GOLD MAKES A NEW ALL TIME CLOSING HIGH: NOBODY HERE NOTICES

 

Gold continues to climb.  It's moved up over 100 dollars since the debate.  But all we can talk about is our domestic political situation - which is leading us to ruin,,,,  And not one person in a million can see it...

Why?

Gold loves the move towards autocracy.

Gold loves Tarrifs and trade wars.

Gold loves mass deportations that will devastate the suppy of labor in a country with a dangerously declining birth rate.

Gold loves tax cuts for the wealthy that lead to massive deficits.

Gold loves - more than anything elrse - the idea of a dependent Fed that will drop rates back to Zero on the orders of the President/Autocrat.

America thinks a Strong Man leader witll lead the county back to Prosperity.

We can't wait.

But look at the other countries with strong man leaders:

Some people think Hitler was good for Germany.  But Germany was devastated and didn't recover for 50 years.

Just look at Orban in Hungary.  Hungary is mired in a perma-recession with out of control inflation - that has moderated a bit from last year's 17 percent but is still decimating the middle class - or whatever's left of it.  True you don't have to worry about Ttrans-sexual athletes auditioning for school sports teams.  So if you care more about that than eating you're set.  Otherwise, it's a disaster.

Look at Putin in Russia.  Russia suffers from peremanent Stagflation and a decimated middle class.  Its offical growth rate is temporarily jacked by the wartime economy but life there is miserable - unless you are an Oligarch.  The young and educated are fleeing the country in droves. 

China, on the other hand,  is an animal we don't understand.  They are autocratic but the autocracy is committed to developing a free market economy - that is tighly regulated so that the top 5 percent can't fleece the bottom 95 percent.  This idea is so foreign to Western thought it's no good even trying to analyze it.  Over many years they may succeed.  For right now, suffice it to say that they view America as the number one impediment to acheiving their aims.  And they think that by de-dollarizing the world they will achieve financial dominance.

So far we are doing everything in our power to help them.

And the number one weapon we use to Help China is by weaponizing the dollar thus stoking inflation at home and encouraging de-dollarization abroad.

Why?

I don't know.  

It's so stupid it beggars belief.

But a lot of Americans seem to view it as a sign of strength

So, go figure...

Or don't figure... just buy gold...

THE US FISCAL HEALTH: NOTHING TO SEE HERE

 

The fact of the US fiscal situation is this: Defense, Entitlements and Interest Payments - three things that only go up - never come down - are now 120 Percent of tax receipts.

Do the math.  

All the difference to pay our obligations and anything discertionary: infrastructure, scientific exploration, disaster relief, war, ANYTHING comes from PRINTING MONEY:

INFLATION.

This is a fact.

This is another fact: nobody running for political office talks about this.  Because nobody has the courage to lose their job over telling the truth: we have to cut our spending.  (and tax cuts is the exact same thing as spending in this environment because they add to the deficit - the last three trillion of tax cuts added three trillion dollars to the deficit and that much more in interest payments.)

Nobody Cares.  Everyone complains.  But nobody is willing to even talk about the real problem. 

In stead, everyone talks about Social Issues, Lefties, Fascists, Socialists, White Supremacists : Fear, Crime, Immigration, Climate Change, Palestine, Abortion, Transgender High School Swimming Scandals, the war on the Bible, Gun Safety, the War on Christmas, Wokeness (whatever the hell that is), the war on Democracy, the war in the middle east, the war with Russia...

Anything but the one thing that really matters to everybody's quality of life - except the billionaire class.

And that is the fact that as our debt soars, our two fiscal choices are INFLATE or DEFAULT.

If we default all asset prices will crash and chaos will ensue. In the Chaos only gold and hard assets you can protect with your guns will survive.  So it is not likely the Govenment will choose to default.

That leaves Institutionlized Global Inflation forever - or at least until  we have a crisis stemming from that fact that nobody can afford anything.

In that scenarion every asset inflates - except bonds - and then as proift margins get crushed, stocks crash,  then as nobody but billionaires and private equity can afford a house, housing crashes,  and  then as everything becomes too expensive - everything crashes but gold.

That is where we are.  That is who we are.  It takes time to unfold.  But as Hemingway said: Gradually - then suddenly.

Prepare yourself.

UNDERSTANDING THE GOLD TRAJECTORY: TRUEFLATION

 

According to a recent study by Scott Golloway:

Boomers entering work force average entry level job adjusted for inflation: $70,000 (1970)

Gen Z entering the work force in the average entry level job $56,000

If that doesn't answer why 80 percent of the populace is angry and hopeless...

Add to that:

Annual cost of college as percent of income:

Boomer: 14 %

Gen Z: 42 %

Home price to income ratio

Boomer: 3X

Gen Z: 7X

Cost of McDonalds hamburger and fries 

Boomer (1970) 35 cents

Cost of McDonalds hamburger and fries

Gen Z: $7.75

And even more recently:

Average mortagage payment 2019: $1100

Average mortgage payment 2024: $2300

Average home cost 2019: $290,000

Average home cost 2024: 420,000

Now take into account that when the Government takes its CPI measurements they exclude everything above (Home prices, Education, Food)

Now take the average ounce of gold in 1970: $253

Average ounce of gold 2024: $2350

Take into account that as the debt levels grow in our economy this trend intensifies.

And the debt levels are growing exponentially.

Now think about the value of Gold in protecting your wealth over time....

UNDERSTANDING GOLD'S TRAJECTORY (and by extension the entire Hard Asset class).

 

Expensive is a psychological determination.

Stable is a psychological determination.

For the last 50 years the United States has gone through periods of relative stability and relative price gyrations.  There was the Viet Nam war and the social unrest surrounding that.  There was the massive inflation of the 1970's and the social unrest surrounding that.

The enormous difference between then and now is the United States was a Creditor Nation with the world's unchallenged reserve currency.  Households did not amass debt.  Corporatioins did not amass debt. The Government was paid for with tax receipts.  And the government was run by relatively well educated serious people who cared about solving probelms. 

Through all the unrest our House was in order.

Even the protesters realized that.  They were angry that solutions they wanted weren't being offered.  But they saw that solutions were possible.

Stable.

