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Economic Crisis News 2015-05-15

China has been lowering their interest rates repeatedly in the last 18 months. China has lowered its 1-year lending rate to 5.1% recently, this means China is easing their financial policy even though their stock market is rallying already. Economic markers for the Chinese economy show clear deceleration.

OilPrice.com reports that china had a near monopoly on Rare Earth Element production in 2010 at 97 percent but it has reduced to only seventy percent today.

Precious Metals

Silver is up about double percentage-wise compared to gold with both climbing steadily at precisely the same rate from a week ago with Gold now over 1,220 per ounce and silver over 17 dollars 40 cents. Platinum is up with Palladium down. For the last 6 months Platinum has slumped 6.5 percent and Palladium just 2.2 percent, whereas both gold and silver were up for the same time frame.

US

US Stock markets rallied Thursday; the Dow closing just 36 points shy of a new all-time high and the S&P 500 actually making a new closing high. The Nasdaq was within 1% of it’s all-time high which occurred just 3 weeks ago anyway. This kind of action does not make sense with the fundamentals like the approaching debt crisis in the US.

Debt Crisis in Puerto Rico

Teetering on a default that would reverberate across the $3.6 trillion dollar municipal-bond market, the government is rushing to complete a restructuring deal before a $416 million dollar payment coming due July 1st that could force a shutdown. To avoid this they want to raise taxes instead of cutting spending.

Puerto Rico has a debt load of around $72 billion dollars, nearly three-fourths of their GDP. Over the last five years, the island of just 3.7 million has closed 150 schools because of the crisis. The government warns it may have to close up to 600 of the remaining fifteen hundred schools by next year. Their population is actually down 8 percent in the last 15 years.

Puerto Rico, being a territory of the United States, is just an example of the larger problem the US government is facing. US Bond yields hit a 6-month high at over 3 percent for 30-year bonds.

Greece

Wednesday we reported that Greece took extraordinary measures to make their latest IMF payment. Now we look to June 5th & 12th for when the musical chairs game could come to an end.

Oil

June 5th is also the next OPEC meeting, we expect no major cuts. Oil is now 60 dollars a barrel for WTI and 67 dollars for Brent. If there is a cut we could see 65 to 70 dollar oil; without a cut we may see 55 to 50 dollar oil as a production cut may be somewhat priced in at this point.

Bitcoin

In Digital Currency news, the Bitcoin Investment Trust is finally being traded on the OTC. The current price is 45 dollars for a share of GBTC which is supposed to represent a tenth of a bitcoin unit. This would price bitcoin at nearly twice the current value. GBTC shares cannot be redeemed for real bitcoin. The upcoming Winklevoss symbol COIN however will be a redeemable bitcoin ETF.

Something interesting to note regarding the growth of the bitcoin infrastructure is SoundCloud is now integrated with ChangeTip meaning you can send or receive bitcoin with podcasters and artists on the SoundCloud platform now.

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