This post EXPOSED: Biden’s Deep Corruption appeared first on Daily Reckoning.
I try to limit my analysis to markets while leaving politics out of it, but sometimes I have no choice but to focus on politics. This is one of those times.
Their potential impact on markets is simply too great to ignore.
Despite media blackouts and social media censorship, most Americans have by now heard about the Biden family scandals involving China, Russia, Ukraine and Kazakhstan (scandals involving other countries may pop up in the next week before the election).
The basic outline is simple. While Joe Biden was Vice President, and after he left office, his son, Hunter Biden, working with several partners, including Dennis Archer, Tony Bobulinski and others, reached out to oligarchs and parties with links to the Communist Party of China to structure deals.
These transactions involved millions of dollars of payments to Biden family members in exchange for White House meetings and government favors from Joe Biden.
Payments were disguised as “consulting fees,” “management fees,” and “director fees,” but little or no work was performed, and expertise in the needed areas was completely lacking on Hunter Biden’s part.
The money was split, with a share going to Joe Biden. He did not receive the money directly. Instead, it was paid to Hunter and Joe’s brothers, Frank and Jim, through shelf companies who could then direct the money to Joe through less suspicious channels or simply buy homes or other amenities for him as his “share.”
Not “Russian Disinformation”
These allegations are not based merely on suspicion or inference. The Hunter Biden laptop contains thousands of emails and photographs that confirm the story.
The Director of National Intelligence has confirmed that the laptop is not Russian disinformation. The FBI has confirmed they are conducting a money-laundering investigation using the laptop information.
Now, Bobulinski has come forward with direct testimony about meeting face-to-face with Joe Biden. He has met with the FBI and turned over three cell phones with thousands more emails.
Bobulinski has also confirmed that an email message with his name found on Hunter Biden’s laptop is authentic. More information is in the process of being released by former Biden associates other than Bobulinski.
The initial leaks of information have turned into a flood. Normally this would either disqualify a presidential candidate or ensure his defeat. But, due to the pro-Biden media blackout, it’s not clear if enough Americans have heard about this or if enough people even care.
Biden is simply the anti-Trump candidate, and Trump opponents would vote for anyone who was opposing him. Biden is almost incidental.
Why Scandals Blow Over
One problem with American political scandals is that they’re so technical and complicated that the perpetrators can create a fog around the issue, the media can choose not to do their jobs, and the American people can hardly be blamed for losing interest after a year or two of no accountability.
When the scandals arise in bureaucracies like the FBI or CIA, the trail of responsibility is even more difficult because the players …read more
This post The Golden Solution to America’s Debt Crisis appeared first on Daily Reckoning.
Right now, the United States is officially $27 trillion in debt. Nearly $7 trillion was added since President Trump took office.
This year’s budget deficit is projected at $3.3 trillion, over three times last year’s estimate. The coronavirus is responsible, and the number should be an outlier. But annual deficits will be at the trillion dollar level for the foreseeable future.
Basically, the United States is going broke.
I don’t say that to be hyperbolic. I’m not looking to scare people or attract attention to myself. It’s just an honest assessment, based on the numbers.
Now, a $27 trillion debt would be fine if we had a $50 trillion economy. But we don’t have a $50 trillion economy. We have about a $21 trillion economy (at least we did), which means our debt is bigger than our economy.
When is the debt-to-GDP ratio too high? When does a country reach the point that it either turns things around or ends up like Greece?
Economists Ken Rogoff and Carmen Reinhart carried out a long historical survey going back 800 years, looking at individual countries, or empires in some cases, that have gone broke or defaulted on their debt.
They put the danger zone at a debt-to-GDP ratio of 90%. Once it reaches 90%, they found, a turning point arrives…
At that point, a dollar of debt yields less than a dollar of output. Debt becomes an actual drag on growth. What is the current U.S. debt-to-GDP ratio?
About 130% (the reaction to the pandemic caused a spike. It was previously about 105%).
We are deep into the red zone, that is. And we’re not pulling out. The U.S. has a dangerous debt to GDP ratio, trillion-plus dollar deficits, more spending on the way.
We’re heading for a sovereign debt crisis. That’s not an opinion; it’s based on the numbers. How do we get out of it?
For elites, there is really only one way out at this point is, and that’s inflation.
