Market Report 24th August 2020
A roundup of economic stories which caught my attention during the past week.
Covid-19 lockdowns and social distancing have played havoc with the US coin market to the extent they asked consumers to pay for whatever they can with coins. Due to lockdown and social distancing the US Mint are unable to produce enough currency coins and bullion coins for the markets to meet demand. A spokesman for the US Mint explains that normally there would be a certain amount of currency coins in circulation but with shops closed and services reduced customers are holding their coins and not spending them. An appeal went out for coins to be used to pay for good and services where possible or to pay with debit cards as businesses are unable to get sufficient coins to provide change when notes are used.
Cardtronics, one of the biggest ATM operators in the UK ask for the interchange fee between banks to be increased so it can increase the number of ATMs in its network. The fee was reduced from 28p to 25p reducing income for the company to provide services. As a result it has reduced the ATM network from 22,000 machines to 17,500. The company state there seems to be a push to remove cash from daily life and move people onto card transactions but that hits certain markets who are totally reliant on cash. The increase in the interchange fee would allow Cardtronics to install more ATMs and provide services to communities who are losing banking services through bank closures.
TSB Bank are trialling the closure of across counter banking services in 14 branches. The branches will stop accepting transactions from 2pm daily with the bank encouraging customers to use alternative ways to do their banking.
The Debt Bubble
In my blog, All Money is Loaned into Existence, I talk about economies being debt based and growing at an exponential rate. Latest data from Office of National Statistics (ONS) shows the UK money printing schemes to support the economy during lockdown has created debt levels in the trillions of pounds and debt is now at 100% of GDP. Other economies have followed suite. The question that remains now is how to get debt back to an acceptable level. Higher taxes and inflation appear to be the two key ways to make the debt appear more controlled. Higher taxes will help reduce the amount in money in circulation and inflation will make the debt appear smaller. Negative Interest rates are already being used as a tool to bring in extra cash.
graph supplied by ONS
Gold – continues its downward trend to a more realistic price level for the current economic situation as the “Feel Good Factor” (see blog Thursday 27th August) impacts the false economy. Gold is at US$1934 offering good investment opportunities before it starts the proper climb in price.
Silver – as always follows suite closing down at US$26.30 again offering good investment opportunities
Gold:Silver Ratio – is moving upwards again from a low of 70 to 71.97. This indicates silver is the commodity to buy at present offering the best value for money and when markets do move upwards again there is still plenty of leverage within the ratios
Although, Gold & Silver markets are correcting at the present the best way to be active in these markets is to have a plan to purchase the commodities on a regular basis. With the price being volatile it is unwise to invest large sums at present and a PCA strategy over the longer term will be cost effective and offer the best opportunities for future growth.
Oil – Warren Buffett sells his US$10 billion holding in Occidental Petroleum. He has bought the common stock to help fund the company’s expansion but the timing was unfortunate with the virus lockdown and crash in oil prices making it unviable for the company to drill for oil.
Carbon Footprint – sees a growing number of oil and gas companies looking at ways to measure and reduce their carbon footprint. This has resulted in a growing number of technology companies launching carbon emissions tracking and accounting software according to Reuters.