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Tuesday, November 5, 2024

GOLD AND THE ELECTION

 

There is one enormous economic factor affecting the future of gold that nobody in th Political Sphere is talking about.  

Nobody.

But it affects the future of gold in particular and all US economic activity in general more that  anytbing else happening in the realm of Global Economics.  And the policies of neither a Democrat or Republican administration are taking this massive Global Economic Factor into account.

All of our economic woes stemming from massive deficit spending and perpetual negative real rates have been masked for the last 50 years by that fact the we have had the world's reserve currency.  So no matter how much debt we incur the rest of the world needed to buy our debt in order to have dollars as a settlement currency for oil, copper, lithium, and every other commodity.

This is ENDING.  Because of the lunacy for Tarrifs and Sanctions every country has decided to ditch the dollar as a reserve currency.  Nobody is buying our debt.  Because nobody wants to hold dollars that can be confiscated.

That is why the long dated treasuries are rising even as the Fed is cutting.

But it is a gradual process.

UNLESS we double down on tarrifs and santions.

Then the rest of the world will double down on ditching the dollar.

It is not a simple unwinding because the Eurodollar market is vast.

However, it is the most destructive process to our economy we have encountered since WWII.

And it means that inflation will reignite while the yeilds back up and up and up.

Unless somebody in our government gets their head around this.  The US dollar is screwed.

And gold will go to the stratosphere.

Unfortunately nobody running seems to have any idea what I'm talking about here.  Plenty of people in the fincial community do.  It's hard to understand why the disconnect is so great.

But gold knows.

Thursday, October 31, 2024

HOW TO UNDERSTAND THE GOLD BULL

 

GOLD BULL FROM 600 BC


How to understand this rocket up move in gold?  Normal.  Things in the gold market are absolutely normal. The Fed has lost control of the Gold market, which they had systematically supressed for years as the economy loaded up with mountains of debt.  Every time they try to crash gold the central banks of the world stept in and buy.  They just don't have the muscle to compete with that.

So gold is moving according to unrestricted market forces.  Normal.

And old measures like COT releases and Elliot Waves and whatever bizarro trading methods you think can predict gold movements are all out the window.  Because we are now in the End Game of fiat currency.

MMT -     Modern Monetary Theory - which basically says that you can print as much money as you want to fund whatever you want was once a fringe left wing joke.  Now it has been embraced by both parties.  Print Print Print.  That is the mantra of Republicans and Democrats alike.  And Europeans.  They're in the same boat with the Euro.  As is Japan with the yen

It used to work better here because we had the world's reserve currency wherein we would print debt and the whole rest of the world would buy it thus subsidizing our profligacy.  They needed it as a settlement currency for oil, and all other commodities.  

But that game is rapidly eneding as the BRICS+ seek to aggressively de-dollarize.  They have stopped buying our debt.  In stead they buy GOLD.  And they craft intercountry settlement agreements for commodities - and goods - that cut out the dollar.  And Gold is the stabilizing currency behind other settlement currencies.

This is the NEW REALITY

And it is only just beginning.  Becuase of the collassal stupidity of our politicians from both parties we are about to elect a president - no matter from which party - who has ZERO understanding of this new dynamic.  They talk about Tarrifs and Sanctions.  They talk about closing our borders and demonizing other countries.  They talk about ending Global Trade.  All of which causes the BRICS+ countries which accounts for 40 percent of GLobal GDP and a much higher percent of the Global Commodity Trade to DEDOLLARIZE at ever faster rates.

And as they dedollarize the Fed loses control - not only of the GOLD market - but much more importantly to the LONG END OF THE BOND MARKET.

When they cut - as they must - regardless of inflation because they have to bring down spriraling Debt Service costs - the long dated bond yeilds RISE.  Not fall.  Rise.

This is the ultimate catastrophe for the US economy.

If you don't understand this you really should do some work to understand it.

Because it is the key to everything that will follow.

Including the continued Ascendency of Gold.

It won't be straight up day after day.  (today it's down big time - take advantage gold in on sale)

But it will be straight up Year after Year.

Until a new monetary system is agreed upon - Globally.

That will take a while.

A good long while.

Meanwhile the GOLD BULL WILL RAGE,



Friday, October 18, 2024

GOLD SOARS AS REPUBLICANS REVEAL THEY ARE ALL IN WITH MMT - JUST LIKE THE DEMOCRATS

 



The Republican Candidate for President revealed he is all for scrapping pretty much all taxes - at least those on corporations, firemen, policemen, everyone in all branches of the military including national guard, coast gard etc, as well as on tips, anyone working overtime, social security, and pretty much everything else.

So, with no income, the Federal Government must simply print up trillions and trillions to pay for anything and everything especially all those concentration camps for the evil immigrants, subsidies to all oil drillers, deportation programs and an greatly expanded military.

Add to that a massive Tarrif program that will raise the price of everything stoking massive inflation and killing global trade while the President takes over the Fed and drops rates back to Zero.

It's no wonder gold is making new highs every day.

It's hard to imagine the Democrats being a whole lot more fiscally conservative.  Escpecially when many of them have expressed the opinion that MMT works just fine.  So at least everone agrees on that.  At least everyone in US Politics.

So I really wouldn't worry about much of a pullback in gold until someone with a modicum of common sense decides to run for office in this country.

Don't hold your breath

Thursday, October 17, 2024

Gold and the charts

 

I'm  not a huge  believer in technical analysis.  I think you find an investment with massive cyclical tailwinds, buy and hang on,  Like Gold: massive global printing of paper money in the form of massive debt that must be serviced creating massive printing needs creating ever more debt.  Add to that a Central Bank buying regiem as the world de-dollarizes, add to that the rise of Greedy Violent and highly erratic Madmen taking over both Werstern and Eastern governments - and mix in two hot wars - well you get the idea.

