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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

February 2019 - Week 2 Edition

Gold Holds Above $1,300

Gold has held above $1,300 every day since January 28, so $1,300 is a new technical “floor” under the metal, after two major assaults on $1,300 had failed in the previous eight months. One of the reasons is that the Federal Reserve has declared a pause in its rate-hike plans. This should help push the dollar lower in 2019, giving gold an extra advantage in U.S. dollar terms, perhaps reaching $1,400 by year’s-end.

Federal Deficits to Grow by $1 Trillion per Year – and Nobody Cares!

The media and most politicians seem to concentrate on trivial events – like some Kentucky schoolboys in Washington, D.C., or some 35-year-old yearbook pictures – instead of huge mega-trends, like the $22 trillion in public debt. Both Democrats and Republicans seem to agree that the federal debt is not a problem worth addressing. On the weekend “Meet the Press” program, several Democratic Presidential hopefuls said “I’m sick and tired of hearing we can’t afford…” this or that new form of spending. Host Chuck Todd quoted polls showing that an overwhelming majority of Americans want MORE spending!

An army of new Democratic President hopefuls is calling for a cornucopia of new federal spending programs, including student loan forgiveness, free college education, open borders, universal healthcare (“Medicare for everyone”), and even guaranteed minimum income for all, when the U.S. Treasury is running on fumes, and Congress is spending $1 trillion more than we take in via taxes each year.

The Congressional Budget Office just released a massive study, “The Budget and Economic Outlook, 2019-29,” released January 28. It projected that the Treasury debt held by the public would grow by over $1 trillion per year over the next decade, rising from $16.6 trillion in 2019 to $28.7 trillion in 2029. (This does not include all public debt – only the debt held by the American public). CBO warns that this would precipitate a “fiscal crisis… Specifically, the risk would rise of investors’ being unwilling to finance the government’s borrowing unless they were compensated with very high interest rates. If that occurred, interest rates on federal debt would rise suddenly and sharply relative to rates of return on other assets.”

America is currently growing strongly – with GDP growth of about 3% per year – and still we run a $1 trillion deficit, with relatively low interest rates. What would happen if America entered a recession and interest rates rose? The interest on the federal debt would rise and tax income would shrink, pushing the annual deficits toward a record $2 trillion per year – yet politicians of both parties don’t seem to care.

These lofty deficits will eventually crater the dollar and potentially bankrupt the Treasury, boosting gold’s price and the price of gold coins.  Call us to buy gold coins now!

Alexandra Ocasio-Cortez Calls for “Gazillions” in Spending – Funded by 70% Tax Rates on the “Tippy Top” Rich

Many in America loved Bernie Sanders in 2016, and he would have been the Democratic candidate for President if Hillary Clinton had not called in special favors with the DNC establishment. He called for the standard socialist spending “laundry list” of student loan forgiveness, free college education, universal healthcare (“Medicare for everyone”) and $15 minimum wage, paid for by excessively high taxes on the rich.

Now, there is a younger version of Bernie stirring the fancy of the nation, calling for up to 70% taxation on the “tippy-top” layer of taxpayers, those making “gazillions” of dollars. In one Twitter post, newly-elected Congressional Representative Alexandria Ocasio-Cortez (AOC) said she could easily raise the money to pay for the $32 trillion bill of “Medicare for all,” since she would take $21 trillion in Pentagon financial transactions that “could not be traced, documented, or explained.” Voila, she said. “That means 66% of ‘Medicare for All’ could have been funded already by the Pentagon.”  The problem with that analysis is that the Pentagon hasn’t spent $21 trillion in its entire 73 years of post-World War II existence.

She took that nonsense figure from a discredited article in the socialist magazine, Nation, but it just shows how economically ignorant she is of the defense budget, which has never reached $1 trillion per year.

AOC’s radical “Green New Deal” (GND) is not just a publicity stunt. On Day 1, her bill had 70 co-sponsors, including four Democratic Presidential candidates. Her GND calls for the elimination of all fossil fuel energy production by 2030, eliminating 99% of all cars and all airplanes, the gutting of every building in America, the ending of all nuclear fuel, free education for life, free food, free housing, guaranteed income, even to those “unwilling to work” – and no meat, because we must “fully get rid of farting cows.” No, that’s not a joke by little boys at camp, but a serious proposition by a Congresswoman.

She is very entertaining when she utters non sequiturs in public, like this gem: “I do think a system that allows billionaires to exist when there are parts of Alabama where people are still getting ringworm because they don’t have access to public health is wrong.” That’s what she recently told a reporter.  By the way, I know “Tippy Top” people in Texas with pets who occasionally get ringworm too!

Need I say, prohibiting the “existence” of billionaires (do we kill them?) has no connection to a dubious health deficiency in Alabama. Let’s just address the ringworm problem in Alabama and let the billionaire live! Maybe the billionaire will actually donate $10 million to a health care clinic in Alabama, or the tens of millions of taxes paid by that billionaire might actually help create the program that solves the problem.

Like Bernie Sanders, AOC keeps saying that the rich (the “tippy top”) should pay their “fair share,” but hardly anyone in the news media lets America know that the tippy-top 1% pay 39% of all income taxes, so they are the “golden geese” that help fund the programs the liberal establishment wants to create.

A CNBC News report said the stock market decline in December hurt Democratic-dominated California, because that state’s “top 1% of personal income tax earners – roughly 164,000 tax returns – generate about half of the personal income taxes in California.” That sounds like more than a “fair share” to me!

In the next 18 months, we’re liable to see increased moves to “Impeach Trump” combined with constant calls to raise tax rates and “soak the rich” with 70% tax rates, which would kill the economy. Most polls show great support for these super-high tax rates on the rich because, of course, 99% of Americans would not have to pay these super-high rates. But Americans need to be educated on how these rates would hurt them by causing economic contraction, layoffs and lower income for the middle class and poor as well.

As in past years – under Nixon and Reagan – calls for impeachment or higher tax rates by a Democratic Congress led to higher gold prices and rare coin market prices. That could happen once again in 2019 or 2020.  I strongly suggest you call one of our fine account managers and buy gold and gold coins now!

 

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