Jim Rickards Exclusive: Dollar May Become “Local Currency of the U.S.” Only

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Mike Gleason: It is my great privilege to be joined now by James Rickards. Mr. Rickards is editor of Strategic Intelligence, a monthly newsletter, and Director of the James Rickards Project, an inquiry into the complex dynamics of geopolitics and global capital. He’s also the author of several bestselling books including The Death of Money, Currency Wars, The New Case for Gold, and now his latest book The Road to Ruin.

In addition to his achievements as a writer and author, Jim is also a portfolio manager, lawyer and renowned economic commentator having been interviewed by CNBC, the BBC, Bloomberg, Fox News and CNN just to name a few. And we’re also happy to have him back on the Money Metals Podcast.

Jim, thanks for coming on with us again today. We really appreciate your time. How are you?

Jim Rickards: I’m fine, Mike. Thanks. Great to be with you. Thanks for having me.

Mike Gleason: Absolutely. Well first off, Jim, last week, the fed increased the fed funds rate by another quarter of a point as most of us expected, but during that meeting, we also heard Janet Yellen say she wants to normalize the Fed’s balance sheet, which means the Fed could be dumping about $50 billion in financial assets into the marketplace each month. Now you’ve been a longtime and outspoken critic of the fed and their policies over the years. So, what are your thoughts here, Jim? Do you believe they will actually follow through on this idea of selling off more than $4 trillion in bonds and other assets on the Fed’s books? And if so, what do you think the market reaction would be including the gold market?

Jim Rickards: Well, I do think they’re going to follow through. Of course, it’s important to understand the mechanics of the Fed. They’re actually not going to sell any bonds. But they are going to reduce their balance sheet by probably two to two and a half trillion. So just to go through the history and the math and the actual mechanics there, so prior to the financial crisis of 2008, the Fed’s balance sheet was about $800 billion. As a result of QE1, QE2, QE3, and everything else the fed has done in the meantime, they got that balance sheet up to $4.5 trillion. By the way, if the Fed were a hedge fund, they’d be leveraged 115 to one. They look a really bad hedge fund. But that’s how much the Fed is leveraged, they have about 40 billion of equity, versus 4.5 trillion of assets. Mostly U.S. government securities of various kinds. So, they’re leveraged well over 100 to one.

And if you mark the balance sheet to market, not always but sometimes depending on what interest rates are doing, they’re actually technically insolvent. There have been times, again not all the times, but times when the mark to market basis, the Fed would have negative equity or basically would be broke if they were anyone other than the Fed. So that’s how leveraged they are. That’s how bad it is.

Now, what they want to do is to get the balance sheet down to what they consider normal. Now normal is completely subjective. There’s no rigorous scientific formula for what’s normal. The way you would do it is go back to 2008, start with the 800 billion, and say well look, if we had grown the balance sheet on the prior path, where would we be today in 2017, going into 2018, 2019? That number’s around two trillion. I mean it wouldn’t have been 800 billion. They’re not going to hold it steady. But probably just two to two and a half trillion for an approximation, which means that they have to reduce the balance sheet by two trillion dollars or more to get back to normal.

Now the question is, how do you do that? And again, I just want to emphasize, they’re not going to sell any bonds. What they do is they let them mature. If you want to go buy a treasury bond, let’s say we bought a 5-year note, five years ago and it was maturing today. What would happen? The Treasury just sends you the money. It’s like any bond. You don’t have to sell it. You don’t have to do anything with it. They just send you the money. They have your account and the money just shows up in your account. Well, it’s the same thing with the Fed, they have all these trillions of treasury notes and bonds and bills and mortgages and all that. And when they mature, the Treasury just sends them the money.

So, if that’s true, which it is, why hasn’t the balance sheet been going down all along? Well the answer is, they have been reinvesting the proceeds. So, as I say, if you have a 5-year note you bought five years ago, it matures, treasury sends you the money. Well the Fed has been going out buying a new 5-year note to replace the 5-year note that just matured. So that holds the balance sheet constant. During QE, they were actually doing more than that. They were not only rolling over the existing balance sheet. They were buying new securities with money from thin air.

