Centrists Unveil Bipartisan Plan
Trump would need to sign the legislation but Coronavirus Stimulus Talks Restart.
House Speaker Nancy Pelosi (D., Calif.) and Treasury Secretary Steven Mnuchin planned to speak Tuesday afternoon. Meanwhile, after a month of discussions, a group of lawmakers from both the House and Senate unveiled Tuesday morning a $908 billion aid proposal, seeking a middle ground between Democratic and Republican leaders’ stances.
“We simply can’t leave town and leave anyone in the cold, without getting something done immediately,” said Rep. Josh Gottheimer (D., N.J.), co-chair of the bipartisan Problem Solvers Caucus, which has endorsed the proposal.
Mr. Mnuchin told a Senate hearing Tuesday that the White House and GOP leaders were interested in further relief, but didn’t provide a target. “We all believe there should be targeted fiscal response,” he said.
The proposal unveiled Tuesday, which would run through March 2021, includes some measures sought by both parties. Lawmakers included $160 billion in state and local funding—long one of the biggest sticking points in talks among congressional leaders.
The bipartisan proposal also nods at one of Republicans’ top priorities: legal protections for businesses and other entities operating during the pandemic. Lawmakers said they would provide a short-term suspension of liability lawsuits related to Covid-19 at the state or federal level, giving states time to put in place their own protections.
The proposal also includes $288 billion for the popular Paycheck Protection Program, $16 billion for the distribution of a coronavirus vaccine, $82 billion for schools, $25 billion for rental assistance and $180 billion for additional unemployment insurance, including $300 a week through March, aides said. In addition, the plan would give $17 billion to airlines.
$908 Billion Aid Proposal
$908 billion is a lot of money, but recall that Democrats sought $2 to $3 Trillion a couple months ago.
Reaction From Gold?
It’s difficult to say precisely what a market is reacting to, but gold appears to be a beneficiary.
As I type gold is up about $37 today, but it’s still down over $200 from recent highs.
Change in Stimulus Expectations
As noted a few days ago, Biden’s Progressive Agenda is Dead on Arrival.
And recently, Gold had been acting as if Congress would do nothing. Previously, the expectation was Democrats would pick up seats in the House and flip the Senate.
Had that happened, who knows how high the spigots would have gotten?
I don’t, nor does anyone else, but it is certain that Elizabeth Warren, AOC, and other progressives would apply pressure for all kinds of projects including Medicare for All, energy, and state bailouts.
Gold had been pricing in that possibility when it made new highs over $2000.
Everyone understands that deficits would soar no matter who won the election, so it’s these ongoing changes in fiscal expectations that matter as well as the actions of the Fed vs other central banks.
Mish
Mish being out of the office today, I was wondering if we could have a discussion about the inflation vs. deflation argument.
Anybody want to play?
My research leads me to believe that the most important thing to understand…… is how Eurodollar lending outside the US affects the strength (or weakness) of the dollar.
A dollar shortage in foreign countries tends to make the dollar stronger than it perhaps should be…..but it isn’t clear to me that this condition is irreversible. Here are two articles that talk about this…..I’d really like to hear from some of you about your take on this.
I think some very informed people read this blog….thanks in advance for any comments.
I’ve read about this mysterious dollar shortage caused by EuroDollar issuance often and I’m on the Red Herring side.
Let’s say a European institution issues a 5 year USD denominated Eurobond. European investors have to purchase USD to buy it with their home currency, unless they’ve already bought them at some time in the past. The borrower may or may not want to sell the USD at the outset. On maturity the process is reversed. Either way any demand for USD created by the issuance takes place at the beginning, so evidence of vast amounts of outstanding Eurobdollar debt is only evidence that USD may or may not have been purchased on issuance. At maturity the holders of maturing bonds may or may not want to sell USD, which might be offset by the borrower needing to buy. Either way I can’t see how it creates a shortage at maturity. Maybe I’m missing something.
Additionally, if the borrower didn’t really want USD and only issued in USD because the equivalent in their home currency was dearer, say DEM. It’s unlikely they’d sell dollars spot against DEM at launch, because they’d be taking on a huge exchange risk. It’s much more likely they’d enter into a simultaneous cross currency interest rate swap, so they’d be protected from such exchange risk.
Thanks, Scoot. I replied, but my comments are going poof again today….I’ll try again later.
Euros not DEM 🙄
Thursday, Dec. 3, 2020
So….if one did believe in a “managed” gold market, it might not be wrong to expect gold to take a big hit by the algos sometime in the next couple of days….especially if the dollar keeps falling hard.
The DXY broke 90 yesterday…sort of a line in the sand. That has to put upward pressure on gold…and the Fed won’t like the optics of a crashing USD happening in tandem with a gold breakout.
If the dollar falls more….or if gold breaks out….either one….I would expect one of those strange events….either at the open of one of the exchanges, London, NY, or aftermarket….or, possibly during the overnight.
Pop the popcorn.
There’s no managed Gold Market. It’s just something people pontificate about when the price doesn’t behave the way they think it should. It’s no more managed than anything else anyway!
I’ll make a note.
