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7 Stocks That Could Get a Big Boost From Biden’s ‘Build Back Better’ Bill

Most news from the Capitol this month has centered around the bipartisan infrastructure bill that President Joe Biden signed into law earlier this week….

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This article was originally published by Investor Place

Most news from the Capitol this month has centered around the bipartisan infrastructure bill that President Joe Biden signed into law earlier this week. It allocates significant funding for all things related to infrastructure, including electric vehicle charging. Now, lawmakers have switched their focus to a softer side of infrastructure, as debate heats up around the Build Back Better bill. This second piece of legislation promises to fund things like universal preschool and reduce prescription drug costs. Following a vote in the House of Representatives today, what are some potential Build Back Better stocks to watch?

And perhaps more importantly, what else should you know?

According to a statement released by the White House, Biden “believes that there’s no greater economic engine in the world than the hard work and ingenuity of the American people.”

While the statement doesn’t directly mention the stock market, we’re about to see massive investments in related sectors. That in turn will send these stocks up. With that in mind, what companies should investors be considering as Build Back Better stocks?

Here are the top seven to watch:

  • AvalonBay Communities (NYSE:AVB)
  • Bright Horizons Family Solutions (NYSE:BFAM)
  • ChargePoint Holdings (NYSE:CHPT)
  • Eaton (NYSE:ETN)
  • First Solar (NASDAQ:FSLR)
  • Nucor (NYSE:NUE)
  • Vulcan Materials (NYSE:VMC)
  • Build Back Better Stocks: AvalonBay (AVB)

    Source: Andriy Blokhin / Shutterstock.com

    This would have been a good stock to buy for the coming year even without the Build Back Better bill. As InvestorPlace contributor Chris Markoch noted a few months ago, there’s bullish case to be made for AVB stock for any investor looking to stay ahead of inflation.

    With $150 billion in the bill allocated for affordable housing, it makes sense to look at this real estate investment trust that focuses on apartment development. Its business model also highlights affordable housing as a key component, and there aren’t many publicly traded companies that focus on that aspect of real estate.

    The current real estate market is complicated, to say the least, and as aspiring home buyers are priced out of their desired areas, rental and other affordable housing options start to look better and better. The need for affordable housing isn’t going away any time soon, and for that matter, neither is inflation. AvalonBay knows both those things and it is determined to stay ahead of these trends. If it can do so successfully, 2022 will be a great year for its investors.

    Bright Horizons Family Solutions (BFAM)

    a girl sitting in front of a laptop working on homework. investing for kidsSource: fizkes / Shutterstock.com

    This year brought a true back-to-school boom, as many students returned to in-person school for the first time in months. While this wasn’t initially good news for the tech companies that had benefitted from the remote learning trends of the Covid-19 pandemic, some found ways to stay ahead.

    As InvestorPlace contributor Josh Enomoto noted, Bright Horizons is a rare investment in the sense that it is an education-related tech stock with the ability to leverage modern academic innovations for elementary-school-age children. This may not seem like a typical candidate for a Build Back Better stocks list, but it is absolutely worth considering.

    The passing of Build Back Better is also good news for companies in this space. It includes a $400 billion investment in universal preschool. For companies such as Bright Horizons, whose dynamic business models centers around providing care primarily for young children, this type of development could allow for significant growth.

    Build Back Better Stocks: ChargePoint Holdings (CHPT)

    EV stocks: A close-up shot of a ChargePoint (CHPT) charging station.Source: YuniqueB / Shutterstock.com

    The bill includes $555 billion to fight climate change and that includes investing in electric vehicles.

    As the EV race has picked up steam and seen many exiting developments, the need for the type of infrastructure that powers the innovative vehicles has become apparent. Thankfully, companies are stepping up to produce the charging stations necessary to keep vehicles from Lucid (NASDAQ:LCID), Rivian (NASDAQ:RIVN) and their peers on the road. The company leading the charge so far is ChargePoint, a company that has made quite a name for itself providing charging infrastructure.

    ChargePoint has done an excellent job positioning itself as an industry leader in the emerging and expanding market that is EV infrastructure. Shares have risen more than 27% during this month and experts have indicated that it has a great chance of rising more during the coming year, potentially by as much as 50%. The passing of a bill designed to invest in its sector will only help this stock continue to grow, especially as it continues to gain market share.

