America used to have an extraordinary level of excellence—not just in depth, but in breadth. It just wasn’t hard to find people who were very good at what they did. They were everywhere, though slackers and incompetents seem to exist in every system.
With our current system of poor education and training, selection on the basis of other factors than merit, the rewarding of participation rather than winning, the high level of graft, the extraordinary level of welfare and other something-for-nothing payments, professional and labor organizations developed to protect members from market forces, the overall destruction of character, and the overt and severe persecution of people who oppose these trends, such excellence is much harder to find. True professionals and people of deep character still exist, but they’re a smaller percentage of the total workforce and the population.
People who recognize this fact likely also recognize that Trump is tackling the proximate causes of this decline in excellence. The ultimate cause is spiritual, and thus beyond the control (but not the influence) of any leader. Still, the number of proximate causes Trump is tackling, along with his perspicacity in identifying them, is impressive.
Doing this as vigorously as he is brings its own challenges. The US Constitution was developed in a different time, when knowledge of first things was far more widespread and excellent leaders more common. The principles the Constitution was built on would not be relied upon today. The founders knew that was likely to happen, so they made it hard to change the government. It takes time and effort—and lots of both.
But what happens when the country degrades for a few centuries and gets to a point of crisis? Many things happen this way—slowly over a long period of time, and then suddenly. But if you try to make changes quickly to address the crisis, the Constitution stands in your way—not necessarily on grounds of morality or efficacy, but on grounds of procedure.
The Democrats know that Trump wants to change things faster than the founding document permits, so they are ironically and self-servingly using the Constitution to challenge him. (You might love the Democrats or not, but if you believe they revere the Constitution, you simply have not been paying attention—and yes, the Republicans are often little better.)
The other huge obstacle Trump faces is a system that is extremely unhealthy, yet seems to many people to be wonderful. This includes large numbers of people that are being revealed by DOGE as having both hands in the till, incompetent federal employees, people on the dole, and even many people who do not realize that though America is still a wonderful nation, it has been in rapid and existential decline.
It also includes some investors and other participants in the financial system that have benefited from our debt-based economic system. These people want the system to continue as long as possible because they are getting rich off of it. Never mind what it is doing to the working man or woman, or to the nation.
The upshot, however, is a massive economic system that fundamentally affects every single citizen and resident of America and most other people in the world, but that is built on a faulty foundation and is about to collapse. In comes Trump trying to set the matter right as fast and well as he can. But that much energy shakes things up, and a rickety structure might not survive the shaking.
Doug Noland expresses concern for this reality this week, as he has in past CBBs. Will the world survive the corrective actions Trump is pursuing? God knows. We don’t. But Doug’s concern is factual and real, and could well be the clarion call we need.
The present author is taken, as is much of America, with Trump’s efforts to return excellence to America. However, we all know where the road paved with good intentions leads. Our financial house looks good on the outside, but is termite-eaten and decrepit on the inside. Will it survive the shake-up it’s being subjected to? Those of us who are in thrall to Trump’s attempts to serve good and justice will do well to study the potential cost if they fail.
Perhaps we will see a return of character and excellence on par with times in America’s past. Perhaps we will ironically see the effort destroy what’s left of this nation’s greatness. Or perhaps, as in Reagan’s first term, we will go through very hard times before moving on to very good times. The wise person will be prepared for any of these possibilities.
One thing’s certain: whether Trump succeeds in devaluing the dollar to bolster American manufacturing and trade or whether the bubble bursts and the whole system falls apart, gold will have a crucial role. Will you have gold?
Key Takeaways:
- Some details of Trump’s plan to MAGA
- Of politicians, plans, and bond vigilantes
- What are the odds that this bubble will burst?
- Gold is up—buy or sell?
