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Saturday, April 20, 2024

Is Gold really being driven by "GEOPOLITICAL RISK?"

 


The pundit class always has to say something to make it sound like it knows something.  With gold, the new fad is to say that it is being driven by "Geopolitical Risk."

Is that really any different from economic risk?  

Let's look at the various risks:

1) The US election.  Sure that has "geopolitical" consequences.  But there are only two possible outcomes.  

First, Trump wins.  That means tarrif wars which are highly inflationary: excellent for Gold.  And it mean a new Fed Head who will be instructed to drop rates back to Zero and he will comply.  That mean hyperinflation.  Excellent for gold.  (How do I know?  Trump has promised this.)

Second Biden wins,  Trump doesn't concede.  The republican congress suppports his opposition government, the country splits and economic activity grinds to a halt.  This is a recipe for recession or depression - which would appear bad for gold (and every other asset), but then the Fed would be forced to print money like crazy to bail everything out and that means Stagflation.  Also great for gold.

2)  The Ukraine Russia War.  The pundits act as if the possibility of a tactical nuclear weapon scares the public into buying gold.  The reality is that the economic effects of this war are profoundly supportive of Gold.

A) the American weaponization of the dollar and the swift system has caused many central banks - especially China - to dedollarize - stop using their trade surplus money to buy US Treasuries and instead buy gold.  This not only directly supports the price of gold but is highly inflationary in the US as the Fed has to print money to buy the Treasuries other central banks won't buy.

B) All the oil and grain that once flowed from this war torn region to the West now flows to China.  THis is inflationary for evnergy costs and food costs in the West.   Sounds like that is economically supportive of Gold.

3) The War between Israel and Hamas/Hezbollah/Iran.  The US is on the side of Isreal.  Russia is on the side of Iran, and since Russia is now an economic client state of China as Reussia depends on China to buy all its commodities that it can't sell to the West, we can surmise that China is also on the side of Iran,

Sound like a Geopolitical Mess but it's really not the threat of nuclear war that's driving the gold price.  IF there's a nuclear war, gold won't keep you from getting incinerated.  This war is being fought in the region that supplies most of the world's energy.  And it controls the most important shipping lanes for energy delivery - and the delivery of many other goods.  Energy costs are the major input cost for almost every industry.  This is highly inflationary and thus ecxcellent for gold.

So this fastening on "Geopolitics" as opposed to "Economics" which we are assured are in excellent condition - is really a distinction without a difference.  If Geopolitics suffer - so do economic conditions.

The unusual thing about both the geopolitics and the economic conditions they support is that there is very little guess work involved this time around..  Our candidates have told us what they will do.  Compromise is not on the table.  In fact it is despised as weakness.  The combatants in the various wars have made clear their completely intransigiant positions.  None of them want peace, unless it involves unconditional surrender of the other side.  

Only those looking on the outside through fantasy tinted glasses can see "two state Solutions" or "coaltion governments."  This time around that's just not on the table.

So this is a rare case where the effets of the future on the price of gold a known.  

THis is why gold is moving as it is.

Tuesday, April 16, 2024

GOLD MAKE A NEW CLOSING HIGH AS BULLION CLOSES OVER $2500 AN OUNCE - AND STILL NO US RETAIL BUYING:


This chart illustrates is the most dramatic shift in the gold market since the world shifted from Britain having the world reserve currency status pre World War II where gold was priced in brtish pounds to the US having the world reserve currency status post WWII where gold is priced in dollars.

The next seizmic shift in the gold market came in 1973 as Richard Nixon closes the gold window when certain European countries demanded to repatriate their gold and we didn't want to (or couldn't) pay.  This took the world off the gold standard for the first time since - well, sometime before 3000 BCE.  We don't know when because there is no surviving written language before then.

This also launched an era of unprecedented global debt accumulation as the debt no longer had to be converted into gold.

THen in 2004 the GLD ETF is launched and ever since every gold rally was led by US speculative interest in purchasing gold.

And each time gold was about to break out, the Fed and the bullion banks were able to manage the gold breakout by dropping untold throusands of futures sell orders on a thin market.

UNTIL NOW.

The great gold breakout rally has finally occured after years of the most talked about Cup and Handle technical pattern perhaps ever as gold formed this massive pattern that suggested a breakout the next time the US public got excited about gold.

But, instead, the breakout has come - without any particiapation of the US public.

And without the Fed having the ability to cap it.

How has this happened? 

Eastern Central Banks.  Led by China. And also led by the retail public in the Eastern countries where the central banks are both buying and promoting  private ownership of gold.

This has overwhelmed a basically thin market, taken the US retail buyer totally by surprise and overwhelmed the Fed's ability to control the market.

Clearly there is a massive divergence of views between East and West as to the ultimate - and near term - safety concerning the mountain of Paper Assets denominated in US dollars.  Largely because the debt component of these assets as roughly 35 trillion government, 20 trillion corportate, 17 trillion private, and additional 120 trillion in unfunded liabilities and a dollar denominated derivative debt market or about 4 qudrillion dollars (over the counter and unregulated).

The concern in the East is also very much caused by the recent weaponization of the dollar and the US swift system along with violent anti global rhetoric coming out of our political system.  And the coming election is most likely to intensify this violent rhetoric, and produce equally financially violent policy.

The altenative has been chosen.  And it is Gold.

Nobody here wants to see that yet.  And Americans are very good at burying their heads in Internet Nonsense.  We've become a country of internet ostriches looking for scapegoats, conspiracies and fastening on code words as outlets for frustration and hatred.

None of that will help us though.

What will help is seeing what is going on and finding a way to participate positively to protect yourself.

If we can't do it as a country it is up to each of us as individuals to make smart choices.

ANd the sooner we start the better.

Thursday, April 11, 2024

GOLD FLOWS EAST: US INVESTORS REMAIN CLUELESS

 


GLD, the major US stock tracking the price of gold has been rising steadily, to new highs week after week.  And week after week US gold investors have been pulling money out of the fund.  So accordingly the fund divests gold holdings. 

CEF the Sprott gold and silver fund most favored by US investors is trading at a 5 perent discount to NAV.  When US investors are bullish on gold the fund can trade at a 15 percent premium or higher.

At the same time gold funds in China are selling at a 30 percent premium to NAV.  This reflects the Chinese public appetite for gold purchases.

And the Eastern Central Banks are buying hand over fist.

I track gold purchases of all sorts of semi-bullion collector coins: Limited central mint runs of coins that were either circultion coins like French 100 franc gold angels or Peruvian 100 soles gold coins, or coins intended primarily as limited run bullion like certain Chinese Pandas or British Mint collector bullion, and many pieces that have interest for Asian collectors have gone crazy in price in the last year.

Gold is flowing from West to East.

And US traders and technical analysts are bewildered.  Gold keeps going up in spite of the fact that yields are also going up, stocks are going up, and nominal inflation is coming down.  And the charts have gone hyperbolic.

Nobody here gets it.

Yet.

The fact is everybody in the world can see that the US is spinning out of control in terms of debt, debt service, debt refinancing, and there is no Political Will to do anything about it.

The whole world can see that either outcome in this election will lead to more debt and less Poltical resolve to address it.  Because the both candidates have already pledged to increase the debt.  Biden through massive social spending and Trump through tax cuts, tarrif wars, and dropping rates back to zero.

Both are a recipe for greater inflation.  Though one leads to stagflation and the other leads to hyperinflation.  

So a death by a thousand cuts.  Or death by a massive blow to the head.

Nobody in the world is waiting to find out which, because it doesn't matter.

The Fed is in a box.  They can't raise rates without provoking a debt crisis.  They can't drop rates without stoking inflation.  Meanwhile, they're losing control of the long end of the rate curve.