    Eaton (ETN)

    An Eaton (ETN) sign on a company building.Source: Lukassek / Shutterstock.com

    One of the bill’s main focuses is clean energy technology and development. As such, companies involved in the space of green-focused infrastructure are going to among the biggest winners of the Build Back Better bill. An important company is Eaton, one of the country’s leading providers of electric systems and their components. The company may bill itself as being in the field of power management, but it’s important to remember how important alternative sources of power are going to be to both infrastructure development and combatting climate change, two central areas of the bill.

    Eaton is deeply involved in the areas of both wind and solar energy, two clean energy areas whose importance has become increasingly apparent throughout recent years. As it website notes, its electrical solutions involve converting alternatively generated energy into electricity and transporting it to major grids. The Texas power grid crisis has alerted America’s politicians just how concerned they need to be with this area of infrastructure. Companies in the space are going to have plenty of work to do moving forward and Eaton is an industry leader within it, making an ideal candidate for a list of Build Back Better stocks.

    Build Back Better Stocks: First Solar (FSLR)

    Solar panels in an open area, with the sun shining over them.Source: Shutterstock

    In any discussion of alternative energy, the topic always seems to shift to solar technology. The industry took some significant hits during Donald Trump’s presidency due to his trade policies, but the Biden administration seems determined to turn things around. This will be helped considerably by the funds allocated for clean energy development in Build Back Better. And as the industry moves forward, First Solar will be at the forefront.

    This Arizona-based company was an early winner among solar stocks. Despite some setbacks, FSLR stock has enjoyed an impressive year, rising by more than 50% during the past six months.

    Nucor (NUE)

    two construction workers on a worksiteSource: Shutterstock

    When a bill centers around building and repairing, it stands to reason that companies producing core building materials would be among the stock market winners.

    Based in Charlotte, North Carolina, Nucor is North America’s largest domestic steel producer. It may not receive as much coverage as its competitor U.S. Steel (NYSE:X), but its stock performance has been notoriously less volatile. It’s a great time for a bullish play on steel stocks, and Nucor should give investors the most confidence.

    That doesn’t just come from the impending influx in business from infrastructure spending, though. Nucor has reported excellent earnings this year, likely stemming from the exceedingly high demand from automakers. The stock did see a slump last month but it’s been in the green for most of November and has made steady progress since. It is absolutely a name to watch among Build Back Better stocks.

    Build Back Better Stocks: Vulcan Materials (VMC)

    The Vulcan Materials (VMC) website is displayed on a smartphone screen.Source: madamF / Shutterstock.com

    Like Nucor, Vulcan was also recently named to a list of stocks to buy as Biden signed the more traditional infrastructure bill into law. While Build Back Better focuses on more social components of infrastructure, Vulcan and its peers will still be relevant.

    Based in Birmingham, Alabama, Vulcan has spent decades securing a market share in a field that has been expanding recently and won’t be slowing down any time soon. The construction company’s market capitalization of $26 billion should be a good indicator of its stability. Like Vulcan, it’s seen some declines recently, but shares are in the green for the month.

    Anyone considering a bullish play on the construction sector would do well to consider Vulcan. Next year promises to be a big year of infrastructure spending. That makes all of these Build Back Better stocks top names to consider.

    On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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    Author: Samuel O'Brient

    Economics

    Bitcoin Isn’t Any More Dangerous than the Euro

    Major representatives of the European Central Bank—including ECB president Christine Lagarde—continue to warn against bitcoin. In a recent article,…

    Major representatives of the European Central Bank—including ECB president Christine Lagarde—continue to warn against bitcoin. In a recent article, addressed to the inflation-adverse German audience, the ECB representative Klaus Masuch together with the former ECB chief economist Otmar Issing has stressed five risks of bitcoin: a lack of intrinsic value, risks to financial market stability, the use in financing organized crime, high energy consumption, and the danger that taxpayers are held liable for financial risks. It is good that the ECB wants to protect us against possible risks, but a comparison between bitcoin and the euro in the five points mentioned should be allowed.

