Gold and Miners Soar to All-Time Highs, Fed Rate Cuts Appear Imminent

Consumer Economy

ISM Services Index 50.1 (prior 50.8)
Total Vehicle Sales (TOTALNSA); 1.41M +115K (+8.98% m/m)

I changed the auto series I track this month – I found the total vehicle sales series at FRED (auto + light trucks + heavy trucks). The total vehicle sales (black line) are actually doing reasonably well.  What I thought was interesting: Americans switched to buying more light trucks (red) instead of autos (blue) just after 2000. I put all the series through an MA12 to smooth out all the bounces.  You can see the “recession-that-wasn’t” in the black line dip-down back in 2022.  Things look better now – mostly not recessionary.

Credit & Rates

Fed Balance Sheet (WALCL); 6.64T -1.7B (-0.03% w/w)
Total Bank Credit (TOTBKCR) 18.60T +15.0B (+0.08% w/w, 4.16% annualized)
30 Year Mortgage Rate (MORTGAGE30US); 6.63% -9 bp
10 Year Treasury Yield (DGS10); 4.29% +6 bp
20 Year Treasury ETF (TLT); 87.29 -0.60% w/w

This week’s scouting report on bank credit gives a great detailed explanation why I monitor Total Bank Credit every week, and why I say it needs to expand by at least 5% (annualized) or “things are gonna break.”  In aggregate, banks have to increase total loans in order to generate enough cash to pay the interest on the debt that’s already out there.  The monthly series (LOANINV) goes back to the 1940s and shows how “insufficient credit” tends to result in recessions.  Note that the chart lags, since its y/y % change, which means the drop in bank credit tends to show up late.

We should have had a recession two years ago (when bank credit dropped below 0%), but “something happened” (Ed Dowd thinks: 15 million migrants were given cash by Biden-Autopen) to keep things afloat in spite of the bank credit contraction.  Right now, bank credit remains “too low”.

Are recessions the goal of this structure, so the Oligarchy can periodically buy stuff cheap?  Or are they just what happens due to a cycle?  If banks couldn’t print money out of thin air (by “loaning” it into existence,) would we even have a 4-7 year “business cycle”?