That, by the way, for listeners who may not be familiar, that is how the Fed creates money. So, the Federal Reserve calls one of the so-called primary dealers which are the big banks. It’s Goldman Sachs, City, JP Morgan, the usual suspects. And they say, “offer me 10-year notes or 5-year notes, whatever.” And the dealer will offer them a price. And the Fed will say, “Okay, you’re done.” And then the dealer delivers the treasury notes to the Fed. And the Fed pays for them. But the money comes from nowhere. If you or I called Merrill Lynch of Goldman Sachs or somebody and said, I’d like to buy some 10-year treasury notes, they would sell them to us, but we’d have to pay for them with real money. I mean the money would come out of our brokerage account or a bank account. Whereas when the Fed does it, they just say, “Here’s the money.” And it literally comes from thin air.

So that’s what Quantitative Easing was. That was printing money to buy bonds to build up the balance sheet. And then that money went into the banking system. Of course, all the banks did was give it back to the Fed in the from excess reserves. On which they got interest, so the whole thing was just a way to funnel earnings from the treasury to the banks at the tax payers expense without anyone knowing. I mean obviously, technically I just described it, but this is not something that the everyday American necessarily understands that well. So, that’s what QE is, and this is now the opposite. And the name for it is quantitative tightening. So, when they were printing money, it was Quantitative Easing. Now that they’re making money disappear, that is what happens, it’s Quantitative Tightening, so we call it QT.

So, we had QE1, QE2, QE3. Now we’re going into QT or quantitative tightening. Now this does make money disappear. It’s the opposite of creating money. So again, simple example. The 5-year treasury note on the Fed balance sheet, it matures. The Treasury sends you the money. Now what they’re going to do, Mike, this is what you referred to, instead of going out and buying a new one to roll it over, they do nothing. And then the money disappears, the bond disappears, because it matured. And the balance sheet shrinks. So, the significance is not that they’re dumping bonds, because they’re not going to sell a single bond. The significance is that they are not buying new ones. Now at the margin, that still affects the market. The Fed has been the biggest buyer of new treasury issues for the last eight years.

In recent years, they’ve been buying as much as 30% of all the treasury bonds. So of course, the treasury issues bonds all the time to cover the deficit, right? So, we’ve had these huge deficits. They were over a trillion dollars back in the Obama days. They’re now down to around 400 billion, but that’s still a very big number as a percentage of GDP. And the Treasury covers those deficits by issuing notes and bonds. Well, the Fed has been buying 30% of them. So, it’s like any market. You take the biggest buyer out of the market, what’s going to happen? Well prices are going to fall, which means that interest rates go up. So that’s going to be a very strong headwind for the economy.

Now the Fed is trying to pretend that that’s not going to happen. And I know that sounds ridiculous, but here’s the way they’re spinning this whole thing. The Fed is saying, “Look, our policy tool is interest rates.” When they were zero, they didn’t have any flexibility. They couldn’t go below zero. I mean technically, you could go to negative interest rates, but the Fed never did. The evidence is pretty good that negative interest rates don’t work anyway. So, let’s just put negative interest rates off to one side for the time being. They are a tool in the toolkit, but not a tool that the fed has ever used or is planning to use. So, put negative interest rates to one side. Treat the zero interest rates as a hard boundary. When they were on the boundary, they couldn’t really do anything with interest rates. They couldn’t cut them anymore. They certainly weren’t going to raise them at the time.

But now they’ve got them up to 1%. We’ve had four interest rate hikes. December 2015, December 2016, March 2017 and June 2017. So, we have four rate hikes behind us – 25 basis point each. So that actually got rates up to 1%. Now they’re indicating they’re going to raise them some more. I don’t see that until December at the earliest. Maybe not even then, but I don’t think they’re going to raise rates in September. But they’re hinting that they will. They think they can raise them. If somehow we dropped into a recession, they wouldn’t do this right away, but they could cut them.