The billionaire class doesn't care.  They get richer either way, because inflation leads to asset inflation.

If you're not a billionaire and you care, think about protecting yourself the way the rest of the world is doing.

Sooner or later you'll have to.

Sooner is probably better.



Saturday, April 6, 2024

Hs the Fed lost control of the gold market?

 



It's been no secret the the Fed and the bullion banks that own the Fed have kept on lid on the gold market for the last 40 years as the value of the dollar has been inflated away.  

It's easy for them to do this simply by dropping thousands of sell orders on the futures market late in the off hours, running everyone's stops, and setting off a flight out of speculative long positions by small investors which generally follows through into the opening and right through the next trading session.  Then when everyone has sold the bullion banks cover their shorts and go long, making money both ways.

They've done with with clockwork-like regularity for the last 40 years.  Everyone sees it.  And even the regulators (SEC and CFTC) have slapped JP Morgan with nearly a billion dollars worth of fines for manipulating the gold market, yet the trades are so luctrative the billion in fines is like a gentle slap on the wrist.

But a funny thing has happened.  Not so funny maybe to the Fed and JP Morgan but really funny to those of us that have longed for the day that a big enough player enters the market that everytime the bullion banks pull a raid, this new Big Player steps in and hands them their heads by simply taking the other side and buying after gold drops a bit.

And then as gold starts to rise, JP Morgan has to cover and gold ends up rising 40 dollars instead of dropping 40 dollars.

This is the Chinese Central Bank.  They are buying hand over fist.  But they have company: the Turkish Central Bank, and the Polish Central Bank and the Czech Central Bank and the Jordanian Central Bank and many others.  

But the Chinese have decided it is time to take control of the price.  You can speculate as to why.  Perhaps they will eventually launch a gold backed currency.  Perhaps they simply want out of the US dollar/swift system before they are kicked out by an agressive anti Chinese regiem.  So they are replacing US Treasury reserves with gold.

It really doesn't matter why.  It will eventually.  But right now what matters is that they've taken over.  Which means that every time the Fed wants to knock down the gold price in order to solidify their claim that inflation is essentially under control and the US banking sysemt is essentially sound, and the US economy is on firm footing - there's a buyer on the other side waiting to take advantage of every artificial dip.

And all this is happening without any significatnt US retail participation.

Nobody in the US is in this gold trade. Institutions here don't support it, because they can't monetize this trade.  The government doesn't support it because it is difficult to tax and regulate and it sends the wrong message.

Other countries are encouraging their populations to buy gold.  The Eastern and Mid Eastern countries all have a long tradition of gold buying and preserving wealth through gold.  Europe has a tradition of protecting private wealth through gold as the two world wars were fought there.  And only those with gold were able to preserve their wealth.

But the US public seems to have become the very last to realize what's going on,

Eventually they'll catch on.

Or not.

It doesn't really matter to this global market anymore.

Wednesday, April 3, 2024

gold prepares for the election

 



I've never believed the stock market discounts the future.  Because it relies on the psychology of the masses.  And the masses are usually wrong.

Gold, however is excellent at looking into the future, because its movement is ultimately decided by the the global central banks that conrol the economic and political future.

And Gold, right now, has its eye firmly on the US coming election.

Because Gold thrives on chaos, strife, and most of all Gold thrives on War.

There are already two hot wars, one involving Europe and Russia, one involving Israel and Hamss/Iran/Hesbollah.  And both wars have an enormous impact on the all importan US-China relationship.  

And the coming election will be key in what happens to those two hot wars.  

Gold sees an outcome in the coming election that will cause the wars to boil over and spread.

And as the war spreads international trade dies and commodity prices are driven up and up and up.  At the same time war kills demand for discretionary purchases.

Gold also thrives on trade war.  Trade war is highly inflationary globally.  Tarrifs are a tax on the consumers of the country that imposes the tarrifs.  At the same time it drives up prices in the exporting countries that seek to recoup lost profits.  Global GDP dives as global costs rise.  Trade war is wonderful for Gold - if nothing else.

Gold sees an outcome in the coming election that will mean massive Trade War.

Gold thrives on civil war.  It doesn't have to be declared war.  Just violent tension between various citizen groups tends to eventually kill the animal spirits that drives discretionary spending.  Eventually people start hoarding essentials that they belive to be scarce or that they believe will become scarce.  This is highly inflationary.

Gold sees an outcome in the coming election that bodes well for civil war.

Gold thrives on poltical warfare.  The less civil an election cycle the more gold likes it.  The more the various branches of government appear to be at war amongst themselves the better it is for gold.  The stronger the Centralized government becomes the better for gold.  This is because an economy thrives on Trust.  The belief in its institurions in crucial for that trust.  As trust erodes people stop spending and start hoarding.  In the early stages of trust erosion you may well get YOLO - you only live once - spending.  But as the erosion of trust continues you get Survivalism.

Gold sees an outcome in the coming election that will lead to a survivalist mentality.

Gold particularly loves Autocracy.  The more likely the election is to result in Autocracy the better for gold.  Look at Turkey - or Hungary - for democracies that have moved towards Autocracy.  The inflation rate in Hungary is 30 percent.  The inflation rate in Turkey is 65 percent.  

Gold sees an election outcome that will lead towards Autocracy.

It's not as if Gold is omniscient.  But Gold is the reflects the collective vision of the global central banks.  Ands this is what gold sees.  



Monday, April 1, 2024

GOLD AND THE CRASH

 


Nobody knows when a crash is coming.  A lot of people see it coming.  But if it's 5 years away you look like a fool waiting for it while everyone else is cashing in on the precrash mania.

Because without the mania there wouldn't be a crash.

And manias can go on and on and on.

Right now, however, we are in an unprecedented period where rates were kept at ZERO year after year so that everything from Governments to Real Estate to Companies were funded with DEBT issued at or near ZERO.

This wan't because there was no  inflation.  It was because globalization was a heavily deflationary force that kept the inflation of the massive money printing/debt regiem in check.

Now globalization has reversed.  Hot war in Europe and the Middle East , nascent trade war, East vs West cold war that could morph into hot war over Taiwan or Poland or Iran or wherever, at any moment has crushed the old supply lines, regarding commodity inputs, labor, and international cooperation, so that the inflationary forces of money printing/debt are now being pressured mightily by higher rates.

And the wars themselves are highly infaltionary.

And the central banks only control short term rates.  So they will start to cut short rates as the burden of underwater bonds start to impact Governments, Real Estate, Corporations, and especially the BANKS that own alot of the debt.  Most of the banks, including the central banks are dead broke if they had to mark all their bonds to market.

They don't.

But as the bonds mature they do have to either realize the losses or try to refinance at much higher rates - or both.

And even if the Fed cuts short rates, it doesn't mean the long rates will follow.

That's the catch.  That's when the Fed loses control. And that's inevitable with debt load of this size.

This debt problem is imminent.  Just because we've been able to keep it under control so far doesn't mean we'll never discover the breaking point.  TWO TRILLION dollars of corporate debt finaced at Zero comes due over the next two years.  The Commercial - and multi family home  - Real Estate business is dead broke. And the every central bank is carrying massive balance sheets comprised of underwater debt.,  The US Fed still has 8 trillion dollars of it (despite supposed QT).  Other central banks are in the same boat. 

And all the commercial banks - even the big ones - are in the same boat.

There is no out.  There is no soft landing.  There is no  way to resolve this except hyper inflation or default - or both.

Evey Central banker knows this.  That's why central banks are buying gold.

And in the Eastern governments are heavily encouraging their citizens to buy gold - because they know when the debt crash comes gold will get you through it.  They're not worried about people using gold to evade taxes because if you evade taxes there they'll just kill you.  Even if you're rich.

