Reserve Currency Issuer Plus Global Pariah = Historic Monetary Reset

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Published : July 03rd, 2017
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Category : Opinions and Analysis

The gold Cartel will eventually collapse – just like all Cartels before it, like the London Gold Pool in 1968, before gold surged from $35/oz to nearly $900/oz a decade later.  However, in the meantime, we must continue to fight a monetary battle to the death – which mathematically, must be won by sound money; as, per the immortal theme of Gresham’s Law, good money always chases out bad.  Not to mention, Economics 101; as, per last week’s “Precious Metals’ ultimate downside protection,” the mining industry has been so decimated by two decades of price suppression, supply is guaranteed to plunge indefinitely.  This, as the terminal, malignant phase of history’s largest, most destructive fiat Ponzi scheme causes global Central bank printing presses to be turned up to “ludicrous speed” (Spaceballs reference).

Thus, on one of the year’s thinnest trading days – the day before July 4th, when trading desks are manned by skeleton crews – what were the odds we wouldn’t see the 191stSunday Night Sentiment” attack of the past 201 weekends, and 866th2:15 AM” raid of the past 988 trading days?  This, on a day teeming with the PiMBEEB headlines I’ll discuss shortly; whilst other commodity prices are flat to higher; interest rates are barely changed; and the only reason the dollar is modestly above its post-election low, is the historic, unexpected, landslide defeat Shinzo Abe’s Liberal Democratic Party suffered in yesterday’s Tokyo regional elections, causing the Yen to significantly decline.

To that end, to put the blatancy of the U.S. government-led Precious Metal manipulation into perspective, 201 weekends and 866 trading days represents nearly four years of time.  In this case going all the way back to the spring of 2013, right after Obama’s infamous “closed door meeting” with the top “too big to fail” bank CEOs preceded, by one day, the vicious “alternative currency destruction” attack; clearly, utilized to push PMs below their respective 200-week moving averages, and launch a now four-year propaganda campaign regarding the Fed “tightening” that has yet to occur.

During this period, believe it or not, gold is up $80/oz; and silver, $1/oz.  In other words, we’re to believe that during a four-year period when Precious Metals rose 7%; not to mention, as global money printing went parabolic; countless fiat currencies crashed; and “tightening” and all, the Fed still has a 1% interest rate and a $4.5 trillion balance sheet; that a “freely-traded market” produced PM declines on 95% of all weekends, and 88% of all London paper pre-market openings?  Frankly, even “sixth sigma” doesn’t properly describe such blatancy – in suppressing what the fiat-currency-loving “powers that be” fear more than anything; like fire to the Scarecrow, and Kryptonite to Superman.

To that point, it’s quite funny – and interesting – that Superman’s menace was “Krypto”-nite; given that, in my very strong view, “Crypto” currencies will ultimately be the powers that be’s’ principal monetary nemesis; and, per December’s “why Bitcoin will make gold and silver go up,” Precious Metals’ most powerful ally.  Thus, when I saw this weekend’s extremely interesting news that Delaware – by far, the state with the most incorporated companies – is about to enact a law legalizing stock trading on blockchains, my spider senses started tinging.  As clearly, when this commences, it will dramatically decentralize financial markets; to the point that exchanges – from the NYSE to the COMEX (which FYI, is incorporated in Delaware) – will be replaced by the inexorably advancing tsunami of financial technology.  Which, by the way, is exactly what is occurring in the crypto-currency “ICO,” or Initial Coin Offering, market.  As I wrote in May, “decentralization is the future of monetary value” – and when it comes to crypto-currency and Precious Metals, nothing better defines decentralized.  As opposed to fiat currency, which could not be more centralized, and destructive, if it tried.

As for this weekend’s PiMBEEB onslaught, much of it is directly related to today’s principal theme – of the borrowed time the U.S. dollar is living on as “world’s reserve currency,” given that it has more debt than most other nations combined; a long-dead manufacturing sector; a reckless Central bank that has destroyed countless nations via the unprecedented exportation of inflation; and a rapidly deteriorating diplomatic reputation, which the historically undiplomatic Trump Administration has dramatically worsened via its aggressively “America First” geopolitical and trade policies.  Not to mention, a President whose unfiltered “Tweeting” has offended many of the world’s most important leaders and nations.

To start, we have the States of Illinois, Connecticut, New Jersey, and Maine all failing to pass fiscal 2018 budgets – to the point that “emergency measures” have either been, or shortly will be, instituted, to keep them afloat.  In other words, America’s growing bankruptcy epidemic, at all levels, is being exposed – to the point that actual bankruptcy proceedings, Puerto Rican style, are likely.  In all cases, criminal governments – like New Jersey’s, whose hideous fiscal collapse in large part occurred under the stewardship of none other than Jon Corzine – are desperately attempting, like the Federal government in advance of its “debt ceiling” limit this Fall, to enact near-term patches, to, as always, “kick the can” those last few inches.

