THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

The crisis I have been discussing and writing about for many years is the end of the current monetary era, especially in the West. The exponential growth of debt, which we have experienced since 1971 when Nixon closed the gold window, is reaching an uber-exponential phase in the current century with runaway deficits and debt. 

The likely course of events is unlimited money printing to counter an uncontrollable debt crisis. This leads to monetary debasement, high inflation or hyperinflation, which eventually turns into a deflationary collapse of the financial system and depression. 

THERE CAN BE NO CLEARER SIGN OF THE END OF AN ECONOMIC ERA THAN WHEN THE RESERVE CURRENCY DECLINES BY 99%.  

A possible alternative would be that the financial system implodes before the money printing has taken effect, with a subsequent deflationary implosion. This would mean a period without functioning banks and money. 

As this is the way every monetary system has ended in history, without fail, anyone questioning this inevitable outcome will be entirely wrong. It is only a question of when, not if. 

As the Austrian economist von Mises said:

As always in history, an economic crisis always goes hand in hand with political or geopolitical turmoil. 

When a country spends money it doesn’t have, starting a war is the most convenient way of creating new paper money, which, of course, has ZERO intrinsic value. 

Expanding credit or printing money does not create economic value, but buys time.

Money printing also buys votes. Reelection is the primary objective of any government in a democratic system.

Consecutive US governments have increased US Federal debt almost every year since the early 1930s. 

The current deficit is over $2 trillion, and tax revenue is only $5 trillion. With over $7 trillion in federal spending, the US government needs to borrow another 40% on top ($2T) to make ends meet.

I created the graph below in November 2016, when Trump was elected the 45th President of the United States. I forecast that 8 years later (whoever was president), the debt that Trump inherited ($20 trillion) would be $40 trillion in early 2025. I based the forecast on a simple extrapolation. Since 1981, US debt has, on average, doubled every 8 years. Well, the debt will probably not reach $40T by 20 January 2025, but still, it went up by $16T rather than the $20T that I forecast. 

More importantly, as the graph below shows, debt has increased 44X since 1981, but tax revenue has only increased 6X to $4.9T.  

Can anyone explain how this debt will be repaid? The standard reply is that governments don’t need to repay their debt. 

Well, let me again cite history, which is such a useful empirical tool. 

Throughout history, a country which has not repaid its debts has, without fail, always defaulted, and the currency has gone to ZERO. 

No one must believe that it will be different this time!

A monetary crisis at the end of a major cycle leads to economic collapse, poverty and misery. 

However, this current financial cycle is already developing in parallel with a geopolitical crisis of a magnitude and scale that could be greater than those of WWI and WWII. 

GEOPOLITICAL CRISIS 

The financial and geopolitical conflicts are clearly linked. As in many armed conflicts, the US has been involved since WWII, although the country is not directly threatened.

This has been the case in Vietnam, Afghanistan, Iraq, Libya, Syria and Ukraine. 

Most of these wars are about fear of losing the US hegemony. The US government subscribes to the 1904 Mackinder theory that whoever controls the Heartland controls the world. The Heartland is the area of Eastern Europe stretching to the Yangtze River in the east and the Himalayas in the south. This area has massive natural resources. 

Syria probably just fell to opposition groups backed by Turkey in an attack supported by the US military. Interestingly, the latest conflict started the same day as the ceasefire between Israel and Lebanon. Clearly, it’s not a coincidence. 

So Turkey, which for a while has ridden two horses, a Russian and an American, has now taken the US side. 

Turkey is a NATO member and also a prospective BRICS member, among others, Russia, China, Iran and India. 

With Turkey now on the US side and against Russia, we see the first military conflict between the West and BRICS.  

Nobody knows if Syria will regroup again with Assad in Moscow and the soldiers deserting the army. For the Russia – Iran axis, Syria is strategically critical. But Russia cannot win that war with just air power and most probably does not want to divert resources from Ukraine. 

Thus, we now have yet another crisis in the Middle East, a situation with dire consequences for the area and the world.

So we are likely to see continued war in Syria, with anarchy and the rise of more jihadist groups. 

As Thanassis Cambanis, a senior fellow at the Century Foundation, said: “In the best case scenario, Syria’s factions will struggle for primacy through contained local battles. At the other extreme, the collapse will spur a renewed period of total warfare in which factions target civilians.”

So, it is likely that more Syrian people will be homeless and migrate to Europe and the US. As we know, no Western country has the capacity to take care of these people, so again, another humanitarian catastrophe has hit the world. 

Losing access to Syria and the Mediterranean has weakened Iran, which will look for other options. The danger has always been that Iran blocks the Strait of Hormuz, which would lock in 24% of global oil. The US could not stop this. It would lead to oil prices at least doubling or more and a major global depression. 

The UAE (United Arab Emirates), which includes Dubai, is right by the Strait of Hormuz. 

Personally, I have always been surprised that so many people move to and invest in Dubai, given the major geopolitical risk that this area carries.

The world is in a severe war cycle, which, at best, will include insoluble and intractable wars in the Middle East and Eastern Europe with both the US and Russia involved. And at worst, a nuclear war.

I was always of the opinion that the Ukrainian conflict is a war Russia is very unlikely to lose. And neither the US nor European NATO troops have sufficient resources to win a war with boots on the ground. 

Russian missiles are currently superior, but anything can happen in a nuclear conflict.

In a nuclear war, there is no winner, and that could be the end of the world, so it is not worth speculating about the outcome of such a war.

THE TRIUMPH OF DEATH

Peter Bruegel painted the “Triumph of Death” in 1562. 

Currently, the world, and especially the West, is on a path to geopolitical and economic destruction.

No one knows how this will end. Even if it takes years, the world is unlikely to be the same once these two cycles have run their course. 

I have already stated that the end of the current economic cycle will be devastating for the world but bearable relative to the worst outcome of the war cycle. 

I had a hope that Trump would settle the Ukrainian situation if the US Neocons didn’t manage to escalate it severely before January 20. 

However, the Middle East conflict, with Iran involved, makes the situation much more complex, even with Trump’s best intentions. 

I always believe in finding solutions, but it is hard to be optimistic when the two Cycles of Evil prevail so strongly. 

At least anyone who has savings should take action to protect these against the coming implosion of financial assets. 

MARKETS

Stocks in the US are massively overvalued. 

The Buffett Indicator, US Stocks to GDP, is at 208%, an all-time high.

Just a normal correction would be a 50% to 75% fall.

The Price Earnings Ratio of Nasdaq stocks is 49X. 

A decline of at least 80%, like in the early 2000s, is likely. 

Obviously, bubbles can always grow bigger before they implode. 

However, the risk of a market collapse sometime in the next few months is extremely high.

Inflation will rise rapidly, as will interest rates, driven by money printing. 

The US 10-year treasury will greatly exceed 10%, as in the 1970s. 

WEALTH PRESERVATION 

Finally, gold will continue to reflect the destruction of the dollar and most currencies. 

Gold in US dollars is up 10X in this century. It is likely to rise by multiples from here as money dies. I explain why in this article: THE CASE FOR GOLD IS INCONTROVERTIBLE.

Gold must be held in physical form and outside the financial system with direct access to your gold. And preferably in a safe jurisdiction outside your country of residence. 

Finally, especially in periods of crisis, helping others and having a close circle of family and friends is more important than all the gold in the world. 

THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

It was always inevitable that the GOLD price would reach $ 1 million!

So, now we are there.

The price for a 400-ounce gold bar has now reached $ 1 million.

It reached $ 1 million on August 16, 2024 – 53 years and 1 day after the US (Nixon) permanently said farewell to the dollar as a store of value by closing the Gold Window.

Let’s just recap what has happened to the cost of a 400 oz gold bar since 1971:

So, has the value of gold gone up 71x since 1971? (71x$14,000=$1M)

No, of course not. The dollar has collapsed by 98.5%.

Or, if we look at it differently:

That is a loss of purchasing power of 98.5% over the 53 years between 1971 and 2024.

Just think about it: If you put $14,000 in the bank in 1971 and earned, say 4% on average, that would be $116,000 today. A far cry from the $ 1 million that the same amount invested in gold – REAL MONEY – would be worth. 

So, what does closing the gold window actually mean? 

It simply means that after August 15, 1971, the dollar could no longer be converted to gold by any investor, private or sovereign.

FOLLY OF THE WEST

Before we look at the fatal consequences, let’s just look at the Folly of the West.

First, we see the West’s  prediction of the consequences as interpreted by Nixon on 15 August 1971:

WISDOM OF THE EAST

And below follows the Wisdom of the East (Mao) as written by the official Government body, the People’s Daily:

So the US (Nixon) said, “Your dollar will be worth as much tomorrow”.

