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Is the Gold Standard Coming Back? Doug Casey on the BRICS Gold-Backed Currency

International Man
: There have long been rumors that Russia or China would create a gold-backed currency, but there was never a formal acknowledgment… until recently.

The Russian government recently stated:

"The BRICS countries are planning to introduce a new trading currency, which will be backed by gold."

Analysts expect a formal announcement at the next BRICS summit in Johannesburg in the coming weeks.

What is your take?

Doug Casey: Let’s try to parse the words in the statement. In particular, the use of the word "trading." I’m not sure what the difference between a "trading currency" and an ordinary currency might be. My guess is that it would only be used for settling accounts internationally. Also, if it’s going to be backed by gold, where will that gold be held? Will the amount of this currency—let’s call it the BRIC—that different governments get be based only upon the amount of gold that they have in their treasury? And will the currency be just for governments, or will it be available to companies or the average guy?

It’s unlikely to be of use to the average guy. In the first place, they won’t be printing 100 BRIC (or whatever they’ll call it) notes in this age of CBDCs. Allowing its use by the plebs would give them entirely too much freedom to take their assets across borders. Remember that almost all the countries talking about replacing the dollar now have crappy "blocked "currencies that are essentially worthless outside their home countries. My guess is that the new BRIC will be for international settlement only, just so they don’t have to use the dollar. Citizens will still have to use their crappy national currencies domestically.

There’s a basic question we have to ask ourselves, one that everyone is forgetting: Why is this new currency "backed" by gold in the first place? Why not simply use gold?

In other words, why have a government middleman there to call some amount of gold a "franc," a "ruble," a ‘pound," a "dollar," or whatever? Who needs some untrustworthy intermediary to give you paper? Why not just allow everybody to use gold itself, the world’s only historically successful money? The only reason for a currency is because they’re planning on manipulating it, which means inflating it at some point.

Of course, it will be nominally backed by gold to start with—it has to be, because none of these governments trust each other. But who among them can be trusted to store and redeem the gold? Nobody. That guarantees that although it might start out well because somebody says it’s redeemable and limited in quantity, it’ll eventually fall apart.

International Man: While the details remain unknown, how do you expect a potential BRICS gold-backed currency to work in practice?

What does this mean for the US dollar?

Doug Casey: I’m all for anything that gets the world off the dollar standard. The fact the dollar is accepted everywhere allows the US government to do all kinds of things—almost all of them stupid and destructive—that it wouldn’t otherwise be able to afford. Roughly $800 billion dollars are exported annually. That trade deficit has been going on for over 40 years. It’s artificially raised the standard of living of Americans. It’s made them think government economic policy is wise. Which it isn’t. Decades of accumulated offshore dollars will someday—soon—come back home. Many trillions of dollars will be traded for real wealth in the US; prices will skyrocket, and the standard of living will collapse.

Since the early ’80s, the major US export has not been Boeings or wheat, or computers. It’s been dollars. Who knows how many scores of trillions of dollars are outside the US now? Foreigners only use the dollar because it’s traditionally accepted and convenient. Americans use it because they must, as "legal tender." At some point, foreigners will dump the dollar for any number of reasons. It’s a time bomb waiting to go off.

It’s nice to see an alternative currency developing. But none of the governments involved—the Chinese, the Indians, the Russians, and 30 or 40 little players so far—have any reason to trust each other or the BRICS currency. I think it will fall apart.

It might do better than the euro initially. As I’ve often said, if the dollar is an "I owe you nothing," the euro is a "who owes you nothing," With the proposed BRIC, at least somebody’s theoretically got some gold available for redemption. But at least the euro is used by individuals and has paper notes. The BRIC won’t be used by tens of millions of individuals to help keep it stable. The BRIC is unlikely to be used for anything but accounting between governments.

They should just use gold itself—honest, uncomplicated, non-political money.

Every currency in the world is a fiat unit, backed by nothing but faith and habit, backed by nothing except the force of a government to make it legal tender.

The dollar is just—for the moment—the most accepted currency.

International Man: "We should expect over time a gradually increased share of other assets in reserve holdings of countries."

"It’s possible to have more than one reserve currency."

These are the recent words of Janet Yellen, the Secretary of the Treasury, and Jerome Powell, the Chairman of the Federal Reserve.

Their remarks strongly hint that the current international monetary system based on the US dollar is on its way out… and soon.

Even the elites running this 50+ year-old system can’t go along with the farce of maintaining it anymore.

