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Here Is What Will Happen When Real Panic Begins To Unfold In The Financial Markets

Greyerz – Here Is What Will Happen When Real Panic Begins To Unfold

As the world edges closer to the next crisis, today the man who has become legendary for his predictions on QE and historic moves in currencies spoke with King World News about what will happen when the real panic begins to unfold.

Unlimited Credit Creation At Work
July 14 (King World News) – 
Egon von Greyerz:  “Investors today have Hobson’s Choice. But they don’t understand the options open to them. Thomas Hobson had a livery stable of 40 horses in Cambridge in the 16th-17th centuries. But customers only had a choice of one horse. They could either take the one nearest the door or none at all.

Below is the choice of asset classes investors have today and where 99% or more of global liquidity is invested. The problem is that these assets are massive bubbles as a result of unlimited credit creation and money printing in the last few decades.  

So if we assume that the horses in the stable represent the asset classes below, they will all be a very poor choice: 

  • Stocks will decline by 75-95% in real terms as the stock market bubble implodes
  • Bonds will lose 90-100% of their value as sovereign and private borrowers default 
  • Property values will implode by 75-95% with rates at 15%+ and no credit available 
  • Private Equity investments will lose 70-100% slaughtered by high leverage and rates
  • Cash will either be bailed in or lost in bankruptcy of banks or totally debased by governments 

Listen to the greatest Egon von Greyerz audio interview ever


The problem is that investors have been conditioned to put all their funds into one or several of the asset classes above and that is their Hobson’s choice. Very few will be overly concerned about the risks before them today and nobody can believe that all the horses can be lame or unfit.

Some investors might reallocate part of their assets to cash as market volatility increases. But they can’t earn any return on their cash with rates anywhere from negative to just positive. And then they have the bail-in risk as banks have major losses. Then, as all currencies finish their run to ZERO, the complete debasement of money will have completed its course. Remember that they all have already lost 97-99% since the Fed was founded in 1913. 

Decades of investment gains which are virtually all due to credit expansion have led investors to believe that markets always go up in the long run and also that they have magical money making skills. Little do they understand that virtually no skills have been required to make money in markets in the last 70 odd years. See my article about Alfred, a stock market winner with zero talent.

A Devastating Event For The World
What few realize is that we are now in the final innings of an investment game that will end badly. Major stock markets in many countries, including the Dow and S&P, are now finishing their bull market moves, both short term and long term. The fundamental position has been indicating high risk for a while and the technical picture is now confirming that we are ending a major secular bull market that will turn into a catastrophic secular bear market which will be devastating for the world. 

Markets are likely to top very soon. Whether the bear market will start with a crash or just an initial slow move down, we will soon see. In either case, the autumn of 2019 will be one that investors will not forget.That will be the time when sentiment will change course dramatically. Confidence and euphoria will turn to fear and despair. Once the market realizes that this time central banks have no weapons left in their armory and that money printing or lower rates have no effect, there will be real panic. When the last crisis started in 2006, US rates were above 5% and German rates over 3%. Today US rates are around 2% and German rates negative. In addition, 23% or $13 trillion of Sovereign debt now have negative rates. So there is virtually no margin to make meaningful interest rate cuts.

Yes, there will be massive money printing because that is the only thing central banks know. But we must remember that global debt has doubled since the last crisis. In 2006, global debt was $125 trillion and today it is $250 trillion. None of that money has benefitted the general economy. Instead, it has only inflated asset markets. When the next money printing round starts, no one will benefit. The world will realize that you cannot create wealth by printing worthless pieces of paper or adding zeros on a computer. And finally, this time central bankers will learn that they won’t be able to solve a debt problem by adding more debt. 

Here Is What Will Happen When Real Panic Begins To Unfold
We will most likely see central banks lowering short term rates as they do every time they panic. But the long end of the market will most probably go the other way and long term rates will go higher. As the panic in the bond markets, both sovereign and corporate, leads to major liquidations of bonds, long term rates will rise. The 10 Year US Treasury, which has gone from 3.25% to under 2% in the last 8 months, has most likely bottomed and will in the next 2-4 years be back in the teens where it was in the early 1980s.

So let’s go back to Hobson. Investors will go for Hobson’s lame horses, which in their case will be  bubble assets like stocks or bonds and maybe some increase in liquidity. Virtually nobody will think of alternatives. Very few are aware that there is an asset class that has outperformed stock markets since the beginning of this century. As the chart below shows, global equities have lost 70% vs gold since 2000 and are likely to lose another 95% in the next 3-6 years.

So instead of protecting against the total wealth destruction that the world will experience in the next few years as all the bubble assets implode, investors will take Hobson’s choice of lame assets that will be virtually worthless by 2025.  

