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  • ‘Mandate of Heaven’ in Jeopardy – Economic Impact of the Coronavirus

    The US–China trade war has taken up more ink than I care to remember. I’ve been writing about it for over a year now.

    And even though there is some sort of stage one deal happening…it’s far from over.

    But don’t take it from me, take it from Jim, as he writes in Aftermath:

    China feels that its economy is sufficiently strong and resilient enough to weather a trade war with the United States. China can always buy soybeans from Canada and aircraft from Airbus. It is betting that the United States has more to lose than China if the trade war escalates.

    China is wrong in its estimate.

    Both sides my lose in a trade war, but China has far more to lose.

    While the trade war is far from over, it’s still not the whole picture of the economic disruptions we are facing…

    …rather what’s happening in China is a critical part of what happens next.

    That’s after the coronavirus stops hogging headlines. After the trade war peters out. Well after we are forced to face our global buildup of unsustainable debt…

    Jim calls it ‘Reset 2020’.

    If you click here, you can read Jim’s warning about what will actually happen after the next crisis, and how you can help protect your wealth from it.

    Now, read on for more.

    Until next time,

    Shae Russell Signature

    Shae Russell,
    Editor, The Daily Reckoning Australia


    ‘Mandate of Heaven’ in Jeopardy

    Jim Rickards

    The US markets were closed on Monday for Presidents’ Day.

    But one event is taking centre stage in the world that affects not only basic survival for millions of people, but the health of the global economy overall.

    Of course, I’m talking about the coronavirus outbreak currently playing out before our eyes in China.

    China’s economy was slowing substantially before the outbreak of the highly contagious and deadly virus last fall.

    This slowing was the predictable result of excessive debt levels, Trump’s retaliation in the trade wars, and China’s encounter with what development economists call the ‘middle-income trap’.

    Stuck in the middle-income trap

    Developing economies can grow at double-digit rates as they move from low-income (about $3,000 annual per capita income) to middle-income (about $10,000 annual per capita income).

    The main requirements are limits on corruption, a large pool of available labour, and an attractive legal environment for foreign direct investment.

    Once investment is used for infrastructure and labour is mobilised, large-scale basic manufacturing can commence.

    This powers growth and the accumulation of hard currency reserves from export earnings.

    The difficulty begins when an economy tries to move from middle-income to high-income (about $18,000 annual per capita income).

    That move requires more than cheap labour and infrastructure investment. It requires applied technology to produce high-value added products.

    Only Taiwan, South Korea, and Singapore have made this transition (excluding Japan after the Second World War, and oil-exporting nations).

    This explains why China has been so focused on stealing US intellectual property.

    Trump has been closing that avenue. China cannot generate the needed technology through its own R&D. China is stuck in the middle-income trap and a slowdown in growth is the inevitable result.

    Coronavirus rippling effects on the Economy

    The story gets worse for China.

    As of Friday, the total reported number of people infected by the coronavirus was 64,435. And the death toll was up to 1,383, including three people outside of China.

    Those figures are official statistics released by China and other countries around the world where the virus has spread.

    However, there is substantial medical, anecdotal, and model-based evidence that the actual infection rate and death rate may be 10–20 times higher than those official statistics.

    Over 60 million Chinese in several major cities are under ‘lockdown’ where individuals are confined to their homes and may only leave once every three days to buy groceries.

    Streets are empty, stores are closed, trains and planes are not moving, and factories are shut. The Chinese economy is slowly grinding to a halt.

    This not only affects China’s economy as a whole, but the contagion filters down into individual companies that are dependent on China both for supply chain inputs and final sales.

    And it will have a rippling effect on the US economy also. This story has a long way to run.

    All the best,

    Jim Rickards Signature

    Jim Rickards,
    Strategist, The Daily Reckoning Australia

    PS: How Exposed Are You to an Aussie Recession?…and three steps to ‘recession-proofing’ your wealth. Download your free report now.

    The post ‘Mandate of Heaven’ in Jeopardy – Economic Impact of the Coronavirus appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

  • Calling All Gold Bulls — Watch This Space: Gold Stocks Could Go Up

    Once a bear, always a bear, right?

    I mean, I’m the first to point out Australia’s shaky economy…

    Learn why a recession in Australia is coming and three steps to ‘recession-proof’ your wealth. Click here to download your free report

    And last week we looked at how the coronavirus is shuttering the labour capital of the world…

    Then you’ve got Aussie indices sitting at all-time highs…

    …in spite of the uncertainty building all around.

