March 25, 2020 - (Gold Market Wire) - The big talk around the now stay-at-home market is, of course, the $2 trillion stimulus and spending package that has been agreed in Congress..and why, given all the largesse that it entails, including the creation of new funding facilities for corporations, the US Dollar has remained stubbornly strong. Money – US Dollar money - is being readied to be poured in the economy with type of liquidity reserved for new oceans, and still the dollar remains strong. Just two weeks ago cable (GBP/USD) was at $1.32 and now we're at $1.17. That is simply a breath-taking move..and another $2 trillion slushing around has done nothing to stop it. Ditto the Euro (although not in the same extremis) –  now flirting with major support in the 1.035-1.05 band.

The Fed has launched what amounts to QEternity...and still, the demand for dollars internationally – keeps right on rising. There is so much demand now that some European countries are considering holding US Dollar auctions. The bare fact remains that the US Dollar and its Dollar-based debt markets are now the only place where money can park and funding can be had. Part of this is because the other two “serious” currencies in the world, the Yen and the Euro, no longer have functioning debt markets.

The Euro is especially problematic because its negative rates mean that parking money ends up essentially being taxed. Nobody in the world wants to hold Yen based debt securities – i.e. JGBs -  which is why the Japanese government buys everything. At zero %... the lower bound is dead on the ground. Are the Euro and Yen, with their now moribund government debt markets - seemingly open only to the issuer - the first 'tell' that the era of Central Banking is coming to an end? The US Federal Reserve is now the last man standing, it seems.

So, Dollar denominated debt issuance has soared, because no one wants to be holding the proverbial bag when the Euro implodes or disappears off the face of the earth. The Reminbi is subject to all sorts of political machinations, including trade wars, that could could cause instability... so large-scale debt issuance in it is limited too. Then, if all that wasn't enough, the talk that the Euro could be digitized has frightened everyone, because people now fear being locked into a digital Euro that will be promptly devalued, diluted and bailed-in when its teetering banking system, which is in truly horrific condition, finally fails.

That leaves only the dollar.

People are starting to wonder exactly what purpose Central Banks serve, if rates are at 0% and monetary stimulus does nothing anymore. And why, exactly, do nations issue debt - - just to buy it all themselves?

The other leitmotif in today's market is that Washington's 'resolution' comes at a large political price – that of an ever divided country. If households get $1,200 each, where is that money supposed to go? To pay off student debt and credit cards? While Airline CEOs, who were making $10 million per year, are demanding a government bailout, ordinary citizens are becoming exasperated. If airlines are so 'essential' to the economy, and are suddenly to be considered a 'utility', why are their CEOs making that kind of money? If taxes go up to fund the stimulus/bailouts, what good is the $1200 hand out going to be? Washington is playing with fire. The 2009/Paulson bailout is still fresh in everyone's mind. Is this to be a regular occurrence? Are we driving towards full corporate socialism?

On the Gold front - the market has been rocked by a $100/.oz price spike yesterday that seemed to be the result of a combination of refinery shutdowns in Switzerland and the loss of price discovery in the London market. People are claiming that the different delivery spec (between London/New York) was the reason for the spike, but that is just too convenient. When New York opened, the spike ended. That is telling.

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