GOLD"S SECRET WEAPON: MISTRUST

 

The entire global economic system works on the foundation of something concrete- liquidity - and something equally important but entirely ephemeral: Trust.

The last post dealt with how the trend in liquidity is entirely supportive of higher gold prices.

But the trend in trust - or mistrust is equally supportive.

There can be no transaction - even the smallest, simplest transaction - without trust.

Nobody would ever lend a cent to anybody if they had no trust they would ever get it back.  Every loan would take a tremendous amount of liquid collateral.  Derivatives which are a quadrillion dollar business would stop.  (that might be a good thing - but then hedging would die which would also gum up the global economy.)  No more options.  No more futures.  Farmers couldn't hedge their crops.  No more drilling.  No more mining.  No more banking. No more shipping.  No more insurance (how can you trust you'd ever get paid?) No more mortgages.  No more - you get the idea...

Obviously we're talking about a complete absence of trust which could never happen, right?

Actually it has happened before, and it could happen again.

We're not there yet but we're heading in that direction.  Less and less trust in all our institutions.  Especially the legal institutions that enforce all contracts.

Trust in Congress which makes our laws: stands at 13 percent.

Trust in the US judicial system stands at 25 percent!

Trust in the Supreme Court: 40 percent.

Trust in the banking system stands at 10 percent!!!!!

40 percent of Americans believe in a "Deep State" that seceretly controls everything.

40 percent of Americans believe we are living in a Biblical End of Times.

40 percent of Americans believe in a New World Order in which a shady class of Elites led by Jews is trying to take control of everything.

40 percent of Americans believe the last election was rigged.

And one of our two political parties is running on the platform that all of these institutions are rotten to the core and deserve even less trust.

The truth behind all this mistrust is irrelevant.  It is the mistrust itself that leads investors to protect themselves with the one great hedge against mistrust: Gold.  

Gold is the only investment with no counterparty risk.

Gold is the only form of money with no counterparty risk.

As trust dies gold soars.

GOLD AND LIQUIDITY: 2025

 

LIQUIDITY is the only meaningful metric when judging what will happen to all asset classes in the global economy.

So what is Liquidity?

Liquidity is money creation and dissemination.

In the United States of America which still possesses the Global Reserve Currency, the Dollar, money is created by the US Treasury which has a printinhg press and can print as much money for any purpose as demanded by A) the Federal Government (Fiscal Liquidity) and B) the Federal Reserve Bank. (monetary liquidity).

The Federal Governemnt starting with Trump in 2016 began to run yearly 3 trillion dollar deficits (pre-covid).  This has continued unabated through Biden.  Despite lip service to fiscal restraint this fiscal deficit can only grow because the portion of the this spending that is Debt Service is 18 percent of the federal budget and growing at about 3 percent a year but if rates ever reflect real future cost of money that figure could become much much larger.

Therefor Liqidity in Fiscal terms can only continue to grow .  There is plenty of it.  And no politician in the US will ever succeed in bringing it down because that would involve either much higher taxes (no one can be elected advocating for that) or the erradication of Social Security (no politician will ever be elected advocating for that).

Monetary liquidity can be measured by the balance sheet of the Federal Reserve Bank.  Since covid that expanded to about 10 trillion dollars.  Under supposed Monetary Tightening the Fed has gotten it down to about 8 trillion dollars.  Back in 1980 it was in Surplus.  There were no monetary deficits.  

But the Fed has ways of creating monetary liquidity even when it is suppposedly tightetning. The Fed's Bank Term Funding Program (BTFP), is currently providing trillions in liquidty to undercapitalized banks.  As long term rates continue to stay higher for longer (even as short term rates come down a bit) the trillions that were borrowed at zero percent over the last 10 years will have to be refinanced at much higher rates going forwards which means that either many corporation and banks will go bust (HA HA HA like that will ever happen in the US) or the FED will have to ask the Treasury to create money out of thin air to bail them all out.

Obviously the latter will happen.  This creates massive amounts of Monetary liquidity going fowards.

As crisis hits and certain instituions get in trouble there will be moments of ILLIQUIDITY that will rock all markets.  Each one will result in massive bailouts meaning more and more liquidity.

We will eventually drown in a sea of liquidty. This will result in crushing stagflation, yeild curve control and a declining currency.

Meanwhile all this liquidity means one thing certainly: The price of Liqudity Hedges will rise.  

The best Liquidity Hedge is Gold.

You ain't seen nothing yet.

GOLD BREAKS OUT AND NOBODY NOTICES - THANK GOODNESS

 

Yesterday gold made a monthly closing high.  Today 12/1/2023 gold made a weekly closing high.  It has yet to make an all time daily closing high.  But the fact that nobody in the United States of America is making a big deal of this gold move is awesome.  

To be sure, a lot is going on.  

A) An election is ramping up that might well change the course of democracy.  Argentina and Holland have recently elected anti-democracy plutocrat populists (Yes - it sounds absurd but we may do the same.)

B) Two hot wars with Western proxies vs Russia and Iran (and their proxies) could well presage world war III.

C) Though government statistics indicate inflation is dropping and extremely wealthy analysts are worried about deflation - everything from Housing to Education to Healthcare to Food is still so expensive that 62 percent of Americans would become homeless and starve is they miss a single paycheck.  If you don't believe that, it shows you're  part of the lucky 38 percent.

So, sure, why notice a gold market that is beginning a massive breakout?

After all this is the fifth try to break out over $2100.

BUT - this time gold is breaking out in advance of the next recession that many still don't see coming and in advance of the most massive dollar denominated debt refinancing in the history of the world.  Hundreds of billions of dollars of corporate debt around the globe and trillions of government debt originally issued to around ZERO PERCENT will have to be refinanced at much higher levels in 2024 and 2025.

There isn't anyone from Drukenmiller to Zulauf to Paul Tudor Jones to Ted Oakley, to Lacy Hunt to James Grant to Marc Faber to Jim Rogers to Ray Dalio etc etc who don't see this refinancing causing massive cracks in the global economy.  Cracks that can only be filled by extreme Central Bank Injections of Liquidity.  So extreme that nobody has any idea what the result will be.

Except everybody understands this will vastly weaken the purchasing power of the world's currencies with respect to real hard assets.

So maybe it's time to notice the gold breakout.