Now the United States is a massive debtor nation.  And most of the major central banks of the world are aggressively de-dollarizing.  Led by China, Russia, Iran - but also including Saudi Arabia and other oil producing countries in the Middle East and South America. 

Households are drowning in debt.  80 percent of the country lives paycheck to paycheck, and their kids can't afford college and will never ever be able to afford a house.  And food is too expensive.  Food is shockingly expensive.

Unstable.

And 20 percent of every dollar the Government spends is borrowed  - which means PRINTED and injected into the economy.  And the percentage increases every year.  And the more you print and the less other countries want your debt - the higher inflations soars.

Now when you have social unrest it is expressing an anger born of Hopelessness.  Solutions are not obvious.  Solutions do not even seem possible.   The problems of debt once they reach the point that the debt can never ever be realisitcally paid off - or even paid down - it simply has to be rolled over for ever - mean you have problems that have no solutions.

That can go on for an indeterminate period.  But as you print more and more money to support this unstable structure all the wealth accrues to the top few percent and the everybody else gets ground under the pityless wheels of inflation.

This is a very unstable situation.

And Gold and Hard Assets are the only assets that survive in a massively unstable society.

Right now we are at the point where gold price is just beginning to reflect the Central Bank buying  of China, Russia, India, Iran, Saudi Arabia and others preparing for a period of massive instability.  These are very old societies that remember centuries of prior instability.  It's baked into the psychology.

Here in the US we have been conditioned by 50 years of stability.  The psychology is that of a very young country that has no shared long term memory.

But psychology is strange.  It can flip.  And when it does, it tends to move in the new direction for quite a wbile.

It is just beginning to dawn on Americans that the problems we have are grinding them down in a way that doesn't present any obvious solutions.  The politicians we have now have no interest in solving or even addressing these problems.  They are far more interested in taking advantage of the social rifts that develope from the underlying problems.

All we hear here is invective against fellow citizens who have become our enemies.  That's so much easier than addressing the massive unfunded liabilities.  Or the problems of a predatory financial industry like private equity.  Or our unwillingness to allow large institutions to be responsible for their own losses.

And still many here remain hopeful.  Because we are coming off 50 years of prosperity.  Somehow things will turn around.

But every day that possibility seems more and more remote to many.

At some point Psychology flips. And people become frightened.  And Angry.  They stop spending on crap they don't need while the things they do need become ever more expensive.  And that makes them even more frightened.  And Angrier.

If you think that the last vestiges of hope are born of realistic possibility for solutions then the gold price would be a blip to be ingored.

If you think that hope is misplaced and the problems we have will get worse for quite a while before serious people come in and try to address them - then gold and hard assets will go much much higher than they are now.

Simple as that.  

AN EXCELLENT POLITICAL BACKDROP FOR GOLD

 

Right after the debates the yeild on the 10 year notes soared over 200 basis points.  Evidently the message to the bond market was that neither candidate is at all concerned with bringing down inflation.  Though gold is temporarily consolidating the movement in the long bond should be read as extremely beneficial long term for gold.

Then today July 1st, the Supreme Court handed down a decision that is should be the coffin nail for the dollar as reserve currency when they transferred all the power from the judiciary - which is in charge of settling international conract law, to the  President = who can now settle all international currency policy by fiat.  

The ten year note reacted by jumping another 100 basis points! 

Why:

This means that the President alone has final word on who to sanction, who should pay tarrifs and in what amount, and who should suffer confiscations.  He need not consult any other branch of Government as he is no longer bound by laws or conventions.

This is a tremendous development for Gold as it takes away the final support for the the dollar as an international settlement currency - or the world's reserve currency.

The dollar has already become unattractively loaded down with debt, with both candidates pledging to increase debt exponentially, 

But now the US Judicial system has now been sufficiently gutted so that the President is first, last and final arbiter of how the dollar will be used as a weapon going forwards.

Both candidates have already demonstrated their love of weaponizing the dollar.  Now they have unlimited power to do so.

This makes the dollar that much more unattractive to Global Central Banks.

Over the next few years this is the most excellent news Gold could have ever hoped for.

SEASONAL GOLD

 

Seasonally, gold peforms as it does because of the Chinese and Indian wedding and festival seasons which provide a massive support of physical gold buying,

There are all sorts of charts you can look up but the one above provides a pretty good summation of stronger and weaker periods for gold - based heavily on the Chineses and India physical gold buying seasons.  That's about 3/8th's of the world's population that stores its wealth and passes it along from generation to generation in thre form of gold.

You can simplify this down to say that Feb thorugh June and into early July is the traditional weaker period.  August through January is the tradtional strong period.

Beyond this there is the eight year cycle with three strong up years and 5 down years that many technical analysts follow.  The beginning of the new technical up cycle is January of 2025.  Some eminent technicians like McClellan believe the yearly parameters are worth sticking to, others like Zulauf believe the upcycle has already begun here in 2024 and that it can last more than three years.

Obviously we've been in a strong upcycle since oct of 2023 and a pronounced upcycle since January of 2016.  And an overall upcycle since 2001 - and a permanent upcycle since Nixon took us off the gold standard in 1971.  Long term charts bear all of this out.

There are many secular factors that outweigh the Eastern festivsal and marriage buying season that affect these cycles.

First and foremost, without the gold standard the US has been free to churn out as much debt as it wants as it can always be paid back with printed dollars.

But a slew of secualr developments have had a huge effect on the gold price more recently.

Among them:

1. Central Bank buying has shifted heavily away from US dollars and towards gold especially in the last few yars.  This is because of A) the massive buildup of dollar denominated debt and B) the weaponizaion of the dollar through Tarrifs, Sanctions, and Confiscations.

2. Gobal Inflation fears which have exploded in about 2016 and went into overdrive after covid.

3. Faith in integrity, fairness, and competence of major Dollar/Euro/Yen driven governements that dominate western economy.

4. Fears of war, trade war and violence fueled by income inequality and the morally bankrupt demagogues seaking to profit from this inequality which has led the United States to the brink of civil war, while hot wars rage throughout the Middle East and Eastern Europe.

5. De-globalization which is a highly inflationary secular movement bound to last decades.

All of these trends are intensifying by the minute. 

But when you add these trends to a technical backdrop which is shifting powerfully to the advantage of gold and a coming commodity supercycle and you get the potential for a powerful upward move in the price of gold that could/should last at least through 2028.

