WAR/MASSIVE DEFECITS/TROOPS ON THE STREETS IN THE US = VIX AT ALL TIME LOWS

 

If you looked at the chart above of the volativlity of the SP 500 you'd have to conculde that there were almost no risk on the horizon either politically, militarily, or financially to the US stock markets.

And with almost no prospect of risk of any kind, Gold is still very near all time highs trading around the $3400 mark.  That's an increase of $800 since the new US political regiem has taken power.  So far this move has been largely driven by foreign central banks seeing and protecting themselves against risk.  And the US billionaire class is also sees risk and is buying gold (check out ther services of Matterhorn Asset Management for example.)

But the average US investor still sees no risk.

Yet, it seems that there are risks.  Troops are fighting US citizens on the streets of the largest US cities.  War is intensifying in Ukraine,  War has broken out between Israel backed by the US and Iran - fully backed by China and Russia.  Iran's defenses are far more sophisticated than what we are being told in the Regiem sponsored media.  This war is also intensifying with "surrender" or "regiem change" being held up unrealistically as probabilities.  Yet the real probability is that this war goes on and on and metastacizes.

And then there is the debt storm with Debt Service being the largest portion of the current budget - and with an additional 5 trillion dollars of debt and an complete suspension of the debt ceiling being proposed as economic balm.

Everyone from Jamie Dimon to Ray Dalio to James Grant to Michael Pento to Neil Howe to Jim Rogers to Grant Williams to etc etc is warning that a debt bomb is in the process of detonating.  

Perhaps they are all wrong.  Still it seems that the must be some risk in the debt.  More than is reflected in the Vix' all time low reading.

The reason for this, of course is that eveyrone expects at the first sign of trouble the Fed will come in and bail everyone out.

And of course they will.

But the Fed's balance sheet is still at about 7 trillion dollars from previous bailouts.

How much bad debt does the Fed have to swallow before the US dollar plummets dangerously in value?

Is there no risk there?

When all these risks begin to be factored in to US investor calculation, gold will make the next move in this epic bull market.

GOLD: TRADING ON MATH VS TRADING ON SENTIMENT

 

If you trade stocks, you're trading sentiment.  First and foremost.  Yes, you're trading on earnings and innovation and brand.  But all of that is entirely dependent on sentiment.  For. stocks, sentiment is at all time positive highs right now.  And that is after 15 years of positive sentiment.  So positive sentiment has become firmly entrenched and things like Earnings multiples and disposable income really don't make any difference to anyone.

If you trade gold, all that matters is math.

For example, the trade deficit is just the sum of all goods and services purchased abroad.  That's math.

And the amount of the trade deficit exactly equals the amount of the capital surplus. In other words: The amount we puchase from abroad equals the amount of dollars we sell abroad.  That's math.

You can't say, "well we'll purchase less goods but keep selling dollars."  That is a nonsense sentence.

For gold, when we stop selling dollars abroad, that is exactly that amount of dollars NOT BEING USED BY OUR TRADING PARTNERS TO BUY OUR FINANCIAL ASSETS.  ESPECIALLY OUR DEBT.

That erodes the buying power of the dollar proportionally because we can not service our debt by that amount.  So we have to buy that debt ourselves with printed dollars.  That erodes the value of our currency.  And it sends rates higher.  Which makes our debt even more expensive to service.  Which erodes the value of the currency.

Over time, gold must appreciate by that amount that the currency is depreciating.

That's a math trade.

The same with the Budget Deficits,  When a big budget bill adds 5 trillion dollars to the debt over time.  That erodes the purchasing power of the US dollar proportionally.

Over time gold will appreciate by that propotional amount.

That's a math trade.

Of course, you can make up fantasy stories like "When you cut people's taxes you actually get more tax receipts so you can run a bigger deficit and it will get paid for."

That's just a story.  It's a type of sentiment.  So stocks can take comfort from it even though it's not true.  Stocks may rise on it.

Gold only moves because of math.  So that story will not keep gold from rising as the currency depreciates.

Of course, when the retail buyer plunges into gold, as happens periodically, gold can get a sentiment boost.  But ultimately it will fall back to reflect the purchasing power of the underlying currency.

This is because all the central banks of the world know more or less how much they are debasing their currencies and they purchase gold to protect the value insofar as they are able.

In that way gold has held it's value over that last 5000 years of human history.  

To be clear human history is only 5000 years old.  That is not to say gold wasn't used before that by civilizations.  It was.  We know that from paritially deciphered languages,  But languages we undersand (History) going back to Ancient Phoenician (1000 bce) Ancient chinese (2000 bce)  Ancient Egyptian (3000 bce) and Ancient sasnskrit (3500 bce) all record the use of gold as the monetary metal of choice.

Once upon a time, silver was also used as a monetary metal.  But that was back before financialization created so much debt that only gold had a sufficient value to offset the value of the debt,  That is why the value of gold is now 100 times the value of silver rather than 10 times.

Of course, if sentiment turns completely against a currency because faith in the government that issues it erodes irrecvocably, then the value of gold can soar to any level.

But that is because the value of the currency crumbles.

It is still a mathematical relationship.

HOW TO INVEST IN GOLD

If you're reading this you're probably already on the gold train.  However, there's a lot of confusion even among long time gold investors about the best way to protect yourself with gold.