But just on a tehinical basis. Gold looks amazing. It has not risen straight up - though if you're not paying attention that how it seems.  But in reality it is rising in a series of reverse head and shoulder patterns, that sometimes evolve into cup and handle patterns,  

This is amazingly bullish as it is technically quite sustainable.

This current upward thrust to new all time highs is a marvelous reverse head and shoulders pattern that looks like it could have much farther to run.  And even if it just flattens out for some time here that would make a beautiful cup and handle pattern,

You can see the myriad reverse head and shoulders on the charts above.  The top is longer term.

Wednesday, October 16, 2024

GOLD AND TARRIFS

 


It's looking increasingly like a regime of Tarrifs will become the economic policy of the United States.  It's shocking that only 90 years since the last regime of Tarrifs - Smoot Hawley Tarrif Act of 1930 not only destroyed the US economy but put the entire Global economy into  a decade long depression.  

Who would want to repeat that?

Someone who has no coneption of US or Global History.

Someone who doesn't understand that Tarrifs are a massive tax on the US consumer.

However, there is a much more pernicious effect of Tarrifs at this moment in US history.

The US enjoys a mighty economic privilige: the US dollar is the GLobal Reserve Currency.  What this means functionally is that we can print money to pay our own debts - AS LONG AS THE REST OF THE WORLD WANTS TO BUY OUR DEBT.

But suddenly for the first time since World War II, much of the world does not want to buy our debt.  In fact they are selling our debt and using the proceeds to buy Gold.  They are replacing the dollar ar their primary resesrve with GOLD.

ENTER TARRIFS..  This becomes a major incentive of CHINA to rapidly increase their dedollarize campaign  and lead the dedollarization camapaigns of the rest of the BRICS+ countries which now include: Brazil, Russia, India, China, and South Africa New members: Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates And 17 other countries are applying for membership.

GET IT? 

Not everyone does.  

In fact neither candidate for president seems to have any idea this is happening.

But when the tarrifs raise the cost of everything, they will also raise interest rates as other countries 
head for the exits and refuse to buy our debt.  

So the Fed will have to buy all our debt while prices are rising.

And this will make the regeim of Tarrifs into perhaps the dumbest most destrutive

economic act in the history of the US, and perhaps in Global history.

But it will be great for gold!

Monday, October 14, 2024

A STRANGE CORRECTION

 


Well, it looked like a correction.  Then the gold price popped back up tp $2650.  The problem for those waiting for this correction to get in - is that the Central Banks of the World aren't waiting for a correction. 

 They're buying.

It used to be that the Fed could manufacture a good correction simply by backing the JP Morgan trading desk which would dump as many sell orders as necessary on the Future market in the thin evening session and then in the morning everyone long would panic sell into it creating a huge downwared move.

Now, they still try it but whatever size the JP Morgan trading desk can throw at Gold, the Central Banks of China, Russia, India, Indonesia, Poland, Mongolia, Czech Republic, Mexico etc simply say the equivalent of "Goody, Cheap Gold,  I'll take some of that!"  And the price pops right up.

It used to be you could even watch the COT (commitment of trader) reports and see when the commercials were net shot and the small traders were net long and predict a good move down.

But the Central Banks don't appear in those reports.

The game has changed.

It doesn't mean gold can't correct.  Everything does eventually.

It just means all the old ways of predicting the Gold movemnet are out the window.

Because the Central Banks of the world don't want to depend on the US Dollar when the US dollar is 

A) Drowning in debt.

B) Has been weaponized through Tarrifs and Sancations.

C) Is under the control of a potentially erratic, aggressive and unpredicatble Government.

This is not my opinion.  This is the open assessment of the BRICS+ Nations that are leading the accumulation of Gold while aggressively de-dollarizing their economies.

That doesn't mean the dollar will cease to be the Global Reserve Currency right away.  That's not possible with a Eurodollar market 5 times the size of the US dollar market.  But All of the dollar Reserves is held in the form of DEBT.

But it does mean that Gold has much much further to run vis a vis the US dollar - and all other currencies.  Because it is becoming the Global Reserve Currency that is NOT A UNIT OF DEBT.  It is a PURE ASSET.  It has no counterparty risk.  (And it can not be eroded by simply printing more units of debt - like the US dollar.)

So everyone has a choice as to what reserve currency they employ.  

Debt or a pure asset.

That includes every private citizen.

That includes you.


Thursday, October 10, 2024

GOLD'S LONG AWAITED CORRECTION

 

Gold has finally started its long awaited correction.  It has barely taken a pause since it launched from under $2000, had a brief snooze in the $2300 area and then hit its current level of around $2600.

The Chinese announcement that they would pause in their massive stimulus campaign sent all commodities reeling.  And the fact that Israel has not yet hit Iranian oil fields or nuclear facilities has fanned  the eternal hope for a cease fire that has tempered bets on gold and oil. 

But also, just technically, Gold is due for some kind of pullback.  Many Americans are hoping against hope it is a major pullback.  Because either their technical models have been calling for one for a very very long time or - most likely - because they missed the entire run up.

Yes, most Americans have missed the entire run up.  It has been fueled by Asia - China and Japan and India,  Both by Asian Central Banks and Asian consumers.  Throw in Russia and many of the Mid Eastern Sovereign wealth funds and you have the recipe fot this type of move.

And now many Americans are hoping for a big pullback to provide and obvious entry point into this rabid bull market.

