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Historical lessons in prosperity vs. poverty

Historical lessons in prosperity vs. poverty

As the grandson of Genghis Khan, Kublai Khan had a lot to prove.

So he set his eyes on the biggest prize in the known world at the time: southern China.

Kublai Khan completed his conquest of China in 1279, forging a new empire and creating the Yuan dynasty.

The Mongols were known for their expensive habits— they liked war and women especially. So when the money started to run out, administrators in the Yuan dynasty started printing paper money.

Yuan officials weren’t the first to come up with this idea; the government from the prior Song dynasty had also printed paper money. But there was a huge difference—

Paper currency from the Song dynasty, known as guanzi, was backed by copper, silver, and gold coins.

The Yuan currency, however, was backed by nothing. So whenever the government started to run out of money, they simply printed more.

By 1350, Kublai Khan had been dead for decades. But the Yuan dynasty’s economic overseers were still printing paper money like crazy. And it was causing severe hyperinflation across China.

People’s lives were turned upside down by the government’s fiscal irresponsibility, and rebellions broke out across the country.

By 1368, the Yuan dynasty had completely collapsed, and a destitute peasant farmer-turned-monk named Zhu Yuanzhang rose up to become Emperor and found the new Ming Dynasty.

To stimulate the economy ravaged by inflation, the Ming dynasty created an unprecedented level of economic freedom.

Markets and industries were deregulated; the government abandoned its monopoly on salt production, for example, and merchants were encouraged to allow market competition to set prices.

In time, the government stabilized the currency and reintroduced metallic coins. And by the 1500s Ming officials even allowed foreign currencies like the Spanish Silver Dollar to circulate in China.

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

This is a Financial Revolution

This is a Financial Revolution

At precisely 2:32pm Eastern time on May 6, 2010, the US stock market started to drop.

The decline was sudden, and vicious. Within minutes, more than $1 trillion of market capitalization had vanished, with the Dow Jones Industrial Average losing nearly 10% of its value.

This event became known as the ‘Flash Crash’. And early explanations pointed to the big investment banks and their high-tech trading algorithms, i.e. software that could buy and sell stocks without human involvement.

When the market started its decline that day, banks’ trading algorithms went haywire and started selling everything. This caused the market to decline even further, which triggered the algorithms to sell even more.

The humans were powerless to stop it. There were stories of panicked tech teams at investment banks frantically ripping cables out of the floor trying to shut down the machines.

But the selling went on for 36 minutes… during which time the banks and big funds racked up enormous losses.

For me, however, the Flash Crash was great. I was ‘short’ the stock market at the time, meaning I had bet that the market would decline.

And when the market dropped by more than 1,000 points, I happily cashed in.

But two days later I received an email from my broker explaining that they were CANCELING my trade.

The poor little investment banks had lost money because their fancy algorithms didn’t work. So the exchange was giving them a ‘do over’ at my expense.

Incredible. It hadn’t even been two years at that point since the banks had to be bailed out at taxpayer expense during the Global Financial Crisis of 2008.

Then, 20 months later, the Flash Crash happened. And the banks were simply able to wipe all their losses away.

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

Five ways to loosen Big Tech’s grip on your life

I imagine there are countless people right now who feel a wide range of emotions when it comes to Big Tech companies. Anger. Disgust. Confusion. Fear.

We’ve watched with exasperation as Google, Facebook, Twitter, YouTube, etc. have systematically squashed intellectual dissent; their actions have been so commonplace that there’s even a name for it: “De-platforming”.

We all know there’s a ton of garbage on the Internet, including from mainstream sources.

But de-platforming has proven to be wholeheartedly biased, totally arbitrary, and often comically ridiculous.

This isn’t just about the election or the Capitol. For example, if you dare utter a word on social media that goes against the infinite and infallible wisdom of the Chinese-controlled World Health Organization, then you might find yourself banned.

YouTube even suspended a renowned epidemiologist– a bona fide pandemic expert– because he opposed lockdowns and was hence ‘dangerous’.

Facebook censored more than 22 million posts in Q2 of 2020 for ‘hate speech’. Naturally, its entirely up to Facebook to define hate speech and judge whether or not you’re using it.

#killallmen, for example, is NOT considered hate speech. And even by the company’s own admission, hate speech against men, or white people, is a low priority.

It’s clear these companies have an enormous amount of unchecked power. They have the ability to erase you from the Internet, destroy your reputation, and, if you’re someone who makes money online, terminate your livelihood.