Why not follow the Silk Road countries that continue to buy the annual mine production of gold. As the chart below shows, since the finical crisis started in 2006, these countries have bought almost 30,000 tonnes of gold.

Since gold broke the Maginot Line at $1,350 just under a month ago, it has consolidated around the $1,400 level. The next target is $1,600 to $1,750. Once gold breaks out of the current trading range, we will see a fast move up to that level. 

The Biggest Gold Bull Market In History
The $1,350 level is now extremely strong support, and as I have already stated, the price is unlikely to go below that level more than momentarily. The risk is now to be left behind in the coming biggest gold bull market in history. All the surprises will be on the upside. 

Gold will reach multiples of the current price, but we are not invested in gold for the coming major price move. Instead, gold is for protection against the massive risks in all financial markets and in the financial system. Gold is insurance and gold is wealth preservation. 

Finally, a word about silver. Silver is much more volatile than gold and therefore not the same degree of wealth preservation. Still, we are likely to see a most spectacular move in silver starting shortly. 
Silver is incredibly undervalued and depressed and once it breaks out, is likely to explode. Below is a chart of silver adjusted for real inflation.

Holders of physical gold and some silver will not only protect their assets but are also likely to see the price of both metals reach levels that are difficult to fathom today…For those who would like to read more of Egon von Greyerz’s fantastic articles CLICK HERE.

Video: First Reset Has Begun, USD To Lose 50%: Bill Holter & Jim Sinclair – Gold To $87,000 per ounce

Legendary investor Jim Sinclair and his business partner Bill Holter say Gold is going much higher. It’s a mathematical certainty. Sinclair says, “You need to look at gold, not a speculation, but as a savings account. If the dollar gets sliced in half, you basically double the value (of your gold) if not more. I think much more. . . .

In the second reset, that will take gold to a price where it will balance the ability to pay global debt. That’s the major move coming forward. Right now, we are definitely going back to the $1,850 and $1,925 area per ounce for gold. The second reset, you can pick any price you want for gold. Pick a high price.”

With the national debt officially at $22 trillion, and the additional “missing” $21 trillion discovered by Economics Professor Mark Skidmore at Michigan State University in 2017, you have a huge amount of debt and dollars floating around. This fact makes Sinclair’s prediction of $50,000 per ounce gold a few years ago look conservative.

Bill Holter has done the math and says it simply must go much higher. Holter explains, “If you take the 8,300 tons the U.S. supposedly has, and I did this math last year when the official national debt was approaching $21 trillion, gold would need to be $87,000 per ounce to cover just the on books debt. I am not talking about the “missing” money, not future guarantees, pensions, Social Security and things like that. . . . So, the number is $87,000 per ounce for gold or multiples of that. Open the Video

The Real Reason Why The Fed Isn’t Cutting Interest Rates

In an article published in September 2015 titled ‘The Real Reason Why The Fed Will Raise Interest Rates’ I outlined a kind of economic war game, a predictive theory in which the Federal Reserve would hike rates into clear economic weakness in order to deliberately cause the implosion of the vast financial bubble they had created through several years of quantitative easing. At that time this theory received a lot of opposition. Nearly everyone in the mainstream and in the alternative media argued that the Fed was going to shift to NIRP (negative interest rates), in order to continue propping up the system. The idea that the Fed would actually raise rates and cause an engineered crash after propping up the system for so long was treated as outlandish.

Of course, this is exactly what happened. Within a year the Fed had started to tighten policy instead of extending stimulus measures. The denial that this was happening was so strong that many analysts claimed the Fed was simply “pretending” to tighten when they were actually still stimulating. Yet, this claim turned out to be incorrect; nearly every sector of the economy began an immediate and steep decline the moment the Fed launched interest rate hikes and cut its balance sheet. The evidence was mounting that yes, the central bank was not just pretending to tighten – it was actually strangling liquidity and the mirage of economic recovery was quickly fading.

To this day and despite all the evidence to the contrary some people still argue that the fed is either not tightening, or will reverse on tightening measures very soon. In fact, every month since last November there has been a chorus of voices saying that “this is the month” that the Fed will return to easing and possibly QE4. And, every month they have been wrong. This includes this past month of June, when so many people were so certain that a Fed interest rate cut was baked into the cake.

In my article ‘The Federal Reserve’s Controlled Demolition Of The Economy Is Almost Complete’, published in March, I predicted that the Fed would continue to hold interest rates steady for many months to come and that Fed language of “accommodation” and “patience” was a head-fake to keep the investment world tied up in stock markets as every other major indicator showed a recession was upon us. Again, this is exactly what has happened.