So, the Fed feels that the interest rate tool is now in use again. They can raise them or cut them. They’ve got a little bit of flexibility both ways. So, they don’t need to use the balance sheet. So, what they’re saying is, “Okay, starting now, we’re not going to sell any securities, but we’re not going to buy new ones. The amount that we’re not going to buy.” It’s kind of a strange concept, how much are you not going to buy? Or in other words, what’s the ceiling on the amount that you’re prepared not to roll over. And it’s going to start low. They’re going to start at 10 billion a month at six billion in treasuries and four billion in mortgages, but they’re going to ratchet it up. Every three months that number’s going to go up and up and up. Until they get to the point where, and this is the number you mentioned, it’s $50 billion a month broken into 30 billion in treasuries, 20 billion in mortgages.

But it’s 50 billion a month times 12 months is 600 billion dollars a year. So sooner than later, meaning late 2018, early 2019, the Fed is going to not roll over $600 billion a year. Put differently, $600 billion a year in money is going to disappear. The Fed would like us to believe that that’s not a monetary tightening, that that’s not going to have any impact on the economy. That’s nonsense. How could they tell us for eight years that Quantitative Easing was stimulative, that Quantitative Easing acted through the portfolio channel sect by pumping up stock prices, by pumping up house prices, making it good collateral for loans. This would increase funding and spending, have a wealth effect. All this wonderful stuff.

By the way, a lot of what I just said is nonsense. I mean I’m describing how the Fed thinks about it. It’s not necessarily how I think about it. Nor do I think all that stuff works the way they think it does, but that’s what they told us. That Quantitative Easing would have all these wonderful effects. Well how come Quantitative Easing has those good effects, but Quantitative Tightening or QT doesn’t have any bad effects? That seems ridiculous. So, little by little, they’re going to work their way up to $600 billion a year of money that disappears, that reduces the base money supply (M0), but somehow, we’re all supposed to pretend that that’s going to have no impact on stock prices or housing. I think that’s nonsense.

So, it’s a very big deal and the Fed says they wanted to run on background, wants to pretend that this not rolling over the 600 billion a year is going to run on background, pay no attention to that man behind the curtain. We’re not going to use it as a policy tool. We’re just going to do interest rates up or down over here, so ignore this. Well they can say that, but the market’s not going to ignore it. The market understands what’s going on. And it will have this tightening effect as you described.

So, the Fed is blundering once again. They can’t seem to get anything right. That’s not really surprising when you have the wrong models, obsolete models, you’ll get the wrong policy every single time. But the economy’s weak. It’s getting weaker. We may be in a recession sooner than later. The market looks vulnerable and now the Fed wants to launch this major tightening program. I think it’s nonsense to think that won’t have some very bad effects.

Mike Gleason: Switching gears here a little bit. I want to talk about the dollar. It’s long been said that the U.S. dollar is significantly boosted and allowed to maintain its status as perhaps the world’s most reliable fiat currency or the tallest midget at the circus, so-to-speak, because the world’s financial system is built around the dollar. It is used to settle trades of oil and practically everything else. Now you’ve written a lot about currency wars and how this type of thing plays out and what goes on behind the scenes with all of this. And you just know people like the Chinese and Russians would love nothing more than to see the Petro-dollar taken out and replaced. Is our US dollar going to retain its Petro-dollar status over time here, Jim?

Jim Rickards: I don’t think so. There’s a very famous line from an Ernest Hemingway novel. The novel is The Sun Also Rises. It’s basically two guys, they’re having a drink at the bar and the one guy’s recently gone bankrupt. The other guy’s a little incredulous and he says, “Well how did you go bankrupt?” And his very famous answer was, “Slowly at first, then quickly.” Meaning, with any exponential algorithm or any exponential function, it starts slowly at first and then quickly. In other words, it’s the famous story of the courtier to the emperor of Persia, who did the emperor a service. The emperor was so pleased, he said, “I’ll give you anything you want. What do you want?” And the guy took out a chess board and he put one grain of rice on one corner. He said, “I’d like you to double the rice every square, so I’ll get two grains of rice on the second square, four grains of rice on the third square. And eight grains of rice on the fourth square, etc. around the board. And that’s how much rice I want.”

