Jim Grant on Asian central bank buying of gold

Not everyone cheered when Western authorities immobilized some $350 billion of Russian foreign-currency reserves following the Putin-ordered invasion of Ukraine.  Nor does everyone agree with recent Western proposals to commandeer that cash to shore up Ukraine's defenses.  China, in particular, has withheld its applause, and it may not be coincidental that March marked the 17th consecutive month of Chinese gold purchases.  [The People's Bank of China bought a record 735 tonnes of gold in 2023 according to The Gold Observer.]  Even such central banks as Singapore and Poland, the governments of which harbor no known extraterritorial ambitions, have been stocking up on the legacy monetary asset, the World Gold Council reports.

"The U.S. is essentially throwing its weight around, maybe a little too much," Pierre Lassonde, a cofounder of Franco-Nevada Corp. and a dean of the Canadian mining community, opines to deputy editor Evan Lorenz.  "Looking at the finances of the United States and the enormous budget deficits, just interest on the debt is more than the defense budget.  The dollar used to be called TINA, i.e., There is No Alternative.  Gold is the new alternative.  I call here GINA."

~ Jim Grant, "Gold rush," Grant's Interest Rate Observer, April 11, 2024

John Hathaway on central banks replacing U.S. dollars with gold

At this point, one can only speculate on the reasons for the behavior of gold bullion.  There are many interrelated forces at work to explain the slump in the U.S. dollar (USD) relative to the gold price.  However, in our opinion, the most obvious is a general loss of trust in the USD as a store of value and U.S. Treasury bonds as a safe asset. 

Widespread evidence includes record purchases of gold by central banks replacing U.S. dollars and other paper currencies for bullion at a record level in 2023 (1,037 tonnes).  For central banks, unlike mainstream investors, the math on the U.S. fiscal situation dictates immediate action.  The $168 billion increase in U.S. government debt over the last 20 days equals the entire U.S. deficit in 2002, as noted by Fred Hickey in the 4/02/2024 High-Tech Strategist.  By year-end, interest on the national debt is likely to be the largest single U.S. government outlay, according to Bank of America chief market strategist Michael Hartnett (FFFT, The Forest for the Trees, 4/06/2024).  Non-U.S. investors have been voting with their feet, as the steady decline in the USD as a share of global foreign exchange reserves illustrates (see Figure 5).

~ John Hathaway, "What Does the Gold Price Breakout Mean?," Sprott Gold Report, April 10, 2024

What

Dan Ferris on central bankers

They're like people in a job interview who don't quite think they're qualified.  They're always trying to impress you and they're always trying to pull out something that impresses you.  And so they're trying very hard to suggest that they're in control and that they know what they're doing.  They represent themselves as a group of very smart people with excellent tools.  "We are like surgeons with precision instruments."  In truth, they are like a drunk sailor at a carnival playing whack-a-mole, and he can't even hit the board.  He's hitting the ground and he's hitting himself in the leg.  They really don't know.

[...]

It's propaganda.  It's a sales pitch.  "What am I being sold and why?" is the question.  You're being sold a level of control they simply do not possess.

~ Dan Ferris, "2023 Midyear Market Outlook," Stansberry Investor Hour, 36:00 mark, June 26, 2023

Dan Ferris on misplaced faith in central bankers

It's not that central bankers aren't doing their job right.  It's that the job shouldn't exist and can't be done any way but wrong.

~ Dan Ferris, tweet, September 30, 2022

Marc Faber on dishonest central bankers

Everybody applauds the central banks.  Because of course the fund managers, they want the central banks to print money because their fees go up.  They don't want an honest central bank.  They want a dishonest central bank.  At the same time they want dishonest politicians because everybody's dishonest so they can also stay dishonest as fund managers. 

~ Marc Faber, "The End Game Ep. 8 - Dr. Marc Faber," The Grant Williams Podcast, 22:00 mark, October 7, 2020

Dan Ferris on central banking

People actually believe that a few numbskulls with advanced degrees and finance pedigrees can control and manipulate a hopelessly complex 20 trillion dollar economy from the top down with these simple levers of moving interest rates around, printing money, buying securities.  It's ridiculous.

