Buck Smashed, Metals Rally, and Bad News is Good News

There were two reports this week, plus the series I usually monitor:

• Consumer Price Index (CPIAUCSL): +0.18% m/m (prior +0.12% m/m); mildly inflationary.
• Producer Price Index (PPIACO): -0.04% m/m (prior -1.26% m/m); deflationary, declining-but-flattening; driven by energy.
• Fed Balance Sheet (WALCL): -1.4B (-0.02% m/m), prior -0.51% m/m.  deflationary; 2-year low.
• Total Bank Credit (TOTBKCR): -35B (-0.20% w/w), +0.18% y/y.  2008-level deflationary.

The increase in the CPI fell to an unexpectedly low level this month; +0.18% m/m instead of the expected +0.3% m/m.  The report released at 08:30 Eastern (Thursday) seemed to drive large rallies in gold, silver, and a plunge in the buck.  But prices on some items were moving well in advance of Thursday’s release.  Perhaps the banksters already knew?   Shocking, I know.  This would suggest that the government is corrupt – for sale to the highest bidder.

Bank credit continues to look horrific; I can’t understate what a calamity this is.  While energy = civilization, bank credit = monetary stability.  No increasing bank credit = a massive deflationary event is on the way.   Chart below shows two views of the same (TOTBKCR) weekly series; red line is absolute bank credit, while the black line is %change y/y.  Note: I picked my “line of death” (about 2.5% y/y) arbitrarily, and we are at +0.18% y/y. But look back at what happened in 2008 – that’s the only time the y/y change went negative.  The Fed “should” get nervous when y/y bank credit change drops to this level, but they are ignoring it, for now.  As for the absolute value of bank credit – it ticked lower this week by 35 billion.  Perhaps next week it will be in negative territory, on a y/y basis.  As you can see, this (red line) series very rarely goes negative for a full year.  But it is almost there right now.

And here’s the buck; it fell 2.34 [-2.30%] to 99.61, dropping through 100 for the first time since mid-2022.  The trends look very negative.  There was a relief rally in the buck on Friday [+0.15%], but the (daily) candle did not signal a reversal.  Maybe it was just the banksters ringing the cash register after a fantastic short week?