Here's the salient point about this particular gold move in this particular economy:

CENTRAL BANKS ARE BUYING BULLION.  AND THEY ARE EVER INCREASING THEIR PURCHASES.

YOU SHOULD TOO:  CENTRAL MINT GOLD COINS AND BARS.  US EAGLES.  CANADIAN MAPLES.  KRUGERANDS.  PHILHARMONICS.  ST GAUDENS.  LIBERTYS.  SOVEREIGNS.  FRENCH ROOSTERS.  ETC.

Ther corallary to this: CENTRAL BANKS DON'T BUY GOLD STOCKS.  CENTRAL BANKS DON'T BUY SILVER.  

That's not to say you shouldn't.  Maybe you know a lot about gold stocks and silver shortages etc etc etc.

But Gold Bullion is the only TIER ONE CENTRAL BANK RESERVE ASSET other than the US Dollar Denominated Debt (and possibly Bunds.)  

So don't overthink this one.  Just do what the central banks of the world are doing because they have driven this entire gold move.  Asian private citizens also buy gold.  European private citizens are buying gold now.  US citizens are not.  Eventually they will.  So that is alot of money that has yet to come into this market.  

Maybe some will rotate into gold stocks or silver,  Maybe not.

But follow the central banks.  They get that debt levels are such that they must Inflate or Default.  The only thing that will protect the value of thier currency is Gold Reserves.  So they are buying.

That is the only thing that will protect the value of your asset base.

After you have a satisfactory level of bullion, you should consider a pure a leveraged play on bullion:

That is bullion based collector coins: PERUVIAN 100 SOLES.  FRENCH 5 FRANC SOWERS.  BRITISH 5 SOVEREIGNS and BRITISH MASTER ENGRAVER RESTRIKES.. FRENCH GOLD ANGEL 100 FRANCS.  These are all bullion issues of relatively short prints that have already increased in gold in high grade.  Some of these now sell at 2-3 times bullion.  Five years ago they all could have been bought at bullion prices.  More recent issues of very low mintage can still be bought very near bullion.  So the risk is still very low on those issues that hevent yet caught on.

From there you can move back in history.  Fifteen years ago Alexander Thet Great Gold Staters from 300 BC could be had for 3-4 times bullion in lower grade.  Now they are worth much more.   But there's still room for profit if you know what you're doing. 

But this is a specialized market.  It takes expertise.  If you don't have any expertise - stay away.  

And start with bullion.  And if you just stick with bullion you'll be fine.

GOLD'S ROBUST YIELD

 

The stock jockey rationale against gold is that it has no yield.

This is a misunderstanding of yield.

A financial yield is the income an investment generates over a period of time.  Gold's current yield this year is 25 percent.  Last year it was 27 percent.  That's pretty good.

A 10 year treasury yields about 4.5 percent and is trending higher so the price of this invesment is trending lower.

In a booming economy that yield might be indicative of economic health and might signal less of the need for gold - especially if the debt situation was well under control

In an economy that is currently growing beneath the 1 percent trend growth - this yield is indicative of debt market that is nervous - perhaps frightened about the health of the underlying currency.  Especially when the debt has exploded to 125 percent of GDP and is trending rapidly upwards.

Then the 4.5 percent yield (trending higher) is indicative of a powerful need for Gold as a hedge against debt and currency instability.

Because that's what gold is: AN INSTABILITY HEDGE.  In debt crisis gold is the only monetary hedge.  And make no mistake, by massively increasing our debt (the big burdensome bill) and incentivizing other countries to dump our debt (that is what Tarrifs do when you have the reserve currency, and that's math not opinion) we are rushing head first into a debt crisis.

Throw in a chaotic trade war that has already destabilized the global economy and you have a global rush out of US debt and into GOLD.  

To be sure, gold has appreciated 8 percent a year since 2000 while stocks have appreciated 7 percent.  

But with stocks trading a record multiples and the stock mania at all time highs (as measured by the VIX and by the percentage of stocks that make up the net worth of the US invsestor) while US and Global GDP are trending down towards zero with Global Debt at 300 percent of global GDP, and you have a recipe for massive financial instability wherein the gold price can only move upwards both in real and relative terms.

And with gold currently returning about 25 percent - that seems like a worthwhile yield - as a reward for moving into the ultimate safe haven investment.

Big Burdensome Boondoggle

 

The US Congress is fighting hard to add 5 trillion dollars to the massive fiscal deficit plaguing the debt soaked economy our children will inherit.  

That's on top of the 2 trillion dollars a year they are spending now - (not counting the 100 trillion dollars of of off budget unfunded liabilities that gernerations have paid into - but which has already been spent by our profligate congress (social security, medicare.))

What about Doge?  Oh yeah they saved 60 billion dollars by cutting all spending on Science (who needs clean air and water and food - if you're a billionaire you can live on top of a mountain in Aspen and drink mountain stream water and have your foie gras flown in). 

But congress has been spending like this for the last 50 years - so what's the probelm?

Here's the problem: Congress had a 20 percent Paul Volker interest rate to cut every time the economy slowed.  That lasted a good 50 years.  Now,  that is gone.  

And Congress had a globalized economy wherein we were happy to sell our dollars all around the world so that our trading partners could subsidize our debt thus keeping rates low (the Capital Surplus that is the other side of the balance sheet to the Trade Deficit).  That is gone.

