A Discussion of The Dollar, Gold and Chinese Liquidity with Paul Mylchresst

183

We've regularly published Paul Mylchreest's insightful analysis for about as long as there has been a TFMR. Whether his work is written independently or for his employer, ADM ISI in London, Paul consistently sees things that few others in the investment world notice and he writes with a clarity that everyone can understand. As you might imagine, it was a tremendous pleasure when, earlier this week, we finally had an opportunity to connect for a podcast.

First of all, let me just state that you are definitely going to want to listen to every minute of this discussion. In fact, many of you will likely end up listening to it more than once! Over the course of these forty minutes, Paul and I:

  • Begin by discussing gold
  • From there we transition into the close correlation we've seen between Comex Digital Gold and the USDJPY
  • We then discuss how and why this correlation exists
  • Which leads us to a discussion of the US dollar and its impact on the emerging markets
  • Paul then explains what a "global dollar shortage" is and how it comes about
  • Paul speculates that dollar liquidity may be the only remaining market force that the Central Banks cannot control
  • And from there, the conversation logically circles back around the USDJPY and Comex Digital Gold.

Again, I'm confident that you'll find this discussion to be as fascinating as it is educational. We thank Paul for so willingly sharing his time and expertise and we look forward to speaking with him again soon.

TF

  183 Comments

lund175
Jan 13, 2017 - 8:41pm

WOW, great talk and thank you

Paul sure does know how to put the piece's of the puzzle together.

With the talk of lack of liquidity, lack of dollars, lack of Yuan etc., was not the SDR to the rescue (if & when) suppose to help this?

IMF is suppose to print, print, print.

GoOto123
Jan 13, 2017 - 9:52pm

Re: Sharia gold

(This is in reference to yesterday's podcast question.)

Gold has been Sharia law compliant investment since the beginning (ie: it does not earn interest). The BIG change they made so gold is Sharia law compliant is the paper game: the leasing of gold, re-hypothecating & etc.

I don't believe gold is an investment, it is an insurance against political stupidity ... there's plenty of that going on around the world.

canary
Jan 13, 2017 - 10:08pm

There must be some physical buying....

coming from China before their Holiday, what keep the price moving toward $1,200....But I'm afraid, once the pressure is out, the banks will put the price back in place.

Chinese Lunar Holiday (Fr. Jan 27....Th Feb. 2)

The only thing that may interfere with bankers plan, is the DOW having a correction....But I doubt it.

Lugnut
Jan 13, 2017 - 11:16pm

Really good podcast

I'm going to have to listen to this a couple more times. My ADHD affected brain can't get it all in one shot.

Beachedas Lugnut
Jan 13, 2017 - 11:25pm

I really struggled to make

I really struggled to make sense of the last 20 mins. Maybe I just need to listen to it again.

Dingo
Jan 13, 2017 - 11:39pm

I have to listen multiple times.

Like many of the best interviews - a second listen is required for this one.

Now that I've listened again - a third listen is required ( at least).

Well done Turd and Paul.

tyberious
Jan 14, 2017 - 1:50am

Trying to force price

Trying to force price inflation when there is no wage inflation

I still have a business card that a guy gave me in 1971, "will paint any car, any color in Urethane for $35". He painted my '65 Impala with a 2-tone fade-in of ralley green and Camaro green for $35, materials included . That was then, this is now. Motel 6 now charges more than $6.

Those closest to the money spigot have to keep the money flowing. Otherwise, their income would be commensurate with their actual contribution to productivity. This includes just about everyone in the finance industry. Of course, it includes most of GOV also.

Mish has written a good article about the subject.
"Under President Obama, the percent of income going to the top 1% went from about 18% to about 21%.
The entire jump from under 15% to 21% of income going to the top 1% occurred under Clinton and Obama.
Under Reagan, start to finish, the percent of income going to the top 1% went from about 10% to over 14%"

ALL GOV is socialist and the demands and needs of socialism grow without self-imposed limits. The only way to finance this is to pump up the banking sector and slurp up whatever can be squeezed from the bankers. Socialism is the firewall between non-producers and Darwinian pressures. Gold is "Kryptonite" to socialism because it prevents unlimited expansion of State give-aways. While a social safety net is a good idea, it ALWAYS breaks the bank eventually. Unfunded liabilities in America are about $ 213 trillion so, America has travelled down a well-worn path.

The CB inflates everything in sight until the system breaks. All socialist and democratic systems in history have crashed. The inflation from the CB eventually outruns the actual productivity of the State and the bond market blows up. All the gains from the inflation have gone to the people who already have lots of money but, the eventual losses will hit them also.

"Gold Window Synopsis

1. Total credit exploded from $1.7 trillion to $63.5 trillion at the end of 2015.
2. To service that growing pile of debt, the Fed had to keep slashing interest rates.
3. Instead of allowing consumers to benefit from technological advances that are inherently price deflationary, the Fed sought to increase inflation. This is to the benefit of the banks and already wealthy.
4. A policy of 2% inflation coupled with no restraints on trade deficits (thanks to removal of the gold window), encouraged the outsourcing of jobs.
5. After the dot-com bubble burst in 2001, the Greenspan Fed stepped on gas blowing the biggest housing bubble on record. Then the Fed bailed out the banks, the asset holders and the wealthy. This chain of events left the median person being worse off than before.
6. Given that executive pay is based on performance, rising share prices further benefited the top 1%.
7. Fed policy itself, coupled with rampant expansion of credit thanks to Nixon closing the gold window is totally responsible for the rising income inequality from 1971-present."

"There is no answer because history and logic both show that concerns over consumer price deflation are seriously misplaced.

The BIS did a study and found routine deflation was not any problem at all.

“Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the BIS study."

"A good starting point is “why” income inequality is rising as opposed to investigating ridiculous wealth-transfer schemes and government stimulus projects in a fool’s mission to fix a problem that Summers, DeLong, Bernanke, and Krugman all fail to understand."
https://mishtalk.com/2017/01/12/secu...ion-challenge/

The CBs are terrified of price deflation because the credit airplane can only stay aloft of there is systemic inflation,,, usually resulting from price inflation.
In a healthy economy, there is a natural price inflation driven by demand. In our fully automated system, there is no limit to supply so, we rarely see price inflation driven by supply constraints. To keep the credit airplane flying, the CBs must create price inflation artificially.
The "benefits" of CB inflation have only reached a small percentage of the population. The remainder of the population is experiencing WAGE deflation so, demand is shrinking.
The less we see of demand-driven price inflation, the more that the CB has to try to force artificial price inflation. They have had MAJOR successes in the upper loop. They have failed in the lower loop. As they drive up prices of basic necessities, they have driven down consumption of everything else.

As more investors abandon the bond market, the CB has to buy more and more. This extra printing leads to more price inflation in the upper loop. Part of this bleeds-over to the lower loop and diminishes the purchasing power of the bonds. The "bond vigilantes" demand higher interest. The CB prints more
to meet the higher cost of debt service.

canary
Jan 14, 2017 - 2:21am
James Crighton
Jan 14, 2017 - 3:26am

Great discussion on the state of the economy and World

Rogue Money (V the Gorilla Economist) discussion between 5 people - all specialists in their fields. Very interesting discussions on Silk Road, Middle East, Israel, Gold-Bitcoin coupling (for Silk Road), real estate, and more:

Mornings with "V" & CJ - New Silk Road, Trump & The Emerging Multipolar World (01/13/2017)
Old Howard
Jan 14, 2017 - 3:57am

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