GOLD AND THE DEBT BOMB OF 2024

 

Everyone knows that the US government is drowning in debt.  US debt including unfunded liabilities is at about 120 trillion dollars.  

But everyone also knows the US government owns the global printing press.  It is true that China,and Russia are leading an international coalition that now include some of the world's largest oil and commodity producing countries in developing bilateral trade agreements and perhaps even a commodity backed currency to settle trade outside the dollar.  But still the dollar is the world's reserve currency for the foreseeable future

BUT - many seem blissfully unaware that US publicly traded companies will have to refinance about a trillion dollars of debt in 2024 and another trillion in 2025.   This is debt they acquired at around ZERO percent that will now have to be refinanced at 6, 7, 8, 9 percent depending on the deals they can get from banks that are very reluctant to lend right now.  Banks whose own balance sheets are suspect.

The effect this will have on the Quadrillion dollar debt derivatives market is entirely unkown.  Because that market is over the counter, unregulated, and often poorly understood even by the experts who design and sell the instruments.

Debt and debt derivatives are now  in the portfolios of most of the nation's pension funds - both public and private.  If you think the managers of these pension funds have any understanding of the instruments they buy from the largest Private Equity Firms who market these things - well, I have a bridge in Brooklyn I"d like to sell you.

These companies and funds do not own a printing press.  They will go bankrupt unless the Fed bails them out.  Which means flooding the market with tons of printed dollars which will cause inflation to shoot to the moon.  Hyperinflation.

DEBT DEFLATION OR HYPERINFLATION.  Take your pick.   I know what the Fed will choose.

And the global Eurodollar market is comprised of over another 5 trillion dollars of dollar denominated debt, much of which was also borrowed near zero must be refinanced at much higher rates in the next two years.  And none of these other countries own a printing press that prints dollars.

A debt bomb is going to explode in 2024 and continue through 2025.

And the only thing I know that will protect you from this is gold

AN OLD MARKET IS REDISCOVERED

 

Una and the lion medallion sold at heritage auctions for $144,000 in 2021

Medallions, especially in gold have always been the prized possessions in the cabinets of Kings and Queens, Emperors and Tzars.   If you go to the British Museum, or the Hermitage or the Louvre for example you can see large gold medallions that were once the prized possessions of Royalty.

When you think about the idea of Intrinsic Value it's not hard to understand.  Medallions were struck for the pleasure of monarchs by the great engravers of their eras.  They celebrate momentous occassions: Coronations, Victories of War,  Peace Settlements, Artistic and Scientific acheivements, and the like.  Most any large gold medallion you can buy would have been originally owned by an historical figure of note.  

But after the bullion price of gold collapsed after Volker crushed inflation in 1980, which coincided with an activist Federal Reserve Bank keeping real rates negative for the next 50 years along with the US government's systematic dismantling of its regulatory agencies and systems, a strange thing happened.  Momentum Trading began to replace Value Investing.  

Not all at once.  But persistently.  And as it did Hard Asset Investing took a hit and Historical Gold medallions took a back seat to the momentum trade herd mentality chasing whatever could be hyped.  In the coin world it was mostly US rartities like Lincoln Pennies from rare dates one of which sold for nearly 2 million dollars.   This happened as the price to earnings multiples of stocks rapidly expanded, debt to equity ratios blew up and new industries developed like the Leveraged Buyout Firms that sold junk debt to unsuspecting banks and insurance companies destroying value and killing jobs.  All the while the Fed kept lowering rates to make the debt fueled orgy more and more compelling. This moirphed into the Private Equity Business that now control and systematically destroys the value of Hosptals, Schools, Universities, Nursing Homes, Real Estate, Super Markets etc - making everything extraordinarily expensive while gutting these institutions of all value.

Is it any wonder that value investing in hard assets of intrinsic value took a hit.

But a strange thing has happened in the last few years.

People started to become wise to this cynical game.  And investors started to seek to protect themselves against the currency devaluation that accompanies the cynical explosion of debt and debt financings.

This coincided with the steady rise of the gold bullion price - and the rediscovery of Hard Assets and especially Historical Gold Medallions.

The Brtish Series of Coronation Medals began to catch a serious bid.  The Queen Anne gold coronation medal for example which as readily available for $5000 ten years ago now sells for $50,000 in High Grade.

Then the Holy Roman Emperors caught a robust bid.  This Leopold gold Coronation Medallion sold for $360,00 in 2021

Medallion of the Russian Tzars caught a bid. Medallions of French Kings, and here in the US Betts Medals and Indian Peace Medals and the Medals pertaining to George Washington were rediscovered

                                     Washingtom funeral gold medal $372000 at Heritage auctions 2023

To be sure, the momentum trading that had dominated the last 50 years of investing still has a hold on market psychology.

But the explosion of debt has finally resulted in a pernicious inflation that can no longer be disguised by fictitious government data.  Everyone knows real things are getting more and more expensive vis a vis debased currencies.

And more and more investors are seeking the safety of Real Things of Intrinsic Value.

So what exactly is the Intrinsic Value of Large Gold Historical Medals?

1) Most obviously large gold medals are comprised of a lot of gold of high purity.  As the price of bullion inevitably rises for many many reasons so must the price of high grade gold artifacts.

2) These medallion are historical artifacts.  As such they are objects of of Historical Interest - perhaps even historical importance.  

3) Beauty,  These medallion were most often engraved by highly skilled artists with unique and beautiful designs.

4) Absolute Rarity. Historical Gold Medallions were minted in amounts limited to the VIPS who attended the specific ceremonies.  Even commemorative medallions that were minted for collectors at or near the time of these events were issued in tiny mintages because those who could afford to pay for a large gold artworks were only the extremely wealthy.  Most often only a small handful - perhaps 5 to 10 pieces, perhaps less, are available in decent  collectable grade on the market.

But like the price of bullion gold, the Large Gold Medal Market is really only newly rediscovered.  There is so much room to grow - because the dirty little secret of modern debt financing is that the debt has reached sufficient levels that through the burden of Debt Service alone it must continue to spiral ever out of control.  And as rates spriral higher debt service becomes ever more expensive, currencies are debased,,,

And so Hard Assets of intrinsic value will become more and more valuable.

