If there really is a Chinese curse “may you live in interesting times,” then we truly live under sino-obloquy. Love ’em or hate ’em, the times are très interesting. And consistently enough, the Chinese are certainly not our greatest fans at the moment.
In fact, if the major media are to be believed (stop laughing), our only fans in the world are Javier Milei, Vladimir Putin, and Benjamin Netanyahu.
Our allies are turning against us and our enemies hate us more than ever, according to these media sages. However, it should be clear at this point that the world that is turning against us is not so much the world America made—as some in the media describe it—as the world that America bought. With borrowed money. That we now can’t afford to pay back.
Anytime you give a person (or a nation) something of great value regularly for a long period of time and then stop giving it to them, human nature takes over. Rather than being grateful for the longtime benefits, they are furious that you stopped. That’s where we are. Trump is turning off the money spigots, and people around the world hate him for it.
This is not to say that Trump’s plan will work. The risks and the stakes are immense. America could crash and burn. Much of the world could crash and burn. But Trump is very much like a pilot who pushes through the cabin door and takes the controls of an airliner headed for a mountain. If he stalls the aircraft trying to avoid the mountain, he will be responsible for the ensuing crash. But he will not have caused it, and his action will not necessarily have been wrong.
The distinction won’t matter to the passengers, but it’s important to make nonetheless. Someone, somewhere—in the distant future—might learn the lesson: Don’t fly into mountains. Don’t build your economic system on debt.
We can hope.
Oh, and there’s also the possibility that the aircraft will not stall and will clear the mountain. We can hope for that, too.
Key Takeaways:
- Inflation’s second wave
- Presidents who govern glass houses shouldn’t throw stones
- Reindustrialization has massive financial implications
- If the Western investor wakes up, there’s not enough gold
The McAlvany Weekly Commentary: Rising Gold Still Waiting For Western Investor
David and Kevin discuss the difficulties facing young people in America today as they deal with higher real estate prices and a lesser opportunity to accumulate wealth in a family home. Some of them are turning to Hail Mary opportunities to catch up such as sports betting, options trading, and cryptocurrencies. From there, the hosts turn to the uptick in inflation registered in CPI and PPI for January. Though goods had been increasing in price less than services, goods took a step higher last month. David points out that inflation often hits in two waves. Our first wave is behind us. The second is often significantly worse. This will have an effect on bonds, which in turn affects the profitability and safety of the Modern Portfolio Theory mix of stocks and bonds. The hosts also discuss the counterintuitive movement of European stocks in the aftermath of Trump Administration actions. All foreseeable outcomes of Trump’s policies are positive for gold, but Western investors are still on the sidelines. David outlines the three stages of gold bull markets, giving some insight into a very positive outlook for the yellow metal.
Credit Bubble Bulletin: Disrupted
This week Doug laments the loss of civility in public discourse epitomized by Donald Trump’s comments. The trend is much broader than the president’s words alone, of course, but its prevalence in recent communications with European and North American allies is particularly distressing to the author. “The ‘world order’ was significantly disrupted this week. By now, we Americans are used to the antics, theatrics, and shameless threats. I didn’t expect the emboldened ‘TRUMP’ shtick to play well internationally—but never imagined how quickly it would go off the rails.” Doug sees such disruption as a large threat to financial markets. “News and analysis predictably follow market direction. A crazy notion, indeed, but reality may even start to sink in. Tariffs are a problem. The current global backdrop does not support cooperation and compromise, whether the Ukraine war or trade disputes.” He then provides article excerpts detailing the number and extent of some of Trump’s recent shakeups of government entities and programs.
Hard Asset Insights: Gold’s Shining Moment?
Morgan focuses his attention this week on Trump’s American reindustrialization efforts, noting that, “As German economist and political theorist Friedrich List observed in the early 1800s, ‘The forces of production are the tree on which wealth grows.’” This emphasis leads Morgan to a deeper dive on his previously analysis of Trump’s economic plans. Those plans evidently entail a strong devaluation of the dollar to end (or at least blunt) its reserve currency status and provide impetus to American manufacturing. Morgan provides as the latest proof of this intent Vance’s recent excoriation of Germany for abandoning its manufacturing emphasis just as Russia begins saber rattling in earnest. “What Trump seems to be attempting is a U.S. reindustrialization policy via tariffs and other potentially radical policy tools to weaken the dollar and disincentivize Treasuries as global reserve asset.” Building on earlier analysis, Morgan then reemphasizes that, “a weak dollar policy shift would seemingly require the adoption of a new neutral reserve asset that floats in all currencies—likely gold.” He provides strong evidence that this shift in reserve assets is already occurring.
Golden Rule Radio: Gold Demand Shakes Markets
Miles’s weekly chart update finds the metals continuing strong, with significant volatility in platinum and palladium. The S&P is also strong, reaching a new high, and the dollar is showing some minor weakness that Miles suspects is confirming its continued loss of purchasing power. Rob takes over and explains what gold leasing is, what it’s doing, and what that activity means. The change has been quite large, and this information is quite educational if you aren’t familiar with gold leasing. Rob notes that not only leasing, but ETFs and institutional long contracts are increasing rapidly, but still the American investing public is not interested. Rob discusses the implications of an audit of America’s gold holdings, noting the many variables that could impact the outcome. Rob and Tory discuss the fact that there’s not enough gold to meet demand if people begin to understand its true value in the current situation. Gold is priced far too low, and there’s simply not enough of it if people catch on.