Maybe they'll get it.  But the markets rarely ring a bell (as the old saying goes).  Maybe this time will be different.  And maybe gold will simply dip a bit and then launch higher.

We'll see.

But a few things are completely obvious:

1. Israel will hit Iran.  Iran will retaliate.  Things will get much worse before they get better.  That conflict has no solution other than complete victory by one side or the other.  Because both sides have told us that is their position.  And it's not really relevant that those not directly involved (Like the US or the UN or Europe or Russia, or some 18 year old at Harvard) may have another opinion.

That sucks for humanity, but it's good for gold.

2. In the US both candidates have promised unequivically to explode the deficit.  The bipartisan policy center estimates that the Republican budget will increase the deficit by 8 Trillion (over what base?  Who knows.) and the Democrat budget will increase the deficit by 5 Trillion.  But that doesn't take into account things that have not been budgeted for like: Getting involved in the the 2 existing wars.  Dealing with the Immigration crisis.  (In the Republican case creating concentration camps for all the immigrants and then eventually deporting them which should add many many trillions).  Dealing with the massive natural disaster crisis that is developing from climate change,   (For which neither side has anything budgeted to address.)   And dealing with the massive homeless crisis that is affecting all US cities in red and blue states.

And it doesn't take into account the Global depression that will certainly result fromTarrif Wars.

This budget crisis which is really a DEBT CRISIS - sucks for humanity.  But is great for gold.

3. The Asian central bank purchase of gold is a prelude to a gold backed settlement currency to compete with the dollar.  We know this because the BRICS+ countries have told us that that is their intention. We don't know how this will play out but it will be dollar negative and gold positive.

4.  The US investor has not yet caught on to this megatrend that will last for at least the next few years.  When the US investor (That is to say the gambling class of the worlds' largest economy) catches on gold will recieve a massive boost.

So - enjoy the pullback while it lasts,  Whether it's a scary dip or a mild dip - it's a chance to buy cheaper gold.  Take advantage while it lasts.

I doubt anyone will ring a bell when it's over.

Friday, September 20, 2024

GOLD: ANOTHER ALL TIME HIGH FOR THE ANTI MEME STOCK

 


Gold just made another all time closing high at $2625 spot.  This is still without much public participation.  How can we know?  Simple: check inflows into the ETF'S like GLD, which are anemic to non existant (The stock rises because of derivative exposure not people buying gold) - and check both availablity and the premium over spot on the big bullion sites like APMEX.  Everything is available in quantity and the premiums are historically tiny.

It's still the Central Banks that are gobbling up gold.  Because the central banks know that the dollar is being destroyed by Deficit Spending and Money Printing.  And they are preparing the ultimate de-dollarization play: the launching of a competing settlement currency.

So Gold is not a meme stock.  It is not Gamestop.  It is not Invidia which has real earnings and sales but it sells a product for which there is little real productive value at this point.  It is not Bitcoin which has no use  but soars or falls purely on investor sentiment.  It is not Apple which has wonderful products though each year it comes out with the exact same product with a few pointless bells and whistles and expect to sell it all over again to the same people who bought it last year.

No - gold is the anti-meme stock -  It is a reserve currency used by central banks to secure the liquidity of their central economy.  It is the currency of last resort.  When there are no more lenders, when the printing press (electronic though it may be) stops printing money that people want to use - the Central Authority still possesses a currency that anyone anywhere will accept in return for real goods.  Simply because they have done so for thousands and thousands of years.  It provides the ultimate fiancial stability.

Gold is the anti meme stock.  It has only use value.   

But then gold can have what Karl Marx would have called fetish value.  That is to say what we call Meme value or what used to be called vogue, trend, craze, rage, mania or fad value.  At times of stress in the system investors and traders do flock to gold.  It just hasn't happened here in the US yet.  Because here in the US we have been feasting for so long on the value that has accrued to us through the use of the world's reserve currency that we can not recognize this moment of stress that almost everyone else in the world can see.

Our government was nearly overthrown in violent revolution just a few years ago and we've totally whiteswashed the memory.  Two hot wars are raging in oil and grain producing areas that could metatstasize at any moment yet they have already moved out of the news cycle, as everything does after a few weeks of coverage.  Then it gets boring and old - to US viewers.  Becuase we're special.  Nothing touches US because we have the worlds reserve currency.

But as the world dedollarizes (while we sleep) eventually we wake up one day and realize the dollar is losing value at an alarming rate.  And it makes no difference who is in the whitehouse or who is at the Fed or what the next transformative technology is changing the world.  Because there are just too many dollars being printed and distributed to too many people for it to retain any real value over time.

And then things which are just annoyingly expensive now will be prohibitvely expensive.  LIke houses, and education and food.  We're close.  But we have no attention span.  Anyone who promises to fix the problem will be believed because we want to believe.  

But what is the solution to a debt based currency when we are drowning in debt and when any slowing of the debt produces a recession - that can only be cured by more debt?

When the average Amercian understands that this is the problem and not immigrants or blacks or jews or muslims or women with no children or strangers eating our pets then they will realize that there are only two solutions: Change the economic system which will require years of difficult adjustment or protect yourself with your personal reserve currency of last resort.

And then Americans will buy gold.  And the price will shoot ever higher.  But then the availability of REAL GOLD BULLION will disappear and the premium over spot will shoot up to 10,20, 50, 100 percent and more.  

Then Gold will become a meme stock.  Everything has its moment.

Thursday, September 19, 2024

DIVERSIFICATION WITHIN THE GOLD UNIVERSE

 



Let's say you're one of the very few Investors who have bought into the Gold story. 