    First, the authors write that bitcoin has no intrinsic value, i.e., no direct use value as gold does, for example (see also Thiele 2017). This is true, but some value arises from the fact that bitcoin makes electronic transactions possible without a bank account (peer to peer). The euro also has no intrinsic value; at best it has value in the form of the burning value of the notes and the metal value of the coins. Euro credit money has been backed by the investment projects it has financed, but the persistently loose monetary policy of the ECB is increasingly zombifying euro area enterprises. More and more private deposits at the commercial banks are backed by the commercial banks’ deposits at the central bank instead of credit-financed investment.

    Bitcoin per Euro

    Source: Reuters.

    Thus, the trust in the two currencies depends on how credible they are, with this question being strongly linked to the restraints on the supply of the currencies. The number of bitcoins is credibly limited to a maximum of 21 million. Bitcoin miners have to do substantial work to create bitcoin (proof of work). The necessary efforts increase with the number of bitcoins created.

    The supply of euros was intended to be limited by the ECB’s objective of price stability as outlined in article 127 of the Treaty on the Functioning of the European Union (TFEU) as well as by the prohibition of government financing by the central bank (article 123 of the TFEU). But these rules seem to be increasingly undermined, as the ECB’s balance sheet continues to grow at a high speed. Moreover, it is less and less clear whether the government bonds and loans on the asset side of the ECB’s balance sheet—which match commercial banks deposits and euro bills issued on the liability side of the ECB’s balance sheet—are at risk of default. Therefore, confidence in the euro is dwindling and confidence in bitcoin is growing, with bitcoin strongly appreciating against the euro (despite strong fluctuations; see chart above).

    Second, Masuch and Issing express concern that bitcoin could suddenly lose all its value and thus destabilize the financial system. This risk is low because the supply of bitcoin is limited and a large share of bitcoin is held decentrally. At best, financial instability may emerge if bitcoins are an essential part of a financial product (but see below). Perhaps for this reason, the German legislature has limited investment in bitcoins to special funds and there to a maximum of 20 percent.

    On the other hand, the ECB creates risks to financial market stability, because the ultra-loose monetary policy is depressing risk premiums. Speculation and high levels of debt are encouraged, which can lead to new debt and financial crises. In addition, the ECB’s low, zero, and negative interest rate policy is squeezing banks’ interest rate revenues, thereby destabilizing many banks in the euro area. The risks for banks could grow further if the ECB itself issues a digital central bank currency and savers shift their deposits from the commercial banks to the central bank.

    Third, the authors object that bitcoin can serve organized crime. Yet, money laundering and terrorist financing existed even before cryptocurrencies, which did not lead to criticism of or even bans on the dollar or the euro. Unlike transactions in fiat money, bitcoin transactions can be viewed on a public ledger (blockchain). Moreover, aren’t there currently concerns that parts of the EU reconstruction fund, which is indirectly backed by the ECB, could end up in the hands of the Italian mafia?

    Fourth, there is criticism regarding bitcoin’s impact on the climate, as the energy consumption during production (mining) is high. However, bitcoin production is geographically independent. Bitcoins can be mined where electricity capacity is idle (and therefore cheap). Since electricity is difficult to store, bitcoin is a way to solve the problem of too much electricity (grid fluctuations).

    Furthermore, it also takes energy and resources to create and distribute euros—whether in paper or electronic form. Unlike the decentralized bitcoin, the euro is maintained in a huge new fully air-conditioned skyscraper and nineteen national central banks with large numbers of highly paid staff. An extensive network of commercial banks distributes and stores euros in paper and electronic form. From this perspective, bitcoin seems very lean in terms of resource consumption.

    Moreover, the ECB’s ultraloose monetary policy is unsustainable in its effect, as persistently low interest rates are boosting debt and consumption (Schnabl and Sepp 2020). The loss of confidence in the euro has triggered a flight into real assets, resulting in construction booms. Between 2003 and 2007, low ECB interest rates contributed to real estate bubbles in Spain and other southern euro area countries, which left many construction ruins in their wake. Since then, low interest rates have boosted construction activities in most euro area countries. From the perspective of Hayek’s overinvestment theory, the ECB’s persistently loose monetary policy is causing an unprecedented misallocation (and thereby waste) of resources (Schnabl 2019). As bitcoin is scarce, it helps to avoid such overinvestment booms.