MODERN GOLD RARITIES - a New Market Comes of Age

 

Republic gold 100 Soles 1952 MS66 Prooflike NGC Price realized: 37,200 USD   

Heritage auctions 3 November 2023

The 100 soles coin above with a very low mintage of 126 pieces was purchased 4 years ago for $12,000.  It has tripled in value in the last 4 years.  SImilar coins from years of higher - but still limited mintages - in high grade have also tripled from values that 4 years ago were closer to bullion.

Coins that once were purchased from bulk dealers like apmex have now found their way into exclusive high end auctions.  

Not all coins that started out as bullion - as all coins once did - attain great collector value.  But modern rarities that strike collectors' fancy are attaining the high prices.

For example the coins above: France Republic gold Piefort 5 Francs 1960 MS67 NGC mintage: 50

Price realized: 9600 USD Heritage Auctions  3 November 2023

THis coin was purchaed only three years ago for $4200.  THe thing to realize is that the price of bullion gold over this period has been relatively stable.  UP a little down a little.  I think the bullion price will eventually break out when people realize the economy is too debt laden to do anything but sink over time taking the value of the dollar with it.

But meanwhile all sorts of limited issue high grade modern coins that were issued as novelty bullion issues have sky rocketed in value in the last few years.

Canary in the coal mine.  

These coins go up in value ahead of bullion because bullion is fungible.  One bullion coin is exactly like the next.  But bullion that has an atractive design (the famous Oscar Roty sower image above) and is issued in very limited numbers is catching a major bid.

Even coins issued in the last few years :

Elizabeth II (1952-2022), gold proof Two Ounces of Two Hundred Pounds, 2020, Three Graces, struck in 999.9 fine gold, sold for 15,000 USD in the Sovereign Rarities aucion of 26 September 2023

THats's a pretty hefty price tag for a bullion coin minted four years ago.  THe mintage was 335 pieces.  Not tiny - but the design is tremendously popular and the mintage is small enough.

This doesn't seem to be an abberation.  There are enough issues catching a greater and greater bid auction to auction year after year that the trend seems well established.

Many coins and medals from the mid 20th century that were once bullion pieces are now hotly pursued collector's items.

And Central Government mints in Paris, London, Utrecht, Jablonec, and British dependencis like Alderney, Ascension Island and St Helena and others are getting a piece of the action with new limited edition pieces sometimes with mintages as low as 20 pieces.

If you take a shot on an attractie low mintage design already graded as MS 70 and buy somewhere near bullion it's tough to see the downside.

More and more collectors are doing it.

And the trend seems sustainable as long as the world's major currencies are being debased to pay for astonishing debt service levels.

Which would appear certain into the foreseeable future.

Owning Gold: Beyond the Basics; Seeing the Future

 

Conviction in any market is a key to making money.  Because in the short term anything can happen.  Martkets can be irrational.  Because people are irrational, emotional, psychologically bizarre animals.

So seeing the future clearly can help navigate the vagaries of our fellow animals.

Seeing the Future leads to Conviction.

It's easier than it sounds,  All you have to do is ignore what everyone else is saying, tweeting, posting, writing, lecturing, expounding.  You need to use your own brain.  And look at the things that are most obvious.

1) All governments are being run on deep deep deficit spending, facilitated by negative real rates, and have been doing so for decades.  Because of the Interest on the Accumulated Debt, the deficits must grow exponentially.   

This is excellent for gold (and all hard assets of intrinsic value) and very poor for everything else - in the long run.

2) Most  Coroporations have been running on the same principles.  They have been financing irresponsibly for decades because real rates have been deeply negative.   Often money has been available at O percent.  This has led to a debt soaked coroporate - and banking - structure that can not survive higher rates for long.  And as the debt grows, inflation grows, and rates eventually rise.

This is terrible for the gobal economy and great for gold and hard assets - in the long run.

3) Negative Real rates have caused a massive inequality of wealth.  This has led to tremendous resentment and anger in the mass of the world's populations.  Most people don't know they are angry because of Negative Real Rates - also referred to as Financial Repression.  That's hard to understand.  So they blame the OTHER.  Immigrants.  Jews.  Elites.  The Woke.  The Establishment.  The Deep State,  Blacks.  Browns.  Whites. Colonialism.  The Patriarchy.  Any stupid catch phrase that obviates the need to think and helps provide an outlet for rage.

This blame leads to the embrace of Strong Men Leaders - Fascists - on the left and the right who promise to Punish the Guilty, and redress wrongs.

This is terrible for solving problems and leads to greater and greater instability.

This is bad for the global economy and great for Gold.

4) Realizing all this the question becomes not whether to accumulate Gold and Hard Assets but how to do so.   There are many ways.  They need researching and careful consideration.  But most of all they need conviciton.

Owning Gold: The Basics

 

If you want to own gold but don't know how here are some basic rules.

1 Gold is money.  Gold has always been money.  All Central Banks own Gold.  We are in a period when most central banks are accumulating more gold.  

2) You can't trade gold.  Gold is a stability hedge.  As gold rises it is a baromater of unstable financial conditions.  The US Central Bank - the Fed - knows that.  They try to cap the price of gold in dollars by knocking traders out of the market with massive Futures sell orders through proxies at the bullion banks like JP Morgan.  You will lose your position if you try to trade gold.  

3) The Fed can affect the day to day trading of gold.  Nobody can affect the Primary Trend over time.  The late great Richard Russel taught me that and it is a trueism of all markets.  The Primary Trend of Gold is UP as long as the Global Central Banking system is run on Deficit Spending.  That is a certainty for the foreseeable future.  So accumulating gold over time is a winning strategy.

4) Physical gold in the form of Central Bank Issued coins is a good way to buy bullion gold.  It is easy to identify. It can be exchanged in any major city in the world for any currency.  But it takes effort to buy and sell so you can't impulse trade it.  That makes it good for accumulation.  Buy from a reputable dealer.

5) Gold Stocks are not gold.  They are stocks.  So gold can go up and they can go down.  For many many reasons.  However GLD tracks the price of gold.  If you accumulate it and don't trade it it's a good way to reap the benefits of a gold upward primary trend.

6) Other precious metals are not like gold because Central Banks own gold and Central Banks don't own other precious metals.

7) Because Gold has always been money there are about 5000 years worth of Historical Gold Coins and Medals and a vibrant global market that trades this Historical Gold.  You can see dozens of auctions listed during any given month on line at Numisbids.  