Though this is, at present, a story that is very much driven by Central Bank purchasing, and very few US investors have bought in - YET - let's say you're in.  But you're not sure exactly what to do to maximize the value of your position.

It's like any other investment.  You need to diversify within the Gold Universe.

How?  You prepare for the various scenarios in which gold will be needed.

These scenatios include:

A. Inflation.  This is guarnateed by the central bank driven, deficit spending driven, global economy.  Real inflation (as calculated by the metrics the government used back in the 1980's before that fancey hedonic adjustments) has been at between 15 and 22 percent for the last four decades.  Anyone alive spending money who is not a billionaire is sure to have noticed.

B. World War which ruputures supply chains, ratchets up inflation, and increases the chance of real terror inducing disruptions.  There are two significant hot wars going on where Russia. China, and US all have vital interests in the outcomes.  And it is certain China will  move on Taiwan before long.  So 3 vital hot spots that couls easilty metastasize.

C.  A strong man Autocrat seizes control of the US govenment, and takes control of the Fed which will cause a flight from the dollar, especially in the quadrillion dollar derivatives markets.  And when everyone tries to sell at once - financial markets head into crisis.  Again, the only thing keeping the world in the dollar is confidence in the Fed.  It takes a lot of heat from a lot of places.   But no one doubts that they're trying to keep the value of the dollar steady.  If an autocrat takes over the Fed, that confidence will die, and so will the dollar and this will cause havoc in the financial markets

So how to prepare?

A.  Physical gold.  You need some.  And you need it where you can get your hands on it quickly.  A nearby bank vault.  A hole the ground in your back yard.  Somewhere safe, nearby, accesible.

This will be most important for scenearios B and C.  Any breakdown in social order and you need physical gold.  And any breakdown in the financial order and physical might be your only savior.

B. Electronic gold: GLD is the biggest and  most liquid tracking stock.  This is not gold.  They own some gold along with a heavy dose of derivatives.  So in scenario A you can make money of this vehicle and it is far more liquid than physical gold.  I use it.  It's great.  In a true A/B crisis though I'd sell it in a heartbeat.  Because the derivative market can seize up in  a heart beat.

C. Collector Gold.  This market is real.  You can't really rely on experts though, except to explain things to you as you learn about it.  You have to know what you're doing.  But it's well worth learning because the market is big, real, liquid.  The trick is you have to buy and sell through dealers and auction houses.  So you have to pay retail or pay the hammer fees at auction.  Don't let this daunt you.  As the price of the dollar is destroyed through Fed/Treasury printing schemes and through a government drowning in debt that has totally given up on fiscal responsibility the value of collector coins like all hard assets keeps rising.

The trick here is to always remember its a DEMAND DRIVEN market.  Something can be rare and interesting but if nobody cares, the value won't rise.  You have to monitor the market and see what's in demand.   Then you have to get to know and understand areas that interest you and areas in which you have some familiarity through study or heritage or aesthetic appreciation.  Take the time. Learn.  It's worth it.

D, Other types of precious metal etc: Silver, Platinum, Diamonds: all of thse can work.  The problem they are all at the mercy of investor demand.  Gold is the only thing used by Central Banks as a reserve currency.  That is a very major underpinning of the market.  And for this reason, in a real crisis - only Gold is as good as Gold.

Saturday, September 14, 2024

Gold is the real de-dollarization play – Nassim Taleb

 


De-dollarization has become a trending topic amid the rising strength of the BRICS bloc and surging U.S. debt. But according to one analyst, while many are focused on competing currencies or digital assets, the real de-dollarization play is gold

 

“People are not seeing the real ‘de-dollarization’ in progress,” essayist and mathematical statistician Nassim Taleb said in an X post. “It is not [about] trade settlements. Transactions are labeled in USD, as an anchor currency, but central banks (particularly BRICS) have been storing, that is, putting their reserves, in Gold.”

 

Gold is up ~30% y-o-y,” Taleb highlighted. 

 

Luke Gromen, founder and president of Forest for the Trees, responded with the following chart, noting that “It's quietly been underway for 10 years; got much louder post-2022 sanctioning of Russian FX reserves.”

 

teaser image

 

As Gromen mentioned, chatter about de-dollarization has been on the rise for the past several years. The decision to freeze Russian assets after the country invaded Ukraine served as a wake-up call for those who held large portions of their reserves in U.S. Treasuries.

 

Geopolitical and financial analyst Angelo Giuliano posted the same chart as Gromen, saying, “De-dollarization is happening.”

 

“Instead of buying US debt, countries are buying GOLD,” he added. “The US dollar Ponzi scheme is collapsing...the US exorbitant privilege to print endless amount of paper toilet currency is over. Gold hit an all-time high today [Sept. 12]. +30% yearly performance. Only the beginning.”

 

X user The Parabolic responded to Taleb’s post by noting that “The emerging monetary order can be summed up using Jevons' 3 key functions of money: store of value, unit of account, and medium of exchange.” 

 

“It is a historically odd and an aberration to have USDs/USTs serve all three roles,” they said. “Between 1922 (Genoa Conference) and 1971 (Nixon shock), the Anglo powers removed physical gold as the international store of value. They replaced gold with  government promises (banknotes, bonds, etc.), and the resulting debt-based system is extremely unstable, requiring ongoing quick fixes to not blow up.”

 

Taleb “shows that while the USD instruments can function as a medium of exchange and unit of account, their role as a store of value is being questioned by some of the world's largest economies,” The Parabolic said. “BRICs et al wanna take us Back to the Future.”

