Category Archives: Money

The Battle of the ‘Flations has Begun, by Tom Luongo

Can central banks stop a deflationary tsunami? From Tom Luongo at tomluongo.me:

Inflation? Deflation? Stagflation? Consecutively? Concurrently?… or from a great height (apologies to Tom Stoppard).

We’ve reached a pivotal moment where all of the narratives of what is actually happening have come together. And it feels confusing. But it really isn’t.

The central banks have run out of room to battle deflation. QE, ZIRP, NIRP, OMT, TARGET2, QT, ZOMG, BBQSauce! It all amounts to the same thing.

How can we stuff fake money onto more fake balance sheets to maintain the illusion of price stability?

The consequences of this coordinated policy to save the banking system from itself has resulted in massive populist uprisings around the world thanks to a hollowing out of the middle class to pay for it all.

The central banks’ only move here is to inflate to the high heavens, because the civil unrest from a massive deflation would sweep them from power quicker.

For all of their faults leaders like Donald Trump, Matteo Salvini and even Boris Johnson understand that to regain the confidence of the people they will have to wrest control of their governments from the central banks and the technocratic institutions that back them.

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Why Gold Is the Best Money, by Doug Casey

The logical case for gold as the basis for monetary systems is solid. From Doug Casey at caseyresearch.com:

Chris’ note: Chris Reilly here, managing editor for Casey Daily Dispatch.

As you know, gold is on the rise. It’s up 15% over the last two months… and recently hit $1,500 an ounce for the first time since April 2013.

Hopefully, you’ve added some to your portfolio… before this boom really takes off. We see big things coming… and that’s why today, we’re sharing one of the most important essays on gold we’ve ever published.

It comes from our founder, Doug Casey, who explains the key reasons why gold is the best money. As Doug says, you’ll want to burn them into your memory…


By Doug Casey, founder, Casey Research

It’s an unfortunate historical anomaly that people think about the paper in their wallets as money. The dollar is, technically, a currency. A currency is a government substitute for money. But gold is money.

Now, why do I say that?

Historically, many things have been used as money. Cattle have been used as money in many societies, including Roman society. That’s where we get the word “pecuniary” from: the Latin word for a single head of cattle is pecus. Salt has been used as money, also in ancient Rome, and that’s where the word “salary” comes from; the Latin for salt is sal (or salis). The North American Indians used seashells. Cigarettes were used during WWII. So, money is simply a medium of exchange and a store of value.

By that definition, almost anything could be used as money, but obviously, some things work better than others; it’s hard to exchange things people don’t want, and some things don’t store value well. Over thousands of years, the precious metals have emerged as the best form of money. Gold and silver both, though primarily gold.

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We’re All Currency Manipulators Now, by David Stockman

With universal fiat currencies backed by nothing, every government is a currency manipulator, including the US government. From David Stockman at lewrockwell.com:

Call it the monetary theater of the absurd. After all, here is what a determined currency manipulator did between September 2002 and July 2008.

To wit, it pumped about $200 billion of new dollar liabilities into the world financial system, thereby expanding the Fed’s balance sheet by 26%. Clearly, global traders and US trading partners didn’t welcome that flood of freshly minted fiat currency because during the same period, the traded-weighted dollar exchange rate plunged by 25%.

Moreover, there can be little doubt that the severe slump in the US dollar shown below was deliberate. During much of that period, the Fed conducted an aggressive campaign to slash interest rates, goose domestic growth and perk-up the inflation rate. The last objective in particular was the brain child of newly appointed Fedhead Ben Bernanke, who falsely warned Greenspan & Co. about the dangers of an imminent “deflation” that never remotely happened.

Needless to say, the impolite word for a policy of suppressing domestic interest rates and goosing inflation is trashing your own currency. All things being equal, foreigners will lighten their dollar holdings and trade the dollar down when authorities promise to reduce its purchasing power and to push yields lower relative to alternatives abroad.