Once the Fed raised rates to their neutral rate of inflation (something they had not done for decades) the fate of the US economy was sealed. To be fair, the real rate of inflation is much higher than the Fed admits, but the point remains that the US economy as it stands today cannot handle even moderately higher rates. With corporate and consumer debt at historic highs not seen since 2007 just before the credit crash, any interest pressure above zero is going to destroy the fragile economic bubble.

Some people claim that the Fed is completely unaware of this situation and is fumbling in the dark. But this is not true. In 2012 Jerome Powell outlined exactly what would happen if the Fed began tightening policy in the October minutes of the Fed meeting. Powell KNEW that higher rates and balance sheet cuts would cause the kind of crash which is now happening; but as soon as he became the Fed chair in 2018 he launched tightening measures anyway.

Whether you are for or against Fed tightening measures is truly meaningless. The point remains that the Fed created the Everything Bubble, and now they are crashing the Everything Bubble and they know they are doing it.

So, where do we go from here? Has the Fed done all the damage it needs to do to ensure a crash? Is all this talk of accommodation actually real this time? Will they cut interest rates soon in order to prop up the system longer. I continue to predict the Fed will not be cutting interest rates or ending balance sheet cuts until there is a blatant breakdown, or a major distraction event. And by “breakdown” I am referring to public perception of the economy waking up to the reality of the crash.

It is important to remember that the US economy has been in negative territory for the past 10 years. It has been hanging by three thin threads – the first being Fed stimulus (which has now been taken away – sorry skeptics but this is a fact), the second being the dollar’s world reserve status, and the third being public perception of recovery. The central bankers are now relying heavily on the manipulation of public perception in order to keep certain sectors (like stock markets) afloat for a little while longer. What is the specific goal in this? It’s hard to say. However, the move to trick the investment community into making far reaching assumptions has some advantages.

Stock markets are absolutely useless as an economic indicator because they lag far behind real financial conditions. Stocks fall after every other fundamental indicator has already turned negative and the crash is already at the public’s doorstep. However, they do serve one purpose; stock prices can be exploited to give the population a false sense of economic health, leaving them unprepared and vulnerable to the consequences of a downturn. Most Americans do not track economic data beyond stocks and employment, which are both highly manipulated points of reference.

Stocks remain levitated on two factors: Massive stimulus from China since December, and blind hope from the investment world that the Fed is going to bring back the punch bowl and pump out stimulus again. Minor language changes to Fed statements are now hyped as dominant indicators that the Fed is about to flood the markets with liquidity; yet other language indicators showing the opposite are ignored. With so much capital lured into stocks on the “certainty” of Fed rate cuts or stimulus – I ask, what would happen if the Fed DOES NOT fulfill growing market expectations?

On June 19th just after the Fed meeting I noted that there was little chance of of a rate cut in July, and recent statements from Powell and St. Louis Fed President James Bullard support this argument.

After the June meeting, many in the investment world priced in a 100% chance of an interest rate cut in July. Why did they do this after being wrong every month for the past several months? I still can’t figure out what the source of this assumption is. Nowhere in the Fed’s minutes or in post meeting statements has the Fed indicated a cut in July. The reality is that the last Fed meeting showed NO CUTS until the end of 2020. This does not necessarily mean the Fed will hold rates until that time, but there is no evidence to support the notion that they will cut in July.

Perhaps I am wrong and the Fed will follow assumptions this time instead of assumptions following the Fed. I haven’t been wrong on Fed policy changes yet, but my point is, there is no evidence that they will cut next month, only expectation based on hearsay.

The Fed continues to lie about economic expansion, claiming a strong recovery or improving fundamentals when all the data shows economic decline; from bond yields to housing sales to housing prices to auto markets to manufacturing to shipping and freight to retail closures to weakening job prints, etc. At the same time we are witnessing inflationary pressures in necessities like food, fuel and rental housing. It’s a stagflationary mess.

Incessant reporting of strong economic health and the defiant dismissal of declines is not the behavior of a Fed that is about to capitulate on tightening. Yet, the investment community has been all-in on a rate cut for months. When the rate cuts don’t come, they then assume that the past month was close, and that the next month is a sure thing. It’s truly bizarre.

As long as the Fed holds rates near the neutral rate of inflation and continues to cut assets from its balance sheet, flooding the economy with treasuries, mortgage backed securities and toxic assets, the decline of multiple sectors is assured. There may come a point in which the Fed has done all the damage it needs to do to accelerate the crash, allowing them to then pull back on tightening, but we have not reached that point yet. As I have noted in past articles, the Fed has done all this before.