 

And touching on Taleb’s point that transactions are labeled in USD, author Richard Turrin noted that the “dollar's high percentage in trade settlements is increasingly meaningless,” as “1) Gold holdings show reserve storage, and 2) Migration of trade to alternate currencies isn't captured on SWIFT statistics.”

 

“The US will tout the USD's high percentage use in trade all the way to the bottom,” Turrin said. 

 


Friday, September 13, 2024

OUR ECONOMY and GOLD IN 2 CHARTS

 

THIS CHART SHOWS A PROPORTIONAL REPRESENTATION OF THE FINANCIAL SECTORS OF THE ECONOMY



This chart puts some dollar values on the various financial sectors.

There is no collateral for almost all the Credit based Derivatives that make up the vast dollar amounts involved in our Financial Economy.  (2-4 Quadrillion dollars in derivatives alon)

The entire multi Quadrillion dollar derivatives sector of our economy is comprised of UNSECURED DEBT where the counterparty risk is spread across all sectors of the economy,

However, much of financialized sectors below that also includes unsescured debt like ETFs, REITS, Tracking stocks, etc that purport to own commodities or stocks or real estate  but only own derivatvies that represent this ownership through leveraged derivate instruments.  And then there is the universe of strucutured products that supposedly base their performance of undrlying stocks or commodities but again are comprised of derivatives.

Then, even with Government Bonds, these are IOU's that will not default because we can print money to pay them off, but they are backed by nothing but "Good Faith."  

In fact, the entire pyramid above the tiny gold triangle at the bottom can be said to represent a global economy that no longer has any capitalist component (investment in capital through savings) - it is rather a Creditocracy - or Creditism - where economic growth is gained through credit creation that enables consumption.

But this is a highly inflationary system by nature.  And it is form of a Ponzi Scheme dependent on the unlimited growth of credit to unable the unlimited growth of discretionary spending.

The trouble comes in turbulent times - when inflation gets out of hand, and spending becomes more and more punitive and then every wants to cash in, and when they do they find out their claims are worthless because the tiny bits of collateral underlying all the derivativres have been sold again and again to vast numbers of other claimants (Rehypothecation) and you own nothing but worthless derivatives based on nothing of real underlying value.

Every government understands this. I'm  not saying anything new or inspired.

That's why all governements are furiously buying gold.  (Except the USA where we're clinging to strength of the printed dollar.)

And if you're at the very top of the US CREDITOCRACY this is still a good deal for you.  There are plenty of suckers willing to by your worthless derivative crap and make you richer and richer and richer while everyone around you goes broke.  (Yes, you, Blackstone, and Carlyle and KKR etc - Good job!)

But if you want protections against this and you don't work for one of the firms above you need to go right to the bottom of the pyramid and buy the only asset that has no counterparty risk and no rehypothication risk and no collateralization risk: GOLD.

Thursday, September 12, 2024

GOLD AND THE DOLLAR AS RESERVE CURRENCIES

 

The US dollar became the world's reserve currency after WWII because of what is now called American Exceptionalism. This meant that thr US has/had the world's pre-eminent military along with the world's deepest and most sophisticated financial markets.  So the dollar was the natural choice for reserve currency status - and the dollar was convertible into Gold.  Therefore, Gold was the ultimate reserve currency.

In 1972 when US president Nixon closed the gold window - in other words declined to honor requests (in this case by France) to  exchange  dollars for Gold, the dollar became unhinged from its Gold anchor - which ushered in the Age of Financialization which quickly turned into the Age of Unlimited Debt.  The Age of Unlimited Debt also turned into the Age of Unlimited Wealth Transfer from the working classes and middle management classes that had to qualify stringently for debt to the Financial Classes that could obtain debt on vastly favorable terms.

And those who could obtain enough debt on favorable terms soon discovered they would never be forced to honor - or repay - that debt.  This created a class of Billionaire Debt Barons.

However, through this unprecedented Global Debt Orgy the US has managed to retain Reserve Currency status because our financial system is the one which has been able to originate and control  most of this debt globally through the EuroDollar (debt) market.

Now US Exceptionalism is predicated on the use of the US Dollar as reserve currency.  This is our biggest asset because we are the only nation that can simply print dollars to repay dollar denominated debt.

This game could probably go on for a very long time until massive defaults overwhelmed the system.

UNFORTUNATELY a genereation of exceedingly stupid politicians have done the one thing guaranteed to bring about the demise of the US dollar as reserve currency:

THEY/WE Have WEAPONIZED the dollar.  SANCTIONS AND TARRIFS are the two things you have to avoid if you want to keep the privilege of the reserve currency.

WHY? Because sanctions and tarrifs incentivize other countries to DEDOLLARIZE.  That means stop buying our debt.  And stop settling international deals, especially commodity deals, in dollars.  (among other things.)  And not just the sanctioned and tarrifed countries.  Every country looks at the US and thinks "We could be next.  Better dedollarize."

And through this age of American Exeptionalism every country including the US has kept a huge store of Gold in its central banks as an Reserve Currency of Last Resort.  So the first step in dedollarizing is making sure you have enough gold.

Now countries that have sufferered the weaponization of the US dollar  have banded together in what is known as the BRICS+ nations (which comprise about 3/5 of the world's first and second world economies) and are aggressively DEDOLLARIZING and buying vast amounts of GOLD in preparation for the launch of their own settlement currency and their own transfer systems.

What this means is as they move away from the dollar the US if forced to finance its own debt.  In other words Buy its own debt with its own Central Bank.

This is the ultimate cause of Massive Inflation.  It means the we have to print dollars to finance our debt.