As long as the primary trend of gold is up these markets will rise.  But buying and selling in these markets takes Expertise.  You need a good grasp of the history of the period in which a gold coin or medal is minted  You need a good grasp of how Hard Asset Markets work.  You need conviction and a reasonable time frame in which to accumulate in an area you understand.  If you have these things, or if you can learn these things these can be very profitable markets.  If you dive in without expertise they - like all markets - can be dangerous.

GOLD: APPROACHING THE EDGE OF INSTABILITY

 

Gold is only just beginning to attempt a fourth breach of the old highs.  This is not really very impressive considering the value of the dollar has broken down significantly since gold made it first top back in 2011 after the MBS crisis of 2008.  At that time the Fed showed it was willing to bail out the economy at the then massive cost of a 3 trillion dollars given away to the banks that caused the crisis.

This engendered a newfound respect for the Fed.  Somehow.  It was thought it showed the Fed was able to bail out any crisis no matter how big, so your money would always be safe in the US banking/brokerage system,

The covid crisis hit and the Fed bailed that out with ten trillion dollars given away to the largest banks, brokerages and bond holders.  They again showed their awesome power to save the day.

Now all that money creation has created the most out of control inflation we have experienced since the 1970's.  But in the 1970's the US economy was burdened by NO DEBT.  No BURDEN NO DEBT (as Bob Marley once sang).  Now we have 32 trillion dollars of Federal Debt, and another 200 Trillion of unfunded liabilities.  Along with many hundreds of trillions of Corporate Debt Financed near Zero percent that will have to be refinanced soon.

What's A Fed to do?

Well, raise rates up to 5 percent to attack the inflation.  It's beginning to work in the sense that the rate of inflation is coming down - but the prices that are already devastating the vast middle class are still rising - just a bit more slowly.  Meanwhile the hundreds of billions financed at zero percent are beginning to show serious cracks.

And suddenly the Fed has a million critics.  They waited to long to raise.  They raised to high.  They have no plan.  They are data dependent but all their data is backwards looking.  ETC ETC.

The main thing is that Economic Proffessionals who used to praise the Fed to the skies have turned on the Fed.  

This makes the Fed's ability to control the economy - and the gold price - more difficult.

And the competing Central Banks in China, Russia, the Middle East are working against the Fed by buying gold hand over fist.

So as gold makes its fourth attempt to break out the Fed's ability to control the gold price through dumping massive sell orders on the Futures Markets through the Bullion banks is being challenged in a way that it has never had to contend with before.

Add to that a major hot war in the the World's Oil Producing center and Instability begins to seriously worry the world's financial proffesionals so the potential for a gold breakout becomes that much more likely.

And you can bet your bottom dollar that whoever becomes President in 2024 will install a Fed dove to try to jumpstart the economy - and then inflation will really soar.

So there is much that would lead one to believe that new highs for gold are in the near future.  

And those highs are likely to confirm the Fed's inability to control the economy which will lead to a virtuous cycle for gold and a frightening cycle for most everything else.

GOLD STARTS TO TREND UPWARD: THE INSTABILITY INDEX

 

Gold is an instability hedge.  This is something few people understand.  Some people call it an inflation hedge.  This is only true when inflation is causing instability.  Some people call it the fear trade.  This is only true if the fear is causing widespread instability.  Some people call it a safety trade.  Safety from Instability.

What are the major causes of Instability in the Global Economy right now?

1) The central Banks are losing the confidence of the global investing class.  Inflation is out of control - no matter what the official figures may say.  Everyone can feel it.  Housing is historically unaffordable.  Education is historically unaffordable.  Medical Care is historically unaffordable.  Food is historically unaffordable.  Energy is volatile but heading there.  Everyone knows this.  Yet the relative high rate regiem of the Fed is proving ineffective because the unaffordability has reached a level that  slowing its increase does nothing to help the average citizen.  A two percent target increase (which nobody believes will ever be acheived) is still two percent over an unbearable burden of inflation.

Finally the massive debt level will crack under the new 5 percent long bond regiem.  Everyone knows it.  WHen and how is up for debate.  But that it will happen is certain.  When it does the Fed will print money and lower rates.  This will send inflation spiralling out of  control.

Very Destabilizing.

2) Governments are losing the confidence of the global investing class.  The US government has one party that is invested in shutting the government down while discrediting law enforcement and the court system.  Nothing to build confidence there.  The other party is invested in coddling a faction that sympathizes with terrorists that also want to destroy our government, while also discrediting law enforcement.  Nothing to build confidence there.  And both parties spend money they don't have like drunken sailors (just on different priorities)  This is all very destabilizing.  Especially since the financial system can only work if we have a stable government and enforcement system backing it up.

With a new Governmnent Shutdown looming and an election with two historically unpopular candidates on the near horizon it is difficult to see where stability will come from.

3) Hot wars are breaking out across the globe.  This is very destabilizing.  The areas where they are occuring are areas that determine the flow of oil - which is still the main ingedient for running the global economic system.  While other major commodities are involved - like grain.  These hot wars are also proxy wars that lineup the West led by the US against the East led by China and its client states like Russia and Iran.   This can only lead to greayter instability - and a  destruction of global supply lines that will cause ever greater inflation.  Worst of all, many of the governments involved have little incentive to de-escalate the hostilities.

4) A Global Credit Crisis is brewing.  Debt levels throughout the world are at records vz GDP, GDI, and most any other metric your prefer,  Most of this debt was financed near zero percent over the last decade.  Much of this debt will come due to be rolled over in the next year.  This will have to be refinanced at 5, 6, 7, 8 percent rather than 0 percent.  This will cause a credit crisis of unprecedented proportions.  This is very destabilizing.

5) The massive global disparity of wealth is so pronounced that the wealthy class that controls much of the global economy really doesn't understand - or just doesn't care about - the extant and depth of the anger and rage of the 80 percent that can not pay its bills.  This is massively destabilizing.

None of the these problems has a short term or even intermediate term solution.  I would say nobody is currently working on a solution to any of these problems.

Expect Instability to grow.

Expect the price of gold to continue upward.

RARE GOLD COINS AND AND MEDALS AND THE GLOBAL ECONOMY: INFLEXIBLE SUPPLY

 

We live in a world of inflexible supply.  This is the central fact of the current global economy.  What  does that mean?

