Seeking Reality in a Potemkin Nation

McAlvany Recap • Apr 03 2023
Seeking Reality in a Potemkin Nation
MPM Posted on April 3, 2023

A large part of the difficulty fiscal conservatives have had with America’s economic system since 1913 is that they’ve known what the eventual end of it would be. America’s current woes are a surprise only in a few specifics, not in general or in principle.

Conservatives do not have this insight because they are oracles or seers. Rather, they recognize Kipling’s “gods of the copybook headings” as immutable principles, not rules they can violate for personal enrichment while leaving other people to suffer the devastating consequences. It’s a key distinction, both in understanding and character.

Alas, America and much of the world remain in thrall to “Wise Men (and Women)” who never scruple to observe principles when there’s money or power to be had. Doubtless, such wise ones will not only maintain our present course into crisis, but double down on their control measures when the inevitable calamity is upon us.

This week’s discussion in the McAlvany Weekly Commentary of central bank digital currencies (CBDCs) drives the point home. A CBDC is not a pleasant prospect, but, as usual, the MWC is proactive in discussing not only news but implications of upcoming developments.

Importantly, however, you’ll see that the MWC also presents ways you can lessen the impact of a CBDC on your life. The greater your use of un-backed, traceable currencies as legal tender, the more you need real money to backstop them.

You’ll see this emphasis on real things—principles, truths, disciplines, and assets—in the communications below. And you’ll see it each and every week. Enrich your understanding and your life with the information they contain, and make them a regular part of your week.

Key Takeaways:

  • Cryptocurrency is coming soon to a central bank near you
  • Monetary inflation returns with a vengeance
  • The time to prepare your portfolio for recession is before it hits
  • Gold shows us yet one more time why people rely upon it

The McAlvany Weekly Commentary: Along with a number of timely topics, David and Kevin deal this week with the developing dollar crisis—specifically the dollar’s rapidly eroding ability to purchase gas, groceries, other consumer staples, utilities, etc. Precisely because it is a crisis that is destined to get worse—perhaps much worse—before it gets better, and because governmental power accumulators never let a crisis go to waste, the hosts anticipate the introduction of a new currency. While the new currency might still have a nominal connection to the dollar, it will be a central bank digital currency—a government created and controlled cryptocurrency. Such a currency would be an all-encompassing and repressive control mechanism for Americans. There is another option if or when the dollar fails. It’s a proven system rather than an experimental one, and it greatly enhances currency stability and personal freedom. Do Americans have the knowledge and foresight to demand it?

Credit Bubble Bulletin: Summarizing the first quarter of 2023 in regard to market developments and expectations, Doug found a great deal of volatility and monetary inflation. After chronicling instances of massive monetary expansion, he observes that, “My analytical framework takes a foreboding view of this type of monetary inflation. Indeed, the rapid expansion of money market assets is part and parcel of dangerous growth in financial sector leveraging – typically through the rapid expansion of perceived safe and liquid central bank and GSE [government sponsored enterprise] obligations.” He then proceeds to explain how GSEs such as the Federal Home Loan Bank have long been “dangerous financial institutions that have played an instrumental role in the multi-decade credit bubble.” Nowhere else will you find so much crucial data, analysis, and news so ably aggregated and assessed. CBB is a gold mine of information.

Hard Asset Insights: While continuing his incisive analysis of the Fed’s policy and options for the immediate future, Morgan also applies his magnifying glass to some practical concerns for investors. Citing JPMorgan Chief Investment Officer Bob Michele regarding what Michele regards as inevitable recession before year-end, Morgan writes, “ ‘You may see it coming, you may not. You don’t know exactly when it’s going to hit, but once it hits, whatever you own, you own.’ His message? Sanitize portfolios to include only assets that can at least weather, and at best thrive in, the turmoil of recession.” Importantly, Morgan includes some sage advice as to what kind of assets are likely to meet such vital criteria.

Golden Rule Radio: Tory returns to the studio this week as he and Miles review the quarter with regard to the precious metals’ performance. Miles then puts gold’s quarterly record in first a longer, six-month perspective, and subsequently in the characteristic pattern we have historically seen in gold’s price performance over multi-year periods. It’s key insight into what is not meant to be definitive behavior, but generally descriptive tendencies over time. Despite its general nature, it is an illuminating glimpse into macro trends in the gold market that gold investors often miss or don’t fully appreciate. With the recent news in the banking sector, however, gold has broken with its historic tendencies. That is both indicative of gold’s historic role in markets and instructive for those investors who haven’t yet availed themselves of gold’s stabilizing and value-preserving characteristics.

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