Over this past week Germany has been up to mischief. The new chancellor of the country, Friedrich Merz, is head of the center-right CDU party—which garnered the most votes in the recent German election. The new parliament required by the results of that election will be seated on March 25, 2025.
However, because of the election results, that parliament will include a much larger contingent from the AfD, a more conservative party than the CDU. In particular, the AfD is far more committed to avoiding war than the CDU is.
But the plot thickens further. Germany’s constitution has forbidden the nation from going into debt, which has been a tenuously observed restriction. However, the prohibition is substantive enough to require a change before wholesale alterations to Germany’s debt abilities are made.
Before now, the restriction on debt has been manageable because America assumed virtually all of European defense costs. However, Trump’s policies vis-à-vis Ukraine and NATO have rattled the EU and awakened Europe’s political hawks and military-industrial complex. Germany in particular wants more guns, and it wants them now.
Enter Merz—and opportunity. The existing parliament is much more leftist and bellicose than the one that will be seated on March 25th. So Merz called for a vote to change the constitution with the rump parliament rather than wait for the AfD to stymie his plans. This, from a party and leader who are considered by Germans to be conservative.
The change to the constitution passed, so Germany can now zoom past America on the debt autobahn (highway), heading toward debt slavery even as the US tries to escape it. But the incident is instructive.
Just as in America, “conservatives” who try to govern from the middle tend to be far more prone to veer left in their causes than right. This is because of human nature, the nature of governance, and what the left and right stand for.
Human nature, as mentioned several times in this blog, is in its essence mercilessly self-aggrandizing. It seeks power, money, prestige, fame, esteem, and every other advantage it can get. Checks to this tendency are primarily spiritual and instructional (typically from family), but power-seekers can easily pass themselves off as having morals and self-restraint. By the time they’re found out, it’s often too late.
Governance is the perfect forum in which to indulge every self-aggrandizement urge mankind can muster. By elevating a person above his fellows, it immediately offers power and attracts sycophants. The other benefits often follow in short order.
The left says it stands for personal freedom and safety, but it believes these things can be obtained only by surrendering all personal belongings and choice to the government. This is clearly seen in communism, but is inherent (if less overt) in all leftist movements. Hence the effort to totally destroy (not defeat in debate and political process) all opposition to the left’s dictates that has been apparent over the past few years in America. Pandemic repression and the war against Trump and January 6ers are examples.
The right in America has many faces, and many more if Europe is included. Quintessentially, however, it believes in “power down,” to use a phrase not often heard these days. The first level of responsibility for both success and failure is personal, then family, then church and community, then county, then state, then nation, then international organizations. The farther an authority is from an individual, the less effect it should typically have on him or her—with exceptions for just wars and certain other limited concepts. In essence, this emphasis is the reverse of leftism.
And incidentally, Nazism is not a conservative variant. It is leftist in its essence, and the name means “national socialism.” Nazism does emphasize nationalism, but with the stated goals of very leftist international conquest and total control. Hitler hated communism, but he didn’t hate socialism. Tomāto, tomɑto.
In these definitions is seen the bias for leftward movement inherent in government. If you start from the middle, you end up left of center very quickly. If you start on the left, you end up supporting the far left as we’ve seen clearly during the Biden years. Those on the “far right”—often simply true conservatives who are lumped in with a fearful fringe—are often seduced, intimidated, or browbeaten by Washington to move them leftward, but not all of them shift. Principled defenders of individuals are typically the ones most substantively resisting the leftward drift of the entire government.
We can hope that the Trump years will be different from what has gone before—his term is certainly starting out that way—but we have no guarantees. The Trump administration consists of people, and we have seen how often people give in to the temptations of power and money. They also give in to pressure, and no administration in modern history has had the pressure on it this one does.
This is not an exercise in put-downs or an attempt to dampen your mood. It’s a rather thorough description of why the McAlvany companies always appeal to you to act at the personal level first. You obviously have many opportunities to invest at higher levels of organization, whether it’s working in a corporation, volunteering at church or with a charity, investing in a managed fund or many other ways. These are typically excellent endeavors, but start at your personal level.