And they’re right on one point. Tax cuts won’t do it, structural changes to the economy wouldn’t do it. Both would help if done properly, but the problem is simply far too large.
There’s only one solution left, inflation.
Now, the Fed printed trillions over the past several years, and trillions more over the past several months. But we’ve barely had any inflation at all.
Most of the new money was given by the Fed to the banks, who turned around and parked it on deposit at the Fed to gain interest. The money never made it out into the economy, where it would produce inflation.
The bottom line is that not even money printing has worked to get inflation moving.
Is there anything left in the bag of tricks?
There is actually. The Fed could actually cause inflation in about 15 minutes if it used it. How?
The Fed can call a board meeting, vote on a new policy, walk outside and announce to the world that effective immediately, the price …read more
This post The Fed MUST have Inflation appeared first on Daily Reckoning.
The Fed says that “price stability” is part of their dual mandate and they are committed to maintaining the purchasing power of the dollar. But the Fed has a funny definition of price stability.
Common sense says price stability should be zero inflation and zero deflation.
A dollar five years from now should have the same purchasing power as a dollar today. Of course, this purchasing power would be “on average,” since some items are always going up or down in price for reasons that have nothing to do with the Fed.
And how you construct the price index matters also. It’s an inexact science, but zero inflation seems like the right target.
But the Fed target is 2%, not zero. If that sounds low, it’s not.
Inflation of 2% cuts the purchasing power of a dollar in half in 35 years and in half again in another 35 years. That means in an average lifetime of 70 years, 2% will cause the dollar to 75% of its purchasing power!
Just 3% inflation will cut the purchasing power of a dollar by almost 90% in the same average lifetime.
But for the Fed, there’s a problem:
They can’t produce 2% inflation. Inflation depends on consumer psychology. We have not had much consumer price inflation, but we have had huge asset price inflation.
The “inflation” is not in consumer prices; it’s in asset prices. The printed money has to go somewhere. Instead of chasing goods, investors have been chasing yield.
Inflation would help diminish the real value of the debt, but central banks have obviously proved impotent at generating inflation. Now central banks face the new depression and more deflation with few policy options to fight it.
So the Fed is reaching deeper into its bag of tricks to get the inflation they desperately need.
The Fed recently announced that it will target average inflation of 2%. This means that if inflation is under 2% for a sustained period (as it has been), then inflation can run above 2% so that the average of the over and under periods will come close to the target.
There are numerous flaws in this approach which the Fed does not understand. The first problem is that if the Fed cannot achieve 2% inflation, why on earth do they believe they can achieve 2.5% inflation to hit the average of 2%?
Clearly the Fed does not know how to cause inflation. Just saying they have a higher target does nothing actually to hit the target.
It has been clear for decades that the Fed has no idea what it is doing when it comes to monetary policy. This new policy just makes their confusion even more obvious.
But the Fed should be careful what it asks for. We’re facing deflation now, but all this money creation will lead to inflation at some point if expectations change.
Once inflation expectations develop, they can take on lives of their own. Once they take root, inflation will likely strike with …read more
This post Silver Could Explode Within Weeks appeared first on Daily Reckoning.
Do you have a flashlight, spare batteries and some duct tape stashed away for home emergencies like power outages or hurricanes? Of course you do. How about 100 ounces of silver coins? If not, you should.
In an extreme social or infrastructure breakdown — where banks, ATMs and store scanners are offline — silver coins might be the only way to buy groceries for your family. This is one of many reasons why sales of silver coins and bullion are set to skyrocket.
The upcoming election and its aftermath could witness social unrest that would make this summer’s chaos look downright tame. We might not even know the winners for several weeks after the election. Things could get very ugly.
If that happens, shortages will appear and the price of silver could soar to $60 per ounce or higher from current levels of about $25 per ounce.
Silver Is More Practical Than Gold
As you know, I write and speak frequently on the role of gold in the monetary system. Yet, I rarely discuss silver. Some assume I dislike silver as a hard asset for your portfolio. That’s not true.
In fact, in an extreme crisis, silver may be more practical than gold as a medium of exchange. A gold coin is too valuable to exchange for a basket of groceries, but a silver coin or two is just about right.