And China said, “These measures mark the collapse of the capitalist monetary system with the US dollar as its prop”.

So the West is only interested in instant gratification, issuing debt and thus buying short-term prosperity and votes, leading to “decay and decline”. 

DECAY AND DECLINE OF THE WEST

So, let’s look at the “decay and decline” of the US and the West reflected perfectly in the fall of the US dollar.

Here is the performance of the dollar since August 1971:

Nixon said in 1971 that the “strength of the currency is based on the strength of the economy”. 

Hmmm…

A 98.5% fall in the value of the dollar (in real terms, against gold) since 1971 can hardly be called “worth the same”. 

Measuring the dollar against gold is the only correct method to determine the real purchasing power of the dollar. To measure currencies against each other serves no purpose. All that tells us is which currency will win the race to the bottom. 

What will destroy the dollar and all Western currencies, will be the exponential growth of debt led by the US.

US ROAD TO PERDITION 

The table below shows the inevitable road to perdition that the US dollar’s is now on:

With debt up 82x since Nixon closed the gold window in 1971 and GDP only up 26x, it is not difficult to see that the US engine is running on empty. 

Just look at the super-exponential phase of debt since 2009, the year that the Great Financial Crisis was supposed to have ended. Since 2009, US debt has trebled, while GDP has only doubled. 

But it has, of course, not ended at all. 

More and more debt is required to create growth. Consequently, since 1971, US debt to GDP has gone from 39% to 122%. 

Over 90% of Debt to GDP is considered junk, and 122% is Banana Republic territory.  

But it won’t stop there. 

A pure statistical extrapolation of the debt trend tells us that by 2036, the debt will be $100 trillion. 

I have explained many times how fast the exponents’ phase of a dot crisis and currency collapse develops:  “THE REAL MOVE IN GOLD & SILVER IS YET TO START”

The conclusion is simple. 

The US government, together with all Western governments, are destroying the fabric of society by constantly spending more than they earn. Even the word “earn” is deceitful.

Governments don’t earn anything. They will just wilfully levy taxes and other charges against the people without their consent. After decades of suffering from high taxes, people are entirely “socialised” and expect the government to pay for everything. 

Do the people of the US and Europe want to send $100s of billions to Ukraine? Do they want to pay similar amounts for the immigrants, many of whom get preferential treatment when it comes to housing, social security, hospital treatments, etc? 

Well, nobody knows what the people want since they are never asked. But I doubt they would approve this spending if they had a say.

WHERE IS THE MONEY COMING FROM?

Nor does anyone ask where all this money is coming from. It definitely hasn’t been earned by the government. 

The government doesn’t even have the money it is paying out. It just creates money out of thin air and creates ever-increasing deficits that lead to exponentially growing debts. 

The people are pacified since they believe that the government is paying. Nobody understands that all this debt is owed by the people. 

CONSEQUENCES

But they can, of course, never afford to repay it in taxes and other levies. Nobody understands that the consequences will be the value of money dropping catastrophically, poverty, famine, shortages of many items, homelessness, social unrest and probably war. 

And once a country reaches that stage, the government is powerless. They are bankrupt and have no funds to assist anyone. The risk of anarchy is high since the government will have few tools to maintain law and order. 

So, how can we predict such a dark period? It requires no predictive powers but just a study of history. Please read “THE DARK YEARS ARE HERE II”,  a 2018 update of my 2009 article. It was even more important today than it was in 2018.  

Just take the US government’s mismanagement of the country’s finances as the inevitable journey to serfdom. With a handful of exceptional years, the US has increased the Federal debt since the early 1930s. Even during the so-called “Clinton surplus years”, the debt went up. So, the surpluses were fake.

AN ILLUSORY FANTASY GAME

As current growth is derived from creating debt with ZERO intrinsic value, the growth is only illusory. 

The world will soon understand that it is all a fantasy game, with trillions of unreal assets created by even more trillions and quadrillions of debt (including derivatives) made out of thin air. 

In the next few years, the world will realise that debt has zero value since neither sovereigns, corporations, or individuals can repay their debt or even afford the interest. 

Remember that the official global debt is around $350 trillion plus a big part of the derivative time bomb which could be into the quadrillions. Much of that will transition to debt. 

As the debt implodes, so will all the bubble asset values. 

The billionaires will lose all or most of their zeros (of their wealth), and so will the trillion-dollar companies. 

The wealth transfer will be shocking. The wealthy have the most to lose. Some have been clever and are debt-free. But most are leveraged and will lose everything. 

Everyone will suffer, rich or poor. However, the poor and ordinary people have the most to lose with no reserves, no safety net, and a bankrupt government that can’t help them. 

The few who have understood that future prosperity comes from natural resources will obviously be in a better position. Technology will also be a growth area, but it is currently overvalued, as it was in the 1990s. 

The asset-rich BRICS countries will be major beneficiaries, whilst the debt-infested West will experience the end of a major era. These are all major shifts that will evolve over decades and even centuries. 

But the beginning could be very rapid and most probably violent for the whole world, West and East…

So many factors come into play. 

Economic decline, financial collapse, wars, political and social unrest, poverty, food shortages, as well as mass migration led to major cultural shifts. 

So how can we be so confident that all this will take place?

Well, that is what history tells us with great certainty. History never lies, and it never fails us as lying politicians do, without exception, for their political survival.

But history doesn’t tell us when, of course. So, the exact timing is always unknown. 

We also know that the world has never experienced a global debt bubble of such magnitude. 

So, the timing is almost irrelevant. 

It’s important to understand that the risk is now higher globally than at any point in history. 

DOLLAR, GOLD AND EXCHANGE CONTROLS 

As I have outlined in this article, a continued and steep dollar decline in the coming years is a virtual certainty. 

As there has been no gold window to close since 1971, the US government is almost certain to implement foreign exchange controls as the dollar falls. I wouldn’t be surprised if it comes relatively soon, but the timing is irrelevant. The risk is here today and now is the time to prepare for it. 

Thus, for Americans, it would be an advantage to have funds or assets outside of the US as soon as possible. Physical gold and silver are clearly the best assets to hold as they also protect against the dollar debasement. 

Switzerland and Singapore are obvious places to hold gold. Switzerland has a strong currency and a very sound economy. Exchange controls would be unlikely here. 

What is extremely important is not to hold your precious metals through a US company or other entity, which the US government can order to return the gold or silver from a foreign vault to the US. 

Instead, hold your metals through a Swiss or Singaporean company that has no US links. 

MOST PEOPLE CAN AFFORD SOME GOLD OR SILVER

For anyone who has savings, big or small, putting them into physical precious metals can make the difference between survival and misery. 

Most people can afford to buy a few silver coins every month, and many can afford one or more small gold bars or coins. 

With the acceleration of the dollar’s (and other currencies) debasement and shift in Central Bank reserves out of dollars into gold, the revaluation of gold in coming years will be by multiples. As I keep on saying, the real move in the gold and silver hasn’t started yet. 

But above all, a harmonious and close circle of family members and friends is crucial to survive the difficult times ahead.  

THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

In this latest Gold Matters discussion, VON GREYERZ principals Egon von Greyerz and Matthew Piepenburg squarely address the rising symptoms of a financially and politically unstable financial system reaching the end of an openly embarrassing cycle reminiscent of prior cycles, from Ancient Rome to today.

Piepenburg gives an American perspective on the dispositive evidence of an American crisis, citing the toxic levels of both governmental and consumer debt data. In addition, signals of a looming banking crisis (underwater UST collateral combined with massive credit risks and non-performing loans) and dangerously narrow equity markets suggest far more pain than pleasure ahead for families, citizens and investors.

As von Greyerz reminds, however, the stressors and failures facing the US extend well beyond its borders into Europe and beyond. The EU merely (and wrongly) follows US policies to their own detriment, whether in terms of monetary reactions to Fed policies or foreign policy fiascos, including the backfiring sanctions against Russia. Meanwhile, signs of open political fractures in the UK, France, Germany etc. increasingly suggest that majority rule (i.e. democracy) in Europe has been eclipsed by a patchwork of coalition governments (from London to Paris) which make less and less sense. Instead, this open and sustained level of political mediocrity (from DC to Brussels) is just more evidence of a political and financial system in open decline and at the end of a cycle.

Piepenburg shares similar concerns, and underscores the fact that financial and political disaster is not a looming or pending event, but one taking place in real time—i.e.: Right now.  It is often hard, he says, to see history playing out when one is right in the middle of it, but the changes we are seeing in markets, banking, inflation and, of course, currencies are “frog boiling” us toward clear financial decline.

This currency “frog boil”, of course, has massive implications (from both math and history) for owning physical gold outside a precarious banking system and held privately in one’s own name. Given that gold is not only real money, but “nature’s money,” the case for something natural rather than man-made makes historical and common sense, as it is the one asset that man can not create (or distort) at will.

THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

Between politics (driven by self rather than public servants), markets (driven by debt rather than profits) and currencies (diluted by over-creation rather than chaperoned by a real asset), it is fair to say we live in not interesting but surreal times.

But amidst the surreal, the dollar, as many believe, is our rock, our immortal albeit often unloved constant.

The USD: Too Big to Fail?

Whatever one thinks of the dollar, we can’t deny its centrifugal force, exorbitant privilege and entirely unequaled market power (from the current SWIFT and Eurodollar systems to the derivative and petrodollar markets).

And even as broken, debased, inflated (and inflation-exporting) as the USD is, its place as a world reserve currency (with 80%+ of global FX transactions) is firm.

More importantly, the USD is a currency (base money) that only the Fed can print into existence and which the rest of the dollar-thirsty and dollar-indebted world (i.e. Eurodollar markets) can only lend into existence (like a second derivative credit currency) in a perpetual dollar-roulette of “debt and print” or “debt and lend.”

This effectively makes the USD the world’s base money (and denomination) for the vast majority of derivative global debt instruments, which means everything else (including Eurodollar lending) is essentially just credit-related.

 And because credit makes the $330T debt-world spin, the USD, by extension, makes the world spin.

In short, one might argue the USD is too big to fail, right?

The Immortal Greenback?

Given the baked-in global demand and credit role for this otherwise diluted super-dollar, the national and global system which it has ruled since 1944 will thus likely and only end (save for a miraculously peaceful Plaza Accord 2.0) in some form of what Brent Johnson rightfully described as “profound violence—economic and/or military.”

But according to the dollar bulls, even a collapsing system and, hence, tanking US bond market, would send UST yields to the moon and, hence, the USD (ironically) even higher. 

In short, no matter how some spin it—the dollar is king, and every central banker in DC knows this, right?

After all, such dollar realists have discovered the hard truth through the lens of realpolitik global finance: The dollar, love or hate it, is the base money of the global financial system and, as such, will be “the last to fall.”

Gold Backing? 

As for any return to a gold-backed dollar, those same realists would remind us of the infamous 1896 “Cross of Gold” case laid out by William Jennings Bryan, who warned that with a dollar tied to gold, credit would eventually tighten to such levels that the average citizen and small business would be left bleeding credit-dry in the streets.

Furthermore, there’s the equally realistic stance that no country would want to be tied to a gold chaperone (or “standard”) for long, as this would only impede their sovereign ability to mouse-click their own currencies into existence when needed (i.e., whenever backed into a self-created debt wall).

Money, and hence the USD, they ruefully conclude, will therefore be whatever the strongest country (bully) on the block says it is, and like it or not, the US and USD are still flexing the strongest biceps in the global neighborhood, right?

Assuming Nothing (or History) Ever Changes

But each of the foregoing (and reasonable) conclusions only hold true if one assumes that the US is and remains the strongest bully (and money) on the block.

The evidence of history, however, which is dynamic rather than static, may suggest otherwise.

For now, however, the dollar matters most to many.

China, Russia, or India, for example, may be important, but few of us can or would predict that the yuan, ruble, or rupee will replace the greenback.

I certainly don’t.

So again, the USD will remain the king of liquidity. 

And even for those who take de-dollarization seriously, will the BRICS+ nations really be able to agree to a gold-backed BRICS+ currency redeemable in, say, Moscow or Shanghai?

I have my doubts—for the simple reason that as much as the BRICS+ nations collectively distrust the now weaponized USD, they don’t trust each other enough to relinquish their option to print their own currencies at will.

But that doesn’t end the discussion on gold’s new and rising role in a changing dollar/world.

Going Around Rather than Replacing the Dollar

For me, debating a gold-backed new currency or “end of the dollar” drama thesis is missing the bullseye. 

The facts and evolving history of today and tomorrow suggest that the real story is not about replacing the dollar, but simply going around it in a new price direction paved in both black and real gold.

Toward that end, look at what the rest of the world and its central banks are doing, not what they (or our financial leadership) are saying:

• Since 2008’s GFC, Putin has been hoarding gold;
• Since 2014, global central banks have been net-sellers of USTs and net buyers of physical gold;
• In 2023, 20% of global oil sales were outside of the USD;
• Despite being pegged to the USD, Saudi Arabia, the UAE, and other GCC nations’ favorite import out of Switzerland this year is physical gold;
• More than 44 nations are currently executing trade settlements outside of the USD;
• Both Japan and China, historically the most reliable buyers of Uncle Sam’s IOUs, are now dumping billions and billions worth of them;
• Russia is the world’s greatest commodity exporter, and China is the world’s greatest commodity importer—and they like each other far more than they do Biden or the next White House resident; more importantly, it is a matter of national survival for China to buy oil outside the USD;
• Russia is now selling oil to China in yuan, which the Russians then use to buy Chinese goods (once made in America); thereafter, any delta in the trade is net settled in gold (not dollars) on the Shanghai Exchange. This, folks, is BRICS scalable (think India…);
• Between swap lines, the CIPS alternative to the SWIFT system and rising negotiations between Gulf oil nations and other BRICS+ big-whigs, the current move away from dollar-denominated oil trades is real rather than imaginary;
• Given the growing decline of physical gold and silver levels in the New York and London exchanges, they can no longer price fix gold as in the days of yore, nor can they justify a different 200 moving day gold price than one more fairly priced in China’s exchange;
• The BRICS+ nations are no longer USD pawns but rising rooks. Their share of global GDP is surpassing that of the G-7;
• In 2023, the Bank of International Settlements declared physical gold a tier-one asset alongside the 10Y UST;
• Nations are openly (and naturally) preferring gold as a reserve asset over the other “tier-one” option–a dollar-based IOU of “risk-free-return,” which by any honest (current and future) measure of inflation offers a negative real yield, in other words: “return-free-risk;”
• No matter how enamored the green crowd is of ESG, we are decades and decades (as well as trillions and trillions) away from carbon-neutral, and like it or not, energy matters and fossil fuels literally fuel the world;
• China and India each have populations of over 1.4B. If oil demand increases even slightly in either of these BRICS countries, oil prices in rupees and yuan (and every other fiat currency) will explode—and two of the biggest players in the oil space don’t want to use dollars to pay for it. Instead, they’d prefer to net settle their oil and gas in gold, which buys more energy than dollars can;
• Given that the annual production capacity for oil is 12-15X that of global gold, and with gold increasingly becoming the favored oil payment, gold’s price relative to oil can only go up;
• This explains why gold is openly (not theoretically) becoming a more trusted reserve asset than the UST:

In short, Energy matters, and rather than the USD being the base layer of money (see above), energy very well could be. 

And THAT, folks, is how a system changes “violently and or militarily,” as most US direct and proxy wars have something to do with…oil.

And that oil, by the way, is increasingly being net-settled in gold—day by day, and minute by minute, for the simple reason that history is like a hockey puck: You play where it is headed (gold), not where it sits (the USD).

The Other Bullies Are Coming Together

Returning to the prior assumptions of the Immortal Dollar thesis above, if money is whatever the strongest bully/power says it is, what happens to the previous notion of “money” when a collection of rising and resource-rich bullies/powers (BRICS+) is growing stronger, and their preferred focus is oil and not the dollar?

What happens after a neutral reserve asset is weaponized against a major nuclear power and energy exporter (Russia) already in financial bed with the world’s largest energy importer (China)? 

The answer is simple: That once “immortal” reserve currency is less trusted and hence less in demand.

Is it any coincidence, for example, that after DC weaponized the USD, the BRICS+ roster of nations increased to include the major oil exporters?

Is it a coincidence that Saudi Arabia’s crown prince, whatever you think of him, gave Biden a fist-pump and Xi a warm handshake?

And let’s be blunt: Does anyone truly believe oil is irrelevant? That American wars (direct or indirect) with Iraq, Libya and Syria were about protecting freedom and democracy? 

Or might these conflicts have had something a bit more to do with energy in general and oil in particular?

What the US elite doesn’t want you to know is that oil matters more than dollars, and that more countries today would rather pay for that oil in gold.

And do we think the Saudis haven’t noticed that gold-backed oil sales are significantly and historically more stable than dollar-backed oil?

Is it, therefore, a coincidence that since DC weaponized the USD, global central banks have been stacking gold at historical levels?

Is it a coincidence that more and more nations are net settling commodities and other trade deals in gold rather than dollars?

Is it a coincidence that nations and their central banks would rather save in gold (a finite asset of infinite duration) rather than US IOU’s (an infinite asset of finite duration), whose returns can’t beat inflation and whose purchasing power, even in dollar terms, has fallen greater than 98% when measured against a milligram of gold since 1971?