    Finally, concerns are expressed that a financial crisis triggered by a sharp drop in the value of bitcoin could force policymakers to offset losses in order to prevent a systemic crisis in the financial system. The warning against a suspension of the liability principle is justified. Everyone should invest and speculate at their own risk.

    In line with the liability principle, the bitcoin network creates default risks on an individual level due to its decentralized nature. From this point of view, there is no systemic crisis. In contrast, in the financial system of the euro area, the liability principle was suspended with the bailout of banks and highly indebted euro states in the course of the European financial and debt crisis  back in 2008–12. Since Mario Draghi’s “whatever it takes,” the ECB has been keeping a growing number of highly indebted euro states fiscally stable with the help of extensive government bond purchases. Individual risks are thus socialized, thereby paralyzing growth.

    The upshot is that the persistently loose monetary policy of the ECB and other central banks has led to a loss of confidence in the euro. This loss is not only reflected in rising bitcoin prices as well as in hiking stock prices, real estate prices, gold prices, etc. The ECB’s ongoing low, zero, and negative interest rate policy is leading to an immense misallocation and waste of resources, which is likely to dwarf the energy consumed by bitcoin mining by far. If bitcoin—via currency competition with the euro—helps to discipline the ECB’s monetary policy, then it makes an important contribution to both financial market stability and sustainability in the European Union.










    Author: Gunther Schnabl

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    Economics

    Davos Is Making The Central Bank Case For Gold

    Countries lining up on the opposite side of the Great Reset are buying gold while it is still cheap…

    Davos Is Making The Central Bank Case For Gold

    Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

    A few months ago I talked about the upcoming changes to the way adoption of Basel III’s new bank reserve rules would alter the gold market.

    In short my conclusion was similar to that of Alistair MacLeod’s and others, that Basel III should collapse the egregious manipulation of the gold market through the use of using futures and unallocated gold as bank reserves.

    In May I wrote:

    In effect, Basel III, if implemented in its current form, would change the gold market from a speculative one based on perceptions of the efficacy of monetary policy to control real interest rates to one that should force price discovery in an almost purely physical market. As I told my Patrons in May 16th’s Market Report video, physical gold will go from being the price taker to the price maker.   

    I didn’t then nor do I think now that will happen immediately after Basel III goes into effect in the U.K. on January 1st. But I do think the recent weakness in gold has been an early sign of stress within the gold market brought on by the upcoming rules implementations.

    And that has sent gold lower in recent weeks despite rising inflation and falling real interest rates. Of course this is because the markets have been overpricing the ‘transitory inflation’ argument put forth by the major central banks.

    So, when Jerome Powell came out, in his first important statement post-reappointment announcement, and put a fork in ‘transitory’ inflation the markets were properly shocked. This happened on the heels of OmicronVID-9/11 dominating the headlines and also creating some overblown market reactions thanks to poorly-programmed headline trading algorithms.

    For those who have been confused or disagreed with my assessment of Powell for the past six months, thinking Powell was lying about inflation as proof he’s just another idiot Fed Chair, I give you the counter argument. He had to survive the obvious coup attempt put on by Obama and Lael Brainard to oust those not controlled by Davos from the FOMC.

    Once that happened, Powell could speak openly because the political storm clouds over his head dissipated. Cue his forcing Treasury Secretary Janet Yellen to finally agree with him on inflation after he put his cards on the table.

    Now, we have policy clarity from the Fed.

    They will be tapering QE and they will be raising rates in 2022. Now the markets can begin the task of readjusting themselves into year-end. With that in mind, it makes perfect sense to see gold, which has been a losing trade all year under pressure just from tax-loss selling alone, no less expectations of a stronger U.S. dollar.

    It also makes sense for high-flying equities to take a hit along with junk bonds which were yielding less than inflation. There are trillions in misallocated capital out there that go far beyond the simple idea that the Fed’s only mandate is to prop up the equity markets.

    Powell and those that stand behind him, I have strenuously argued, can see the fight for the future of the monetary system clearly, and it doesn’t include a place for the commercial banks in a world of CBDCs. While one could argue the Fed would like that power CBDCs confer, one could also clearly make the counter argument that it also loses a tremendous amount of power now being just one central bank among many and the dollar just another digital token without value.