Here’s a photograph of your correspondent inside a highly secure vault in Switzerland. I’m pictured with a pallet of silver ingots of 99.99% purity. The ingots weigh 1,000 ounces each, about 62 pounds. The brown paper hung on the walls behind me is to hide certain security features in the vault that the vault operators did not want to reveal. You may notice the small 1-kilo gold bar by my left hand, worth about $45,000.
Silver is more difficult to analyze than gold because gold has almost no uses except as money. (Gold is widely used in jewelry, but I consider gold jewelry a hard asset, what I call “wearable wealth.”)
Silver, on the other hand, has many industrial applications. Silver is both a true commodity and a form of money.
This means that the price of silver may rise or fall based on industrial utilization and the business cycle, independent of monetary factors such as inflation, deflation, and interest rates.
Nevertheless, silver is a form of money (along with gold, dollars, bitcoin, and euros), and always has been.
“The Once and Future Money”
My expectation is that as savers and investors lose confidence in central bank money, they will increasingly turn to physical money (gold and silver) and non-central bank digital money (bitcoin and other crypto currencies) as stores of wealth and a medium of exchange.
This is why I call silver “the once and future money,” because silver’s role as money in the future is simply a return to silver’s traditional role as money throughout history.
In short, silver is as much …read more
This post America Has the Government It Deserves appeared first on Daily Reckoning.
“Every nation gets the government it deserves,” said 18th-century French philosopher Joseph de Maistre.
If true — we suspect it is — the United States is a nation of scoundrels, cads, wastrels and spongers.
For the nation has a spendthrift government perpetually on the borrow, perpetually holding out an empty hat.
By some metrics, the United States presently takes on more debt in one year than it did in its first 200 years of existence.
This was true before the virus invaded its shores. Now all previous projections go into the fireplace, discarded and useless.
In 2018 — merely two years past — the Congressional Budget Office (CBO) projected the national debt would exceed $23 trillion by 2020. Exceed.
We suspect the 2018 forecast was intended to raise the hair. Yet here we are in 2020… staggering, groaning under a $27 trillion debt… which counts higher with each swing of the clock.
A $27 trillion debt exceeds a $23 trillion debt nearly as a half-foot exceeds an inch, as a foot exceeds a yard.
It is not merely “more.”
‘What Can I Do?’
Yet somehow the business seems beyond all human agency, beyond all control. ‘What can I do?’ a fellow wonders. His shoulders he shrugs. His head he bows.
He may cluck-cluck his opposition to it all — and who does not?
The Modern Monetary Theory zanies may not oppose it. They would argue greater debt is the proper medicine. But they are not our concern today. Come back to our normal man…
He is largely a man resigned.
Besides, he bellows, today’s obscene debts are the fault of the big-spending politicians sitting at Washington. Not himself.
But are they? Is the glad-handing, vote-seeking politician solely to blame for the nation’s desperate finances?
No, argues Paul Van de Water, senior fellow at the Center on Budget and Policy Priorities.
Look thyself in the mirror, citizen, says he:
Even voters who say they’re against deficits would also prefer lower taxes.
That is, the average voter sniffs the free lunch… and orders up a plateful.
We must agree with this analysis.
The cost-free lunch has eternal appeal. It is a painless gain… and what a gain it can be.
Once it goes upon the menu it never comes off. But ultimately the waiter lays the check upon the table… as warned Mr. Benjamin Franklin:
When the people find that they can vote themselves money that will herald the end of the republic.
And in Aristotle’s telling:
Republics decline into democracies and democracies degenerate into despotisms.
Do we condemn the voter for biting the bait? No, we do not pass judgment — we have yet to decline an expenseless meal.
We merely observe… and reflect.
But is it necessarily in the nature of democracies to run down the nation’s finances — to lunch free of charge?
Perhaps it is not democracy as such to blame… but the character of a particular people.
Look to Athens
Ancient Athens — a democracy (with noticeable exceptions) — amassed a vast public treasury in its Golden Age.
That treasury …read more
This post Your Personal Gold Standard appeared first on Daily Reckoning.
Elites are extremely hostile to the idea that gold should have any role whatsoever in the monetary system. To them, gold is truly a barbarous relic, as John Maynard Keynes was supposed to have said. You might as well propose bringing back the horse and buggy.
Except Keynes never said gold was a barbarous relic.