But the only reason they have this power is because we’ve given it to them. Hundreds of millions of people have intertwined their entire lives into the Big Tech ecosystem, to the point that they know absolutely everything about us.

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

FDIC asks Americans to keep their money in the banks

FDIC asks Americans to keep their money in the banks

Yesterday the Chair of the FDIC released an astonishing video asking Americans to keep their money in the bank.

Accompanied by soft piano music playing in the background, the official said:

“Your money is safe at the banks. The last thing you should be doing is pulling your money out of the banks thinking it’s going to be safer somewhere else.”

Amazing. I was half expecting her to waive her hand and say, “These aren’t the droids you’re looking for…”

As I’ve written before, there’s $250 TRILLION worth of debt in the world right now: student debt, housing debt, credit card debt, government debt, corporate debt, etc.

And let’s be honest, some of that debt is simply not going to be paid.

Millions of people have already lost their jobs. Millions more (like the 10 million waiters and bartenders across America) are barely earning anything right now because their businesses are closed.

A lot of those folks have no emergency savings to fall back on during times of crisis, so they’re going to be forced to choose: pay the rent, or buy food.

The government has already suspended evictions and foreclosures, which is a green light for people to stop paying the rent or mortgage.

And that means banks will take it in the teeth.

This is what happened back in 2008– millions of people across the country stopped paying their mortgages, and the banking system nearly collapsed as a result.

Today it’s a similar situation; a lot of people are going to stop paying their mortgages, credit cards, auto loans, etc. And that directly impacts the banks.

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

Banks are going to drown in an ocean of defaults

Banks are going to drown in an ocean of defaults

On November 6, 2000, then US presidential candidate George W. Bush told a crowd of cheering supporters, “they misunderestimated me.”

Now, if English is not your native language, allow me to clear the air: ‘misunderestimate’ is not a word. But then again, George W. Bush was legendary for hilarious slip-ups like this.

There are entire books dedicated to his ‘Bushisms,’ the ridiculous made-up words and incomprehensible sayings that became routine for the 43rd US President.

‘Misunderestimate’ seems to be a conflation of the words ‘misunderstand’ and ‘underestimate’. And while that was utterly hysterical 20 years ago when Bush first said it, ‘misunderestimate’ may be the most appropriate word of today.

The entire world has completely ‘misunderestimated’ the Corona Virus.

In terms of misunderstand– that’s obvious. There’s so much that we don’t know about the virus (officially known as SARS-CoV-2) and the disease that it causes (COVID-19).

For example, a group of researchers published a “peer-reviewed” research paper earlier this month stating that the virus had split into multiple strains.

(Peer-reviewed is a type of self-regulation among academics; it means the paper had been evaluated by other experts before it was published.)

But other specialists in the field strongly disagreed with the paper’s conclusions.

Swiss biologist Richard Neher described the research as, “wrong, misleading. . . downright dangerous inferences,” while Australian virologist Ian Mackay called it a “weak paper and poor science.”

Another peer-reviewed study released in the Journal of Medical Virology concluded that the virus originated from snakes. But plenty of experts disagreed with that assertion too.

The scientific community has learned so much about SARS-CoV-2 since it first surfaced a few months ago.

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

Negative interest rates in the US are virtually guaranteed now

Negative interest rates in the US are virtually guaranteed now

On October 19, 1987, the US stock market suffered the worst crash in its more than 200 year history, dropping more than 23% in a matter of hours.

It wasn’t just in the United States, either. More than 20 major stock markets around the world, from London to Hong Kong to Australia, fell by similar amounts.

And economists estimate that stocks worldwide lost roughly $1.7 trillion of value (approximately 10% of global GDP at the time) during the October 1987 crash.

The next morning on October 20th, the Federal Reserve announced that they would do whatever it takes to support the economy.

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And ten days later they cut interest rates by 0.5%.

Yesterday the Federal Reserve did the same thing. Stock markets worldwide have been jittery lately due to Corona Virus fears, so the Federal Reserve stepped in and cut interest rates by 0.5%.

Honestly there are so many things that are remarkable about this—

First, the Fed already has a regularly scheduled meeting coming up in two weeks on March 17th. But apparently they thought the situation was so severe that they held an emergency meeting yesterday and hastily voted to cut interest rates by 0.5%.

Just think about what that means: 30+ years ago, the Fed cut rates by half a percent after, literally, the worst day in the history of the stock market.