Fwiw…..there is plenty of documentation for unexpected market moves in gold that have been caused by AI and algo trading….by what appear to be some very big players….the only question who the players are and why it’s being done.
What I just did was to make a small prediction concerning such moves….let’s see if I’m right or not….the proof is in the pudding.
Yes I agree about the algo trading etc, it exacerbates the volatility in lots of things, I think it’s mostly based based on technical analysis.
Scoot your right no more managed than anything else. But just about everything else is managed so in a way you are right and and in a way maybe a little off.
USD seems to be bouncing after a down month….so the scenario I described looks less likely now.
“it is certain that Elizabeth Warren, AOC, and other progressives would apply pressure for all kinds of projects including Medicare for All, energy, and state bailouts.”
Not it is not certain. Warren opposed Medicare4All until she supported it, and her support was not clear.
And, since Medicare4All would REDUCE DEFICITS, gold should by Mish’s (TOTALLY FALESE FAKE NEWS REASONING), gold should TANK on the passage of Medicare4All.
The Turtle Man already shot down that bipartisan deal.
Imagine that…
This is quite interesting. You should try this pin link to in.pinterest.com
So how is the gold price related to bitcoin? Not my thing since I am not into FX
See here.
My two cents…BTC and gold are both dollar hedges…..and possible ways to preserve wealth in a true currency crisis….which we don’t appear to be anywhere near, fwiw.
Bitcoin and gold, all other things being equal, might tend to move higher together in an inflationary environment…but all things aren’t equal…..bitcoin whales flip bitcoin for gold when bitcoin has had a run…..this affects bitcoin price a lot……but gold not so much, because they are fairy small players in a big gold market.
In an deflationary economic crash (like 2008 for instance ) all assets fall hard, but gold tends to rebound quickly. Way before stocks. Before most assets.
Gold is a tangible asset. It never falls to zero. Gold is probably far better to own in a depression than any intangible asset….but generally cash is good too in a deflationary environment.
Bitcoin also falls in a crash, because it’s just one more asset to sell when the margin calls start. Whether it comes back after a bad crash…or not…..is not understood…..too new….but it is not a tangible asset, so maybe it never comes back.
Bitcoin is primarily a speculative asset without much real world use…..the price is being driven by manipulation at times…..but also by greed. Crypto is the first new asset class to emerge in over 100 years. Institutions are buying it….usually not directly, but through something like Greyscale Bitcoin Investment Trust….Trading desks are trading it, mostly using big leverage in BTC futures.
Because there is a very small amount of bitcoin…..even with its forks….it has the potential to have enormous price appreciation if lots of people suddenly decided to own it…..this is the main reason people speculate on bitcoin….some people think it could go up 25X from here.
Bitcoin has a lot of downside risk. It is hackable by way of 51% attacks, because it is not actually all that decentralized….not nearly as much as it was designed to be.
It also has a risk of being made illegal, by one or more countries…..especially if that country wants to go with a sovereign crypto of its own.
I would be very careful with Bitcoin, at least until you are familiar with the risks associated with Tether. Tether presumes to be a “stable coin” with 1:1 backing of cash reserves to tokens, but they have admitted in court that it is only 74% backed by reserves. That was some time ago, who knows what the number is now.
They are currently being investigated by the NYAG office.
It is a long saga, but one you should investigate before putting a penny in bitcoin.
Forgot to mention that one….just one more on a long list of terrible risks
I wouldn’t use Tether at all…at least not for more than a quick run for cover. There are many other better stablecoins, but they aren’t always available.
Another thing I just thought about….for US investors…..I wouldn’t buy anything that isn’t listed on Coinbase. BTC is of course…..but over last couple of years Americans (at least the ones who don’t hide their identities by using a VPN and lying about their residency) have been thrown off nearly all foreign crypto exchanges.
Very frustrating to be holding crypto on some exchange and find out that you can’t even log on anymore to move it somewhere else.
“It’s difficult to say precisely what a market is reacting to…..”
I don’t think anyone does, and that’s one of the reasons volatility is so high in most markets.
Once vaccines become widely available, gold will collapse. The economy will recover, taxes will start flowing in, the deficit will fall and stocks will soar.
I didn’t think the economy affected stocks anymore -:)
We are headed for a depression…
We might already be in one…..but it hasn’t impacted everyone yet. When people line up in the cold to get a CHANCE at a $250 gift card to Publix…..it means some people are really hurting. I sure don’t like to read news stories like that.
One thing is for sure, you won’t get the straight news out of any MSM. Its so biased I just don’t watch it anymore.
Interesting conclusion…..but as long as we’re making prophecies, I’d like to go on recored as saying gold a has a fairly good floor in this general range…and that the medium term outlook (like the next 2-3 years) looks pretty bullish to me on gold….with chances of a of a serious upside breakout….
The deficit has about as much chance of falling as I do of becoming the King of France…
And stocks will soar anyway, as long as the central banks keep supporting that.
I don’t currently own any gold or any stocks….so don’t accuse me of talking my book….lol.
I’ll make a note.
