CMR is the leading provider of funding and management support for small to medium-sized businesses and entrepreneurs 

While there have been more than 60 confirmed cases of a new mystery virus emerging from Wuhan, China, UK experts estimate that closer to 1,700 have been sickened with the SARS-like pneumonia, according to the BBC.

"I am substantially more concerned than I was a week ago," disease specialist Prof Neil Ferguson told the outlet.

The work was conducted by the MRC Centre for Global Infectious Disease Analysis at Imperial College London, which advises bodies including the UK government and the World Health Organization (WHO). -BBC

The estimate was calculated by the Imperial College of London based on the following assumptions: 

• Wuhan International Airport has a catchment population of 19 million individuals [1].
• There is a mean 10-day delay between infection and detection, comprising a 5-6 day incubation period [8,9]  and a 4-5 day delay from symptom onset to detection/hospitalisation of a case (the cases detected in Thailand and Japan were hospitalised 3 and 7 days after onset, respectively) [4,10].
• Total volume of international travel from Wuhan over the last two months has been 3,301 passengers per day. This estimate is derived from the 3,418 foreign passengers per day in the top 20 country destinations based on 2018 IATA data [11], and uses 2016 IATA data held by Imperial College to correct for the travel surge at Chinese New Year present in the latter data (which has not happened yet this year) and for travel to countries outside the top 20 destination list.

According to the report, "It is likely that the Wuhan outbreak of a novel coronavirus has caused substantially more cases of moderate or severe respiratory illness than currently reported. The estimates presented here suggest surveillance should be expanded to include all hospitalised cases of pneumonia or severe respiratory disease in the Wuhan area and other well-connected Chinese cities. This analysis does not directly address transmission routes, but past experience with SARS and MERS-CoV outbreaks of similar scale suggests currently self-sustaining human-to-human transmission should not be ruled out."

To that end, airports in Singapore and Hong Kong have been screening passengers from Wuhan, while three US airports announced similar measures on Friday at three major airports; San Francisco, Los Angeles and New York. While most of the cases have occurred in China, there has been at least one reported in Japan, after a Chinese national traveled from Wuhan to his home in Kanagawa Prefecture.

About the virus:

The BBC also reports that this virus is just one of six Coronaviruses known to infect people.

At the mild end they cause the common cold, but severe acute respiratory syndrome (Sars) is a coronavirus that killed 774 of the 8,098 people infected in an outbreak that started in China in 2002.

Analysis of the genetic code of the new virus shows it is more closely related to Sars than any other human coronavirus. -BBC

Preliminary analysis of the novel coronavirus (in red) believed to be responsible for an outbreak of pneumonia in Wuhan, China shows it's closely related to SARS CoV. https://t.co/Vf6U2W4oYR pic.twitter.com/3WbFpQ02Pc

— EcoHealth Alliance (@EcoHealthNYC) January 11, 2020

According to Ferguson, it's "too early to be alarmist" over the virus, but that "people should be considering the possibility of substantial human-to-human transmission more seriously than they have so far," adding "It would be unlikely in my mind, given what we know about coronaviruses, to have animal exposure, be the principal cause of such a number of human infections."

Understanding how a novel virus is spreading is a crucial part of assessing its threat.

The WHO's China office said the analysis was helpful and would help officials plan the response to the outbreak.

"Much remains to be understood about the new coronavirus," it said. "Not enough is known to draw definitive conclusions about how it is transmitted, the clinical features of the disease, the extent to which it has spread, or its source, which remains unknown." -BBC

So far just two deaths have been reported.

Authored by Adam Taggart via PeakProsperity.com,

Juggernaut: (n) massive inexorable force, campaign, movement, or object that crushes whatever is in its path

The US Federal Reserve is once again force-feeding liquidity into the system. At its fastest rate ever.

The result? Record high stock prices whose valuations defy all logic.

What’s wrong with that? Shouldn’t we just enjoy the party and be grateful for our rising 401ks?