What is your view?

Doug Casey: Yellen and Powell are said to be economists. In fact, they are not economists. An economist is somebody who describes the way the world works in going about its business of producing and consuming. That’s not what these people attempt to do. They try to prescribe the way they think the world ought to work by creating more dollars.

Perhaps they finally see the writing on the wall. With the annual interest on the US now crossing the $1 trillion level, even they can see that the US government has to borrow money just in order to pay the interest on its debt. That means it’s pretty much "game over."

So yes, there will soon be more than one reserve currency. The world will have to go back to gold simply because these governments are congenitally irresponsible and unsound. They have no reason to trust each other. They’re all inflating their currencies. They’re all bankrupt. The dollar is on its way out.

What’s going to replace the dollar? I don’t think it’s going to be the BRICs currency. Or the euro. It’s going to be gold itself. The problem is that these governments might try to make gold something that is just used between themselves for trade as opposed to something that the average guy can keep in his pocket. That would give them vastly less control and individuals entirely too much freedom.

International Man: Given everything we’ve discussed, what are the best ways to get positioned for prudence and profit?

Doug Casey: Well, it’s very clear that gold is moving back into the international monetary system after many decades of being viewed as an ancient foible or a pet rock. There’s actually no alternative other than primitive barter for international commerce.

Since there are only six or perhaps seven billion ounces of gold in the world—less than an ounce for every person on the planet—chances are that there’s going to be much more demand for gold both from individuals and from governments and all entities in between as national currencies collapse. So even though, at this moment, gold is now reasonably priced relative to everything else in the world—houses, clothes, food—I nonetheless think it’s likely to go much higher. It’s a refuge from chaos, and chaos is in the cards.

To answer to your question: Buy physical gold coins and keep most of them in your own possession. Also, to speculate on further increases in the price of gold, buy well-selected mining stocks. In past gold bull markets, they have moved upwards 10 to one, with some individual stocks moving up 100 to one or even 1,000 to one over the course of a few years.
 
Fug it...


GOODBYE DOLLAR, HELLO GOLD...​

Tuesday, July 11, 2023

Gold silver and PM stocks staged a major breakout yesterday as the dollar cratered to signal the onset of a major devaluation as its loss of reserve currency status becomes a physical reality. The BRICS are set to introduce an alternative CBDC related gold backed currency of their own that should drive the last nail into the dollar’s coffin. This has been “in the works” for quite a while and this being so it only is surprising that it has taken the dollar this long to break down. We saw all this coming a couple of weeks ago in the article PM SECTOR update – REVERSING TO UPSIDE and the two larger gold stocks featured in the article, Royal Gold and Victoria Gold have soared.

Anyway, the point is that the PM sector – and commodities generally – are embarking on a long and powerful uplegthat is still in its earliest stages and this being so you can basically put on a blindfold and throw darts at a list of PM stocks and pick winners although of course we will strive to do somewhat better than that.

Now we will proceed to look at a range of charts showing the dollar breakdown and the PM sector breakouts yesterday that I am confident will “make your day” if you are long the PM sector…

We’ll start with the dollar which is of course the cause of the PM sector breakouts yesterday. The dollar cratered yesterday with a breathtaking 1.2% drop in the dollar index which broke it down from the bear Pennant it has been stuck in since late January.…



Meanwhile, the Canadian dollar, in common with many other currencies, broke higher against the US dollar yesterday, although as we can see, it had already started to break higher against the US dollar by the middle of last month. The Canadian economy is much more resource-based than the US and advancing metals prices should have a beneficial effect. Investors in Canadian mining stocks can therefore expect an additional benefit from relative currency appeciation, relative because all currencies are depreciating in real terms, if not against each other…



On gold’s 1-year chart we can see a quite lovely breakout yesterday from the corrective bullish Falling Wedge that brought it back to an important buy spot at the lower boundary of its larger uptrend channel and as we can clearly see, there is ample upside back up to the top of this channel – and there is nothing to say that, given the enormity of what is going on in the world, that it won’t in due course proceed to accelerate out of the top of this channel…



Silver had a big breakout yesterday too and although its uptrend is not yet as strong as gold’s as its larger uptrend channel is converging, it will probably proceed to rectify this in time by busting out of the top of this channel…



The chart for GDX (PM stocks) not surpringly looks very similar to gold and we can expect a robust by the sector as gold advances. Don’t worry about it having risen a lot yesterday – this chart shows that it has much further to go.