We’re not saying you need to sell your portfolio and go whole hog into gold. Adjusting the bulk of your holdings for the uncertainty ahead is far beyond the intent of this article. Just get some gold. We are witnessing the downtrend of some high counterparty risk investments and institutions. Be sure to anchor your investments with something that has no such risk—gold bars or coins, personally delivered.
And if you do rely on others for your welfare, whether political, financial, or otherwise, make sure they have had their character and their beliefs tested by fire and found strong and genuine. If you’re having trouble finding such folks in the financial realm, just ask us. We happen to know a few.
Key Takeaways:
- When will the West wake up?
- The global transition and its accompanying uncertainty
- Detoxing from decades of government spending
- Gold breaks away from the pack
The McAlvany Weekly Commentary: Gold At Triple-Triple Zero
After closing above $3,000/oz for the first time, gold became the initial focus of this week’s MWC. David and Kevin began the program by highlighting the record price and then tracing some notable facts about gold’s path to its current heights. Even with the record price, gold is still not on most Western investors’ radar. It’s recent outperformance has been achieved overwhelmingly by non-Westerners. The hosts reemphasize that such a situation likely represents an opportunity to prepare for big changes in the financial landscape occasioned by Trump’s policies. David notes that the opening of US investors’ eyes is beginning to happen: “I think what we have in 2025 is the shifting geostrategic relationships and the uncertainty that creates. It’s allowing for a risk reassessment amongst investors.” The hosts also discuss investment strategy using the Dow/gold ratio: “Think of it as a portfolio force multiplier. To double your share count, reinvesting dividends might take you a decade or more. Using the Dow/gold ratio, playing the ratios, you have the opportunity to compress time.”
Credit Bubble Bulletin: In Defense of the Constitution
Doug provides a compelling summary that he then proceeds to build out in his customarily thorough manner: “Evidence builds by the week that the world is transitioning between cycles. The multi-decade global super boom cycle is faltering, with historic Credit and speculative Bubbles hanging in the balance. Uncertainty is at its most extreme. The current environment is characterized by an extraordinary interplay of highly complex systems. Acutely fragile global market Bubbles have turned highly unstable. The odds of panics, financial crashes, and crises are uncomfortably high. Bubble economies are increasingly vulnerable to shocks in confidence and disruptions in market-based finance. Wild unpredictability has engulfed politics and geopolitics. The nature of policy responses to market dislocations is highly uncertain.” He also discusses “periphery” (emerging market) developments, with emphasis on power moves by Turkey’s Erdogan against his rivals.
Hard Asset Insights: The Detox Period
Drawing from comments made by Treasury Secretary Scott Bessent, Morgan doubles down on his analysis that whatever economic and financial good times the US might eventually enjoy will likely arrive only after some very difficult times. Knowledgeable Americans understand that the country is in severe economic straits. To describe the situation, choose your metaphor: gross obesity, alcoholism, drug addiction, or any one of several others. Getting healthy again will take some doing. Any of those metaphorical conditions requires extensive and real hardship before high-functioning health can be reclaimed. The same will almost certainly be true for the US. Bessent calls it detox, but he calls the alternative (maintaining the status quo) unsustainable. Morgan notes that, “Bessent is exactly right—the unsustainability is real, and the detox is necessary.” But Morgan also points out that, “Bessent’s detox period may have begun, and it might turn out to be much more toxic than the administration and markets currently assume.” Whys and wherefores ensue—direct, on point, and drawn from Morgan’s extensive research.
Golden Rule Radio: Metals Shine While Stocks Struggle
Miles’s weekly recap shows gold not only showing up equities and the dollar, but the other precious metals as well. The hosts also take a quick look at the Commitment of Traders (COT) report, which shows long gold contract numbers way up, though short contracts are up proportionally more. Rob explains that much of the action in the gold market is short covering by institutional investors because private investors are still on the sidelines. Tory explains why high gold prices should not necessarily be a don’t-buy signal, giving historical rationale for this being a paradigm shift rather than the end of a gold bull market. And given the Trump administration’s focus on Main St. rather than Wall St., Tory wonders what will happen in the event of an equities washout. He notes some very interesting developments, “they’re not suppressing the gold price anymore, and they’re lending credence to the gold market by talking about it for the first time in 40 years.” The hosts also discuss the impossibility of going to a gold standard given the amount of dollars outstanding.