What’s wrong is that the Fed’s actions are dooming us. Their poisonous cocktail of endless cheap money and rock-bottom interest rates is hastening a terminal breakdown of the economy, while deliberately enriching a tiny cadre of elites to the ruin of everyone else.

Though most remain blind to this, Fed policy (and the similar ones pursued by the other major world central banks) is directly responsible for, or a major contributor to, many of the biggest challenges society is facing.

Tens of millions of Boomers who can’t afford to retire. Tens of millions of Millennials who can’t afford to purchase a home. History’s largest wealth gap between the 1% and everyone else. Relentless increases in the cost of living while real wages remain stagnant. Depletion and degradation of our key natural resources by zombie companies run without profits. We can thank the Fed for all of these ills, plus many more.

All we’re offered in return is the fake reassurance that “everything is awesome” because stocks are higher today than they were yesterday. As if that really makes a difference when the top 1% owns 50% of all stocks and the top 10% owns over 90%.

And when today’s epicly distorted markets reach their breaking point — which may be imminent given the truly manic action recently — not only will the resulting damage be commensurately epic, but it will injure the 99% FAR more than the 1% who benefitted from it.

Mass layoffs. Bankruptcies. Destroyed retirement portfolios and pensions. State and city budget crises. Higher taxes. More fees. Cancelled social services. Hollowed-out communities.

The Fed’s deliberate policy of privatized gains for the elite and socialized losses for the masses ensures that Joe Sixpack is going to take it in the shorts while Reginald Caviar-Maybach will still receive his record bonus from Goldman Sachs.

Which is why the video below is essential viewing for anyone not currently CEO of a too-big-to-fail bank or too busy counting their $billions.

We brought together several of the best monetary and macroeconomic minds to explain exactly what is transpiring and what concerned individuals like you should be preparing for.

Here’s our full 90-minute video WTF: What The Fed?!?, featuring Grant Williams, Mike Maloney, Charles Hugh Smith and Chris Martenson:

Understanding the nature of what is underway is critical. While the Fed’s liquidity juggernaut rolls on, it will continue to crush equality, opportunity and fairness for the masses. But once it stalls, the systemic crash and societal upheaval that will follow will be even more horrific for those not prepared for it.

Ahead of Tuesday's opening arguments in the Senate impeachment trial, House Democrats - seven impeachment managers led by Intelligence Committee Chairman Adam Schiff - filed their legal brief today.

The 111-page summons urges the Senate to "eliminate the threat that the President poses to America’s national security" as it lays out the case against President Trump.

The House legal filing (due by 5pmET) reiterates the findings of the House Intelligence and Judiciary panels, which, after hearing from witnesses and experts, settled on charging Trump with abuse of power and obstruction of Congress.

Additionally, the case that House prosecutors sent to the Senate references new evidence that wasn’t part of the impeachment inquiry, including material from Lev Parnas, an associate of Trump’s personal lawyer Rudy Giuliani, according to Democratic officials familiar with the argument.

“The evidence overwhelmingly establishes that he is guilty of both. The only remaining question is whether the members of the Senate will accept and carry out the responsibility placed on them by the Framers of our Constitution and their constitutional Oaths,” the brief reads.

“History will judge each Senator’s willingness to rise above partisan differences, view the facts honestly, and defend the Constitution.”

Compiled by the seven Democrats serving as impeachment managers, the brief describes the president’s conduct as “the Framer’s worst nightmare” in arguing that he should be impeached and removed from office.

“President Trump’s ongoing pattern of misconduct demonstrates that he is an immediate threat to the Nation and the rule of law. It is imperative that the Senate convict and remove him from office now, and permanently bar him from holding federal office,” they write.

Read the House Democrats full legal brief below:

President Trump's legal team outlined the fiery response to its impeachment summons, calling the two articles of impeachment passed by the House last month “a dangerous attack on the right of the American people to freely choose their president.”

The six-page document - which they stressed is different from the brief that is not due until Monday - offers a taste of the rhetoric expected to be deployed by the president’s defenders in the Senate.

“This is a brazen and unlawful attempt to overturn the results of the 2016 election and interfere with the 2020 election, now just months away,” the filing states.

