Richard Mills, Ahead of the herd
Whether it's a Democrat or a Republican installed in the White House this November, you can count on fiscal discipline going out the window. Neither the incumbent, President Donald J. Trump, nor the leading Democratic contender to replace him, Bernie Sanders, appears to give a hoot about shoveling more onto the enormous pile of debt that a few months ago shot past $23 trillion.
Why does this matter? Because debt impedes economic growth . And just like a business, if a country isn't growing, it's dying.
Keep that in mind as we explain how the real problem with the US economy, and what is driving gold prices ever higher, is not the coronavirus (though Covid-19 is certainly making things worse), but the 500-pound debt gorilla that is sitting on Uncle Sam's chest, fattened by an all-you-can-eat buffet of dollar-denominated debt.
Let's start with the financial news.
Gold nears $1,700
A wild day on Wall Street Monday paired a US stock market rout with tumbling US Treasury yields, as gold pushed to new heights.
A risk-off mood that started building last week, due to the spread of the coronavirus and what that means for economic growth, continued to steer investors towards the safety of US government bonds and gold.
US equities slumped alongside stocks in Europe and Asia, after finance ministers and central bankers over the weekend warned the virus poses significant downside risks to global growth.
US Treasuries were a go-to refuge, with heavy buying pushing up bond prices and lowering yields. The 10-year note slid to 1.377% - its lowest since July 2016 - the 2-year ell to 1.287%, and the 30-year bond yield tumbled to 1.849%, Marketwatch reported. Bond prices and yields move in opposite directions.
The 10-year rate is important to watch, having fallen below the Bank of America's 1.4% "tipping point". When that happens, there is a greater than 50% probability the Federal Reserve will cut interest rates back to 0% from their current 1.5% to 1.75% range. A