What he did say was more interesting. In his 1924 book Monetary Reform, Keynes in fact wrote “the gold standard is already a barbarous relic.”
Keynes was discussing not gold, but the gold standard. There might not seem to be a difference, but there is. In the 1924 context, he was right.
The classical gold standard ended in 1914 with the outbreak of WWI. To pay for the war, combatants printed massive amounts of money.
After the war many wanted to return to the pre-war gold standard. In 1925, for example, the British Exchequer was Winston Churchill. He wanted to return to the old gold price, ignoring the fact that the wartime money printing demanded a much higher gold price. He in effect overvalued the pound.
Keynes told Churchill this would be a deflationary disaster. If Britain was to go back on a gold standard, it would have to set the gold price higher. But Churchill ignored his advice.
The result was massive deflation and depression in Great Britain, years before depression struck the rest of the world.
The notoriously flawed gold exchange standard that prevailed until 1939 should never have been adopted, and should have been eliminated before WWII did the job.
These days, there isn’t a central bank in the world that wants to go back to a gold standard. But that’s not the point. The question is whether they will have to.
I’ve had conversations with several Federal Reserve Bank presidents. When you ask them point-blank, “Is there a theoretical limit to the Fed’s balance sheet?” they say no. They say there are policy reasons to make it higher or lower, but that there’s no limit to the amount of money you can print.
That is completely wrong. That’s what they say; that’s how they think; and that’s how they act. But in their heart of hearts, some people at the Fed know it’s wrong. Luckily, people can vote with their feet…
I always tell people who say we’re not on the gold standard that, in a way, we are. You can put yourself on a personal gold standard just by buying gold. In other words, if you think that the value of paper money will be in some jeopardy, or confidence in paper money may be lost, one way to protect yourself is by buying gold. And there’s nothing stopping you.
The typical response is, “What’s the point of owning gold? They’re just going to confiscate it, like Roosevelt did in 1933?” I find that extremely unlikely.
In 1933, we’d just come through four years of the Great Depression, and Roosevelt was new in office. People talk about the first hundred …read more
This post Rickards: Here’s the Gold Price in 2026 appeared first on Daily Reckoning.
The first two major gold bull markets were 1971–80 and 1999–2011. Today, gold is in the early stages of its third bull market in 50 years.
How far can gold go during this bull run?
If we simply average the performance of the past two bull markets and extend the new bull market on that basis, we would expect to see prices peak at $14,000 per ounce by 2026.
What specifically is driving the new gold bull market?
From both long-term and short-term perspectives, there are three principal drivers: geopolitics, supply and demand and Fed interest rate policy (the dollar price of gold is just the inverse of dollar strength. A strong dollar equals a lower dollar price of gold, and a weak dollar equals a higher dollar price of gold. Fed rate policy determines if the dollar is strong or weak).
The first two factors have been driving the price of gold higher since 2015 and will continue to do so. Geopolitical hotspots like Iran, Korea, Crimea, Venezuela, China and Syria remain unresolved. Some are getting worse. Now we have armed conflict between Azerbaijan and Armenia in the Caucasus.
Turkey, a NATO member, backs Azerbaijan, while Russia backs Armenia. While direct conflict between Turkey and Russia is remote, it cannot be ruled out.
Each flare-up drives a flight to safety that boosts gold along with Treasury notes.
The second factor driving gold prices is supply.
Gold’s supply/demand situation remains favorable with Russia and China steadily building up their reserves while global mining output has been flat for at least five years.
The third factor, Fed policy, is the most powerful on a day-to-day basis.
Rates are at zero after the Fed reacted aggressively in response to the COVID-19 crisis. But there’s little chance that the Fed will be raising rates anytime soon, which the Fed itself has admitted.
Meanwhile, debt levels are exploding. Debt was already growing faster than the economy before the lockdowns. Now it’s skyrocketing.
Debt is now at the highest levels since World War II. We’re nearly in the same position on a relative basis as we were in 1945.
Because of the natural deflationary state of the world and the high debt-to-GDP ratio, growth has been snuffed out.
And based on Congressional Budget Office (CBO) projections — which I think are conservative — the debt-to-GDP ratio is going to keep going up.
Last year’s budget deficit was $984 billion. But the 2020 deficit is projected at $3.3 trillion, mostly because of the response to the pandemic. And federal debt is almost 100% of GDP.
