President Trump's escalating trade
war appears to be affecting gold prices, which respond to a stronger dollar. The tariffs will make Chinese goods more
expensive, but the Chinese can make their goods cheaper by making their
currency cheaper to offset the effects of the tariffs. There are many ways the Chinese can do this: The yuan is pegged to the dollar, so they can
lower the peg. This is easy to do
because the Chinese owe at least a trillion dollars in loans to the US, and they hold
trillions in dollars and dollar-denominated loans that they’ve made to the US
government. If they purchase dollars, the dollar will strengthen, and Chinese
goods will become cheaper, offsetting the tariffs.
In turn, the price of gold is affected by the dollar. A
stronger dollar means cheaper gold. That correlation has held this week.
It
will be seen whether gold can hold a technical $1240 inflection point. If not, there may be a good way down as the Sino-American
trade-and-currency war escalates. That might provide a good entry point for
gold, perhaps below the $1,000 mark.
Jason Bellini of the Wall
Street Journal interviews Princeton economists Anne Case and Angus Deaton,
who observe that white American suicide rates have increased since 1999. During
the same time period, suicide rates have
not increased in Europe, and they have not increased among African
Americans. However, suicide rates have long been higher in many countries, including Finland and Japan.
The two biggest demographic
segments affected by increasing suicide rates are the Southwest-and-Rocky
Mountain region, which is among the more individualistic regions, and Americans without
a college degree, who are twice as likely to commit suicide than Americans with
a degree.
Case and Deaton’s explanations don’t
much extend the 125-year-old work of Emile Durkheim in his book Suicide.For instance, they observe that increased
individuality, especially in religion, may be associated with suicide, although they find no hard statisical evidence of a relationship.Durkheim found that education raises suicide
rates; perhaps increased education rates, short of college graduation, are
having the reverse effect of what Case and Deaton claim.
Durkheim, offered an explanation of
suicide in addition to individualism and education: Increased social control. According to Business
Insider, the countries with the highest suicide rates in 2014 were Lithuania,
South Korea, Belarus, Kazakhstan, Russia, China, India, Sri Lanka, Japan,
Hungary Latvia, Ukraine, Moldova, Slovenia Finland, and Belgium. France has a
higher suicide rate than the US.These high-suicide rate countries are not characterized by individualism but rather by
informal or authoritarian collectivism. Hence, Case and Deaton’s claim that the
rise in suicide rates is due to the US’s lack of Finnish or French dirigisme
appears ideologically motivated.
Case and Deaton emphasize the lack
of economic opportunity that has evolved since 1971, when the Federal Reserve
Bank’s pure paper money system facilitated enhanced subsidization of the
financial and computer technology industries.Access to credit has been diverted from rural America to select, elite
industries, and rural areas have been starved of credit. As well, American
banks have subsidized plant relocations to China, and the Chinese provinces
currently owe one trillion dollars to them.
These government policies have reflected elite interests.
It is not American free market capitalism that has been hard on workers, as
Case and Deaton seem to claim, but American progressivism and government
intervention, which have amounted to a
nonstop welfare-and-bailout program for billionaire donors to Princeton University.
Rather than emphasize declining opportunity
for self-actualizing entrepreneurship due to the increased involvement of
government in the economy since the 1960s and relentless Fed subsidization of
Wall Street, Case and Deaton emphasize the lack of a European-style welfare
state even though socialist countries dominate the list of high-suicide-rate
countries.
Rather, it may be that Americans, who prefer individualism and
self-actualization, have been increasingly stifled by the Great Society policies beloved by the Princeton elite.
Case and Deaton note that life expectancy has
been declining for the past two years, and that this may reflect underlying
trends that may result in a Constitutional crisis. Maybe so, but the
reaction of the rural, white population to declining opportunity has been
different from what Case and Deaton advocate. Rural Americans voted for Donald
Trump, who has deregulated industry and taken other steps to increase economic opportunity. Belorussian policies don't seem high on the priority list of rural Americans.
Alex Stanczyk interviews Jim
Rickards in the June 2018 edition of Gold
Chronicles. Rickards’s thesis is
that the dollar is going to collapse.I
agree, but while it is easy to know that this will happen, it is hard to know
when—whether in three years or 35 years. I am accumulating gold gradually
and plan to have about 20% of my portfolio in gold and silver, although I’m at
about eight percent now.I’m not totally
convinced that the downturn in the gold price from the 2011 peak--due to monetary expansion and the Trump stock
market bubble--is over.
Rickards says that gold production
has flatlined. We all know that the “peak”
thesis was wrong for oil, and I have little reason to believe that it will be
right for gold.However, production is
not a determinative factor in the long run.
Rickards claims that there is a new
axis of gold formed by secondary and tertiary powers who are looking a way out
of the dollar system, and they will hasten the invention of an alternative
monetary system that will include both blockchain technology [but not Bitcoin]
and gold.Incidentally, I have purchased
a small amount of Overstock.com, which has become a blockchain incubator.