Trump’s legal team, led by White House counsel Pat Cipollone and Trump personal lawyer Jay Sekulow, is challenging the impeachment on both procedural and constitutional grounds, claiming Trump has been mistreated by House Democrats and that he did nothing wrong.

Read the president's full response to articles of impeachment:

Notably, at least four of the impeachment managers, including Schiff, are scheduled to appear Sunday on political talk shows.

Former Rep. Trey Gowdy (R-SC) told Fox News this week that he predicts President Donald Trump’s Senate trial will be short and that the president’s best defense is a review of the transcript.

“The transcript is the single best piece of evidence that the president has,” Gowdy said. “Who brought up Rudy Giuliani’s name? It wasn’t Donald Trump. It was Zelensky. This was the second call, not the first call. If President Trump were really hell-bent on ensuring that Ukraine investigate the Bidens, would he not have brought that up in the first telephone call he had with Zelensky? Why wait till the second?”

“As far as the timing of this trial is concerned, Trey, they are estimates that it could be quick, it could last as long as six weeks,” Fox News co-host Sandra Smith said. “Where do you fall on that, and what is the length of time mean?”

“I mean God help us if it lasts six weeks,” Gowdy responded. “The investigation is over, so it’s Schiff’s job to present the case. If he’s going to present the case on the paper with the depositions, it shouldn’t take that long. I don’t need Adam to read the depositions to me; the jury can go read it themselves.”

“If they open it up to witnesses, and they want Bolton, and then there’s some Republicans that want four or five other witnesses, it could last six weeks,” Gowdy continued. “Sandra, I just have not met anyone whose opinion has changed during the pendency of this investigation. I can’t identify – maybe three open-minded jurors in the U.S. Senate. I just don’t, no matter how long it lasts, I don’t think it’s gonna change anyone’s mind in the Senate or among my fellow citizens. The shorter the better.”

Fox News co-host Bill Hemmer asked, “Did you want to give us a time frame for that?”

“I’m saying two weeks,” Gowdy said. “If it goes six weeks, then they’re going to have to make some hard decisions on which witnesses are important enough to hear from and which ones, while they may have relevant evidence, we just don’t – I think in terms of a real trial.”

“Why would you ever not call a witness if that witness has relevant information?” Gowdy continued. “How do you pick which ones to call and which ones not to? You can never do that in a real trial. So, if we’re going to open this thing up anew to a brand new investigation, then call everybody, and God knows how long that’ll take.”

“President Trump has done nothing wrong and is confident that this team will defend him, the voters, and our democracy from this baseless, illegitimate impeachment,” White House Press Secretary Stephanie Grisham said in a statement on Friday night.

A GoFundMe for a browbeaten Target manager has reached more than $18,000 after a notorious internet troll's temper tantrum over a mispriced toothbrush went viral.

Liberal journalist David Leavitt - who the late Anthony Bourdain once called a "gaping asshole" for mocking victims of a terrorist bombing - tried to publicly shame the Target manager, known as "Target Tori" after she refused to sell him a $90 toothbrush which had accidentally been marked at .01c, based on a Massachusetts law (he likely misinterpreted).

When Tori put her foot down, Leavitt called the cops and threatened to take Target to court.

I just had to call the police because @target Refused to sell me the toothbrush

— David Leavitt (@David_Leavitt) January 17, 2020

After Leavitt's post went viral, he was caught in a lie trying to defend himself when he claimed to have not been to a dentist in over three years - only for an old tweet to surface in which he bragged about turning off Fox News in the Dentist's office.

pic.twitter.com/9SmngFARvj

— notoriously irritable ?? (@manda_writes) January 18, 2020

And while the internet came to Tori's defense, President Trump's favorite meme maker - Carpe Donktum - set up a GoFundMe to send '#TargetTori on a vactation' which has raised more than $23,000 as of this writing.

Tori was reached, and full control of the GoFundMe has been granted to her.

Winnie the shit?

