After being away for a couple of weeks travelling to the east coast, I finally have a bit of time for another Morning JAVA post. Yesterday, the Federal Reserve concluded yet another FOMC meeting and to no one's surprise, the FED held bench mark rates steady at 5.25 to 5.5%. The FED had warned that rates would stay higher for longer and for a change, they weren't bluffing. Rates have held steady since the last rate hike last fall.
Rates are still historically low but when compared to the zero interest rate environment of the previous decade, the sudden spike in rates have led crashing banks and a brewing commercial real estate disaster. Just last week, another bank, Republic First collapsed and was taken over and quickly resold at auction by the FDIC. Are we seeing a consolidation of banks?
Most people don't know that the FED has been conducting quantitative tightening, removing $60 billion per month from circulation (through a redemption cap on securities holdings). In the last year, the FED has taken $720 billion out of circulation. At a time when the U.S. government now has to come up with an extra trillion just to cover interest payments for the next year, you'd think taking money out of the system would be a bad idea.
Well, the FED announced yesterday they are reducing the total amount being taken out of circulation by $35 billion vs the expected $30 billion. This is called quantitative tightening 'tapering'. So now, 'only' $25 billion will be 'burnt' starting in June. Also, while two rate cuts were expected before year end, it has now dropped to one rate cut.
I myself believe there will be at least one rate cut, simply because it's election year and I think it will come as soon as next month. The fact that they're tapering now strongly suggests this. It also suggests quantitative easing is around the corner, aka, more money printing. They literally have no choice in the matter. Just look at the total federal debt which as of this morning, has surpassed $34.7 trillion.
Gold seesawed pre and post FOMC, as shown below. Otherwise, gold is doing extremely well, holding at or near the $2,300 mark.
Starting around the 10th of April, the USD has been soaring, from a level of 104 to where it sits this morning at 105.8 which is remarkable considering the enormous amount of debt backing the dollar.
While Bitcoin has been pushed back down, this is nothing more than a healthy correction and presents itself as a buying opportunity. Those that bought low have sold high and are taking in profits. I do see Bitcoin eventually rising again. See the 3 month Bitcoin chart below. The average has been about $65K.... not bad!
Then, there's inflation. Peter Boockvar, in an article published yesterday on KWN, warns that another inflation wave is inbound. I have to agree. An interview also published yesterday on KWN featuring Rob Arnott of Research Affiliates and who oversees $150 billion in assets, warns that we may be facing a terrifying hyperinflation similar to that experienced by Germany in the 1920s. An ounce of gold cost 150 marks in 1920. By the end of 1923, the price had shot up to 57 trillion marks. What ended Germany's hyperinflation? A return to a gold backed currency immediately put an end to that.
History never repeats but often rhymes and for this, I see that we're headed back to some kind of gold backing. Another sure sign of this is the massive accumulation of gold by the Chinese and other countries. They know and understand what's going on and they're getting ready for the BIG MOVE.
Something's gonna give and probably sooner than we all expect. Got gold or Bitcoin (and a small property to grow food on)?
I do have some good news though. Cocoa prices have come down from a record $11,000 per tonne set last month. As of writing cocoa prices are sitting just below $8,500. Well, it's not really good news when you look at the February, 2023 price which was just $2,500 per tonne. Choclolate bars have gone up about 10 cents each at Dollarama. I guess that's still affordable but a 11% increase nevertheless. That's quite a bit higher than Jerome Powell's imaginary 2%!
Comments are welcomed. See references section below for more information.
Coffee drinkers love Morning JAVA! Follow my new series:
Most Recent Posts
The Bitcoin Halving #4 April 14.
Gold hits record intraday high $2,400 Apr. 12
Are university degrees worth it? April 4
Gold skyrockets but look at oil too! April 1
Port Of Baltimore bridge collapse just the beginning. March 27
Cocoa futures hit Record $10K March 26
Gold, S&P 500, Nasdaq new record highs. March 22
View All Morning Java Posts.
Consider Donating Bitcoin: My Public Address...
bc1qx5skjkw35djfs8spm6xmyrwhxmvdewjs99tww2
Thank you for your support!
The only coffee company I'm affiliated with, Cooper's Cask Coffee Co.
First time buyers get 10% off. Use code 'FIRSTTIME'.
10% off all products in the store, free shipping over $39.95
USE CODE: FIRSTTIME ( First time orders)
Thank you for supporting my sponsors.
Buy Silver! Visit my eBay channel.
Cooper's Cask Coffee Co. 10% Off First Order w/ code 'FIRSTTIME'
Printpapa - Get 20% off your first order!
Milk Road - Bitcoin newsletter
Bitify - Buy and Sell Bitcoin marketplace
Fire Maple Gear. 5% Off First Order w/ code 'FM5'
ShareAsale - $$ Affiliate Marketing $$
I'm also on Substack with occasional new podcasts and now also on Twitter / X.
Thanks for dropping by.
Subscribe and join the club!
Tips are always appreciated!!