Looking further ahead, annual deficits are projected to increase from 5% of GDP in 2030 to nearly 13% in 2050, when federal debt is projected to be an astonishing 195% of GDP.
There is no way out except inflation.
Add it all up and the environment is highly favorable for gold. But if you want evidence that owning gold is probably the best way to guard your wealth, just look at the “smart …read more
This post New Gold Standard: Orderly or Chaotic? appeared first on Daily Reckoning.
Before 1914, the global monetary system was based on the classical gold standard. But over the past century, monetary systems change about every 30 to 40 years on average.
Sure enough, 31 years after the end of the classical gold standard, in 1945, a new monetary system emerged at Bretton Woods. The dollar was officially designated the world’s leading reserve currency — a position that it still holds today.
Under that system, the dollar was linked to gold at $35 per ounce. But 25 years later, in 1971, Nixon ended the direct convertibility of the dollar to gold. For the first time, the monetary system had no gold backing.
Today, the existing monetary system is nearly 50 years old, so the world is long overdue for a new monetary system. Gold should once again play a leading role. It may be the only asset that can anchor the international monetary system in these troubled times. But the gold price will be much, much higher.
I’ve written and spoken publicly for years about the prospects for a new gold standard. My convictions have only gotten stronger since the coronavirus and the monetary chaos it generated.
My analysis is straightforward…
International monetary figures have a choice. They can reintroduce gold into the monetary system either on a strict or loose basis (such as a “reference price” in monetary policy decision making).
This can be done as the result of a new monetary conference, a la Bretton Woods. It could be organized by some convening power, probably the U.S. working with China (which might seem unlikely these days, but not as unlikely as you think).
Or they can ignore the problem, let an even bigger debt crisis materialize (that will play out in interest rates and foreign-exchange markets) and watch gold soar to $14,000 per ounce or higher — that’s not a typo — not because they wanted it to but because the system is out of control.
I’ve also said that the former course (a conference) is more desirable — why not avoid the train wreck rather than clear up the wreckage? But the latter course (chaos) is more likely. A conference will probably be ignored until it’s too late.
Either way, the price of gold soars.
The same force that made the dollar the world’s reserve currency is working to dethrone it.
Under the Bretton Woods system, all major currencies were pegged to the dollar at a fixed exchange rate. Indirectly, the other currencies had a fixed gold value because of their peg to the dollar.
Other currencies could devalue against the dollar, and therefore against gold, if they received permission from the International Monetary Fund (IMF). However, the dollar could not devalue, at least in theory. It was the keystone of the entire system — intended to be permanently anchored to gold.
From 1950 into the 1960s, the Bretton Woods system worked fairly well. Trading partners of the U.S. who earned dollars could cash those dollars into the …read more
This post “Money Is Gold, and Nothing Else!” appeared first on Daily Reckoning.
This is not the first time I’ve relayed this information. But these days I believe it’s more important than ever to remind readers of its significance, especially in light of the unprecedented credit creation the Fed’s been conducting since March.
Following the Panic of 1907, John Pierpont Morgan was called to testify before Congress in 1912 on the subject of Wall Street manipulations and what was then called the “money trust” or banking monopoly of J. P. Morgan & Co.
In the course of his testimony, Morgan made one of the most profound and lasting remarks in the history of finance.
In reply to questions from the congressional committee staff attorney, Samuel Untermyer, the following dialogue ensued as recorded in the Congressional Record.Untermyer:
I want to ask you a few questions bearing on the subject that you have touched upon this morning, as to the control of money. The control of credit involves a control of money, does it not?
Morgan: A control of credit? No.
Untermyer: But the basis of banking is credit, is it not?
Morgan: Not always. That is an evidence of banking, but it is not the money itself. Money is gold, and nothing else.
Morgan’s observation that “Money is gold, and nothing else,” was right in two respects.
The first and most obvious is that gold is a form of money. The second and more subtle point, revealed in the phrase, “and nothing else,” was that other instruments purporting to be money were really forms of credit unless they were redeemable into physical gold.
So much of the gold market is “paper gold,” not actual gold. This paper gold market is so manipulated, we no longer have to speculate about it. It’s very well documented.