Facebook said on Saturday it was trying to figure out how the name of China's president-cum-dictator for life, Xi Jinping, appeared as "Mr Shithole" in posts when translated into English from Burmese, apologizing for any offense caused and saying the problem had been fixed.

The "error" emerged on the second day of Xi Jinping's visit to the Southeast Asian country, where Xi and state counselor Aung San Suu Kyi signed dozens of agreements covering massive Beijing-backed infrastructure plans. A statement about the visit published on Suu Kyi’s official Facebook page was littered with references to “Mr Shithole” when translated to English, while a headline in local news journal the Irrawaddy appeared as "Dinner honors president shithole”.

Umm. Facebook seems to be translating “Xi Jinping” written in Burmese as “Mr Shithole”.

This is a post on Aung San Suu Kyi’s official page, recounting her meeting with him yesterday... h/t @felizysolo

”kingdom of Mr Shithole” pic.twitter.com/B4V2cYjPJw

— Poppy McPherson (@poppymcp) January 18, 2020

It was unclear how long the issue had lasted but Google’s translation function did not show the same error, prompting amused commentary on social media.

"Xi Jinping"

Google translate?
No problem. ??

Facebook translate?
"Mr Shithole"

Keep your head down, Zuck. ?? https://t.co/UVk7Li8SK2

— Rt Rev Sir Chris Pamplemousse Esq. ???? #FBPE?? (@ChrisMousse3) January 18, 2020

In a statement, Facebook said that “we have fixed an issue regarding Burmese to English translations on Facebook and are working to identify the cause to ensure that it doesn’t happen again,”

This issue is not a reflection of the way our products should work and we sincerely apologize for the offence this has caused," Facebook added and it had plenty of reasons to be concerned: China is Facebook’s biggest country for revenue after the US and the company is setting up a new engineering team to focus specifically on the lucrative advertising business there, Reuters reported last week.

“We are aware of an issue regarding Burmese to English translations on Facebook, and we’re doing everything we can to fix this as quickly as possible,” a spokesperson said in a statement.

“This issue is not a reflection of the way our products should work and we sincerely apologize for the offense this has caused."

This is not the first time Facebook has faced problems with translation from Burmese. In 2018 it temporarily removed the function after a Reuters report showed the tool was producing bizarre results. An investigation documented how the company was failing in its efforts to combat vitriolic Burmese language posts about Myanmar’s Rohingya Muslims, some 730,000 of whom fled a military crackdown in 2017 that the United Nations has said was conducted with “genocidal intent”.

It also showed the translation feature was flawed, citing an anti-Rohingya post advocating killing Muslims that was translated into English as "I shouldn’t have a rainbow in Myanmar."

Adding more to the ever evolving rationale for the Jan.3 Qassem Soleimani killing which has brought the Middle East to the brink of a new major war, President Trump told Republic donors Friday night that the IRGC Quds force chief was “saying bad things” about the U.S. before his death.  

High-dollar donors were gathered for a fundraiser at Trump's Mar-a-Lago estate, where Trump offered a play-by-play of sorts surrounding the decision-making behind the admittedly bold and risky move to strike the elite Iranian military leader via drone as he passed through Baghdad's international airport. Soleimani was “saying bad things about our country” prior to the US taking action, Trump described of his decision. 

"How much of this shit do we have to listen to?" Trump was quoted as saying in audio of the event obtained by CNN. "How much are we going to listen to?" The president continued, suggesting that Soleimani's anti-American invectives were ultimately a convincing enough reason to sway Trump toward issuing the final order. 

Trump further admitted the killing "shook up the world" given that from the perspective of Iran and its allies "He was supposed to be invincible". 

However, like with prior official statements surrounding the controversial military operation, which subsequently triggered a move in Iraqi parliament to boot American forces from the country, no specific evidence was offered that Soleimani was an "imminent" threat to US national security in the region. Previously contradictory statements have come out of the administration saying US embassies in the region were under threat of bombing. 