Here in the West Governemnts won't do that because they need money to stay in the local currencies - Dollar or Euro so they can keep control of the Tax structure.  Here if everyone had gold and stopped spending so much on useless crap the goverment tax collecting would implode,  And here they can't even prosecute rich people for avoiding taxes because they own the legistlators and have already put in so many loopholes they don't pay much tax anyway.  If Government lost any revenue from the middle class it would be a disater.  Or even more of a disaster.

So here it's up to you to figure this out and buy gold on your own initiative.

Before it's too late.

Friday, March 29, 2024

GOLD A NEW CLOSING HIGH: CORRELATION VS CAUSATION

 


Gold has just made a new closing high in US dollar terms, and still retail investors in the US are just compltely oblivious.

Why?

Because nobody here can understand why gold is going higher.

That is because here in the US there is a lamentable confusion between correlation and causation.  Not just in the gold market, but in all levels and areas of thought.

Traditionally gold has moved opposite the US dollar.  Why?  Because traditionally the dollar strengthens when the US economy is strengthening so there is no need for gold as a hedge.

That is a correlation.  Not a causation.

Now, the dollar is strenthening because massive dollar printing/debt is causing an interest rate differential between the dollar and other currencies.  This is destabilizing.  So gold is rising along with the dollar.

A different correlation.

Traditionally gold rises as inflation goes out of control.  That is because inflation can be destabilizing.  That is also a correlation.  Not a causation.  

Now inflation is abating yet gold is rising quickly.  That is because the real cost of living is already too high for most middle class citiziens to make rent and buy food.  So a sinking rate of inflation simply means things are getting even more expensive - just at a slower rate.  That is increasingly destabilizing so gold is zooming higher.

You see, the correlations shift according to a constant which is the actual cause of gold's rise: STABILITY - or INSTABILITY.

The more unstable things become - financially, politically, and most importantly (though impossible to qnantify) EMOTIONALLY, the higher the price of gold.

On top of a raging inflation (that is 40 years in the making - but was held in check by 40 years of deflationary globalization) there is also tremendous political instability both domestically and internationally.  

And there is an emotional instability that is being exponentially magnified by Social Media which fragments society and stokes Hatred and Violence and Resentment through algorythms.  

So though you can not quantify Instability it is the prime causation of the rise in the gold price.

Therefor the old correlations that were based in an era that was fundementally more stable because Globalization produced a period of deflationary cooperation between nations that kept the massive money printing inflation in check and kept Nationalistic hatreds in check and kept the differences between liberal and conservative in check - have now all reversed.

The old correlations have broken down and new correlations of instability have arisen.

And this feeds on itself as people looking for answers are looking into the past and at past correlations.

And all of this confusion is turned into hatred, violence and scapegoating by unprincipled politicians and their accolytes on social media.

So look for the instability to increase.  And with it the price of gold.

And eventually when the US public realizes that the gold price is rising for a good understandable reason, they will participate - and drive the gold price that much higher.

Wednesday, March 27, 2024

BULLION VS COLLECTOR COINS: ABOUT 5000 YEARS OF HUMAN HISTORY TO COLLECT

 


The old question for those who know they want gold is simply to store your weath in gold bullion, or to veer off into the 5000 years of gold coinage that defined, described, illustrtated and chronicled the waxing and waning of human political culture.

Bullion is the safe bet.  So if what you're doing is safeguarding your wealth that's your best bet.

Collector coins are close to collecting Old Master Art; there's a lot to know, there's risk involved, and there's potential for great appreciation.

The drawbacks of bullion are 

1) storage.  It's best to store it accessibly.  If the world devolves and your gold isn't accessible it may not serve its purpose.

2) Portability.  If you have a lot of bullion it is very heavy and tough to move.  But if you can afford a lot of bullion you can probably affford and armored  courier service.

3) It's not as easy for the government to track as say electronic tranactions.  But storing a sizable amount of bullion or converting it to currency may attract the attention of the Government.  You may be fine with that.  It bothers some people.

The advantages of bullion: it is a global market: bought and sold fungibly in all the major urban centers on earth.  The price is set by weight.  Everyone knows it.

Collector coins are interesting for all their drawbacks.  In fact it is largely on account of these drawbacks that many people are attracted to them:

1) Very few people know their value.  However they do have a value within a set range but this will vary with condition, availability and demand.  If you happen to be expert on those elements, that value can be known fairly precisely to you.

2) Coin and medallions of great value can be very portable.  That doesn't mean you wouldn't prefer to send them with an armed courrier.  But, in a pinch, you can put them in your pocket and flee.

3) They are just as difficult for the government to understand and track as they are for the average collector.  Few people (in the government) are even aware of the difference between, for example, a Ptolemaic Oktodrachm and a donative of mulitple ducats of Antonio Venieri.  It might take quite a long time to explain the difference in type, place of issue,  value etc.  This opacity makes them quite attractive to people who don't mind putting in the time to learn and especially attractive to those who value privacy.

And the thing about collector coins are that there are as many types as there have been local centers of  commerce in the entire world over that last 5000 years. That's a lot of types.  And there tend to be a lot of collectors for each type.  

The trick is knowing where they are, and how they value their particular pieces of history.


Sunday, March 24, 2024

DEBT AND GOLD: ALL YOU NEED TO KNOW

 


The Federal Debt in the US doubles every 8 years: that takes us to 100 trillion dollars of Federal debt in 2036.  That is 12 years from now for the mathematically challenged.  It is no different under Democrats or Republicans.  Everybody loves to spend.  Everybody also loves to talk about the deficit.  Nobody will evern touch it because it means sufferening through a recession/depression.  No politician will ever opt to do that.  Ever.  

Nominal growth of the US economy is dependent on Federal Spending.  Whether an administration attempts to offset that with tax cuts for the wealthy that are supposed to stimulate investment but just go into luxury purchases that result in much lower tax receipts that necessitate greater issuance of debt (the supply side economics farce) or whether an admnistration attempts to offset spending with debt forgiveness and social programs that are supposed to encourage investment but just go into yolo spending and results in the need to issue ever greater debt to pay for the programs (the middle class relief farce).

It doesn't matter.  It all results in more and more debt.

And the greater the debt the greater the debt service which necessitates more debt which demands more debt service (repeat ad infinitum)

What to do?

Well, at this point, nothing  Sorry.  But once debt becomes an overwhelming force in an economy it can only be wiped out by A) Default.  B) Hyperinflation.

Neither is a painless solution.

It doesn't matter if we are 97 percent of the way there or 98 percent of the way there (this is how much the dollar has been devalued since we left the gold standard in 1973.)  The last few perentage points can take 5 years or five months.

Meanwhile that's how long you have to prepare to protect your wealth.

So while the many are trying to figure out how to get the last few bucks out of AI or Fintech, the few are figurng out how to protect their wealth when the paper currencies finally inflate/deflate the last 2 to 3 percent which is where the devestation will occur.

And the best way to do that is Hard Assets that have stood the test of all previous inflation/deflation events: That is Gold, diamonds, Old Master Art and the like.

Better to be early than late.


Tuesday, March 19, 2024

GOLD AND THE US DOLLAR - WHAT YOU NEED TO KNOW

 



Until recently many analysts just assumed an inverse relationship between Gold and the US Dollar Index.  Until recently, this relationship was fairly well correlated.  Though on the chart above you can see that gold started its recent ascent well in advance of the dollar index drop.  Then continued its asent even as the dollar rose.

Then if this chart continued into 2024 you would see gold go violently  upward even as the dollar moved slightly upward. 

What's going on?

For one thing, the dollar responds positively to an upward thrust of interest rates - regardless of whether this is caused by a strong economy or just casued by high inflation and rising rates.  