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Europe is Dying on a Cross of Gold, by Tom Luongo

Are investors and speculators edging towards the exits on Europe? From Tom Luongo at tomluongo.me:

Gold is calling out the insanity of the European Union. It is also calling out the insanity of the global economy. But really it’s all about the euro at this point.

Since breaking through the post-Brexit high of $1375 per ounce, gold has pushed higher. Yes, it’s been volatile. Yes, the forces of control keep trying to stuff gold back inside the box, as it were.

And they keep failing.

Last week’s price action was impressive, even if the close was less than stellar. In the world of financial commentary everyone is looking for proximate causes for spikes and dips.

But most of that is simply noise. I don’t care why gold touched $1450 last week, only that it did.

Because a bull market that shakes off a number of big intra-week corrections to then blast to a new near-term high is a healthy one; one climbing the proverbial wall of worry.

And what’s important here is that this is not an anti-dollar trade. It is an anti-euro one. The U.S. Dollar Index has fully shaken off all attempts by the Fed to talk it down, trading at 97.6, and threatening a back-to-back monthly reversal at 97.8.

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Our Ruling Elites Have No Idea How Much We Want to See Them All in Prison Jumpsuits, by Charles Hugh Smith

Lock ‘em all up! From Charles Hugh Smith at oftwominds.com:

Even the most distracted, fragmented tribe of the peasantry eventually notices that they’re not in the top 1%, or the top 0.1%.

Let’s posit that America will confront a Great Crisis in the next decade. This is the presumption of The Fourth Turning, a 4-generational cycle of 80 years that correlates rather neatly with the Great Crises of the past: 1781 (Revolutionary War, constitutional crisis); 1861 (Civil War) and 1941 (World War II, global war).

What will be the next Great Crisis? Some anticipate another great-power war, others foresee another civil war, still others reckon a military coup is likely, and some view a collapse of the economy and U.S. dollar as inevitable.

While anything’s possible, I propose a novel crisis unlike any in the past, a Moral Crisis in which the people challenge the power of the nation’s corrupt Ruling Elites: not just elected officials, but the technocrats of the Deep State, the vested interests pillaging the nation, the New Overlords of Big Tech, the financier New Nobility, the Corporate Media and the self-serving state/corporate technocrat Nomenklatura who do the dirty work of the Ruling Elites.

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Will the Multi-Polar World be Backed by Gold? by Tom Luongo

Not to say that it can’t happen, but it’s going to be a while before a significant portion of the world adopts a gold-based currency. From Tom Luongo at tomluongo.me:

It’s not news that China and Russia have been buying gold by the hundreds of tonnes. It’s not news that Russia divested itself of most of its U.S. Treasury holdings last year in response to Donald Trump’s sanctions on Rusal, upsetting the global Aluminum market.

Russia has led the charge on central bank gold buying, having increased its official holdings from 400.3 tonnes in Q1 of 2007 to 2168.3 tonnes as of the end of Q1 2019. That’s a 442% increase in gold reserves.

China, on the other hand, has only in the past couple of years joined Russia’s party of announcing its gold buying on a monthly basis. Previously, China would simply drop a 500-600 tonne bomb on the markets and see what would shake out of it.

Now, few people who follow this stuff believe China’s government only owns 1916.3 tonnes of gold. Estimates range from 4000 to 6000 tonnes. Like Russia, very little of China’s domestic production of gold (404 tonnes in 2018) leaves China and makes its way into the global market.

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Doug Casey on Gold Breaking Through $1,400… and Four Ways He’s Positioned

Doug Casey is bullish on gold and commodities. From Casey at internationalman.com:

International Man: Recently, gold broke through the $1,400 barrier for the first time since 2013. What do you make of this?

Doug Casey: It’s long overdue.

The thing to remember here is that since the crisis of 2008, not just the US but all of the major governments in the world—the Japanese, the Chinese, the Europeans, and all the little countries too—have been printing up money hand over fist. Gold hasn’t really responded so far.

