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The massive money creation in the 2000s has led to a debt and asset bubble, which is about to burst. Investors will be shocked by the speed of the decline and won’t react before it is too late.

The massive money creation by central and commercial banks in this century has resulted in a growth of global assets from $450 trillion in 2000 to $1,540 trillion in 2020.

DEBT TO GDP GROWTH

As the chart below shows US debt to GDP held well below 25% from 1790 to the 1930s, a period of almost 150 years. The depression with the New Deal followed by WWII pushed debt to GDP up to 125%. Then after the war, the debt came down to around 30% in the early 1970s.

The closing of the gold window in 1971 ended all fiscal and monetary discipline. Since then, the US and much of the Western world has seen debt to GDP surge to well over 100%. In the US, Public Debt to GDP is now 125%. Back in 2000 it was only 54% but since then we have seen a vote buying system with a money printing bonanza and an exponential increase in debt to 125%.

A major part of the debt increase has gone to finance the rapid growth in property values.

The table below shows that property has grown on average by 250% between 2000 and 2020. So individuals are creating wealth by swapping properties with each other. Hardly a sustainable form of wealth creation.

The exponential growth in property prices has been global although countries like China, Canada, Australia and Sweden stand out with over 200% gains since 2000. Most of the properties bought in the last 20+ years involve massive leverage. When the property bubble soon bursts, many property owners will have negative equity and could easily lose their homes.

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

A surprising benefit to owning gold– especially now

May 25, 2022

A surprising benefit to owning gold– especially now

By the year 41 BC, just a few years after the assassination of Julius Caesar, Rome was under the strict rule of a three-person dictatorship known as the Tresviri rei publicae constituendae.

Historians today refer to this committee as the Triumvirate, and it included a general named Aemilius Lepidus, as well as Gaius Octavius– who would eventually become Emperor Augustus.

But the leader of the group, at least at first, was Marcus Antonius, also known as Mark Antony.

Mark Antony was not especially popular. Many Romans rightfully suspected that Mark Antony had been involved in Caesar’s assassination. Plus he was sleeping with Caesar’s widow, Cleopatra.

But Antony’s power through the Triumvirate’s was absolute. He could raise taxes, establish new social and religious traditions, regulate daily life, seize private property, and even condemn people to death… all without any oversight or due process.

And he wasn’t shy about using this power to squash his opposition.

Antony put several of his political enemies to death– including the much beloved Cicero, who was trying to escape Rome when Antony’s goons killed him.

Antony also threatened to kill another Senator named Nonius. But unlike Cicero, Nonius managed to escape Rome… bring with him about $1.5 million worth of gold and jewels.

People in the ancient world knew that precious metals (and precious stones) were pretty much the only portable forms of wealth.

Human civilization at the time was completely agrarian, so most productive assets like land and crops were impossible to move. Gold was almost the singular option to move large sums of wealth, and it remained this way for centuries.

These days there are much better options. Many forms of wealth– financial securities, intellectual property, bank deposits, and cryptocurrency– are completely portable. So gold is no longer necessary as a way to move money abroad.

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

Gold As Cheap Today As In 1971 At $35

May 19, 2022

GOLD AS CHEAP TODAY AS IN 1971 AT $35

“Specie (gold and silver coin) is the most perfect medium because it will preserve its own level, because having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war.” – Thomas Jefferson

Since no current President or Prime Minister nor any Central Bank Chairman understands what money is or the relevance of gold, we turn above back to history and Thomas Jefferson, America’s third president for a proper definition.

Jefferson also understood that “Paper is Poverty, It is only the Ghost of Money, and not Money itself.”

As the world economy goes towards an inflationary depression exacerbated not only by epic debts and deficits but now also by war, the significance of gold takes on a whole different dimension.

So let’s dissect Jefferson’s statement:

“(GOLD) Will preserve its own level”

Gold is Constant Purchasing Power. As such, gold doesn’t go up in real terms. An ounce of gold today buys a good suit for a man just like it did in Roman times.

The graph below shows gold as constant purchasing power at the 100 line whilst all the currencies are crashing to the bottom.

All currencies are continuing to lose value against real money although it never takes place in a straight line. With higher interest rates & inflation, higher deficits & debts, poverty, cost of wars and increasing pressures in the financial system, the currency debasement will now accelerate.

Gold is not an investment. Gold is eternal money. As such gold maintains its REAL value whereas paper money loses all its value over time. For 5000 years gold has outlived all other forms of money including paper money.