But we print dollars by creating NEW DEBT.  That how it works. The more we have to finance our debt by printing - the more debt we have - and the more debt we need to finance and the more debt we have.  Repeat until financial collapse.

We have shot ourselves in the head and we are continuing to shoot ourselves in the head.

Meanwhile if you want to protect yourself from this institutionalized suicide you might want to do what the central banks of the world are doing.  

Convert some of your dollars into GOLD


Wednesday, September 11, 2024

Gold and the Debates

 


Republican squared off against Democrat last night and battled over who could run up the deficit the highest.

The Republican claimed he would spend untold billions moving 20 million people (who exactly he didn't specify) first to "Camps" and then out of the country.  Obviously this will require an entirely new agency, appropriations of land and massive constructions of Camps that can house 20 million people as they await deportation - which will cost a fortune in itself.  This was a mastersrtoke of Deficit  Spending! No number was attached but pick a number in the hundreds of billions and then mutlitiply it be ten if this program ever gets off the ground.

Combine that with a Massive Tarrif program that will cost the US consumer Trillions that will come out of discretionary spending and reduce global trade by about 50 percent if the Smoot Hawley Tarrifs are any guide and then you will get a massive reduction of tax income, to add to the promised massive redutions of corporate tax income - so, in all, and impressive master stroke of Deficit Spending!

On the Democrat side we heard about Grants for anyone starting a small business.  No number attached again, but imagine that it will be managed with the same efficiency that the Covid Relief spending was managed by Republicans and Democrats alike, and you can bet that any number they can come up with will be quickly depleted by anyone who can fill out a form properly, and then have to be renewed every quarter or so.  So, that should be quite a number to pile up on the Deficit Spending side.  And then middle class  tax breaks and child support in the form of Grants or Checks of printed money mailed out again to anyone good at filling out forms.  So they still need to work on some massive Deficit Spending proposal to match the Tarrifs, but it's a good start!

So, in all, I'd say Gold won the debate by any standard!

Go GOLD!

Tuesday, September 10, 2024

GOLD AND THE 8 YEAR CYCLE: SHIFTING SEASONS

 



A big deal is being made in technical circles about the 8 year cycle in gold - and rightfully so.

It really matters as to where you are in the larger, long term cycle - in order to have confidence in the only strategy that makes sense - Buy and Hold - unless you can trade with the kind of size that Goldman Sachs or JP Morgan traders can have to push the markets around in your favor.

But here's something to think about:

Cycles dominate all Forms of Nature (human psychology, which informs Market pschology, which moves Market Prices must be considered within the Form of Nature).

But all the Forms of Nature appeat to be shiftling.

Take political pscychology: The Far Right has shifted so far to the right it's where the far far left used to be 40 years ago: Socialstic Totalitarianism.

And the far left has shifted to where the Far Far right used to be 80 years ago: Social Darwinism.

And even the Seasonal Cycles have shifted dramatically.  

Here in New York City, where I live, the winters used to be brutal.  Weeks on end with 3 feet of snow piled up, and sub zero temperatures with biting winds forced everyone indoors.  Summers used to be brutal with weeks on end of relentless 97 degree heat, and 100 percent humidity.

Now, for the last decade, at least, winters are progressively mild.  Summers are progressively mild.  The magnificent Falls we used to have are now confined to a few short weeks.  And Spring barely exists.  One day the trees are bare.  A week later everything is in bloom.  And every season starts a few weeks earlier than it used to start.

It's weird.  The seasons have totally shifted.  And it rains all the time.  It's like we've become the Pacific Northwest.

How?  Why?  I have no idea.

But if the Seasonal Cycles are shifting - why not other Cycles?

What if the 8 year gold cycle is now a 71/2 year cycle - or a 7 year cycle?  If you look at a chart it certainly appears that the gold cycles - and other cycles - are shifting both in duration and in the violence of the spikes - just like the weather.

Now, if that's the case, (and obviously this is entirely observational = not mathematical or scientific in any way) - but if this is the case, we are already well into gold A upwave of year 1 - and anyone waiting for a huge wave 3 downward correction to get in to this bull market is going to be sorely disappointed.

Just a thought.  Perhaps wishful thinking because I'm comitted.  I think even if we get a draw down it's termporary and you just tough it out because higher prices are ahead.

But a practical thought too.  Because when you wait for that perfect In point - you tend to miss the entire move.  Especially if your precious cycles have shifted.

Saturday, September 7, 2024

GOLD AND ELECTION DEFICIT INCREASE PROMISES

 


Just 2 months before the election and both candidates are trying to outdo each other with massive spending and tax break proposals.

Obviously both tax breaks and spending are the two means of increasing the massive deficit.   And there's a vicious competition going on to see who can increase the defecit the most.

Republican Deficit Increase proposals:

1. Massive Corporate tax cuts.

2. Unspecified tax cuts promised to billionaire donors.

3. The government pays for all In Vintro Fertilization treatments.

4. Free On Line College for everyone.

5. Ending taxes on tips and on Social Security.

6. Open eneded government payouts  for child support (what kind unspecified.)

Democrat Deficit Increase proposals

1 Massive tax break for middle class and working class families

2. Free Community College for everyone.

3. Ending taxes on tips.  

4. Government payouts for anyone starting a small business.

5. Child support tax breaks.

I'm sure there'll be alot more Deficit Expansion Proposals as we go along.

So the only thing that is sure is that the Government spigotts will be wide open no matter who wins.  And as rate are sure to remain somewhat elevated (above the zero bounds of the past) so will Interest Payment on the ever expanding Government Debt.  

And now that China is no longer buying our debt - in fact nobody is buying our debt but us and the Fed  - the value of the dollar in relation to Gold and all Hard Assets is bound to fall precipitously.