Now, as the economy slows with real rates negative (under the cost of real inflation) and with nobody to buy our debt but the Fed or the US banks subsidized by the Fed (same thing) - all we can do to fight a slowdown is flood the economy with printed dollars and thus create MASSIVE INFLATION.   

And here's the dirty little secret about inflation: things only get more and more expensive relative to disposable income.  The INFLATION RATE that the government prints is not a meausre of inflation but the the rate of change of inflation (by their anemic measures.  In fact the BLS has been ordered to make sure their inflation prints are in line with the Regime's projections)   But all the inflation that's occured the last 50 years is STILL THERE.  It's simply growing at a faster or slower rate.  

Nothing will ever be less expensive than it is now.

And that includes the interest payment on the US DEBT.

And that is why even as the economy slows long dated treasury rates are rising and the dollar is sinking.

That is the behavior associated with  an emerging market economy.  Not the Reserve currency economy.

All the central banks of the world have noticed are dumping dollars and buying gold. 

Maybe you should consider the strategy.

Is gold expensive? S&P 500-gold ratio historical performance: The big picture:

 

THE CAPITAL WAR: WHO WILL WIN?

 

Everyone's  talking about the Trade War.  The fact is nobody wins a trade war.  Some lose more than others.  It's fun to talk about who loses most.  But that's not what will change the economic world.

What will change the economic world is the Capital War.

What is the capital war?

It is the other side of the coin of the trade war.

When you buy a good or a service you are also SELLING A DOLLAR.

The US has been selling its dollars all over the world for the last 50 years.  And we have been running huge CAPITAL SURPLUSES.

This is the heart of American Excetionalism.  

Why?

Because we have the reserve currency.  That means when all the other countries buy our dollars they use them to turn around and BUY OUR DEBT,   Because our debt is a Tier 1 Capital Reserve Asset.  

This underwrites our huge debt.  It also provides liquidity to the huge Eurodollar debt market.  And it keeps our rates low so we can refinance our debt cheaply.  AND When we sell our dollars we get cheap well made goods it return, which keeps our inflation rate low.

And most important: it provides tremendous liquidity for all dollar denominated Debt Markets.  

Without this liquidity the potential for a global debt crisis becomes dangerously high.

If liquidity dries up in the debt markets the only response is a massive infusion of printed money by the global central banks.  This will be highly inflationary.  Great for Gold.  Great for the super wealthy who own most of the hard asset market.  Not so good for everything else.

The US Capital Surplus (the other side of the Trade deficit) has been the single greatest Deal in recent economic history, bringing unpredcedented prosperity through unprcedented global liquidty.  That is why evey administration for the last 50 years have engaged in it.

Unitl now.

Now are undoing this deal.  

Why?

To bring back manufacturing which is only 20 pecent of our economy and will go to automated factories over the course of the next 20 years so few  jobs will be  created.

Doen't seem like a good trade.

Especially since now GOLD is also a TIER 1 reserve asset.

So now we are agressively demanding other countries not buy our dollars and thus not buy our debt.

And they are obliging.   

So what do they do with their excess capital now?

Well, they buy the only other Tier 1 reserve asset: GOLD.

HOW TO VALUE GOLD?

Now that gold has broken out into new all time territory the question remains: How do you  value gold?

How high can it go? 

How far can it fall?

Is it fairly valued here?

You can not answer this question without understanding the very first principle of gold valuation: 

GOLD NEVER MOVES.  THE PRICE OF GOLD OVER TIME IS ABSOLUTELY CONSTANT AND HAS BEEN SO FOR THE LAST 6000 YEARS OF HUMAN HISTORY from about 3500 BCE to about 1973 AD.

What moves NOW - since 1973 -  is the purchasing power of the Reserve Currency; the US dollar.

THE US dollar's stability was originally  pegged A) to NATO and B to the Petrodollar, the two underpinnings of a unipolar world.   Furthermore the US Treasury was the reserve asset of choice in a world wherein the US ran a trade deficit and a fiancial account surplus, which enabled other countries to keep buying our debt and financing our liflestyle.

At the same time the dollar's stability was regulated by the LBMA and COMEX.

NOW: NATO is dead.  The Perodollar is all but dead.  The US has weaponized Treasuries so nobody wants them anymore.  The world has become multipolar.  And the LBMA and COMEX have been neutured by stand for delivery Contracts as the world's reserve banks sell US Treasuries and load up on gold.

At the same time the US debt has spiraled completely out of control.

And it is a about to get much worse with a new round of tax cuts.

The "savings" from geting rid of some government workers will add to the debt as they will all have to go on the dole rather than providiing essesntial services.  And if there is no dole, the savings will simply go into "Sovereign wealth funds" which buy Crypto and other useless assets.

So in this new world what is the value of GOLD?

Nobody knows.

All you can know for sure is the direction things are moving.

And right now things are spinning faster and faster towards a world where nobody want Treasuries (except domestically as a short term hedge against recesssion) and everybody wants Gold.

Invest accordingly.

POP QUIZ; ANSWER THIS AND YOU WILL UNCOVER THE SECRET TO INVESTING:

 

QUESTION:  WHAT ARE  THE TIER ONE RESERVE ASSETS THE GLOBAL CENTRAL BANKS ARE ALLOWED TO HOLD UNDER BASEL 3? 