    Does anyone really believe Wall St. is happy to sign up for this nonsense? City of London?

    To get a really good sense of where I think we are in this now, check out my recent appearance on Bitcoin Magazine’s Fed Watch Podcast and Livestream.

     

    Okay so, all that said, let’s really talk about what’s happening in gold.

    Because this week we saw two major announcements by two very different central banks vis a vis gold.

    All Roads to Singapore

    Singapore has now joined the ranks of Russia, Turkey, Hungary, Serbia, Poland and others in adding to their central bank gold reserves.  This is a very significant move because this is the first country outside of those in Russia’s nominal orbit.  

    Singapore, outside of Hong Kong, is a major clearinghouse for offshore Chinese yuan settlements.  ICBC opened up a branch there in 2012 to handle such transactions and things have only progressed from there.

    I don’t necessarily see this as a China-related move by the MAS — Monetary Authority of Singapore — as their monetary policy is very independent and pretty much algorithmic.

    They manage the exchange rate of the Singapore dollar (SGD) within a 1% band of expected rates against a basket of currencies, rather than publishing a benchmark rate.  Moreover, the MAS is moving away from the old SIBOR / SOR system. SIBOR is Singaporean LIBOR — the interbank overnight lending rate.  And SOR is the SGD overnight swap rate.

    They, like the U.S., are move to an analogue of SOFR — the Secured Overnight Funding Rate — to replace LIBOR.  SORA is Singaporean SOFR for all intents and purposes.

    So, why is this important? 

    If Singapore is worried, like everyone else is about a collapse of the current financial system which is expressly on the table via Davos and the Great Reset, then those with the gold will be in a much better position to defend their currencies during a crisis and maintain a relatively stable global exchange rate.

    Since Singapore aims to be the independent broker between East and West, especially now that Hong Kong has all but been taken over by China, this move is very interesting to say the least.

    From the Zerohedge article on this there’s is this great point:

    For a central bank which actively publishes reams of publications and reports on all sorts of topics related to Singapore’s financial sector and markets and it’s international financial position, this omission about Singapore’s sizeable gold purchases could be considered quite strange, but then again, given that we are dealing with the secretive world of gold and central banks, maybe it’s not so strange.

    In addition, MAS is famous for it’s obsession with maintaining and controlling the exchange rate of the Singaporean dollar (versus a basket of currencies), so perhaps MAS prefers not to draw attention to the amount of gold in it’s international reserves as this might encourage FX markets to view the gold purchase as a move that strengthens Singapore’s reserve position and hence could put upward pressure on it’s exchange rate.

    Singapore is a key player for the future of pan-Asian finance.  If the very savvy MAS is buying gold then they are scared. They are making plans for a very different future where debt becomes the dirtiest word in English.

    Moreover, they bought this gold back in May and June and it has only now been discovered on their balance sheet. Why would they not announce these purchases?

    For the same reason the Bank of Ireland didn’t tell anyone they nibbled on some physical gold over the summer, so as to not move the price. What’s really significant here is that Ireland is the first euro-zone country to announce gold purchases. Previous to this it was only non-euro EU members like Hungary, Poland and Czechia.

    That we’re seeing euro-zone countries begin shoring up their currency reserves with gold feeds the argument I made back in May.

    Moreover, just so everyone is also clear what both of these central banks are facing, it isn’t just Europe that is now dealing with insane natural gas prices. Singapore is looking at a catastrophic rise in energy costs. So, if you think the MAS isn’t still toe-dipping without telling anyone into gold to stabilize the SingDollar well, you have a reading comprehension problem.

    The Golden Circle

    Now let’s go back to Basel III and talk about how it was supposed to be the thing that finally got gold out of its slump.

    Back in May, Powell hadn’t begun defending the U.S. dollar. He hadn’t even had his public spat with ECB President Christine Lagarde yet. Nor had he raised the Reverse Repo Rate he was paying to 0.05%.

    So, with Basel III on the horizon and the U.K. exempt until January 1st, 2022, there is still the basic infrastructure in place that if the Fed tightens, which it did through the RRP rate, then gold would be under constant pressure by those needing dollars at cheap rates regardless of the fundamentals.

