Since the original voice crying in the wilderness 2,000 years ago, there have been many others. Some, such as John Wycliffe and Jan Hus, have had variations on the same message. Others have upheld subordinate but crucial truths in other areas.
Galileo Galilei, Isaac Newton, and Ignaz Semmelweis, among others, said that science consists of discovering what is true, not maintaining what is popularly believed or officially asserted. John Calvin, John Knox, and Patrick Henry asserted that even kings and emperors are subject to higher law. And Adam Smith, Eugen von Böhm-Bawerk, and Ludwig von Mises asserted that free markets, not governments, are best at creating wealth.
Each of these positions has been radically unpopular in its time—often costing the lives, livelihoods, and/or reputations of those holding them. But each, though pilloried and widely opposed, was—and is—right. Much of the functionality and wealth of the West rests on their contributions.
There is another truth that has been upheld through some very adverse times over the past century: gold is true money; government IOUs are not. Opposition to this message has been astonishingly broad and deep, and short-term fiat money benefits have bought the loyalties of many who should know better.
But some have maintained a true course through the vagaries and temptations of fiat currency, maintaining that only someone capable of efficaciously decreeing “fiat lux” (let there be light) can truly and lastingly say “fiat pecunia” (let there be money).
In that light (pun intended), this week’s Commentary is of crucial importance. Light, truth, and lasting value are related, and dawn is breaking on the U.S. government’s actual ability to decree and maintain monetary value.
Inflation, after all, is a real-time gauge indicating the rate and extent of the decline in a currency’s value. If you buy groceries or other consumables, you have been given a clear glimpse of the true and ultimate value of the government’s promises to pay holders of its debt (in the form of dollars or other debt instruments such as Treasurys).
Whether you are new to this truth, lost sight of it in the excitement of fiat currency opportunities, or have maintained it untarnished to this day, you’ll find this week’s Commentary to be a must-listen or must-read communication. And while you’re at it, be sure to check out the other crucial publications summarized below.
Key Takeaways:
- The mother of all discussions about gold
- The 800-pound gorilla in the credit markets
- Employment is still good—sort of
- What the heck did gold do?
The McAlvany Weekly Commentary: It would be very difficult to overemphasize the importance of the message in this week’s Commentary. Anyone capable of viewing current events objectively and not just through the lens of the predominant American worldview can see that the world is in massive flux. The leader of a unipolar world for over 30 years, America is experiencing challenges that portend the diminishment or possibly even the end of its political and economic hegemony. Untold millions of Americans, however, including most in its investing ranks, never got the memo. If you’re one of them, this podcast is the memo. If you hope to negotiate the coming changes in world order (predominant among them the decline in the dollar), you need to invest in the store of value the rest of the world—and we do mean the rest of the world—is investing in. The music will stop. Perhaps soon. The chairs are metallic. They’re yellow. You might want to get one while it’s still possible.
Credit Bubble Bulletin: Doug focuses this week on government’s exploding presence in debt markets. “Federal borrowing now dominates system Credit expansion. This perceived money-like debt enjoys insatiable demand, while providing the perfect instrument for levered speculation. Traditional sources of finance have tightened, with a notable pullback in bank lending, along with diminished corporate and household debt growth. Meanwhile, evidence of an ongoing historic expansion of speculative finance mounts, as suggested by the extraordinary expansion of ‘repo’ lending.” He notes that the government and government-sponsored enterprises (GSEs) have greatly increased their footprint in the non-financial debt category. “In conspicuous government finance Bubble ‘blow-off’ excess, combined Treasury and GSE Securities ballooned $2.640 TN over the past year, $5.766 TN over two years, and $13.473 TN (49.8%) over 17 quarters. At $40.551 TN, combined Treasury and GSE Securities ended September at 147% of GDP – up from 55% to end 2007.”
Hard Asset Insights: “The week was all about employment,” notes Morgan. “We had updates from the JOLTS survey, ADP private payrolls, Challenger job cuts, and non-farm payrolls on Friday… Aggregate employment remains positive, but employment growth is way past peak, is slowing into a pronounced downtrend…, and the leading employment indicators paint a portrait of further weakening to come.” You know we’re in trouble when even the good news is troubling. Despite immense efforts by the government and the Fed to boost the economy, “both colossal spending to support growth and high interest rates to combat inflation is fundamentally untenable.” It’s like stepping on the gas and the brake full force at the same time. Morgan breaks this down with careful and detailed analysis.
Golden Rule Radio: Miles and Rob acknowledge the all-time high in gold that occurred over the weekend, followed by a sharp move down to the $2020 range. Both the high valuation and its short duration were anticipated on the program over the past few weeks, though its timing was uncertain. Miles makes the point that advances in gold’s price will typically be accompanied by quick reversals as gold makes its way higher over time. He shows expected points that could define highs and lows going forward. Both correspond with seasonal performance expected in the gold market. The hosts also discuss silver, its performance vs. expected, and its likely movement going forward. Miles is fond of referring to silver as “angry gold,” running ahead of gold in strong markets and lagging behind when it takes a break. He expects that pattern to continue as trends become more pronounced.