Stanczyk says that gold is
migrating from the West to the East, especially from London to Switzerland and
then to China and India.Gold reserves
held in emerging market central banks increased 91% from 2006 to 2017. The Russian central bank has purchased over
600 tons of gold over the past four years. The Keynesian claims that gold is a “barbaric
metal,” defunct, and meaningless with respect to monetary policy, seems to have
escaped central bankers around the world.
“The dollar is still boss,” Rickards says, but
“Russia buys [gold] like clockwork.” Still, remember that the price of oil collapsed a
couple of years ago [and gold can still do the same]. The oil collapse hurt Russia’s economy. In the
2014-2016 period, Russian dollar
reserves declined by 40% due to the fall in the price of oil, but Rickards
points out that the Russians did not stop buying gold even during this difficult
period.It’s like you buy $100 a month
in gold, but then you lose your job. Even then, you still buy the gold. That’s
conviction.
China is less transparent than
Russia, according to Rickards. China has purchased 600 to two thousand tons;
Turkey has acquired gold; Iran has acquired gold; Kazakhstan has been acquiring
gold. From 1999 to 2010 central banks sold gold. [They apparently sold into the
gold bull market.] Since then, the central banks have been buying gold.The last time the US sold gold was 1980,
despite the scoffing of foundation-funded academics.
The big sellers after 1980 were the
UK, Switzerland, and the IMF. Germany, France, and Italy never sold.The central banks that were selling have
stopped. Now, on net, banks are buying.Miners
are having difficulty finding new gold. “What’s going on is strategic,” says Rickards.
The US dollar is currently more
than 60% of global reserves, 80% of global payments, and 90% of oil
payments.The Establishment (Ben Bernanke,
Tim Geithner, John Lipsky) sees continued dominance of the dollar.Currently the US is in financial wars with Iran,
Russia, North Korea, and possibly China. The ubiquitous dollar enables the US
to be effective at enforcing economic sanctions. The problem is that these
countries, at the short end of US foreign policy and trade policy, are trying to
get around the dollar system.Russia,
China, Iran, Turkey, Venezuela, and Brazil are looking for an alternative to
the US dollar system.
A comparison of the vote counts for Ulster County, NY (h/t Glenda R. McGee) reveals something interesting: The vote for Clinton was weaker than for Obama while the vote for Trump was stronger than for Romney. Ulster County is a mixture of two elements: rural New Yorkers whose ancestors have lived in the region for generations and are chiefly Republican and transplanted New York City refugees like me. The New York City refugees are mostly Democratic. Clinton stimulated less interest among the New York City element than Obama had while Trump stimulated more than Romney had. However, the numbers in the region are now overwhelmingly in favor of the Democrats because of the demographic shifts. 2012 Ulster County Presidential Votes:
Tyler
O’Neil of PJ Media (h/t Glenda R. McGee) reports that seven California teachers have filed a
class-action suit to recoup past forced fees. The teachers had been forced to
subsidize things like pro-abortion advocacy even if they opposed abortion.
In
my own case, I was for many years forced to subsidize the CUNY union, the Professional Staff
Congress’s, advocacy of socialism.
O' Neill cites an Education
Weekarticle, which suggests
that there will be multiple law suits in many states…
Retraction Watch reports that several history of economics journals are complaining because Clarivate Analytics dropped them from its journal rankings. The reason was that Clarivate was concerned that the journal editors might have been adding citations from each others' journals, in effect committing fraud. The journals include the European Journal of the History of Economic Thought, the Journal of the History of Economic Thought , and the History of Economic Ideas.
The Retraction Watch article is critical of the use of impact factors and journal rankings more generally, which is a point well taken. The technique that Clarivate used to identify the pattern was to identify the sources of the citations of articles in the journals. It turned out that almost all of the citations were in each of the other journals.
It is unfair to jump to conclusions about the editors, but that sort of collusion would, if it has occurred, be consistent with the entire structure of higher education, which I have witnessed over the past 30 years.
Gold-stock analyst John Doody holds in a Kitco interview that the Trump tariffs will result in job losses. He says that, in turn, the Fed will cut interest rates. The result of further monetary expansion will be a 2001-2011-like upswing in gold prices. The trouble with his thesis is that interest rates are already so darn low that the Fed doesn't have very far to cut even if it wants to cut. I'm sympathetic to his opinion that a trade war will contribute to a declining economy, resulting in increased Fed intervention. The whole house of cards of the post-Reagan era can fall.
I have researched and written about employee benefit issues and in my previous life was a corporate benefits administrator. I am currently associate professor of business at Brooklyn College. I hold a Ph.D. from the Columbia University Graduate School of Business, an MBA from UCLA and an AB from Sarah Lawrence College. I am working on a project involving public policy. I blog on academic and political topics.
