BRICS aims to launch a new currency that will be backed by gold as a counter to the US dollar. A common currency will make the alliance usher into a new financial era and become a cornerstone for further developments. The upcoming summit in 2024 will shed more light on the policies that are aimed to topple the US dollar.
We live in interesting times.
This catastrophe has been a long time in the making. In 1993, for instance, the annual deficit amounted to 3.8% of GDP, and the debt, which seemed astronomically high at a “mere” $4.4 trillion, was Lilliputian by today’s standards.
The trend goes back longer than that. The growth of the U.S. government in modern times is the story of post-WWII America. President Dwight Eisenhower seems to have been the last guy in the post-WWII era who understood that the welfare state, the warfare state, and tax cuts not backed by tough spending cuts are incompatible with fiscally responsible government, or at least with reasonably-sized government. His predecessor, Harry Truman, who had funded the Korean War effort, left Eisenhower a level of federal spending equivalent to 18.5% of GDP. Between then and now, both parties, with short-lived exceptions, have pushed both the defense and domestic budgets exponentially higher.
Lyndon Johnson took spending to 19.6% of GDP; Richard Nixon and Gerald Ford to 21.5%; Jimmy Carter to 21.8%; George W. Bush to 21.9%; Barack Obama to 24.9% (before bringing it back to 21.9%); Donald Trump to 31.3% (during the COVID-19 meltdown), and Joe Biden to 31.7%, although now it has come down to 22%.
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It’s now come down to this. Unless a new generation of leaders has the courage to cut such “untouchables” as the defense, education, justice, and homeland security budgets, and privatize the Social Security program (as more than 40 countries wisely have done), sooner or later, the current trajectory of federal finances will lead to an extremely ugly place. If you think things are bad now, just wait.
I need an underground bunker on a farm in Idaho.
Dimon recently stated that stagflation was unavoidable for the United States. Therefore, he predicted that high inflation and unemployment would be a massive concern for the country. That is a dire statement, as the employment figures have been a stabilizing factor in the US economy amid its two-year inflation fight.
The pressure of these impending realities is only made more concerning with government spending continuing to grow. The US quarterly debt interest payment has recently surpassed the $1 trillion mark. That details the incredible global concern regarding the continued viability of the US dollar as a reserve asset.
Joshua Ramos
May 30, 2024
BRICS: JPMorgan Forecasts Unavoidable Crisis for the US Dollar (watcher.guru)
See also U.S. Reacts To BRICS De-Dollarization Agenda.
And don’t forget the country is adding $1 Trillion in Debt Every 100 Days as well.
We live in interesting times. Prepare appropriately.
Privately I have been talking about the collapse of the dollar since at least 2008. So much so that people sort of roll their eyes when I mention it these days. They don’t use these exact words, but it amounts to, “You have been saying this sort of thing for 15 or 20 years now and nothing has really changed. Why should anyone worry now?”
I have asked financial advisers if I am crazy thinking this is something to be concerned about. They don’t seem to think I’m crazy, but they never give me advice which would appear to take these concerns into account.
These concerns are why I watch the price of gold so closely. My hypothesis is that a rapid increase in gold price will be an indicator that “the end is near”. And my model is that once nearly “everyone” realizes the end is near the collapse will be scary fast, perhaps in weeks or days.
This may be another indicator:
BRICS: China Dumps The Largest US Treasuries in History
BRICS member China dumped a record number of US treasuries and agency debt bonds worth a staggering $53.3 billion. Historically, this is the largest sell-off initiated by China ever recorded and occurred during the first quarter of 2024.
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China and other BRICS countries have been offloading US treasuries worth billions since 2022. The Communist country has a record of dumping the highest in the last two years. The development indicates that BRICS and other developing countries want to move away from owning US assets in their reserves.
The uncontrolled debt of $34.4 trillion is worrisome making BRICS rely on local currencies and not the dollar. In addition, even a close ally of the US, Belgium dumped $22 billion worth of treasuries during the same period. This shows that even European nations are beginning to distance themselves from the US economy, including selling off bonds and treasuries.
Prepare appropriately.
Today the currency is in dollars. Soon it could be in bullets. With the threat being hyper-velocity instead of hyper-inflation.
MTHead
June 1, 2024
Comment to Hyper Inflation May Be Avoided.
It will take more to convince me this is plausible in the near future. But I like the wordcraft.
And I want an underground bunker in Idaho just in case.
This contrarian sees a strong consensus around the notion that hyper-inflation is the inevitable end-game of nation-states / central banks issuing fiat currencies, i.e. currencies that are not restrained by being pegged to tangible assets such as gold reserves. The temptation to issue (via “printing” or borrowing new currency into existence by selling sovereign bonds) more currency becomes irresistible to politicians and central bankers alike. as the means to mollify every constituency, from elites to the military to commoners dependent on state-funded bread and circuses.