Technically the better season is about to begin for gold after perhaps one more selloff to scare the weak holders out of their positions.

So you get the Eastern buying season somtime this fall and that coincides with the most extraodinarily incendiary election season since the 19th century with two of the most unpopular and underqualified candidates in the history of elections,

This  coincides with the beginning of the powerful 8 year technical upcycle in gold.

And add to this the most technically overbought stock market in history which can provide little competition for the hard assets market.

And you get perhaps the most powerful support for an upward gold move in our lifetime.

Of course, all of this could fail and gold could fall.  Nothing is certain in life.  

But the current odds are really in the favor of the gold buyer

GOLD and the RARE COIN MARKET: Market report

 

A ‘Petition Crown’ of Charles II has been sold for CHF 949,375 ($1 million) to become the most expensive British silver coin ever sold at auction. The coin was included in a joint sale on May 8, 2024, by Numismatica Ars Classica, Classical Numismatic Group and Numismatica Genevensis 

The rare coin market - like the gold market - is being dominated by the Eastern countries.  Japan and China have both become voracious buyers of high grade ancient and European Rare coins and medallions. 

The US rare coin market it dominated by US buyers - as always.  But the Ancient and European markets - especially the coins of Great Britain in high grade has been very hot for over three years  now, principally because of Eastern Buyers.

Amercans have been moving into Ancients too.  But they have been quite slow to pick up on the the hot European areas which right now include (but are not limited to):

Gold Coronation medals: British, French, German, Holy Roman, 

Gold 5 guinea and 5 pound pieces.

Gold Triple Unites.

Silver  Victoria Gothic Crowns

British and French proof coinage and essais.

Any coins of particular rarity and beauty like the British Petition Crown.

Large Gold medals, Salvator Mundi medals, Bank Portugalosers, multiple ducats of the German Kings and Holy Roman Emperors.

Italian presentation multiples.

in Ancients the popular areas right now are:

Gold Alexander Staters

Gold Kroisos Staters

Gold Oktodrachms 

Large gold and silver pieces of Arsinoe.

Gold Julius Caesar Aurei

Very High grade gold and silver 12 Caesar coins.

Silver Decadrachms.  Especially of Kimon.

High Grade Signed Tetradrachms - especially of Eukliedes.

These are only some of the hottest areas.  Right now the emphasis is on technical grades.  The temptation - especially for novices - is to buy the holder rather than the coin.

The holder is an excellent starting point.  But when dealing especially with ancients the holder will tell you very little about the long term value of a coin which is also dependent on Beauty, Rarity, and Historical Importance.  And the the holder can shed little light on these attributes.  Nor is it supposed to.   It supports authenticity and state of preservation - both crucial starting points.  So Ancients is still an area for experts - or at least those who have put some time into study.

On machine made modern and early modern coins the holder is more instructive, as coins tend to be more uniform.  But and MS61 gold coronation medal maybe 61 because of an invisible rim knock and some light cleaning marks that can hardly be seen when you turn the medal in the light - or perhaps it is MS61 because of some nasty marks right on the King or Queen's face.  It makes a difference to many collectors.  Some 61's are quite attractive.  Some 58's are quite attractive.  Some are not.

And as always, the best opportunities are in coins and medals of great rarity, beauty and historical importance that have not yet found wide popularity.  Because over time what is popular shifts.  

What is historically important does not.

Will the dollar be replaced by a Gold Backed BRICS Currency?

 

Will the dollar be replaced by a Gold Backed Brics Currency?

This has become a hotly debated issue. It has huge implications for the ability of the US to fund and service its massive debt.  Thus it has huge implications for US inflation.

This massive debt and the political stupidity of weaponizing our greatest financial advantage in the world, and thus turning our financial clients into our financial enemies is what is at the root of the problem.

The answer however, is that the dollar can not be replaced as a debt instrument because there are many hundreds of trillions of dollars in dollar denominated debt already in the world when you take into account the Eurodollar market.  And Quadrillions of dollar denominated debt when you take into account the OTC derivatives markets.

How do you replace that?  You can't.

HOWEVER - the real issue is what do GLOBAL CENTRAL BANKS use as reserves given the debt and weapnonization of the dollar?

The debt makes the dollar a depreciating asset.

The weapnonization makes the dollar a completely unstable asset.

The massive instability of our entire political class is the nail in the coffin,

The answer is upon us.

The GLOBAL CENTRAL BANKS are in the process of selling Treasuries and buying gold.  This has been going on at an increasingly faster pace for the last seven years.

Then the issue is for large internationals commodity trades is what currency do you use if not the dollar?

Do you really want Yen or Rubles or Yuan or even the Euro?

Or do you want something that has held its value and even appreciated against all other commodities and currencies of the the last 50, 100, 1000 years?

That would be gold.  At least sufficient gold in the Central Bank Reserves to assure that the currency will be stable enough against the traded commodity.

Or preferably a gold backed unit of settlement.  A BRIC settlement currency for example.

Commodities are already bein settled outside the dollar in bilateral trade agreements.  It won't be long before a settlement currency is in use.

This is real and happening.

Americans are not buying gold.  Yet.

The rest of the world is buying gold for these reasons.

This is a trend in its infancy.

If  you think you've missed out on the move, think again.

Because when Americans catch on, the trade will take its full force.

What could dethrone the dollar and send the US into economic crisis?

 

Having the world's reserve currency for a long period of time, as the US has had with the dollar since the Second World War, gives the impression that all the benefits that accrue from this situation are premanent.

There are many who still feel this way.

In spite of an aggressive global central bank program of buying gold and selling US Treasuries.

In spite of the loss of the petrodollar.

In spite of China and Russia - and others - engineering bilateral trade agreements around the globe for commodities that settle in currenies outside the dollar.

YET - all this could amount to a very gradual process of dedollarization that takes decades and would not provoke any crisis here in the US as we'd have ample time to deal with this shifting landscape through intelligent policy.

UNFORTUNATELY the thing that would greatly hasten this process - and tip the US into an economic debt crisis - is the economic weaponization of the dollar by ignorant US political regiems.

AND UNDFORTUNATELY this process was begun suddently in 2016 with a regiem of Tarrifs, and then kicked into overdrive in 2020 with Sanctions, confiscations and the removal of Russia from the Swift system.