Describing that the drone strike took out "two for the price of one" — in reference to slain Iraqi Shia paramilitary commander Abu Mahdi al-Mohandes, who had been at the airport to greet Soleimani, Trump gave a more detailed accounting than ever before of proceedings in the 'situation room' (which had been set up at Mar-a-Lago) that night.

According to CNN's summary of the new details recounted in the speech:

He went on to recount listening to military officials as they watched the strike from "cameras that are miles in the sky."

"They're together sir," Trump recalled the military officials saying. "Sir, they have two minutes and 11 seconds. No emotion. '2 minutes and 11 seconds to live, sir. They're in the car, they're in an armored vehicle. Sir, they have approximately one minute to live, sir. 30 seconds. 10, 9, 8 ...' "

"Then all of a sudden, boom," he went on. "'They're gone, sir. Cutting off.' "

"I said, where is this guy?" Trump continued. "That was the last I heard from him."

During these latest remarks Trump spoke of Soleimani as a "noted terrorist" who "was down on our list" and "was supposed to be in his country" before he landed in Iraq that fateful night. 

However, during the night of boasting the president predictably avoided the question of what's next in terms of US relations with its uneasy Middle East ally. Washington now finds itself in the awkward and increasingly precarious situation of being at the center of popular Iraqi anger and wrath, while also wanting to 'stay the course' in the country to "curtail Iran".

It goes without saying the Soleimani killing has set off a chain of events which are entirely unpredictable and possibly disastrous for Americans in the region, which could lead to a another significant military conflict and quagmire in the region.

As the market is levitated by central bank liquidity to record high after record high despite stagnant fundamentals, one asset manager is quantifying the mass hypnosis and warns investors are in "grave danger."

"Investors should keep in mind that market valuations stand nearly three times the historically run-of-the-mill valuation levels from which stocks have historically generated run-of-the-mill long-term returns," says John Hussman, president of the Hussman Investment Trust, in his latest note to investors.

"In fact, the highest level of valuation ever observed at the end of any market cycle in history was in October 2002, and even that level is less than half of present valuation extremes."

To Hussman, this indicates that there's a wide disconnect between valuations and underlying fundamentals.

"This doesn't mean that valuations have 'stopped working,'" he said.

"It means that speculative psychology plays an important role over shorter segments of the market cycle, and that investors place themselves in grave danger if they assume, at points of extreme confidence, that valuations can be ignored."

The business media is awash with asset-gatherers and commission-rakers arguing that low interest rates "justify" higher stock market valuations, but as Hussman explains

"...that’s really equivalent to saying that 'low prospective returns in the bond market justify low prospective returns in the stock market'... Emphatically, nothing about that argument changes the fact that elevated stock market valuations imply lower future investment returns. We also have to ask how much of a valuation premium is actually ‘justified’ by low interest rates."

Adding that...

"It’s there that investors have inadvertently created a world of future pain for themselves."

So just how much pain?

"The risks that investors face don't care whether their investment horizon is 10 years, or 12 years, or 20 years," he said. "The problem is that at present valuation extremes, passive investors are locking in dismal future return prospects regardless of their investment horizon."

And so how do we get back to historically run-of-the-mill valuation norms?

The answer is simple:

"Wait nearly 30 years, allowing both the U.S. economy and U.S. corporate revenues to grow at the same rate as the past two decades, while stock prices remain unchanged, with no intervening periods of recession or investor risk-aversion, or alternatively (and far more likely), watch the S&P 500 lose two-thirds of its value over the completion of this market cycle."

Couldn't happen? Ask the Japanese...

Buy... and wait passively.

Presently, Hussman estimates that S&P 500 total returns will fall short of Treasury bond returns by about 2.5% annually over the coming 12-year period, which is equivalent to saying that we estimate negative total returns for the S&P 500 itself over that horizon.

Future generations, Hussman argues, seeing the collapse of this bubble in hindsight, will marvel that today’s speculative extremes were ever possible; that they were ever invited and embraced by investors.

They will look back on the entire episode, just as we look at the aftermath 1929, and 2000, and 2007, shaking their heads at the utter madness of it all.