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

Collapse Is Happening Before Our Eyes

May 5, 2022

Analysts and authors, myself included, have been warning about the collapse of the dollar as the global reserve currency for years. I described this prospect in my first book, Currency Wars (2011), and in several other books in the years since.

This process can take many years. For example, the decline of sterling as the leading global reserve currency played out over 30 years from 1914 (the beginning of World War I) to 1944 (the Bretton Woods conference).

Still, events today are playing out so quickly that the collapse is happening in front of our eyes.

It’s no longer a matter of a major event on the horizon; it’s occurring in real-time. Russia has just linked the ruble to gold at a rate of 5,000 rubles to one gram of gold. China is discussing with Saudi Arabia the prospect of paying for oil in yuan.

Israel is likewise considering taking yuan in exchange for its high-tech exports. China and Russia are creating new payments systems to avoid U.S. sanctions. You get the point.

Foreign Central Banks Aren’t Dumb

Central banks have been net buyers of physical gold since 2010. Countries all over the world are considering dumping dollars for fear that they will be next on the list to have their dollar assets frozen or seized the way the U.S. seized the dollar-denominated assets of the Central Bank of Russia.

That makes sense. What’s the point of holding dollars in your reserve positions if the U.S. can freeze those accounts on a whim? Americans tend to take dollar strength for granted, but that’s a mistake. It’s helpful at times like this to get a foreign perspective.

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

The Dollar Dethroned: We Have Reached The End Of Monetary Policy As We All Once Knew It

April 5, 2022

The Dollar Dethroned: We Have Reached The End Of Monetary Policy As We All Once Knew It

And the world hasn’t even noticed yet.

People who speak out openly with concern about the potential death of the U.S. dollar have been written off as conspiracy theorists for the better part of the last few decades.

But looking back, unfortunately, I’m sure history is going to be kind to these people and their prognostications. They will have been the ones who sounded the alarm in a relatively short amount of time before ultimately being proven right.

I don’t say this to brag or boast in advance in any way, I say it because I truly believe we are at the “beginning of the end” of the Keynesian economic experiment.

Less than two weeks ago, I wrote an article proclaiming that Russia would back the ruble with gold as a way to fight back against Western economic sanctions. I also made similar predictions about the new digital Chinese currency last summer when I first started Fringe Finance.

To me, since I began piecing together my understanding of macroeconomics and the global economy about a decade ago, it had become painfully obvious that the fiat system the U.S. plays by, which hinges on the dollar being the global reserve currency, had its days numbered.

The catalyst that is helping hurl us toward our monetary rude awakening faster than ever has been the war in Ukraine. Actually, it hasn’t been the war so much as it has been the West’s reaction to the war. As only blindly arrogant believers in the Keynesian dog-and-pony show could do, we rushed to cut Russia off the SWIFT system, limited investing in Russia companies and sanctioned the country’s oligarchs.

To which Russia basically replied, “OK. We still have the oil.”

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

What You Need To Know About Physical Gold Supply And Demand

March 29, 2022

What You Need To Know About Physical Gold Supply And Demand

Much of the confusion regarding the gold price has to do with gold’s dual nature, being both a currency and a commodity. This confusion is removed when you realize that in terms of supply and demand dynamics gold trades more like a currency than a commodity.

The major difference between gold and perishable commodities is their stock-to-flow ratios, measured by the above ground stock divided by annual production. Gold has a very high stock-to-flow ratio, while commodities like wheat have a low stock-to-flow ratio.

Thousands of years ago people started using gold as money, because gold is immutable, easily divisible, and scarce. Gold is the most marketable commodity. Its long tradition as store of value means extremely little gold has been wasted over history. The vast majority of all the gold ever mined is still with us. Consequently, annual mine production adds about 1.7% to the above ground stock of gold.

Most above ground gold is held for monetary purposes. Jewelry is a store of value combined with esthetics and status.

At the time of writing the total above ground stock of gold is 205,000 tonnes and global mine output in 2021 accounted for 3,560 tonnes. The stock-to-flow ratio (STFR) is currently 58 (205,000 / 3,560). Gold’s high STFR and the fact that most above ground gold is held for monetary purposes is what makes it trade like a currency.

For a thorough understanding of gold’s price formation, let’s first have a look at supply and demand dynamics of a perishable commodity. Then we will discuss how this differs from the gold market.

Soft Commodity Supply and Demand Basics

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

World War III Has Already Started, and It’s an Economic War

March 11, 2022

World War III Has Already Started, and It’s an Economic War

In an article I published in April of 2018, World War III Will Be An Economic War, I outlined a number of factors that portend a large scale conflict between East and West and why this war would be mainly economic in nature. I investigated how this conflict would actually benefit globalists and globalist institutions seeking to bring down multiple nations’ economies while hiding the engineered crisis behind a wall of geopolitical chaos and noise.