The problem all of these aggressive economic moves that may make sense in the very short run is that they provide massive incentive for other countries to aggressively dedolarise.  So a process that could have taken decades is transpiring in years and could possibly tip the US into crisis at any time.

China, Russia, Iran, North Korea, the oil producing middle east Countries and South American Countries constitute a huge block that doesn't want to be hostage to unstable and aggressive US financial regiems.  And add in most of commodity producing Africa, as well as the Stans that are rich in uranium and oil and gold and add in India which would like to modernize in a western way but is geographically situated within the other Block and dependent on them as trading partners - and you get a huge area of the world actively engaged in dedollarisation.

Some like India and Saudi Arabia are moving tentatively away from the dollar - others like China and Russia are moving quickly.

Every Sanction, Every Tarrif, every confiscation speeds up the dedollarisation process.  Because every country realizes they could be next.  

And most unfortunately we have an election coming up that pits two cantankerous old men who are competing to be the toiughest and most belligerent in ways that are guaranteed to to do the most harm to the dollar.

This deosn't mean the dollar itself will fall in value.  It does mean our ability to fund our debt by printing dollar denominated treasuries will become much much more expensive.  It does mean our rates will rise while our debt is spriraling out of control. 

And it does mean the inflation will be a virulent problem for a very long time.

GLUE: Dollar as Reserve Currency.

 

The Glue that's holding the entire structure that is the United States of America together is the dollar serving as the world's reserve currency.

What this means is that the US is the only country in the world that can print money to pay back its debts.

Every country can print their local currency to buy there Government debt.  Though this is highly inflationary.  But they can not print US dollars to pay back internationally settled US dollar denominated debt.

We can.

The advantage this gives us economically is huge.

This advantage is predicated on the stength of the major US institutions: The Fed and depth of the US financial markets for issuing and controlling debt.  US Judicial System for settling debt disputes.  The US army for enforcing disputes.  The US government for maintaining an even handed and mature grip over those who control and regulate threse other institutions.

It's a delicate balance.

Because of the advantage of the Reserve Currency and the great depth of the Financial Markets we have had a huge leeway with the rest of the structure.

But the rise of the China/Russia/Iran block that has made great inroads with oil producing nations in the middle east and South America, and has bought up much of the commodity producing areas of Africa is pressuring the reserve status of the dollar for the first time.  Bilatteral trade agreements for settling major commodity trades outside of the dollar are proliferating.  This greatly lessens the need for other countries to buy US tresuries.  And this at a time when our debt is exploding so we need to issue ever more Treasuries.

AND just as this is happening - here in the US we have bcgun a massive home grown attack on the institutions that support the dollar and our entire debt structure.

Our Governement is split into two parties that have no interest in governing other than to attack each other and their constituents.  Faith in the Governement stands at about 15 percent.  Other countries notice this astonishing instability.

Our Judiciary is attacked daily - by our own Government officials!  Faith the in the judiciary here in the US stands at about 35 percent and declining quickly.  Other countries notice this alarming instability.

The army is still strong but public appetite for using it for anything is at an all time low.  Other countries notice.

That leaves the Fed and the depth of our Financial/Debt markets.  So far, faith in the Fed is holding.  Though there is serious talk of turning the Fed into anotther partisan institution.  Some are beginning to claim that it already is.  

The big problem will come when Inflation - which is already well into the process of destroying the viability of the bottom 90 percent of the US economy - gets worse - and at the same time a debt crisis provoked by higher rates and massive debt gets out of control.

It's bound to happen at some point.  It almost did with SVB but the Fed bailed everyone out and got away with it again.  But as some point the bailout will be so big and so visible and so obviously the cause of a new round of even more virulent inflation, that faith in the Fed will crack.

Once that goes, the dollar as reserve currency will be in real trouble.

Then we'll see how long the center can hold.

THIS TIME IT'S DIFFERENT

 

AGGREGATE COMPOUND INFLATION RATE OVER THE LAST FOUR YEARS: %25

https://truflation.com/methodology

The paper currency/ debt based Financial system is reaching some sort of critical mass.

The dumbest thing you can ever say in economics is "this time it's different."

But this time it's different.

Because: We've reaching a point in the Global Debt system where all the old remedies no longer work, they just make things worse.

Case in point: Supply Side Economics.  When introduced in 1980 the US was in surplus and the top tax bracket was still 70 percent.  So cutting tax rates and regulations and using debt to create new business all made sense.

Now the top tax rate for many businesses and many of the top 1 percent of the country is ZERO.  because there are so  many loopholes and exceptions, deductions, tax havens, and complex trust structures. 

And the US Total debt is 120 percent of GDP.  And the global debt structure is 350 Trillion dollars.  About a third of that is dollar denominated if you take into account Eurodollar debt.

So what happens now when you cut taxes?  You go farther into debt.

What happens now when you cut regulations.  Goods become more expensive which drives the economy farther into debt.

What happens now when you lower rates to help the economy?  You go farther into debt.

A big problem is that the smart guys at the top of the Financial Industry have figured out how to profit off of debt.  It doesn't have to be productive any more.  The more of it, the more money can be made off it a the very top of the lending pyramid.  

And the more of it the less the currency is worth in terms of buying real things.

We are there.

So what's the solution?

There isn't one.

Sorry.  

That's the reality.

Not until there's a new currency system. Which won't be any time soon.

The real solution is protect yourself.  Because nobody will  do it for you.

Understand this debt based Financial System.  Invest accordingly.

THE GLOBAL FINANCIAL MARKET IS THE NOW THE GLOBAL DEBT MARKET

 

Private Equity is  now Private Lending.   Investment Banking is now Debt refinancing Banking.  And the business of the Central Banks is Debt issuance and management.

The Debt Financing and Refinancing Market is the driver of global financial activity and it dwarfs the Real Economy in size and as a driver of Global Liquidity.

There is currently 350 trillion dollars of global debt with an average lifespan of about 5 years.

Every year there is about 75 trillion dollars that the financial markets need to refinance.

For perspective: Global GDP is about 120 trillion dollars.

Debt refinancing has replaced Capital Investment Financing as the major activity of the Global Finsancial Establishment.  

The Debt Finance industry is three times the size of the Global Real Economy.

