Financial experimentation continued last week with the US S&P 500 share index “levitating” to record highs in all main indices!

On Friday the S&P 500 finished bang on 2500 points, right on the close. Golf Clap.

Yep, no ICBM missiles, nukes, terror, crypto crash or dismal data is going to crash that party.

It’s a pity the same doesn’t happen in Australia! The All Ords here are truly all ordinary, trading mostly between 5750 and 5800 points for about 6 months now. We hope this proves to be a blessing in disguise.

The tug of war between economic fundamentals and the world’s central bankers continues in earnest.

One of this week’s headline themes reads, “Gold falls for the 5th day as investors prefer riskier assets”.

And why wouldn’t they!! The world didn’t end, Trump got the invisible debt ceiling raised and $150 BILLION per month of central bank emergency monetary stimulus is still enough to keep yields under control.

Today, there was news on the “rate hike” announcement tomorrow from the Fed: Markets now expect a 0% chance of a US Fed rate rise tomorrow.

Poor base economic data keeps this accommodation in place so all systems are go, right?

Certainly, trillion dollar US government deficits as far as the eye can see must be great news too.

Unfortunately, the chart below only represents a small part of a large problem. Matterhorn Asset Management recently placed global debt at closer to 240 trillion, Pension Liabilities at 400 trillion, Medicare obligations at 210 trillion and we’ve left out the 1.5 quadrillion of derivative obligations because some really smart people tell us “it all nets out”. Phew. Unlike 2008.

There may be some minor and/or major rounding errors in the above numbers but we’re pretty sure it still adds up to a lot of money.

Farce.

Why wouldn’t there be Peak Complacency at the top?

Enough with the commentary. It’s going to be an interesting next month or so.

Everything’s truly is, probably, awesome, so let’s move on.

This chart below helps us state another obvious, things are always changing, including China’s shaky 40 trillion dollar credit system that accompanied its amazing regrowth.

Does recent Silk Road, China, Oil and Yuan news bring us a little closer to calling time on USD Hegemony? We’d say yes but as it was when Rome wound down, it all happens slowly… at least we hope so (with peace too!)

Whether or not you agree with certain estimates above of global debt levels/obligations vs GDP, the one thing you could not disagree with is the amount of money printing/stimulus going to be needed to hold the thing together from now on, given what we’ve seen in last 8 years.

The larger the numbers get the more will be required, and so on. If what is being printed now keeps “recession” at bay, what will be required if we happened to meet one head on?

Are there enough arrows left in the central bank quiver to handle a possible GFC2? Of course there is. Don’t worry.

In fact, it’s not even a matter of whether or not there is enough, the enough, in this case, is infinite, in the wisdom of those pulling the levers.

It’s the consequences that will matter to investors.

History points to currency debasement (inflation) over reform every time. Time will tell.

On the gold front- paper rules, and in some most unusual ways.

Just check the Gold price perfectly mirroring the JPYUSD cross, as usual.

And again, and again and again (we’ll leave out further charts, we’re sure you get the message).

It’s a kind of magic, assisted by the Bank of International Settlements itself.

Like we’ve said before, that the price is “managed” is not debatable, it’s the why that should prick your attention. See comments above, “consequences”.

GATA has produced another smoking gun: ‘BIS Gold Swaps Soar from Zero to Record High’ (http://www.gata.org/node/17646):

Disclosures in the August statement of account published by the Bank for International Settlements indicatethat during August the bank increased substantially its use of gold swaps. An estimated 130 tonnes of new gold swaps were made last month, worth about $5.9 billion at the month-end gold price, and the total level of gold swaps at the end of August was close to 500 tonnes.

This is the BIS’ highest level of gold swaps recorded since the bank first reported the use of gold swaps in its annual report for the financial year ended March 31, 2010. A review of the previous use of gold derivatives by the BIS reveals that the transactions in the year ending March 31, 2010, were far more substantial than anything done by the bank in the years immediately before.

The use of gold swaps reported by the BIS in recent times is summarized below:
March 2010: 346 tonnes.
March 2011: 409 tonnes.
March 2012: 355 tonnes.
March 2013: 404 tonnes.
March 2014: 236 tonnes.
March 2015: 47 tonnes.
March 2016: 0 tonnes.
March 2017: 438 tonnes.

Click the GATA if you want to see more. Have fun, it’s probably nothing anyway…

Standby for a note on Cryptos. What an interesting space! So much to learn.