Feds Seek Huge Royalties from Gold Miners in New Crackdown / Commodities / Gold and Silver Stocks 2023
Fears of inflation remaining stubbornly high, andinterest rates going higher, rattled financial markets this past week.
On Wednesday, the Federal Reserve left its benchmarkfunds rate unchanged as expected. However, Fed chairman Jerome Powell left thedoor open for another hike in the near future. He also suggested rates may needto stay higher for longer than previously expected.
By Thursday, investors were fleeing from stocks andbonds. The S&P 500 broke down to a three-month low as long-term bond yieldssurged to their highest levels in more than a decade.
There were few places for investors to find shelter fromthe carnage except in precious metals markets.
Earlier in the week, crude oil futures ran up to a newhigh for the year above $92 per barrel. Oil prices pulled back following theFed announcement. Some commodity analysts still see the potential for crude toexceed $100 per barrel before the end of the year.
Americans are feeling the pain at the pump. Motorists insome parts of California are now paying over $6.00 per gallon to fill up theirgas tanks.
It’s not just an inflation problem. America is alsofacing a resource scarcity problem.
The Biden administration moved recently to crimp energyproduction out of Alaska by cancelling oil and gas leases on hundreds ofthousands of acres of land, this despite the fact that top elected officialsfrom Alaska as well as Native American groups opposed the move.
The administration has also drained America’s strategicpetroleum reserve down to a multi-decade low. Despite promises to refill it,America’s oil reserves continue to remain historically low,leaving the country vulnerable in the event of an emergency.
Russia announced this week that it will ban exports ofgasoline and diesel fuel to most countries, further crimping global supplychains.
Meanwhile, the U.S. continues to be dependent on Chinafor supplies of critical metals used in electric vehicles and othertechnologies. The Biden administration risks increasing that dependence bythreatening to impose royalties on metal producers operating under federal landleases.
The government is not able to collect royalties onminerals extracted from federal lands under a law that has been in force since1872. But the Biden administration wants to change that. It proposes taking an8% cut on the copper,gold, silver, and other metals extracted by miners.
At a time when the mining industry is already strugglingwith rapidly rising operating costs, government demands for royalties coulddrive some producers to operate elsewhere or significantly reduce their output.
Domestic mining and energy companies are also finding itdifficult to obtain financing under new regulations that discourage banks fromlending to carbon-emitting industries.
President Joe Biden claims that his policies are bringingdown inflation. But restricting domestic supply of resources does the opposite.It puts upward pressure on prices.
The administration seems to believe it can work aroundthe problem by aggressively pushing electric vehicle mandates and launchinggovernment programs aimed at transitioning the country to alternative energy. It is now launching a so-called “ClimateCorps” program that will create more than 20,000 jobs for people who aresupposedly going to combat climate change.
Whether they will have any measurable effect on globaltemperatures is in doubt. But the tensof billions of dollars they will receive in government funds will doubtlesslyadd to the national debt.
That debt just surpassed $33 trillion, by the way. Andnobody in Washington, Republican or Democrat, seems to have any idea of how topay it down. But servicing that debt is going to get a lot more expensivethanks to higher interest rates.
Individuals and businesses who face overwhelming debtburdens risk having their credit lines cut off if they don’t scale down theirspending.
The political class in Washington feels no such urgencyto get its finances in shape. That’s because it has access to a printing press.Even though the U.S. government’s credit rating was downgraded this summer, theFederal Reserve won’t hesitate to buy up Treasury bonds in unlimited quantitieswhenever the need arises.
Under our fiat monetary system, staving off a sovereigndebt default is always possible. But it comes at a cost. That cost is paidthrough the inflation of the currency supply and the resulting devaluation ofthe currency’s value.
The risk is that given prevailing fiscal and politicaltrends, central bankers may never be able to get inflation back down to targetagain.
By Mike Gleason
Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.
© 2023 Mike Gleason - All Rights Reserved
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