ANSWER:  US TREASURIES AND GOLD

QUESTION: UNDER THE CURRENT ADMINSITRATION WHICH CENTRAL BANKS ARE ADDING US TREASURIES AS THEIR TIER 1 RESRVE ASSET:

ANSWER: ONLY THE US CENTRAL BANK

QUESTION: UNDER THE CURRENT ADMINISTRATION WHICH CENTRAL BANKS ARE ADDING GOLD AS THER TIER 1 RESERVE ASSET?

ANSWER: CHINA, RUSSIA, POLAND, INDIA, GERMANY, FRANCE, AUSTRIA, INDONESIA, ITALY, SWITZERLAND, NETHERLANDS, THAILAND, SAUDI ARABIA, KHAZAKSTAN, UZBEKISTAN, TURKY, SINGAPORE, UAE, EGYPT, QATAR, BRAZIL, VENEZUELA, CHILE, ETC ETC ETC

NOW WORK INDUCTIVELY AND FIGURE OUT WHY THIS IS SO.

THEN YOU TOO CAN INVEST LIKE A BILLIONAIRE - OR A CENTRAL BANK

GOLD: US VS THE REST OF THE WORLD: ONE OF THESE THINGS IS NOT LIKE THE OTHERS

 

Central banks stay bullish on bullion in January

• Central banks reported 18 percent of net purchases at the start of 2025 
• Emerging market central banks remain at the forefront of net buying, with Uzbekistan, China and Kazakhstan the top three buyers 
• Poland and India also continue to accumulate gold reserves 2025 – both central banks added 3t to their respective reserves in January

China sees record gold ETF inflows in February, jewelry demand should stabilize as the economy improves – World Gold Council

“European funds saw their largest monthly inflow since March 2022," with strong demand in the U.K. and Ireland dominating trading activity. Regional ETFs added 39 tonnes of material to take total holdings to 1,327 tonnes. AUMs rose $3.4 billion, to $120 billion.

Gold breaks records, US ETF retail investors pull back—inflows crash 47%!

   Someone is missing the boat,  You decide who it is.

GOLD MAKES ANOTHER ALL TIME HIGH - EVERYONE NOTICES BUT AMERICA

Gold  made another all time high, and another all time closing high today.  Still nobody in the United States seems to notice or care.  Everybody here is still looking for a bottom in risk assets.

But all around the globe everyone else is buying gold.

Central Banks around the world are buying gold because ithe only Tier One Reserve Assets are gold and US Treasuries.  And nobody wants to hold US Treasuries any more.  There is no longer any guarantee the debt will be honored.  Everyone must prepare for the possibility that it will be seized and confiscated, or simply defaulted upon at the whim of our chief executive.

That may seem absured to most Americans.  The problem is it doesn't seem absurd to the other central bankers of the world.  That's why the comex is being overwhelmed with Stand For Delivery orders and the price of bullion is rising.

Similarly Gold is the only monetary asset that has no counter party risk.

Think about that.  It can not be hacked or hypothicated or confiscated or diluted or defaulted upon.

And is has a liquid and easily disvoverable value anywhere in the world.

That gives it a pretty special status in today's Kleptocratic Economy.

It is the citizens' only monetary defense against the State.

If you don't think that is valuable right at this moment, then don't buy it.  Now.

You can just as well buy it later.  Though it may be much harder to find.

THE BULLION PREMIUM STARTS TO MOVE - DON"T BE THE LAST ONE IN

1 oz American Gold Eagle Coin BU (Random Year)

Top Pick 

$3,047.89

GoldPrice. 
WHERE THE WORLD CHECKS THE GOLD PRICE

Holdings 

2,911.17

-9.02

-0.31%

Premium over spot gold: %4.6 

The above is the basic gold price for a quantity of US Gold Eagles at Apmex the largest US bullion dealer. The premium in historical terms is still quite low.  This tells us that despite the impressive run up in the gold price, very few Americans are buying gold.

It also tells us that this is currently changing.  The spread has widened a almost 2 percentage points in the last 2 weeks.

The US domestic economic situation it rapidly deteriorating.  All those who thought that Tarrifs were simply a clever bargaining ploy have been proven wrong.  They are now premanent policy.  And they accomplish three important things for GOLD.

1) They are highly inflationary, as they are paid for almost entirely by American business and consumers.

2) They are a massive drag on business activity and economic growth.  These two factors spell Stagflation, which has entered the vocabulary of almost every economist not employed by the current administration.

3) Perhaps most important for Gold: Tarrifs weaponize the US dollar thus destroying the usefulness of the US dollar as a reserve currency. 

Even as the US was running a current account deficit (trade deficit) we were also running a commensurate financial account surplus.  This meant that while other countries sold us goods they also bought the US dollar which they then recycled into US DEBT thus financing the US lifestyle, keeping goods cheap, inflation under control and growth humming.

This game is DEAD.

And the only beneficiary is gold.  Every Central Bank in the world now understands this.  The central banks of the world are selling US debt and buying GOLD.

At some point the US consumer will catch on to this new game.  Then Gold will really move.

Don't be the last to catch on.

 

\\\\

 

THE NEW GOLDEN AGE: THE AGE OF GOLD

If this is a GOLDEN AGE I would think that term should be taken most literally, the one asset everone should hold is gold:

A Trade War is bad news for  everyone in the global economy.  I know there a many who would wish that it were otherwise.  But trade wars slow global growth and raise global prices.  That is true for every economy.  Especially the United States because so many of our companies are multinational.  And so many of our products of choice are imported.