The goal? To convince the masses that national sovereignty was a plague that only leads to mass death, and that the “solution” is a one-world system – conveniently managed by the globalists, of course.

One issue which I used to get a lot of arguments over was the idea that countries like Russia and China would end up so closely aligned. People claimed there were too many disparities and that the countries would ultimately turn on each other in the middle of a financial crisis.

Well, it’s four years later and now we’re going to see if that is true or not. So far, it looks like I was correct.

My position has long been that certain nations have been preparing for a collapse of the U.S. dollar as the world reserve currency (the primary currency used in the majority of trade around the world). My belief is that America’s top economic position is actually an incredible weakness; the dollar’s hegemony is not a strength, but an Achilles heel. If the dollar was to lose reserve status, the whole of the U.S. economy and parts of the global economy would implode, leaving behind only those who prepared – those who saw the writing on the wall and planned ahead.

The dollar crash coalition

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

Russia, Ukraine Prove Gold Is Still the Best Safe Haven

March 7, 2022

Russia, Ukraine Prove Gold Is Still the Best Safe Haven

Image via Reuters/Ilya Naymushin

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Gold remains the best safe haven despite volatility, how geopolitical tensions are further compromising the bond market, and renowned money manager weighs in on new all-time highs for gold and silver.

Gold’s volatile week and why it matters little in the metal’s trajectory

Last week has been a volatility showcase that is rarely seen in the gold market. Russia’s invasion of Ukraine sent gold flying past its 2011 high and up to $1,976, the highest level in a year and a half. The very next day, gold posted considerable losses and ended Friday’s trading session around $1,890. This surge and immediate slump in prices frustrated and disappointed a lot of traders, but we should remember that, for most of us, buying gold is not a trade. It’s an investment.

Even so, there are many takeaways from these wild couple of days, and a few important reminders.

Until a few months ago, gold was rangebound between $1,750-$1,800. The difficulty of breaching the resistance was noted by many. Yet now, we are treating $1,890 as a kind of support. It reinforces the notion that gold is being pushed up by many factors, and that geopolitical tensions are just one of them (and a recent addition).

While gold can benefit from the kind of uncertainty we saw last week, it’s far from necessary. The so-called “geopolitical play” isn’t a necessary force for gold’s price to continue climbing. Wells Fargo highlighted that even central bank rate hikes probably won’t slow the metal’s move to $2,000 this year.

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

All Hell Breaks Loose On Russian Oil Embargo Fears: Futures, Stocks Plunge As Oil Soars To $139, Gold Hits $2,000

March 7, 2022

All Hell Breaks Loose On Russian Oil Embargo Fears: Futures, Stocks Plunge As Oil Soars To $139, Gold Hits $2,000

All hell is breaking loose in the Sunday evening session where S&P equity futures and Asian markets tumbled, while havens such as sovereign bonds and gold soared amid fears of an inflation shock in the world economy as oil soared on the prospect of a ban on Russian crude supplies.

Emini futures were down 1.6% as of 9:00pm ET, while Nasdaq 100 futures plunged 2% and European futures were down 3%.

Meanwhile, the stock MSCI Asia-Pac index was on course for a bear market — a drop of more than 20% from a February 2021 peak, while Hong Kong’s Hang Seng index plunged more than 5%, and below the March 2020 low…

… as Brent oil briefly hit $139 a barrel at the open when stops were hit, and West Texas Intermediate $130 a barrel, before trimming some of the rally…

… even as Jen Psaki earlier tweeted a humorous tweetstorm about how the US plans to achieve energy security in 9 “specific” steps:

The catalyst for the sharp move higher in oil was the earlier commentary from Secretary of State Antony Blinken who said the U.S. and its allies are looking at a coordinated embargo following Russia’s invasion of Ukraine, while ensuring appropriate global supply.

It is the latest spike in energy prices, which are now dangerously close to levels last seen in 2008 just before everything collapsed, that threaten to spark a global recession, something we have been warning about for months, and is a risk that is sending tremors across markets.

The risk carnage sent funds flowing into safe havens: in one of the clearest signs of risk-off markets, the swiss franc just broke below parity with the euro for the first time since the SNB depegged back in January 2015, even though a governing board member of the Swiss National Bank said it’s ready to intervene to tackle rapid strengthening.