We've shifted from a world of New Capital Raising to Debt Financing and Rollover.

The question is: what is the global Balance Sheet supply of Capital necessary to roll over this ever increasing amount of debt?

Or where is the Funding Liquidity for all this debt coming from?

1) Central Banks create liquidity by creating money out of thin air and injecting it in various ways directly into the economy.  (this is not just about Balance sheet expansion or shrinkage or interest rates.  There are a myriad ways for central banks to inject liquidity.  Think of the massive funding facility for SVB and many other undercapitalized banks.  Or think the Repo market)

2) Collateralized loans from Private Investment Banks are the driver of the new Private Lending Facilities.

3) Traditional Commercial Bank lending which has come under massive pressure as the capital requirements have been raised after the banking collapse of 2008.  Many commercial banks are still undercapitalized.

The Financial Capital available to fund debt rollover is about 170 trillion dollars.  So about half of the debt in the system.  

The real economy is still driven by innovation, productivity, enrepreneurship. drive etc.  Just as it has always been.  But the Liquidity available to drive economic activity comes from the Debt Markets.  The debt market are the Financial Markets.  So the Real economy is dependent on the Financial economy rather than the other way around.

This is new.  This has happened over the last 10 years or so.  And it is accelerating at an alarming pace.

In order to keep the economy moving you need an ever greater amount of debt added to all the debt that needs to be refinanced.

AND THE KEY IS THIS: DEBT IS NEVER REPAID.  

IT IS SIMPLY ROLLED OVER.  

THE MORE THERE IS THE MORE YOU NEED TO GENERATE TO FINANCE THE REAL ECONOMY WHICH NECESSARILY SLOWS UNDER THE BURDEN OF DEBT REFINANCING.

So the real economy slows as the Debt/Financial econ0my grows ever larger.

Think about that.  Then add the costs of the current economy that are growing while debt is growing and real economic activity is slowing:

1) an ageing population that needs to be serviced through massive Medicair, Medicaid and Social Security payments.

2) Growing Global Tensions - wars and trade wars - that necessitate ever greater Defense Spending.  and Tarrifs that make all goods more expensive.

3) the Politcal reality that no politician will ever have the guts to raise taxes to pay for anything because it's political suicide.  In fact politicians brag about Tax cuts which add ever more debt to the deficit, fuel inflation and slow the economy (which was not the case when the financial economy was investment based rather than debt based).  Just as no politician will cut transfer payments to their elderly constituents because they are the sector of the electorate most likely to vote.

4) US treasuries are now being sold globally at the margins rather than bought.  The current instability in the United States works against the treasury market that is our major economic advantage in the global economy.  This makes it ever harder to finance our own debt burden.

5) MOST IMPORTANT: The effect of compound  interest means that now Interest Payments in the US are more than a trillion dollars a year and growing exponentially.

So how do you fund all this?  (ha ha ha)

Print money to buy the debt.  That is the only answer.  

Monetize the Debt.  

Which devalues all paper money.

Which makes inflation intorlerable for all who do not benefit from asset inflation.

It's a one way process with no end game.

The only true protection over time is Gold and Hard Assets.

That way you become one of those who benefit from Asset Inflation.

That is the only protection.

GOLD, HARD ASSETS AND DIVERSIFICATION

 

The 60 - 40 Stock to bond portfolio wherein the stock portion is well diversified through various sectors, and the bond portion is diversified through varying maturities and yeilds is now 100 percent correltated.

In other words 100 percent non-deversified.

This is because when debt levels far outstrip GDP levels any crisis can become a liquidity crisis and in a  liquidity crisis every financial asset is correlated.

But not Hard Assets.  Hard Assets are uncorrolated.

Because Had Assets (Art, rare books, rare coins, Real Estate, Collectibles etc) can not be bought and sold with the flick of a keystroke.  Some peopel hate that about true Hard Assets.  It doesn't mean they are illiquid.  Their liquidity requires effort and knowledge.   But the Auction schedule and private placement networks for good high end hard assets are plentiful and international.  And in a debt soaked world this is a marvelous advantage.

Gold sits in a unique position between a financial asset and a hard asset.  Real Gold is a hard asset.  Financialized Gold derivatives including ETF'S, Options, Futures, etc is a financial asset linked to gold.  These can be bought and sold with the flick of a keystroke, so they are more volatile than the underlying Gold.  Yet - and yet - after the initial volatility of panic - unless the crisis is terminal - the price will be drawn back towards the underlying price of the Real Gold that is stored in the vaults of the world's Central Banks and the world's Billionaire class.

Real Gold is a Real Hard Asset.  But there are many other Hard Assets that perform far better than gold.  However they are not as liquid.  And they are riskier.  AND they require real expertise.  You really can't rely on the expertise of an expert for these.  A generious expert will help you develope your own expertise and can get you started by supplying Hard Assets at a fair price.  But you will have to develop your own expertise over time.  

This is why it is best to delve into an area in which you already have some expertise.  Rare coins are excellent for those with a good grounding in History.  Rare books are excellent for those with a grounding in literature.  Collectibles are for the Popular Culture mavens.  Wines for the incurably pretentious.  (because you can't really drink them so you really don't know if they're any good.)  Wristwatches are great for the ostentatious.  They all tell the time the same, but certain ones let everyone know how rich you are.  

There's a hard asset for everyone.  Whatever appeals to your aesthetic, your education, and your disposition.

Choose one.  Because at the high end they're getting more expensive by the day as they tend to rise in value as the global debt levels rise.

GOLD IN CENTRAL BANK TERMS

 

Since 2014 Global Central Banks have net sold $400 Billion in US treasuries (reserves) and bought net 600 Billion of Gold (for their reserves.)

A) As the dollar becomes weaponized through sanctions and tarrifs it becomes increasingly undesirable as a reserve asset.  Gold holds no counterparty risk.

B) As the price of necessary commodities (oil, copper, etc) reach peak cheap values - (increasing demand must outstrip potential supply over time) it is important to hold reserves in a form that holds its value historically over time against these necessary commodities.  Treasury bonds do not.  Gold has done so.

Russia says that 90 percent of its trade is now conducted in the Rubel and the Yuam

China, Brazil, Argentian, India, Saudi Arabia, Indonesia have all initiated bilateral trade agreements in their own currencies.  