Broken Supply Chains make getting goods from point A to point B difficult at best; and often times impossible.

Many people blame that on covid.  That is a misunderstaning.  The problem is Global Mistrust.  Hatred of the other.  Incendiary rhetoric combined with unthinkably stupid policy.  Trade Wars.  Tarrifs.  Sanctions.  Immigration Wars.  Hot Wars.  It all contributes to the destruction of supply lines what were imagined to be Global in Nature for the period starting about 1980 and ending with a Bang in 2017.

The destruction of supply lines means Inflation Forever.  Because the central banks can only affect the demand side.  When you get supply side inflation there is nothing they can do.  Even a global depression won't keep prices from rising if the commodities become increasingly scarce.  You may get a period of Disinflation - that only means inflation is rising a bit less quickly.

Now, Rare Gold Numismatics exist in a Global Market.  These are becoming increasinly valuable as trust in global currencies weakens. But as trust weakens Mistrust gains strength.  And getting valuable goods from point A to point B becomes increasingly dffiicult.

Customs is becoming a huge problem even between countries that are apparantly allies.  Everything gets hung up in customs now.  Hopefully for short periods of time.  Sometimes for ever.

Memorandums of Understanding Between countries on goods that fall under  Cultural Heritage laws - such as rare gold collector coins - are becoming increasingly contentious.  Countries with animosities towards other countries will try to snatch anything they can get their hands on.   Even traditionally friendly countries that are miffed by tarrifs or other trade policies may become difficult to deal with.

All this mean that as supply becomes disrupted - like anywhere else - the rare coin market is bound to become more and more expensive.

Get used to it.

For now it's a one way bet.

GOLD: THE NEXT TRIGGER

 

Despite an historic Fed rate rising from 0 to 5.5 in under a year and the concomittant rise fo ythe dollar against all other paper currencies gold is holding in at about $1950 an ounce.  

We have entered into the traditional gold buying season (weddings and festivals) for Chinese and Indians which last from now through February.  But with rates set to stay high for a while and the dollar strong, what could trigger gold's next move higher?

Here are a list of the usual and not so usual suspects that could set us off into the long long awaited gold breakout:

1) First and foremost is the wave of refinancings and servicing of debt that was originally taken out close to 0 percent and now will have to be rolled over and serviced at 7,8,9 Percent depending on the creditworthiness of the borrower.  Because not only are rates much higher, but lending standards are much tighter and the available credit is much tighter.  This rollover will affect thousands of major corporations, the entire commercial real estate sector, the auto industry, and it will effect many millions of overleveraged consumers.  And the servicing of the debt will be a body blow to the US Government. PLUS the imminent debt rollover will affect the multi trillion dollar Eurodollar market in which debt is borrowed in dollars outside the US.

A storm is coming.

The fact that this debt bomb hasn't exploded yet is because the debt has not yet been due.  It comes due in waves starting towards the end of this year.  And that will set off a wave of defaults and bankruptcies that will signal the beginning of the next Fed easing regime.

Gold to the Moon.

2) A Usual Suspect: The infinite capacity of the US politicians to destroy our own economy for perceived poliitcal gain: THE DEBT CEILING.  This comes up again at then end of THIS MONTH.  And yes, I know, they always take it to the brink and then come up with a last second solution.  Until they don't.  Default has become a political game.  The US credit rating has already been downgraded because of this game.  Don't doubt the spectacular stupidty of our political class to take this game to the next level.  Ans yes the FED will step in and print unlimited money to make sure we don't really default.  THAT IS QE.  A return to QE will send gold to the moon.

3) The effects of Foreign Central Bank gold buying and dedollarization.  This is the main reason why during a manic rate hike spree gold has barely sold off.  And when the rate hike spree is done (Now?) the power of this global move towards gold and away from dollars will launch gold higher.

4) The massively distressed state of our Political Class. The politcal divide in this country is so massive, the hatreds so pronounced that nobody is trying to solve any of our problems.  Everybody is in it for personal gain for themselves and their political team.  We are devoid of ideas.  We are unable to debate.  Face it, the problems we have with debt, inflation and a resultant 1 percent trend economy are real, persistent and overwhelming.  And nobody is even addressing them.  Everybody is just looking for a scapegoat.  We know how that movie ends.

Gold to the moon.

Finally, when the Fed is forced to ease, we will have a return to inflation.  Because the rate regime only affects demand.  And much of the inflation is caused by supply dislocations that will only get worse with the global divide between the west and the China/Russia led BRICS block.

And when inflation returns gold will never look back.

BRICS ADMITS 6 NEW MEMBERS

 

The Brics will expand, admitting 6 new members: Saudi Arabia: the world's 2nd largest oil producer, The United Arab Emirates, the world's 7th largest oil producer, Iran, the world's 8th largest oil producer, Ethiopia: a treasure trove of gold, platinum, copper and natural gas, and Argentina, another treasure trove of natural resources and Egypt: politically a dominant player in the Middle East.

US economists are falling all over themselves trying to downplay the significance of this move.  These are not huge countries by GDP.  There still is no common currency.  True and True.

But the days when oil is settled in dollars are over.  That is a huge deal.  In fact that was the stabilizing basis at Bretton Woods for making the dollar the world's reserve currency.  Since then a huge eurodollar debt market has evolved and that is not going away.  But the need for the world's largest economies to buy our debt as a repository for dollars needed in the oil - and commodity trades is over.

So who will buy our massive debt?  The United States Federal Reserve Bank.  That's who.

That makes us Japan.

Not today.  Not tomorrow.  But very soon.

And just as significantly, this move make China a formidable global power as they now have outsized control over the global energy supply.  Because not only do they have an influence over the oil markets, but they also control the rare earth markets that are necessary for the chips used in electric energy.

So get ready - over time - for expensive energy in a world that is already moving towards out of control inflation.

Got Gold?

HISTORICAL GOLD MEDALS: WHY THEY'RE MY HARD ASSET OF CHOICE

 

I sell gold medals, so take this with a grain of salt, since I'm talking my own book here.

But compared to almost any other Hard Asset, in my view, Historical Gold Medals are by far the best investment.

1) They're gold.  So they're chemically inert.  They don't tarnish, tear, corode, fade. The condition you receive them in, is the condition they will remain in unless you degrade them yourself.