Both candidates for President guarantee it.


Thursday, September 5, 2024

Gold Vs Bitcoin a Common Sense Approach.

 


There's still an argument about whether you'd be better off investing in Gold or bitcoin to weather the coming storm.

Consider this:

Central Banks all own gold.  This provides a Global Use for gold as a rerserve currency.  

No Central Bank owns bitcoin.  Thus Bitcoin has no use value.  It has only a completely arbitrary trade value.

Central Banks are buying gold aggressibely especially China and India and Russia and the rest of the Brics + nations.  That is because they will use Gold reserves as a backing for a settlement currency to compete with the US Dollar in the trade for Global Commodities.

Central Banks are not buying any bitcoin.  They have no use for it.

Moreover, consider this:

China has issued its own Digital Currency.

Consequently China made Bitcoin Illegal as it doesn't want a competing digital currency.

Eventually all Governements will have digital currencies.

Eventually all Governments will make all competing digital currencies illegal.  Why wouldn't they?

At that point what will Bitcoin be worth?  To whom?

Use your common sense.


Wednesday, September 4, 2024

GOLD TECHNICALS and CENTRAL BANKS

 



For all of the technical traders following either fantasy "systems" like hidden pivots and elliot waves - which have a place, as everything has a place in trading - one of the great systems employed by sophisticated technical traders is the "8 year cycle."  Three hard up years followed by five down years in a series of elliot style waves.  If you go back and check the charts this system has some correlation to reality for example if you take 2001 as a starting point, the next three years go higher - but then the next 5 retracement years also go higher.  There is a blip down just where'd you'd hope for one in year 8 - but so what?

However, some very smart people look to this to give a gerneral shape to the movement of gold.

Just so you know 2025 is an A up year.  (However 2024 has been pretty up)

The same way the Commitment of Traders 'COT' report figures heavily in technical trader's assessment of the gold sentiment as the Big Commercials tend to move the markets according to how short they are in order to lock in profits at perceived tops.

All well and good.

I think it's a good idea for every gold investor/trader to have some fluency with these ideas.

The elephant in the room, however is the Global Central Banking community.  They dwarf every other player, every other trend, every other system.  And they don't really care about historical cycles.

We are living in peculiar times.  Neil Howe calls it the Fourth Turning and this term has captured the imagination of many fund managers because it seems to sum up the period of enormous Global Unrest the seems to rhyme in a frightening way with the last Fourth Turning - the 1930's.

It is a period of uhpheaval.  A period where trends that have been simmering for decadeds come to a boil.  These trends include Decades of Financial Represssion that has resulted in mass disillusion with Democracy, with Capitalism, with Socialism, with the Honesty and Probity of all Leaders and their Institutions, and resentments that express themselves through hatred of anything identified as Other.

And on a global scale this is expressed in a rapid De-globalization pitting New Powers (of some very ancient countries) like China and India and the Russia and Iran and the BRICS against old powers (of much younger countries) like the US and Europe.  And even within Europe there is a splitting up rather than a coming together of binding institutionsn like the EU.

For whatever reason (something having to do with 5000 years of history of gold as money) - the entire CHINA/RUSSIA/ IRAN/INDIA block has decided that GOLD is an integral weapon to be amassed and horded as a means of stabililzing economies during this period of turmoil.  Also to use as a weapon against what they see as the tyrrany of the dollar as a settlement currency.

The Buying Power of these Central Banks is so overpowering that things like the Commitment of Major Commercial Traders is a tiny drop in the bucket in comparison.  The mathematical elegance of technical systems that at times do desrcribe movements leading into this period of Turmoil seem to fall  apart under the raw power of Central Banks pivoting to protect themselves from a coming storm.

My point is this: Look at the broad movements of the Central Banks and seek to emulate them as best you can.

Know about these other systems and technical trends.  But if you rely on them you'll be swept aside by this ineluctable tide of History.



Sunday, September 1, 2024

HOW NEGATIVE REAL RATES AND fINANCIAL REPRESSION DESTROY CAPITALISM

 


Negative Real Rates occurs when the rate of interest on a loan is set by a Central Planning Committee rather than the market and it is set below the the real rate of inflation.

The real rate of inflation is what a basket of goods that consumers must use in their daly life like housing, education, energy, food, transportation, communication devices, clothing, etc - how much that all rises on a year over year percentage basis.  (in western first world economies the real figure is about 10 perent)

In Free Market Capitalism - which exists nowhere in the world - this interest rate would theoretically be set by private transaction according to the real rate of inflation, the credit worthiness of the borower and other risk factors.  (So even Elon Musk would borrow at say 13%)

In Socialism which every country on earth has adopted for the purposes of controlling and centralizing  the flow of money through a Central Bank - it is the Central Bank that sets rates - not the free market.

It is also the Central Bank and the Central Government Planning committee that establish the Nonimal Rate of Inflation, which is calculated in a way to keep the number well below the real rate of inflation. (through hedonics, substitution, equivalent rents and other nifty accounting tricks)  That way the Central Bank can issue Interest Rates also well below the real rate of inflation.

What happens next is that Large Corporations and Billionaires can receive "loans" from the Government at this extremely low interest rate.  Then they use the money in the risk markets,  If they gamble in enough size and they lose, the Governement will forgive their losses by bailing them out or sticking the losses on the balance sheet of the Fed.  If they win they keep all the winnings.

Good work if you can get it.