    So when you spend a career talking up gold, people often think that automatically means you’re talking down everything else.

    But that’s simply not true.

    Because you know what’s getting ready to move higher?

    Gold stocks.

    Economy RESET 2020

    ‘So, what are Jim’s thoughts on the coronavirus?’

    ‘Hey, yeah, what are Jim’s thoughts on gold this year?’

    ‘Stocks are pretty high right? What’s Jim got to say about that, Shae?’

    These are just some of the questions I get once people find out I work alongside Jim.

    Given that I’ve worked alongside Jim for the better part of years now, it goes with the territory.

    However, there’s been something different about the questions I’ve been getting over the last couple of months.

    One is the frequency.

    It’s gone from the odd question maybe once a month…to two or three people a week asking a variation of the above.

    But here’s what surprised me most.

    These aren’t financial novices asking me what Jim thinks.

    They’re coming from people who work in the industry.

    Financial advisers. Stockbrokers. Hedge fund managers.

    All are looking for a peek into what one of the world’s most eminent contrarian economists thinks.

    They know something is up, but can’t quite put their finger on it. So how are they supposed to guide their clients?

    And I know why. Some sort of reckoning is coming.

    But it’s not the warning of another market crash…

    …or some media dude doing his best effort to describe a future black swan (hint: black swans are unpredictable, but easy to see with hindsight).

    Oh no. Instead what Jim is talking about, in his words, is predictable. But many aren’t prepared for this wealth-altering shift.

    Instead, Jim’s talking about some sort of reset to the monetary system.

    Sounds impossible? Click here to see why Jim says it’s more likely than not…

    The multibillion-dollar gold rush

    Late last year — as all analysts like to do — I put my ‘here’s what to look for in 2020’ prediction out there.

    But really, this year’s trend actually began in the middle of 2019.

    It all began with Barrick Gold.

    Barrick made a US$6.5 billion (AU$9.5 billion) bid for Randgold Mining back in September 2018. Suddenly, the world’s largest gold miner (at the time and based on ounces mined) was making a play for the 15th largest gold miner.

    There was one thing driving the merge: For Barrick to get bigger.

    Less than four months later — after the Barrick-Randgold merge was announced — another big merge became public.

    Newmont wanted Goldcorp. Again, the world’s second largest gold miner was going after the world’s fifth largest gold miner.

    Cleary Newmont’s decision to buy other gold miners has paid off.

    Last week Newmont announced they now have a whopping 100 million ounces in gold reserves, thanks to their Goldcorp acquisition.

    Not only that, but CEO Tom Palmer reckons the company will produce more than ‘six million ounces a year…for decades to come’.1

    In other words, a large secure gold supply could see even more investors rush into their shares.

    But what all these northern hemisphere mergers really did was just kick off a bigger trend…

    Cashed up and ready to pounce

    Right now, the Aussie dollar gold price has been kind to Australian gold miners.

    The difference between the cost of mining gold, has been significantly lower than what they are selling it for.

    Meaning Aussie gold miners have been banking serious cash.

    And it appears they’ve been using that wisely.

    For most of last year, Aussie gold miners went and bought international assets on the cheap.

    The pot stock boom in the US and Canada meant that investors ditched risky mining stocks and chased potential gains from pot companies.

    Leaving a whole bunch of international mines with almost no cash and no investor interest.

    So many Aussie-listed companies bought up those unloved mines, with the hopes of turning them around.

    Our own Newcrest Mining paid AU$1.1 billion for a 70% copper-gold mine based in British Columbia.

    Then, just a few short weeks later, Australian gold miner St Barbara paid $795 million for Vancouver-based Atlantic Gold Corporation.

    At a similar time, Northern Star Resources waded in and bought the Pogo site in Alaska for a cool AU$376 million.

    Then towards the end of last year, the action begun closer to home.

    We saw Saracen buy a 50% stake in the Kalgoorlie Super Pit.

    Mere weeks later, Northern Star, was back at it again and bought the other 50% of the super pit.

    It’s worth noting here, that both Saracen and Northern Star are considered mid-tier gold miners.

    Yet combined they scraped together nearly two billion dollars to buy Australia’s biggest hole.2

    And just when you think all the mergers are over, another mid-tier miner waded in.

    Just last week, Ramelius Resources made a $200 million bid for explorer Spectrum Metals.3

    How to ride the trend – Look at ASX Gold Stocks

    What can we take away from this?