Creating enormous financial bubbles and then deliberately popping them is a classic central bank maneuver. Each time, they claim they were “unaware” of what was happening, then years later admit outright that they knew what was happening; from Alan Greenspan admitting that the Fed was well aware of the bubble that led to the crash of 2008, to Ben Bernanke openly admitting that the Fed had caused the Great Depression by tightening into economic weakness in the 1930′s.

Tightening liquidity and policy conditions into economic weakness is what central banks do to trigger chaos. But why would the Fed deliberately initiate a controlled demolition of the US economy? The bottom line is central banks are tools of the globalist elite. They are not as autonomous as they seem. No, the Fed does not answer to the US president, but it does answer to the Bank for International Settlements, as do all other major central banks in the world.

The economic disasters they create are then used as leverage to consolidate financial wealth as well as control of hard assets into the hands of these elitists. Crisis events are also used to consolidate power over the people and to centralize governance on a global scale. The Fed is nothing more than a mechanism used to help achieve this agenda.

Alternative economists should abandon any notion that Donald Trump will interfere with this plan. Trump has been under the thumb of the globalists ever since Rothschild banking agent Wilber Ross bailed him out of his debt obligations in the Taj Mahal casino in the 1990′s. Wilber Ross is now Trump’s Commerce Secretary, standing over his shoulder along with a large crew of other elites in Trump’s cabinet. This would explain why Trump vehemently criticized the Fed for inflating the Everything Bubble under the Obama administration through artificially low interest rates during his campaign, and then suddenly pulled a full reversal once he was in the White House and claimed his administration was the reason for all time highs in stock markets.

Trump has also stated time and time again he has no intention of trying to unseat Jerome Powell (he did it again just this week), and frankly he has no power to do so anyway. His “battle” with Powell is a farce.

The Fed is a private entity, and as Alan Greenspan once openly admitted, it answers to no one. Trump has attached his administration so completely to the economic bubble that when it completely collapses he and his conservative followers will inevitable be blamed and it is my belief that he is doing exactly as he has been told to do by the banking cabal.

This leaves one final question – What is the Fed waiting for? Why not crash everything including stocks right now? Why continue to head fake investors on rate cuts and accommodation? As I noted in my recent articleGlobalists Only Need One More Major Event To Finish Sabotaging The Economy’, the elites need a distraction that would satisfy the public’s search for a rationale after the consequences of the crash finally hit them. The accelerating trade war is very useful for this, but it is not enough. The globalists need something else.

This may come in the form of a shooting war, possibly with Iran. It may come in the form of a “No Deal Brexit” in October (and I continue to predict this is an intended event). It may also come in the form of a surprise retaliation from US trading partners, such as a dump of US treasuries or the dollar as the world reserve currency. This is what the globalists are waiting for.

Once such an event takes place, or perhaps just before the event, the Fed may finally cut rates again, or stop its balance sheet dumps. It may not. Trump’s trade war is leading towards price inflation, which could be used by the Fed as an excuse to keep interest rates steady or even hike them again. Nothing is written in stone except the primary agenda, which is: Inflate financial bubble through stimulus, implode financial bubble through tightening. Afterwards, the Fed has options. It can stimulate again as a non-solution, or do nothing. Either way, the crash is already a given and the Fed has no intention of stopping it.

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After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

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Rates, Time, & Gold – The Last Thing Central Bankers Want To See

The interest rate fallacy

There is a widespread assumption that interest rates represent the cost of borrowing money. In the narrow sense that it is a rate paid by a borrower, this is true. Monetary policy planners enquire no further. Central bankers then posit that if you reduce the cost of borrowing, that is to say the interest rate, demand for credit increases, and the deployment of that credit in the economy naturally leads to an increase in GDP. Every central planner dreams of consistent growth in GDP and they seek to achieve it by lowering the cost of borrowing money.

The origin of this approach is mathematical. William Stanley Jevons in his The Theory of Political Economy, first published in 1871, was one of the three discoverers of the theory of marginal utility and became convinced that mathematics was the key to linking the diverse elements of political science into a unified subject. It was therefore natural for him to treat interest rates as the symptom of supply and demand for money when it passes from one hand to another with the promise of future repayment.

Another of the discoverers of the theory of marginal utility was the Austrian, Carl Menger, who explained that prices were subjective in the minds of those involved in an exchange. He argued it was fundamentally a human choice and therefore could not be predicted mathematically. This undermines the assumption that interest is simply the cost of money, suggesting that some sort of human element is involved, separate from pure cost. Eugen von Böhm-Bawerk, who followed in Menger’s footsteps saw it from a more capitalistic point of view, that a saver’s money, which was otherwise lifeless, was able to earn a saver a supply of goods through interest earned upon it.