This unrestrained creation of new money far in excess of the expansion of goods and services (i.e. the real economy) devalues the currency, as “all the new money chases too few goods and services.” Gresham’s law kicks in–bad money drives good money out of circulation–as precious metals, fine art, gemstones, etc. are hoarded and the depreciating currency is spent as fast as possible before its purchasing power declines even further.
The Cantillon Effect also kicks in: those closest to the spigot of new money get first dibs on converting the depreciating currency into tangible goods, leaving the non-elites to sweep up the “trickle-down” shreds left as the currency loses purchasing power daily.
The consensus holds that there is no way to stop this decay of purchasing power to near-zero, i.e. hyper-inflation, once it starts. As in a Greek tragedy, the fatal flaw of the protagonist–in this case, fiat currency–leads inevitably to its destruction.
In the real world, things having to do with money tend to occur because they benefit powerful interests. This leads us to ask of hyper-inflation: cui bono, to whose benefit? Exactly which powerful interests benefit when a currency’s purchasing power plummets to near-zero?
Charlies Hugh Smith
May 27, 2024
Of Two Minds – Is Hyper-Inflation that Destroys a Currency a “Solution”?
Emphasis in the original.
I found his alternate version of things may turn out intriguing. But as I read his post I became more and more concerned with the question, if things will go a different way because of the “powerful interests” will steer it to something to their advantage, then why has there ever been hyperinflation? Wouldn’t those “powerful interests” have taken those previous (except perhaps the first example of hyperinflation) instances down a different path?
Still, something other than hyperinflation as the reset button is something to consider and prepare for.
The greatest enemy of socialism is reality.
It is reality itself that they must deny, redefine, subvert, censor and ban.
Alice Smith (@TheAliceSmith)
Posted on X August 16, 2023
Reality is the enemy of most political and nearly all economic theories.
I don’t have much confidence in economic forecasts, but here is one anyway:
Here’s why economists are so worried about soaring US debt levels (msn.com)
Technically, the government could print money to pay off its dues, but that would result in hyperinflation as the money supply skyrockets.
Robust economic growth can make debt more sustainable, but the debt is growing way faster than the economy — the national debt balance rose 86% over the last decade, while GDP grew by 63%, according to Fed data.
Economists are uncertain of when exactly the national debt will become a true problem for the US. If the pace of borrowing doesn’t slow, Rubin anticipates a crisis of some sort materializing within the next decade.
“It starts slowly and then it accelerates rapidly. Right now I don’t think anything is imminent. I would say we have 10 years or less to fix this problem. I think that may be the optimistic scenario,” Rubin said.
I question how he, or anyone can put a number on this. Perhaps by comparison to other nations with similar problems but that doesn’t take into account things like the U.S. Dollar being a reserve currency, the state of our technology development. After all, where is the case history where there was no need to physically print the money, the government could just change a few 1’s and 0’s in a computer file someplace.
It was about 15 years ago that Chet and I started talking about the imminent risk of U.S. hyperinflation. And it still hasn’t happened. How many times does one get to cry “wolf” before no one listens to you any more?
Still, ten years or less? You and I might be able to build our underground bunkers by then.
A debt jubilee is certainly appealing to debtors and those who see the cliff ahead, but recall that all debt is an asset that is holding up an asset class far larger than the debt itself: mortgage debt is what props up the entire global real estate market, and what happens to valuations when debt ceases to exist?
Those who see jubilee as a solution also tend to ignore that all this debt is an asset of which 90% is owned by the wealthy class who run the status quo. Every bond, every mortgage-backed security and every bundled student loan / auto loan is an asset owned by someone or some entity who depends on that asset and its income stream for their wealth and thus their political power.
To hazard a guess based on human history, the wealthy / powerful will probably not be too keen to surrender the vast majority of their wealth and thus their power in the laudable pursuit of eliminating all debt and starting over.
CHARLES HUGH SMITH
April 19, 2024
Living on Uneasy Street
Emphasis in the original.
I see the only way out of things is for hyperinflation to “cancel” both private and government debt. Hold on, it is going to be a bumpy ride.
Prepare appropriately.
We live in interesting times.
Gold is shining ‘bright like a diamond’ and could hit $3,000 says Citi (cnbc.com)
“We project $3,000/oz gold over the next 6-18m,” said Citi’s analysts led by Aakash Doshi, Citi’s North America head of commodities research. The financial gold “price floor” has also moved higher from around $1,000 to $2,000 per ounce, Citi said.
