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What Is Real Wealth?

What Is Real Wealth?

As for acquiring capital–the most important types of capital don’t require much money.

What is real wealth? Money, right? Currency, gold, quatloos, you name it.Money is real wealth because you can use it to buy whatever you want.

I would argue money in any form is only the means to acquire real wealth, which is the agency, opportunity and time to pursue your life’s work.

The conventional view that wealth is money and leisure has it all wrong. Let’s imagine the owner of a vault of conventional treasure: jewels, gold coins, etc.

If the “wealth” stays in the vault, what’s the point of owning this “wealth”? The secret satisfaction of being “wealthy”?

If “wealth” is only an internal state, then let’s measure friendship and being needed/wanted as the metrics of “wealth.” You see the point; if “wealth” is merely an internal state of satisfaction, then a vault full of “money” is a poor metric.

What money buys that is real wealth is freedom and control of one’s life. This control over one’s life is called agency. Agency is defined as “the capacity of an actor to act in a given environment.” This may not seem like a profound concept, but another way to describe agency is that agency is the opposite of powerlessness.

People with agency define themselves and their identity; they shape the world they inhabit rather than passively await whatever circumstances deliver up.

In the real world, people with agency move on when things no longer work for them in a particular situation. Agency is not just the opposite of feeling powerless; it’s also the opposite of victimhood, i.e. the state of being in which others are held responsible for all of one’s travails and difficulties.

Agency and responsibility are two sides of the same coin: each manifests the other.

…click on the above link to read the rest of the article…

The Confusion in Gold

QUESTION #1: [_____] says that the dollar will collapse because with the debt ceiling gone – no more buyers of Treasuries in the markets and only the Fed Reserve buying – inflation goes to the wazoo. All over USA. care to comment?

ANSWER: Total nonsense. The USA debt of $20 trillion is a tiny fraction of global debt at $160 trillion. This entire theory does not hold up. Just where is all the money going to run? Gold? Institutions do not buy gold and cannot function with gold, which is not legal tender for even paying your taxes. The only thing that matters is the general public confidence. When the average person on the street no longer trusts government, that is the tipping point.

There is a whole series of people given a choice between a bar of chocolate and a bar of silver. They take the chocolate. Kids line up in Starbucks and pay with their phone – not even cash. Not until you shake the confidence of these people will you see the explosion in markets. That is what took place in the late 1970s. I was there. OPEC created the image of wholesale inflation. People were hoarding toilet paper.

QUESTION #2: What will Fed Balance Sheet Shrinkage do to Gold?

ANSWER: The opposite of what people think. Shrinking the Balance Sheet will be anti-inflationary to the standard reasoning and thus gold should collapse with deflation. However, the Fed has turned away from QE because pension funds are at serious risk. They have run off to emerging markets and bought very long-term paper desperately trying to get their yields up. As the stock market rises because there is no alternative, the Fed politically will be forced to raise rates. They will end up creating inflation with rising rates that will blow interest expenditure through the roof.

…click on the above link to read the rest of the article…

The Golden Solution to America’s Debt Crisis

The Golden Solution to America’s Debt Crisis

Right now, the United States is officially $20 trillion in debt. Over half of that $20 trillion was added over the past decade.

And it looks like annual deficits will be at the trillion dollar level sooner than later when projected spending is factored in.

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 $20 trillion debt would be fine if we had a $50 trillion economy.

The debt-to-GDP ratio in that example would be 40%. But we don’t have a $50 trillion economy. We have about a $19 trillion economy, 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?

105%.

We are deep into the red zone, that is. And we’re only going deeper.

The U.S. has a 105% debt to GDP ratio, trillion dollar deficits on the way, more spending on the way.

We’re getting more and more like Greece. 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?

