BOOM as at 22nd July 2018

THE ATTACK OF THE GOLD BUGS — DEBTS ARE DIFFERENT — THE EMPIRE STATE BUILDING MUST FALL DOWN — THE US GOVERNMENT’S CREDITORS

THE ATTACK OF THE GOLD BUGS

BOOM has written about The Attack of the Gold Bugs before. The promoters of Gold always predict the end of the financial world as we know it, the certain collapse of currencies (especially the US Dollar) and the inevitable surge of the Gold price to US$ 10,000 or US$ 20,000 or even US$ 100,000 per ounce. Their stories always end in an exhortation to buy Gold. But, before doing that, they urge you to subscribe to their newsletters and their daily email offerings.  They also tell you to buy their books plus attend their regular conferences and seminars.

BOOM has been reading these gold bug reports for well over 30 years now. It is a never ending industry. The tune never varies. It is clearly a successful technique and allows the Gold Bug promoters to live lives of relative fame and leisure traveling from conference to conference all over the world.

BOOM likes to read these gold bug predictions of gloom for entertainment. A recent one, published in February and written by a well known Gold Bug predicted a completely new global financial system to begin early this year exactly on March 1st. It was going to be imposed upon us by an elite cabal. But it didn’t happen.

No one has bothered to call him out on this even after 5 months of prediction failure.  The dogs don’t bark and the caravan moves on. He has another forecast out now which his loyal followers will presumably continue to follow.

THE GLOBAL DEBT GOLD BUG

BOOM just read another well known Gold Bug report published last week that concentrated on Global Debt. It correctly pointed out that total global debt is now estimated to be approximately US$ 240 Trillion.  The Gold Bug said that this number is way too big, enormous and it will therefore “explode”.

Let’s think about that number for a moment.  $ 240 Trillion is $ 240,000 Billion or $ 240 Million Million. There are 7.5 billion people on the planet.  That is 7,500 million.  Do the calculation and you will discover that there is US$ 32,000 of debt per person on the planet. That equates to about US$ 100,000 per household.

So what does that debt represent?  That debt has been put to use building houses, dams, roads, bridges, cities, hospitals, power generation & transmission systems, airports, railways, cars, trucks, mines, steel mills, aluminium mills, clothing factories, food production systems, sewerage systems, water supplies, aircraft, ships, satellites, spaceships, entertainment systems, telecommunications systems, medical treatments, weapons systems (sadly) and much more.

We, the citizens of planet Earth, have benefited from all of that and it cost us a total of US$ 100,000 per household accumulated over many, many decades. But it is actually better than that — read on — because lots of that “total debt” is not actually household debt.

DEBTS ARE DIFFERENT

That calculation of total global debt includes household debt, debt accumulated by finance companies, government debt and non-financial company debt.

As BOOM has explained in many previous Editorials, government debt created in a government’s national currency is not really debt in the normal sense. There is virtually no risk of borrower default, the borrower is immortal, no fresh new money is created so the money supply does not expand and no collateral assets are taken as security against default.  When governments issue bonds in their own currency, they simply suck already existent money into their Treasury Departments and spend that money almost immediately back into the economy. This is very, very different to household debt.

It is also easy to see that financial company debt and non-financial company debt are also clearly not household debt, by definition.

So — how much of the $ 240 Trillion is household debt? The answer is — about 20% of it.

So, total global household debt is actually only about US$ 20,000 per household or about US$ 6,000 per person. And for that accumulated total of debt each household (even the most primitive) reaps the benefits of living in a complex, advanced civilization.

Such benefits are obviously not equally distributed but that is another story for another day. Today’s story is just about the amount of money in existence as debt and the total of material consequences.

 
THE EMPIRE STATE BUILDING MUST FALL DOWN

Saying that Total Global Debt MUST collapse “because it is so big” is akin to saying “the Empire State Building MUST fall down because it is so big”. A child below 5 years of age might fall for that logic.  But an adult should not.

 
THE US GOVERNMENT’S CREDITORS

The US Government does not borrow from a bank. They issue IOU’s called Treasury Bonds, Notes and Bills. Investors buy those Bonds, Notes and Bills.

The US Government’s “debt” amounts to US$ 21.15 Trillion. It has increased by $ 1.2 Trillion over the last year. Who are the creditors? Who is owed all this money?

US$ 6.17 Trillion is owed to foreign investors in US government Bonds, Notes and Bills.
US$ 5.72 Trillion is owed to US government entities.
US$ 2.4 Trillion is owed to the Federal Reserve (the US Central Bank)
US$ 6.86 Trillion is owed to American Institutions and Individuals

Look closely at the identity of those investors, all of whom purchased US Treasury Bonds, Notes & Bills.

Will many of those investors demand repayment next week? Or the week after that? Or the week after that?  No.

Will many sell their Bonds or Bills in the secondary market tomorrow? No.

So why do some so-called analysts say that “the US sovereign bond market will collapse”?

BOOM does not know why they would say that. It seems that they have done no research. But these people are listened to and paid credence by the mainstream media because they are predicting dramatic, adverse events. They usually want you to invest in their newsletters, books and seminars.  Sounds familiar?

In economics, things work until they don’t.


Until next week …………  Make your own conclusions, do your own research.

BOOM does not offer investment advice.