Meanwhile, gold responds to the overall economic conditions of the global economy.  

The average US investor thinks that the higher rates in the US is a product, at least in part, of a strong economy.

The central banks of the world, which have been buying gold in vast quantities, think that the higher rates we are seeing are more a product of a stagnating economy laden with massive debt.

In this case, if the global banks are right, the dollar can keep rising even as gold goes parabolic.  (which has not yet happened - but will as stagflation solidifies.)

Yet the dollar has certain headwinds that will become tailwinds for gold

These are:

As rates go up, debt service adds geometrically to the debt.

As debt rises so does inflation.  And as inflation rises gobally, so does destabilizing violent political agitation.  As fascist authoritarion movements gain power, inflation goes parabolic.  At some point this will crush the dollar and all paper currencies and send gold spiraling upwards.

As inflation rises globally the movment towards hot war becomes an inelcutable escape route for political regimes that find themselves reviled for the inflationary environment.  This leads to a temporary relief in the form of ramped up military industry but inevitably leads to greater inflation as supply chains are destroyed.  

Finally, authoritarian government leads to a breakdown in the rule of law that governs innternational corporate cooperation.  This is also very bad for the dollar especially, as it has the current reserve status which would be undermined irreperably by a breakdown in the laws that support  it.

The only beneficiary will be gold.

Saturday, March 16, 2024

GOLD PRICE IN DEVALUED DOLLARS

 

Here we see a 30 year gold chart.  It's done pretty well in the last 30 years as the dollar has steadily depreciated.

But a curious thing happened between 2012 and now: the Fed realized that it could take unlimited amounts of bad debt onto its own balance sheet - and other off balance sheet accounts and thus bail out every major bank, shadow bank, insurance company - or anyone else deemed Too Big To Fail.

And the markets figured this is an excellent thing.

In 2012 gold hit $2000.  The markets weren't so sure about this too big too fail thing,

But then they decided - why not?  It's working now - who cares about "long term lag effects?"  Only doomsaying jerks who miss out on every rally.

Now, 12 years later and gold has only just broken out to new highs.  But at 2012 value for the dollar the price would have to be about $2600 to have broken out to a new high.  So we still have a ways to go.

Just as a way of seeing what the true value of gold would be today if investors were suspicious of the Fed's ability to control the economy as they were back in 2012 - at the tail end of the Great Economic Crisis.

The thing is the Fed's balance sheet back then had ballooned to about 3 trillion dollars.  Whoa!  Nobody had heard of such a thing.  And the Federal debt had ballooned to nearly 80 percent of GDP.  

Scary!

Now, with investors just beginning to get suspicious again of the long term stability of the financial system the Fed's balance sheet if nine trillion dollars and debt is 125 percent of GDP.  AND Two trillion dollars of corporate debt borrowed at near ZERO will have to be refinanced at 6,7, 8 percent over the next 20 months!  AND we go into an election that may well lead to civil war.  While two major hot wars a being fought in Europe and the Middle East!  Neither with any solution on the horizon.

And gold has only just broken out.  It has to get to about $2600 just to equal its value at its high in 2012 dollars.

So if you're worried you missed the rally.  Think again. It's only just begun.

Wednesday, March 13, 2024

HOW DO YOU TRADE GOLD?

 


Question: You've "missed" the gold run up.  It took you by surprise.  You'd like to get in, or you'd like a bigger posisiton but you don't want to chase it.  What to do?

Answer: You do not trade gold.  You invest in gold.  Huge difference.

The only way to invest in gold is through real physical gold.  There are many ways to buy real physical gold. My preference is to buy US gold Eagles and an assortment of shorter print World Gold that has interesting historical themes and designs taken from the dies of master engravers - such as is done at the Paris Mint or the Royal Mint (great Britain) or the Royal Dutch Mint.  

But research it and find what you like.

But the whole point of Physical Gold is that:

A) it's real.  You possess it.  When the electricity grids are hacked it doesn't matter - you still have it.

B) You won't be tempted to TRADE it.  Trading gold is an idiot's game.  because your oponents are the Bullion Banks that own the Fed and can trade is such volume that they will run your stops, or just run you out of your positions with sudden wild moves and then when they reverse course you have nothing.

If you subscribe to a fool proof trading system that can beat the Fed and its bullion banks then you're such a dope you might as well give your money away to charity- it will do more good then winding up in the vault at Chase.

So buy real physical gold, put it away, then buy some more.   It doesn't matter what price because in serveral year it will be much higher, as long as history's greatest DEBT SPIRAL continues - which is for the forseeable future - meaning at lest the next 20 years.

If you can't understand why gold must appreciate - then don't buy it in the first place - it's not for you anyway.


Sunday, March 10, 2024

Gold and Foreign Retail buying

 


In the US physical gold buying centers around the US gold eagle 1 ounce coin, and the $20 gold liberty and St Gaudens.  There are bulk sellers selling these coin about 5 percent over spot.  This is as low as the premium ever gets.  Often it gets up towards 20 percent.  This shows the US public is just not buying gold yet.

We know the Central Banks are buying gold hand over fist, and anecdotally it seems the super wealthy are buying gold and storing it in secure Swiss facilities.  But what about the buying public outside the US?

There are persuasive clues that this market it much stronger.  We can see this in France, England, Mexio, Peru, Germany, Austria to name a few places where there is more of a history of the retail public protecting themselves with gold.

Where do we see this -  in France:


Here is an 1881 MS 62 gold 100 francs, about the same weight and time period as a US St. Gaudens or Liberty in a common grade, and a common year.  it sold very recently fort $3600 - thats' about a 60 per cent premium over spot.  Much higher graded coins bring much higher premiums.

In England:  


A common mintage gold 5 pound piece from 1993 graded MS 69 sold for $2760 that's a 22 percent markup over spot (when adjusted for the 1.1 ounce weight.)  Coins of much rare mintages in MS 70 bring much higher premiums


In Peru 

A 1963 MS 65 100 soles sold for $4300 - that's a 66 percent markup adjusted for weight.  Coins in much higher grades from rarer years sell for up to 600 percent of bullion.

In Mexco: 

a 1945 (the most common yearr) 50 gold pesos in MS 65 sold for $3600 thats's a 45 percent markup.  Rarer years bring much higher premiums.

5 years ago all of these coins sold at or near bullion.

These are a few examples of things that are going on all over the world.  It's only here in the US where the retail public can not see that times are unusually perilous both economically and politically.

YOLO - you only live once - has seized the US consciousness - a product at least in part of an intense addiction to Social Media - which destroys the attention span necessary for analysis.

My only point here is that it is inevitable that even the Tik Tok addicted US public will eventually join the rest of the world.

And that is when you will see the real rise in gold in US dollar terms.

Friday, March 8, 2024

GOLD LOVES BIG GOVERNMENT

 


Once Government becomes large enough, the only cure is Bigger Government.

What is Large Enough?  Debt is greater than GDP.  In the US debt is 125 percenty of GDP

In the  US debt to GDI (gross domestic income)  is 140 percent.  That shouldn't be possible but it is.

In the US debt service is 17-20 percent of the Federal Budget (depending on off balance sheet service)

Neither candidate running for president has any plan to reduce this.  Because there is no plan.  When debt becomes this large - and this debt is echoed in the corporate and household sectors (go through the data yourself) - the only solution is to Big Government is Bigger Government.

What does this mean?  It means when spending on social programs is so great the government runs massive deficits and the inflationary spiral results in Diminishing Returns whereby the more they spend, the poorer everyone gets - except the super rich -

Then  the angered impoverished class votes in what they believe to be Right Wing Reformers.  These Right Wing Reformers take over the government and they do end the spending on social programs - and they replace it with an even Bigger Government that spends only on itself - and all the money goes to those in control of the Government.