    The biggest thing for investors to note here, is that the big gold miners are out to get even bigger.

    Every ounce of gold out of the ground, is an ounce of gold, out of the ground.

    And securing a supply of gold is the most crucial thing for a gold miner.

    Meaning, years of slashing exploration budgets means today’s gold miners have no choice but to buy each other out — or buy older assets and try to get more out of them.

    The trend of gold miner mergers wasn’t just a flash in the pan.

    I’d suggest we get used to this.

    The big guys are done fighting over each other.

    However now the middle tier producers are cashed up and looking to expand.

    Going into 2020, there are going to be more gold miners merging…and more miners buying old assets.

    And the biggest winner from this trend is looking to be gold stocks.

    Until next time,

    Shae Russell Signature

    Shae Russell,
    Editor, The Daily Reckoning Australia

    PS: In a brand-new report titled ‘The Looming Aussie Recession and How to Survive It’, Nick Hubble reveals why a recession in Australia is inevitable and three steps to recession-proof your wealth. Click here to receive your free report

    The post Calling All Gold Bulls — Watch This Space: Gold Stocks Could Go Up appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

  • Coronavirus: It’s Not Economic Armageddon, It’s Just a Flesh Wound…

    Another day, another story on the coronavirus.

    I’ll be honest, I hadn’t planned on talking about the bug today.

    Initially I set out to attack the blind optimism coming from our central bankers.

    Over coffee and reading the morning news, I too got sucked back into the virus vortex.

    The good news is, a central banking takedown can wait for another day…that will probably give ‘em more of a chance to say a few silly things for me to pull apart later on.

    Instead, I think we need to talk.

    We need to start looking at the markets, and perhaps just how disconnected they are from reality.

    You see, I fear investors are looking at all the wrong clues…

    Learn why a recession in Australia is coming and three steps to ‘recession-proof’ your wealth. Click here to download your free report

    Coronavirus to trigger a monetary reset?

    I was a young adult when the SARS virus hit in 2002.

    Aside from a family member who worked in the Shenzhen province of China at the time, it didn’t really register.

    Sure it was newsworthy. And most likely a little frightening for those close to the centre.

    But the impact in Australia was limited to some headlines on the nightly news (remember when watching that was a thing?).

    Thanks to our perpetual links to information and the interconnectedness of global economies, it’s different this time.

    A financial panic hasn’t hit…yet. Nonetheless, what if there was some sort of trigger that forced a shuttering of banks? And by that I don’t just mean banks closing, I’m talking about a full sort of monetary ‘reset’. One where your money is stuck in the bank….and you’re on the outside — cashless — wondering what to do next while politicians decide the fate of money?

    Jim Rickard says this is entirely possible. His latest book Aftermath talks you through how elites could use a panic to set up a new monetary ‘reset’.

    Click here to read about Reset 2020, and see what it could mean for you.

    Aussie market acts like nothing has happened

    The coronavirus is back in the headlines. Some editorial I read overnight called it ‘China’s Chernobyl moment’.

    In other words, this is the trigger that sees the iron grip on the country loosen…before falling apart all together.

    This is beginning to call into question Big Xi’s vice-like grip on the country.

    He’s been largely absent from public view since the virus unravelled.

    Which, from a leader that promises prosperity to his people, is a bad PR move if you want to keep your 1.3 billion people from rioting.

    But not all investors seemed concerned.

    The US market was down marginally overnight. And since the virus was first discovered in the middle of December, major indices in the US continue to march on to new highs.

    It’s a similar story with the Aussie markets. The XJO is only a few points from its all-time high in January.

    The market continues to ignore the coronavirus.

    It reminds me of a Monty Python skit where the knight declares his recently chopped off limbs are just a flesh wound.

    The thing is, investors would probably do better if they ignored the market…and looked at the signals coming from commodities.

    Stocks might look fine — everything else does not

    You have to ask yourself this: just how are investors shaking this off, when things happening in the background look bleak?

    Take this for example.

    Large sections of China are closed. Ports are closed. Airports are closed. Trains are closed. Major manufacturing hubs are frozen. Large masses of people can’t leave the country. Schools are closed. Fast food joints and restaurants are shut.

    Trading rooms have almost no one in them.

    Yuan transactions have halved, says Bloomberg. Adding that Chinese FX and bond traders are stuck at home, working remotely where possible.

    Yet the markets are glossing over the labour capital of the world having multiple weeks of downtime.