2) They're gold.  So they're beautiful.  Humans have prized gold for it's amazing eye appeal since the dawn of human history.  

3) They're gold.  So they're portable.  You don't need a fortress to guard them or truck to transport them of a museum size spcace to display them.

4) They're gold so they will hold their value throughout the ages and appreciate over time against all paper currencies.  

5) They're of Historical Interest, and even, in some cases, importance.  They were almost always issued to celebrate some Historical occasion of Importance, or interest and issued to Historical Figures of Great Accomplishment.  Often Kings, Queens, Generals, Emperors, and Artist and Inventors of great talent.  In many cases they were once owned and prized by these most notable humans.

6) They're most often wornderful works of art, as the important humans who commissioned them tended to hire the great artsists of the era to engrave them.

7) They're extremely rare.  A rare coins might be issued in the thousands or tens of thousands.  A rare medal may be issued in the hundreds.  In many cases a rare medal might be unique in gold.  Or issued in gold to a small handful of the era's most important figures.  

And yet, because fo few are even aware of their existence, they're suprisingly affordable compared to many other hard assets - especially coins.  (But the number is rapidly growing.)

8) They are extemely undervalued, because it takes effort to research their historical and cultural importance, to loacate them, and to assess their value because they're so rare they seldom sell at auction.  Most coin types can be easily researched and valued.  But a rare gold medal can take hours or research to identify how many exist, who has owned them and what they ought to bring at fair value.

In the same way, memorabilia connected to figures with whom everyone of a certain era is familiar are easy to acquire and value.  But a sneaker that was once worn by Kobe Bryant may be of tremendous value now, or a Dress worn in a film by Julia Roberts, or a guitar played by Johnny Cash.  But in a hundred years will anyone value these things?  Who knows.  

Yet a gold medal awarded to Admiral Nelson may mean little to most people today, but in a hundred years it will still have tremendous historical - and monetary value, to the history buffs: military, economic and political .enthusiasts and scholars of tomorrow.  And there are more of them than you might think,

The same goes for modern art.  You might pay a million dollars for a Banksy drawing of a cute smiling monkey today and sell it for two million tomorrow.  But in a hundred years will anyone pay a dime for it?  Who knows.  

But that Gold Medal celebrating a major victory by Napoleon Bonaparte, engraved by one of History's great artists: Bertrand Andrieu,  will certainly have more value in a hundred years than it has today.

8) Another wonderful thing about gold medals is that they have been around for ever, so you can collect in any period of interest.  It is doubtful most most peope could afford a Gold Medallion of Constantine for a few million dollars.  But there are gold medals in every era, and many are supprisingly affordable.  Some of great artistic merit and hsitorical import sell for little more than melt.

So research an era, or a King or an Emperor or a Pope  or an Artist or a Scientist, a battle, a war,  or even an olympic athlete and chances are there are Gold Medals associated with them that you can track down with a little determination and application.  It will be worth you while.

HARD ASSETS VS THE DOLLAR: REASONS TO BUY GOLD NOW

 

The Dollar is currently at a high after the Fed has raised rates from zero to 5.5 percent in record time (about a year).

In spite of this lightening round of tightening that has yet to work its way into the real economy, Gold has dropped only about 6 percent on the COMEX - which is an exchange domininated by FED surrogates like JP Morgan and Citibank.  

Meanwhile the central banks of the world have been loading up on gold at a record pace.

Now the ability of the Fed to keep raising rates is near zero.

Because the effect of this tightening is about to be felt  in an economy where hundreds of billions of dollars financed by commercial real estate, residential real esate,  hundreds of zombie companies (13 percent of all listed firms and countless smaller businesses), and hundreds of businesses that have been loaded up with debt by Private Equity and sold to dupes at a Pension Fund near you (Like Texas and Florida whose pension systems are controlled by political appointees with no financial background) must now REFINANCE this massive debt load at rates closer to 9 and 10 percent than 1 or 2 percent where they first leveraged up.

This is a bug in search of a windsheild.  

WHen the bug smashes - the Fed will have to lower rates and extend another round of massive bailouts = and then the Dollar is cooked.

MEANWHILE:

Fitch has dropped the dollar's AA A credit rating - largely because of an idiot anti-democratic political class intent on destroying faith in the Justice System that protects the reserve status of the dollar.  Fitch cited Jan 6 and the constant wrangling over the debt ceiling as evidence.

So the Dollar that made up 73 percent of global reserves in 2001 now makes up 58 percent of global reserves.  That's still a hell of a lot.  

But on top of the debt problems and the political problems we have weaponized the dollar through sanctions against Russia.

Which means that all those treasuries they bought that help us finance our debt - we default on.  We just seize them and don't pay!

And howsoever they may deserve it, that is something you  just can not do if you expect other countries to keep the dollar as their reserve currency - and keep buying your treasuries.  In an era when your debt is expolding and you need to sell those treasuries. 

Now many countries don't want them because they're afraid if they piss us off we will sanction them too. 

 Especially powerful countries like CHINA.

The BRICS meeting at the end of August has 20 new countries making official application for membership including Saudi Arabia.

Many BRICS countries are already settling commodity purchases in local currencies.  And cutting out the dollar.

The BRICS along with the CHINA led BELT ROAD INITIATIVE nd the Shanghai Cooperation Organization are seeking to build a coalition that circumvents the use of the dollar as a settlement - or reserve currency. And this group represents 85 percent of the worlds population.

Now Saudi will be joining the BRICS - and the BRICS new development Bank.  They will be accepting other currencies for oil.

CHina has brokered a peace between Saudi Arabia and Iran. Sauid, Iran UAE Bahrain Pakistan and INdia are building the BRICS NAVAL ALLIANCE.

And eventually it is certain this BRICS group will announce a competing reserve currency for cross border accounts settelement.

And it will likely be backed  by gold/.

BIS has reclassified gold as a TIER 1 asset - many feel in preparation for this new currency.

Central Banks have bought more gold over the last 18 months than any time in history.

Don't look at the day to day Comex price of gold.  Look at what's happening in the world.

AND PROTECT YOURSELF.

HARD ASSETS NOW: THE PITCH:

 

Okay, you're probably not new to this, but what are the basic arguments for Hard Assets as the core of the your portfolio rather than a small hedge?

1) Hard Assets have no counterparty risk.

