Of all the things I’ve observed in my three decades of financial market watching, none baffles me more than the idiocy of the Charlie Brown-like “traders” that buy paper gold and silver contracts on the COMEX, only to have the “football” pulled out by “Cartel Lucy” time and time again.
Albert Einstein put it best when he defined insanity as “doing the same thing over and over again, and expecting different results”; and in my view, nothing is more insane than betting against a “house” run by the government, with the explicit goal of destroying you. Which is why, amongst the countless fundamental reasons silver has bottomed – at a decidedly “higher low” – it’s no coincidence the COMEX “commercials” are covering en masse. And who do you think they’ve been buying back their (illegal, naked) shorts from? Yep, said Charlie Brown speculators; who, per this chart, are now stuck in their largest silver short position since…drum roll please…the ultimate bottom in December 2015 – when the Fed first started “raising rates,” I might add.
In other words, the odds of a strong move higher are very high, in my view – let alone, amidst a continuing dollar plunge; stagnant interest rates, near the low end of their six-month range; a U.S. economy on the brink of recession; a dead-in-the-water Presidency, fighting fiscal and political brigands from all directions; and massive, global geopolitical instability – as evidenced by yesterday’s largest UK terrorist attack in more than a decade.
This weekend’s Beijing summit cemented the ominous fact that U.S. hegemony is dying; and now that, LOL, Angela Merkel is calling the Euro “too weak” whilst Donald Trump laments the “too strong” dollar, the pressure for the Western investment community to hedge dollar weakness will likely generate strong paper gold and silver demand. This will serve as a tailwind for the sector, but the fact remains that paper Precious Metal trading is ultimately the dog’s tail; which, whilst “wagging the dog” in today’s futures-dominated pricing scheme, will ultimately be dictated by inexorably tightening conditions in the historically tight physical market.
By the way, since yesterday’s Audioblog was published, here as some of the dramatic PiMBEEB headlines of the past 24 hours alone. Aside from the aforementioned largest UK terrorist attack –which ISIS has taken credit for – since 2005, that is.
- Greek debt relief deal collapses, putting it one step closer to bankruptcy
- Rumors that South African President Zuma will be removed from office
- New Trump budget deal declared dead in the water by numerous Congressional Republicans, setting up another prolonged budget battle (as the debt ceiling rapidly approaches)
- Shocking Spanish Socialist Party election result sets up potential for new snap elections, Catalonian secession acceleration
- Asia’s largest commodity trader, Noble Group, on brink of collapse
- In ominously recessionary sign, China’s bond “double inverts”
- China imposes 95% sugar import tariffs
- Largest auto-backed loan issuer, Banco Santander (of Spain), only verified income on 8% of new auto loans
- Obamacare subsidy battle to go back to court, further delay repeal/replace legislation
- Dramatic plunge in U.S. new home sales, Richmond Fed Manufacturing Index
OK, now that said “housekeeping” is out of the way – as frankly, it’s mentally exhausting confronting the tsunami-like swarm of ominous news flow, no matter how empowering it is to my investment positioning – I can get to today’s extremely important topic. Which, for long-time readers, is not a new revelation; but instead, a synopsis of the “investment thesis” I have adopted in the past year, given the dramatic acceleration in the demise of fiat currency confidence, on a worldwide basis, and the impact the rising crypto-currency wave will likely have on future views toward, money, “monetary assets,” and the role of governments and Central banks in future “monetary systems.”
It started with my July 2014 article, “is gold money? Who cares?”; in which, I first hinted of my skepticism regarding the potential for a new “gold standard” when the current, historically destructive fiat Ponzi scheme inevitably, and violently, implodes. Clearly, in the back of my head, a realization that governments would no longer be trusted to administer any monetary systems – and Central banks, “monetary policies” – was starting to emerge.
“No, I am not waiting for a utopian, gold-backed monetary system – much less, a Star Trek world where money is no longer needed. Instead, I am simply waiting for the universal realization that gold and silver are the only assets capable of offsetting hyperinflation. In other words, while future monetary systems are not set in stone, the hyperinflation emanating from this, history’s largest ever fiat Ponzi scheme – is guaranteed. Literally, hundreds of trillions of soon-to-be-worthless fiat currencies – or at best, dramatically devalued – will be competing for the minuscule hoard of available for sale physical PMs; not to be used as ‘mediums of exchange,’ but to save investors from bankruptcy.”
In the ensuing three years, even I have been awestruck by the destruction caused by government monetary policies – from the hyperinflation of Venezuela, to the negative interest rates of Europe, and the Hari Kari destruction of the Yen. On average, the world’s 180 fiat currencies have lost half their purchasing power since the 2008 crisis alone; and given the accompanying, exponential debt explosion, the process of fiat purchasing power destruction must accelerate, ad infinitum.