…click on the above link to read the rest of the article…

Gold Jumps After Mnuchin Says “Less Concerned About Inflation Than Economic Growth”

Gold Jumps After Mnuchin Says “Less Concerned About Inflation Than Economic Growth”

In a potentially revealing glimpse of what is to come from the next Fed head, Treasury Secretary Steven Mnuchin, speaking during a Politico forum, told the audience:

“Although we respect the Fed’s independence, we are concerned about economic growth. We’re doing everything we can — whether it’s tax reform, whether it’s regulatory relief, whether it’s trade — to create economic growth. And we’re less concerned about inflation at the moment.”

Seemingly suggesting that the administration will do “whatever it takes” to get economic growth (cough QE moar cough), no matter what inflationary impact.

The reaction was quick – Gold jumped to the high of the day and USDJPY spiked lower – but no follow through for now…

Mnuchin also replayed Trump’s comments on Yellen, saying he “respected her” and “enjoys working with her” perhaps in some further conditioning for the market that Yellen may be asked to stay around (as long as she remains uber-dovish, perhaps).

Mike Maloney: The Top 10 Reasons I Own Gold and Silver [New Video Series]

When the average investor thinks about gold, they may view it as an inflation hedge. Or maybe as crisis insurance. Or perhaps solely as a portfolio diversifier.

These are all good reasons to own gold—but those are always good reasons to buy precious metals. Mike Maloney’s reasons to own gold and silver at this point in history are very different than what passes as standard arguments.

Given the monetary and economic risks present today, and the types of crises Mike believes are coming, he wanted to share his personal reasons with everyone. And he has a brand new video that details them:

They center around a perfect storm of worldwide trends that are set to explode simultaneously—and push gold and silver into hyper-bubbles.

Let’s count down the Top 10 Reasons Mike Maloney owns gold and silver…

#10: All Fiat Currencies Eventually Go to Zero—and All Currencies Today Are Fiat

Since the year 1500, a whopping 617 fiat currencies have become worthless. About a quarter of those was due to hyperinflation.

The message from history is very clear: No fiat currency has lasted forever. Eventually, they all fail. And today they’re all made of paper, backed by nothing.

Mike owns physical gold and silver because they are money, and every fiat currency today is not.

#9. The Current State of the Global Economy

Debt, deficit spending, derivatives, and trade imbalances are at levels unprecedented in all of history.

As bad as worldwide debt levels are, total derivatives exceed $1.2 quadrillion. This precarious bubble threatens to take down the world economy. This factor alone could wipe out your wealth overnight. Gold and silver, on the other hand, will soar in that scenario.

…click on the above link to read the rest of the article…

On Guard Against The Banks

On Guard Against The Banks - Craig Hemke

Following the events of yesterday, it seems wise this morning to take an in-depth look at the charts in order to discern what moves The Banks may take next in the hope of stemming this rally and reversing the trends.

Let’s start with Comex Digital Gold. It has been in an UPtrend since July 10 and this rally has carried it $150 or about 12.5%. In doing so, The Commercials on the CoT have increased their NET short position by 182,000 contracts and, specifically, the 24 Banks of the Bank Participation Report have doubled their NET short position, going from 104,748 contracts NET short in July to 213,746 NET short last week.

This places the CoT in its “worst” position since last September and this BPR reveals the largest NET short position on record. Therefore, you KNOW that The Banks will do just about anything at this point to reverse the trend and begin flushing The Specs back out of paper gold. Though they are clearly capable of pulling this off, it may take them a while to do it. Why, you ask?

For CDG, it’s all about the moving averages. We noted early last week that CDG’s 50-day had bullishly crossed UP and through both its 10-day and 200-day MAs. This is a very bullish trend indicator and, most importantly, it sets the Spec HFTs into a “buy the dip mode”. You can see this playing out already when you look at the daily chart.

Also last week, we began to discuss the significance of the $1331 level as support in any pullback. This was the level of resistance and then support in late August so we hoped/expected that same action on any pullback. And look what has happened thus far this week! Even though the all-important USDJPY is up another 50 pips today and pressing against 110, Comex gold is hanging firm at….$1332! For us, this is clear evidence of the HFTs buying the dip.