Is it a coincidence that within 2 years of de-coupling the USD from gold in 1971, DC desperately raised its interest rates and strengthened its dollar so that Saudi Arabia et al. would agree to force the world to buy oil in strong dollars, thereby creating forced demand for an otherwise over-supplied/printed USD?

But is it also just a coincidence that 50+ years (and a 98% weaker dollar later), Gulf nations like Saudi Arabia are now slowly turning away from that petrodollar after a generation of seeing it debased by over $100T in US public, private, and household debt—all of which has made an increasingly unloved UST increasingly unable to withstand further rate hikes and hence dollar-strength?

It’s Good to Be the King

But as per above, the smart bankers at the Fed and big banks still want us to believe the dollar is king, and that despite all its flaws, the great straw-sucking demand from a dollar-centric world is precisely what makes the greenback too big to fail.

But what if the world is energy rather than dollar-centric? And what if the BRICS rise is more than a chimera but a new puck direction?

Think about that. No one in DC or Wall Street wants you to.

Pride Comes Before the Fall

The certainty that tomorrow’s dollar will remain yesterday’s dollar is, in fact, a dangerous sign of hubris (and historical ignorance) before the fall.

After all, if we can see the decline of the USD’s purchasing power since 1971, can’t others?

And if we can see that UST returns are losing (technically defaulting) to current and future inflation, can’t others?

And if we can see that the fake liquidity (QE or other) required to pay Uncle Sam’s rising bar tab will continue to be highly inflationary (and dollar-debasing), is it not reasonable to assume that the rest of the world can see this too?

Going Around Rather than Against

In fact, and based on what is being done rather than said, the rest of the world appears to see precisely what we are seeing.

The BRICS nations are not seeking to destroy or replace the dollar. Instead, and like the Germans facing the Maginot line, they are already and openly going around it.

How?  

By using local currencies for local goods which are then net settled in a timeless asset: Gold.

And if we can see that holders of gold can purchase significantly more energy (i.e., oil or gas) with gold ounces and kilos than they can with American dollars and USTs, is not at least reasonable to assume that gold’s role as a trade settlement asset will have higher demand as the USD suffers declining demand?

And if demand for the USD as a net trade settlement asset continues to fall rather than rise, is it not equally plausible (if supply and demand forces still apply) to suggest that tomorrow’s dollar may be weaker rather than stronger?

Two Crowns: The Timeless vs. The Temporary

And even if we were to concede the milk-shake theory’s reasonable postulate that despite all its blemishes, the dollar will be “the last to fall,” the simple fact remains that regardless of whether it falls or fails “last,” it is already being repriced, even if it may never be fully replaced?

Finally, and perhaps most importantly (and obviously), even if the USD remains “king” relative to all other fiat currencies (and this matters if you live in countries—like Turkey or Argentina-where your currency is far weaker), we can still objectively see, again, that gold holds its value even better than that USD “king.”

In short, there’s a far better “king” than the USD—it was always there. 

The central bankers just don’t want you to see it. 

And this precious king has a crown of gold rather than paper.

Which king will you choose?

THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

The rise in the gold price this spring was undoubtedly spectacular. In just a few weeks, the gold price rose by almost 20% in USD terms, with a gain of 21.7% for the first half of the year alone. In EUR terms, gold increased 16.4% in the year’s first six months.

The showdown in the gold price we predicted in the In Gold We Trust Report 2023 has passed. What is remarkable is that all of this is happening in an environment where, according to the previous playbook, the gold price should have fallen. The collapse of the correlation between the gold price and actual interest rates raises many questions. In the old paradigm, it was unthinkable that the gold price would trend firmer during sharply rising real interest rates. Gold and gold investors are now entering terra incognita.

Traditional  correlations are breaking down

In addition to the high negative correlation between the gold price and US actual interest rates, the once strong link between investor demand from the West and the gold price has dissolved in recent quarters. Given gold’s record run, one would have expected ETFs to register record inflows. First, things turn out differently, and second, they unfold contrary to expectations: from April 2022 to June 2024, there was a net outflow of almost 780 tons or 20% from gold ETFs. The old gold playbook shows gold should be around USD 1,700, given the fall in ETF holdings.

Consequently, a vital element of the new gold playbook is that the Western financial investor is no longer the marginal buyer or seller of gold. The significant demand from central banks and private Asian investors is the main reason why the price of gold has thrived even in an environment of rising real interest rates.

A reduction in gold ETF holdings when actual interest rates rise is undoubtedly a rational decision from the point of view of the players in the West, provided they assume that:

1. They are not exposed to increased counterparty risks and, therefore, do not need a default-proof asset;
2. Actual interest rates will remain positive in the future, and a second wave of inflation will not occur;
3. They suffer opportunity costs if they underweight traditional asset classes such as equities and bonds or even “concrete gold” (=real estate) at the expense of gold.

In our opinion, all three assumptions should be questioned – and that sooner rather than later.

The marginal actor in the gold market moves from West to East

The global East, on the other hand, is becoming increasingly important. This is hardly surprising given that the West’s share of global GDP continues to decline due to weakening growth and an ageing population.

In addition, many Asian countries have a historical affinity for gold (India and the Gulf States, mainly, are worth mentioning). Still, China is increasingly discovering its preference for gold.

In 2023, demand for gold jewellery totalled 2,092 tonnes. China accounted for 630 tonnes, India for 562 tonnes, and the Middle East for 171 tonnes. Together, these amounts to almost two-thirds of the total demand. Of the nearly 1,200 tonnes of gold bars and coins that were in demand in 2023, almost half went to China (279 tonnes), India (185 tonnes), and the Middle East (114 tonnes).

Gold is also benefiting from other developments. China is discovering gold as an alternative retirement provision precisely because of the structural problems in the real estate market. Gold in beans is currently trendy, especially among China’s youth. The strong demand for gold from Asian central banks is another pillar of this epochal change. These changes are also why certainties, such as the close correlation between the gold price and actual US interest rates, are disintegrating.

Central banks are becoming increasingly crucial for gold demand

Central bank demand accelerated significantly in the wake of the freezing of Russian currency reserves immediately after the Ukraine war outbreak. As a result, central bank demand for gold reached a new record high of over 1,000 tons in 2022, which was only narrowly missed in 2023. Q1/2024 was then the strongest first quarter since records began. It is, therefore, hardly surprising that the share of central bank demand in total gold demand has increased significantly: from 2011 to 2021, the share of central banks fluctuated around the 10% mark, whereas in 2022 and 2023, the share amounted to almost 25%.

The profound distortions triggered by the sanctioning of Russian currency reserves will keep central bank demand for gold high for some time. This is also shown by the recently published World Gold Survey 2024 by the World Gold Council (WGC). According to the survey, 70 central banks assume that central bank gold reserves will continue to grow. Geopolitical instability is the third most crucial reason for central banks’ investment decisions. And geopolitical instability will undoubtedly be with us for some time to come.

The debt bomb is ticking – also increasingly in the West

We are entering a new era, particularly evident from developments in the countries with the highest total debt (government, non-financial corporations & households).

Japan occupies the inglorious top spot with just over 400%. The dramatic fall in the value of the Japanese yen -12.3% in the first half of 2024, -32.6% in the past five years and even around 50% compared to the almost all-time high in 2012 – is a symptom of Japan’s increasing imbalance. Accordingly, the economic thermometer in the form of gold prices in the Japanese yen is beating intensely. At the end of June, the gold price had risen by 28.7% since the beginning of the year. Since 2023, it has increased by just over 50% and around 165% since 2019.

France is in second place worldwide and first place in Europe with 330%, making it a much bigger problem child than Italy, which is much maligned in the media. Italy’s total debt is around 80 percentage points lower. The unclear political situation following the surprising election victory of the far-left New Popular Front in the new elections to the National Assembly unexpectedly called by the French President will further exacerbate France’s debt situation.

In addition to the continued, highly loose fiscal policy, the US is in an increasingly tricky domestic political situation just four months before the presidential elections, following the disastrous performance of US President Joe Biden in his first TV debate with his predecessor and challenger – Donald Trump. This will also make solving the US debt problem more difficult, especially as Donald Trump, who is leading in the polls, described himself as the “king of debt” a few years ago. An easing of the situation is, therefore, not to be expected. On the contrary, the next major debt crisis could affect some leading industrialized nations.

The new 60/40 portfolio

The investment environment for gold investors has fundamentally changed. The reorganization of the global economic and political order, the dominant influence of emerging markets on the gold market, the reaching of the limits of debt sustainability, and possibly multiple waves of inflation are causing gold to appreciate. It is, therefore, also time to adapt the traditional 60/40 portfolio to these new realities.