So, the king goes, “Done. You got it.” And then of course, he didn’t do the math. That’s two to the 4th power because there’s 64 squares on a board. And then the king’s administer came back later and said, “That’s more rice than the entire kingdom.” So, it’s an example of how starting with a grain of rice, you can bankrupt a kingdom when you have any kind of exponential effect going on. So, with regard to the U.S. dollar, yeah, the dollar is 60% of global reserves today. It’s 80% of global payments today when you look at all bank wire transfers and purchases of securities and currency trading and global trade, etc. No doubt that it is used to price oil and a lot of other things. So, no doubt that the dollar is the dominant global reserve currency today.

But I see at least seven or eight different, very powerful threads. Those grains of rice are going two, four, eight, 16, 64, 128 and so forth, leading to the demise of the dollar. So, what are they? Well number one, is gold. I think the China gold acquisition story is pretty well known. The Chinese officially say they have about 800 tons of gold. By the way, all these numbers I’m going to recite, these are all government gold. I’m not talking about private gold, which is a separate area, also important, but just government gold. China says they have about 1,800 tons. But (there’s a) very good reason to believe, based on Chinese mining output figures, Chinese gold imports, activities of People’s Liberation Army, which moves the gold. I’ve been to China recently. I met with the top gold banks in China.

I’ve also been to Switzerland recently and met with refiners there who actually sell gold to the Chinese and based on a lot of sources, it looks like they probably have more like maybe 4,000 tons, maybe even higher than that from all it’s probably higher, maybe 5,000 tons of gold. Russia is a lot more transparent than China, but they have tripled their gold reserves in a little over 10 years. In 2006, they had about 600 tons. And now they just passed 1,700 tons. We just got the numbers for May. That may not sound like a lot compared to the 8,000 tons that the United States has, officially 8,133 tons, but remember Russia’s economy’s only 1/8th the size of the U.S., but they have almost one quarter the amount of gold, which means that their gold to GDP ratio is double the United States.

If you had to back up your economy with gold, Russia would have twice as much as the United States again, all relative to the size of their economy. China is about on the par with the United States. It seems determined to pass the United States. So, two of the most powerful countries in the world are buying all the gold they can lay their hands on. The way I put it to people is, you can draw two conclusions. Number one, the Chinese and the Russians are really dumb. Or, they see something that you don’t. They see something that most people don’t see coming. I’ve spent time in Russia and China, they’re not dumb, meaning they see something that most people don’t see. And they’re preparing for a post dollar world or a world in which the confidence in the dollar is greatly eroded. So that’s one thread right there.

Beyond that, we have crypto-currencies. And I don’t want to get into Bitcoin and all that, but that’s a whole separate subject. It’s a long subject and a difficult one for a lot of people. But in all my discussions, I’ve always separated block chain from bit coin. Block chain is the technology behind the distributive ledger and how you actually account for the bitcoins. Bitcoin is the specific digital currency. And there are others out there. Bitcoin may or may not be the future though. That remains to be seen. I have my doubts, but others disagree. But there’s no question that block chain technology has a bright future. Russia is exploring that. If you were Russia, then you were the central bank of Russia, why would you want to be talking to the founder of Etherium or other experts on block chain technology.

Well one answer would be that you’re building a digital currency alternative to the dollar that the U.S. cannot hack or disrupt, because right now everybody’s vulnerable to dollar sanctions. So, Russia doesn’t love the dollar. They don’t love the United States, apparently. But when they sell their oil on global markets, they get paid in dollars. Now they then take the dollars. They do stuff with them. Sometimes they buy gold. We talked about that, and that they store the gold of Russia. They don’t store it in New York by the way.

Or they can buy U.S Treasury securities and they have some of those. They can buy European or Euro denominated securities, German government bonds – they have some of those etc. or they can put it into their sovereign wealth fund. So, there are a number of things they can do with the money, but they always start with dollars. And when you start selling dollars for euros, or buying gold, sending the dollars to a Swiss refinery, getting the gold in return, etc. you’re trapped in this dollar payment system that I was describing earlier, where all of what is called the message traffic – I pay you, you pay me. And we do it through banks. How is that actually done? Is it through these MT forms on Swift MT stands for message traffic?

That’s how we make irrevocable transfers. Well the United States has a choke hold on all that. We definitely have a choke hold on Fed-wire, which is the dollar payment system. And through our allies and out intelligence services, we have a choke hold on Swift, which is the international payment system.