~ Dan Ferris, "When to Buy and When to Sell," Stansberry Investor Hour, 10:30 mark, November 25, 2020

Kevin Duffy on central bankers: "beyond the point of no return"

Is it possible the central bankers will admit the error of their ways and back away from their grand experiment?  Don’t bet on it.  Ideology and conviction – what Barbara Tuchman calls “wooden-headedness” – are a potent mix.

Strongly held beliefs are nearly impossible to let go, especially when the world is backing you with trillions of poker chips and genuflecting at your genius.  Central bankers are all-in.  There is no folding.  They are well beyond the point of no return.

For better or worse, they hold the losing hand.

~ Kevin Duffy, The Coffee Can Portfolio, August 11, 2020

Sean Corrigan on BOE's Mervyn King wanting to subsidize unemployment in response to the coronavirus shutdowns

The three-way contest between Epidemiologists, Climate crazies and central bankers to wreak the most havoc upon humanity has tipped in favour of the lattermost.  Mervyn King wants people doing no - or only part-time - work to go on receiving 80% of salary from government until GDP is restored.

~ Sean Corrigan, Cantillon Consulting, twitter post, May 12, 2020

Kevin Duffy on QE to infiinity

Central bankers are the compulsive gamblers of our times.  They had already bet the house and kids. Now they’re betting the afterlife.  They have no clue they’re holding the losing hand...

~ Kevin Duffy, March 23, 2020

Jim Grant on the panic of 2020

That the central bankers do not always control events, but that events sometimes overwhelm the central bankers, is one lesson of the panic of 2020.

~ Jim Grant, "Biggest hearts, lowest rates," Grant's Interest Rate Observer, March 20, 2020

Dylan Grice on the skill set of central bankers

The only thing central banks are good at is blowing the bubbles that cause the crashes which are used to justify their existence.

Market prices only reflect fair value by accident and in passing.

~ Dylan Grice

Jim Grant: "Will central bankers continue to control events or will events start to control the central bankers?" (2019)

The question before the house is whether the central bankers can continue to control events or whether events will turn the tables and start to control the central bankers.  Our money's on events.

We reason that mighty interventions have unintended consequences.  Suppress the rate of interest, and you misdirect capital.  Cut short the corrective processes of a business-cycle downturn, and you store up trouble for the next recession.  Intervene over and over to save a bull market, and you must continue to intervene - you're in too far, you can't stop now, the downside is frightening.

Ultra-low interest rates, low volatility and stretched valuations soothe the spirit as they fatten the net worth.  Rising markers seed a belief that the world has arrived on a kind of permanently high plateau, not necessarily of price but of predictability.

~ Jim Grant, "The surprise factor," Grant's Interest Rate Observer, September 20, 2019

Bank of Canada governor: "Our fundamentals are quite solid"

The Canadian economy begins the new year in solid shape. Our fundamentals are quite solid.

~ Stephen Poloz, Bank of Canada governor, interview with CTV news, December 20, 2018

Jim Grant on central bankers

The Ph.D. standard is the regime of discretionary monetary management by former tenured economics faculty. Not much is new under the sun in finance, except for this regime of improvisation by college professors trying stuff because it looks good on a blackboard. What it means for investors is thrills and chills.

~ Jim Grant, "Jim Grant Is Bullish on Gold, Bearish on Kraft," Barron's, August 1, 2016

Jim Grant on negative interest rates

We are living in a unique time. Negative rates aren’t a naturally occurring phenomenon in finance but a creation of our ingenious central bankers. Furthermore, they seem to defy common sense. Interest rates exist because we want things now rather than later. That’s the nature of human desire. Negative interest rates turn that on its head. So they are a sign not of constructive policy making, but of trouble.

~ Jim Grant, "Jim Grant Is Bullish on Gold, Bearish on Kraft," Barron's, August 1, 2016

CNBC's Bob Pisani admires the world's central bankers

Central bankers around the world should have been Time's Person of the Year this year.

~ Bob Pisani, CNBC, 9:40 AM, December 30, 2013