Böhm-Bawerk confirmed interest produced an income for the capitalist and was a cost to the borrowing entrepreneur, but agreed with his mentor there was also a time preference element, the difference in the value of possessing money today compared with the promise of possessing it at a future date. The easiest way to understand it is that savers are driven mainly by time-preference, while borrowers mainly by cost. This was why borrowers had to bid up interest rates to attract savers into lending, the explanation for Gibson’s paradox.

In those days, money was gold, and currencies were gold substitutes, that is to say they circulated backed by and freely exchangeable into gold. Gold was the agency by which producers turned the fruits of their labour into the goods and services they needed and desired. Its role was purely temporary. Temporal men valued gold as a good with the special function of being money, but as a good, its actual possession was worth more than just a claim on it in the future. But do they ascribe the same time preference to fiat currency? To find out we must explore the nature of time preference as a concept.

Time-preference in classical economics

Time-preference is simply the desire to own goods at an earlier date rather than later. This is because everyone prefers immediate ownership to the promise of future ownership. Therefore, the future value of possessing a good must stand at a discount compared with actual possession, and the further into the future actual ownership materialises, the greater the discount. This is time preference. But instead of pricing time preference as if it were a zero-coupon bond, we turn it into an annualised interest equivalent.

Obviously, time-preference applies primarily to lending to finance production, which requires time between commencement and output. Borrowed money must cover partly or in whole the commodities and all the costs required to make a finished article and the time taken to deliver it to an end-user. An entrepreneur must forgo some of his current consumption if he is to invest in his own production, and the allocation he makes of his current resources to that end is governed partly by time-preference and by the profit he anticipates. If his production process requires a long time between investment and the sale of a finished product his sacrifice of current consumption will be for proportionately longer, so it has to be worthwhile.

The easiest way to isolate time-preference is to assume our entrepreneur has to borrow some or all the resources necessary. We now have to consider the position of the lender, who is asked to join in with the sacrifice of current consumption in favour of the future. The lender’s motivation is that he has a surplus of money to his immediate needs and instead of just sitting on it, is prepared to use it profitably. His reward for doing so by providing the utility of his excess to a businessman must exceed his personal time-preference.

The medium for matching investment and savings is obviously money, because it would be very difficult to coordinate them in a barter economy. It is this function above all else which money facilitates. We take this obvious function so much for granted that we forget that interest rates are actually the expression of time-preference, which has its origin in deferring ownership of consumer goods. Intermediation by banks and other financial institutions conceal from us the link between interest and time-preference, on the saver’s false assumption he is not parting with his money by depositing it in a bank.

The bank appears to be giving the depositor something for nothing in its role as financial intermediator, but it is effectively cutting the link between savers and borrowers. Both parties in a modern economy end up dealing with a bank instead of each other. However, despite a bank’s intermediation, the basic relationship between saver and entrepreneur through a bank is the possession of the former’s capital for a period of time. It may conceal it, but it cannot get rid of time-preference.

When a saver saves and an entrepreneur invests, the transaction always involves a lender’s savings being turned into the production of goods and services with the element of time. For the lender, the time preference will always equate to the loss of possession of his capital for a stated period.
Time preference and fiat money

Today’s economists do not recognise time-preference. For them, economics is about Jevon’s mathematics, state-issued currencies and the exclusion of human interest. They say we have moved on from the household economics of yester-year, and they despise classical stick-in-the-muds. But we can see from their repeated failure to tame human action in order to conform to their economic models that modern economists do not have the answers either. All they have done is cover up their failures through monetary inflation.

The ubiquity of unbacked state currencies certainly introduces new dimensions into prices and deferred settlement. Not only is the saver isolated from borrowers through bank intermediation and the belief his deposits are still his property, but his savings are debased through monetary inflation without his knowledge. The interest he expects is treated as an inconvenient cost of production, to be minimised. Interest earned is taxed as if it were the profit from a capitalist trade, and not compensation for a temporary loss of possession.

Consequently, the saver has been driven to speculate well beyond the possibility of not being repaid by a borrower by buying equities instead. He swaps credit risk for entrepreneurial risk. And because the expansion of bank credit out of thin air favours the entrepreneur over the saver, the theory goes that over time he is compensated for the loss of interest. The whole system has changed, and even consumers, who under the classical economic model would defer some of their consumption, have become unsecured borrowers themselves.

It is this evolution away from the strictures of time preference that has taken us to zero and negative interest rates. Yet, if the cost of money was simply its interest rate, the economy would be permanently mended and there would be no credit cycle. Why on earth it took the planners so long to understand the benefits of free money, and to even pay borrowers to borrow, would have been a mystery. Yet, experience and an understanding that economics is a human science tells us otherwise. Despite handing out free money, the Eurozone is in a worse economic and systemic condition than it was before the Lehman crisis ten years ago, with major bank share prices languishing at all-time lows. And all zero interest rates have achieved, together with aggressive monetary debasement, was the deferment of a banking and systemic crisis.