Every dollar raised by Tarrifs are raised from the American Consumer.  This makes everyone who is not a billionaire poorer.  Billionaires are excepted because it makes no difference to them if a car is 40 or 50 or 60 or 150,000 dollars.  It's just not an amount large enough to matter.

If you are not in that catagory, you need to protect yourself now.

If you don't believe me look at the data:

ISM: The new orders index fell to 48.6 from 55.1 in January. The prices index jumped to 62.4, up from 54.9 in January.

Atlanta Fed GDP revision; Last wednesday Atlanta Fed GDP estimate stood at %2.5.  Friday it was revised to NEGATIVE %1.5.  

Unit Sales for consumers have been decreasing for the last year.

Consumer sentiment has fallen sharply the last 2 months:

Bloomberg: Consumer Sentiment Plummets to 15-Month Low Amid Tariff, Inflation Worries

Inflation expectation has increased sharply the last 2 months.

Bloomberg: US Consumers Long-Run Inflation Views Rise to Highest Since 1995

US consumers' long-term inflation expectations rose to the highest level in almost three decades on concerns President Donald Trump's economic agenda.

Annualized CPI currently stands at 4.8 percent.  (not close to the 2 percent the Fed needs to start easing)

Credit spreads have started to widen noticeably:

Bloomberg: "Global corporate bond spreads have widened for eight trading sessions in a row, ending a period of remarkable tranquility, as investors start to turn defensive amid fears about the impact of tariffs."

And today the ADP employment report which is much more reliable than the BLS report showed 77,000 new jobs created in Feb.  That is against an estimate of 140,000.

It's early days in this Trade War.  The effects are only just beginning to be felt. Wait until the tax cuts blow a massive hole in the budget.  Then our debt requirements will blow out at the exact same time our economy is slowing and prices are rising.

That's when you'll really need gold.  But by then it may be difficult to find.

ISM GIVES FIRST CONFIRMATION OF STAGFLATION:

 

Institute for Supply Management’s Purchasing Mangers Index slipped to a reading of 50.3 in February, below economists' expectations at 50.5, according to FactSet. The new orders index fell to 48.6 from 55.1 in January. The prices index jumped to 62.4, up from 54.9 in January.

This if the first real confirmation that the regime of firing, deportations, and Tarrifs are creating an environment of slow growth and high prices.

Throw in an extra 5 trillion dollars of new debt from tax cuts for the top 1 percent and you get the perfect storm.

This is otherwise called STAGFLATION.

It is impossible for the Fed to combat stagfation.  If they attack the slow growth by loosening monetary conditions,  inflation carreens out of control

If they attack inflation by tightening monetary conditions, the economy could spin into a depression.

This wound is entirely self inflicted.

Yet once the geers are in motion it is very difficult to stop them from griding on into oblivion.

Of course, there seems to be no interest in turning things around.  According to the current administration there is no inflation except that which was caused by the previous administration, and growth is entering into a GOLDEN AGE.

Sounds good.  If you're holding a cellar full of gold.

WHERE DOES GOLD GO FROM HERE?

 

POSTIVE MACRO FOR GOLD:

a) Deficits.  Deficits drive inflation and slow growth.  Great for Gold.  

5 TRILLION DOLLARS IN ADDITIONAL DEFICITS have been promised through tax cuts on the wealthy.  This will pass and no amount of cutting pennies off government salaries or aid to the needy will even begin to offset this.  Neither will increased GDP.  

When Reagan cut taxes in 1980 the top marginal tax rate was 90 percent and the US was a surplus nation.  Each dollar of resultant debt could expect to produce 2 and a half dollars of GDP.  That was supply side economics.

Today the top marginal tax rate is 37 percent (And with loopholes closer to 17 percent) and the US is one of the world's largest debtor nations.  It now takes 4 dollars of addtional debt to create 1 dollar of GDP.  If you have 6th grade math you could figure out the efficacy of that plan.

GREAT FOR GOLD.

B) TARIFFS.  Tarrifs are highly inflationary.  First they make goods more expensive.  Second they destroy supply chains.  Third, they induce retalliatory tarrifs. Fourth: They immediately increase INFLATION EXPECTATIONS.

You can argue that applied with precision within a grand master plan they eventually will help onshore businesses and add jobs.  You can argue that.  This is a long term prospect that may or may not occur.  In the short run in an environment where most middle class families are deeply underwater - those families can expect much harder times ahead.  And they do expect that - just look at the inflation expectation component of consumer confidence.   It's through the

And inflation expectation causes inflation.

GREAT FOR GOLD.

c) GEOPOLOTICAL CONFUSION AND PANIC.

Most people don't realize that gold is a STABILITY HEDGE.  The more unstable events appear to be the higher the price of gold.  Right now we are in an historically unstable period.  Who are our allies?  Not Europe,   Not other democracies.  Not Nato.  Not Canada.  Russia?  The Nazi Party in Germany?  The fascists in Yoguslavia?  Not China.  Though China is the major ally of our new allies.  When Russia buddies up to us are they doing so on behalf of China?  What does that mean?  Does it mean anything?  What about Saudi Arabia?  They're settling oil with China outside the dollar.  What about the Belt Road initiative?  Trump's threatened tarrifs on anyone involved but nobody seems to care.  In fact the Belt Road Initiative exists to combat just such threats.  So what does the mean over time?