The McAlvany Weekly Commentary: Trump: Breaking Bad To Remake Good
David and Kevin first discuss the flurry of actions by the new Trump administration, then turn to the responses by Mexico and Canada. They next discuss the contrast between 2024 and early 2025 regarding economists’ forecasts. Last year they were pessimistic leading into a banner year for equities. This year they’re almost uniformly optimistic. To give some context to such misplaced optimism, David tells a story of a mountaineering exploit of his in which a beautiful day nearly obscured a deadly danger. There are some warnings of analogous danger in the economic sphere that David lists and comments on. Returning to Trump’s actions, David references last week’s Hard Asset Insights. There, Morgan Lewis first discusses Triffin’s Dilemma, which highlights the declining benefits of being the reserve currency issuer, and then brings to light a paper by Stephen Miran, Trump’s new head of the Council of Economic Advisors. What that paper showed was essentially a blueprint for how Trump intends to restore American manufacturing and conquer inflation. This has some major ramifications for investors that Morgan emphasized and David reiterates.
Credit Bubble Bulletin: The Dog That Does More Than Bark
When it comes to politics, Doug’s mantra might be “the proof of the pudding is in the tasting.” For politicians, the order of business seems to be “sell, try, and hope”—sell your agenda to the people, try it, and hope it works—or perhaps just say it worked. For Doug, Trump’s plans remain fond hopes until they pan out. Trump can plan and agitate for low interest rates, but the bond vigilantes have lately returned with a vengeance. Will they have the final say? Doug notes that bond yields have come down in recent days for many nations. This has restrained crisis dynamics at the periphery (emerging markets) that were threatening to move to the core. The dip in yields has been minor, however, and Doug asserts that, “Our President and Treasury Secretary have reason to be nervous. A break higher in Treasury yields would be destabilizing. Yields closed the week about 50 bps below the key psychological 5% level. The unfolding Trump agenda is filled with potentially problematic issues for the bond market.” Doug then goes through several of the tax cuts Trump has proposed, and summarizes: “If I were the bond market, I’d be leery of a budget big on tax cuts offset by indeterminate revenue sources.” Clearly, when you get beyond the hope and enthusiasm, Trump’s agenda faces some daunting challenges. Doug lists and discusses several of them, concluding that Trump is playing a very dangerous game and that resistance to his “power grab” is growing worldwide.
Hard Asset Insights: Embrace the Bubble—or Gold?
Morgan reins in Barron’s advice to “embrace the bubble” with some sobering facts and analysis. First he quotes and explains John Hussman’s definition of a bubble—which is clarifying in the extreme—and then he proceeds to apply the definition to conditions in the markets. In the process, he offers this gem: “While rational markets have proven one of the greatest wealth-generating constructs in human history, bursting bubbles are incredibly destructive and financially ruinous events. And history is unambiguous—bubbles always burst.” They always burst. So much for the hopes of proponents of Modern Monetary Theory, buy and hold, and perpetual profitability (the belief that the Fed won’t let the market go down). Morgan pulls it all together with this: “To play the momentum of a late-stage speculative bubble is to play with fire… Fortunately, some distance from the perilous powder keg, we have the opportunity to invest in the monetary metals and their related producers on the cusp of what increasingly looks like…a regime change that’s very likely to result in a much higher gold price.”
Golden Rule Radio: Market Volatility Continues
Tory rejoins and introduces the program this week, while Miles takes over to recap the metals action. It was a good week for the precious metals, perhaps even a very good week. The S&P was flat and the dollar down slightly. Overall, however, the theme seemed to be volatility—lots of ups and downs on the way to those weekly totals. Tory takes over and shows charts on the January action in the metals. They are having an amazing start to the year, with strong performances across the board. The hosts (joined by Rob) discuss the impact of the futures market on prices, given that the futures price often differs from the spot price. Rob notes that while there is strong demand for gold among MPM buyers, there is not yet urgent (panic) buying. Demand was even stronger coming into the election, when the price was lower. Tory discusses the proportion of reserves central banks keep in gold vs. how much individual investors keep in gold, noting that central banks might have a better handle on what’s safer and better for the times ahead.