Aside from gold, we also see other alternative asset classes, such as commodities and Bitcoin, as beneficiaries of the new gold playbook. Therefore, we are convinced these two asset classes are indispensable in preparing a portfolio for the new playbook. A suitable portfolio comprises 60% equities and bonds + 40% alternative asset classes.

Our interpretation of the new 60/40 portfolio for long-term investors provides for the following allocation:

Stocks	45%
Bonds	15%
Stocks + Bonds	60%
Safe-haven gold	15%
Performance gold	10%
Commodities	10%
Bitcoin	5%
Alternative Assets	40%

Source: Incrementum AG

This marks a clear departure from traditional 60/40 portfolios. Of course, this positioning is not a rule set in stone but rather a guideline based on current market conditions and will evolve with time and changes in the currency environment. The new playbook applies as long as we are in a period of currency instability characterized by vast debt burdens and above-average inflation volatility. In other words, a higher proportion of hard currencies seems necessary until we return to an environment with a stable hard currency – be it a sovereign hard currency or a gold/Bitcoin standard.

Conclusion

We are currently witnessing a fundamental transformation. Old certainties are fading; established strategies are failing. The willingness to question established patterns of thought and break new ground often requires courage, but for those who recognize the signs of the times and dare to change, implementing the new gold playbook opens the door to growth and stability.

In principle, the new gold playbook suggests that the portfolio’s allocation to alternative asset classes should be higher to align appropriately with changes in the investment environment.

THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

In this compelling conversation with Tom Bodrovics of Palisades Gold, VON GREYERZ partner, Matthew Piepenburg, bluntly dissects the empirical realities from the main stream fantasies regarding the risk-asset and economic narratives making the current headlines. He touches upon risk asset facts, the deep implications of debt-to-GDP levels globally, the real rather than sensational consequences of ongoing de-dollarization and the now undeniable fact that gold is replacing the UST as a global reserve asset.

The conversation opens with a candid assessment of the common denominator (and common sense) reality of unsustainable debt and its now obvious ripple effects on all the current narratives and debates regarding stocks, bonds, currencies, deflation/inflation and sound vs. fiat money, all of which culminate in a realistic and sober discussion of gold. 

As Piepenburg reminds, the outsized risks in credit and equity markets (from scary “private credit pools” and “low-yield” junk bonds to dangerously narrow/tech-meme-driven stock indexes) can no longer be relegated to the cynicism of “gold bug” thinking, as even the finest minds in the stock and bond markets are drawing the same clear conclusions. 

Piepenburg makes an equally blunt case for the risks facing paper money in a global backdrop of open currency debasement. He shares his views on how even the “smartest money” in the room continues to deny or avoid these realities by measuring their wealth in currencies (melting like ice cubes) and chasing yield in increasingly more dangerous corners of the credit and equity markets. 

Toward this end, Piepenburg gives his views on family office dynamics and allocations derived from direct managerial experience and a host of recent conversations around the world with many principals in this space. Their relatively low allocations to physical gold in a world otherwise replete with debt, risk-asset and currency risk is fascinating yet otherwise understandable given how fundamentally misunderstood gold remains as an asset class. 

Piepenburg holds nothing back in explaining just how and why gold is in fact intentionally misunderstood by many of the most sophisticated investors.

THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

With the collapse of the Western financial and political systems now happening before our eyes, wealth preservation takes on a totally different meaning. 

As political parties, currencies, stocks, bonds and other bubble assets fall, the indisputable winners will be gold and silver.  

The world and in particular the West is now entering a period of political and social unrest that signifies the end of a major era. 

It is the consequence of deficit spending, major debt expansion, currency debasement, inflation leading to political and economic turmoil and misery.  

Politics in the West are already a total mess. Whatever party gets into power, the deficit spending will accelerate, probably exponentially. That is certain in the UK with the new Labour led government, in France with a motley coalition government and in the US where one candidate might end up in jail (or become president) and the other one is too senile to stand for election. In either case, the US will have an insoluble debt crisis. 

What a mess!

Financial markets will, in coming months and years, reflect this mess. 

Geopolitical risk is of course also significant. A major war is a big risk, even nuclear war. But leaders of China, Russia and the US are of course aware of the finality of nuclear war and only an “accident” is likely to start one. But there are so many new ways of modern warfare as drones become so much more sophisticated. 

Even more effective are Cyberwars. China, Russia and the US all have the ability to immobilise computer, electronic and electrical systems to the extent that major parts of countries and even the world would be totally paralysed. In today’s sophisticated world, virtually nothing would function without computer systems – financial markets including banks, travel by any means, shipping, supply of goods including food, telecommunications, internet etc, etc. 

It is quite frightening how in the last 50-60 years the world has become totally dependent on electrical and electronic systems without which we could quickly go back to the Stone Age.

 WARS WITH STICKS AND STONES

As Einstein said:

Sadly, certain humans in power have an innate instinct to self-destruct so Einstein’s prediction is not so unrealistic. 

Also, the world is now for the first time in history in possession of weapons such as cyber, drones and nuclear that can all virtually end life on earth.

POLITICAL TURMOIL

Anyone elected to President, Prime Minister or Chancellor in the West in the next few years is likely to at best stay in the position for a full term but more likely to be thrown out before that. 

For example, the newly elected UK Prime Minister Keir Starmer won an overwhelming majority in parliament with only 33% of the vote. Even more remarkable is that 80% of all people eligible to vote did not support him. 

Well, a day is a very long time in politics. Five years ago, Labour lost so big to the conservatives that no one thought that Labour would come back in the next decade or two.

The US will have a similar problem after the November election. As it looks now Trump will win although a lot can happen before then. But even if Trump wins, he will probably have a thin majority. So around half of the people will be against him. And if a Democrat would win (definitely Biden will not stand) the Trump supporters would never accept the result. 

And in France Macron suffered a devastating defeat in the first round. Macron (on the tricycle below) is now a lame duck president. But he is still arrogantly behaving like the French Marshall Foch in the Battle of the Marne in WW I who famously said: “My centre is giving way, my right is retreating; situation excellent, I am attacking!”  But Macron is certainly no Marshall Foch. 

Still through skilful political manoeuvring, Macron might succeed in being part of a new coalition government with feeble support both from the right and the left. 

So, the order in the caricature below from the first week has now reversed although Le Pen’s National Rally is the biggest party.  

A WEEK IS A LONG TIME IN POLITICS

Yes, a week is a long time in politics as desperate leaders cling on to power. By the time France holds the presidential election, Le Pen now has a bigger chance of winning. But it is not unlikely that the coalition collapses long before then. 

What is important to understand is that new governments are seldom voted in. Instead, it is the sitting government which is voted out. The Brits had had enough of the Conservatives, the French hate Macron, the Germans don’t respect Scholz and the US people are in the unenviable position to choose between two octogenarians (or a new democratic candidate), neither of which is respected by the rest of the world. 

Historically these political upheavals always happen at the end of an era whether it was Rome, France, Ottoman or the British to mention a few. 

Currently we are seeing the fall of the US empire which is financial rather than territorial. Most European governments are slaves or more appropriately lapdogs under the US might and follow virtually all US dictates whether they are financial like FATCA (Foreign Account Tax Compliance Act) or political like freezing and confiscating Russian assets.

But as the US lead debt bubble bursts, their financial and military superiority will rapidly evaporate. 

WITHOUT WEALTH PRESERVATION THERE WILL BE WEALTH DESTRUCTION 

For 25 years I have stood on a soap box, advising investors about the importance of wealth preservation in the form of physical gold. During that time, gold as a share of world financial assets has stayed at 0.5% in spite of the fact that gold has outperformed most asset classes including the S&P 500 with dividends reinvested.

Between 2000 and today, the S&P, including reinvested dividends, has returned 7.7% per annum whilst gold has returned 9.2% per year or 8X.

As the world approaches the end of an era, it is fascinating to watch the (un-)awareness among fellow investors. 

Having recently spent a couple of days at a family office conference and given a speech on wealth preservation and gold, it is discouraging to observe the total lack of fear and or awareness of risk. 

More wealth has been accumulated by the average investor than ever in history. Most investors believe that they are masters of the universe and that their investment trees grow to heaven.

For these investors wealth preservation means spreading risk between a number of investment classes such as stocks, bonds, private equity, property etc. 

A typical spread for a Family office is: Stocks 32%, bonds 18%, private equity 18%, property 10%, cash 10%, hedge funds 6% plus a total of 3% in gold, precious metals, art, commodities and antiques. 

It could be argued that up to 80% of the above asset classes are correlated since they are affected by credit expansion or money printing.  Cash is also correlated as it declines in real terms (measured in gold), the more money supply expands. 