2) Every other investment has counterparty risk.

3) Hard Assets will never have counterparty risl.

4) Every other investment will always have counterparty risk

Think about that in an era when cash itself will inevitably go digital so every investment (including and especially crypto) can and will be tracked, taxed, hacked, confistcated, and subject to complete and utter collapse.  One bad trade.  One poorly managed bank,  One dishonest exchange,  One terrorist attack, One surprising declaration of war, One Virus,  One bad election result, Can all cause a ripple through the financial world  that destroys  the value of collateralized assets.

Except Hard Assets.  Because they are not collateralized.

The next major reason to own Hard Assets:

1A) Expertise.  You can and should own hard assets in an area where you have developed expertise.  Then you rely on your own expertise.  Are you an athlete?  Buy Athletic Memorabilia.  Are you a dancer?  Buy Dance Memorabilia.  A History Buff?  Buy coins or medals or rare books.  An Artist or Art Historian: Buy Art.  A Musician?  Buy instruments of musical memorabilia.  Buy what you know.

No matter how much you know about stocks and bonds, unless you are a full time trader for Goldman Sachs, somebody knows much more than you do.  (yeah, that means you - all you clever day traders with fool proof technical systems)   Not so with your particular area of expertise.  Most everyone has one.  For God's sake if all you do is smoke pot, collect celebrity roach clips.  They'll be worth somehting to somebody.  Your better of than getting ripped off investing in stuff you really don't understand at all.

The next major reason to own Hard Assets

1C) In an era of a MEGA DEBT BUBBLE; the only way for governments to survive is to inflate away the debt.  That means debauch the currency.  That means every Hard Asset will rise in proportion to the debauching of the currency.

This is incontroveritble, ineluctable math.

Finally: 

1D) FOMO

Almost all invresting at some point is driven by Fear of Missing Out.  This has not even remotely begun in the hard asset universe.  Right now we are in the stage when Hard Asset Investing is bgeinning to reach a broader consciousness.  You see it on TV  You see it a the auction houses.  You see it with financialized funds organized to buy wine or art or coins.

But it is in its infancy.  When FOMO takes over, look out.

Hard Assets: What rhymes with the 1930's?

 

Everyone knows history doesn't repeat, it rhymes.

Unfortunately we are now rhyming with the late 1920's and early 1930'S.

Same massive debt hangover.  Same mass disillusionment with Demcocracy.  Same anger, frustration feelings of betrayal and victimhood.

Back in the 1930's the debt hangover and resulting anger was due to a World War, mass destruction, reparations.  Now the debt hangover is due to mass financialization and the betrayal of a financial class that instead of efficiently directing capital to where it would do the most good, has figured out how to efficiently suck capital out of the system into the pockets of the very very few.

The causes are different, but the situation rhymes.

The same mass anger, frustration, and casting about for scapegoats: foreigners, immigtrants, jews, muslims, dark skinneds, asians.  Crisis at the border.  Crisis in the cities.  The situation on the ground no different than it has been for decades, or centuries, but the imagined Crisis in the Minds of the Betrayed the same as in the 1930's.

The same disillusion with Democracy. After all it has only brought about and alarming debasement of the currency,  income inequality, and an alarming toleration of weakness - or Wokeness.  So the complaint goes.

We need a Strong Man to make it Right.

Make Germany Great Again.  Make Europe Great Again. Make America Great Again.

And the other thing sure to rhyme is the coveting of Gold and Hard Assets.

The first thing Hitler did when arriving in a newly conquered country was go straight to the Central Bank and steal all the gold.  Then go straight to the National Museums and steal the art.  Lebensraum was the pretext.  Gold was the objective.

And not just Hitler.  Everyone knew that to survive the era that led inexorably towards another World War was the amassing of Hard Assets.  That was the only way to get through.

It is happening already.  China and Russia and India are hoarding Gold.  There is a global race to corner the markets on scarce resources: Gold, copper, rare earths, oil, grain.

And the wealthy all over the world are converting their paper assets into Hard Assets.

Here in the center of financialization the realization that Hard Assets will be the economic saviour of the next decade has been a bit slower to sink in  It is just in its infancy.

But it is beginning to creep into the general consciousness.  Hard Asset TV shows are on at all hours on serveral channels all day long.  Storage Wars.  Pawn Stars.  Antiques Road Show,  Flea Market Flip, Money for Nothing, House Hunters, The Coin Vault, The Jewerlry Arcade, Auction Kings, American Pickers, Found Objects, Counting Cars, Rust Valley Restorers, on and on and on.

Go to the Sotheby's website.  It's not just old master paintings.  It's Grateful Dead T shirts, and Concert Posters, it's Celebrity Memorabilia, and Hand Bags, and Hip Hop clothing, basketball sneakers and anything and everything Hard and Real.

Money is beginning to flow there.  

Beginning.

Because we are in the early early stages of what rhymes with the 1930's.

What comes next is when you'll really need Hard Assets for your financial salvation.

Fitch downgrades US debt on debt ceiling drama and Jan. 6 insurrection

 

Fitch Ratings downgraded its US debt rating on Tuesday from the highest AAA rating to AA+, citing “a steady deterioration in standards of governance.”

The downgrade comes after lawmakers negotiated up until the last minute on a debt ceiling deal earlier this year, risking the nation’s first default. But the January 6 insurrection was also a major contributing factor.

In a meeting with Biden administration officials, representatives from Fitch Ratings repeatedly highlighted the January 6th insurrection as a significant concern as it relates to US governance.

A fitch downgrade?  Big deal!  Right?

Yeah, in the next five minutes nothing will change.  But over time it is indeed a very big deal when you have two thirds of the world's population represented by the BRICS actively de-dollarizing and 40 to 50 other countries seeking to join the BRICS economic block.  THis is just more amunition for them to site as to why the dollar is not the bastion of stability it once was.

Stability.

That is the dollar's main strength.

Now that the previous president has been indicted for his connection to events that have serverely impacted the dollar's stability his allies are attacking the stability of the judicial system.  This translates directly to more dollar  instability.

To be sure there are no stable economies in the world right now.  So the dollar is still the most stable currency - outside of Gold.

But each blow to dollar stability is one more bastion of support for Gold as the anti-dollar.

And all those governments seeking to de-dollarize are making gold an increasing part of their reserves.

