Gold and silver prices have skyrocketed to $3,400 and $39 respectively, signaling a potential massive market event.
The current gold-to-silver ratio of 87:1 suggests silver is undervalued and may outperform gold in the future.
The platinum-to-gold ratio, historically at 1:1, now stands at 1:2.5, indicating platinum is undervalued and could outperform gold.
China’s government is actively promoting platinum and silver purchases as inflation hedges, potentially driving up future prices.
Japan faces a financial crisis with a debt-to-GDP ratio over 250%, causing the Japanese bond market and carry trade to collapse.
The US government confronts a financial crisis due to an unsustainable debt-to-GDP ratio exceeding 140% and a liquidity crisis.
A buying frenzy in the gold mining industry may lead to a 20-year resource climb and a concurrent 20-year stock market crash.
Seasonal trends indicate strongest periods for gold (August to December) and silver (September to December), suggesting a potential price surge in coming months.
Massive fiscal deficits since 2016 have led to a shift from austerity to fiscal expansion, with governments spending without limit and pro-cyclically, laying the seeds for future inflation and potential bond crises.
The US Treasury’s short-term T-bill issuance since the pandemic has created a huge reliance on short-term debt, intertwining Fed monetary policy with fiscal policy and limiting the Fed’s independence.
Fiscal QE, where governments borrow to finance spending, may lead to inflation, higher bond yields, risk asset sugar high, weaker dollar, and a potential developed market bond crisis.
The jobs market is expected to slow down, with cracks appearing in the labor market, potentially leading to a recession if not addressed.
Inflation outlook is expected to rise due to both structural and cyclical factors, with cyclical inflation picking up again after a period of decline.
Within 10 years, interest payments on US national debt are projected to account for almost 25% of tax revenues, increasing the risk of a sovereign debt crisis.
The US bond market liquidity has deteriorated, with rising longer-term yields driven by term premium, as investors demand higher returns for fiscal policy risks.
20-25% of the US government’s interest bill goes to foreigners who may not reinvest in the US, potentially impacting liquidity and fiscal stability.
Even without a bond crisis, higher bond yields will eat up more tax revenues, grind economic growth, lower profit margins, and weaken the job market.
The US government may resort to financial repression to stem rising borrowing costs by compelling domestic buyers to purchase debt through regulations.
The embrace of cryptocurrencies, specifically stablecoins, may be a strategy to increase demand for US debt by backing stablecoins with treasuries.
Tariff burden sharing between the US and foreign countries is complex, with some nations potentially absorbing costs by reducing wholesale prices to importers.
The Treasury’s control over its account at the Fed (TGA) significantly impacts liquidity and inflation, as TGA changes affect system-wide liquidity.
The Fed is reluctant to cut interest rates due to fears of undermining the US dollar, spiking inflation, and causing long-term interest rates to soar.
Despite rising stock prices and short-term rates, the Fed acknowledged the falling dollar in their June 18th meeting minutes, noting the dollar’s sensitivity to economic surprises.
Since the 1950s, the Fed has been manipulating interest rates, creating a 40-year tailwind of lower long-term rates and stimulating asset bubbles.
The value of the US dollar is currently falling, while prices of monetary metals like gold and silver have significantly increased.
Chairman Powell aims to maintain high rates until his 2026 retirement, potentially to save face rather than for public benefit, as the next crisis could be triggered by a single rate cut.
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