20 percent of the world's oil was sold in non dollars currencies last year, whereas over the last century the petro-dollar had been the force behind dollar dominance.

Of course, it can be argued, this is occuring at the margins.

The dollar is still the global reserve currency.

But then, all change in value occurs initially at the margins.  

The question becomes at determining the rate of change at the margins over time.

And the rate of change in the shift to gold and away from dollars for the Rererve Banks of the World is accelerating.

I'm not sure anything else really matters in determining the change in the dollar value of gold over time.

GOLD: THE BASE CASE

 

The base case is things going on exactly as they are now, not getting any worse.  And not getting any better.  That's the best we can hope for because for things to get better we need to elect a politician who is unelectable (willing to take things away from their voters - carried interest exceptions - stock buyback loopholes, corporate tax loopholes - entitlement reform etc, cuts to military spending).  An impossibility.

So what is the base case?

Inflation.  This is when a Central Bank monetizes massive government debt.  Over time this destroys the confidence in a fiat currency's purchasing power.

The starting point for this inflation is deglobalization.  The reversal of the trend that kept rates low while massive debt was amassed globally.

The starting point for this inflation is ultranationalism a trend that keeps demographics shrinking just when they most need to expand to keep inflation under control.

The starting point for this inflation is 2 to 3 trillion in yearly government deficits. 

The starting point for this is 46 trillion in corporate debt.

The starting point is 40 percent of this 46 trillion in corporate debt being currently insolvent.

The starting point is when 2 trillion dollars of corporate debt financed near zero percent has to be refinanced ot 6-9 percent over the next 2 years.

The starting point is a trillion dollars of yearly government interest payment on the cumulative debt.

It's starting out when the total deficit outstanding is 700 percent of yearly revenue.

Eventually as the economy slows and the Fed drops rates to grease the economy and to allow all this debt to be refinanced at more manageable interest rates - 

Then who will retain confidence in the Fed and the Currency as inflation rises while the economy slows and the currency loses purchasing power vs real things?

This is the base case: It is called STAGFLATION.

The worse case is we continue to weaponize the dollars as the global situation becomes ever more warlike ande confrontational.  This will cause other countries to dedollarize more rapidly which is highly inflationary for us.

The even worse case is a global trade war that puts tarrifs on everything making inflation many times worse for us.

The even worse case is a political establishment that causes the Fed to drop rates back to Zero, even as inflation rises.  Then long rates keep rising under the financing avalanche.   This will cause the stagflation to morph into hyperinflation.

So base case or worse case.

Choose your poison.

Both are great for gold - if nothing else.

GOLD GETS REALLY HIT FOR THE FIRST TIME SINCE BREAKOUT - WHAT'S UP?

 

Gold is getting walloped right now.  

A) it is technically severely overbought.  But OverBought things can stay overbought for long periods.

B) This is the weakest seasonal period.  But sometimes gold can move up during weak seasonal periods.

So why now?

Invidia earnings.  The new fantasy is AI.  Everybody in the West is High on AI.  No need for Gold because AI will transform Western Industry and Productivity and gernerate a new financial golden age.

They're not buying this in the East, where Gold is still at the heart of investing strategies.  China, India, the Middle East and Japan.  They account for about 75 percent of all physical gold purchases.

Of course the Asians are just not as sophisticated techincally as us Westrners, right?  

Just walk through the Campus of MIT or Cal Tech and you'll see nothing but Asian students.  So how come they're being so thick about AI?  (Even though they're the ones developing it)

Well, what can AI do?

It can collate.  It's amazing at collating.  Huge data bases are collated in seconds!!!!!!!!

And image recognition.  It's great at that.  Which is great for deep fakes that confuse political enomies.  So if you're a terrorist it's super.  If not, it's not so useful.  Except fot maybe better graphics for games.

So how does this collation translate into real applications?

So far, it doesn't.  Because it sucks at thinking.  Thinking involves providing CONTEXT to all those collated factoids. 

Context is incredibly complicated.  But without it all those factoids are meaningless.  

If you study Ancient Greek, you finds quickly that you can translate a long sentence in two completely different ways, with two completely unrelated meanings.  And both are gramatically correct - with verb and noun endings that correspond perfectly.  How do you know which meaning is correct?

CONTEXT.  In fact entire texts can have different meanings if you get the context wrong.  

The same with THINKING in general.  It's all about providing well conceived context.

But we humans don't even undestand how the brain provides and analyzes context.  Until we do, there's zero chance we can teach AI to replicate the process.  

And only the most sophisticated and highly intuitive human thinkers are good at providing context.  (That's why the internet is filled with ill conceived garbage passing itself off as analysis.)

But what is Intutive?  Nobody understands this either.  Until we do, how do we teach a computer?

Right now, AI essays are a garbage pail full of word soup.  Kind of like a speech you'd hear at a typical political rally.  Lots for phrases, no meaning.  And AI poems are far worse than Hallmark.  Read one some time.  And AI wikepedia type entries have far more made up factual innacuracies than even Wikepedia itself.  It's worthless.

Yes, Invidia is making real profts - but by sellling billions of dollars of chips to companies liked Meta,  that have no real way to monetize this AI.  

So maybe the Asians are not so dumb in missing out on this AI fantaticism.  (Even though they make most of the chips)  Maybe right now it isn't so transformative.  Perhaps one day.  But right now it will not provide any miracles.

The same debt bomb is exploding in the same debt soaked global economy.  The same strong men morons are being elected all over the world to beat our supposed oppenents into submission while the real enemy is still DEBT.  And the same strategy of buying votes and weapons with ever more debt is the only answer ourn politicians have.

Nothing's changed.  

It won't be long before that's apparant.  And the same protection against debt is still Gold.

That's what the Asian economies get. 

Maybe somebody the West will come around to this point of view too,

Gold makes a new all time closing high. Nobody in the US notices

 

Gold is a stability hedge.

Long time commodity investors understand this.  It's not an inflation hedge - unless the inflation is particularly destabilizing.

China and Russia and India and the Middle Eastern countries and the Eastern European countries are all experiencing inflationary pressures and they are all hyper aware of the current instability.  Most of these countries are buying gold through central banks or sovereign wealth funds and through active campaigns to encourage their citizens to buy gold.