Russia is very uncomfortable having to transact through a system that the United States holds in its grip. It’s like you’re in intensive care and you’re on oxygen and your worst enemy has his hand on the oxygen supply. They can cut it off anytime they want. So, Russia is building alternative payment systems. It’s not enough to try to get out of dollars into gold. You actually – if you’re going to transact, if you’re going to pay people for things – you need an alternative payment system that the U.S. does not control. Block Chain offers that. So, Russia and China are pursuing that.

There are there threads out there. The Chinese are very heavily diversifying into euros right now. Not all at once… none of these things happened all at once. But if you look around at the landscape, and Russia and China are buying gold. Russia and China are looking at digital payment systems, block chain type technology that the U.S. can’t control. Russia and China are doing currency swaps. China’s doing currency swaps throughout the world with Brazil, Switzerland, and with a lot of other countries. Saudi Arabia is looking at perhaps pricing Chinese oil in yuan. They’ve done currency swaps with China. They’re working on these block chain based technologies. China’s buying euros. This has the look of, you lose your status slowly, and then quickly at the end.

So, yes, I think that the dollar will sooner than later lose its status as the dominant global reserve currency. It doesn’t mean dollars go away. It does not mean that we wake up one day and, “Oh, gee. There’s no dollars.” It just means that it becomes less and less important, the U.S. loses its financial leverage, and the dollar may end up like the Mexican peso. If I go to Mexico, I’m going to get some pesos, because I need them down there for taxi drivers or tips or bartenders or whatever. So, it’s a local currency, but I’m not going to take them back to the United States with me.

Well, the dollar could get to the point where it’s the local currency of the United States. You’ll have some when you come here. And you and I might get paid in dollars or spend money in dollars or whatever, because we live in the United States. But it loses its global reserve currency status. And that’s a very big deal in terms of the ability of the United States to run perpetual trade and budget deficits without having to suffer inflation or suffer devaluation or the consequences that countries like Argentina know all too well.

And we haven’t even talked about the SDR, which is another alternative to the dollar. I’ve been talking about Russia and China and block chain and gold and euros, but the SDR is out there as well. The last issuance of SDRs was fairly recent in 2009, in the aftermath of the financial crisis. And then the next global liquidity crisis, which again, you can foresee and expect. Independent of the decline of the dollar. That’s something that’s just happening in front of our eyes. But a global liquidity crisis could happen at any time. And it begs the question. How do you re-liquefy the world? How do you put out or end a global liquidity crisis?

The last time it was the central banks bailing out Wall Street and really bailing out the world, but going back to the earlier part of the interview, Mike, when we talked about the Fed reducing their balance sheet. Well the way the fed dealt with it last time was by expanding their balance sheets. From 800 billion to 4.5 trillion. Printing money in other words.

Well what if a global liquidity crisis hit soon or maybe even next year long before the Fed reduces their balance sheet? Why is the Fed reducing their balance sheet? Why do they care? Why not just keep the 4.5 trillion? What’s the big deal? Well the answer is they’re at the outer limit of a confidence boundary. They’re at the outer limit of how much money they can print before people start to question the value of the money itself. So, they want to get it down to two trillion, so they can go back up to 4.5 trillion again if they have to. In other words, if here’s another liquidity crisis. And you start at maybe two trillion, you can take your balance sheet up to five trillion with, that would be QE4 and QE5 and QE6.

And that would help to maintain the U.S.’ dominance. But here’s my question. What if the liquidity crisis hits before the Fed can get their balance sheet normalized, which in my view is very likely. Well in that case, you need another source of liquidity, and that source would be the IMF issuing SDRs and that would be the end of the dollar. So, the threats are everywhere. They could come from a lot of different directions. In fact, all these things will tend to converge, each one will amplify the other. But they all point in the same direction, which is the devolution in confidence in the value of the dollar and much, much higher dollar prices for gold.

Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

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Gold and Silver Are “Asymmetric” Trades

An asymmetric trade is a situation where investing a relatively small amount of money holds the potential of yielding a profit many times the amount of the original sum at risk. In other words, where the risk to reward is skewed massively in the direction of reward.