All that new money has gone into the stock and bond markets, and certain areas of the real estate markets. Now interest rates are once again down to their all-time lows, and about $13 trillion of bonds have negative yields—something that should be metaphysically impossible. Money is finally starting to filter down into commodities. All of which are extraordinarily depressed right now.

The recent move in gold has grabbed everyone’s attention. But all the commodities are going to move higher. There’s a lot of fear building up, and that always drives gold prices.

I’m bullish on gold. I don’t think this is a false start.

It last peaked in 2011 around $1,900. Gold is going back to at least its previous high, and that goes for all the other commodities as well.

International Man: You mentioned there’s a lot of fear building up. What do you mean by that?

Doug Casey: A lot of people are starting to recognize that in today’s world you don’t really own anything.

Stocks in your stock account are just another liability of the brokerage firm. If your broker goes bust, you’re out of luck for anything beyond the amount for which you’re insured. You’re just another unsecured creditor, like the broker’s landlord. You really don’t own the stocks in your stock account—at least in any secure way.

When it comes to commodities, the bust of MF Global under Corzine a few years ago proved that you really don’t own the money in your commodities account either. It used to be than an account with a clearing broker was sacrosanct. That’s no longer the case.

International Man: Recently, gold broke through the $1,400 barrier for the first time since 2013. What do you make of this?

Doug Casey: It’s long overdue.

The thing to remember here is that since the crisis of 2008, not just the US but all of the major governments in the world—the Japanese, the Chinese, the Europeans, and all the little countries too—have been printing up money hand over fist. Gold hasn’t really responded so far.

All that new money has gone into the stock and bond markets, and certain areas of the real estate markets. Now interest rates are once again down to their all-time lows, and about $13 trillion of bonds have negative yields—something that should be metaphysically impossible. Money is finally starting to filter down into commodities. All of which are extraordinarily depressed right now.

The recent move in gold has grabbed everyone’s attention. But all the commodities are going to move higher. There’s a lot of fear building up, and that always drives gold prices.

I’m bullish on gold. I don’t think this is a false start.

It last peaked in 2011 around $1,900. Gold is going back to at least its previous high, and that goes for all the other commodities as well.

International Man: You mentioned there’s a lot of fear building up. What do you mean by that?

Doug Casey: A lot of people are starting to recognize that in today’s world you don’t really own anything.

Stocks in your stock account are just another liability of the brokerage firm. If your broker goes bust, you’re out of luck for anything beyond the amount for which you’re insured. You’re just another unsecured creditor, like the broker’s landlord. You really don’t own the stocks in your stock account—at least in any secure way.

When it comes to commodities, the bust of MF Global under Corzine a few years ago proved that you really don’t own the money in your commodities account either. It used to be than an account with a clearing broker was sacrosanct. That’s no longer the case.

You don’t really own the money in your bank account, at least beyond the insured amount. The 2013 Cyprus crisis proved that. Instead of bailing out the banks, they were “bailed in” by customer accounts. The fractional reserve banking system, combined with a debt-heavy economy, guarantees there will be another wave of bank failures. Governments will follow the Cyprus model. Depositor’s funds are at risk.

More people are starting to realize that you actually don’t own any intangible assets in today’s over-financialized world. Security is an illusion.

That’s why there’s going to be a movement to gold. As I’ve said many times in the past, but it bears repeating, gold is the only financial asset that’s not simultaneously somebody else’s liability. It’s the “go to” asset in an unstable world.

International Man: The Fed capitulated earlier this year and ended its tightening cycle. The next stop seems to be more money printing. What does this mean for gold?

Doug Casey: Well, the more fiat money that’s created, the higher prices are going to go. That absolutely includes gold.

The big X factor is the huge amount of debt in the world, which is once again at new all-time highs. Mortgage debt, student loan debt, automobile debt, credit card debt, government debt, and corporate debt. The US dollar itself is a form of debt. It’s been this country’s major export for two generations now.