    It’s time I reckon investors need to start looking at commodities

    The values of copper, iron ore, soybeans, wheat, and cotton are all down between 4.7–9.3% in the past four weeks, when official news said the virus was starting to spread…

    Energy has taken a big hit. In the same time, Brent crude and natural gas have fallen 18% and 17% respectively.

    Yet the Baltic Dry Index tells us who the biggest loser is…

    Baltic Dry Index 2015–20


    Dailyreckoning

    Source: Trading Economics

    [Click to open in a new window]

    The Baltic Dry Index — the tool that measures shipping of bulk goods — has plunged to levels not seen since Jan 2016.

    More importantly, note that the BDI has dived 72% since early December…before the virus officially existed.

    In fact at these levels, it takes the BDI dangerously close to a pre-globalised point of trading. Lows not regularly seen since 1986.

    It’s a rough tool, but the BDI gives us an indication about the future of trade. And that tumbled more than five weeks before the value of commodities did.

    But one look at stock markets indices around the world, and it appears investors aren’t looking at what things are happening in the background.

    Rather than take your cues from the market, perhaps look at the value of goods that make up the things we buy.

    That will give you a better idea of how the coronavirus is impacting the markets.

    Until next time,

    Shae Russell Signature

    Shae Russell,
    Editor, The Daily Reckoning Australia

    PS: Discover how some investors are preserving their wealth and even making a profit, as the economy tanks. Download your FREE report by clicking here.

    The post Coronavirus: It’s Not Economic Armageddon, It’s Just a Flesh Wound… appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

  • Green Energy – Is Aussie Gas Secretly Saving the Planet?

    Monday’s commute featured an epiphany. I suppose that’s what happens after two weeks’ paternity leave.

    After getting on the train here in London, I spotted a lady wearing bright green glasses.

    I’m not talking about the frame. I’m talking about the lenses. Literally everything she sees must be green.

    It was especially noticeable because she was the sort of person who both needs to get a seat and needs to be the first person to get off the train at the station too. A bad combination in overcrowded carriages. Especially if you’re seeing green to begin with.

    Wall Street Insider Shares His Wealth Preservation Tactics. Click here to learn more

    The result was a very grumpy set of commuters getting elbowed in the hip and head-butted in the elbow as everyone had to make way, before following her onto the platform anyway.

    No doubt you’ve caught on to the metaphor. The world is increasingly seeing everything through the lens of environmentalism. Green-tinted glasses. And the consequences are a painful nuisance as we all have to adjust our lives for the new way of seeing things.

    In Sydney, two dams are at 100% capacity and overflowing. But water restrictions continue because of the drought…

    Putting on display the opacity of the green-tinted glasses is this from 2GB, with emphasis added:

    Sydney water restrictions will not be upgraded after a weekend of intense rain and flash flooding across the state.’

    It takes flash flooding just to prevent droughts from getting worse these days…

    The surprising news is that the green energy furore seems to be working…in a sense. 2019’s global emissions from energy production specifically did not grow from 2018 levels according to the International Energy Agency (IEA).

    Despite scientific studies predicting an increase…but let’s not go there.

    While emissions in growing economies boomed thanks to coal (I wonder if the two are related…), total emissions from advanced economies’ power sectors fell to levels ‘last seen in the late 1980s’, the IEA estimated.

    Not bad. But not as good as the 70s, when oil shortages spiked oil prices and brought emissions down even further. Those were the good old days for emissions, when we worried about cooling instead of warming, in more ways than one.

    Enter the caveats to the recent energy emissions data…

    Who exactly do we have to thank for this extraordinary progress in fighting climate change? Greta Thunberg’s decision to take a sailboat to Chile and back? The Davos crowd’s decision-making skills? Central bankers’ newfound focus on climate change?

    The Financial Times explains who gets the credit:

    The US saw the largest single decline in emissions of any country, unleashed by the cheap natural gas prices offered by the domestic shale boom. This led to a rapid switch away from coal in the power sector, helping lower emissions by 140m tonnes or almost 3 per cent.

    The shift has come despite the Trump administration’s withdrawal from the Paris deal and its strong support for the coal industry.

    Yes, President Trump and shale gas are saving the planet. Although, over in the EU, it’s the Russians doing their bit. Gas produced more power in the EU than coal for the first time, also cutting emissions there.