Thus Big Government beomes Bigger Government.

And the Super Rich are those who control the Government.

Like Russia.  Like Hungary.  For example.  Like Turkey.  Like Saudi Arabia.  But the movement to emulate these countries has seized the West.  Few here see this coming even though many are openly campaigning for it.  

It's strange.  How few see the obvious.

But Gold sees it.  And that is why Gold is moving without the support of the retail public in the US - who doesn't believe this is what's coming.

We'll soon see who's right - Gold or the Retail Public.

I'm betting on Gold.

Thursday, March 7, 2024

The Golden Wilderness

 



Gold keeps moving up.  The move took every trader in the US by surprise.  I monitor serveral trading sites, all of whom consider themselves to be hip and in the know, and they consider those not on their sites to be stupid outsiders, and most of them were trying to figure a good place to go short gold around $2000 dollars, figuring they'd buy back in at 1900 or 1870.

After all - the dollar (though it fell the last couple of sessions), is historically high, as are rates, and the stock market is still going gangbusters.  So there's really no reason to own gold.

Yet it keeps going to record highs sesssion after session.

The gold bullion premium over the spot price is at record lows.  

Inflows into Gold ETF's are flat, to NEGATIVE.

No retail investor is buying gold in the United States.

So how it it moving?

Central Banks.  

Who else?  I don't know.  But there have been several large repositories created in places like Switzerland which hold tonnes of gold for Super High Net Worth individuals and families.

They don't release their inflow outflow information, but some who direct these repositories give interviews and say business is excellent.  Check the site Thoughtful Money for inerviews with some of these like Mathew Pipenburg.  It's interesting.

The wealthiest invidividuals and institutions are all proecting their wealth.

From what?

Take a look into the near future and ask yourself if the Political and Economic atmosphere is healthy or deteriorating?

Clearly the average retail investor in the US is coming to a very different conclusion than the Central Banks of the world, and many of the super high net worth investors of the world.

So what else is new?

But when the retail investor finally discovers gold, a new phase of this bull market will open up.


Sunday, March 3, 2024

GOLD AND VALUE

 


Gold has just closed at an all time high.  Yet all the financial headlines mention NVIDIA, Tesla and bitcoin.  Hamas, Primaries and law suits.  Wildfires, immigrants and street crime.

Okay, almost anything is better clickbait than gold.

In every top 10 investing ideas list you'll find on the interenet, not one will mention gold.

Then again, if you go back to 2000 the 5 biggest meme stocks before the AI craze, were CROX, Krispy Kreme Donoughts, Build a Bear, and Healey's (wheeled sneakers) and Barnes and Noble.  Since 2000 13,000 companies have gone bankrupt.  120 large cap stocks on the Dow and Nasdaq have been deslisted.

Right before 2002 there was the dot com bubble.  Remeber that can't miss period of investing?

Of course AI is different - it has real earnings.  After all One AI stock META, just bought about 17 billion dollars of chips from another AI company NVIDIA, so that they can build a metaverse, where you put on a helmet and pretend to do things in seconds that would take you years to learn to do in the real world.  Like play an instrument.  Or play a sport.  Or get a real job in some exciting field like the Navy Seals.  The thing is, you don't do any of those things.  You put on a helmet and pretend. I know that appeals to the chronically stupid and lazy.  And maybe there are a lot of those to sell to.  But how many have the cash to lay out thousands for the helmet and the support systems?  Just like how many people have $100,000 to buy an electric car that only goes 50 miles before you have to recharge it for hours and hours,  costs many thousands to repair if some tiny electric problem goes wrong on the dashboard, and has ZERO resale value, because it needs a new battery which costs nearly as much as a new car?

Not that you can't make money investing there.  But it's not investing.  It's a form of greater fools gambling.  Because you putting money into markets that sound as if they should develope, and over time they will, but the companies and products that are in first and get all the meme capital are not necessarily the ones  that survive.  Teslas are vastly inferior to BYD cars according to Charlie Munger who feels that BYD will survive and Tesla will not.  Maybe he's wrong.  But he's rarely been wrong.  And if he's right?  Boy that's a lot of capital that will be wiped out.  And what if those META helmets don't catch on?  Not only does META go down, so does NVIDIA - maybe not to Zero but a long long way.

Just ask some smart people who poured billions into Herbalife, Blockbuster, Nokia, Sears, or the penny stock boiler house fad in the 80's, or the dot com fad of the 2000's

Meanwhile, boring old GOLD which has survived and thrived as an investment for over 5000 years is now trading at an all time dollar high, while the dollar is still by far the strongest currency on earth and rates are rising - two conditions thought to be supremely negative for gold.  Yet nobody in the US has noticed.

Gold may never make you rich the way buying a 10 beanie babies for ten dollars and selling them for $100,000 dollars each at the top of the craze will.  

But it will continue to appreciate as all other currencies depreciate.  That is simple ineluctable math.

The thing that is so difficult is to measure a currency's depreciation.  Because they are measured against other depreciating currencies.  You can look at measure of inflation - but those only track short term rates of change - not the absolute loss of buying power that occurs over time.

But Gold notices over time and appreciates accordingly.

RIght now the levels of debt are so astronomical that the amount of currency needed to roll it over and service it is so vast that currencies are depreciating more quickly than ever - even if that's difficult to measure.  

Gold measures it.  Because the Central Bankers of the world are all hyper aware of this, and buying gold at furious rates to sure up their reserves against their depreciating currencies.

The general public is aware their purchasing power is eroding at an alarming rate.  But right now they are distracted from the obvious problem and busy blaming everything on their political enemies like socialists and immigrants - or the Chinese.

Eventually they'll realize the probelm is caused but  nothing other than  debt used to buy useles crap they don't need, (like meta helmets) and can't afford (like electric cars) or wasted by governments spending wildly on their own expansions - funded entirely by more and more debt - which is synonymous with debased currency.

But until they do, it's best to do what the central banks are doing and buy gold.


Friday, March 1, 2024

GOLD FLIRTS WITH THE ALL TIME HIGH AND NOBODY IN THE U.S. NOTICES

 


Gold is back near its all time high.  Globally this is a big story.  Yet nobody in the US has noticed.  The story here is all about AI, Big Tech and Bitcoin (which trades exactly in unison with Big Tech).   

The current applications for AI and Bitcoin are de minimus.  AI, at this point, can create deep fakes, and be used to crunch data more efficiently than humans.  That makes it good for basic clerical tasks and fraud.  Same with Bitcoin, the Fintech applications to this point are near non existent and it is good at hiding the gains from fraud.  Perhaps this is why they trade together.

To be sure, AI is a great story and makes for great print.  It is a as Meme Trade.  With real earnings it should be said.   And over time it may or may not justify its current hyperbolic multiple.

But none of this helps the 90 percent of the US and World population that is lost, angry, unable to cope with virulent sticky inflation, unable to buy a home.  unable to feed thier kids or pay for college.  And they are becoming inreasingly violent and supportive of authoritarianism.  Which is massively destabilizing, both politically and economically.

And none of this will help the 90 percent of the stock market that is currently stagnant.  Only 7 stocks account for the entire move in the market.  Just as only the top 1 percent of the economy is rich enough that the current inflation is not a perceptible issue.

Gold is back to all time highs because the Central Banks of the world understand the dire situation in the global economy.  It's a race to the bottom for global currencies suffering under the very massive debt that has created in the inflation problem.

And the inflation problem can not be solved without higher rates.  But as rates go higher delinquencies rise, and defaults rise, and companies can not afford to service their debt and go bankrupt, and banks go bankrupt.  And countries can not afford to service their debt.  And go bankrupt.