CLICK HERE FOR PODCASTS:   OUR BRAVE NEW ECONOMIC WORLD

PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 21st July 2018:

1. SILVER PRICE (IN USD) — Changed to DOWN Arrow Dominance
2. UK INFLATION LINKED GILTS (INXG.L) — Changed to UP Arrow Dominance

===================================================================

NOTE — RED ARROWS INDICATE BOOM PRICE PULSE DOMINANCE in the present moment (as indicated by the date of the chart and taking into account the 3 year time frame shown).  The charts are now arranged in PRICE PULSE RED ARROW DOMINANCE.    NOTE: All Charts are WEEKLY Charts over the last 3 YEARS time frame.  Arrows indicate PAST price action (not future).  No predictions are implied from past action.

Comments refer to past PRICE PULSE (Red Arrow DOMINANCE) over the last 3 years, the week ended 21st July 2018.  You can RIGHT CLICK a chart and OPEN in a New Tab.   Make your own conclusions, do your own research. BOOM does not offer investment advice. 

PLEASE NOTE — Many charts are ETF’s from NY Market  (not the base commodity or currency etc). The NY Stock Code is in the Top Left Hand Corner of each chart.
Charts are produced from http://www.stockcharts.com

Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/


NOTABLE PRICE PULSE CHANGES OVER THE LAST WEEK ENDED 21st July 2018:-

1. SILVER PRICE (IN USD) — Changed to DOWN Arrow Dominance
SILVER

2. UK INFLATION LINKED GILTS (INXG.L) — Changed to UP Arrow Dominance
SILVER

========================================================

PRICE PULSE RISING — (RED ARROW UP DOMINANCE)

# US INFLATION PROTECTED BOND PRICES — UP Arrow Dominant
# US UTILITIES STOCKS — UP Arrow Dominant
# AGGREGATE US BOND PRICES (BND) — UP Arrow Dominant
# US LONG BOND PRICE (TLT) — UP Arrow Dominant
# RWR (US Real Estate REIT Fund) — UP Arrow DominanT
# AUSSIE ALL ORDS INDEX — UP Arrow Dominant
# INDIAN STOCKS — UP Arrow Dominant
# VALE STOCK (Iron Ore) — UP Arrow Dominant
# US BIOTECHNOLOGY INDEX — UP Arrow Dominant
# WEST TEXAS OIL PRICE — UP Arrow Dominant
# COMMODITIES INDEX (USCI) — UP Arrow Dominant
# TAIWAN STOCKS — UP Arrow Dominant
# US DOW STOCK INDEX — UP Arrow Dominant
# RUSSELL 2000 INDEX — UP Arrow Dominant
# US TRANSPORT INDEX — UP Arrow Dominant
# US INSIDER SENTIMENT (KNOW) — UP Arrow Dominant
# NASDAQ COMP INDEX — UP Arrow Dominant
# US JUNK BOND PRICES — UP Arrow Dominant
# US 3 MTH T BILL YIELD — UP Arrow Dominant
# LIBOR — UP Arrow Dominant
# FRANCE STOCKS — UP Arrow Dominant

PRICE PULSE FALLING — (RED ARROW DOWN DOMINANCE)

# COPPER PRICE — DOWN Arrow Dominant
# INDUSTRIAL METALS ETF (DBB) — DOWN Arrow Dominant
# YUAN (AGAINST USD) ETF — DOWN Arrow Dominant
# HANG SENG — DOWN Arrow Dominant
# GOLD PRICE in USD —DOWN Arrow Dominant
# SOUTH KOREA STOCKS — DOWN Arrow Dominant
# SINGAPORE STOCKS — DOWN Arrow Dominant
# THAI SETI INDEX — DOWN Arrow Dominant
# AUSSIE DOLLAR AGAINST US DOLLAR — DOWN Arrow Dominant
# CANADIAN DOLLAR AGAINST USD — DOWN Arrow Dominant
# BRAZIL STOCK INDEX — DOWN Arrow Dominant
# ARGENTINA STOCKS — DOWN Arrow Dominant
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# NOMURA HOLDINGS — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# SWISS FRANC (AGAINST $US) — DOWN Arrow Dominant
# PLATINUM PRICE — DOWN Arrow Dominant
# SHANGHAI STOCKS — DOWN Arrow Dominant
# US HIGH GRADE CORP BONDS (LQD) — DOWN Arrow Dominant
# PALLADIUM PRICE — DOWN Arrow Dominant
# BITCOIN INDEX $NYXBT — DOWN Arrow Dominant
# SWISS STOCKS — DOWN Arrow Dominant
# DEUTSCHE BANK SHARES — DOWN Arrow Dominant
# FOOD INPUT PRICES (DBA) — DOWN Arrow Dominant
# EURODOLLAR INDEX ($XED) — DOWN Arrow Dominant

PRICE PULSE UNCERTAIN NON-DOMINANCE OF RED ARROW –

# YEN (AGAINST $US) — NO Arrow Dominant
# JAPAN NIKKEI STOCKS — NO Arrow Dominant
# GOLD PRICE (in Aus Dollars) — NO Arrow Dominant
# TED SPREAD — NO Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — NO Arrow Dominant
# TRIM TABS US FLOAT — NO Arrow Dominant
# COAL ETF (KOL) — NO Arrow Dominant
# FVL — VALUE LINE — NO Arrow Dominant
# US KBW BANK INDEX — NO Arrow Dominant
# NATURAL GAS (SPOT PRICE) — NO Arrow Dominant
# GERMAN DAX — NO Arrow Dominant
# DENMARK STOCKS — NO Arrow Dominant

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