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BFI Bullion
June 25, 2018

Don’t cry! Argentina Gets the Largest IMF Bailout in History

Every week, our friend ,David McAlvany puts out his weekly podcasts, like clock-work. If you have the time, it is certainly worth tuning in. The latest podcast, posted on June 12th, strikes us as particularly timely and relevant.

In this podcast, David asks: “Are we going to see the Fed walk the talk? Are we going to see the ECB step up and begin restricting and limiting liquidity? There are going to be consequences. Again, all the things that are overlooked in the short run, now all of a sudden come into high relief because – oops – everything is permissible in the world of Internet liquidity and low rates. But you do have to mind your Ps and Qs if the cost of capital is rising.”

He believes that we reached “one of those thresholds” last week: “On the table is the seventh increase in rates and you don’t have to look too far – consider the real estate market – just to illustrate the point. Mortgage rates have risen from a little over 3% to a hair under 5%. So, if you’re combining the high asking prices of real estate given supply and demand dynamics, and higher financing cost, you’re looking at affordability at this juncture which is setting records, not because it is affordable, because it is almost not affordable for anyone. Something has to give. At the same time, you have the ECB, the European Central Bank, meeting on the 14th this week, and that may be just as vital. So, this is a big week.”

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