When Adam Smith penned his seminal work An Inquiry into the Nature and Causes of the Wealth of Nations, he discussed the concept of the “unseen hand” at work in markets. When he did that in the years leading up to 1776, he was writing to a West that was still predominantly Christian, so it had no problem recognizing the existence of unseen forces.
Fast forward to today, and much of the West is secular, rationalistic, and very much in denial that anything undetectable by the five senses or scientific instruments can even exist. In the realm of politics, hidden agendas might be acknowledged, but most analysts look at policies and political statements as highly indicative of a leader’s priorities and beliefs.
The only problem with that is that America has become a democracy when it was intended to be a republic. When universal suffrage was enacted, leaders were faced with answering to a politically uninformed populace and legions of low-information voters. (No disrespect intended. They were [and are] often intelligent and productive members of society.) These folks could be swayed by emotional arguments opposing hard-to-explain-but-necessary-to-implement initiatives. So even more of what was already the majority of political action moved out of the limelight, leaving only chosen soundbites and press conferences to convey intended messages.
Those sculpted messages are often incomplete or incoherent, so people look for the rest of the story. But people who spend too much of their time positing ulterior motives among politicians find themselves discredited–particularly if they make the mistake of insinuating or even (heaven forefend!) asserting that a conspiracy is afoot. Conspiracy theories are ipso facto evidence of mental disease in America, never mind that any given person in politics has opponents and that people naturally organize (even the bad guys–witness cartels, organized crime [could there be a clue in the name?], gangs, and even mobs).
So you’re pretty safe if you say that there are deals done behind closed doors or that there are some small-scale doings going on out of the public eye, but any assertion of major agendas being enacted in secret will make you a candidate for a white jacket with wraparound sleeves and a room with nice soft walls.
This dynamic has affected the right by causing most conservatives to fail to see the unifying theme behind Biden’s otherwise patchwork (and seemingly insane or incompetent) actions. People who have studied Russian history and are not afraid to see unpopular truths know that Biden has been furthering a revolution rather than merely a left-leaning agenda. It’s a revolution against the American Constitution and the Christian West, which both limit the power of leaders. If you look at it in that context, Biden’s actions assume a coherence that is otherwise totally lacking.
Naomi Wolf, when she was significantly more liberal than she is now, wrote a book setting forth the revolutionary playbook used by dictators. She thought Trump was using this playbook in his first term, but was savvy enough to realize early in Biden’s term that Biden was actually using the playbook.
That said, there is also a blindness that affects many on the left and in the what-you-see-is-what-you-get corps of analysts. These folks think that Trump is merely a buffoon who bumbles into heroic outcomes like Peter Sellers in The Pink Panther–this, despite the fact that he has become an exceptionally rich and successful businessman, and his unifying theme in his first term was in close concert with what he claimed he intended to do–make America great again.
This all probably sounds more adulatory than intended. This author has often cited criticisms and concerns about Trump, but credit where it’s due. The man plays a far more sophisticated game than most people suspect. Clearly, like King David in front of his Philistine enemy King Achish, Trump plays crazy with purpose. And just as clearly, it works, though it drives sophisticated people nuts–actually because it drives sophisticated people nuts.
All this to say that the future is anything but known, and should be anything but boring. There is much to say that things should turn around and start working now–good people in place, a leader who does productive things, lots of positive momentum. But there’s also much to say that things could go downhill from here–a dismal economic situation that is highly resistant to solution, a huge part of the population that is astoundingly self-absorbed and destructive, and powerful enemies that have an interest in going to war with us.
Where will things go from here? We don’t know. There’s too much hidden from view, which is why we advise investing with one eye on risk mitigation and the other on opportunities. Gold is simply the best investment for this, as proven by thousands of years of human experience and thousands of tons of central bank buying in recent years. Safety and opportunity are not just for the big guys. They’re for us, too.
Key Takeaways:
- Is China becoming Japan 2.0?