However, if you're not say Elon Musk or David Rubinstein, then you have to pay a much more realistic interest rate if you  borrrow money.  Let's say ten times what Elon Musk pays.  Or fifty times if you're a bad credit risk.  THen you use the money and if you can not make enough to make a large profit and pay back the huge interest rate then you go broke and get put in jail.

Take buying a house.  David Rubinstein gets loans near zero and  buys 1000 houses for his firm The Carlyle Group, and then sits on them for the appreciating value of the land and the fact that real inflation will inflate their prices over time) and sells them later, little by little to keep the illusion of scarcity inflating the prices.  The loan costs him near nothing so penalty for sitting on them is near nothing.  

Now, you want to buy a house.  Well, not much on the market since David Rubinstein bought all the houses,  But there is a house for sale at a really inflated price and you can get a mortgage for let's say 7 percent - let's say 7 times what David Rubinstein payed for his loan  And if you can't make your mortagage over time the bank takes your house away and you go live in the street.  And even if you work hard and struggle to make your mortgage there is little left over for anything else.  And nothing left over to put into the risk markets which also get inflated ever higher by the same finincial repression.

Since David Rubinstein puts all his profits in the risk markets which get pushed up higher and higher, so even if you have a little left over from paying off your expensive loan it's not enough to buy anything of value in the risk markets.

That is Financial Repression.  

That is the basis of all First world "capitalist" economies.

That sounds like a simplification.  It is.  Only in the senese that David Rubinstein and Elon Musk have a billion other ways to take advantage of access to cheap money that you don't have that are too complex to go into here.

This is why so many people are unhappy.  They blame Immigrants.  They blame socialists or communists.  They blame Blacks or Jews.  They blame red states or blue states.

And their unscrupulous venal, grasping, polilticians  encourage them in their hatreds.

Because they are too god damned lazy to learn about the real problem, which is Financial Repression,

So the rich get richer and richer and the poor get poorer and poorer.

Until A) Wiser heads get together and rerstructure this failed monetary system or

B) Until the poor are so angry they  elect a strong man politician who converts this socialist system into full blown Autocracy and then the strong man and a few of his freinds own everything and nobody else has anything.



Saturday, August 31, 2024

The Pause that Refreshes

 


Gold has paused around the $2500 level.  Nothing goes straight up.  And we've hit a concensus: wait and see area.

Meaning: Do we have a soft landing?  Does inflation pause here and then dip back down into the Fed range - or does it ratchet back up?  Who wins the election and what does that mean for the economy?  Both wars appear to be out of mind and in permanent holding patterns with no solution in sight but with nothing materially worse in store.  Everything is on pause.

Or so it seems.

And gold like all risk assets performs in the short short run according to how "it seems."

And now, especially a world of social media where everything is relative, one truth is as good as another, and every possible truth can be found in any number of massive media echo chamber: How it seems is how it is.

But the difference between how things appear to be going and how they are going is a distinction that can leave you well off or destitute.

How things are going are thus: We are drowning in debt.  Both candidates are pledging massive amounts of addtional debt.  Inflation in real things can and must continue to spriral out of control.  The participants on both sides of both wars have pledged to continue their wars until one side attains a complete and total victory and the other side is wiped out.  There will be no compromises of any lasting value.  All commodities thus affected, especially oil and grain will over time become severely disrupted causing even \greater inflation, and ever greater global instability.

And our country is hopelessly divided by a hatred born out of the need to blame something more concrete than Negative Real Rates for our physical deprivations.  And the debased human opportunists who feed off this hatred.

That is happening.

Who cares how things seem right now?

(The markets - in the very short run)

In the long run everything is clearly pointing towards a higher gold price.


Thursday, August 29, 2024

GOLD COLLECTOR COINS RULE #1

 


You may just want to buy bullion.  You may want to buy limited edition bullion for slightly more money.  There is nothing wrong with that.  In fact it's the smartest thing you can do unless you have some expertise.  The bullion price is very likely to double from here as long as the debt trajectory remains as it is.  And both presidential candidates are guaranteeing an orgy of debt.

However, if you do want to wade into collector coins.  Let me offer up one preeminent rule of thumb.

Buy something you really love,

Don't try to game the market and figure out the things most likely to rise from here.  

Don't jump in and momentum bid.  That works sometimes with stocks.  But with collector coins, because of the hammer fees you probably won't do that well.

Now, many people advise against collector coins altogether.  However if you go to Numisbids you'll see dozens and dozens of auctions full of collector coins going off every day, every week, every month.  So a lot of people are into it.  And some of them are pretty smart.

I can't tell you what to buy.  There's Ancients - Greek, Roman, Byzantine.  There's Medieval.  There's world by countries.  By Empires.  By issue types.  Coronation issues.  War commemoratives.  Historic Cities.  Historic Rulers.  It goes on and on.

But start with something you just think is amazing and would love to own.

It sounds simple but so many people try to outhink or game the market.

The thing is, if you find some coin or medal to be really beautiful, or historically important, you're probably not alone.  If you think something is amazing you'll probably find a community that also appreciates the same thing.  

Above is pictured the world's first gold coin.  When I first learned you could buy one of these 2500 year old objects on the open market, I was truely amazed.  I couldn't believe it.  And at the time they really weren't very expensive.  You could pick up a really nice one for maybe $4000.  Now it costs a lot more.  But really, compared to a painting by Basquiat that's all of 40 years old it's still incredibly cheap.

I also fell in love with this:


I bought a nice one on ebay for $2000.   I had to think long and hard.  I didn't really know what is was.  But what crasftmanship!  The portrait is amazing.  And it dates back to 1821.  There's some good history there.  Now a nice one is ten times as much.  Still, compared to a lot of things, not that much.

So buy what you love.

It's always best.