The process is slow.  You can't see it happening except in the slow, steady increase over time in the price of gold.

But things in the economic world happen (As Hemmingway famously observed) Gradually and then Suddenly.

Suddenly the gold price witll be $2500.  Then $3000.  

And then will you buy or figure you've missed the move and will wait for it to come back to you?

Then it will be $3500.  Then the fear of missing out crowd will wake up....

Get ahead of the trend and be patient.  Gradually always becomes suddenly in the financial world.  It's just now possible to predict when.

MOVEMENT AWAY FROM DEMOCRATIC NORMS IS TANTAMOUNT TO A MOVEMENT AWAY FROM THE DOLLAR

 

There is an undeniable movement occuring in the Democratic West towards Strong Man Style Fascism.  Netenyahu's judicial reform in Israel, the Reich Citizens movement in Germany, and the trashing of the US Judicial System by those who disagree with it enforcement policy are all symptoms of the same disease.

According to a recent Axios poll 35 percent of Americans would prefer an autocrat to a democratically elected leader - if the autocrat more closely represented their personal views.  The figures in recent polls are even higher in many European countries. (Source: https://www.axios.com/2022/09/12/two-americas-index-democracy)

I think what many pro autocratic Americans don't really understand is that without the support of a powerful Democratic Judicial System the Dollar as a reserve currency would be toast.  (that's a technical economic term.)

If US economic contract law were subject to the whims of an Autocrat nobody would trust the dollar as a settlement currency.

Already, carpricious trade wars, tarrifs and sanctions have damaged the dollar in ways the average American has yet to understand.

It is difficult to overestimate the damage that the loss of reserve status for the dollar would do to a country the is carrying 30 trillion dollars worth of Sovereign Debt and another 70 trillion dollars worth of Unfunded liabilities.

If you think inflation is now a problem and can't see what the loss of reserve currency status would do to the US and Global economy, I'm afraid you have a very limited imagination.

The problem we are facing now is that most every country on earth is already anticipating the effects of this anti deomocratic movement on the dollar.

A slow but perceptible shift away from the dollar is occuring all across the globe.

It is not too late to return to an embrace of democracy.  That would help.  But the problem is complex and sure to get worse before it gets better.

And the only hedge against it for the priviate citizen is storing wealth in hard assets.

That is a verdict with 5000 years of human history to support it.

BRICS: PERHAPS NO UNIFIED CURRENCY ANNOUNCEMENT - BUT A DE-DOLLARIZED SETTLEMENT AGREEMENT AMONG 40 COUNTRIES IS ALL BUT CERTAIN

 The BRICS group of fast-developing economies — Brazil, Russia, India, China and South Africa — has positioned itself as an alternative to the Western-dominated global order. BRICS officials say that spirit has sparked the interest of some 40 countries in joining as the bloc gears up for a summit in August.

Current BRICS chair South Africa is hosting the three-day meeting in Johannesburg next month and says BRICS expansion will be high on the agenda.

Argentina, Iran, Saudi Arabia and the United Arab Emirates are among the countries looking to join, South Africa's BRICS ambassador, Anil Sooklal, told journalists, adding that it demonstrated the confidence Global South nations have in the organization.

"Twenty-two countries have formally approached BRICS countries to become full members. There's an equal number of countries that has been informally asking about becoming BRICS members," Sooklal said.

INFLATION VS DEFLATION

 

There's a raging debate right now about whether inflation or deflation will take hold in the US and global economy.

Here's the simple answer: if the debt overwhelms US and global companies so that global finance collapses you'll get deflation.

If the US and Global Central Banks come to the rescue and print money and bail everyone out you'll get inflation - or stagflation.

If there is a Sovereign Debt Crisis the central banks will still try to print their way out and you'll get inflation or stagflation.

I'd bet the Central Banks keep printing.

GOLD: THE STABILITY HEDGE

 

Most people think of gold as an inflation hedge.  This is not true either historically or theoretically.  It can be true if the inflation is one that cause instability because the mass of the population can no longer afford basic amenities like housing, education, health care, food, energy: such as now.  

Our particular inflation is very destabilizing.  

However in a strong economy growing at trend 4 percent with affordable amenities, such as the US had in the fifties and sixties (in spite of - or partially because of a 70 percent tax rate) inflation was a result of healthy economic growth and not a cause of instability so gold was not really necessary as a hedge against instability.  

Yet gold played a hidden role in keeping debt in check as debt had to be convertible back into gold - so it was stabilizing behind the scenes.  

When we broke the gold conversion in 1971 debt instruments began to be invented, attitudes towards balance sheets shifted, experiments with derivatives sprang into existence - and many credit this with the birth of modern finance which, they say, brought the standard of living up across the globe.  

Perhaps.  In some ways it did.  If you look at the world in a very short term sort of way. 

But by the end of the decade inflation has careened out of control and had to be tamed by Volker raising rates to 18 percent, causing a a debt reset that sent the global economy into a long recession.

Since then the world economy has been lowering rates continually fostering a second wave of debt induced inflation that is so out of conrol that there is no advanced economy whose debt to GDP ratio is under 100 percent and the global debt is growing at an alarming rate.

This in spite of central banks raising rates a tiny bit (by historical standards.)

In fact raising rates now only increases debt by adding to the debt service load!

Talk about No Way Out.

And talk about Instability.

This instability is paralelled in the political and social world.

People who can't afford housing and food and care for their kids are angry.

And unscrupulous politicians spring up to take advantage of this.

We now have leaders and candidates who preach hatred, violence, retribution, exclusion, and scapegoating.  (Just like in the last virulent debt laden period of the 1930s.)

It is once again socially acceptable in the western world to hate Jews and Blacks and Browns and anyone who thinks or looks differently.

Whether you're for or against this, you have to admit it is terribly detsabilizing.

And gold is a hedge for that type of instability too because it leads ultimately to more financial instability.

This is why the world's central banks are now loading up on gold.  It is why the Governments of China and India are actively encourging their populace to load up on gold.

It is not yet part of the US conscsiousness, but it is making inroads. 

You see it if you are active in the hard asset markets.  You see it in ads on youtube and on television.  And you're begining to see it in the recommendations of astute asset managers.

It's early.

If you're on the fence you haven't missed anything yet.  

The instability will get much worse before it gets better.