The chart for the Canadian dollar looks strong too, like it is breaking out upside from a long period of consolidation. Its chart will be added to this article later today, so look out for that.

Incidentally there are a string of big white candles in James Turk’s GoldMoney’s chart (XAU.TSX) over the past week, suggesting that investors of piling into physical gold.



Amongst stocks looking good this morning that we will be looking at ASAP are Sierra Madre Gold SM.V that has positive news out this morning and Spey Resources SPEYF is at a very good entry point too. Away from the PM sector Muscle MakerGRIL put in a reversal candle at strong support yesterday and looks set to advance.

End of update.
 
Help me out, here, Z. You have taught me too well. When I see every analyst and his mother screaming from on high about the death of the dollar and ensuing dominance of gold, I gotta check myself. There is an awful lot of koolaid out there to drink. Is this just another bad trip that I'm embarking on? Be my soothing guide here, please...
 
Help me out, here, Z. You have taught me too well. When I see every analyst and his mother screaming from on high about the death of the dollar and ensuing dominance of gold, I gotta check myself. There is an awful lot of koolaid out there to drink. Is this just another bad trip that I'm embarking on? Be my soothing guide here, please...

I get the sense that the issue is getting a bit crossed up, I've always understood the BRIC's currency to be an international settlement currency to replace the eurodollar (USD outside the USA) in international trade. People seem to be arguing against a 'Euro' type of currency across the BRIC's nations, that, I think it is safe to say, is not even on the horizon. Jeez I wish they'd change one of those terms, so easy to confuse Euro Dollar with Eurodollar!

My view is that a BRIC's international settlement currency based on a basket of tangibles is a probable outcome. I can also see that this will not kill the USD's value. To keep it simple WAY too many deals are done in Eurodollars (USD circulating outside of the USA) for it's value to fall away rapidly. If anything the success of a BRIC's trade currency would see the need to close out Eurodollar business in order to move to the new system. Given the fractional reserve nature of the system this will lead to more demand for those dollars (to settle commitments) than dollars in existence. It's the debt in Eurodollars that leads to, what I believe will be, a major spike in the USD's value. I suspect that this happens post 2024 sometime and will probably be the event that defines the correction between this phase in the gold bull market and the final phase of the gold bull market.

Frankly I expect something like $4300 to $5400 POG in 2024/25, even if the USD is relatively strong then a sharp correction while the USD has a bit of a blow off/flame out which will be a part of a re-balance of the monetary world order. This could easily result in new USDX highs 160+, system breaking stuff. I think that the USD bears are mistaking inevitable for imminent. I think that a BRIC's currency is more @ the beginning of the end than the end. I think that the USD bears are jumping to the end and over looking the mechanics of getting there.

I think this will be a drawn out messy process with gold doing well over the longer run. I think it will be manic depressive and you will need strength to stay the course if you are a buy and hold guy. If JS's over the weekend reset comes about then I think we are all in trouble, then I think they come hunting for all profit in every gold related asset. Nothing will be left standing and the will still need vast amounts of money. That IMO is Mad Max world, I suspect that there is too much vested interest to let that happen. I suspect that EVERY law would be broken to defend the system against that outcome. I dunno, I hear the argument that they will not have a choice but I'm not sure it is that cut a dry... hence vey expectation of 'very messy'.

I know no more that you guys and I will not be at all surprised to be wrong but you have to have some sort of plan of attack!

Rambling lunatic? You did read the thread title didn't you?
 
DXY Quarterly - Looking @ this I'd plum for sideways for a while, maybe down to 90 ish at the worst but certainly not a collapse. I think it puts in it's low for this cycle sometime in 24.

JMO etc...

DXY_2023-07-20_14-13-14.png
 
That's not really possible though. There cannot be enough money to guarantee all banking deposits. Its a FRACTIONAL reserve system.

What makes you think they're going to be replacing deposits with cash? They will simply receive the same 'promise to pay' from a more financially viable counterparty. You don't need cash you simply need a solvent entity willing to take on the liability of the deposit. If the government promises to backstop this process very little cash is actually required.
 
Commercials short Silver now?

Somewhat, all be it on a lower OI... OI has been drying up a bit, that is kind of interesting. To me it suggests that there is less willingness to take out purely speculative positions and that what we are seeing is more genuine hedging of real world transactions.

You'd have to say the wider trend here is that the commercials are three years into a reduction of short positions.

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