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

Who’s Got the Gold?

March 3, 2022

Who’s Got the Gold?

In 1971, the US abruptly went off the gold standard, and in making the public announcement, US President Richard Nixon looked into the television camera and said, “We’re all Keynesians now.”

I was a young man at the time and had previously bought gold, albeit on a very small scale, but I recall looking into the face of this delusional man and thinking, “This is not good.”

However, the world at large apparently agreed with Mister Nixon, and within a few years, the other countries also went off the gold standard, which meant that, from that point on, no currency was backed by anything other than a promise.

Party Time

It didn’t take long before countries began playing with their currencies. At one time, the German mark, the French franc, the Italian lire, and the British shilling had all been roughly equivalent in value, and four or five of any one of them was worth about a dollar.

That had already begun to change prior to 1971, but following the decoupling from gold, the governments of the world really began to see the advantages of manipulating their own currencies against the currencies of other nations.

From that point on, a currency note from any country, which was already no more than an “I owe you,” was increasingly degraded to an “I owe you an undetermined and fluctuating amount.”

This fixation with monetary manipulation began much like the 1960s youths’ experimentation with drugs, and by the millennium, had morphed into something more akin to heroin addiction. Unfortunately, those who had become the addicts were the national leaders in finance and politics.

Well, here we are, in the second decade of the millennium. The party has deteriorated and is soon to come to a bad end.

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

Ending Fiat Money Won’t Destroy the State

January 13, 2022

Ending Fiat Money Won’t Destroy the State

A certain meme has become popular among advocates of both gold and cryptocurrencies. This is the “Fix the money, fix the world” meme. This slogan is based on the idea that by switching to some commodity money—be it crypto or metal—and abandoning fiat currency, the world will improve greatly.

Taken in its moderate form, of course, this slogan is indisputably correct. State-controlled money is immoral, dangerous, and impoverishing. It paves the way for government theft of private wealth through the inflation tax, and thus allows the state to do more of what it does best: wage wars, kill, imprison, steal, and enrich the friends of the regime at the expense of everyone else. Privatizing the monetary system and imposing a “separation of money and state” would help limit these activities.

But it’s also important to not overstate the benefits of taking money out of the hands of the state. The temptation to push the “fix the world” idea to utopian levels is often seen among cryptocurrency maximalists, and among some gold promoters as well.

For example, at least one bitcoin enthusiast thinks bitcoin will bring “the end of the nation states.” And in one particularly over-the-top paragraph from another bitcoin promoter, we’re told that cryptocurrency will essentially cure every ill from poverty to corruption to environmental destruction.

The idea that changing to different money will somehow end theft, poverty, or even war is the sort of messianic thinking that would have given old-school Marxists a run for their money.

Yes, we can all agree that if we “improve the money” we also “improve the world.” But removing the state’s money monopoly won’t make states fold up their tents and slink away in the night. (And, needless to say, simply changing the money won’t make bad food or poverty disappear either.)

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

2021 Year in Review: Crisis of Authority and the Age of Narratives

January 9, 2022

2021 Year in Review: Crisis of Authority and the Age of Narratives

Every year, friend-of-the-site David Collum writes a detailed “Year in Review” synopsis full of keen perspective and plenty of wit. This year is no exception. Poignant and delightfully acerbic when necessary, considering the troubling times. As with past years, he selected Peak Prosperity as the site where it is published in full. It is longer than our usual posts, but worth the time to read in full. This is Part 1.

Introduction

Dave: You do lack self control, but I learned and laughed making my way thru this.

~ Larry Summers (@LHSummers), former Secretary of the Treasury

I’ve been trying to reach you about your car’s extended warranty. What began more than a dozen years ago as a synopsis of the year’s events in markets and finance for a few friends morphed beyond my control into a Year in Review (YIR)—an attempt to chronicle human folly and world events for the entire year. It captures key moments before they slip into the brain fog. The process of trying to write a coherent narrative helps me better understand WTF just happened and seminal moments that catch my eye.

By far my favorite end-of-year recap for the last ten years. Finished it yesterday. Once again David hasn’t disappointed. He’s on my I want to go to dinner with list.

~ Jim Pallotta (@jimpallotta13), money manager and former owner of Boston Celtics

I’m game, Jim, even if it’s just a pretzel, nachos, and a brewski. The title, “Crisis of Authority,” is a double entendre. On the one hand, previously trusted authorities that we relied on to better understand the world are long gone. Edward R. Murrow, Walter Cronkite, and Tim Russert have been replaced with Chris Cuomo, Don Lemon, and Brian Stelter. Oops. Scratch Chris Cuomo..

