again the moment a Democrat takes office.”

The GOP said it would begin to decry deficit spending and the $20 trillion debt in order to win votes as soon as political power swung back to the opposing party.

“‘The second a Democrat is back in the White House, we will once again start yelling about fiscal responsibility,’ Speaker Paul Ryan said in an address to the House of Representatives Friday. ‘For now, we will continue to vote for unsustainable and irresponsible budgets that your children’s children’s children will pay for for centuries to come.’”

The Bee was poking fun at the budget passed by the GOP Congress last week – the budget that added some $300 billion in deficit spending and raised the mythical debt ceiling. According to the Committee for a Responsible Federal Budget, $300 billion in additional spending will ensure the annual budget deficit will exceed $1 trillion in 2019.

In his podcast Friday, Peter Schiff made the exact same point.

If you really were against the deficits when Obama was president, then why aren’t you doing something to rein them in when Trump is president? Why are you actually voting in even bigger deficits now than the ones you opposed when you were the minority? And this is all hypocrisy. I’ve said this all along – that the Republicans are only fiscal conservatives when they’re in the minority and they can’t do anything about it. But the minute you turn over government to Republicans, they can run up the debt even faster than the Democrats.”

Peter noted that the US Treasury Department plans to auction off about $1.4 trillion in Treasuries this year to finance all of this spending. That raises an interesting question: Who is going to buy all this paper? The last time the Treasury sold more than $1 trillion in bonds, the Federal Reserve was buying. Supposedly, the Fed is now in the process of shrinking its balance sheet. In fact, the Fed plans to allow billions in bonds to mature and fall off its books. That means the government will have to sell even more Treasuries to make up that difference.

Good luck. How can anybody think it’s not going to be a problem to sell all that paper? Especially given how low the yields are. I mean, yeah, if this was like the Reagan administration and we were offering 15% yield on long-term bonds, yeah, maybe people would line up to buy them. But at 3% for 30 years? I mean, are there really that many buyers?”

Meanwhile, the entire world is already holding onto a pile of low-yielding, overpriced US Treasuries. Now they know that the US government is about to sell somewhere in the neighborhood of $2 trillion more.

What do you think they’re thinking? Do you think they just want to hold on? No! They want to get out from in front of that freight train … Everyone is going to want to get out the same door. So, there is no way to stop the bond market from just imploding.”

That means interest rates are going to have to go up.

Now, consider the context here. The bond market is teetering on the brink, meanwhile, the “fiscally conservative” GOP is adding billions to the debt.

Think about it. We’re going to be trying to borrow more money than we’ve ever tried to borrow before – by a massive magnitude. Why would that not push interest rates up?

Peter made the point that the rising interest rates – particularly long-term bond rates – is actually good for gold.

People still believe, falsely, that rising interest rates are bad for gold. And they’re not. But where they’re really not bad for gold is rising long-term interest rates. I mean, you can make a better argument that rising short-term interest rates are bad for gold, but there’s no way that you can argue that if the 30-year bond is going up then somehow that is bad for gold. Especially when long-term interest rates are mainly a function of inflation expectations. And if long-term interest rates are rising, it’s because people expect more inflation in the future. And if you expect more inflation in the future, that’s bullish for gold, because gold is a hedge against inflation, and it’s a much better hedge than a 30-year Treasury that gives you 10 or 20 basis points more in yield.”

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.

Feb 13, 2018

1. Gold has staged a superb rebound from the $1310 support zone, but that was overshadowed by the truly spectacular reversals taking place in most of the Western world’s gold stocks!
2. Please  click here now. Double-click to enlarge this gold chart. I like the technical action being displayed right now. Here’s why:
3. First, $1370 is massive resistance. It’s understandable that gold would build a modest head and shoulders top pattern after arriving at this key price zone.
4. What’s especially positive is that gold has only modestly declined in the face of this resistance and top pattern. My key 14,7,7 Stochastics oscillator is also modestly oversold now, which is good news.
5. For even better news, please  click here now. Double-click to enlarge.  This morning, the dollar broke below key support in the 108 price area against the yen.
6. When investors bet against central banks, they tend to lose. When they bet against the President of the United States, they can get blown right off the financial map.
7. The bottom line is that President Trump was elected on a mandate to bash the dollar lower, and it is getting beat on like a rag doll by the yen right now.
8. The bear flag-like action occurred as the dollar approached this support zone. That is ominous for the dollar bugs, and fabulous news for gold.
9. Investors don’t need to “back up the truck” when buying precious metal assets right now, but they should be emotionally positive and focused more on gold stocks than bullion.
10. That’s because there is so much news taking place fundamentally in the gold market that favours the miners. Inflation is rising, mainly because quantitative tightening is pushing money out of government bonds and into the banking system.
11. That’s raising interest rates, incentivizing banks to lend, and putting pressure on the US government’s ability to finance itself. Please  click here now. Double-click to enlarge. Since breaking the neckline of a daily chart head and shoulders top pattern, the US T-bond hasn’t even staged a minor rally!
12. Another of Trump’s election pledges was that US bond market creditors were going to take a haircut on what they get paid. Looking at the price action in the bond market and statements from new Fed chair Powell, it appears that a haircut is on the cusp of really happening.
13. Trump is acting like he doesn’t care if the US government defaults, and I would suggest that’s the right course of action to take. Inflate, default, or die. It looks like a combination of inflation and “defaultation” is what Trump has planned to end the US government’s horrific levels of excess size, debt, and abuse of citizens around the world.
14. The rising risk of a joint bond and dollar market meltdown is why gold has acted like a champ while quantitative tightening and rate hikes accelerate. 
15. While QT and rate hikes are the main gold fear trade theme, there are many other supporting factors. 
16. For example, powerful money managers are beginning to voice concerns that Trump’s spending on infrastructure and his tax cuts could cause “overheating” in the US economy. 
17. When institutions get into that mindset they buy… gold stocks!
18. On that key note, please  click here now. Double-click to enlarge this GDX chart. There may be a classic non-confirmation signal in play for the entire precious metals sector, with most gold stocks breaking their December lows, while gold bullion did not.
19. The GDX break of its December low was immediately followed by a V-Bottom pattern. Note the position of my key 14,7,7 Stochastics series oscillator. It’s adding to the power of the buy signal in play.
20. Please  click here now. That’s another look at GDX, with an emphasis on the trading volume.
21. Both Powell and Trump seem more interested in the success of Main Street than in Wall Street or the government bond market. I’ve predicted that Powell will attempt to reverse US money velocity by the summer of this year, and that he will succeed.   
22. That change in focus is great news for citizens who have been encased in vile government red tape for far too long, and it is spectacular news for gold, silver, and mining stocks. 
23. With the dollar, T-bond, and the general stock market on very shaky and inflationary ground, institutional money managers have started to take a serious look at gold stocks. By the summer, I expect them to be consistent buyers every month. It doesn’t take a lot of institutional money to blast gold stocks to significantly higher price levels. 
24. To profit from the imminent inflationary fun, aggressive investors should buy GDX call options. Investors who don’t own gold stock at these price levels or lower should be firmly pressing the buy button today! 

Thanks! 

Cheers
st

Feb 13, 2018
Stewart Thomson  
Graceland Updates
website: www.gracelandupdates.com
email for questions: stewart@gracelandupdates.com 
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