US DEBT UP 59X SINCE THE GOLD WINDOW WAS CLOSED

The graph below shows US total debt going from $1.7 billion in 1971 to $100 trillion today. 

As the graph shows, the stock market needs a continuous injection of the debt drug to function and grow. 

This is how US successive governments buy votes. Just expand credit to artificially inflate stocks. It is amazing how far you can get in a successful Ponzi scheme before investors discover that the whole market rests on quicksand.  But it won’t be long now. 

GOLD’S INEVITABLE RISE

A simple method for measuring the massive wealth destruction and transformation that especially the West will experience in coming years is the DOW – GOLD ratio.

Back in early 1980 this ratio reached 1 for 1.  Thus, Gold was $850 and the Dow index 850. The long term trend line now targets a ratio of 0.5 for 1. 

As the graph shows, that could be gold $10,000 Dow 5,000 or it could be gold $ 20,000 and Dow 10,000. 

As we enter the golden era with BRICS countries increasing their purchases continuously and central banks selling US treasuries to buy gold. 

No country and no central bank will in future hold dollars as a reserve asset. 

Physical gold is the only proper reserve asset, just as it has been throughout history. 

Also, the total of US held gold has on average been 40% of US treasuries outstanding. 

Today it is only 7%. 

If gold were to reach the average level it needs to be revalued 6x at least – a gold price of $16,000

And if gold were to reach the 1979 – 80 level of 140% gold need to be revalued 19x to over $40,000.

Silver could move twice as fast. 

These are obviously not forecasts but the consequence of gold returning as a reserve asset and also to historical norms. 

But investors should not focus on potential targets for gold or silver.

Instead, just think of gold as financial life insurance which just as throughout history will at least preserve investors’ assets but most probably also enhance them. 

The only question is what percentage of financial assets to hold in gold.

In my view 20% is a minimum but bearing in mind the magnitude of the coming crisis, 50% or more might be the cheapest insurance that investors can buy.  

Remember to only hold physical gold and silver stored in the most secure vaults and the safest jurisdictions. 

THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

In this extensive interview with Adam Taggart of Thoughtful Money, VON GREYERZ partner, Matthew Piepenburg, addresses a wide range of market forces impacting investors in an almost surreal 2024 of rate tensions, credit vulnerabilities, currency (USD) shifts and geopolitical unknowns. The interview includes a “post-script” analysis of Piepenburg’s observations by two independent portfolio managers worthy of careful attention.

Piepenburg is concerned by an almost “over-confidence” in gold, which the cynical see as “gold-bug book-talking” rather than common sense conviction. That is, every vertical–from credit, equity, recession, inflation and historical indicators–all objectively and plainly point toward precious metals entering the early chapters of an historical reckoning and bull market. This is largely due to unprecedented debt levels which will require increasing currency debasement to monetize the same. In short, and for nations like the US (and its dollar): It’s inflate or die.

As for equity markets, Piepenburg is concerned by their narrow leadership and an S&P whose charts look dangerously familiar to prior bubble/burst cycles like the NASDAQ of 2000. Although he recognizes and addresses the case for further, blow-off, highs, he feels far more concern for mean-reversion risks which outweigh the potential rewards of near-term gains, all of which, if achieved, would only occur at the expense of the dollar’s inherent purchasing power.

Piepenburg is equally, if not more concerned, with the “blood sport” of the US bond market, from corporate to sovereign credits, none of which’s yields are beating actual rather than deliberately mis-reported inflation. The risks in private credit pools and private equity “valuations” are especially alarming yet dangerously overlooked by the majority of yield-desperate yet risk-blind investors. This is followed by a blunt discussion on inflation and recession realities which Main Street feels far more honestly than Wall Street “reports.”

Of course, the key risk is currency debasement, the evidence of which is everywhere but deliberately ignored by the consensus-think banking and portfolio advisory circles. Piepenburg and Taggart discuss the West’s denial of these open risks in contrast to the views Piepenburg has observed among Eastern investors. He sees de-dollarization not as a BRICS “Plan B” but a patiently practiced “Plan A” to slowly but steadily trade outside the USD and net-settle in gold. This is not fable but ignored fact, as clearly evidenced by Eastern central banks stacking physical gold and dumping USTs.

Piepenburg’s observations are subsequently (and independently) reviewed by the portfolio managers at New Harbor Financial for further perspective.

THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

I spend a lot of time tracking the ripple effects of embarrassing and unsustainable debt levels on our credit markets, rate markets, equity bubbles, inflation metrics and, of course, the daily-debasement of our currency’s inherent purchasing power.

Inevitably, I round that all up with the role precious metals play in insuring against the same.

But there’s more to debt than gold and other financial conversations.

We All Cherish Our Children’s Future

Global and national debt forces have a ripple effect on far more than portfolio returns; they affect our kids.

For anyone blessed to parent a child, there is no greater love, no greater joy nor any greater vulnerability and source for endless concern.

This is intuitive, axiomatic and universal. As John Kennedy said (hauntingly) just weeks before his own death in 1963:

“For, in the final analysis, our most basic link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal.”

But what does cherishing our children’s future have to do with the current state of the global and financial markets?

Invisible and Visible Forces

Love for family, friends and partners of all stripes (despite its painful lessons, mistakes and contradictions) is the most important yet invisible wealth. As Saint-Exupery’s Little Prince reminds, “the essential is invisible.”

But there are other invisible forces, from politics to inflation, which have a direct bearing on our collective well-being from one generation to the next.

And if we were to pause to reflect on the hard math of unprecedented debt, openly (criminally?) failed monetary policies and a US-lead global economy falling to its knees in deficits and the concomitant currency destruction which always follows, it would seem, at least at an “economic” level, that we and our leadership do not hold a very high regard for, well—our children…

Below, we soberly consider the evidence that the prior generations (including my own) seem to be collectively thinking more of themselves and less of the next generation.

Really?

Passing the Buck and the Bill

When a once-great nation like the U.S. reaches a debt-to-GDP ratio of 120%+, when its national balance sheet has trillions more in unfunded liabilities (210T) than it does assets, and when its own Congressional Budget Office confesses that its social security and Medicare budget will be tapped out by 2030 unless we print more money, we should be concerned about the reckoning—i.e., the bills to pay.

And when the holder of the world reserve currency runs an annual twin (budget and trade) deficit of $3T and counting, or mis-reports actual inflation to achieve a carefully hidden negative real return on its IOUs to inflate its way out of debt on the backs of the working poor, we should not only be concerned about the bills to pay (and who pays them), but also consider the neutered profile of the “bucks” used to pay them.

But perhaps such concerns feel less immediate to the Baby Boomer et al generation who, knowingly or unknowingly, can (via the help of an increasingly geriatric leadership) simply pass this embarrassing tab on to the next generation?

The Club Baller…

If I, for example, wanted to flaunt my status at the nearest “Popinjay Club” by arriving in the latest fashions and fastest car while indulging in the most elaborate and consistent dinner tabs, polo fees and trendiest wine selections, I suppose I’d have the right to spend as I please and flaunt my “success.”

After all, I am a capitalist, and like all capitalists, who doesn’t prefer first-class over economy seats?

But what if I lived this life for years, smiling through every chucker, wine bottle and sports car only to leave this world in my sleep at ripe ol’ age while leaving the entire invoice to my kids?

That is, what if I enjoyed it all, but then made them pay for it? What if I thrived so that they could suffer?

Seems insane, no? Diabolical? Selfish beyond belief? Absolutely grotesque at the micro level.

But here’s the rub: At the macro level, that is precisely what the older generation of American financial “leadership” is now doing to the younger generation.

The Past Thrives, The Future Suffers

As a nation, my generation has thrived–mostly on debt, extend-and-pretend monetary policies, grotesquely (debt-driven) inflated market bubbles, feudalistic rather than capitalistic wealth transfers, and entirely myopic politicos—so that our collective children will be stuck with the bill.

This is not fable but fact, this is not sensational, it’s merely historical.

And as every sober economist or thinker from David Hume, von Mises or even Reinhart and Rogoff to Mark Twain or Ernest Hemingway already knew: A nation which lives on debt for decades of joy leaves the next generation with decades of pain–all in the form of unsustainable expenses paid for with debased paper money.

Any who understand the fantasy of MMT, the open crimes of the US Fed and its various (direct and indirect) forms of “liquidity” (from QE and Operation Twist to the Reverse Repo Markets, Supplementary Leverage Ratios and the Treasury General Account) already knows: We are expanding our debt while weakening our dollar.

And that, folks, is a double whammy for our children and grandchildren.

Enjoying the Punch Bowl, Transferring the Hangover

How we got here is simple.