    Now I’m not sure what climate change warriors think about gas being their saviour. As far as I know, it’s the one form of power they never seem to mention at all. Then there’s that other one which we’re not allowed to talk about in Australia…

    In Japan, it was the decision to turn nuclear reactors back on that helped cut emissions slightly. Although The New York Times claims:

    Japan now plans to build as many as 22 new coal-burning power plants — one of the dirtiest sources of electricity — at 17 different sites in the next five years.’

    And:

    Together the 22 power plants would emit almost as much carbon dioxide annually as all the passenger cars sold each year in the United States.’

    Coal isn’t finished yet! The only question is who will be mining and selling it.

    Gas, Emissions and Green Energy

    But back to gas and saving the planet. Many years ago, the shale boom in the US and Australia was one of our favourite topics. And it’s certainly been a great boom. But none of us expected this week’s news from the IEA. The idea that gas would be the driver of emissions reduction is a complete surprise to me.

    But the gas boom isn’t finished yet either. The EU doesn’t want to be reliant on Mr Putin for its climate change credentials, so it’s backing 32 gas projects with €29 billion — about 50% of their cost. Yes, even the politicians back gas.

    How was the EU plan passed amidst howls from campaigners accusing the EU of hypocrisy for financing fossil fuels? I’ll leave it to the Guardian to give you a snapshot of the internal functions of the EU, where unelected commissioners propose legislation that Members of the European Parliament can only ‘take it or leave it’:

    The European energy commissioner, Kadri Simson, from Estonia, had asked the parliament to back the proposal on the grounds that three-quarters of the 151 projects were electricity- rather than gas-based.

    The parliament had the option of accepting the entire list, the fourth proposed by the commission under its “connecting Europe” programme, or voting it down in its entirety.

    Simson said: “An objection to the 4th PCI [Projects of Common Interest] list would mean that the 3rd PCI list remains in force — a list with 40% more gas projects than the new list.”

    I love European politics. As long as they don’t propose anything better, the unelected bureaucrats can get whatever they want passed into law. It’s a unique form of faux democracy.

    But what about Australia? Well, we’re a major gas exporter. Usually we collect the criticism for this. Gas does emit, after all. But it looks like gas is contributing to lower emissions, not higher.

    The point being, if gas replaces coal, then it’s a reduction in emissions thanks to our exports…

    That’s not how climate change campaigners see things though.

    Gas has other benefits. It’s supposedly easier to get a gas power plant going than even coal. When a cloud brought down Alice Spring’s power, it was the back-up gas station that failed to ignite. But they chose gas to be there for a reason.

    Conveniently, gas is Australia’s third largest energy resource. The first is coal. The second uranium. Turning away from the top three is self-flagellation taken a little too far if you ask me…

    For now, nobody is pointing out that the correlation and causation arguments may be a little muddled in all this. Perhaps developing economies are booming thanks to their decision to invest in cheap reliable power while stagnating economies subsidise inefficient and unreliable green electricity.

    Perhaps cheap energy makes economic growth more viable. And more expensive energy makes it less viable.

    Emissions from energy production actually fell globally in 2009 according to the IEA charts. Let’s do that again then. After all, it’s what matters when you’re wearing green-tinted glasses.

    Until next time,

    Nick Hubble Signature

    Nick Hubble,
    For The Daily Reckoning Australia

    PS: Learn why a recession in Australia is coming and three steps to ‘recession-proof’ your wealth. Click here to download your free report

    The post Green Energy – Is Aussie Gas Secretly Saving the Planet? appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

  • Last Hurrah for Central Bankers: The Fed Trying to Stimulate the Economy

    I have yet to meet a hedge-fund billionaire, and I’ve met many, who does not have a large personal allocation to physical gold. They are ready for what’s coming. Their clients are not.

    You’ll find those lines in Jim’s latest book, Aftermath.

    But what is it that these hedge fund billionaires are preparing for?

    Aftermath really brings home the idea of just how unprepared the world is for another financial crisis.

    In spite of markets steaming ahead, Jim points out that nothing was fixed from the last crisis. We just stuck a Band-Aid on a flesh wound and moved on.

    The entire point of Jim’s book is to show you what isn’t working in the financial markets. The stuff the mainstream either glosses over or completely ignores.

    But more importantly, as nothing was fixed in the last crisis, the handling of a coming crisis can’t be the same. And it won’t be. The way Jim sees it, there will be a monetary reset…and those left holding fiat dollars may be the biggest losers. You can go here to read more now.