Today’s stock market turmoil is nowhere near as bad as it was in 1987. Sure, the market is down around 10% over the past two weeks.  But where is the law that says the stock market isn’t allowed to fall? Capitalism is all about risk and reward. There are supposed to be periods of decline.

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

Gold’s long-term gains have even outperformed Warren Buffett…

Gold’s long-term gains have even outperformed Warren Buffett…

Warren Buffett, despite his extraordinary investment success, has a rather famous and long-standing love/hate relationship with precious metals.

Maybe it started with his dad– Congressman Howard Buffett of Nebraska– who, as a staunch advocate for the gold standard, argued to his colleagues on Capitol Hill that “paper money systems have always wound up with collapse and economic chaos.”

Warren himself acquired a record-setting 128 million ounces of silver back in the late 1990s… which he later sold at a profit in the early 2000s.

But to listen to him talk about precious metals these days, he’s always negative.

Buffett often quips that if you took the world’s entire supply of gold and melted it together, it would form a cube of about 68 feet (~21 meters) per side and be worth around $9 trillion.

With that same $9 trillion, you could buy every share of Apple, Disney, Google, Microsoft, JP Morgan, Exxon Mobil, all the farmland in the United States, all the developable land in Manhattan, and still have more than a trillion dollars left over.

This is Buffett’s central argument: gold doesn’t produce anything. So it’s much better to invest in a productive asset like a business, farmland, etc.

Sure, I’d rather own a profitable, productive asset than a pile of metal.

But Buffett is completely wrong to compare gold to productive assets… they’re apples and oranges.

Gold isn’t an ‘investment’. It’s an insurance policy against paper currencies will lose value over time. So a MUCH better comparison for gold is CASH.

Using Buffett’s same thought experiment, would an investor with $9 trillion rather have all that money sitting in a bank earning 0%? Or buy all the productive assets I mentioned above?

Clearly it’s more attractive to own productive assets than cash sitting in a bank.

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

How Anti-Fragile are you?

How Anti-Fragile are you?

I arrived back home to Puerto Rico late last night after traveling back from our Total Access event in Las Vegas.

It was probably around 11:15 pm when I climbed into bed. And, within minutes, just as the sound of the waves outside was carrying me off to sleep, the whole house started violently shaking.

It turned out to be a magnitude 6.0 earthquake, about 20 miles off the west coast of the island.

I lived in Chile for seven years before this– one of the world’s earthquake capitals– so I’m no stranger to seismic activity.

But earthquakes are EXTREMELY rare in Puerto Rico… as in, they almost NEVER happen. People simply do not expect them.

Hurricanes, tropical storms, etc., sure, those are common occurrences here.

And you might remember that Puerto Rico was almost wiped out from 2017’s Hurricane Maria. It devastated the island and much of the Eastern Caribbean, and two years later they still haven’t recovered.

Today there’s supposed to be some Tropical Storm coming through, which, by comparison to Hurricane Maria, is barely a bit of drizzle.

But the government here is on pins and needles, and so anxious to show that they’re ready for anything that they closed schools, many government offices, and even called up the National Guard…

I can’t help but feel bad for them. They’re so scarred from Hurricane Maria two years ago that they overreact in desperation at the first warning sign of a storm.

And then, in an instant, something completely unexpected happened: Puerto Rico was hit with a 6.0 earthquake, and the government has no idea how to react.

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

Here’s a dirty secret few people know about gold

Here’s a dirty secret few people know about gold

In 1962 in a picturesque setting in Santa Barbara, California, two local entrepreneurs opened a low-cost, roadside inn where the nightly room rate was just $6.

They called it Motel 6.

And today the chain has grown to over 1,400 locations.

If you want the most straightforward explanation for why you should own gold, consider your local Motel 6.

It’s noteworthy that, today, the very same Santa Barbara location now rents its rooms for nearly $90 per night.

That’s a 15x increase in 57 years, an average increase of roughly 5% per year.

Are the rooms 15x bigger, or 15x nicer? Not really.

The reason the price has increased so much is because of inflation– the gradual erosion of the US dollar’s purchasing power over the past several decades.

This is why it’s important to have a conversation about gold.

Unlike paper currencies, gold has a 5,000 year track record of keeping up with inflation.

In fact, when priced in gold, a room at the Motel 6 has actually gotten cheaper.

Back in 1962, an ounce of gold would buy you about 6 nights at the motel. Now, despite the 12-fold increase in the price of a room, one ounce of gold will buy you 21 nights there.