They understand this is the ultimate hedge against the emerging global instability.

The dollar is still the world's reserve currency.  Yet much of the world views this as a source of instabilty and seek to hedge against it.

The United States is also experiencing a destabilizing inflation - but somehow the faith in the dollar as a source of global stability remains high here.

Faith in the government and the judiciary is at all time record lows.  Faith in congress stands at 15 perdent.  Faith in the Fed has dropped to 40 percent.  Faith in the Supreme court is at 35 percent.

Yet 62 percent of Americans rate their own economic health as comfortable.  They have a lot of dollars.  So what's to worry?

62 percent see the instability in the crumbling institutions around them but they feel they'll personally be fine.

American exceptionalism means that everbody thinks they will be the exception with regards to the emerging global instablity.  Ands faith in the power of the world's reserve currency lies at the bottom of this.

Therefor Americans still don't believe they need stability insurance.

But America has a severe debt problem.  Having the reserve currency helps because you can print money to purchase your own debt.

But this is a highly inflationary exercise.  Which gets worse and worse because the more you print to buy the debt the more debt you have, the higher the rates and the greater the debt service and the more debt you have so the more you have to print so the more debt you have...

There is no way out of this.  It doesn't matter who we elect.  It doesn't matter who's running the Fed.   

We'd like to think it does.  But it really doesn't.  

The inflation is the way out because it inflates away the debt.  It also erodes the standard of living for everyone but the billionaire class.

Especially for the younger generation that inherits this mess.

The mess is only now starting to manifest because it takes a critical mass of debt to tip the balance from stability to instability.

Most of the world thinks we're there.

America doesn't quite see it that way.

We'll soon see who's right.

Gold News you may have missed:

 

Central banks bought 16 tonnes of gold in March; Sovereign Wealth Funds are getting in on the action – WGC

Central bank demand continues to transform the gold market as official sector purchases increased by a net 16 tonnes in March, according to the latest data from the World Gold Council.

 

The updated monthly purchasing data was released less than a week after the WGC published its Gold Demand Trends for the first quarter, showing that central banks bought 290 tonnes in the first quarter – the strongest start to any year on record.

 

However, it’s not just central banks that are getting in on the gold action. The WGC noted that the State Oil Fund of the Republic of Azerbaijan bought 3 tonnes of gold year-to-day. And the Monetary Authority of Singapore and Kazakhstan also each augmented their reserves by 4 tonnes. This indicates a persistent interest in gold across diverse economic contexts, from rapidly developing economies to established financial hubs.

The Big Short’s Michael Burry makes a $10 million bet in Sprott Physical Gold Trust

According to updated regulatory filings, Michael Burry’s Scion Asset Management is now betting big on precious metals. In the first quarter, Burry bought 444,000 units of the Sprott Physical Gold Trust (PHYS), which is valued at more than $10 million.

Scion’s PHYS holding represents slightly more than 7% of total holdings.

Zimbabwe introduces new gold-backed currency to tackle inflation

Zimbabwe has replaced its collapsed local dollar with a new gold-backed currency, the latest move by President Emmerson Mnangagwa’s government to tackle decades of monetary chaos. 

John Mushayavanhu, governor of the southern African nation’s central bank, admitted on Friday that money printing had wrecked the five-year-old Zimbabwe dollar as he launched the ZiG, its replacement. 

BRICS members India and Russia ditched the US dollar and settled payments worth $4 billion in local currencies. Russian exporters purchased Indian-made arms and equipment for defense purposes and cleared the payment using the rupee. The US dollar played no role in the cross-border trade making local currencies the sole beneficiary of the transactions.

Meanwhile: Putin Casts Russia and China as Defenders of Stability

Visiting Beijing, Russian leader seeks to shore up united front with Xi Jinping against Western pressure.Looming over Xi’s meeting with Putin this week are Western threats of more sweeping actions against his country if it continues sending certain goods to Russia. The US government says dual-use exports are enabling Russia to build up its defense industry.

“Russia is fundamental to China’s grand strategy,” said Manoj Kewalramani, who heads Indo-Pacific studies at the Takshashila Institution research center in Bangalore. While Beijing doesn’t want escalation, “there is a deep interest in making sure that Russia doesn’t lose the war,” he said.

When will the US public discover the Gold Bull?

 

The World's Central Banks are buying gold in tonnes.  The World's Billionaire class is buying gold in pounds.  The world's soveregin wealth funds are buying gold in large amounts - they don't publish amounts but it's possible to track what they're buying: Gold, and other hard assets.  

The world's investing class is buying Invidia, Amazon and Shopify.

The Gold bull doesn't really care.  The Central Banks and the billionaire class dwarfs the invsting class.

But it makes a difference at the margin.  It makes a difference for example to the premium that an ounce of gold sells for at Apmex to the average retail investor.  Right now the premiums are at all time lows!

At some point this will shift.

 And when those margins tip you can get really dramatic moves, especially in premiums.

To understand when this may happen you have to understand the pyschology of the US investing class.

Unlike most of the world, a war has not been fought on our soil since the mid 1800's,  Nobody here during the two world wars were really worried about losing everything.  And since the country is only 2 centuries old there isn't the same consciousness of the use of gold as a store of wealth over the thousands of years that other cultures have access to in their shared historical experience.

Still, about 50 years ago, before the interenet and social media, there was a sense in the US that to protect one's wealth one had to do a fair amount of reading - BOOKS! to get an understanding of what an investment ought to look like.  

Popular Opinion was an object of ridicule.  If many people thought something - it had to be wrong.  The less people who knew about your favorite band the cooler it was.  Fads and Trends were for losers. Conspiracy theories were for maladusted morons.  If you could debunk something using your own logical brain for 2 minutes then you could easily  conclude it was beneath consideraion.

Therefor, investments hads to be backed  by a considerable amount of justitied argument.

Not any more.

Now everyone identifies with large groups that think exactly the same things at exactly the same time.  Everyone gets their information from Social Media which funnels unsubstantiated lies, conspiracies, and investing absurdities.   The dumber and less substantive the better, because then it more firmly binds those that are emotionally wed to it as an act of faith.