    Now it’s over to Jim. Read on for more…


    The ‘Last Hurrah’ for
    Central Bankers

    Jim Rickards

    We’ve all seen zombie movies where the good guys shoot the zombies but the zombies just keep coming because…they’re zombies!

    Market observers can’t be blamed for feeling the same way about former Fed Chair Ben Bernanke.

    Bernanke was Fed Chair during 2006–14, before handing over the gavel to Janet Yellen. After his term, Bernanke did not return to academia (he had been a professor at Princeton), but became affiliated with the centre-left Brookings Institution in Washington, DC.

    Bernanke is proof that Washington has a strange pull on people. They come from all over, but most of them never leave. It gets more like Imperial Rome every day.

    Central bankers pull the lever

    But just when we thought that Bernanke might be buried in the DC swamp, never to be heard from again…like a zombie, he’s baaack!

    Bernanke gave a high-profile address to the American Economic Association at a meeting in San Diego on 4 January. In his address, Bernanke said the Fed has plenty of tools to fight a new recession.

    He included quantitative easing (QE), negative interest rates, and forward guidance among the tools in the toolkit. He estimates that combined, they’re equal to three percentage points of additional rate cuts. But that’s nonsense.

    Here’s the actual record…

    QE2 and QE3 did not stimulate the economy at all; this has been the weakest economic expansion in US history. All QE did was create asset bubbles in stocks, bonds, and real estate that are yet to deflate (if we’re lucky) or crash (if we’re not).

    Meanwhile, negative interest rates do not encourage people to spend as Bernanke expects.

    Instead, people save more to make up for what the bank is confiscating as ‘negative’ interest. That hurts growth and pushes the Fed even further away from its inflation target.

    What about ‘forward guidance’?

    Forward guidance lacks credibility because the Fed’s forecast record is abysmal. I’ve counted at least 13 times when the Fed flip-flopped on policy because they couldn’t get the forecast right.

    So every single one of Bernanke’s claims is dubious. There’s just no realistic basis to argue that these combined policies are equal to three percentage points of additional rate cuts.

    And the record is clear: The Fed needs interest rates to be between 4% and 5% to fight recession. That’s how much ‘dry powder’ the Fed needs going into a recession.

    In September 2007, the Fed funds rate was at 4.75%, toward the high end of the range. That gave the Fed plenty of room to cut, which it certainly did. Between 2008 and 2015, rates were essentially at zero.

    The current Fed funds target rate is between 1.50% and 1.75%. I’m not forecasting a recession this year, but if we do have one, the Fed doesn’t have anywhere near the room to cut as it did to fight the Great Recession.

    I’m not the only one to make that point. Here’s what former Treasury Secretary Larry Summers said:

    [Bernanke] argued that monetary policy will be able to do it the next time. I think that’s pretty unlikely given that in recessions we usually cut interest rates by five percentage points and interest rates today are below 2%… I just don’t believe QE and that stuff is worth anything like another three percentage points.

    Summers goes on to call Bernanke‘s speech ‘a kind of last hurrah for the central bankers’.

    He’s right. But if monetary policy isn’t the answer, what does Summers think the answer is?

    Fiscal policy. The government is going to have to spend money directly into the economy instead of relying upon some trickle-down ‘wealth effect’ to stimulate the economy.

    Here’s what Summers said:

    We’re going to have to rely on putting money in people’s pockets, on direct government spending.’

    The next type of ‘fix it’ program

    Remember the term ‘helicopter money’? Milton Friedman coined the term 50 years ago when he made the analogy of dropping money from a helicopter to illustrate the effects of aggressive fiscal policy.

    That’s essentially what Summers is advocating. It might sound a lot like the idea behind Modern Monetary Theory, or MMT, but it’s not necessarily the same thing. MMT takes helicopter money to a whole new level, and Summers has actually been highly critical of MMT.

    But the idea of direct government spending to stimulate the economy is the same, and it’s gaining traction in official circles.

    There’s good reason to believe it’s coming to a theatre near you. And maybe sooner than you think.

    All the best,

    Jim Rickards Signature

    Jim Rickards,
    Strategist, The Daily Reckoning Australia

    PS: In a brand-new report titled ‘The Looming Aussie Recession and How to Survive It’, Nick Hubble reveals why a recession in Australia is inevitable and three steps to recession-proof your wealth. Click here to receive your free report

    The post Last Hurrah for Central Bankers: The Fed Trying to Stimulate the Economy appeared first on Daily Reckoning Australia.

    Posted: by Daily Reckoning Australia

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