Something May Have Blown Up Already In The Financial System

Something May Have Blown Up Already In The Financial System by Dave Kranzler for Investment Research Dynamics

The price of gold ran higher eight days in a row before today’s interventionist price smack. Technically, whatever that means, the gold price was likely due for a healthy pullback anyway. The price of gold is responding to what appears to be the Fed’s decision to begin cutting interest rates, though maybe not at the June meeting. Also, the Fed’s Jame Bullard commented that a $3 trillion Fed balance sheet should be considered the “new normal.” This means that close to 75% of the QE program was outright money printing.  Hello Weimar-style printing, so long U.S. dollar…

In 2007 the Eurollar futures curve was steeply inverted by late summer 2007. Back then Ben Bernanke assured the world that “subprime debt was contained.” In truth, it was already blowing up. Currently, the Eurodollar futures curve inversion is steeper now than it was in 2007 (graphic from Alhambra Investments, with my edits).

Silver Doctor’s James Anderson invited me to be his debut guest from his new perch in Panama. He had just set up his office rig and the internet connection was a bit choppy.  But we chatted about why the various inverted yield curves and the recent rise in the price of gold may be telling us that the brown stuff could already be connecting with the fan blades in the financial system. Here’s the link: Something Has Blow Up In The Financial System or click on the video below:

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Dave Kranzler

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics. Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.