But credit cycles still exist. At their root is the issuance of money and credit on terms that do not reflect time preference. The value of ownership compared with the promise of future ownership has to be respected. It is not something a monetary planner can decide, because it is wholly a market phenomenon. No one but individual consumers can contribute to the collective judgments that say this any species of bird is worth more than two of them in the bush.

Ignoring time preference is the fundamental error behind monetary planning. It is why in a successful economy, monetary intervention by the state is kept to a bare minimum, or preferably banished altogether. Instead, it builds on the error of Jevon’s mathematical approach and the banishment of the people’s choice of money, which throughout history has been metallic.

The question now arises over the relationship between time-preference and gold. We should consider this in the light of historical experience; fiat currency has always died and been replaced by metallic money. Gold and likely silver as well will return to circulate as money.

When gold is used as money, time-preference obviously applies, given our rule that money is earned and saved on the one hand, and on the other savings are deployed in the production of goods and services. A saver lending his gold will expect it to be returned at the end of the loan period with an additional amount to reflect at a minimum his time-preference, usually in the form of interest.

Apart from isolated times of monetary debasement, this held true for millennia until the last century, when gold was gradually replaced as money in today’s currency system. As long as currency acted as a freely convertible gold substitute, interest earned and paid on that currency was tied to the rate on gold. However, if we can imagine a system with both gold and fiat currency in circulation as money at the same time, the time-preference for physical gold, all other things being equal, should be more than that for the fiat currency due to its relative scarcity.

Evidence of this difference is reflected in Gresham’s law. Most of the human population spends state-issued currency more readily than gold coin. The argument about today’s traders not accepting gold coin does not hold water, because gold coin is easily converted into fiat money in order to spend it. Those who own gold or gold coin see its disposal for fiat money not as a first, but as a last resort. Furthermore, if someone wanted to borrow your gold for a period of time, you would almost certainly place a greater value on the temporary loss of ownership than that reflected in the interest rate for fiat currency.

But this supposition ignores monetary inflation. Over history, the expansion in above-ground gold stocks has roughly kept pace with the growth in human population. Fiat currency expands without limitation, and the loss of purchasing power should be taken into account in any calculation of time preference. The fact that this is not reflected in interest rates is a function of central bank suppression of markets and the concealment of time-preference through bank intermediation.

The last thing central bankers would like to see is value given to time preference. Most of them are probably unaware of its existence, being immersed in the mathematical economics of Jevons and his successors. And when the general public wake up to the suppression of time-preference and therefore the mispricing of all future goods and services, the consequences will almost certainly be astonishing.


the coming year, you will begin to notice how the mainstream media is changing its mind regarding the U.S. economy and the trajectory of the stock market. Instead of bashing President Trump, they will celebrate market rallies. Instead of deeming the stocks expensive, they will show “proof” that this is an extreme-value moment. Expert after expert will speak his mind, luring novice investors, Millennials, and people that are sitting on cash back in.

After this recent December crash, Wealth Research Group published an in-depth letter, showing that for the past 86 years, an infallible indicator has predicted huge returns – and that indicator is flashing again. I want to show this again because it is paramount to my overall investing strategy.

Courtesy: U.S. Global Investors

The 3rd year in office for a reigning president is the best one for stocks. This chart goes back all the way to 1833. Since the Great Depression in 1932, the numbers are even better than those above. Returns in the third year of an election cycle yield over 15% – that is insane.

Here’s the thing – as it stands, due to the December mini-bear market, the S&P 500 is actually down a few percentage points since we began to measure the returns of this current year.

The FED has done its part to jolt stocks. Historically, it has minded its own business leading up to a presidential election. This means that we’re not likely to see increases, nor rate cuts for a long time. If we do see them, they will be few and far between. For the most part, I anticipate very marginal monetary policy decisions. The FED doesn’t want to openly influence elections.

Courtesy: fred.stlouisfed.org

As you can see, leading up to the 2008 meltdown and recession, we saw a huge run-up in the net worth/disposable income ratio. This was followed by a sharp change of course – the same one we’re witnessing today, so the seeds of a recession are being sowed.

We’re not in a similar situation as we were in 2008, though. For the most part, that event was a self-reflecting mechanism, which taught the world about misuse of leverage and ignorance of risk. Unfortunately, not all of the lessons that were learned are being implemented today.

The one that we’re most alarmed by is the lack of consideration by Washington, specifically regarding the ability to keep financing $1.1T annual deficits by issuing bonds and getting the world to buy them at low rates.

