Gold Telegraph Weekly Rundown: January 24, 2021

We continue to see many major macro headlines cross the wires daily.

Most notably, this week, we say major headlines cross about the infrastructure being built around central bank digital currencies. These digital currencies should be coming online within the next 24 months, dramatically consolidating the financial system. This is something to consider when learning about cryptocurrencies.

Debt markets remained artificially suppressed and manipulated as central banks continue to print money to monetize government debt. As we actively said throughout 2020, all these economic policies that have transpired will eventually resort to extreme inflation.

Two brilliant minds in Grant Williams and Paul Singer had a fantastic discussion about general markets and, most notably, the prospects of major inflation seeping into the economy due to endless money printing and the suppression of bond markets.

I encourage my readers to listen here.

Everything remains in line for a serious inflationary storm that we will lay-out in a very detailed report published in the coming weeks. We believe central bank digital currencies will play a major role in this development.

They will have a lot more power at dictating consumer spending through a more centralized monetary structure, which is they need to deleverage all this debt circulating the global economy.

Here are this week’s headlines, worth highlighting with our commentary:

 

The new President’s plans to suspend the sale of oil and gas leases on federal land, which accounts for about 10% of U.S. supplies

This week it is expected that President Biden will block the sale of new mining and drilling rights across some 700 million acres of federal land.  This land accounts for about a tenth of U.S. supplies.  Those close to the matter say that the pause will allow the new administration to clearly assesses the environmental impact of the oil and gas leases and decide whether — and how — to restart selling them in the future. 

This move, of course, following just days after Biden’s very busy first day in the White House, cancelling the Keystone XL oil pipeline, rejoining the Paris climate accord and directing regulators to review dozens of environmental rules imposed under Trump.  Biden’s administration has been very open about their desire to rapidly implement strong climate policies, including phasing out fossil fuels over time in favour of cleaner power sources. 

The ‘central bank of central banks’ is building a CBDC settlement platform

Central Bank Digital Currency continues to dominate headlines as research on the subject has been announced as a top 2021 priority for the Bank for International Settlements’ Innovation Hub (BISIH).  Led by the Innovation Hub Centres in Hong Kong, Singapore, and Switzerland the BISIH is focusing on exploring “the feasibility of faster and cheaper cross-border payments” employing digital currencies utilizing “tiered retail CBDC distribution architectures” and distributed ledgers to issue “tokenized green bonds to retail investors.”  Singapore has been tasked specifically with building an international settlement platform for regulated banks and payment firms to settle CBDC transactions. 

Hong Kong will work on the aforementioned green bond tokenization project, and a CBDC foreign exchange transactions platform, and exploring different of stablecoin issuance models.  The Swiss are ahead of the game – already finalizing two different prototype concepts linking existing payment systems settling tokenized assets using wholesale CBDC through “Project Helvetia.”

 

Feds not adding Bitcoin to reserves; Canadian banks mum 

Whether there is looming inflation, deflation, stagflation or any other flation for corporations and governments to worry about – the need to hedge with easily liquidated assets seems to always be present.  In the US, Corporations such as Square Inc. and MicroStrategy Inc. are taking advantage of the increasing value in Bitcoin.  Canadian organizations don’t seem to share the same confidence in the crypto currency.  Or at least not publicly.  

The publicly traded Big Five Banks all refused comment on their passive approach to crypto.  Perhaps stemming from the outspokenly negative stance taken by Finance Canada, which when questioned about their foreign currency reserves stated “they are managed according to the Asset-Liability Matching framework as to limit volatility. This means that for every foreign reserve asset, there must be a liability with a highly correlated value. Bitcoin does not meet these criteria as it remains relatively volatile and cannot be paired under the Asset-Liability Matching framework.”  USD remains the largest foreign currency held in reserve, followed by the Euro and the Pound Sterling and Yen.

 

Yellen Moves Toward Confirmation for Treasury, With Vote Monday

Former Federal Reserve chair, Janet Yellen will likely be the first ever female Treasury Secretary after getting the unanimous approval of the Senate Finance Committee on Friday, with a full vote by the chamber set for Monday.  The panel was unanimous with a 26-0 vote.  After a tie-breaking vote from Vice President Kamala Harris, the Senate now sits under Democratic control though many Republican lawmakers have already publicly voiced their support for Yellen. 

Biden has struggled to gain Republican support for his proposed $1.9 trillion stimulus package, including funds for vaccine distribution infrastructure, $1,400 payments to Americans and further unemployment benefits.  Once confirmed, Yellen aims to move quickly in her support.  “It’s clear that fiscal stimulus to support the economy and the working families most affected by the impact of Covid-19 is our most urgent priority,” Yellen said Thursday, “spending now is “critical” to boost the U.S.’s long-term fiscal health.”

 

Canadians piling on mortgage debt as hot housing market continues

This week Statistics Canada reported that household mortgage debt increased 7.4% in November compared to a year earlier, pushing the total up to nearly $1.66 trillion.  Home sales in Canada set a new annual record in 2020 with 551,392. 

Experts argue that historically low interest rates, limited housing supply, and a desire for more living space due to COVID-19 are just a few of the top reasons for the big bump.  The growth also seems to be acutely focused on specific segments of the market.  “The gains have been concentrated in single-detached and more expensive homes,” Deloitte Canada chief economist Craig Alexander wrote in a note on December’s housing numbers.

 

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