"What QE actually did was to amplify yield-seeking speculation: in the attempt of each successive holder to get rid of their zero-interest hot potatoes, the valuations of stocks and bonds were progressively bid up until everything – all of it – is now priced at levels that promise near-zero future long-term returns. That’s exactly where we are today."

Finally, Hussman concludes, one thing is clear: the Federal Reserve seems to have little grasp of the non-linearities involved in managing such a deranged balance sheet.

One family's crusade to break from the unbearable bondage of royalty is finally over, or in other words, Megxit is a done deal.

Prince Harry and Meghan Markle, also known as the Duke and Duchess of Sussex, will no longer use the titles His and Her Royal Highness "as they are no longer working members of the Royal Family" Buckingham Palace announced Saturday, as part of an agreement that lets them build a life away from intense media scrutiny as members of the royal family.

"Following many months of conversations and more recent discussions, I am pleased that together we have found a constructive and supportive way forward for my grandson and his family," Queen Elizabeth II said in a statement.

"Harry, Meghan and Archie will always be much loved members of my family," she said. " I recognize the challenges they have experienced as a result of intense scrutiny over the last two years and support their wish for a more independent life."

HUGE NEWS in statements from Her Majesty the Queen and Buckingham Palace tonight #HarryandMeghan pic.twitter.com/Fcbc4Xk7oj

— Roya Nikkhah (@RoyaNikkhah) January 18, 2020

As disclosed in the agreement, Harry and Meghan "understand that they are required to step back from Royal duties, including official military appointments. They will no longer receive public funds for Royal duties."

They also shared their wish to repay Sovereign Grant expenditure for the refurbishment of Frogmore Cottage, which will remain their UK family home.

With Brexit no longer dominating the British press, the announcement that the couple wished to step back back from the royal family had thrown Britain’s monarchy into turmoil and dominated the headlines. Even though Harry has only a remote prospect of becoming king - he’s sixth in line, behind his father, brother, and nephews and niece - there was outrage that, with his wife, he wanted to become financially independent and "carve out" a "progressive new role."

Still, as the following chart summarizing the net worth of UK's royalty shows, the former "Duke and Duchess" should be just fine.

According to Statista, Prince William and Prince Harry have similar incomes and net worth, and reportedly earn $6.6 million annually from the Sovereign Grant, which they split, and each have an estimated net worth that ranges around $40 million. Prince Harry’s income could fluctuate once his title is renounced. Rumors claimed Markle, who had a net worth of about $5 million before marrying Harry thanks to her acting career, was already inking up a deal with Disney to do voiceovers for future projects, though the money will reportedly go to charity.

In a separate statement, earlier this week the queen discussed the wishes of Harry and Meghan, a former actress, with her immediate family. The queen at the time described the talks as “very constructive.”

The Queen said the recent discussions led to a "supportive way forward for my grandson and his family." She said she was "particularly proud of how Meghan has so quickly become one of the family."

It now appears that it took Meghan even less time to leave the family.

Submitted by Jan Nieuwenhuijs of Voima Insight.

There are reasons to think that the gold price will rise faster than expected.

Since 2009 China has withdrawn 12,000 tonnes of gold from the rest of the world, where the short and medium-term gold price is set. For reasons I will explain, a tighter market outside of China can make the price of gold price rise faster than many expect. I believe the gold price will rise, because of excessive debt levels around the world, and incessant money printing by central banks. Central banks will try and resolve the debt burden through currency depreciation (inflation). China has been preparing for this scenario by buying gold.

One of the key drivers in recent decades for the US dollar gold price is real interest rates. It is thought that when interest rates on long-term sovereign bonds, minus inflation, are falling, it becomes more attractive to own gold as it is a less risky asset than sovereign bonds (gold has no counterparty risk). However, gold doesn’t yield a return (unless you lend it). So, when real rates rise, it becomes more attractive to own bonds.

Although the correlation is clear, it might change in the future. Possibly, when real rates fall, the gold price will rise faster than before. Let me explain why.