The populations of China and Russia and India are actively encrouraged to buy Gold.  And they do.  In Europe their is still a tradition of buying gold that was fostered by two world wars.

In the US everybody is chansing the latest meme.

Nobody cares about gold.  It's not sexy.

But as it claws its way higher, dollar by dollar, eventually someone will notice here.  Some 19 year old influencer will get on board,  Then all her fans will follow.  And when the US finally participates.  The gold price will accelerate.

Traditionally even the US had 3 perent of its portfolio in gold.  Now it is 1 perent.  If that even doubles. so will the gold price.

And as it becomes clear even to the US citizen that the only real protection against a deflating currency is the only globally stable currency which is gold - they will catch on.

As Churchill once said, "Americans, after having exhausted every other possibility, always do the right thing."



Friday, February 23, 2024

Gold: know where you are in the cycle

 

To a lot of younger investors/gamblers the gold market it an old fuddy duddy market that just churns around and does nothing.

Over the last several years it sure seems that way,  It seems that way now.

Of course if you got into gold in the early 2000's when it became clear that the Fed was hell bent on smoothing out every hiccup in the economy with a downward shift in rates and a macro easing of money gold has been an incredible exhilariting ride from around 400 dollars to 2000 dollars.  

But a perspective of a quarter century is tough when you're 25 years old.  Or even 35 or 40 years old.

But a funny thing happened over a quarter of a century.  The world shifted from globalization to DeGlobalization.

That shift is still going on and we're just in the infancy of feeling the effects which are Inflationary pressures in the global macro economoy rather thn deflationary pressure.

Meanwhite the US and Global economy has taken on historically massive debt - mostly denomitated in US dollars as even around the world much debt is denominated in the Euro Dollar market.  It seemed to make sense in a deflationary world.  Because rates were at zero and there was still no inflation.

Bur now Inflationary pressure and high debt has become a vile cocktail which no eonomy on eartth can combat.  If you can't see why you need to go study that.  That's like a fish asking: "What the hell is water."

Hint: Higher rates crush the economy through debt service.  Lower rates crush the economy through hyping inflation.  

You can't fight both.

This is the economic death spriral - and it is also the macro sweet spot for gold.

So why isn't gold higher?

It will be.  

Right now it isn't lower because all the central banks of the world outside the US are buying gold hand over fist to shore up their reserves for the coming storm.  They're not buying dollars, or silver, or bitcoin, or diamonds.  They're buying gold.  If you have to ask why see the cartoon above.

And gold isn't higher because here in the US a multiple expansion (and an incredibly loose fiscal policy) has taken the stock market to historic blowout highs.  But multiple expansions always revert to the mean.  "This time" is never ever different.  If you think "AI" makes it different, see the cartoon above.  And if you think we can support the markets simply by increasing debt forever see the cartoon above.

And soon - I can't tell you when - but soon enough in the whole scheme of things Americans will rediscover what the rest of the world has already discovered.  That is there is only one protection from the coming storm.  And then the Gold Price denominated in Dollars will move to the next level.

Here's the thing: when it moves,  gold moves violently.  When it goes up, the initial move could be 200 dollars in a week.  

Then, if you're not already in, how do you get in?


Friday, February 9, 2024

GOLD AND GREIVANCE

 


Grievance is the Gold Standard of human emotions.  It leads to high Gold Prices.

And Grievance leads to Authoritarian Govenment 

There is nothing more inflationary than Authoritarian government - which is always the largest form of Government.  For Authoritarianism to work you need a massive army, a massive police force, a massive prison system, a massive judiciary, you need massive oversight of your enemies and you need an oligarch class of massively wealthy to support the Authoritarian leader.      

And you need Enemies.  Enemies to persecute within the state -which is inflationary as it disrupts the labor force as fresh labor (immigrants and political enemies) are expelled, and keeps the political class growing which costs ever more money.

And you need Enemies without to focus the rage of the working class, and this disrupts supply chains that make input commodities ever more expensive  and foments tarrif wars that make goods ever more expensive.

Finally Authoritarinism allows for complete control over the levers of the No Longer Free Market.  Controlled rates go to zero, price controls disrupt the market, and inevitable yield curve control which always seems to make sense to the Authoritarians in the short run,  inevitably leads to Hyperinflation and a worthless currency.

But none of this is possible without Grievance.  Grievance is the emotional ingrediant that allows the 90 to 99 percent of poor and downtrodden tp support their own exploitation.  This massive class includes the "middle class" which is subsumed into the poor and downtrodden class by the inflationary structure.

Grievance is critical.  In the Bible they call it "Coveting,"  Thou shalt not covet.  Why?  Because coveting drives you to endless dissatisfaction which ends in Hatred of the enemies who keep you from getting all the stuff you want and deserve.  Dante has these folks in his fourth circle of Hell.

None other than Charlie Munger has identified the rise of Grievance as the single most destructive force in the American Economy.  And he lived through the depression - which he said never engendered the same kind of Grievance he sees now.

It takes a special politician to understand and manipulate Grievance properly.  In fact it takes effort by the political class to cultivate and grow Grievance.

These special Grievance Connoisseurs come along only once in a while, and we know their names.  Hitler was brilliant at it.  Stallin was pretty good.  Good enough, in fact, that th Russians have made a study of grievance control and they have devoted a massive portion of their military budget to Cyber-ops and Psy-ops meant to foment Greivance in the countries of their Enemies.

And the Chinese have followed suit.  And they're pretty good at it too.  

Social Media and Streaming Services are used in the formation of Hate Groups that are dominated by the intelligence services of Russia, China, Iran, and others.  There are currently nearly 1500 Hate Groups being monitored in the US by our own Intelligence Service.  The problem, is that in Russia and China and Iran, they keep a very tight control over Internet and Streaming Access.  In the US there is no control.  So our enemies have free reign to stoke Hatred and Greivance.  

Many of our most popular Internet and Twitter stars - and even Television personalites - here in the US are used by the Intelligence Services of Russia, China and Iran to spread the messages that they want - to stir up Greivance in the US.  They do this through the most sophisticated use of social and streaming media to support feed back loops that encourage the Grievance or Hate Groups and help them develope their messages and their means.  And they have made a study of techniques that make those who become fascinated by these messages to act in a manner of the choosing of these foriegn Intelligence Servives.

Sounds like science fiction, right?  Only it's real.  Our own intelligence service is only too aware of it.  But thus far, they've had very little succes in combating it because of our free speech laws, and because there are some very powerful people protecting the hate groups for their own benefit.

What to do?  I have no idea. The Russians and the Chinese and their American Media Star-stooges have amassed critical power through the manipulation of grievance.

But I do know this.  Greivance ends in Authoritariansim and as such it is the emotional ingrediant that allows Inflation to get out of control.

Right now we're speeding that way.  

If you can't see a solution - at least protect yourself with inflation hedges.

The best being gold.



Wednesday, February 7, 2024

GOLD: WHY APPRECIATING ASSETS APPRECIATE

 


What makes certain assets appreciate perpetually over time?

Inflation.

Hard Assets of Intrinsic value go up as currencies are debased.

It's axiomatic.

So - what causes inflation?

All the things that define humans and human activity at this juncture of our evolution.

1) The need to dominate our evironment.  This leads certain political beings to need to amass more and more money and power.  To do this they need more and more government to fund and protect and justify their acquisitions.  The larger the government the more expensive it is to fund.  Eventually the expense of running the government demands greater and greater DEBT which eventually crowds out productive investment.  All this funding and debt require massive printing of money - which debases the currency.  That is inflation.