That’s because the price of gold has largely outpaced the rate of inflation and the decline in the purchasing power of the US dollar.

Gold is a fantastic long-term store of value. It’s also an insurance policy– a hedge against paper currency, systemic risk, and uncertainty.

And there’s plenty of those in the world.

But there’s also a number of catalysts emerging right now that could send gold prices substantially higher in the near future, so it may be worth considering gold right now as a speculation.

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

Central banks are buying gold at the fastest pace in six years

Central banks are buying gold at the fastest pace in six years

Earlier this month the World Gold Council published its quarterly report– and it shows that central banks and foreign governments from around the world are buying up gold at their fastest pace in six years.

This is pretty big news, and it says a LOT about the future of the dollar.

Remember, central banks and foreign governments hold literally TRILLIONS of dollars of reserves… and traditionally they do this by buying US government debt.

It sounds strange, but to big institutions, banks, etc., US government debt is equivalent to cash. They use it as a form of money.

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More importantly, they hold US dollars because that’s the global standard: the US dollar has been the world’s primary international reserve currency for seventy five years.

So US debt is extremely liquid. In fact, the $22 trillion US debt market is the biggest and most liquid market in the world.

But foreign governments have started breaking with the tradition of buying treasuries.

As the World Gold Council’s report showed us, foreign governments and central banks have been buying a LOT more gold than in previous years.

Net gold purchases in Q1/2019 among foreign governments and central banks was nearly 70% greater than Q1/2018… and the highest rate of first quarter purchases in six years.

The Chinese in particular, have been stockpiling gold faster than ever, while at the same time, Chinese ownership of US treasuries as a percentage of total holdings has been gradually declining over the past years.

And it’s not just China.

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

If Donald Trump is the King of Debt, these guys were the Kings of Inflation

If Donald Trump is the King of Debt, these guys were the Kings of Inflation

Maximilian Bern had saved up 100,000 German marks for what should have been a modest, but comfortable retirement.

But in 1923, he withdrew every last cent, and spent it all on one purchase: a subway ticket.

He rode around his city one last time before returning home, and locking himself in his home, where he died.

He didn’t kill himself. He starved to death… simply because he could no longer afford food. A single egg at the market would cost millions of marks, more than Maximilian Bern had saved over his entire life.

This was one of the most famous episodes of hyperinflation, certainly in modern history.

In the wake of World War One, Germany (known as the Weimar Republic) was completely broke.

The War to end all Wars had bankrupted them; and on top of losing the war, Germany was forced to make ‘reparation payments’ to the victors, including France, the UK, etc.

That took Germany’s overall war debt to impossible levels. So in a feeble attempt to keep the economy afloat and meet its war debt obligations, the German government printed massive amounts of paper money.

Prior to World War I, one US dollar was worth 4.2 German marks.

By 1923, a single US dollar was worth 4.2 TRILLION marks.

We’ve seen this in our own lifetime in places like Zimbabwe, and now Venezuela.

I remember the first time I went to Venezuela the official exchange rate was four bolivars to the US dollar—and the black market rate was eight to one.

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

How 1984 turned into an instruction manual

How 1984 turned into an instruction manual

“Sometimes [two and two are four], Winston. Sometimes they are five. Sometimes they are three. Sometimes they are all of them at once. You must try harder. It is not easy to become sane.”

One of the key themes from George Orwell’s dystopic novel 1984 is that the Party can do and say whatever it wants.

And more importantly, you must believe it, with all your heart. No matter how absurd.

That’s doublethink. It is impossible for two plus two to equal three, four, and five simultaneously. But if the Party says it is so, it is so.

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If you can’t make yourself believe two contradictory facts simultaneously, that makes you a thought criminal — an enemy of the Party.

Thoughtcrime is thinking any thought that contradicts the Party.

Facecrime is when you have the wrong expression on your face. For instance, if captured enemy soldiers are being paraded through the streets, looking sympathetic is a facecrime.

Newspeak is the language of the Party–one that has painstakingly been removed of unnecessary words, or words that might contradict the Party’s ideals.

“Don’t you see that the whole aim of Newspeak is to narrow the range of thought? In the end we shall make thoughtcrime literally impossible, because there will be no words in which to express it.”

During daily two minutes hatecitizens shout and curse whatever enemies the Party shows them.

And the face of the Party, Big Brother, is watching you. He helps you be a better citizen.

This isn’t just some random literature lesson. Understanding Orwell’s 1984will help you understand 2019 America.