For generations, we as a nation have been getting drunk (and re-elected) on debt at levels far beyond our national income (as measured by tax receipts or GDP).

In short, prior generations enjoyed the Fed martinis (and even a Bernanke Noble Prize) while the next are left with the hangover and the tab.

And what does this “drunk phase” look like?

Well, drunk is fun, and it makes a nation appear all warm and happy and seemingly care-free. It also makes us a bit greedy, as we keep putting the drinks (fake liquidity) on a credit card whose pains and costs are less noticed so long as the punch bowl is constantly re-filled and the bill ignored.

To help this sink in, let’s add some data to the drama.

Data Point 1: Greed

As for greed, America in particular has had it in spades.

When my grandfather was an executive at Ford long before my birth, the aggregated CEO-to-worker compensation ratio for the largest publicly traded companies was 20-to-1.

Today (Statistica data below) that ratio has leapt to 340-to-1.

And in the case of those oh-so essential (Main-Street-destroying/Sherman and Clayton Act violating) executives at Amazon, the ratio is a staggering 6,474-to-1.

Again, I’m a capitalist, but such wealth inequality and c-suite greed are not the products of a fair playing field and an equal access to credit or genuine, capitalistic competition.

Instead, it’s an open symptom not only of individual psychopathy but of insider advantages based on credit and legal mechanizations that far more resembles a case of modern feudalism than traditional capitalism.

Scott Galloway described it as a generation focused on “increasing compensation while reducing accountability,” as the $34M annual salary of BOEING’s CEO, for example, makes comically apparent.

Data Point 2: Stock Markets

But let’s not forget the oh-so rigged playing field of the US stock market, of which 90% of its actual wealth belongs to the top 10% of the population, most of whom came of age in the aforementioned “greed” generation.

This wealth effect is largely due to a generation of Fed chairs who never let a market dip suffer too long before reflating the same with money literally created out of thin air.

I came of age when Greenspan sold his PhD to the highest bidders on Wall Street, sending rates to the floor and building a credit-driven tech bubble 1.0 which allowed my generation of young dragon-slayers the chance to buy Amazon, Apple and Netflix at single digit share prices.

By contrast, today’s market-tracking youth (the very few who can even afford to speculate after tech sirens) are chasing blow-off tops in a meme-familiar NVIDIA comedy.

Yesterday’s policies, from bank bailouts (Wall Street socialism) to the current (oxymoronic) narrative of “debt-based growth” ($35T and ticking), have led to the greatest wealth inequality and poorest “next gen” population in US history, yet Powell openly denies that the Fed has anything to with this.

Hmmm.

Data Point 3: The Cost of the American Dream

Unfortunately, our kids already feel what Powell’s demographic often ignores.

The last two U.S. generations, for example, are making less money on an inflation adjusted basis, while their cost of living, on everything from unaffordable housing to grotesquely rigged (debt enslaved) tuition goes higher.

My generation saw public university as an option, with an average admission rate of 27% and student debt at 31% of first-year incomes.

Today, however, those public education admission rates have sunk to 6% yet the debt percentage of first-year salaries has skyrocketed to 53%.

This objectively means that less and less young people can access and afford a real education, which Thomas Jefferson understood as the foundation to our nation’s future.

Sadly, most current 20-somethings can’t afford that future and have lost both hope and faith.

In my day, the average house price to first-year income was 4.4x, today it’s 8.5x.

For the first time in American history, 30-year-olds are not doing as well as their parents were at 30, which suggests that the social contract from one generation to the next is now officially broken.

But as Galloway also observes, the results of this broken contract are far more than economic.

He argues that the inequities (or national bar tab) passed to this generation are “incendiary,” creating a collective sense of undeserved “rage and shame” that finds its current, splintered and identity-obsessed expression in everything from MeToo, BLM and LBGTQ to the highest self-harm (especially among women), overdose, teen depression, gun death and suicide rates in our history.

The young are even having statistically more problems finding someone to sleep with, which stems more from depression, tech-induced isolationism and growing tribalism (self-censorship) than from natural biology…

In short, economics do impact society, and when those economics are characterized by the highest debt levels ever recorded in history, the consequences are not theoretical but appallingly real.

Data Point 4: Political Zombies

As for politics, it should be obvious that our so-called leadership is hardly representative of the coming generation, but an openly embarrassing (and power-holding) representation of their own generation (interests).

Galloway, who observed that “DC has become a crossroads between the land of the dead and the golden girls,” calls our top leadership options the “walking (or in Biden’s case, stumbling) dead,” as the following images remind (average age: 80.5)

This is not “agism” but power-ism, and though it is nice to see that senior poverty is down from 17% in the 70’s to less than 8% today, the fact that child poverty has risen to 19% in the same era should make even my generation pause.

But let’s not blame everything on the old faces…

The New “Success” Icons?

The few new faces of the latest generation to make “success headlines” and motivate today’s youth have more than just a little bit of a problem with being financial or social role models…

The damage that “success stories” like Adam Neuman or a socially-troubled Mark Zuckerberg have done to the coming generation are not to be missed.

That censoring and profoundly toxic “compare me” site otherwise known as Facebook, for example is, in my opinion, one of the worst things to infect our country since the 1916 Influenza.

The Wealth Transfer is a Debt Transfer

The foregoing and highly complex financial, political, social and generational concerns all stem from something as otherwise “academic” and straightforward as debt.

Prior generations have been gorging on it, and coming generations will be paying for it—not just in absolute or nominal terms, but far more invisibly yet insidiously in real, inflation-adjusted returns.

This is because central bankers will continue to steadily devalue the inherent purchasing power of their national currency with inevitably rising levels of mouse-clicked, fiat “money,” the ultimate (but largely invisible) insult to our children’s and grandchildren’s generation.

Since 1989, the 70+ group has expanded its share of national Household wealth by 58%, whereas the share of wealth held by those under 40 has fallen by 42% in the same period.

This is not by accident, but policy design. And it’s not because Americans don’t love their children, but because those making financial policy decisions just love themselves even more.

My kids often tell me they aren’t keeping up with dad when I was their age.

But unlike their dad, their generation was born with a politically-culpable debt canon ball chained to their ankles which was unlike anything my generation knew in our 20’s or 30’s.

Most of my children’s generation are working harder for less, and yet they somehow think it’s their fault.

It’s not.

The new generation inherited a $93T (public, household & corporate) debt nightmare and we gave it to them.

THE EVIL CYCLES OF WAR AND ECONOMIC DESTRUCTION 

At the end of a monetary era a number of dominoes will keep falling, initially gradually and then suddenly as Hemingway explained when asked how you go bankrupt.

Some of the important dominoes the world will see falling are: Political, Geopolitical, Currency, Debt and Investment Assets.

The consequences will be unthinkable – Social Unrest, War, Hyperinflation, Deflationary Implosion of Assets, Debt Defaults and much more.

But when things settle down, there will also be offsetting forces such as the emergence of powerful BRICS nations often backed by commodities.

Gold will play a major role during this process. Both central banks, sovereign wealth funds and investors will turn to gold as the most stable part of a crumbling system. This will lead to a fundamental revaluation of gold. As more gold cannot be produced, increased demand can only be satisfied by higher prices.

The likely result will be a revaluation of gold by multiples.

FALL OF THE LEADERSHIP DOMINO

Inept leaders and lack of statesmen are the typical prerequisites for these periods and thus one of the falling dominoes.

I have always argued that a country gets the leaders it deserves.

As we get to the end of one of the worst periods in history, both financially and morally, weak leadership exists in most major Western economies.

So, let’s look at the motley crew of world leaders and their unpopularity.

Political leaders will not only be thrown out at elections but also before their period is finished.

The recent European election is a typical example of a failed system. Most ruling parties are being rejected and in many cases parties on the right gain popularity.

Just look at the picture above from the recent G7 meeting in Italy. With the exception of Italy’s Meloni, the remaining G7 leaders have disapproval ratings of 57% to 72%.

With elections in the UK & France this year, the ruling parties are guaranteed to lose. The French Presidential election is not until 2027 so Macron could be a lame duck for 3 more years. The French people are unlikely to accept that and might force him out before then.

Whoever is elected in France, the powerful trade unions are likely to bring the country to a halt.

UK’s Sunak is one of Britain’s most ineffective leaders in history. But the new Labour Prime Minister, Kier Starmer was not even seen to stand a chance 2-3 years ago. He will not be voted in, but Sunak will be voted out by the people. Next will be a very dark period in UK history with high taxes, high debt, poor leadership and political instability and hard times.

The US situation today is even worse, with a president who seems incapable of taking any decisions. Instead, the US is led by an unelected and unaccountable group of neocons who tell the president what to say and what to do. But even that is difficult for Biden to execute. Just his recent appearance in Italy at the G7 meeting confirms that.