…click on the above link to read the rest of the article…

Legal Tender Money v Fiat

US$-Oh-No

QUESTION: 

I wonder if you would care in a future blogpost to cast some light on the following?

The sole ‘legal tender money’ in the final analysis is the FRN (Federal Reserve Note — coins aside) collateralized by the Fed’s assets.All other ‘money’ is private bank credit money or suchlike,including Money Market Funds and other said-to-be money-like instruments.Despite the aspersions that surround Fiat money it is in toto a small number — around $1.6 bn. However there are promises to pay in FRN on demand.

Does that last fact account for the talk about banning cash ( ie the FRN) ?

Like the promise to pay in Gold it seems impossible to pay in the FRN were that ever to be demanded in size. De Gaulle ended the gold-on -demand offer so could something similar could happen to the FRN ? Back then Gold rose against all assets — ditto the FRN ?

I hope you are reading this in some comfortable place, given the atrocious weather in Florida.

Best Rgrds

Bill

Aquinas

ANSWER: Most money is actually created by the private sector through leverage and bank loans today. This is why when there is a crash, the contraction takes down banks for it is the leverage that collapses. When you have a debt based system, then the monetary system becomes leveraged. With the fall of Rome, the Catholic Church adopted the Sin of Usury thanks to Saint Thomas Aquinas and his 20 volume work, Summa Theologica.

Hammurabi-StellaThere has never been actual tangible money issued by any government that was worth strictly its metal content. It was always valued greater than its intrinsic value. Even the first coins issued by any government took place in Lydia, located in modern Turkey.

…click on the above link to read the rest of the article…

The Long-term Cycle of Monetary Crisis

QUESTION: Mr. Armstrong, I have been following you for all my adult life and that has exceeded 20 years by now and am shocked to say, I found your article on how things evolve GOLD-Oil-Dollar.  I must say this is a eye-opening evolution you are talking about. Has this always been the case with things changing coming into play and then vanishing?

ANSWER: Absolutely. I have written about how gold vanished from use with the Dark Age following the fall of Rome. Gold did not reappear in coinage for nearly 600 years. The first gold coin to reappear in Britain came during the 13th century issued by Henry III.

The Gold Cups of Mycenae

The same thing took place with the Dark Age in Greece. This is when the Mycenae ruled known as the Heroic Period of which Homer wrote. Scholars thought it was just fiction written by Homer until the ancient city of Troy was discovered. Troy VIIaappears to have been destroyed by war around 1184 BC. However, scholars did not believe the writings of Homer because Homer was born sometime between the 12th and 8th centuries BC. He remains famous for his work The Iliad and The Odyssey. So once again there is about 600 years separating the Heroic Age and the Hellenistic Age.

If we turn to Japan, here too we find that the emperor abused his power to issue money and once again we find money vanish for about 600 years. Each new emperor devalued all previously issued coinage to 10% of his new coinage. People simply refused to accept coins because they were devalued and were no a store of value.

Therefore, throughout economic history we always have long-term structural reform. Do not expect either gold or oil to always be a valuable component.

…click on the above link to read the rest of the article…

Using Gold To Hedge Korea Nuclear War Risk? This Is How To Do It, According To Goldman

Using Gold To Hedge Korea Nuclear War Risk? This Is How To Do It, According To Goldman

In a note on the role of gold as a “geopolitical hedge of last resort“, Goldman chief commodities strategist, Jeff Currie, writes that while it is tempting to blame the rally in gold prices on recent events in North Korea – which have certainly helped create a bid in gold – they only explain a fraction, or ~$15/oz of the more than $100/oz rally since mid-July. Instead, Goldman finds that the events in Washington over the past two months play a far larger role in the recent gold rally coupled by a sharply weaker dollar.

Currie writes that Goldman’s market strategists have found that Trump’s approval rating is a good proxy for this “Washington risk” with a high correlation to both interest rates and gold prices (see Exhibit 1).

