Thelma And Louise Monetary Policy, And Have A Good Weekend

Gold and silver flow into LBMA coffers, but ETFs take up the supply, and a silver shortage reappears in London.

For silver at least, this is mostly from ETFs. Demand for silver ETFs has risen, as you can see below. The amount of metal still available is the top color, whatever that is. The bottom color is silver ETF holdings.

Gold to bitcoin may have already broken the lockdown trend line. Drawing trend lines is not an exact science but this doesn’t look good for bitcoin. I’m being generous where I’m drawing this, at the bottom of the candlestick but not the wick. If I drew it at the wick, then we broke the trend a long time ago.

Silver Basis Remains Negative – If the blue line is below the red line, the market is in a silver shortage. As long as the blue is below the red, the chances of silver rising even higher, are high. I don’t call this backwardation, more like a shortage in a particular place (being London), and London is back at a premium to New York by 1.84% (see bottom in chart below).

This itself proves that the silver flows to London are going straight to ETFs and not to the float.

Japan’s government bond market is set for another tough year as investors contend with the largest net increase in supply in well over a decade.

The nation’s sovereign debt - the worst performer among the world’s biggest markets last year - faces an 8% rise in net supply to about ¥65 trillion ($415 billion) in the fiscal year starting in April. This is according to Bloomberg analysis that accounts for the Bank of Japan’s reduced purchases and debt that will mature and be redeemed by the government.

The Yen just hit a 52 week low versus the dollar at 157. The 35 year low is at 162. After that, the Yen is in space, which is where Japanese bond yields already are. The JGB/yen death spiral I believe is just ahead.

No, you did not misread that. Trump is going to take Fannie and Freddie’s cash pile and use it to buy mortgage-backed securities, which he says will bring housing costs down by bringing them up. What he’s trying to do is lower mortgage rates, which makes monthly payments “more affordable” but raises housing prices even further by doing so. Obviously, the lower the monthly payment, the more you can afford to pay for a house. Reuters:

WASHINGTON, Jan 8 (Reuters) - U.S. President Donald Trump said on Thursday he is ordering his representatives to buy $200 billion in mortgage bonds to bring down housing costs.

“Because I chose not to sell Fannie Mae and Freddie Mac in my First Term ... it is now worth many times that amount — AN ABSOLUTE FORTUNE — and has $200 BILLION DOLLARS IN CASH,” Trump wrote in a post on Truth Social.

“I am instructing my Representatives to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS. This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,” Trump wrote.

Federal Housing Finance Agency Director Bill Pulte said on X that Fannie Mae and Freddie Mac will execute the purchase.

Monetarily, this will have almost the same effect on prices that the Fed printing $200B at buying MBS would have. Trump is trying to do what what he wants the Fed to do. I seem to remember that the housing crash of 2008 had something to do with Fannie and Freddie buying too much of this crap that ended up worthless so the Fed bought the garbage instead, where it remains to this day in the form of dead ghost dead called “reserves” that banks now use to execute billions in basis trades.

Clearly, the housing downturn we’ve been in since 2021 is very similar to the one that began in 2005 on the log chart above.

In silver terms, housing prices are down a whopping 85% in 22 years, from 46K ounces to now just 7K. Think about that. We are now closing in on 2011 lows just below 5Koz.

Relative to stocks, silver is clearly in its most furious rally ever, more than doubling in value relative to the S&P in the space of just a few weeks.

We are nearing the point we were at in the 1960s just before silver began its epic rally relative to stocks in the early 1970s.

You can see QE in action on the chart below. The final drawdown I think is just an accounting gimmick involving repos that should reverse next week.

The final printing round has started. Imaging facing down a cliff edge from about a mile away for years with your car stopped. Then you slowly hit the gas, edging closer to the cliff, but you haven’t floored the pedal yet. Soon we’re going to floor it, like Thelma and Louise.

What does this all mean? Paper Silver ETF's ( and Gold) are draining the western reserves (Comex and LBMA).

Only Two outcomes:

-Comex and LBMA have a physical failure to deliver. Default.

- The paper ETF's go bust. They must by contract purchase physical to back the published paper trading price. They purchase physical primarily from the LBMA, further draining down their already low reserves.

Checkmate!

Another “ breaking” development. In the world’s total market cap, Gold overtook everything on planet earth a few months ago, ( $38 .9 trillion), Nividia was number two....today, Silver launched into the number two position.

.....Nividia now number three, Bitcoin market cap dropping to number 8 slot.

A return to honest money, just as Exter’s pyramid states. Investors will do well to pull up Exter’s inverted pyramid, ALL rests on Gold’s shoulders.

“LAYER ASSET TYPES CHARACTERISTICS

Base (Safest) Gold No counterparty risk, historical store of value

Second Layer Cash and cash equivalents Highly liquid, considered safe

Middle Layer Real estate, equities, corporate bonds Moderate risk, sensitive to economic cycles

Top Layer Derivatives and unsecured debt High risk, volatile, dependent on counterparties

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