In my previous post, we have seen that the gold price in the short and medium-term is mainly set in the West by institutional supply of and demand for above-ground stocks. For the gold price, what matters is how much above-ground stock is in strong hands, i.e., owners of gold that will not be easily persuaded to sell.

A significant change in the global economy in the past two decades was the rapid expansion of China’s economy. As early as the 1980s, China started to liberalize its economy, but it was only after it joined the World Trade Organization in 2001 that its economy gained significance internationally. At the time of writing, the size of China’s economy is second globally. In 2002 China freed up its gold market with the opening of the Shanghai Gold Exchange (SGE).

Because of the aforementioned developments, and its Eastern mentality regarding gold, a few years after the Great Financial Crisis (GFC), China became a major player in the global gold market. It was a net importer since the 1990s, but imports grew in 2010 and exploded in 2013.

China’s central bank (which supervises the SGE) and other government departments have been stimulating physical gold ownership. One reason the government erected the SGE, was to allow the people to have direct access to the wholesale market and to be able to trade 999.9 fine gold at the lowest spreads. The stimulation program is sometimes referred to as the “People’s Gold.” In 2012, President of the China Gold Association, Sun Zhaoxue, wrote in Qiushi, the leading academic journal of the Chinese Communist Party’s Central Committee:

Because gold possesses stable intrinsic value, it is both the cornerstone of a countries’ currency and credit, as well as a global strategic reserve. Without exception, world economic powers established gold strategies at the national level. … the state will need to elevate gold to an equal strategic resource as oil and energy, …

In addition, because individual investment demand is an important component of China’s gold reserve system, we should encourage individual investment demand for gold. Practice shows that gold possession by citizens is an effective supplement to national reserves and is very important to national financial security. … We should advocate to ‘store gold among the people’ [“People’s Gold”] and guide a healthy positive development in this segment. … This is the objective under our gold strategy. 

The world economy faces new changes, new challenges and new opportunities. Therefore, we must relook the status and function of gold from a strategic height, and create and implement a national gold strategy, to strengthen our country’s ability to counter complex situations.

Several national central banks in Europe will agree with Sun Zhaoxue, as they’re slowly preparing for Plan B: gold.

In 2016 the SGE launched a smartphone application called “Yijintong” to further ease gold trading for everyone. Note, the government has mainly facilitated the infrastructure for gold trading in China. Nobody forces Chinese citizens to buy gold. “China has been infatuated with gold for thousands of years,” according to former Managing Director of the Far East for the World Gold Council, Albert L.H. Cheng.

When the Chinese population had an opportunity to buy gold, so they did. According to my estimates, there are currently 20,398 metric tonnes owned by the private sector in China. The People’s Bank of China (PBoC) holds 1,948 tonnes, bringing the total to 22,346 tonnes. Up 230% from 2009.

Since the GFC, China has net imported 12,000 tonnes of gold. The gold came from the rest of the world, where the price is set in the short and medium-term. At this stage, it’s prohibited by the PBoC to export gold from the Chinese domestic market—all 20,398 tonnes of it. Gold owned by the Chinese is in strong hands. The fact the market in the West has become tighter can make gold go up faster than expected, according to my analysis. Needless to say, when sovereign bonds are downgraded (rated as riskier), the dynamic between real rates and gold will change too.

From industry insiders and circumstantial evidence, I believe the PBoC holds at least twice the amount of gold officially disclosed. Underreporting their gold reserves allowed the PBoC to accumulate at lower prices. Metal held by the PBoC, in addition to officially reported, was bought abroad and would add another 2,000 tonnes to China’s net import since the GFC. But I will leave this subject for a forthcoming article. I exclude speculative data in the paragraphs and charts above.

One reason for the gold price to rise is because the global debt-to-GDP ratios are excessive, and will be lowered, partially, through inflation. Debt in moderation can cause real economic progress. However, debt in excess can cause bubbles, stagnation, or depressions; too much debt caused the GFC. Unfortunately, the medicine we took was more debt. Last week, the World Bank warned the current debt wave is “the largest, fastest, and most broad-based wave of debt accumulation in advanced economies as well as in emerging and developing economies” since the 1970s.