Hopefully Barr can now resume his investigation into the Russian Collusion smear campaign. Also, the Hunter Biden laptop. He has a lot on his plate! I imagine many at the DOJ are looking forward to when Biden takes office and they can go back to working half days and looking into enemies of the People’s Republic of America.
Or he can peddle his CV on the market looking for a new job…. I wouldn’t hold my breath waiting for him to indict anybody at this point in time.
When both sides of the aisle get upset with one, that usually means the individual is a straight-shooter. So, yes, he might as well polish up the CV. A book by him would certainly be worth a read (or listen).
Always amusing to read the babbling of a Trump zombie.
“the Hunter Biden laptop”
Has it been lost in the Bermuda Triangle? Or did the Lizard people expropriate it?
You would think! The way the FBI promptly did nothing about it, it might have well as been lost…
Hunter’s laptop is safely cradled in Epstein’s lap, right next to Weiner’s.
Attorney General William Barr on Tuesday said the Department of Justice has not uncovered any evidence of widespread voter fraud that would change the outcome of the presidential election—despite unfounded claims from President Donald Trump that the results were rigged. In an interview with the Associated Press, Barr said federal prosecutors and the FBI have been investigating several complaints of mass voter fraud, but have not yet found any evidence to back up those claims. “To date, we have not seen fraud on a scale that could have affected a different outcome in the election,” Barr said. Trump has refused to concede his loss to President-elect Joe Biden, filing several failed lawsuits in multiple battleground states and sending baseless tweets that the election was riddled with fraud.
Last month, Barr issued a directive allowing federal prosecutors to pursue any “substantial allegations” of voting irregularities. “There’s been one assertion that would be systemic fraud and that would be the claim that machines were programmed essentially to skew the election results. And the DHS and DOJ have looked into that, and so far, we haven’t seen anything to substantiate that,” Barr said. The attorney general also noted that the DOJ cannot investigate without cause. “Most claims of fraud are very particularized to a particular set of circumstances or actors or conduct. They are not systemic allegations. And those have been run down; they are being run down,” Barr said. “Some have been broad and potentially cover a few thousand votes. They have been followed up on.”
Markets are always discounting…looks like the gold market found a bottom of some sort here. Going forward I expect much higher prices. Since there are no conservatives anymore in DC, I expect printing will be the norm going forward, that would also include yearly giveaways by congress.
Call me a conspiracy theorist if you will, but my belief is that gold would be much higher now if central banks didn’t take an interest in knee-capping it from time to time. High gold prices make the fiat look weak….a weaker dollar is okay with central bankers….., but a weaker dollar concurrent with a rapidly rising gold price sets off too many alarms.
I used to think that gold was an inflation hedge. Now I don’t really think that’s true anymore, but I’m still in favor of gold.
What seems to be true is that gold is a fear hedge. In good times, capital flows to stocks which go up. Because gold is a barbarous relic with no revenue stream, etc.
But in bad times when fear and panic set in, money flows out of stocks and into… what? Treasuries, cash and gold.
I suppose in a sense the pumping of stock markets is a manipulation that knocks down gold, but I sort of see the gold hit as being a side effect from the primarily desired result of higher stock prices and chasing returns.
Gold will probably be a great inflation hedge again, and maybe sooner than anybody thinks. Inflation has been hard to come by…..but things are shaping up for us to get some, I think. Maybe a lot.
But the sale of physical gold (the only gold I’d own for a hedge) is taxed in the US at your marginal rate…so it’s pretty hard to book profits in gold, unless the roof blows off. The government gets it all. Do the math.
It’s always been possible to buy and sell physical gold off-the-books….it still is, I think…..they keep trying to make the reporting by dealers more transparent, but so far I think small transactions are invisible to the IRS. Do your own DD of course.
Certainly gold is a fear hedge…always has been…..nothing makes gold move like a major war starting.
A rising stock market dulls the luster of gold gains….but it’s usually pretty orderly on the way up….in a crashing equity market gold sells off, because people sell it to raise cash to meet their margin requirements.
“But the sale of physical gold (the only gold I’d own for a hedge) is taxed in the US at your marginal rate…so it’s pretty hard to book profits in gold, unless the roof blows off. The government gets it all. Do the math.”
Out of curiosity Eddie, is Gold treated in the US differently to booked profits in other assets, ie Stocks, Bonds or FX?
Ah, don’t worry, I’ve just googled it.
Yes…the gains one makes on most risk assets are subject to our “capital gains tax”, which is 20% for most investors (it’s actually 3 tiered, but most of us far into the 20%).
This is for assets held for more than a year….
Gold is taxed like regular income….if you’re a high earner you’d pay 37%.
Gains from short term trades in any asset are also taxed as regular income.
With next to zero interest rates and yields currently, the opportunity cost of holding gold is much less, so having a particular need (inflation, fear or whatever) to hold it is much less than it used to be. The main downside is it’s volatility, but if it’s held as part of a diversified portfolio over a long time period that volatility becomes a much smaller consideration.
OH sure I agree. In my mind MOST everything is being manipulated. Just look around you now a days. Can I prove it? NO, but I don’t need to prove it.