Moreover, the level of political deception, market manipulation, geopolitical tension, social unrest, and economic decay – in my view, rooted principally in said monetary destruction – have surged to unprecedented levels; not to mention, the utter abomination the “Cartel’s” daily gold and silver suppression’s have become. To the point that, if there was any remaining belief that a “gold standard” could eventually be reborn from the fiat ashes, administered by one or more governments, it has been completely, and irreversibly, dashed. I mean, every gold standard ever enacted has been destroyed by lying, thieving, governments – for the exact same reasons every fiat standard has been destroyed. Thus, why would it be any different now – given that governments have never been more lying, thieving, or incented to renege on the monetary authority vested in them? This, per the referenced July 2014 quote, without any consideration for what monetary “alternatives” might be available – if any.
Thus, when crypto-currency emerged as a major monetary “threat” last year, said “alternative” came into focus. Not that it will occur overnight, of course; but trust me, given the pace of technological innovation taking place, and the aforementioned acceleration of fiat currency decline – and confidence – it could take a lot less time for decentralized currencies to be accepted than most can imagine. Some of which, like Bitcoin, may start to develop monetary properties as well. That said, my principal concern – both professionally and personally – is crypto-currencies’ impact on Precious Metals; which didn’t take long for me to interpret, per my May 2016 article “Precious Metals and Bitcoin – twin destroyers of the fiat regime.”
My premise then, which has been dramatically reinforced since, is that crypto-currency is awakening the world to the realization that centralized, government-managed monetary systems are the root of the majority of the world’s problems, both past and present. Thus, the desire to circumvent governmental monetary destruction will only accelerate in the coming months and years. And while Bitcoin is the most modern form of monetary decentralization, gold and silver have been performing this role for thousands of years. Moreover, given the aforementioned issues with “gold standards,” the emergence of crypto-currency had the potential to not only reek havoc with – and potentially, violently destroy – history’s largest, most destructive fiat Ponzi scheme; but enable gold and silver to go back to what they have always done best; i.e, preserve wealth over generations, as a decentralized “monetary asset.”
By year-end, when Bitcoin prices started to really surge; taking countless “alt coins” with it as well; it dawned on me that like the Borg in Star Trek, Central banks would start to view crypto-currency as a true monetary threat. And thus, start to fight back – like the PBOC did in early January; when, with the offshore Yuan on the verge of collapsing below the key psychological level of seven to the dollar; as Bitcoin prices rocketed above $1,000 for the first time; they initiated draconian capital controls like prohibiting Bitcoin withdrawals from Chinese exchanges – which to date, have not yet been lifted. For that reason, Chinese exchange-traded Bitcoin trades at a significant discount to other Bitcoin exchanges – and more importantly, decentralized websites like localbitcoins.com. In other words, decentralization decidedly won out – which I assure you, will continue to be the case, no matter how hard governments fight back.
Consequently, I penned “why Bitcoin will make gold and silver go up” in December. Which, by the way, I prefaced with the following disclaimer.
“Neither Miles Franklin nor its principals specifically advocate the purchase of Bitcoin, given its highly speculative nature and numerous political and financial risks. Nor, for that matter, do they discourage it. That said, given my personal belief in Bitcoin, and its rising importance on the global monetary scene, I believe it highly relevant – if not necessary – to discuss its evolution in real-time. Moreover, whilst Bitcoin shares many monetary characteristics with Precious Metals, it is an entirely different asset class – with as many differentiation’s, both practically and investment-wise, as similarities. That said, while investment in Bitcoin is highly speculative in nature, so are many “paper PM investments.” In other words, no matter how you choose to invest, caveat emptor!”
In it, I espoused that, as governments become more and more “worried” about the threat crypto-currency poses to their increasingly vulnerable, and ultimately unviable, fiat Ponzi scheme, they’ll focus an increasing amount of their manipulative efforts trying to stop it. Which, as noted above, will ultimately fail due to the decentralized nature of cryptos like Bitcoin, which have no specific “attack vector” to exploit.
This, at a time when the “Cartel’s” vulnerability in its age-old gold and silver suppression scheme has never been higher – given surging monetary demand, plunging production, and historically low above ground, available-for-sale inventories. In other words, in the 15 years I have been fully invested in the Precious Metal sector, Bitcoin is, by far, the best “ally” gold and silver have ever had. Yes, said “allegiance” is completely circumstantial, but the fact remains that said “twin destroyers”’ increasing attractiveness, indisputably, is because they are decentralized, no matter what your personal definition of “money” is. Remember, we don’t own physical gold and silver for utopian reasons – but instead, to preserve our wealth over time; insure it against dramatic events that look increasingly more likely with each passing day; and profit, with potentially historic gains, from the Cartel’s inevitable – and perhaps, imminent – demise.
Which brings us to today, when crypto-currency interest has reached a manic stage, even as actual usage has yet to materially increase. This, at a time when global political; geopolitical; economic; and most of all, monetary risks have never been higher. And oh yeah, Precious Metal physical demand, led by the Eastern Hemisphere, is at or near record levels, whilst fiat currencies are serially collapsing, for a variety of seemingly varied, but ultimately identical, reasons. In other words, the trend toward decentralization of “monetary value” is rising, at a pace that sooner rather than later, I expect to become tsunami-like in its own rite. And while “future monetary systems” remain as unclear as ever, the “use case” for physical Precious Metal ownership has never been stronger, no matter if you consider it be be “money”; or simply, “monetary value.”