Posted on 02/13/2021 6:58:08 AM PST by blam
This article anticipates the end of the fiat currency regime and argues why its replacement can only be gold and silver, most likely in the form of fiat money turned into gold substitutes.
It explains why the current fashion for cryptocurrencies, led by bitcoin, are unsuited as future mediums of exchange, and why unsuppressed bitcoin has responded more immediately to the current situation than gold. Furthermore, the US authorities are likely to suppress the bitcoin movement because it is a threat to the dollar and monetary policy.
This article explains why growth in GDP represents growth in the quantity of money and is not representative of activity in the underlying economy. The authorities’ monetary response to the current economic situation is ill-informed, based on a misunderstanding of what GDP represents.
The common belief in the fund management community that rising interest rates are bad for gold exposes a lack of understanding about the consequences of monetary inflation on relative time preferences. Rising interest rates will be with us shortly, and they will burst the bond bubble with negative consequences for all financial assets and the currencies that have inflated them.
In short, we are sitting on a monetary powder-keg, the danger of which is barely understood by policy makers and which could explode at any time.
Introduction
We have entered a period the likes of which we have never seen before. The collapse of the dollar and dollar assets is growing increasingly certain by the day. The money-printing of the dollar designed to inflate assets will end up destroying the dollar. We know this thanks to the John Law precedent three hundred years ago. I last wrote about this two weeks ago, here. In 1720, it was just France and Law’s livre. Admittedly, the British had their South Sea bubble at about the same time, but it was the Mississippi bubble which proved that if you print money to puff up asset prices, you end up destroying the currency when the bubble bursts. The Bank of England didn’t make that mistake, but today led by the Fed that is precisely what most central banks are doing. John Law has become global.
And then there’s the European Union and its Eurozone. Last week I explained how the TARGET2 settlement system has become thoroughly corrupted by the bad debts throughout the Eurozone, and that the commercial banks have become horribly over-geared and vulnerable to the slightest knocks. That article is here. There can be little doubt that when this systemic corruption is exposed, the ECB and the euro will be finished. Timescale? Who knows — but it could be any day. Just one day. Any time from now, most likely at the same time as the dollar collapses because both events will likely be driven by higher interest rates. And those who are unprepared for it will lose everything.
The speed at which rigged markets unravel can be extremely rapid. Many of us will remember the end of the Berlin Wall. For seventy years, the Soviets suppressed markets, killing dissenters in their tens of millions. On 9 November 1989 if you tried to escape from East Berlin to the West, you were shot. The next day you were free to cross it. The end of communist suppression of markets took just one day.
(snip)
This reads like an ad for Goldline.
Economics sure is a wacky subject. This article predicts rising interest rates. Yet there was an article here on FR the other day predicting negative interest rates.
I think I’ll take a break from trying to figure this out, and go watch an old episode of ‘Leave it to Beaver’. Maybe Ward Cleaver can provide some insight on this interest rate thing.
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Of course, prudence dictates that everyone should have a diversified portfolio of assets, a healthy supply of food and beverages on-hand, and ordnance. Car insurance protects you against other drivers being stupid.
I remember seeing a video where wealthy people asking the govt to raise taxes balked at voluntarily sending more of THEIR OWN MONEY to Leviathan. It was funny...they never follow their own advice.
I will happily assist Alasdair Macleod and be the proud recipient of any worthless fiat currency in his possession. I suspect, like the aforementioned rich people, he'll decline my offer.
In a related note, on owning or buying bitcoin (and its ilk)...
Like playing musical chairs, except with millions of people and perhaps upwards of a hundred chairs.
Not sure what music would be used, but perhaps Danse Macabre would suffice
I will happily assist Alasdair Macleod and be the proud recipient of any worthless fiat currency in his possession. I suspect, like the aforementioned rich people, he’ll decline my offer.
Obviously, because he advocates turning it into gold.
They always seem so willing to take these "soon to be worthless" dollars off our hands in exchange for some of their precious gold. How do they do it, knowing that they are surely getting the short end of the bargain? Maybe they just want to help us out.
I would say these folks have, well, hearts of gold.
Gold not doing well, so here come the pushers.
I’ve been seeing this stuff from precious metal sellers for over 50 years, when gold falters, sell the fear porn.
I will say this. He did get this part right.
“Furthermore, the US authorities are likely to suppress the bitcoin movement because it is a threat to the dollar and monetary policy.”
From yesterday
https://freerepublic.com/focus/f-news/3934107/posts
“Furthermore, the US authorities are likely to suppress the bitcoin movement because it is a threat to the dollar and monetary policy.”
The giant investors are already taking it over, so the threat to them from it is gone now. They aren’t about to allow it to continue freely.
Kind of like long hair on men horrified everyone in ‘67. By ‘74 all men had long hair and it was boring.
“If you think we are censored now, wait until they can censor your money as well.”
If they think too many are holding gold and silver they will simply give it a set price and forbid trading it.
Gold and Silver won’t save anyone in a currency crash.
A shot of Jack Daniel’s is worth about $1 and is much more useful as an international currency if civilization collapses. But like gold, whiskey requires a gun to retain ownership.
As for those of us who deal in reality, we can backtest Mr Mcleod's July 15, 2020 forecast
I think the problems with the currency are going to happen by the end of this year. I think the problems of the COMEX are going to happen considerably before that. I think they are going to be tied into a wider banking crisis. A banking crisis is certain. I cannot see how it can be avoided. . . . If our end point is the purchasing power of the dollar goes to zero, then you can see $1,800 for the price of gold and $19 for the price of silver is chicken crap compared to where it’s going to go. . . I think the dollar will be destroyed by year end, and the price of gold and silver is infinity. . . . I think the banking crisis could start in a month. Look what’s happening to their balance sheets. . . . I think the collapse is likely to be so rapid that in the absence of any other information, the best thing to do is to hold on to gold and silver as an insurance policy just in case I am right.”
So let's see....dollar still here, check...no banking crisis, check...gold closed at $1825.24 and silver at $27.35 yesterday, check...COMEX still here, check...
0-for-5..but I'll give him partial credit for Silver. However, I bet Mr Macleod does well selling his sensational but crap advice to people.
The dollar is and has been collapsing. My dad bought a full size fully equipped (at the time) car in 1970 for $3,500. What does a comparable car cost today? $35K or so...his 1,500 foot house in a nice middle class neighborhood cost $33,000 in 1964. You can’t build a 2 car garage for that today. So the dollar has lost over 80 percent of its purchasing power in 50 years. Author’s point is gold does not. One hundred oz of gold would have bought dad’s car then, 100 ounces buys a few pretty nice cars now. A thousand ounces bought dad’s house then, 1000 ounces buys a couple of pretty nice houses today.
Minimum wage in 1964 was $1.25...if you were paid in 5 quarters, the silver content of those 5 quarters is about $25 today. No one will work for a buck and quarter an hour today, but a lot of people would pounce on a $25/hour job.
Gold as an asset or inflation hedge looks good or bad depending upon the beginning and ending year chosen. Gold was great in the 70s, sucked wind for the 80s and 90s, rallied from 9/11 through the Obama era, eased under Trump until the pandemic started, peaked in August 2020, and has pulled back since then. This pattern doesn't scream out GREAT ASSET CLASS.
Here is the DJIA (btw, this excluded reinvested dividends):
Still choppy, but not as susceptible to long periods of WTF.
Of course, a diversified portfolio is always advisable. I'm not anti-gold, but I'm not freakishly bullish on it. And I suspect if we face TEOTWAWKI, that pile of gold bars advocated by some of these people would have been more valuable had it been invested in ordnance or some Maslow.
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