Peak Dumb Passed?
“Hard times create strong men; strong men create good times; good times create weak men; and weak men create hard times.”
G. Michael Hopf
It’s interesting to cast our minds back to the launch of the US Fed’s initial “QE1” in December 2008, just after the TARP (Troubled Asset Relief Program) ran out. We wrote at the time that we thought it would become permanent monetary policy, with unintended consequences to both society and the economy. The ramifications at the time were easy to see, large scale wealth divergence and inflation.
What very few understood at the time but is so obvious now is that all the Money Printing, QE, Market support and plethora of other .gov stimulus programs have nurtured and fostered a special type of socialism. The type that naturally manifests into further interventionism, huge expansion of government bureaucracy and, of course, warfare.
To those remaining in non .gov supported business, excessive legislation and regulation are just non-productive tax burdens to go with an already stifling tax regime in many socialist G7 countries. The sheer amount of non-productive regulatory and .gov expansionist policies has led to massive increases in costs of conducting business. These are inflationary policies, to go with already inflationary money printing and “stimuli”!! Just think about the red tape job quotas in OHnS, ESG (sensibly, this is now waning), diversity policing and climate change related roles in any organization these days. These costs are being past to you, the consumer, and they are genuinely inflationary.
Now we are well into 2024, and it is a massive election year, not just for the US. And, it is absolutely obvious that socialist incumbents all over the world are so afraid of change that losing elections in the US and Europe to any other than left wing incumbents is now a “threat to democracy”! Anyone to the right of Marx is now a right ring extremist and we are experiencing a sharp ratcheting up “hate speech policing”, “disinformation mediation”, “extremist monitoring and censoring” as more people start to realise all is not as it seems.
Potentially being stripped of rights for spreading “disinformation” is hardly surprising in societies that are dumbed down by mainstream and social media, to a point that that most are unable to think for themselves. Clueless, without a care. One needs to look no further than Germany for the damage socialists and their green cult policies have achieved. They have managed to decimate entire industries with their “energy” policies, standards of living have substantially declined whilst taxes increase to fund more interventionalist policies. No wonder people are waking up to this malarky all over the world. Could peak dumb have passed?
Could the Davos cult of incompetence have reached its crescendo and a massive shift to the right (all extremists don’t forget) be underway through Europe and the US because ordinary people have woken up from their slumber of complacency and finally realize their leaders only look after their own interests and not represent the will and best interest of the people? Are we going to be censored for even asking this? For socialists, power is the principal objective, not the state of the economy and the standard of living for all.
Just as Oscar Wilde observed many years ago, “The Bureaucracy is expanding to meet the needs of the expanding bureaucracy”. So focused are those in “power” on retaining it they’re actually prepared to torch the lot!!
This is where we are at, the US is now accumulating a mouth-watering $1trillion of extra debt every 90 days to keep this show on the road. Could this trillion per 90 days be a reason gold (and bitcoin) have busted to new all-time highs? We guess it to be a contribution but the real tell is, who is actually buy all the useless yellow barbaric metal? More on this below, it does tell a tale.
But let’s first step back in time for some context below, thanks to GBD’s Marc Faber.
“The world was actually on a watered-down version of a gold standard until 1971 when the US abandoned its solemn promise — the 1944 Bretton Woods Agreement— to back the dollar with gold at $35 per ounce. Gold backing of a currency provided a solid intellectual foundation of reality that few even recognized existed within themselves; (i.e., that we live in a world of scarcity and uncertainty) It reinforced the idea that wealth has to be built. It cannot be conjured out of thin air, just as gold cannot be conjured out of thin air.
But fiat currency can be conjured out of thin air and in enormous amounts. The longer a fiat currency is the coin of the land, the more one is led to believe that nothing should be in short supply, since everything is bought with money and money need not be in short supply. Those who know only unlimited fiat money soon demand free everything, including healthcare and higher education as a right.”
Let’s have a look below at some metrics of our current global reserve currency.
So, back to the story of who is buying the gold. It’s not retail, as per below, investment holdings of gold relative to investable assets is still at 100-year lows.
And Gold ETF’s have been experiencing outflows as the price has risen.
Could it be a continuation of buying from these entities below, and other well healed “insiders”?
Central Bank Buying
The real action behind what is happening is, of course, in the derivatives complex. We’ll not go into those weeds too much other than to say there have been a remarkable number of “contracts” standing for delivery in both the New York and London exchanges this year. The bullion establishment in Western capital markets may well have been caught horribly short and the squeeze is on. Let’s watch it play out.
And the miners of the yellow metal?
Gone nowhere, relative to gold.
But Margins are actually fine.
Now, back to the US election.
Those that have read these notes for long enough will agree it’s remarkable how many “conspiracy theories” turn into fact over time. We have a final prediction for the US election, that is, there is a good chance there will not be one. The blowback from domestic “censorship”, scan and ban in the name of preserving “democracy” will be severe and rejected by a large portion of the population in the US. Our guess is, this blowback will not be peaceful. Long time coming but we hope we’re wrong.
And how did Joe Biden get 81 million votes last election? We’ve always found it quite amazing.
Peace.