Take a look:

Courtesy: Zerohedge.com

Foreigners have been strangled by dollar-denominated debt, but they’re not innocent bystanders themselves.

Governments around the world are staying away from U.S.-originated debt, but they also issue debt of their own at artificially low rates, even negative ones.

It’s a global yield Armageddon.

Check this out:

Courtesy: U.S. Global Investors

None of this is sustainable in the long-term, but as I have said multiple times, it doesn’t mean that the markets will act as a self-correcting mechanism right away.

We know the domestic jobs market is very strong. If you have skills, from basic ones to expert level, you can find employment today. It won’t be a middle-class lifestyle right away, but businesses are definitely hiring and people are not afraid to quit, in pursuit of their dream career.

Job openings have increased since the lows in the summer 2009. The FED wants employment to continue to increase, since it fuels the bubble and feeds the machine.

I can tell you that for the most part, most Americans are already “sold” that the recovery is now in full swing. Of course, the average person has NO CLUE that the price of this wealth effect will be a 25%-30% reduction in the purchasing power of his currency between now and 2024.

A stealth tax of an additional 25% on our entire net worth makes people want to vomit, as it should. This is the punishment of currency printing, which follows the boom.

This is precisely the reason that we’re hedging our savings by diversifying into inflation-beaters; assets that are ideal for times such as the ones we’re approaching.

Courtesy: U.S. Global Investors

Gold stocks are CHEAP. More importantly, look at the incredible rally of 2016, which brought us our biggest winners; truly contemplate how insignificant this was in the grand scheme of things.

You’re becoming a natural resources investor in one of the best times in history.

Best Regards,

Lior Gantz
President, WealthResearchGroup.com

US Army Takes 50 Tons Of Gold From Syria In Alleged Deal With ISIS

As the remaining pockets of ISIS fighters faced imminent defeat in northeast Syria, the United States allegedly gave them an offer they couldn’t refuse: give us your massive caches of gold – or die.

According to reports by Syrian state news agency SANA, U.S. forces struck a deal with ISIS whereby the terrorist group would give up 50 tons of gold across eastern Syria’s Deir el-Zour province in exchange for safe passage.

The precious metal, worth about $2.13 billion, was plundered by the self-designated “caliphate” as its reign of terror spread across Syria and Iraq between 2015 and 2017.

Turkish newspaper Daily Sabah reports that local sources claim U.S. Army helicopters have already transferred the gold from the U.S. forces’ base in Kobani, the Kurdish-controlled city that lies close to Syria’s northern border with Syria. A portion of the gold was also distributed to the Kurdish People’s Protection Units (YPG), which dominates the U.S.-allied Syrian Democratic Forces (SDF).

The news comes after SANA claimed that locals witnessed U.S. helicopters airlifting large cases of gold amounting to about 40 tons from the al-Dashisha area in Hasaka’s southern countryside earlier this month. The gold was purportedly looted by ISIS from Mosul in Iraq and other parts of Syria.

The Syrian state media outlet claimed that ISIS leaders were on-hand to guide the U.S. helicopters to the places where the gold was stashed, “closing a deal by which Washington spared hundreds of the terror organization’s field leaders and experts.”

The claims by the Syrian government outlet coincide with reports by U.K.-based war monitor, the Syrian Observatory of Human Rights (SOHR), which alleged that the U.S. and its Kurdish allies had been sparing ISIS fighters in hopes of acquiring the group’s war spoils.

The SOHR said:

“The U.S.-led coalition forces and the Syrian Democratic Forces (SDF) deliberately do not target the areas under the control of the ISIL terrorists and commanders in Eastern Euphrates in Deir el-Zour as they are trying to locate this treasure by forcing the ISIL militants to speak about its location after surrendering.”

Syrian and Russian media alike have long alleged that, contrary to Washington’s claims, it is waging a war on the extremist group. U.S. forces are instead collaborating with them in myriad ways.

During the destruction of ISIS-controlled Raqqa in Syria by the U.S.-led coalition, a secret deal was struck with the group that granted members safe passage as it evacuated the area. The deal, uncovered by the BBC, ensured the survival and freedom of many top ISIS leaders and a number of foreign fighters.

The U.S. still maintains its base in al-Tanf at the Syrian-Jordanian border in contravention of international law and against the wishes of the Syrian government on the pretext of combating ISIS. Moscow has repeatedly accused the United States of forming new armed groups from the remains of ISIS, where they are allegedly given free rein and pop up “like a jack-in-the-box” to ambush Syrian troops before fading back into the U.S.-controlled region.

Dump dollar for gold: Russia mulls eliminating gold tax to boost investment at greenback’s expense

Russia’s Finance Ministry told the Izvestia newspaper it is considering complete abolition of value added tax (VAT) on gold purchases. This would give Russian savers an option of investing in gold, rather than foreign currencies.