Nobody F-ing knows!  All we know if the situation is entirely unstable.

GREAT FOR GOLD

MASSIVE CENTRAL BANK BUYING.  Central bank buying all around the globe in response to the massively unstable economic and political environment in the US is accelerating.  Most central banks are selling US debt and  buying gold to use as their principle Tier 1 Reserve Asset.  The more unstable the US appears to them the more this trend continues.  (I know - to some of us here the US appears to be in great shape.  Exceptional.  Incredible.  But we don't run the other centtral banks for the world.  It's only really relevant as to what they think.)

GREAT FOR GOLD

NEGATIVES FOR GOLD:  A massive price run up without much of a breather from months and month.  Everything, no matter how big the bull market, must take a breather now and then.  When it comes don't let it knock you out of your position.  This is an historic bull.  Hang on for dear life.

The other negative for gold: the US public just doesn't see any of the above.  They think everything is just fine,  Better than fine.  They think Gold has a plan for us and we will prosper with HIS BLESSING.

At some point they may want to suplement HIS BLESSING with a little gold.

Then gold will really take off in dollar terms.

COMEX CRISIS: GOLD THROWS THE FED A CURVE

 

The unfolding drama of the comex being forced to deliver gold: something it was never meant to do, is creating the first crack in the Fed's Global Financial Dominance.

Ther comex was created expressly to control the price of gold.  As long as Fed-financed JP Morgan et alii were able to drop unlimited sell order on a paper market, the gold price was forever under the cotrol of the US Central Bank.

Since every other Central Bank has gold as its principal Basel Teir 1 reserve asset along with the US dollar - The Fed has tremendous power over the Global Economy - as it controls to a considerable extent the value of the US dollar and the value of Gold.

But everyone who followed the Gold market has wondered for some time: What happens when other central banks decide to take DELIVERY of the Comex contracts?

What happens to the price of gold?

We are in the prcoess of  seeing that unfold day to day right now.

Friday the Fed knocked the gold price down $50 in a day with a classic raid.  Monday and Tuesday - in stead of creaiting a short squeeze panic (something that has occured with regularity the last 40 years) - the price recovered.

But the other most intriguing question: What happens to the dollar - and the US hegemonic position as the only country to fund its own debt with a reserve currency - when other central banks drop US dominated debt in favor of uncontrolled GOLD as the Tier 1 reserve asset of choice?

That is something that is also playing out.  But at a slower pace and far behind the scenes with no real time measurement of the rate of change.

But one thing is for sure: despite the global move towards  protectionism and mercantalism: it is still a GLOBAL ECONOMY.

That genie is out of the bottle.  All comodity markets are now GLOBAL and are being settled outside the US dollar.

All suply chains are GLOBAL.

Every country can try to reverse this - but they will only succeed at the margins.

If China can supply a cheaper AI or a better Electric Car - no amount of Tarrifs or Sanctions will make a difference OVER TIME.  The best products will eventually dominate the market.

The only thing holding the US hegemony in tact (And the US inflation rate) was the Rerserve Status of the US dollar.

As that goes - so does our control over the Global Economy as well as our conrol over the Domestic Inflation rate.

Nobody's suggesing trends that has been in place for over 50 years will reverse over night.

But they are reversing.

Invest accordingly.

GOLD FLOWS EAST

 

While the Stand for Delivery Comex problem  has begun to receive attention in the financial press, there is an important aspect to it that is being largely ignored but which is crucial: the Stand for Delivery Contracts are from the East.

There is a steady flow of Gold now out of Western vaults into ther Vaults of China and the South-east Asian countries, Russia and the East European countries, and the Oil Rich Mid Eastern countries.

And this defines the entire move in the Gold Price thus far.

It used to be an adage that if you follow the flow of gold in the world you follow the flow of Political and Ecnomic power.  From Rome to Constantinople to Spain to France to Holland to England and then to the United States.

Now it is flowing East.  This is a very uncomfortable fact for those who are touting a new Golden Age for the United States, wherein China and Russia and their sattelites cower and kneel in awe of our might.  

Today, most Americans would argue that the flow of gold is no longer relevant in a financialized world wherein Currency is a form of Debt.  Wherein stock prices float ever higher on debt financed stock buy-back programs.  Wherein structural deficits grow ever larger as the billionaire class is subsidized by tax cuts and bailouts, and goverment sponsored contracts, while inflation destroys the purchasing power of the middle class.  

But it is worth wondering where this leads as the countries that are buying gold are doing so expressly in order to dump US debt out of their reserves and replace it with Gold.  

One place it leads is obvious: As our trading partners dump our debt, we will have to buy more and more of our own debt with printed dollars.  We will have to spend more and more to service our debt.  And we will have to exercise control of the long end of the yeild curve.  All of which is highly inflationary.

Meanwhile, we will be engaged in financial warfare with ever greater swathes of the globe, an exercise that is also highly inflationary.

At the same time both of these challenges are a major drag on growth.  Which is highly deflationary.

Over time, this will be a challenge to the New Golden Age.  

And these type of challenges tend to be structural and tend to last decades.