He can obviously not be blamed for being senile. But he should no longer have the ultimate power.

The US election is likely to be a disaster. Looking at the poor health of Biden, it is unlikely that he will stand for re-election in November. Kamala Harris will clearly not stand for election. It would not be surprising to see Hillary Clinton ushered in as the Democratic candidate. Although Trump is loved by around half of the people, he is hated by the other half and thus a very divisive choice. And a rerun of the Clinton – Trump election could easily lead to trouble or insurgence in the US whoever wins. 

Germany’s Scholz’ coalition might not make it to the 2025 election due to its unpopularity and the decline of the German economy.

In summary, the political stage will be a total mess in coming years and lack of strong leadership will not only bring political unrest but also social unrest.

FALL OF THE CURRENCY & DEBT DOMINOES

The currency domino has been falling ever since Nixon closed the gold window in 1971.

With high spending and deficits on top of Debt to GDP above 100% in many nations, the West in particular is facing a very dark period with galloping debt growth and collapsing currencies.

This will lead to debt defaults, bank defaults, more printing, higher interest rates and still higher deficits.

All currencies will accelerate their debasement process.

In such a scenario, there will be no winner. It is possible that the dollar due to demand will be slightly stronger than other Western currencies at least for a period.

But a temporary relative strength of the dollar should be totally ignored. There is no prize for coming 2^nd or 3^rd to the bottom. All currencies will lose dramatically in real terms which means against gold.

We must remember that we are now in the final collapse of the current monetary system. Since 1971 all currencies have lost 97-99% in real terms which means GOLD!

The final 1-3% fall (100% from now) will take place in the next 3-8 years. So, yet another currency system will be laid to rest.

This one lasted since 1913 so a bit over a century. Its demise was predestined the day it was born. It was only a matter of time. As always in history, the consequences will be much more far reaching than just the death of Money.

Debt and currency collapses happen hand in hand. They are partners in crime and are the inevitable consequence of sustained government deficit spending.

After a period of unlimited currency printing, the financial system will fail partly or totally.

Political and social unrest also follows, possibly civil war.

Governments under economic pressure normally start a war or escalate an existing one to divert the attention from domestic problems. A war is also a good excuse for printing more money.

FALL OF THE ASSET DOMINO

Initially there will be high inflation, possibly hyperinflation and high interest rates. Thereafter as the system implodes, inflated asset prices in stocks, bonds, property etc will crash by 50-100% in real terms.

Most sovereign bonds (if they are printed) will serve best as wallpaper.

I rate the chances of this chain of events taking place as very high, especially in the West.

Financial, economic, political and social collapses of this kind are nothing new as they have happened throughout history, albeit not on a scale of this magnitude.

FALL OF THE NUCLEAR WAR DOMINO

Will we have a nuclear war?

We obviously don’t need to worry about this option since if we have a global nuclear war, there will be very few, if any, people left on earth.

As the world potentially moves as close to a nuclear war as it can without starting one, we must ask ourselves, WHO IS RUNNING THE WORLD?

Well, no one individual of course. But the US leadership is probably the main contender when it comes to dictating, at their whim, to any country in the world.

This can be starting wars in a country which is no threat to the US. It can be controlling the global financial system through the dollar or regulating the banking system via edicts like FATCA requiring the world to report any dollar transaction to the US authorities. It can also involve coups in countries which the US leadership finds unacceptable or even eliminating enemies.

It can be sanctions or freezing of assets against countries whose actions the US leadership disapprove. The list is endless.

What is interesting is that the US people never has a say in any of these decisions. All the actions above and many more are taken by the US president and his advisors with zero accountability to the people.

None of that would be possible in for example Switzerland where people power rules through direct democracy.

What the world should ask itself is: How does it solve the extremely serious situation the world is in?

I am not talking about the Ukrainian war which, as Trump has indicated, could be stopped within a few days if the US stopped sending weapons and money to Ukraine.

Putin recently made it clear that what Russia wants is to keep the Russian speaking areas of Eastern Ukraine and no NATO membership for Ukraine. But no one is interested in exploring this.

Instead, there has just been a peace conference in Switzerland where neither Russia nor China was present. Such a conference is a total waste of time and money.

Without two of the mightiest military and economic powers on earth, one of which (Russia) is directly involved in the war, this conference will achieve absolutely nothing.

This is just posing for the cameras with a bland meaningless statement at the end.

So instead of these useless conferences, the leaders of China, Russia and the USA should get together to end the Ukraine war and then tackle the real problems facing the world like poverty, famine, crime, drugs, debt etc, etc.

Imagine what the combined brain power and resources of these countries could achieve assisted by many more nations.

But sadly, that is a dream that is unlikely to be realised.

Much easier to print money and start a war rather than to find REAL and sustainable solutions to the major global problems that the world is facing.

So, world leaders have a choice – pick up the phone and talk to your fellow leaders or start a war.

What sane leader would choose nuclear war before a small loss of ego and peace?

WEALTH PRESERVATION FOR FINANCIAL SURVIVAL

So, what can investors do to protect themselves?

Some DONT’S are obvious, like:

Don’t keep most of your wealth in a fragile banking system whether in cash or in securities –

With many banks likely to default, it might take too long before your assets are released, if ever!

Bail ins or forced investments are likely in government securities at low interest rates and for extended periods like 10 years or more.

Don’t hold sovereign bonds –

Many governments will default.

Don’t bet on inflation reducing your debt –

High interest rates or indexation of loans might make it impossible to repay borrowings.

Don’t forget that stocks have been inflated by massive credit expansion which will end.

The list of don’ts in the biggest global debt and asset bubble in history and is of course endless.

So, some DOs could be more useful –

Do hold a lot of physical gold and some physical silver in safe jurisdictions like Switzerland and possibly Singapore outside the banking systems –

Precious metals must be held in very safe non-bank vaults, in your name with direct access to the metals.

To minimise confiscation or freezing of your metals, best to keep them outside your country of residence.

Hold a meaningful amount of physical gold and silver –

Most of our clients who are HNW wealth preservation investors have more than 20% of their investment assets in gold and with a smaller percentage in silver due to its volatility.

Gold is up 9-10x in this century in most currencies, still.

THE REAL MOVE IN GOLD AND SILVER HASN’T STARTED YET

The move away from the dollar as the global trading currency is likely to accelerate over the next few years.

BRICS countries are whenever possible settling bilateral trading in their local currencies with gold as the ultimate settlement money. This will be a gradual move away from the dollar. At some point the move will accelerate as the need for trading via another nation’s currency will be seem superfluous, especially since final settlement can be in gold.

As I have made clear many times, the US confiscation of Russian assets will lead to central banks no longer holding dollar reserves but instead gold will be the only acceptable reserve asset.

The move by Central Banks to gold as a reserve asset will lead to a fundamental revaluation of gold over the next few years to a price which will be multiples of the current price.

The major increase in demand can only be satisfied by higher prices and not by more gold since the world cannot produce more than the current 3,000 tonnes p.a.

In my 55-year working life I have experienced 2 major bull markets in Gold.

The first one was from 1971 to 1980 with gold up 25X from $35 to $850.

The second one started in 2001 at $250 and has only started a move which will reach multiples of the current price.

 

But my 55 years of gold history is just over 1% of the long-term bull market in gold.

Since the emergence of the fiat money system, the gold bull market is sadly more a reflection of governments’ mismanagement of the economy leading to ever growing deficits and debts. In such a system, the price of gold mainly reflects the chronic debasement of paper money.

Governments and central banks are gold’s best friend.

They have without fail always destroyed the value of fiat money, by debasing the currency through deficit spending and debt creation.

For example, in the Roman Empire around 180 to 280 AD the Denarius Silver coin went from almost 100% silver content to 0%, replacing the silver with cheaper metals.

This obviously leads to the question, why should anyone hold fiat or paper money?

Well, in a sound economy with no deficits, virtually no inflation and a balanced government budget, holding cash that yields an interest return is absolutely fine.

But the world has not experienced such Shangri-La times since 1971 when Nixon closed the gold window.

Still, even at $2,320 today, gold in relation to money supply is as cheap as in 1970 when it was $35 or in 2000 when the gold price was $300.

WEALTH PRESERVATION AND LIFE’S PRIORITIES

With the falling of the dominoes outlined above, most people in the world will experience a lot more hardship than currently.

For anyone with savings, whether it is $100 or $100 million, wealth preservation should be a top priority. Gold and some silver in physical form safely stored outside the banking system should be an absolute priority.

As we encounter difficult times, helping family and friends is more important than anything else. This will be extremely important in order to deal with the trials which we will all encounter.

And please don’t forget that in addition to family and friends, some of the best things in life are free such as nature, books, music and hobbies.