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

The Zombie Ship of Theseus

January 7, 2022

The Zombie Ship of Theseus

The Ship of Theseus is an old philosophical thought experiment. It asks a question about identity. Suppose you replace all of the boards of a ship with new ones—is it still the same ship?

We are not going to try to resolve this millennia-old paradox. Instead, we are going to add one more element, and then tie it to the monetary system. The additional element is what if the replacement boards are adulterated in some way. That is, each new board is warped, or weakened, or otherwise not fit for purpose.

It should be clear that replacing boards with unsound wood does not alter reality, only the ship. It does not remove any constraints such as the need to be watertight. It does not make anything better, only adds new flaws.

Let’s call this new ship, with each original board replaced with these adulterated boards, the Zombie Ship of Theseus. It looks like the Ship of Theseus. However, it does not work like it. It has been corrupted to work in a different way, i.e. to lull sailors into going out to sea, where a storm will drown them.

The History of our Warped Monetary System and Currency

So how does this relate to the monetary system and the currency? There has been a centuries-long process of replacing important boards. Let’s highlight the key changes.

The Original System

At the Founding of America, there was the original Ship of Theseus. One had the right to deposit one’s gold (we will leave out silver, as this complicates the story somewhat) and get a paper bank note in exchange. Or one could keep one’s gold, if one did not like the terms. One had the right to redeem the note, and get one’s gold back…

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

Peak Gold

January 4, 2022

Peak Gold

Preface. Both articles below offer the usual techno-optimism of more gold supplies from Man’s Cleverness: robots, AI, and Big and Smart Data Mining.

But both are energy blind. Ores are decreasing in gold concentrations, and found in deeper and more remote places, requiring more energy to process. Where will this energy come from?

Conventional crude oil production leveled off in 2005, and it appears to have peaked in 2008 at 69.5 million barrels per day (mb/d) according to Europe’s International Energy Agency (IEA 2018 p45). The U.S. Energy Information Agency shows global peak crude oil production at a later date in 2018 at 82.9 mb/d (EIA 2020) because they included tight oil, oil sands, and deep-sea oil. World coal may have peaked in 2013.

So where’s the energy to mine, transport ore, smelt it, and distribute the gold?

***

Harper J (2020) How much gold is there left to mine in the world? BBC.

Discoveries of large deposits are becoming increasingly rare, experts say. As a result, most gold production currently comes from older mines that have been in use for decades. There are relatively few unexplored regions left for gold-mining, although possibly the most promising are in some of the more unstable parts of the world, such as in West Africa.

Gold is a finite resource, and there will eventually come a stage when there is none left to be mined. Some believe we may have already reached that point. Gold mine production totaled 3,531 tonnes in 2019, 1% lower than in 2018, according to the World Gold Council. This is the first annual decline in production since 2008.

The below-ground stock of gold reserves is currently estimated to be around 50,000 tonnes, according to the US Geological Survey. To put that in perspective, around 190,000 tonnes of gold has been mined in total.

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

How to Survive the Mega Collapse of 2022

January 1, 2022

How to Survive the Mega Collapse of 2022

Welcome to 2022!

The New Year’s edition of the Economic Prism is a place of wild guesses and rough suppositions. Today we focus our eyes through our proprietary prism. We set our sights over a 12 month viewshed. What do we see?

First off, 2022 will be a year where everything under the sun happens precisely as it should. Some good. Some bad. Each day shall unfold before you with symbiotic disharmony. You can bet your bottom bitcoins on it.

But what else?

Will gold top $3,000 per ounce? Will Beeple sell another digital art medley NFT for $69 million? Will a paper cup full of Starbucks coffee mixed with syrup and milk froth hit $10 before the year’s over?

What about the S&P 500, the yield on the 10-Year Treasury note, and the price of oil?

Will Fed tapering cause a simultaneous tantrum in both the stock and bond markets? Will Fauci finally be run out of Washington on a rail like a 19th century con man? Will China invade Taiwan? Did WWIII just commence in the Ukraine? Are we fated for complete social distortion?

You likely have opinions on these matters. Many people do. The answers to these questions, no doubt, will be revealed in due course. In the meantime, our advice is to trust your gut. Your guesses are better than most.

After a deranged 2021, and with Jen Psaki as White House Press Secretary, anything and everything can happen in 2022 – including a mega collapse!

Thus we’re eschewing a broad range of predictions for the 12 months before us. But not to worry, we won’t leave you empty handed…

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

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