2) The need to defend our dominance over our environment.  This requires  armies, and police and prisons and weapons.  The greater our domain the more expensive to fund our armies and police and prisons and weapons.  Entire industries spring up to create more and more advanced weapons and bigger survelliance and enforcement agencies - all funded by greater and greater debt.

3) The need for enemies - both within and without to solidify and justify our power.  This is terribly expensive and requires massive funding for infracstructures - media of all sorts - (television, internet, streaming  social networks, radio, satellites, cable, etc) to stoke anger and hatred against these enemies and provoke and justify wars to fight them.

4) Wars.  These are msssively expensive in the cost of waging them - but are also terribly inflationary in the disruption of supply chains and the depletion of stocks of commodities.  Hot wars are the worst, but Trade Wars accomplish the same stoking of inflation while we wait for them to develope into Hot Wars.

5) The need to impress our fellow beings with our grandeur.  This requires more and more stuff - Discretionary Spending on every conceivable product that makes us look and seem more important and beautiful and powerful and interesting  Endless spending on crap we don't really need.  Which ultimately requires more and more consumer Debt which in turn makes everything more and more expensive.

All this human activity requiring endless debt is endlessly inflationary. 

Eventually everyone goes broke.  Or at least nobody can repay their debt,  Which should be the same thing, right?

That should be deflationary, right?

Not when you have a central bank in collusion with a Treasury that sets rates and prints money to bail out everyone deemed Too Big to Fail - which eventually includes all government and all the Big Banks, and all the larger Shadow Banking institutions, and all the largest corporation.  They don't go broke.  The Fed takes their bad debt onto their own balance sheet and the Treasury prints money to keep everhone funded.  This requires ever greater debt.

A lot of poor and middle class people go broke but it can take a long long time for them to organize sufficiently to put a stop the the inflation machine that is breaking them.  Especially when  they still want to gorge themselves on all those discretionary items that distract them from their poverty.  And when  they try to blame inflation on certain arbitrary enemies that the powerful political beings tell them to blame.  This just creates more wars and greater spending,

It always eventually becomes a choice between the debasement of the currency to keep everything inflating- or allowing for a depression and then a monetary reset.  

Guess which the Fed and the Treasury and the President - whomever he or she might be - will choose?

So inflation is a one way bet.

At least until Human Nature changes.

Don't hold your breath.

And maybe buy a little gold for protection.

Sunday, February 4, 2024

GOLD: WHAT IS AN APPRECIATING ASSET?

 


All assets go up and down in the short run.  Over time, however, some assets appreciate continually.  Others not so much.

So, if you want to get rich trading, find an extremely volatile asset and try to time a buy at the lows, and time your sale at the highs.  Easy peasy.   Just ask Baron Rothschild, or George Soros.  Or Jim Drukenmiller.  Or.... well, after that the list falls off fairly sharply.  There are a few others on it.  A very few others.

If you're more the ordinary sort, a good idea is to buy an asset that appreciates over time.  Preferably something towards which you have some sort of emotional affinity.  And buy it as an investment, not a trade.

So what are the qualities of something that appreciates over time?

Aristotle pretty much set the standard for this analasys when he determined the values for that which ought to serve as money itself.  Coincidentally these values were all possessed by Gold.

A) It must not fade, corrode, or change through time.  Obviously.  Because if you buy it in perfect condition and want to sell it many years later in a distressed condition, it will fetch a lower price.

A diamond, for example fits this bill.  A gold coin or medallion.  A Statue made of bronze may take a little caring but should be easily maintained.  What about Real Estate?  Some buildings survive hundreds of years with a little care in excellent condition  You probably don't want to be in a flood zone, or a Tornado zone or in a forest given to fires.  But the right place built the right way could be okay.  Like the Acropolis for example.  Or Augustus apartement on top of the Palatine Hill in Rome has survived quite nicely for 2000 years.  I don't think it's for sale.  But if it were, it would be a really good buy.  What about a Rare Book or manuscript, or tablet or painting?  THese might take enormous care to preserve properly.  But with that care atheir value could be superb over time.

B) It must be portable.  Again, diamond, gold coin or medalllion.  A small statue of bronze.   A book.  A smallish painting.  Real Estate? not portable.  Doesn't mean it can't be a good investment.  But in time of War for example, you may have to flee.  Then it is worthless.  That's why portable is important - because anything bound to a place can be subject to confiscation by authorities.  That which is portable is also easily hidden.

C) To be money it must be divisible for obvious reasons. As an investment, we must amend that.  We should say rather it must be convertible.  

In other words it's appeal must run across cultures - so that it can be convertible into local currencies across the globe.  Obviously a Greek Gold coin might be worth more to a Greek than a Roman,  But then again, it might not.  Greek History is all of Western History.  And it extends and overlaps with Middle Eastern History and Indian History.  And funny enough - many Asians are fascinated by Greek History.  So your object must have appeal across cultures in order to to have true appreciation because the prevailing cultures change over time.

D) It must have Intrinsic Value.  This should be obvious.  Though hard to define.  Things relating to important Historical Characters and Events for example.  Things pertaining to King Solomon, or Julius Caesar, or the Buddha, or Napoleon, or William Shakespeare, or Lau Tzu or John Lennon, or the Magna Carta or the American Revolution or the fall of Jerusalem or the ...  Well, you get the idea.  This is subjective.  But history itself bears out its favorite sons, daughters and events.  And beauty tends to be cross cultural.  Truly amazing craftsmanship,  Remarkeable originality and execution.  Applied skill.  These can recognized by trained eyes everywhere,

These then are the values you must consider.  But even then a few other questions must be asked"

1) How many of the item are available - and how readily available.  Something that meets all this criteria but is available in such numbers that is is quite common - may not appreciate quite so much over time.  It will be subject to peaks and valleys that could be quite steep.  Take, for example a gold stater of Alexander the Great.  These were minted originally in what must have been the hundreds of thousands.  Many of which still exist today.  Many are still buried - but will be eventually dug up.  It's a good investment still.  And in one respect its sheer number is advantage because more collectors will exist which makes it more convertible.  KInd of like a Gold Eagle from the US mint.  There are a lot out there.  But so are there a lot of folks colecting them which makes converting them very easy,

But perhaps not as good an ultimate investment as the gold medallion of Alexander in the Walter Art museum which is unique. (pictured above).  That can be owned by only one person or institution.  And it would take some time to find a buyer.  But finding a buyer would be pretty easy.  And they would pay a fortune.

2) How many substantially similar items are available that might serve to divert investor fascination?  If you want a Guttenberg Bible probably nothig else will do.  Or a copy of the declaration of Independence.  Or a drawing by Da Vinci.  Or the Gold Medallion of Alexander referenced above.  If you want a beautiful Silver Dollar from the Carson City mint from 1883, maybe one from 1881 would do just as well.  So how valuable is the 1883?  It has value.  But not nearly as much as the 1879 Pattern Schoolgirl silver dollar.  You get the idea.

3) Finally how easy are they to fake?  Anything can be forged, copied, reissued etc.  Many items you can collect will have to be authenticated by accepted experts.  This is not a foolproof guarantee of originality - but it is most often a fool proof guarantee that it will be accepted by the prevailing market as genuine - and that's good enough.  So buy things that have been authenticated.  And authenticated objects with well accepted provenance are even better.   Why take the risk?

With these things in mind, go out and find your appreciating investments.  It's fun and profitable.

It's intersesting to me that the most obvious class of object to persue is the Gold Medallion issued to comemmorate an important historical event.  This touches every base.  That's why I like them so much.  But choose your own.  

It will be safest, however if whatever you choose meets all the criteria above.


Saturday, February 3, 2024

WAR AND GOLD

 


War is inflationary.

