• Daily Digest

    Daily Digest 9/4 – The Last Act of the Human Comedy, What Would It Take To Pay Off IL’s Debt?

    by Daily Digest

    Wednesday, September 4, 2019, 7:00 AM


Down, down they go: Emerging central banks deliver most rate cuts in a decade (Saxplayer00o1)

Interest rate moves by central banks across a group of 37 developing economies showed a net fourteen rate cuts last month – the largest number since policy makers ramped up measures to kickstart economic growth in the wake of the financial crisis.

What would it take to pay off Illinois’ debt? (Saxplayer00o1)

That leaves the state with $194.2 billion in unfunded liability. With an estimated state population of 12.7 million people, it would cost each person roughly $15,291 to pay off the state’s unfunded liabilities.

Positive yields ahoy! Investors hoover up European junk bond issues (Saxplayer00o1)

With much of the European bond market now in negative-yielding territory, investors are being forced down the credit spectrum – allowing the likes of Smurfit Kappa and Thyssenkrupp to price deals at levels rarely seen before.

Packaging firm Smurfit Kappa caught the eye with its plans to sell 750 million euros ($835.80 million) of eight-year bonds at 1.5%, some of the lowest yields clocked in the European junk bond market for a new issue, particularly for one of such a long maturity.

Central banks are locked in currency wars they cannot win (Saxplayer00o1)

Yet, if the domination of negative yields is sustained, companies will surely focus on bond markets rather than equity markets. Why, when you can be paid to borrow, would you look to public offerings instead?

This would create a unrecognisable environment: the pipeline of investible public companies could essentially dry up. Unviable companies would be granted extended lifelines, propped up by high valuations solely based on record low debt rates.

Low interest rates are compounding the big problems facing pension funds (Saxplayer00o1)

Public pension plans are underfunded — with an average funded status of 72.1% across the 100 largest public pension plans, according to the 2018 Public Pension Fund Report by actuarial consulting firm Milliman. While the funded status has marginally improved from about 71% in 2014, the dollar value of underfunding has increased from approximately $1.13 trillion to about $1.14 trillion in that time.

Negative Interest Rates Threaten the Financial System (Saxplayer00o1)

In other words, the fractional reserve banking system is leveraged to interest rates. This works when rates are positive. Loans are made and securities bought because they will generate income for the bank. In a negative rate environment, the bank must pay to hold loans and securities. In other words, banks would be punished for providing credit, which is the lifeblood of an economy.

Rich people are hoarding cash, and wealth managers are getting frustrated (Adam)

Wealth managers do not like this trend, for understandable business reasons. Swiss banks in particular, where interest rates are negative at -0.75 per cent, have been passing on these rates to clients with high cash balances. Credit Suisse and UBS had held fire, but recently said they would have to start passing them on, too. If rich people do more with their money — investing in private equity or other alternative assets, buying property or even regularly trading equities, for example — wealth managers make more money from them.

The Last Act of the Human Comedy (Don R.)

And yet, no more than 3% to 5% of the population need be engaged to challenge despotic power. This means, first, naming and accepting reality. It will not be easy. It means grieving for what is to come, for there is certain to be mass death. It means acting, even if defeat is certain, to thwart those who would extinguish us. Extinction Rebellion plans to occupy and shut down major city centers around the globe in October. This is a good place to start. By defying the forces of death, we affirm life.

Australia Wants Two-Year Prison Sentences for Paying More Than $10,000 in Cash (thc0655)

In Australia, they want to make it a criminal act with a penalty of 2 years in prison for purchasing anything with more than $10,000 in cash. Australia is really going off the deep end. They are desperately trying to eliminate all cash and are forcing people to have only bank accounts so they can tax them as they like. This ensures that when there are bank failures, they can just confiscate the people’s money to save the bankers. Australia began as a penal colony, and they seem to retain that idea that the people are really criminals in their minds and are not entitled to their own assets. This also explains why non-Americans are starting to hoard US currency around the world.

Gold will be explosive, unlike anything we’ve seen says Canadian billionaire Frank Giustra (Herman J.)

“I think we’re in the third and final phase of the gold market that’s started in 2001, and this will be the most explosive phase for gold,” Giustra told Kitco News.

Tesla Just Made a Huge Announcement That May Completely Change the Auto Industry. Here’s Why It’s Brilliant (Thomas R.)

Even if Tesla held fast with their decision not to use this data in connection with its insurance offering–and they’d be crazy to do that–what’s to prevent other automakers from doing this down the road?

Of course, I completely understand why Tesla doesn’t yet indicate it will use this treasure trove of data. Just because the technology is there, doesn’t mean people are ready for it.

Putting the ‘nuclear coffin’ in perspective (newsbuoy)

Runit Dome, which is located on Runit Island—one of 40 islands that make up Enewetak Atoll—was built in 1977 as a temporary measure to contain some of the radioactive material left behind from the bomb explosions, some of which were one thousand times more powerful than those that destroyed Hiroshima and Nagasaki. The U.S. Army bulldozed more than 100,000 cubic yards of contaminated soil and debris into a bomb crater and capped it with hundreds of 18-inch-thick concrete slabs. From a Google Earth perspective, the massive dome looks like something out of science fiction, and completely out of place against the expanse of paradise around it.

Gold & Silver

Click to read the PM Daily Market Commentary: 9/3/19

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

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One Comment

  • Wed, Sep 04, 2019 - 1:37pm



    Status: Bronze Member

    Joined: Apr 29 2009

    Posts: 364

    Peak Australia

    Methinks Mr Armstrong catastrophises a bit too much.

    I agree that TPTB are indeed manoeuvering to abolish cash in Australia and it seems that too many of the GP don't see any problem with that. The PP crowd and others do see the ramifications.

    There is quite a division between codgers like me who prefer to pay with cash as far as possible, and young things who pay by waving their cards and phones, even for miniscule purchases. Some shops won't take cash, even though it is (still) a legal requirement to do so.

    On the other hand, in my entire life I would never, ever have wandered the streets carrying even as "little" as $500 in cash. That's just plain foolishness, always was, even in relatively benign times. Prior to EFT, one way to make a large transaction was to purchase a bank cheque. These were relatively inexpensive, as good as actual cash and acceptable everywhere. Or you simply made arrangements with your bank to pay with a personal cheque. No biggie.

    His snipe about Australia having started as a penal colony (after having invaded the continent and ravaged the successful Aboriginal civilisation) overlooks the tremendous social and political progress that the people subsequently made when given a new start in a new setting. Australia was ahead of the game in a number of political reforms.

    But yes, too bad that our current governments, both federal and state, are all showing the signs and symptoms of creeping fascism. So in that political reform we seem to be keeping well up with the rest of the field.

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