The ministry said earlier the measure could also help returning capital worth tens of billions of rubles to the country.

Gold bar buyers in Russia are currently obliged to pay 20 percent VAT. However, when selling ingots, the tax is not returned. As a result, demand for gold investment in the country sits at just under 3 tons per year. Experts say that if the tax is dropped, demand could skyrocket to 50–100 tons.

The abolition of VAT will create an investment gold market in Russia, Sberbank Vice President Andrey Shemetov told the newspaper. According to him, as a financial instrument, gold is protected from inflation, and at a time of geopolitical risks, the metal could be an excellent substitute for traditional investments in US dollars.

Resetting the VAT on gold bullion could support the idea of de-dollarization of the Russian economy, said Aleksey Panferov, deputy chairman of the board of Sovcombank. The inclusion of impersonal metal accounts in the deposit insurance system could become another important step in that direction, he added.

According to the World Gold Council, demand for gold in Russia in 2018 was 2.8 tons. In China it reached 304.2 tons, in India – 162 tons, and in Germany – 96 tons. Compared to 2014, demand in Russia has dropped almost three-fold. A significant increase in demand for gold was recorded in China and Kazakhstan after their abolition of the tax.

Hyperinflation Experts Have It All Wrong

China will have a more significant impact on the global economy by 2025 than the United States. As Wealth Research Group published a number of times in recent months, the Asians are a mere seven years away from boasting the largest economy, based on GDP, to ever exist.

A decade after that, China will be the most intimidating militaristic power ever, having a mightier army than the U.S. ever had.

These are no small changes – they represent the equivalent to a tectonic shift at the earth’s crust, which produced our deepest oceans and highest mountains.

Millions of years ago, a giant island the size of Australia, roughly, located near today’s Madagascar, started moving north, toward today’s Russia and China, at a moderate pace of a few centimeters a year, so no one grew suspicious of these baby steps taken by the enormous island.

No one was prepared, but the colossal island, now called India, collided with Asia, forming the Himalayas.

You see, small, incremental changes go undetected until it is too late. My father ate like a king for 53 years, until his arteries couldn’t take it any longer, and he suffered a heart attack.

The snowball effect in action – it works for us or against us, as we use it. When you reinvest your dividends to buy additional shares in a well-managed business for 20 years, you end up with a wealth fortress, but if you ignore the rules of compounding and watch others, less talented and less sophisticated, making a killing, you’ll stay stuck in a rut.

There are clear rules to generating wealth, and this idea was reinforced while driving the McLaren 570S on the circuit this past Sunday, as any imprecision in braking, turning, or accelerating costs valuable seconds throughout the course of an entire lap and to professionals, it could mean the difference between world fame or mediocrity.

China, like the Indian sub-continent millions of years ago, is headed toward collision, which will impact price levels around the world, but the analysts are focused solely on USD inflation.

This is a huge mistake, since the Chinese will be much more influential, going forward, on how much commodities cost and how inflationary the next decade will be. But most are either completely ignoring the real cause for the coming inflationary crisis or are utterly ignorant of it – I want you to understand it and have no delusions regarding it.

China implemented a one-child-policy, which was meant to curb their national population explosion. Back then, China was based on agriculture, mostly, so families had children to help in the rice fields, but as the transition to manufacturing increased, the need for child labor became less meaningful.

Now, though, the one-child-policy is biting them in the ass.

Their elderly population is growing rapidly, while their demographics of 20 to 65-year-olds are shrinking.

More adults, fewer workers are exactly the formula, which was present in the U.S. between 2000 and 2011, and gold raged higher for 11 consecutive years.

Fewer workers equal less manufactured goods, so prices rise.

The inflationary pressures that the U.S. will experience in the coming years, due to giant deficits and de-dollarization, which will cause foreign creditors to send dollars back to the origin (the U.S. banking system) is nothing compared with China’s upcoming ones.

Gold is now held hostage to many misconceptions, such as, that a growing global economy and higher interest rates are bad for gold prices, but the Reagan years and the Bush years both proved that this is nonsense – both gold and mining shares can perform well in boom times.

China is the key to the gold breakout, just as it is the essential component for continued success for U.S. corporations selling products around the world – global commerce is a delicate ecosystem, and the more it becomes complex, the more commodities will go through even more volatile booms and busts.

For nearly 30 years, commodities have gone nowhere – this is a time when fortunes are made by sitting tight, monitoring, and being extra-selective.

Inflationary pressures from China are the next drum to beat in the precious metals symphony.

Best Regards,

Lior Gantz
President, WealthResearchGroup.com