The Washington risk premium is highly correlated to Trump’s approval rating

Goldman also notes that the Trump risk premium is reflected in both real interest rates and a weaker US dollar account for 85% of the price movement in gold prices this past year.

The Trump risk premium as reflected in real rates and the US dollar (as reflected in a basket of EM FX) explain 85% of the price movement

So what about the risk, or threat, from a North Korean escalation, potentially culminating with a nuclear exchange? Here Goldman is more skeptical about the causal linkage between the growing risk level and the price of gold.

The view that North Korea is a stable equilibrium is consistent with a lack of a large North Korean risk premium in gold prices and consistent with the history of gold prices.

…click on the above link to read the rest of the article…

Rickards: “There Are Three Things Going On With Gold Right Now”

Rickards: “There Are Three Things Going On With Gold Right Now”

Jim Rickards joined Kitco News and Daniela Cambone to discuss the latest news and analysis from gold markets, geopolitics and even bitcoin.  The Wall Street veteran took on the bigger picture facing metals investors and what could be just around the corner in a bubbling market.

Jim Rickards is the editor of Strategic Intelligence and is the New York Times best-selling author of The Road to Ruin. Rickards’ worked on Wall Street for decades and has advised the U.S intelligence community on international finance, trade and financial warfare.

When asked why certain geopolitical tensions have greater impacts on gold and hard assets than others Rickards remarked, “There are two things going on,

“… first is that the North Korean missile threat goes from high tension to back down again. This is a very serious threat and we are headed for war with North Korea. While I don’t know what it will take to not just get gold to go up but stocks and other sectors, ultimately markets are going to be impacted.”

People seem to have very short attention spans but that’s not how to think about it. It’s possible to see that Kim Jong-un is not deviating from his path to get nuclear weapons, the U.S will not allow it. There’s no middle ground there. It would be great if we could have diplomacy. I think we should also ratchet up sanctions on China. But I don’t see either of those happening.”

Don’t underestimate the extent to which gold is being impacted by hedge funds, leverage players, and others that are in the mix for the current high in gold. They don’t really care if it is gold, soybeans, etc. but it is simply another commodity. They receive a nice profit with tight profits, tight stops.”

…click on the above link to read the rest of the article…

Is Gold Still Relevant?

QUESTION: Mr. Armstrong, Gold rallies with each political event and then falls back when the event is over. It is not in a sustainable relentless bull market as was the case in the 70s. Almost every stock market has outperformed gold since 1980. This has made me wonder if something is different. Here in India the younger generation do not buy gold and simply no longer look at it as a safe haven as the older generations. When I travel to the USA, I notice the younger generation pay with their cell phones and are not even interested in paper money. In Europe, the younger generation is also disinterested in gold. Could it be that gold is becoming obsolete as the horse and buggy?

POM

ANSWER: Yes, gold is still relevant for the older generation. It should rally right now and the month-end closing was very bullish into September, but not yet a breakout. To be impressive, gold must exceed the 2016 high of 1377.50 intraday. To show real strength into early 2018, we must close above 1393. A closing above the 2016 high would reflect a rally into 2018, but warn that we are more likely going to fall back once again. The rally in gold simply because of the dollar is not sustainable long-term.

Nevertheless, indeed, over the course of generations, the ideas and trends of one generation are eventually replaced with new trends. Just look at art. The paintings of women by Rubens were always robust. If you were thin you were considered poor. In Asia, girls try to whiten their skin because darker skin implies you are poor and work in the fields whereas in the States girls want to have a tan. Trends change as do fashions over time. Investments are the same. The big investment up until 1907 was railroads and industrial stocks were considered risky ventures until the automobile changed that perception.