Once gold begins to flow in earnest from one are of the world to another - that trend tends to play out over long periods of time.

And remember: we have only been in this highly financialized world for a few decades.  

Another question to ask is what happens in a highly financialize world as global liquidity dries up and all the liquidity has to come from printed dollars injected by our own central bank?

That is exactly what we are about to find out.

It might be good to own some gold when we get our answer.  At least that's what the East seems to think.

COMEX IS BEING FORCED TO DELIVER GOLD: A CRISIS UNFOLDING

 

The comex has traditionally been a futures/credit market where contracts are settled before the delivery date, and large players like JP Morgan, financed by the Fed, could manipulate the gold and silver price simply by dropping huge quantities of contracts (especially shorts) that forced smaller players to cover their positions.  Then all the contracts would settle before delivery.

But since 2021 large players (unspecified) but many seeming to be from well financed Asian positions, have been taking delivery of the comex contracts.

Since 2021 these "Stand for Delivery" positions have steadily increased, and so far a total of over 2,100 TONNES of gold have been delivered.

But, since the beginning of this year there has been a considerable acceleration in the rate of stand for delivery contracts of gold, that has put a strain on the comex, and they have had to arrange for transatlantic flights from the London Bullion market to fulfill their delivery obligations.

This is true in both Silver and Gold.

These deliveries are supposed to be fulfilled in days.  Some contracts are not being delivered.  And there is a tremendous backlog of delivery contracts.

If the accerleration continues at this rate over 2,200 tonnes of gold will have to be delivered this year.  This is the total of the last three years.  The strain on the comex is at a point where a systemic crisis is in the making.  

If they cannot get the gold for delivery and contracts back up for months and months - which is happening now - the price of gold will skyrocket as sellers of physical will simply hold out for higher prices.

This delivery crisis is unfolding right now.

This doesn't mean the crisis won't be delayed as gold exchanges coordinate to resolve immediate delivery issues.

But the problem is being exacerbated by the fact that major Central Banks (China, Russia etc) and large oil backed sovereign wealth funds are buying most of the fresh supply of gold so that the western exchanges are having a difficult time of finding fresh supply.

And over  time, as more as more Stand for Delivery contracts are exercised, the potential for a delivery crisis accelerates.

A PROBLEM TOO BIG TO SEE

 

We have a problem.  And it is so big nobody can see it.  

We like to talk about American Exceptionalism.  We're better,  we works harder, we innovate better, we out negotiate, out manoever, out hustle our enemies and our freinds in every deal.

But really American exceptionalism is due to our performance in World War II.  We came through that war with the world's victorious military, and with the only intact economy because the war was not fought on our soil. So we ended up with the world's RESERVE CURRENCY.

When you have the world's reserve currency you have the privilege of printing money to buy your own debt.  And, at first, everyone buys your debt because it is the safest and most stable investment, and it is needed to settle large international commidity trades like oil.  And so that is the instrument of exceptionlism - as long as you prudently manage your economy..  And as long is you prudently resist the urge to WEAPONIZE your currency.

That is American Exceptionalism.  Before that it was British Exceptionalism.  Before that it was Dutch Exceptionalism.  All the way back to Roman Exceptionalism and Athenian Exceptionalism.  

And America did manage its economy prudently and resisted the urge to weaponize its currency - Until Nixon took America off the gold standard in 1971.  What ensued was a steady increase of debt that culminated in a massive inflation,  But Volker and Carter raised rates to over %20 and broke inflation.

Then the 1980's came and we began to amass debt in unprecedented quantities.  And when anything bad happened all we had to do was lower rates back below the cost of money, bail out the bad actors with printed dollars, and the debt orgy continued.  And we turned from a surplus economy to the world's biggest debtor economy. 

Then Clinton did away with Glass Steagel and we discovered financialization.  And that allowed for debt to become an instrument for gaining tremendous wealth if you were able to borrow deeply below the real cost of money to buy up real assets.  Wealth became increasingly concentrated in fewer and fewer hands of those with access to cheap debt, and inflation became embedded.

This weakened our reserve currency position but only marginally.  But eventually the debt bomb exploded in 2008 and rates went to zero and the we printed trillions and trillions to bail out the bad actors.

Then covid.  And rates stayed at zero and we printed 9 trillion dollars to bail out everyone.  Meanwhile we began to to toy with tarrifs.  Now tarrifs have a place in a Mercantilist economy.  And many of our trading partners were acting in a Mercantilist manner.  So it can be argued tarrifs were a proper response.   However, we are the only party with a reserve currency.  And you have to resist the urge to weaponize the reserve currency or risk other countries trying to de-dollarize in response to the weaponization.

Then Biden committed the ultimate transgression for a reserve currency.  He kicked Russia out of Swift (a system to clear dollar denominated transactions) and he confiscated their Dollar denominated debt instruments.

The dollar was suddenly the ultimate financial weapon.  

This works as long as there is no alternative to the reserve currency.

But what it does is incentivize other powers to aggressively de-dollarize and set up atlternatives for settling and clearing tranactions.  China, Russia, Middles Eastern oil powers, India, Brazil, and many other sattelite countries have begun to aggressively de-dollarize.

And the first step is shoring up your resereves by replacing dollars with GOLD,

That is the drive of the Gold trade, and it is irreversible until a new global equalibrium is established with new clearing and settling currencies that aren't weaponized or laden with debt.