This took place recently with Bitcoin (BTC). Is this conceptually different from bets made years ago on Microsoft, Cisco, Amazon, or Facebook, which yielded hundreds of percent profit to intrepid investors? Does it have relevance to the possible returns during the next few years for those who hold physical gold and silver?

I would answer “yes” and “yes.”

The current “mania” in the cryptocurrency space – most notably BTC and Ethereum (ETH), along with a few other “app coins” – offers an in-future lesson for a similar setup in the precious metals. (For more on the above topic, see “The Blockchain: A Gold and Silver Launchpad?

First: This may be the first time ever that an investment “story” has had the ear and investment dollars of a global audience on a simultaneous basis. Individual investors, hedge funds, businesses, and even countries, are sending a torrent of funds, with the effect, to paraphrase Doug Casey’s famous remark, of “trying to push the power of the Hoover Dam through a garden hose.”

3-Month Bitcoin Chart

At this point, trying to use technical analysis, Elliott Waves – or common sense – in predicting when and how this moon shot is going to end, or even level out, is of little help. Taking some money off the table of a large position still makes sense. But “going to cash” with the idea of getting back in might become a tactical – or even strategic mistake.

In January 2017, ETH could be had for $10 each. By $50, the charts and many soothsayers said that it was “grossly overbought.” Time to cash out? Today ETC sells for $328 each. Can you predict at what price level this will end? Not I. During a bull run of indeterminate length and height, losing your (core) position can knock your profit-making efforts to the curb.

This is exactly what metals’ and miner-holders will face as the next leg(s) of the secular bull run in gold and silver starts moving upward in a sustainable manner. The temptation to sell out at 3-4x will be overwhelming – especially for those who bought at higher levels and are looking for an excuse to “get out at break-even.”

In order to ride the tiger for as long as possible, you will need to have decided beforehand what part of your holdings are defined as “core” – insurance and longer-term investment-related, versus “speculative” – selling into great strength, in order to take profits and “play with the house’s money.”

Without having a plan early on, you WILL end up selling too soon.

Second: Because of the Internet’s power to instantly broadcast information, good or bad, the time it takes for this kind of price run to get underway and rocket off into space has been greatly compressed. It took over two decades for Microsoft to “do its thing.” Amazon? Arguably about 15 years.

Could BTC go to $500,000 each in 5 years? Your guess is as good as anyone else’s on the planet. Jim Rickards has gone on record predicting $10,000 gold, and I have written that silver could rise to $175 to $250 the ounce.

Apply this reasoning to the precious metals.

This report is not about how to “make a killing” on bitcoin. It IS about applying the same kind of thinking to the metals.

What if the new factor of digital metals become wildly successful in the coming years and adds to the already strong demand against finite above-ground holdings? This could cause gold and silver prices to go through the roof… just as new supply from the mines goes into a tailspin.

The coming bull run in the metals – because it too will be “globally attended” will be taking place in a sped-up investing environment, and with the tailwind of a “digital metals’ kicker” – could offer the same kind of wildly unbalanced asymmetric opportunity currently being witnessed in the cryptocurrency space.

Is Your “Picture” Big Enough?

May 22, 2017 was the seventh anniversary celebration of “Pizza Day.” It may have been the first successful trade of BTC for something “tangible” – in this case, two pizzas from a Papa John’s franchise. Laszlo Hanyecz wrote, “I’ll pay 10,000 Bitcoin for a couple of pizzas… like maybe two large ones, so I have some leftover for the next day — I like having leftover pizza to nibble on later.”

Hanyecz can be forgiven back then for not comprehending the potential this new vehicle might someday offer. Still, we can learn from his personal outlook.

And we can learn from the person who sold Bill Gates an operating system for a pittance; the wealthy investor who refused to make a $10 million initial seed loan to a startup operation called Home Depot; or the financier who kicked out the Google founders when they sought a loan for less than one million dollars.

We need to make sure our minds are open enough to “allow” for whatever the future might have in store for our investment and insurance positions in the precious metals’ space.