But even though, right now the social media fascination is with electronic wizardry like AI (that so far can only collate really quickly) or EV's (which right now are only affordable to the billionaire class) to Crypto (which right now has no application outside of gambling and money laundering) -

 EVENTUALLY these fascinations will shift along with an attention span that can only be measured in nanoseconds.

Eventually some incredibly beuatiful avatar of an eighteen year old girl with a made up "hit song" and 2 bllion followers will tell everybody she is into reall physical gold.  And so is her NBA star boyfriend,.

That's all it will take.

And then some beautiful 25 year old analyst on Bloomberg will pick up the same message, and we're off to the races.

The investing class will finally jump on the gold train that left the station about six months ago.

Hopefully by then it won't by too late to help the investing class.

The Pivot already happened: we're there.

 

While everyone is waiting for confirmation that the Fed will pivot and debating wether the next move should be up or down and what is really going on with inflation blah blah blah...

The pivot already happened.

The Fed got rates as high as they possibly could - but not to crush inflation.  The Fed rate policy just tamps down on Bank Lending.  The Fed got rates as high as they could so that they have some nominal amunition to use during the next crisis.  To make everyone think they're still in control.

But the crisis is here.  The debt levels are so out of control in the government,  corporate and household sectors, that debt service is nearly impossible at the current rates.  Look up the stats for yoursself.

The Fed knows this.  They can't say it.  It would cause a panic.  They have to say everything's fine, nothing to see here, just keep spending...

But they're not idiots.  They understand the debt levels as well as anyone.  The problem is there's nothing they can do about it but try to slowly get real rates more and more negative so that the debt can be slowly inflated away.

That's the best possible outcome.

But it's tough.

Because the political class has every incentive to try to make the GDP figures as high as possible.  And the only way they can do that is to print money off the books and funnel to the asset owning classes so that they can spend.

Right now Biden has already prepared a trillion dollars to funnel through the FHA in the form of cheap home laons to those who would never qualify for a bank loan so they can spend going into the october election.  Where does that money come from?  We print it.  The Treasury/Fed/Executive branch has a lot of leeway in hoow they can print and funnel money into the economy - off balance sheet.

If Biden is reeclected he'll keep doing it.

If Trump is elected he'll keep doing it.

And Trump is also already preparing massive spending programs in the form of dollar devaluations, tax cuts for the largest corporations, and new laws that will support exports while making imports much more expensive for the American consumer. All higly inflationary.

Both candidates are preparing massively inflationary policies.  

Because the if you undercount inflation - which the government systematcally does, the inflation shows up as a massively overestimated GDP.

That doesn't change anything for the debt strapped, cash strapped US consumer.  But it it's great for talking points and it makes the rich ever richer.  Becasue Asset inflation is part of overall inflation.

Why do we do this?

That's all our political/economic system is equipped to do.

This is not radical thought.  This is stuff everyone knows.  This is why the Billionaire class from Ackman to Dalio, to Einhorn to Paulsen to Rogers to Zulauf to Rothschild to Druckenmiller to most Chinese and Indian billionaires are all piling into gold.  These are  not "gold bugs."  If I included gold bugs like Schiff etc the list would go on for ever.

This is also why China, India, Russia, Saudi Arabia, and many others are purchasing massive amounts of gold though their central banks,

Not to fight inflation.   But as a hedge against the instability that is sure to flow from the massive inflation.

We're there.

It won't look like a straight investing line.  It never does.

But we're there.

And it will go on until the central banks of the world decide the system is no longer working for any but the top 10 percent - and eventually the top 5 percent, and then eventually the top 1 percent - which is not populous enough to fight off the resentment of everyone else for whom the system no longer works.

Then something will change.  Who know what.  And who knows what to invest in for that system.

But that's a ways off.

Meanwhile buy gold

HYPERINFLATION: COMING SOON TO AN ECONOMY NEAR YOU

 

BY: Andrew Restuccia

, Nick Timiraos

 and Alex Leary

April 25, 2024 9:00 pm ET

Trump Allies Draw Up Plans to Blunt Fed’s Independence

Some Trump advisers argue that the president should be consulted on interest-rate decisions

WASHINGTON—Donald Trump’s allies are quietly drafting proposals that would attempt to erode the Federal Reserve’s independence if the former president wins a second term, in the midst of a deepening divide among his advisers over how aggressively to challenge the central bank’s authority.

Former Trump administration officials and other supporters of the presumptive GOP nominee have in recent months discussed a range of proposals, from incremental policy changes to a long-shot assertion that the president himself should play a role in setting interest rates. A small group of the former president’s allies—whose work is so secretive that even some prominent former Trump economic aides weren’t aware of it—has produced a roughly 10-page document outlining a policy vision for the central bank, according to people familiar with the matter.

The group of Trump allies argues that he should be consulted on interest-rate decisions,

Several people who have spoken with Trump about the Fed said he appears to want someone in charge of the institution who will, in effect, treat the president as an ex officio member of the central bank’s rate-setting committee. Under such an approach, the chair would regularly seek Trump’s views on interest-rate policy and then negotiate with the committee to steer policy on the president’s behalf. Some of the former president’s advisers have discussed requiring that candidates for Fed chair privately agree to consult informally with Trump on the central bank’s decisions, the people familiar with the matter said. 

---

Trump advisers are plotting to deliberately devalue the dollar if he’s re-elected, report says

A second Donald Trump administration could unilaterally devalue the US dollar, the de facto reserve currency used across much of the world as a lynchpin in the global financial system.

According to Politico, Mr Trump’s crop of economic advisers is “actively debating” how to devalue the dollar to bolster American exports, even at at the expense of the dollar’s status as a reserve currency and despite the risk that a devalued dollar could pour gasoline on inflationary fires that President Joe Biden has been trying to quell during his term in the White House.

The top booster of devaluation is reportedly Robert Lighthizer, Mr Trump’s former international trade representative, along with other Trumpworld advisers in Mr Lighthizer’s orbit.

One source told Politico that “currency revaluation” would “likely be a priority” for some of Mr Trump’s top aides if he and they are returned to the White House after this year’s presidential election.

As president, Mr Trump often fixated on America’s trade deficits with other countries and claimed that such deficits were evidence that those countries were somehow “taking advantage” of the US.

A former Trump administration official said devaluing America’s currency is attractive to Mr Trump and his advisers because it could, in theory, provide an artificial boost to American exports.