All that debt can be sustained with interest rates at 0% or 2%, but if—or rather when—interest rates eventually go up, a lot of that is going to be defaulted on. That will redirect people’s attention to an asset that can’t be defaulted on, such as physical gold.

International Man: If gold is merely a “tradition” as central banks like to pretend it is, why are central banks buying record amounts of it?

Doug Casey: Well, to start with, I’m always skeptical about the figures reported by governments. Not all central bankers are buying gold; it’s essentially just the Chinese and the Russians. Central bankers aren’t rocket scientists; they’re just government employees who’ve weaseled themselves into a position where they’re over paid, get to wear $1,000-dollar suits, and go to ritzy meetings. They have no understanding of economics, despite degrees from prestigious schools. They’ve been brought up on Keynesianism, and a lot of them are Marxists.

Central banks are really just engines of inflation. They really serve no purpose except to allow governments to extract capital from their populations indirectly by printing currency. As opposed to honestly—insofar as taxation is honest—by confiscating the money directly from citizens.

My hope is that over the next 20 years most of these central banks will go bankrupt. The Federal Reserve’s published balance sheet is loaded with trillions of dollars of ultra-low interest rate bonds. When—not if—rates return to even normal levels they’ll have hundreds of billions of negative equity. But I expect rates to go to the levels of the early 80’s and beyond.

Hopefully the Fed and other central banks will go bust and disappear. They’ll certainly go bust. As to disappearing, that’s not a prediction, just a fond hope. Banking and money should be left to the market, not an arm of the State.

Let me re-emphasize that the Russians and the Chinese have been buying a lot of gold in recent years.

Now, why are they doing that?

The major asset of the world’s central banks is US dollars. Even though central bankers aren’t rocket scientists, they recognize that the dollar is the just the unsecured asset of a bankrupt government, the US government.

So the Russians and the Chinese are trying to lighten up on dollars and go to gold. Other governments and central banks will too. It’s only convenient for everyone to use dollars out of habit, and because most everything is priced in dollars today.

But countries like Russia, China, and Iran don’t like to use dollars, because any time they transfer dollars—even between themselves—those dollars must clear through New York. The last thing that any of these countries want to do is use the currency of their adversary, or perhaps their enemy.

But what’s the alternative?

They don’t want to use renminbi and rubles, which are illiquid paper currencies. They don’t trust each other, or each other’s currencies. They certainly don’t want to use dollars. As a result I think the whole world is going back to gold. That will take the gold price to much higher levels. Remember, there are probably only about six billion ounces above ground, and the supply grows less than 1.5% per year from new production. That’s not much, considering that there are about 7.5 billion people in the world.

International Man: How are you positioned to profit?

Doug Casey: I’m doing several things.

Number one is buy gold coins every time I get a chance. However, I no longer buy large one-ounce gold coins. I only buy smaller, generally quarter of an ounce, gold coins. Things like Sovereigns, with a small numismatic value.

That’s because I’ve noticed, in several countries now, that if you have something that looks like it might be a Maple Leaf or a Krugerrand, they’ll open up your briefcase and check it out. It’s happened to me where they’ve mistaken silver coins for gold coins.

You should be buying physical gold coins, but preferably ones that look like pocket change.

Number two, you should have physical gold in storage in an offshore account. SWP Cayman, a precious metals storage company in the Cayman Islands, offers a convenient low-cost way to do that. There are others, but very few institutions will touch American accounts anymore, because of US regulations and reporting.

Number three is to speculate on gold indirectly. I’ve always been very big in mining stocks and they’re very cheap right now. When they run, the whole group can generally go 1,000%. I’m very involved in mining exploration and development stocks in particular at the moment.

The last thing, and this is not for most people, is the futures market. I use it by selling puts, buying calls, or just being long futures.

Those are the basics on how you play gold. You should mainly buy gold for safety, out of prudence, and for insurance. But I believe it will also be quite profitable in the years to come.