However, in some cases, like Illinois, the situation is so bad, a bankruptcy filing appears imminent.  To the point that, at the last possible second, the Illinois Congress is trying to pass yet another massive tax increase to “pay” for its out-of-control spending – in a State that has already experienced, by far, the biggest exodus from its borders since Louisiana post-Katrina.  But don’t worry, buy stocks and sell gold – as this couldn’t possibly cause any problems; particularly when the only way to “fund” Illinois’ bills – like the tens of billions of its pension funds that will go broke otherwise – is the issuance of more Federal “money,” followed by its “monetization” by the Fed.

Then we have today’s Saudi/Qatar ultimatum; which, when Qatar ultimately rejects it, will dramatically increase the odds of Middle Eastern military conflict.  Not to mention, the for all intents and purposes death of the Obamacare “repeal and replace” movement; a U.S.-provoked confrontation between U.S. and Chinese warships; and the surreal explosion of the domestic war between Donald Trump and everybody – from the press, to Congress, to State governments – so much so, famed Watergate reporter Bob Woodward deems it the “malignant Presidency”; and it becomes painfully apparent just how dangerous the world is becoming; and within it, how much power, and respect, the “world’s reserve currency” issuing United States is losing, at an alarmingly rapid rate.

To wit, it would be wise to listen to Kyle Bass’s pronouncement this weekend that America’s relationship with China has dramatically deteriorated; as China is not only the U.S.’s largest creditor – which as of last year, no longer buys U.S. Treasuries; but the world’s largest manufacturing nation, with the ability to dramatically weaken our already historically weak balance of trade; and thus, the dollar’s value, and the Fed’s ability to support it; at any given time.  A sentiment which, with eerily perfect timing, was mirrored by none other than Chinese Premier Xi Jinping this morning; who, mere hours after Trump had the gall to call him about “containing” the North Korean situation, just one week after Tweeting that the Chinese had not been helpful in this regard – issued a statement that U.S.-China relations have been affected by “negative factors” since the two first met at Trump’s Mar-a-Lago resort three months ago.  A statement which couldn’t be more ominous ahead of next week’s G-20 summit, when Trump may propose additional Chinese trade tariffs.

Clearly, in every imaginable way, America’s role as a political and monetary “leader” is diminishing, in dramatic fashion – and I’m not even going to breach its collapsing economy, per the U.S. “macro surprise index” plunge depicted below; ironically – commencing nearly to the day Trump was elected; given that Whirlybird Janet decided, contrary to her policy of essentially the entire Obama Presidency, to start aggressively raising rates – against Trump’s vehement opposition – at that very moment in time.  FYI, isn’t it funny how Friday’s and today’s “soft data” Chicago PMI and ISM Manufacturing Indices “surged”; yet simultaneously, today’s hard data report of May Construction Spending plunged?

But I digress, as the most important point I want to make, to drive home today’s theme – is the below chart, of a survey taken by the highly respected firm, Pew Research.  Which frankly, floored me, given just how obvious it is that America is rapidly becoming a global pariah.  To wit, roughly 85% of citizens in the world’s leading Western nations don’t trust Donald Trump – and by proxy, the United States.

You are free to interpret this survey any way you wish, of course.  However, there is NO WAY anyone can dispute the rapidly widening schism between America and the rest of the world – be it with “allies” like Western Europe, South Korea, Japan, Australia, and Canada; “competitors” like China; and enemies, like Russia.  And when you’re hyperinflating managing the world’s “reserve currency,” such a schism will undoubtedly have dire ramifications on the world’s monetary order.

Which consequently, in a world amidst historic physical Precious Metal market tightness – last I looked, the Chinese were the world’s largest buyer; as the “gold Cartel” desperately tries to maintain a dying status quo; whilst crypto-currency, with each passing day grows more powerful; the odds of a significant monetary “reset” have never been higher – against fiat toilet paper in general; and more specifically, its U.S. dollar “leadership.”

Data and Statistics for these countries : Australia | Canada | China | Georgia | Japan | Jersey | Russia | South Korea | All
Gold and Silver Prices for these countries : Australia | Canada | China | Georgia | Japan | Jersey | Russia | South Korea | All
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Andrew Hoffman was a buy-side and sell-side analyst in the United States (including six years as an II-ranked oilfield service analyst at Salomon Smith Barney), but since 2002 his focus has been entirely in the metals markets, principally gold and silver. He recently worked as a consultant to junior mining companies, head of Corporate Development, and VP of Investor Relations for different mining ventures, and is now the Director of Marketing for Miles Franklin, a U.S.-based bullion dealer.
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