…click on the above link to read the rest of the article…

Gold Reset To $10,000/oz Coming “By January 1, 2018” – Rickards

Gold Reset To $10,000/oz Coming “By January 1, 2018” – Rickards

– Trump could be planning a radical “reboot” of the U.S. dollar
– Currency reboot will see leading nations devalue their currencies against gold
– New gold price would be nearly 8 times higher at $10,000/oz
– Price based on mass exit of foreign governments and investors from the US Dollar
– US total debt now over $80 Trillion – $20T national debt and $60T consumer debt
– Monetary reboot or currency devaluation seen frequently – even modern history
– Buy gold eagles, silver eagles including monster boxes and gold bars 

– Have a 10% allocation to gold, smaller allocation to silver

Editor: Mark O’Byrne

Source: Agora Financial

A new monetary standard which will see the dollar “reboot” and gold be revalued to $10,000/oz according to best-selling author and Pentagon insider Jim Rickards.

A monetary ‘reboot’ is not unprecedented

Articles about an imminent return to the gold standard are not exactly infrequent in the gold world and it can be easy to become immune to them and dismiss them without considering the facts and case being made.

Many of the articles are not just based one ever-wishful daydreams. Much of it comes from information that is true about today and is then applied to situations that we have seen in the past.

Rickards makes this point himself. A monetary reset is not unheard of. Since the Genoa Accord in 1922 there have been a further eight reboots. The most recent was in 2016 in what Rickards refers to as the Shanghai Accord which purportedly saw deals done that would allow China to ease without leading to a sharp correction in the US stock market.

Rickards isn’t the only one who is speculating that there could be some big monetary changes on the horizon. In March intelligence service Stratfor wrote:

…click on the above link to read the rest of the article…

Grant Williams: “History Is About To Repeat Itself Again… And It Might Get Ugly”

Grant Williams: “History Is About To Repeat Itself Again… And It Might Get Ugly”

Real Vision’s Grant Williams believes that the 76 million retiring Baby Boomers will trigger a major pension crisis.

“With that potentially bad situation we could face,” the seasoned asset manager and co-founder of Real Vision TV said in a recent extended Metal Masters interview (full interview below), “holding physical metal, somewhere safe, somewhere outside the banking system, is just a sensible precaution to take.”

His outlook has changed drastically since he started his first job trading Japanese markets in 1986: “What I walked into at that time was one of the greatest bull market bubbles the world had ever seen, in the Japanese equity market and real estate market.” During this heyday, precious metals weren’t on his radar at all—until a year later, when he witnessed his first stock market crash and started asking some inconvenient questions.

“I’ve always been a fan of history,” says Williams, who also writes the wildly popular macroeconomic newsletter, Things That Make You Go Hmmm… “So I read financial history and I just kept reading. And it was clear to me that at this point in time, I needed to buy some gold.”

Until then, the gold price didn’t mean much to him, except as an indicator of other things, so he considers the crashes he witnessed in his career wake-up calls and blessings in disguise.

The 1987 crash, he says, was more like “a bad day at the office; it came and went so fast… The bounce-back was quick, but it was a real shock to the system that that could happen.” When the dotcom bubble burst, he was well prepared. “I recognized the madness for what it was much sooner… and so that taught me that markets can reverse and just go down.”

…click on the above link to read the rest of the article…

Bad Ideas About Money and Bitcoin

How We Got Used to Fiat Money

Most false or irrational ideas about money are not new. For example, take the idea that government can just fix the price of one monetary asset against another. Some people think that we can have a gold standard by such a decree today. This idea goes back at least as far as the Coinage Act of 1792, when the government fixed 371.25 grains of silver to the same value as 24.75 grains of gold, or a ratio of 15 to 1. This caused problems because the market valued silver a bit lower than that.