This is not about mindlessly holding an entire position indefinitely for “the long term,” but rather keeping in mind that the potential gain could be all out of proportion to what we now think is possible… and acting accordingly.

Do you suppose that a few short years ago, anyone in Venezuela thought that having just one ounce of silver would one day be exchangeable for 6 months of food, or for an ounce of gold… a house? I didn’t think so.

But just to be fair, the bolivar fuerte – “strong bolivar” currency – in spite of thousands of percentage point devaluation per year, still does have some value… as a napkin, which the adjacent picture that has since gone viral shows.

The moral of this story is that you should continue to exchange some of what David Morgan has so famously called “paper promises” for more physical gold and silver – and if you’re still on the fence about getting started, get a move on!

Don’t be wishin’ and hopin’ at $40 silver that you should have done something at $17, or worse yet, instead of getting invested now, say… “I’ll just wait for a correction.”

David Smith is Senior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com. For the past 15 years, he has investigated precious metals’ mines and exploration sites in Argentina, Chile, Mexico, Bolivia, China, Canada, and the U.S. He shares his resource sector findings with readers, the media, and North American investment conference attendees.

The post Gold and Silver Are “Asymmetric” Trades appeared first on Gold Silver Worlds.

from Gold Silver Worlds http://goldsilverworlds.com/stocks/gold-silver-asymmetric-trades/

How Precious Metals Can Help Protect Your Wealth from Hackers

Could your wealth be hacked? It’s a threat most investors overlook. But they do so at their own peril.

If elections can be hacked, then so can bank and brokerage accounts, as well as any online platforms for digital currencies.

More than five months into Donald Trump’s presidency, the “Russia hacked the election” conspiracy theories still won’t go away. They’re expanding to also implicate Russian hackers for meddling in elections in France and elsewhere. The latest Russian hacking story centers on Qatar.

According to the Guardian, “An investigation by the FBI has concluded that Russian hackers were responsible for sending out fake messages from the Qatari government, sparking the Gulf’s biggest diplomatic crisis in decades.”

The Russian government has repeatedly denied involvement in these hacking campaigns. Regardless of whether the news about Russian hackers is fake, the threat of cyber-attacks is very real.

In recent months, major e-mail providers and e-commerce sites have been hit by hackers. They often take customers’ information and try to sell it on the dark web.

Think Bitcoins are “hack proof” due to cryptography? Think again. Tens of millions of dollars worth of the crypto-currency have been digitally stolen by hackers. The biggest heists hit Bitcoin exchanges Mt. Gox and Bitfinex. More recently, South Korean Bitcoin exchange Yapizon was hacked out of more than $5 million.

Electronic Banking Is Vulnerable to Hackers

Electronic banking and brokerage institutions are also vulnerable. A rogue government, a group of terrorists, or even a lone mischievous teenager could potentially crash markets by unleashing a debilitating computer virus or breaking into networks that undergird the financial system.

The worst-case scenario for the digital economy would be an electro-magnetic pulse (EMP) attack. An EMP could be triggered by an extreme solar flare or a nuclear detonation. In the event of an electro-magnetic pulse, large-scale economic disruptions could unfold as the power grid goes down and computer systems get fried.

If the Internet goes dark, then so does Bitcoin and other digital platforms. No online banking. Your ATM card may no longer work. A national “bank holiday” may have to be declared as a physical cash shortage sends the economy reverting to barter transactions.

Granted, this is an extreme scenario. But you don’t have to take extreme measures in order to protect yourself from it.

Reducing Your Vulnerability to Cyber Attacks: Simple Steps You Can Take

One of the most important steps to take to boost your resilience to digital threats is to hold tangible assets that aren’t dependent on, or connected to, the internet. Physical precious metals are a time-tested form of unhackable money.

Virtual ownership of metals in the form of futures, options, or exchange-traded products will leave you vulnerable to any of the major threats to the financial grid.

The upshot to owning low-premium bullion products you can hold in your hand is that it costs you nothing extra to obtain the protection and utility that physical metals provide.

We’re not suggesting that you pull everything out of your bank accounts and close all your credit cards – for now, they remain a convenience most of us won’t want to do without in our daily lives. (And we’re not saying to steer completely clear of cryptocurrencies either.)

