PMY - SILVER INVESTORS DREAM at start of BULL RUN, page-394

Does anyone have thoughts on Trumps overnight executive orders extending the PPP, etc., albeit reduced by a 3rd, and specifically how the markets (PMs and equity) might view this given the orders are technically unlawful as only Congress is granted the power of fiscal allocation and distribution constitutionally.

The discussion around gold or PMs being a hedge to inflation is an interesting dovetail, because I'm of the view investors are not buying them for this purpose primarily. The net of inflation + interest rates give 'real interest rates' and now there is improved parity globally, there are less alternatives to park yield bearing capital as a safe haven.

One of the reason's PMs and in particular gold didn't get a higher bid prior to the recent melt down, is because bonds and US equities offered fair alternatives - bonds continue their downward long term trajectory and US equities with the exception of FANG tech stocks are sluggish and exhibiting stagnation. Banks and the general credit market stocks, with the exception of banks with a strong broking vertical are the carnary in the mine. A quick review of the US banks provisions for bad debt confirms the rolling insolvency event is unfolding, but takes time to build momentum.

Money printing is debasing all currencies including the USD and the M1/M2 is not necessarily finding its way into the consumer base to spend and provide cash flow to viable or zombie companies, but into assets such as stock, etc. The PPP initiative helps consumers maintain a reasonable level of existence, but does it provide sufficient to fill the consumer spending hole that has been created. The monetary and fiscal stimulus is a misnomer because the hole that it fills is of gigantic proportions. The longer the world is without an effective vaccine, the greater the risk the hole becomes larger.

Additionally, money velocity continues to slide despite the money printing because it is not effectively targeted at the consumers or productivity outcomes - banks will only lend to companies that have a solid balance sheet and prospects or increase the interest rate significantly to account for the risk. Those companies that fit the latter, are not in a position to soak up the margin increase given the uncertainity of the virus containment / disruption or are at least only borrow some time before insolvency hits. Companies in better health will also take the opportunity to peel headcount, which will improve their profits, but because this event is not contained to a specific sector as it was with 2008 - a banking / credit crisis - the scale is larger and

So slowing money velocity won't create inflation, meaning the CBs need to print more cash to inflate the economy and potentially overshoot, if successfull. Additionally they may need to go to negative rates meaning any mistakes in a highly volatile and experiemental policy setting, will be catasrophic.