    Short term funding needs always trump long-term fundamentals.

    So, the Fed still needs gold kept under wraps to maintain its primacy. But at the same time, the ECB and other Central Banks accumulating gold need it to rise, or at least keep pace with their currency vs. the dollar.

    I still believe that dynamic is in play for 2022 and it will finally be the full expression of Basel III that will continue putting a higher floor underneath gold.  

    Remember, as I wrote back in that May article:

    The ECB, on the other hand [vs. the Fed], can go bankrupt, since it has no capacity to [create infinite amounts of elastic money].  All it can do is buy the sovereign debt of the member countries’ central banks and hand them back euros, while swapping around deckchairs on this monetary Titanic. There is a definable limit to this process, especially if rates rise as people lose confidence in the underlying economic activity of those countries and their fiscal positions.

    Europe is locking down its economy over OmicronVID-9/11 and removing the unvaccinated from society. They are between steps 7 and 8of 10 on the path to genocide.

    Does any rational person believe there will be a renaissance of European economic dynamism in 2022 under these conditions? If you do, you might be a shitlib who believes in unicorn farts, 69 genders and that Elizabeth Warren is an economic genius.

    For the rest of us who live in reality-land, of course Europe is the most vulnerable here.

    Once Basel III goes fully into effect and paper and unallocated physical gold will no longer be considered as bank collateral for balance sheet purposes, the demand for physical gold because of this need for it as a central bank asset to back national currencies, becomes even more acute. 

    Those countries lining up on the opposite side of the Great Reset are buying gold while it is still cheap.  Powell’s dollar drain since June’s RRP rate hike has gifted everyone with cheaper gold prices for another 6 months.  

    The MAS buying gold is telling you that what I said back in May is reality:

    So, Basel III is coming to destroy the paper gold markets and destroy the money center banks in New York and London while setting the stage to bail out the euro-zone. Higher gold prices are the answer to all of these things. Think of it this way, in a world where debt assets are failing and new private forms of custodial assets are rising in mindshare [bitcoin and crypto], what’s the only real weapon the central banks have to maintain credibility?

    Their gold reserves.

    This is the essence of why Davos, I think inadvertently, is creating the new role for gold during these times of change.

    For the ECB to survive the bankruptcy of Europe gold has to rise.

    For emerging market central banks to survive the turmoil unleashed by an epic U.S. dollar rally because of Europe’s bankruptcy gold has to rise.

    When China decides to assert itself as the dominant economic player, which I think it would do in the event of a kinetic conflict between it and the U.S., it’s first move will be upwardly revising its official gold reserves… by a lot.

    Gold will really rise on that.

    The Great Quagmire

    Remember the entire Great Reset rests on Davos destroying the current banking system and rolling it up to the central banks, cutting out the classic two-track monetary system with the commercial bankers being the transmission mechanism.

    It means them getting control over the Fed, which looks like a lost cause now. Powell is fully in control of FOMC policy, which I expect him to make very clear at the next meeting. This is why Pelosi so easily cut a deal over the debt ceiling.

    There will be no further stupid and dangerous brinksmanship calling into question U.S. policy. The markets are demanding clarity from the U.S. Davos’ manufactured chaos through the Democrats’ shenanigans on Capitol Hill should be a thing of the past. That alone will help push capital back towards the U.S.

    Davos’ agenda has failed on Capitol Hill, despite winning battles all across Europe and in the English Commonwealth. Those countries are now dead letters until their current governments are overthrown or the people throw off their shackles… not likely.

    Despite the market jitters because of the necessary reallocation to global capital, Powell and the Fed now have to pursue tight monetary policy to force the ECB into openly inflationary policy. This will further trash the euro and finally overwhelm the ECB’s bond buying to the point where rates there start rising.

    Davos has responded with gutting Europe to the bone with OmicronVID-9/11 lockdowns and forced vaccinations to take down the global demand side of the monetary equation while forcing diplomatic conflicts on China and Russia neither want to stop the flow of goods around the world.

    This is why NATO and the Neocons are going wild in Eastern Europe.

    It’s why the Israelis are threatening a war with Iran.