On Friday, Goldman Sachs referred to the gold market as an “unshakeable bull market” and revised upward its price target for the yellow metal from $2,300 per ounce to $2,700 by the end of the year.
BRICS: China Drives Gold Price Up By Buying Supply (watcher.guru)
BRICS founder China is currently driving up the price of Gold by swooping in to buy more supply of the precious metal. As the US dollar plummets, alternatives are growing more important within the global reserve. Thus, gold has experienced significant price growth recently, rising to record highs of 2,342.43. According to economists, the People’s Bank of China is leading the way, actively investing in the asset.
Why is Gold Ignoring Higher Rates and a Stronger Dollar? (msn.com)
Since Russia and China shook hands on a “no-limits” alliance in early 2022, many international transactions have circumvented the dollar. Saudi Arabia and other oil-producing countries have sold oil to China and India for non-dollar currencies.
Gold’s ascent with a strong dollar and high interest rates is a sign of the shift in global leadership in trade. Moreover, rising gold prices could be telling us that inflation is eroding all fiat currencies, including the U.S. dollar. The dollar index is a mirage as it only measures the U.S. currency against the euro, pound, yen, Canadian dollar, Swedish krona, and Swiss franc. Gold is telling us that all these currencies are losing value as inflation and a significant global financial shift are changing the worldwide economic landscape.
The trend is always your best friend in markets, and gold’s bullish trend is now twenty-five years old. High interest rates and a strong dollar have not stopped gold’s rally, which is a significant sign that the strength of the precious metal’s bullish price action will continue. Even the most aggressive bull markets rarely move in straight lines. With gold over the $2,400 level and the critical psychological support at around $2,000, a pullback to that support would not threaten gold’s long-term bullish trend. Moreover, the dramatic shifts could support a continuation of higher highs in 2024.
Central bank buying a driver of golds surge (bankingday.com)
The majority of purchases were made by central banks in emerging economies. The People’s Bank of China was the biggest buyer, with an increase of 225 tonnes in its reserves last year.
Other big buyers were central banks in Poland, Singapore, Libya, the Czech Republic, India, Iraq, Qatar and the Philippines.
The council has reported previously that the growth in central bank gold buying reflects a “rebalancing to a more preferred strategic level of gold holdings” amid concerns about increasing financial market risks and the persistence of high inflation.
A small number of the central banks it surveyed said they were pursuing “de-dollarisation” policies. The US dollar accounted for 51 per cent of central banks reserves at the end of 2022.
Central banks in emerging markets tend to be more pessimistic about the US dollar’s future as a reserve currency and more optimistic about gold.
When asked about gold’s future share of global reserves, 62 per cent of advanced economy respondents said it will remain unchanged over the next five years, while 68 per cent of central banks in emerging markets said gold’s share of global reserves will rise.
Gold has turned into money for Costco, where yellow metal sales begun last year have turned into a cash cow for the big-box retailer.
In fact, sales are so brisk that analysts at Wells Fargo expect revenue “may now be running at” $100 million to $200 million a month, a rapid acceleration since bullion hit the warehouse club late in the summer of 2023.
Jeff Cox
April 9, 2024
Costco selling up to $200 million in gold bars a month, Wells Fargo estimates (cnbc.com)
I wonder if this has been a significant factor in the recent price of gold. At $2,300/oz that is something like 40k to 65K ounces a month.
The EVERYTHING BUBBLE, stocks, bonds, real estate SET to CRASH. US debt increasing by $1 trillion every 90 days. US BANKRUPT. Save your self. Please buy more real gold, silver, Bitcoin.
Robert Kiyosaki @theRealKiyosaki
Posted on X April 6, 2024
Kiyosaki appears to be well respected.
Some people even collect his quotes:
Maybe we should listen to an expert rather than try and figure out complex things like on our own.
The rally is defying a lot of normal thinking, especially when it comes to still-elevated rates. I think the narrative is changing towards sticky inflation and perhaps a hard landing, spiced with a lot of geopolitical uncertainty and de-globalization driving central bank demand.
Ole Hansen
Head of commodity strategy at Saxo Bank AS
April 7, 2024
Gold price rally to record highs is a complete mystery | Fortune
I’m concerned it is not actually a mystery. I suspect it is a reality nearly everyone does not want to believe.
Economic Marxism wants to destroy your property.
Cultural Marxism wants to destroy your civilisation.
Environmental Marxism wants to destroy your species.
Progress!
Alice Smith (@TheAliceSmith)
Posted on X April 6, 2024
Alice Smith claims to be the great-great-great-granddaughter of Adam Smith.
It would be trivial to get multiple quotes of high quality each and every day from her X feed.
Gold prices achieved new heights last week, closing at record levels, with central banks’ interest and geopolitical tensions as key factors. Yet, we’re advising traders to be cautious, as the current rally might not be as robust as it seems.