War costs a lot of money.  War disrupts supply chains.  War uses up vital resources.  War causes interest rates to rise, disrupting global liquidity.

War is great for gold.

The war on drugs for example has costs the US trillions in enforcement, prisons, the destruction of entire populations of drug addicts, and has achieved - what?  Debt.  Nothing but debt.

The entire border crisis is due to the war on drugs.  The Cartels control all the governments of South and Central America.  Everyone there works for the cartels in some capacity.  If you own a shop in Cartagena you pay some protection money to the Cartels.  Your 12 year old son is already working for the Cartles as a runner.  You have a ten year old daughter.  She will have to become a prostitute for the cartels in a couple of years.  Unless you try to get to the US.

It is impossible to stop the supply of drugs.  It is a demand driven probolem.  The demand in the US for drugs is infinite and insatiable.  It can not be legistlated.  All you can do is make drugs legal and tax them.  That would put the Cartels out of business and stop the flow of immigrants out of Cartel dominated territory.  But nobody is really interested in solving that problem.  The problem is what gives power to politicians.  And the force of the money behind the problem is so great that nobody has the will to stand up to it.  Except with empty rhetoric. 

And now we have two new wars that have exploded onto the world stage.  The war between the China/Russia and the Western Countries, currently centered in Ukraine.  And the War in the Middle East between Iran and its proxies and the United Sates and its proxies, currently  centered between Israel and Gaza.

If you're not personally affected by any of these wars you probably don't care much about any of them.  The war on drugs currently affects more US citizens because of the resulting border crisis.

But the other two wars in their own ways are equally as unsolvable as the war on drugs.  Because nobody is really interested in solving them.  They are far more useful to the current power structures as wars.  This is because the global economy has reached a point of instability that war is a useful distraction for those in power.

Putin, for example is far more popular in his depressed economy waging a war in Ukraine, than he was before the war.

Zhi, is suffering from the same economic malaise in China.  How long before Taiwan becomes a useful distraction?

Europe is in recession (Netherlands, Germany, Greece, Ireland are in statistical recessions while France, Italy and Spain have only the slightest statistical growth.).

The economics of the Middle East is dominated by a staggering skew of wealth with 99 percent of all assets in the hands of a few families who control the oil production.

Africa is a mess.

South and Central America are dominated by the Drug Cartels.

And the United States, while by far the strongest economy, is suffering from a skew of wealth due to a 50 year regime of financial repression (negative real rates) which has concentrated 90 percents of the assets in the hands of the top ten percent of the population.

So what's new and  different?

Deglobalization.

For the last 40 years globalization has hidden the inflationary effects all of the other global problems stemming from inequality of wealth.  Globalization provided cheap inputs of labor and materials.  Gobalization has provided a great incentive for avoiding hot wars.  Because every country was profiting from the disinflationary force.

Now that has reversed.  And the incentive structure for War has resversed.  War is good for those in charge of unpopular governments, and flagging economies.  Just look at Netenyahu in Israel.  Without war he would be in jail.  With war he is in charge.  Obviously he was drawn into the war by the brutal thugs of Hamas.  But what incentive does he have to end it?  Just as one might ask what incentive does Hamas have to end it?

The people of Israel and Gaza have great incentive to work through to a peaceful solution.  Their leaders - not so much.  Not at all.  This is the tragedy.  It is perpetual war that keeps brutal leaders supported by small but powerfully united bases in power.  They need enemies.  Enemies within and without.  And they retain power by reigning in a perpetual state of war, disaster and dread.

Criminals have risen to the top of governements all over the world.  Putin in Russia, Netanyahu in Israel, the Hamas thugs in Gaza, the murdering mullahs in Iran, the Cartels control all of the South and Central American governments.  Convicted criminals are currently running for election in Pakistan, India, France and the United States and several African nations.  It is a peculiarity of our age.  

What better to keep them in power than war?  This may sound flippant.  But the age old question: CUI BONO - who benfits - is the most revealing question to ask.  I'm not the first to notice:

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

Ernest Hemingway, “Notes on the Next War: A Serious Topical Letter,”  

Got Gold?




Tuesday, January 30, 2024

Gold and Central Planning

 


Big Government is inflationary.

It used to be that Central Planning was the opposite of Free Market Economy.  Now the world's premier Free Market Economy- the United States of America - is becoming all about central planning.

It used to be that the both political parties were Free Market First - but then had their own Centralized Priorities.  Then in 1913 after a particularly violent market crash the Federal Reserve Bank was invented to be the Central Planning Mechanism for Interest Rates which control the flow of money.  America was on the road to socialism.

Still, there was a mechanism that controlled the flow of money over and beyond the artificial setting of rates.  That was the fact that all money had to be convertible into Gold.

Then came the great crash of 1929.  It seemed the Fed was still not capable of averting crashes.  So a few years later, in 1933, during the ensuing depression we made private ownership of gold illlegal.  This consolidated massive power in the hands of the Fed and the Banks that owned the Fed (yes the largest banks own the Fed).  And of course in the hands of the Treasury.  Because the Treasury is the only entitiy that can legally print money.

By 1971 we had printed so many dollars that it was no longer possible to convert dollars into gold.  So we closed the gold window.  

And the Dollar Hegemony began.  But this consolidated even more power into the hands of the Fed, the Banks that own the Fed, and the US treasury. We were on the road to full blown Socialism - even though Free Market Priniciples still prevailed - at least for the larger coroporations.

At this point we still had two parties Democrat and Republican.  Democrats at this point believed in Free Market but thought that the Government ought to be involved in social justice and the Republicans said they believed that that role of the Governement outside of the Centrally Planned macro economy should remain as small as possible.

Then came the inevitable inflation of the 1970's.  Paul Volcker temporarily killed it with 18 percent interest rates.  But Government didn't get any smaller.

And then in 1980 Alan Greenspan and Ronal Reagan instituted the final nail in America's turn towards socialism - perpetual deficits and perpetual negative real rates.

Government became larger and larger (even as lip service to "Small Government" became louder and louder.)

Along with Government the largest Banks and Shadow Banks became so large that TOO BIG TO FAIL was born.  And with it Perpetual Bailouts.  And as long as too big to fail and perpetual bailouts is the central policy of a centrally planned economy the largest institutions can take unlimited risks - because there is no consequence.  Ansd they get larger and larger as the Government gets larger and larger and the folks who control it all get richer and richer.

Now both Government and Debt is so large that there isn't even lip service to Small Governement.  The Democratic Party wants unlimited funds for its social justice campaigns and the Republican Party wants unlimited funds for its Religious Justice Campaigns and the only argument is who can spend more on what.

40 percent of GDP is government spending.  That's using the funny money accounting of the government itself.  In  truth the Treasury issues debt that the Fed buys and the Government uses the proceeds to instill the illusion that the economy is still growing by whatever small percentage they can manufacture.

The truth is that inflation is so out of control that only the top ten percent of the population - that owns 90 percent of the wealth - ( top 1 percent own close to 1/3 of all the assets in the country) - can afford to comfortably navigate the massive inflation that makes everything more and more expensive day by day.

The problem is that as the other 90 percent gets more and more desperate they seek greater and greater centralized conrol to give them relief.  Fifty two percent of the population believes Amercian Democracy has failed and they would be comfortable with a strong man leader to save them from this failed democracy.  In other words they expect that an even greater centralization of the government will save them from the failures of large central govenment.  They hope to solve the problem with more of the same that caused the problem in the first place.

That is the definition of insanity.

More central planning to solve the problems of central planning.

It's also the defintion of inflation.

Inflationary policy is insane.

Inflationary policy is intensifying.  And most of America wants more inflationary policy to solve inflationary policy. 

Maybe consider protecting yourself with a little of the old fashioned sanity that is gold.