    And it’s why the O’Biden administration is looking increasingly desperate to bring us to the brink of war without there actually being one.

    Just enough conflict, sanctions, sabre rattling and embarrassments to upset China and Russia’s domestic politics while draining them of their economic dynamism through provocations in places like Afghanistan, Syria, Ukraine, Belarus and yes, even Taiwan while trying to force energy prices higher.

    Europe is Davos’ power base. That power looks tenuous at best in a geopolitical sense. The best way for it to reassert what power it has left over the U.S. is forcing a massive revaluation in the price of gold while preparing Europe for further federalization, debt default and population reduction, as I discussed in my last article.

    The main path for the central banks to maintain any semblance of credibility in the minds of investors rightly freaked out over the events of the past two years is to add to their gold reserves to offset any currency risk to their fiat reserves.

    And while the Fed has fought the good fight against this, with the end of QE and rising rates, a flattening yield curve and more turmoil in overseas funding markets as a result of a much stronger dollar, gold will assert itself (alongside bitcoin) as the safe haven asset of choice in 2022.

    So, watch the news flow for more signs of Central Bank gold purchases.  

    So far in 2021, through September, according to the World Gold Council, central banks have purchased 385.4 tonnes of gold, after adding Singapore’s numbers but not Ireland’s.  This is roughly on track with expectations for this year of around 15% of total gold demand.  

    If not for Turkey’s net outflows thanks to the collapse of its banking system (-27.8 tonnes) and the Philippines who sell local mine production to finance the government, the demand would be well over 400 tonnes this year.

    But, as I said throughout this piece, it is the players who are doing this now that matters.  Earlier Japan made headlines, adding 80.8 tonnes in March. Then Poland began a very Russian monthly buying program in May.  Now Singapore is on board trying to offset US dollar strength with gold in an inflationary environment.

    And the Irish are now trying to stave off a monetary famine in Europe.

    The times they are a’changing rapidly.

    *  *  *

    Join my Patreon if you have a role for gold in your life.

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    Tyler Durden Mon, 12/06/2021 – 06:30

    Author: Tyler Durden

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    Economics

    “Perhaps This Is How Our Story Ends: A Run On The Dollar Takes Hold, The World’s Reserve Currency Collapses”

    "Perhaps This Is How Our Story Ends: A Run On The Dollar Takes Hold, The World’s Reserve Currency Collapses"

    By Eric Peters, CIO of One River…

    “Perhaps This Is How Our Story Ends: A Run On The Dollar Takes Hold, The World’s Reserve Currency Collapses”

    By Eric Peters, CIO of One River Asset Management

    “To prepare for the future, we must first reimagine the past in a manner that central banks won’t,” said the CIO.

    “So, what is it that central banks can’t imagine?” he asked, rhetorically.

    “Can they imagine being both right and wrong? Right that the inflation potential of the system is low due to the persistence of deflationary forces that are now well known, but wrong because their actions – based on this belief in deflationary tendencies – unnerves depositors sufficiently that they want to get out of the currency,” he said, the S&P 500 still within a few percent of record highs, home prices surging, used car prices too.

    “And can central banks also imagine technology being both deflationary and inflationary?” he asked.

    “Deflationary for all the obvious reasons – just ask the shoeshine about artificial intelligence and productivity – and inflationary because social media can amplify inflationary fears, while financial technology enables more and more depositors to switch out of dollars at the tap of a button,” he explained, countless buy and sell orders from a whole new generation of day traders, addicted to Robinhood, swirling in the cloud.

    “It could be the currency equivalent of a bank run in the 19th century when the mere rumor – true or false – of a bank losing its gold reserves, could set off a run,” he said, a student of the rich history of financial booms, busts, panics.

    “So, can these two paradoxes combine to take out a reserve currency?” he asked, concerned less by the immediate market risks, but rather, what happens when the next big equity market decline forces the Fed to ease policy while inflation remains robust.

    “Perhaps this will be how our story ends. A run on the dollar takes hold, the world’s reserve currency collapses,” he said.

    “It’s the explosive ending central bankers can’t imagine.”

    Tyler Durden
    Mon, 12/06/2021 – 08:35








    Author: Tyler Durden

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