This will take time.  The dollar and Eurodollat debt markets are massive.  But so is the impetus for other powers to get out from  under the weight of a weaponized dollar.

Meanwhile, what nobody seems to see is that the continued weaponization of the dollar through ever more aggressive Tarrifs is forcing all of our trading parners to ever more aggresively de-dollarize.

So nobody is buying our debt now.  While the debt sprials out of control.  

Therefor we have to buy our own debt with printed dollars.  But this causes inflation to spiral out of control.  And it causes the long end of the yeild curve to spiral out of control.

And here we are.  Racing towards an end game where yeild curve contorl and hyperinflation destroys the economy.

And somehow nobody seems to see it coming.

GOLD MAKES AN ALL TIME HIGH - NOBODY IN THE US NOTICES

 

Gold has made an all time high, rocketing nearly 100 dollars since inauguration day.  Yet nobody in the US has the slightest interest.  We know that because inflows into the GLD ETF move between modestly positive to modestly negative month to month.

Interest in China, Russia, South America, Eastern Europe, Much of Western Europe and the Middle East is at an all time high, led by Central Bank purchases in all of those areas.

But here in the US interest is high in Bitcoin, AI, Trump Meme Coin, Dawgz AI, and Black Box Private Equity Bundles.

This is not a joke.  Nor is it an exaggeration.  Pension Funds across the US are loaded up with "investments" that have no track record, little to no liquidity, and in many cases, no mark to market information.  And not just pension funds, many US investors have borrowed to the hilt to get in on these "opportunities."

Meanwhile, globally the interest in old fashioned boring Gold, Real Estate, Old Master Artworks, Diamonds, and other deathly boring investments are soaring.  The Swiss Federal Pension fund has Gold now as it second highest percentage investment.  The Florida Pension Fund has Bitcoin (bought at an all time high) and Private Equity Black Box investments as its top two "investments."  And when I say Black Box - that means not only are the returns opaque, they don't even know what investments are in the bundles.  The PE firms say that if they told, they would lose their edge.  Seriously.

What is the reason for this extraordinary disconnect?

One thing that might account for the difference in investing strategies is that the Swiss Pension fund has Investmtent Executives with an average of 30 years of proffesional investing experience on its board.  The Florida Pension fund is managed by political appointees none of whom have any proffesional investing experience.  None, not a single one.  They are all lifetime political hacks.  That is not a joke.  Certainly not for the the citizens of Florida. 

According to Warren Buffet the entire US pension fund system is broke on a mark to market basis.  But that's just Warren Buffet; he's really old, so he probably just doesn't get it.

So far AI has little to no monitizable value for the companies that have loaded up on purchases.  This is because AI makes mistakes that are impossible to check without countless editing man hours.  So any company that can be sued for an AI error can't use AI.  That's most of corporate America.

I'm sure some day they'll overcome this drawback.  But right now they're not close.

And as for Black Box investing - Well the financial crisis of 2008 was caused by excactly that type of black box bundling.  It's happening again less than 20 years later.  Repeating the same mistake and expecting a different outcome is the definition of Insanity.

So it is American Exceptionalism or American Insanity?

I don't know.  But Gold is betting that it's the latter.

And I'm betting on Gold.

And eventually some Americans will catch on.  Then the price will really soar.

LONG RATES BACKING UP WHILE THE FED CUTS: GOLDEN ROCKET FUEL

 

This will happen:

As the funding needs of the US government spiral out of control while the tax income is slashed, only one outcome is possible: The US goverment will be forced to issue massive new debt and the markets will demand ever higher rates at the long end.

Meanwhile the Republican Majority supports the president taking over the responsibility for setting short rate policy (That used to be the Domain of the Fed).  And he has made it very clear he wants rates lower, preferably back to zero.  That will be a tremendous benefit to his real estate holdings.  It will be a disaster for inflation.

Period.  End of Story.  This answers the question Cui Bono?  Who  benefits?  The person setting rate policy benefits.  The Billionaire class holding reals estate, gold, art, pop culture memorabilia, and other hard assets, and also some crypto (not a hard asset but an asset favored at the moment by Billionaires in charge of the government.)

Who doesn't benefit?  Anyone who lives and works dependent on job income to feed and house and nurture their families.  Without hard assets their income buys less and less.

And the Fed loses all credibility which will be a disaster for the dollar even further damaging purchasing power for wage earners.

Of course the government will come out with statistics showing Inflation has come back down.  But all that means is that the rate that things are inflating has slowed.

Nothing will ever be cheaper than it is today.  Except Fad Impulse assets.

Insurance, education, housing, food, energy, medical costs  will always inflate under a regime that refuses to raise rates above the real rate of inflation which is close to 10 percent

The last regime with the courage to do so was Carter/Volker even though they knew it was political suicide.  They took rates to 20 percent and caused first a terrible recesion but then a boom that lasted 50 years as each successive regime simply cut rates whenever anything economically challenging occured.  

But Volker raised rates when the US was a creditor nation.  Now we are a massive debtor nation.  So raising rates will be much more painful for everyone who financed purchases at zero and then has to roll over their debts at 7,8,9,10 percent.  All private equity and private lending would go broke.  That's the shadow banking system crashing.  It will not happen.

So inflation must continue to spriral out of control.

And hard assets, especially gold will spiral ever upward.