I don’t want to get too deep in the weeds here. But gold leasing is often conducted through an unaccountable intermediary called the Bank for International Settlements (BIS).
Historically, the BIS has been used as a major channel for manipulating the gold market and for conducting sales of gold between central banks and commercial banks.
The BIS is the ideal venue for central banks to manipulate the global financial markets, including gold, with complete nontransparency.
But the entire scheme rests on a tiny base of physical gold. I describe the market as an inverted period with a little bit of gold at the bottom and a big inverted pyramid of paper gold resting on top.
There’s just not that much gold available. But in the paper gold market, there’s no limit on size, so anything goes.
Leasing of paper gold by bullion banks allows them to sell the same gold as much as 10 times over to 10 different buyers. It’s like a game of musical chairs, only with more participants and fewer chairs.
Problems have turned up lately in this market because investors have shown up and said “I want my gold, please,” and the custodian has been challenged to meet all those calls for redemption.
But …read more
This post Why Gold? appeared first on Daily Reckoning.
That’s a question I’m asked frequently. It’s usually followed by a comment along the lines of, “I don’t get it. It’s just a shiny rock. People dig it out of the ground and then put it back in the ground. What’s the point?”
I usually begin my reply by saying, “It’s not a rock, it’s a metal” and then go from there.
I have a lot of sympathy in these conversations. The fact that people don’t know much about gold today is not exactly their fault. The economics establishment of policymakers, academics and central bankers have closed ranks around the idea that gold is a taboo subject.
You can teach it in mining colleges, but don’t dare teach it in economics departments. If you have a kind word for gold in a monetary context, you are immediately labeled a “gold nut,” “gold bug,” “Neanderthal” or something worse. You are excluded from the conversation. Case closed.
It wasn’t always this way. I was a graduate student in international economics in 1973-1974. Many observers believe that the gold standard “ended” on August 15, 1971 when President Nixon suspended the redemption of dollars for gold by foreign trading partners. That’s not exactly what happened.
Nixon’s announcement was a big deal. But, he intended the suspension to be “temporary” and he said so in the announcement. The idea was to call a kind of “time out” on redemptions, hold a new international monetary conference similar to Bretton Woods in 1944, devalue the dollar against gold (and other currencies such as the German Deutschemark and Japanese Yen), and then return to the gold standard at the new exchange rates.
I was able to confirm this plan with two of Nixon’s advisors who were with him at Camp David in 1971 when he made the announcement. I spoke to Kenneth Dam (an executive branch lawyer) and the late Paul Volcker (at the time, the Deputy Secretary of the Treasury). They both confirmed that the suspension of gold redemptions was meant to be temporary, and the goal was to return to gold at new prices.
Some of what Nixon wanted did happen, and some did not. The international conference took place in Washington, DC in December 1971 and resulted in the Smithsonian Agreement. The dollar was devalued from $35 per ounce to $38 per ounce (it was later devalued again to $42.22 per ounce), and the dollar was devalued against the major currencies of Germany, Japan, the UK, France and Italy.
Yet, the return to a true gold standard never happened. This was a chaotic time in the history of international monetary policy. Germany and Japan moved to floating exchange rates under the misguided influence of Milton Friedman who did not really understand the role of currencies in international trade and direct foreign investment. France dug in her heels and insisted on a return to a true gold standard.
Also, Nixon got caught up in his 1972 reelection campaign to be followed closely …read more
This post Central Banks: Gold’s Greatest Ally appeared first on Daily Reckoning.
You’re likely aware of the price action in gold lately. Gold has rallied from $1,591 per ounce on April 1 to $1,907 per ounce as of today. That’s almost a 20% gain in a little over six months, even with selloffs along the way.
Today’s price of $1,907 per ounce is nearly double the low of $1,050 per ounce at the end of the last bear market in December 2015. That’s highly impressive, but it’s only the beginning.
The history of gold bull markets (1971–80 and 1999–2011) shows that the most powerful gains come toward the end of the bull market, not at the beginning.
That means even if you’ve missed out on the gold rally so far, you could still score huge gains as gold trends toward $10,000 per ounce or higher over the next four years.
$14,000 gold is entirely possible by 2026. How?
If we simply average the performance of the past two bull markets and extend the new bull market on that basis, we would expect to see prices peak at $14,000 per ounce by 2026.