NEW TODAY | Global debt reached a new all-time high of 322% of GDP in Q3 2019, with total debt nearing $253 trillion.

Access the Global Debt Monitor report and database here: https://t.co/UyFYqwNRPx pic.twitter.com/jhEGoD1evz

— IIF (@IIF) January 13, 2020

Since the GFC, central banks have embarked on unconventional monetary policy. Through Quantitative Easing, i.e., printing money and ultra-low interest rates, initially, some economic pain was avoided, but the underlying problem got worse. Across the board, debt-to-GDP levels have gone up (world debt is now at a record 322% of GDP). It seems to me that unconventional monetary policy is counterproductive, and not just because debt has expanded. Consider some of the unintended consequences: Stock markets are addicted to the printing press, asset bubbles are everywhere, and inequality is rising. So-called zombie companies (kept alive through artificially low interest rates) decrease productivity. Instead of spending more, consumers are spending less because the low-interest rates policy makes them feel insecure about the future. How to get out of this situation?

Ever lower rates encourages the taking on of ever more debt which then can't be serviced with higher rates requiring even lower rates which then encourages the taking on even more debt which then can't be serviced by even lower highs in rates requiring even lower rates...etc.. pic.twitter.com/ZaQWJAeuqr

— Sven Henrich (@NorthmanTrader) January 6, 2020

In the stalemate, Christine Lagarde, the new head of the European Central Bank, is urging the few countries with relatively low debt levels, to “stimulate” the economy by borrowing and spending. Meanwhile, she holds key interest rates below zero and the printing press active. The Federal Reserve has reignited its printing press last September, which gave the US stock market another catalyst. When push comes to shove, our monetary “leaders” will always revert to printing money. There is a sense of logic in this, as to not intervene would undermine a central banks’ right to exist.

My concern is that money printing and more government-induced debt will ultimately lead to high inflation. Central banks will be reluctant to raise interest rates when that happens, as it would make the debt unserviceable. A “side effect” of high inflation, is that it reduces the debt burden. (Debt is fixed in nominal terms, of which the real value is eroded through inflation.) It’s an old trick to get out of debt through inflation, and governments are likely to choose this route.

In the scenario described above real rates will fall, and the price of gold will go up.

Hedge fund manager and debt cycle expert Ray Dalio stated in July 2019:

Governments are likely to continue printing money to pay their debts with devalued money. That’s the easiest and least controversial way to reduce the debt burdens and without raising taxes. 

In a leading financial journal, The Economist, the same solution was presented:

good old fashion currency debasement [/inflation] and the annihilation of nominal creditors (most of which reside outside the US). We have done this before in our 200+ year history and we will surely do it again.

Ole Hansen, head of commodity strategy at Saxo Bank, noted on January 9, 2020, “The story for gold is still there…. the United Nations food agency reported Thursday that its global food price index rose to a five-year high in December to 181.7 points. We expect the inflation story to unfold throughout the year.” Just because we haven’t seen staggering inflation numbers in developed nations for forty years, doesn’t mean it’s not on the table.

Like I said before, I think in the current environment, the gold price can rise faster than expected. Aside from the speed with which the gold price can rise—in a debt-based monetary system, the gold price is guaranteed to rise in the long run—equally important is that inflation will create winners and losers. If your savings are in fiat money and you own debt, you will lose. If you own hard assets, such as gold, and you are in debt, you will win. Perhaps this is why Sun Zhaoxue wrote, “The world economy faces new changes, new challenges and new opportunities. Therefore, we must relook the status and function of gold from a strategic height, and create and implement a national gold strategy.” Having 22,346 tonnes of gold within Chinese borders will protect against currency depreciation.

Ms. Lagarde confirmed she aims for currency depreciation when last November, she said, “We should be happier to have a job than to have our [fiat] savings protected.” Fortunately, there is gold in Europe too.

The views expressed on Voima Insight are those of the author(s) and do not necessarily reflect the official views or position of Voima Gold.

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