Sober Gold Vs The Rate-Cut Circus Show

Authored by Matthew Piepenburg via VonGreyerz.gold

Poor America. Poor Jerome Powell…

A Real Cliff, Fake Smile

It's not enjoyable to be openly trapped and in visible decline while feebly asserting that everything is fine. Picture Uncle Sam (or Aunt Yellen) dangling off a cliff with a forced (i.e., political) smile. Above the cliff is a grizzly bear; below the cliff is a pool of sharks. Regardless of the direction chosen, the outcome is messy. Yet, the markets still wait for Powell to make the right choice. But what is the right choice?

Rate Cut Salvation?

Currently, the markets, pundits, and FOMC circus followers are all wondering when Powell’s promised rate cuts will come to rescue the Divided States of America and its Dollar-thirsty, debt-dependent “growth narrative.” In January, Powell was “forward guiding” rate cuts and thus, right on cue, the Pavlovian markets, which react to Fed liquidity in the same way Popeye reacts to spinach, ripped north on words alone.

Here’s My Take: Stop Caring, Because Either Way, We’re Screwed…

As for rate cuts, the case for them is fairly obvious. With trillions in USTs repricing in 2024, and over $700B in zombie bonds from S&P issuers doing the same, if Powell doesn’t cut rates, then sovereign and corporate bond markets are staring down a loaded barrel. This is real. BofA’s own data confirms that Uncle Sam is looking at $1.6T in interest expense payments by year end if Powell doesn’t cut rates soon.

So, Why Wouldn’t Powell Cut?

The official answer, which, by the way, is never the honest answer, is that Powell and his “data dependent” Fed is still worried about inflation, which has failed to reach its “target 2%” level, whatever that is. If one believes this narrative, then higher rates are still needed to “win the war on inflation.”

The No-Cut Scenario

If Powell stays higher-for-longer just about everything (from stocks and bonds to mortgages and economies) will break but the USD—at least as measured by the DXY’s relative strength. In this regard, America can brag about being one of the best horses in the global currency glue factory.

The Three or More Cut Scenario

Alternatively, Powell could cut rates in 2024, weaken the USD, save the debt (and hence rate) sensitive stock markets and let inflation creep further north as whoever is running the Biden White House seeks to bribe the electorate.

A Not-So-Free-Market Reality

The sad fact is capitalism died long ago. Instead, we are all slowly frog-boiling within a centralized economy whose central planners/bankers, in cahoots with a failed, pathologically power-hungry and vote-purchasing DC “leadership,” who circa 1913 sold the nation down the river of a fatal debt quagmire paid for by fake liquidity and the open fantasy-made-mainstream-policy that one can save a debt-strapped nation with more, well…debt.

Rising Gold Patiently Getting the Final Say

This slow but then sudden death of fiat money, seen countless times in our collective past yet ignored by our collective policy makers and day traders, makes history-confirmed anti-fiat solutions like gold all too obvious to ignore.

Meanwhile, The Circus Continues

For now, clever traders and speculators can, will and should keep their eyes on a DXY (and Dollar) which, like the markets, can and will gyrate on the wings of a vast range of current and pending liquidity (backdoor QE) tricks, from the Treasury General Account, the repo markets and Supplementary Leverage Ratios to the Treasury’s Quarterly Refunding Announcements.

From Frog Boil to Fully Cooked

Tax receipts and debt-driven GDP forecasts will never, not ever, be sufficient to plug the hole in the bow of the sinking US debt ship. Despite whatever the trapped Powell or forked-tongued DC says, the only option forward is inflationary, (with a little bit of war to keep us distracted).

Conclusion

In conclusion, the future of America's economy seems to be hanging in the balance, with the potential outcomes of rate cuts or no rate cuts each presenting their own set of challenges. What are your thoughts on this matter? Do you think Powell will cut rates or not? Share this article with your friends and let's get a conversation going. Don't forget to sign up for the Daily Briefing which is everyday at 6pm.