Last week, XAU/USD settled at $2330.160, up $97.04 or +4.35%.
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The market appears ripe for a downturn, and those holding positions near the peak might face significant losses. Therefore, the short-term forecast leans towards a cautious bearish outlook for gold.
James Hyerczyk
April 6, 2024
Gold Prices Forecast: Was a Bull Trap Set on Friday? | FXEmpire
Perhaps. That was Saturday But gold closed at $2,358.09 on Tuesday. That is up another 1.2% in two days.
Predictions are tough. Especially those predictions about the future.
In the past few months, political strategists have marveled at the fact that the economy under Biden was growing (at 3.2pc in the fourth quarter of 2024) but polling on Biden’s performance on the economy was dismal.
A recent paper led by former treasury of the secretary Larry Summers has helped clear up the discrepancy. Summers and his co-authors show that if we adjust American inflation data to consider changes in methodology that have taken place over the past few decades, we see inflation not peaking at 9pc, as the official data indicates, but rather at 18pc. The paper also suggests that inflation measured in line with historical norms would have been 8pc at the end of 2023, not the 3pc shown in the official statistics.
Philip Pilkington
April 5, 2024
The US Fed may kill the Biden presidency (msn.com)
As I suspected, the price of gold is a better measure of inflation than official government numbers.
Prepare appropriately.
Currently, the US national debt stands at an unprecedented $34 trillion, fueled by extensive spending and escalating debt-servicing costs. Bank of America’s estimates, indicating that the US is accumulating an additional $1 trillion in debt every 100 days, underscore the urgency of the situation.
Rahul Kumar
April 5, 2024
Wharton Professor Warns Swelling US Debt Could Trigger Market Crisis by Next Year (msn.com)
On April 1st one ounce of Gold would buy an all time high of $2,264. On April 2nd it reached another all time high of $2,268. Yesterday it closed at the all time high of $2,341.49.
Prepare appropriately.
Gold surged to a new record on Tuesday, as geopolitical tensions and interest rate speculation drove a rally in the yellow metal.
The commodity rose to as high $2,141.79 per ounce, eclipsing its December all-time high of $2,135.39, according to Bloomberg data.
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Gold’s rise is in part due to its safe-haven status, which investors are increasingly seeking out amid ongoing international turmoil. With the Ukraine war and the Gaza Strip conflict still raging, the asset’s spot price has risen 3.2% year-to-date.
But the metal saw a much sharper increase since mid-February, and has added around $100 in the past week.
Filip De Mott
March 5, 2024
Gold Price Hits New All-Time High on Rate-Cut Hopes, Geopolitical Turmoil (businessinsider.com)
That was March 5th. This is the last 24 hours (as of about 9:00 PM PDT):
The all time high referenced in the article has been eclipsed by nearly 6% with the all time high of yesterday morning and yet a new one this morning ($2,268.26).
Gold is either outpacing inflation or inflation is much greater than the Fed is telling us.
I would think that in general gold should be essentially in sync with inflation.
I’ve been asking people, chat bots, and reading articles trying to find a reason I am satisfied with which would account for the rapid rise in the price of gold relative to the dollar in the last month. Nothing is particularly convincing. The following are in the order I find most likely to least likely:
Unless China is buying at a greater rate than previously none of those things are new in the last month.
See also:
Prepare appropriately.
Unlike so many people around the world, those of us that live in the United States were fortunate enough to grow up in a relatively civilized society. Unfortunately, we have turned our backs on the values that our forefathers handed down to us, and so now we are starting to find out what is beneath the thin veneer of civilization that we have all been taking for granted all these years. Our society is absolutely teeming with predators, crime rates are soaring all over the nation, millions of Americans are afraid to leave their own homes, and hordes of drug addicts are literally pooping in the middle of our streets whenever they feel like it.
Michael Snyder
December 4, 2023
We Are Starting To Find Out What Is Beneath The Thin Veneer Of Civilization That We Have All Been Taking For Granted (theeconomiccollapseblog.com)
It is not just a thin veneer of civilization, admittedly they are not orthogonal, but it is also a thin veneer of rationality as well.
Prepare appropriately.
I want an underground bunker in Idaho.
This is the price of gold forecast from J.P. Morgan on January 17, 2024:
It has not been below $2000 mid December and the asking price today was briefly over $2100. Via Gold Price Today | Gold Spot Price Charts | APMEX®:
I’m reminded of Dad and Brother Doug talking to grain buyers about selling crops from the farm. The buyers would explain, in great detail and confidence, why the price would go up/down and encourage the farmers to hold/sell accordingly. Almost without exception you could count on their advice being exactly backward to the best interests of the farmer.