For instance, one California state senator is working on her own version of Newspeak.

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

Get Ready– they’re coming for your money

Get Ready– they’re coming for your money

Every so often throughout history, the peasants grab their pitchforks and come for the elite. It happens when the wealth gap grows too extreme… when people feel like they are getting left behind, with no opportunity to advance.

Central banks around the world have printed trillions of dollars over last decade, and pushed interest rates to zero, and sometimes below. And all of that stimulus went directly into the pockets of the wealthy.

Since 2009, the world’s billionaires more than DOUBLED their combined wealth. All the billionaires in the world had $3.4 trillion in 2009. By 2017, they amassed $8.9 trillion.

Mark Zuckerberg multiplied his wealth almost 20 times over, from $3 billion in 2009, to over $58 billion in 2019.

$8.9 trillion is a massive, almost incomprehensible amount of wealth.

But it really shouldn’t be that surprising if you think about it… these people are wealthy for a reason. Typically, they are pretty good at making money. And with the snowball effect, if you give them more time, they will probably make even more.

For the last ten years, we’ve seen a huge asset price inflation in everything from the stock market, to bonds and real estate, and even fine art and wine.

But if you’re a wage earner without assets, you’ve been left out. Wages andmedian household wealth have stagnated.

And this is a global issue…

The combined wealth of the poorest half of the world–3.8 billion people–fell by 11% just last year, according to Oxfam, a group working to alleviate poverty.

The New York Times claims the richest 8 people on the planet have more wealth than the poorest 3.8 billion.

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

Yet another MAJOR reason to buy gold

Yet another MAJOR reason to buy gold

For almost a year now, I’ve been advising you that gold production is plunging…

By itself, declining gold production isn’t a huge deal.

It takes hundreds of millions of years for minerals to form deep in the earth’s crust… but humans only need a few decades to extract it.

That’s why mining companies need to constantly explore for new deposits.

And that’s where the problem comes in… mining companies haven’t been exploring.

Large mining companies have been cutting their exploration budgets for years. By the end of 2016, exploration budgets hit an 11-year low.

Part of the reason for the decline in exploration has been the stagnant gold price and general, investor disinterest toward the gold mining sector.

If you look at a chart of the Gold Miners ETF (GDX), the price hasn’t gone anywhere for five years.

And gold prices have likewise languished; today’s price of $1,290 per ounce is down 30% from the 2011.

To fight the tough times, miners slashed their exploration budgets.

That means, when the demand for gold picks up again (which I think we’re starting to see now), there won’t be enough gold supply.

You don’t have to just take my word for it…

Pierre Lassonde, the billionaire founder of gold royalty giant Franco-Nevada and former head of Newmont Mining –

If you look back to the 70s, 80s and 90s, in every one of those decades, the industry found at least one 50+ million-ounce gold deposit, at least ten 30+ million ounce deposits, and countless 5 to 10 million ounce deposits.

But if you look at the last 15 years, we found no 50-million-ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits.

So where are those great big deposits we found in the past? How are they going to be replaced? We don’t know.

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

It’s official: the Federal Reserve is insolvent

It’s official: the Federal Reserve is insolvent

In the year 1157, the Republic of Venice was in the midst of war and in desperate need of funds.

It wasn’t the first time in history that a government needed to borrow money to fight a war. But the Venetians came up with an innovative idea:

Every citizen who loaned money to the government was to receive an official paper certificate guaranteeing that the state would make interest payments.

Those certificates could then be transferred to other people… and the government would make payments to whoever held the certificate at the time.

In this way, the loan that an investor made to the government essentially became an asset– one that he could sell to another investor in the future.

This was the first real government bond. And the idea ultimately created a robust market of investors who would buy and sell these securities.

When a government’s fortunes changed and its ability to make interest payments was in doubt, the price of the bond fell. When confidence was high, bond prices rose.

It’s not much different today. Governments still borrow money by issuing bonds, and those bonds trade in a robust marketplace where countless investors buy and sell on a daily basis.

Just like the price of Apple shares, the prices of government bonds rise and fall all the time.

One of the most important factors affecting bond prices is interest rates: when interest rates rise, bond prices fall. And when rates fall, bond prices rise.

And this law of bond prices and interest rates moving opposite to one another is as inviolable as the Laws of Gravity.

Back in the 12th century when Venice started issuing the first government bonds, interest rates were shockingly high by modern standards, fluctuating between 12% and 20%. In France and England rates would sometimes rise beyond even 80% during the Middle Ages.

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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