- Ideal policy sometimes requires ideal conditions
- Biden attempts to tie Trump’s hands with regard to Russian oil
- Likely changes in the economy offer many possibilities for metals investors
The McAlvany Weekly Commentary: Your Mission Critical Checklist For 2025
David and Kevin begin the program by inviting listeners to join David and Doug Noland on the January 30th Tactical Short conference call to review the 4th quarter of 2024. “Doug and I will tackle perhaps the toughest analytical mashup ever on our quarterly Tactical Short call.” Such calls’ stated purpose is to review past performance, but they always include plenty of analysis that will guide the team as it moves forward. A quick preview of some topics in the call: “The bond market, it’s vital and it’s already on the move. I think at this point, you could ignore the Wall Street narratives, and if you don’t, your losses will be catastrophic.” Also, “We’ve got China, the largest contributor to global GDP. It’s quickly moving towards a deflationary Japan 2.0.” The hosts discuss risk-on/risk-off dynamics in the markets, and where we’re heading now. They look at the carry trades with their leverage, and where they’re heading. They also look at the AI bubble, geopolitical risks, and liquidity. Then they turn to gold as insurance in such a dangerous time, and they discuss gold miners as investments, as well.
Credit Bubble Bulletin: Thoughts Ahead of Day One
Doug first looks at the role of bond vigilantes and the threat they pose to low-taxing, high-spending heads of state. To bore into the subject, he takes some of Scott Bessent’s comments from his confirmation hearing that spotlight the importance to Trump of tax cuts and reductions in discretionary spending. Doug responds, “I’m a strong proponent of free markets, fiscal prudence, low taxes, and limited government. Most unfortunately, this framework is hardly even germane at this stage of the cycle, as Credit and speculative Bubbles inflate out of control–as egregious inequality threatens societal and political stability. Unbridled finance is anathema to free market Capitalism.” To slam the point fully home, he adds, “Reining in deficit spending is critical. But the administration’s agenda of wedding government cost-cutting with aggressive private-sector stimulus is premised on the perpetuation of Bubble excess, including easy Credit conditions and booming markets. Such a gambit presents clear and present danger to bond market and system stability.” Doug also discusses market responses to the latest CPI print, bank health, the impact of inflation and global strife on the economy, Trump’s initiative on cryptocurrencies, and more.
Hard Asset Insights: Good for Gold
Morgan starts his letter this week with a comparison of the latest CPI print with its core CPI adjunct. The former looked slightly inflationary; the latter, non-inflationary. The market, of course, had its pick of narratives, and it unsurprisingly chose the optimism of the core print. Morgan doesn’t expect that optimism to last. He moves from CPI to other data that likely portends a meaningful slow-motion rollover from disinflation to inflation. He also discusses recent action by the now-former president, “Interestingly, with just nine days left in its term, the Biden administration finally levied the sanctions on Russian oil and gas that it was seemingly too afraid to issue earlier—likely because of the risk that such a move might have triggered higher inflation and severe U.S. bond market, stock market, and global economic dislocations.” The effects of this were immediate and significant. Morgan acknowledges that the incoming administration has a plan and good people in place, but cautions that the road to health is likely to be a long and arduous one. The potential setbacks along the way are only part of the immense rationale for gold as a reserve asset.
Golden Rule Radio: Markets Hold Steady Amid Incoming Inauguration
Miles’ recap of the week in markets has the metals up with the exception of platinum, the S&P up in the midst of a broader down move, and the dollar up. With all that said, the markets seem to be waiting with bated breath for the inauguration and some indication of Trump policy implications for investing. Even as things hover in place, Rob reemphasizes that the fundamentals for gold remain very strong. He expects $3,000 gold in the spring and more beyond. Tory then joins the conversation and the hosts turn their attention to silver and its likely future trajectory. With that said, they emphasize the need for balance in one’s portfolio, toward which end your advisor can help. That can include diversification in metals, storage location, and form (such as bars, coins, etc.) They also discuss the potentially extremely profitable strategy of ratio trading.