As I’ve stated on multiple occasions, I didn’t just come up with these numbers out of the blue or to be controversial.
They’re simply the implied non deflationary price of gold based on the M1 money supply and assuming it will have a 40% gold backing.
What’s driving this bull market in gold?
It’s not retail investors (apart from a small number who understand the dynamics), and it’s not institutional investors (institutional portfolio allocations to gold are typically about 1–2%).
Instead, the steady buying is coming from central banks (especially Russia and China) and from the super-rich, who typically store their gold in private non-bank vaults in Switzerland and other good, rule-of-law jurisdictions.
The drive toward larger portfolio allocations to gold (in some cases up to 10%) is coming not just from the rich themselves but from their wealth managers and portfolio advisers.
This is a sea change.
For decades, wealth managers have rejected gold and pushed their clients into stocks, corporate credit and alternative investments, including private equity. All of those portfolio allocations backfired when the coronavirus came along. Equity markets have since recovered, due in no small part to massive intervention by the Fed.
The Fed doesn’t entirely explain the rally, but it’s certainly played a critical part. The market is nonetheless set up for another fall. The upcoming election is just one catalyst.
Not only will uncertainty reign until Election Day. It will continue to reign after Election Day.
If Trump wins, the Resistance will not take it well. They will challenge the outcome in court, deny the legitimacy of a Trump victory, and extreme elements in the Resistance will burn American cities.
If Biden wins, his behind-the-scenes handlers will come to the fore with demands for high taxes, more regulation, the Green New Deal and other elements of the Socialist agendas.
Markets are not fully priced for any of this. They’re not priced for anti-Trump chaos, and they’re not …read more
This post Has Our Luck Finally Run Out? appeared first on Daily Reckoning.
Long-term cycles escape our notice because they play out over many years or even decades; few noticed the decreasing rainfall in the Mediterranean region in 150 A.D.
But, this gradual decline in rainfall slowly but surely reduced the grain harvests of the Roman Empire, which, coupled with rising populations, resulted in reduced caloric intake for many people.
This weakened their immune systems in subtle ways, leaving them more vulnerable to the great Antonine Plague of 165 AD.
The decline of temperatures in Northern Europe in the early 1300s led to “years without summer” and failed grain harvests, which reduced the caloric intake of most people and left them weakened and more vulnerable to the Black Plague, which swept Europe in 1347.
I’ve mentioned the book The Fate of Rome: Climate, Disease, and the End of an Empire a number of times as a source for understanding the impact of natural cycles on human civilization.
It’s important to note that the natural cycles and pandemics of 200 AD didn’t just cripple the Roman Empire; this same era saw the collapse of the mighty Parthian Empire of Persia, the kingdoms of India and the Han Dynasty in China.
In addition to natural cycles, there are human socio-economic cycles of the debt and decay of civic values and the social contract: a proliferation of parasitic elites, a weakening of state finances and a decline in the purchasing power of wages/labor.
Debt and Its Eventual Collapse
The rising dependence on debt and its eventual collapse is a cycle noted by Soviet economist Nikolai Kondratieff and others. In fact, Peter Turchin listed these three dynamics as the key drivers of decisive discord of the kind that brings down empires and nations.
All three are playing out globally in the present.
In this context, the election of Donald Trump in 2016 was a political expression of long-brewing discontent with precisely these issues:
The rise of self-serving parasitic elites, the decay/corruption of the social contract and state finances, and the decades-long decline in the purchasing power of wages/labor.
Which brings us to karma, a topic of some confusion in Western cultures more familiar with Divine Retribution than with actions having consequences even without Divine Intervention, which is the essence of karma.
Broadly speaking, the U.S. squandered the opportunities presented by the end of the Cold War 30 years ago on hubristic Exceptionalism, wars of choice, parasitic elites and an unprecedented waste of resources on unproductive consumption.
Now the plan — for lack of any real plan — is to borrow trillions of dollars to fund an even more spectacular orgy of unproductive consumption, on the bizarre belief that “money” can be conjured out of thin air in essentially infinite quantities and squandered, and there will magically be no consequences of this trickery in the real world.
Actions have consequences, and after 30 years of waste, fraud and corruption being normalized by the parasitic elites while the purchasing power of labor decayed, the karmic consequences can …read more