The gold-silver ratio from 1800 to 1915. In the 1870s, numerous nations around the world dropped bimetallism in favor of a gold standard (France was a noteworthy exception). Thereafter it quickly became obvious that silver had been vastly overvalued at the official exchange ratio. It was essentially a subsidy for silver miners. Once a pure gold standard was adopted, mild consumer price deflation became the norm, as economic productivity grew faster than the supply of gold. Contrary to what virtually all central bankers nowadays assert, this had no negative effects on the economy whatsoever. On the contrary, the four decades following the adoption of the gold standard produced the biggest and most equitable real per capita growth the US has ever seen – such growth rates were never again recaptured. Of course, at the time government spending represented between 3% to 4% of total economic output, i.e., government was but a footnote in most people’s lives. The reason why governments subsequently sabotaged the gold standard was precisely that they wanted to grow without limit. [PT]

 

So people were happy to bring their silver to the U.S. Mint to be coined. Silver had a higher value as a coin than it did in the market, and it was the opposite for gold. Gresham’s Law teaches us that if two monies must be treated by law as the same value, then the one of lower value will circulate and the one of higher value will be hoarded. This put the fledgling America on a de facto silver standard.

Eight Spanish silver reales, or “pieces of eight” which consisted of 387 grains of pure silver (the coin on the upper right is a Mexican piece of eight, with Chinese chop marks). These coins were minted by the Spanish Empire since 1598 and were of the same size and weight as the German Thaler, which in turn was standardized across all German territories since the 15th century. These coins were legal tender in the US until 1857 and for a long time were the by far most widely used coin. The Coinage Act of 1792 established that the new US dollar was to be equal in value to Spain’s pieces of eight, but people soon found out that the US Mint used a slightly different standard of fineness (0.9 instead of 0.8924), which meant that about 1% more silver was needed to mint a dollar. This made them reluctant to bring silver to the mint, hence the Spanish coins continued to dominate in daily life. Spanish reales were actually the first world currency, and it worked splendidly for almost 300 years (incidentally, over the time of its existence, this was the least debased coin in the Western world, which explains its popularity). People would cut the coin into 8 pieces (“bits”) of equal size for smaller transactions and to make change – prices on US stock exchanges were quoted in fractions based on these 8 bits for a very long time. The United States Assay Commission which kept an eye on the quality of the production of the US Mint was one of the few bureaucracies to ever be disbanded – in 1980. This is actually testament to the stickiness of bureaucracies – gold coins had been out of circulation since 1933 and silver coins since 1965 (a rudely debased half dollar existed until 1970).  [PT]

…click on the above link to read the rest of the article…

U.S. Treasury Secretary: I Assume Fort Knox Gold Is Still There

U.S. Treasury Secretary: I Assume Fort Knox Gold Is Still There

  • US Treasury Secretary Steve Mnuchin visits Fort Knox Gold
  • Later tweeted ‘Glad gold is safe!’
  • Only the third Treasury Secretary to visit the fortified vault, last visit was 1948
  • Last Congressional visit was 1974
  • Speculation over existence of gold in Fort Knox is rife
  • Concerns over Federal Reserves lack of interest in carrying to an audit on gold
  • Gold was last counted in 1953, nine years before Mnuchin was born
  • Mnuchin may be looking to prevent countries and states from worrying about and repatriating their gold

US Treasury Secretary ‘assumes’ the gold is still in Fort Knox, 64 years after it was audited.

The fortified facility is reportedly surrounded by 30,000 soldiers, tanks, armored personnel carriers, attack helicopters, and artillery. Despite this, there is still concern as to whether the gold is there.

As he headed in, Mnuchin told an audience “I assume the gold is still there…It would really be quite a movie if we walked in and there was no gold.”

With a background in Hollywood it was unsurprising that Mnuchin’s imagination appeared to be getting carried away with tales of finding the $200 billion of gold missing.

Missing gold: fact or fiction?

An empty Fort Knox is an issue far removed from the hills of Hollywood  and has far more basis in reality than many give it credit for.

For many decades campaigns have been led for the US Treasury and government to audit the gold and to testify to its existence.

The gold has not been ‘counted’ since 1953. This was less than 20 years after Fort Knox was built. Since then there has been no official count or audit.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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