Libertarian? Melei asks Uncle Sam for a Bailout
From Almost Daily Grant’s,
The Trump administration’s asset price-minded, E-Z money push has already ushered in a major adjustment in a certain yellow metal, with the price of gold logging more than 30 daily record highs so far this year on its way to a 40% gain. That heady move has roused the heretofore-sleepy mining complex to the tune of a 110% year-to-date rip for the NYSE Arca Gold Miners Index.
That gauge, which finally broke above its 2011 highs on Sept. 5, has tacked on 8% of upside over the past two weeks (including a 4.5% advance today). Underscoring the group’s potent momentum: VanEck’s Gold Miners ETF saw its Relative Strength Index top 70 – signaling overbought conditions on a technical basis – for 13 consecutive sessions earlier this week, the longest such streak since the vehicle’s 2006 inception, according to Bloomberg.
Yet on a fundamental view at least, the sector is hardly out over its skis. Global mining firms are now collectively valued at $550 billion according to analysts at Bank of America, equivalent to 0.39% of worldwide stock market capitalization. That’s roughly equivalent to the ratio logged five years ago and far below the 0.71% seen in 2011. “We wonder,” muses the BofA team, “if the current cycle were to continue for a sufficient period of time, could the 0.71% [ratio] be seen again? It seems possible in our view.”
Meanwhile in Argentina, Anarchist/libertarian heartthrob Javier Melei is looking for a very un-libertarian bailout from Uncle Sam. In what amounts these days to an official communication on X Secretary of the Treasury Scott Bessant wrote, ““These options may include, but are not limited to, swap lines, direct currency purchases, and purchases of U.S. dollar-denominated government debt from Treasury’s Exchange Stabilization Fund,” the Wall Street Journal reported. He said the administration continues to think “fiscal discipline and pro-growth reforms are necessary to break Argentina’s long history of decline.”
Brad Setser, a senior fellow at the Council on Foreign Relations, said that it would be “incredibly unusual” for the U.S. to help Argentina by itself. These things are usually done in coordination with the International Monetary Fund. Mexico was the last nation the US helped financially. Setser says throwing money at Argentina will be much risker than the Mexican bailout given the South American country’s weak currency and the large amount of debt the country owes.
The WSJ reported, “Last week, Argentina’s central bank dipped into its already depleted reserves to sell more than $1 billion of the U.S. currency over three days to defend the peso, which had weakened to the upper limit of its currency band.”
What’s a person to do about all this? See above.