But you can and should take steps to make your accounts at least somewhat more secure:

  • Close any dormant accounts that you no longer use.
  • Keep paper records, including statements, from accounts you access online.
  • Strengthen your passwords by lengthening them or using a password manager.
  • Avoid storing sensitive information directly on cell phones or other commonly stolen/ hacked devices.
  • Check your credit report regularly for signs of identity theft.
  • Install anti-virus software on your devices and keep it up to date.

For the portion of your wealth you want to secure in physical, off-the-grid metal, make sure you keep it far removed from the banking system. That means not storing your precious metals in a bank safe-deposit box that could be raided or rendered inaccessible during a financial crisis.

Keep at least some portion of your gold and silver stash stored in a home safe for immediate accessibility at all times. And keep quiet about it! Your neighbors don’t need to know all about your pure silver bars or your shiny gold Krugerrands.

For the portion of your precious metals holdings you don’t want to keep at home, opt for a secure bullion storage facility such as Money Metals Depository.

MMD only uses physically segregated storage which ensures your metals aren’t pooled or co-mingled with those of other customers.

Even as new and potentially bigger cyber threats emerge, you can rest comfortably knowing much of your wealth is beyond the reach of hackers. That peace of mind is difficult to put a price on. Fortunately, it’s not difficult to obtain. Rotating wealth out of financial assets and into hard assets is as easy as writing a check to a reputable bullion dealer such as Money Metals Exchange.

 

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

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from Gold Silver Worlds http://goldsilverworlds.com/gold-silver-insights/precious-metals-can-help-protect-wealth-hackers/

INFOGRAPHIC – 31 Incredible Facts about Gold

There is always more to learn about gold which is a rare, indestructible metal which can store your wealth.  There are many aspects to gold beyond the bullion investment market.  It has an extensive history.

This infographic  covers many incredible facts about gold.  It covers how gold is created, how much gold an average human body contains, how much gold is in a domestic sewer system, and also details about the earliest known gold relics which have been discovered.  There are many industrial uses.  We all come into contact with gold on a daily basis through the many gold bonding wire found in our smartphones.  But, few people have any idea whatsoever about the gold facts listed below.  Think you know gold?  See below.  Infographic provided by BullionVault.

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from Gold Silver Worlds http://goldsilverworlds.com/gold-silver-general/infographic-31-incredible-facts-gold/

Hell Freezes Over: CFTC Finds Trader Guilty of Metals Price Rigging

It must have been painfully awkward for the Commodity Futures Trading Commission (CFTC).

Last year, Deutsche Bank settled a civil suit involving blatant market rigging and turned over reams of information, including chat logs and voice recordings. The trove contained plenty of damning evidence which had gone overlooked by the CFTC.

CFTC investigators supposedly spent 5 years searching for illegal market manipulation, but somehow, managed to find nothing.

The cheating became hard to ignore after Deutsche Bank turned over voice recordings and 350,000 pages of documents which revealed bank trading desks being run like the back office of a crooked casino.

Here is one of the chat log gems between David Liew (Trader B) and an accomplice at UBS, where they coordinate trades and joke about it with a play on the timeless Ghostbusters song:

UBS [Trader A]: and if u have stops…

 UBS [Trader A]: oh boy

 Deutsche Bank [Trader B]: HAHA

 Deutsche Bank [Trader B]: who ya gonna call!

 Deutsche Bank [Trader B]: STOP BUSTERS

 Deutsche Bank [Trader B]: deh deh deh deh dehdehdeh deh deh deh deh dehdehdeh

 Deutsche Bank [Trader B]: haha16

This and records of many other similarly incriminating exchanges left CFTC officials little choice but to reverse themselves and finally take some action. On June 2nd, the Commission announced a settlement with a single trader named David Liew.

Nevertheless, James McDonald, the CFTC’s Director of Enforcement, seemed proud. He announced, “Today’s enforcement action demonstrates that the Commission will aggressively pursue individuals who manipulate and spoof in our markets.”

Nowhere in his statement will you find him giving proper credit to the cheated bank clients who did the actual heavy lifting. After making complaints to the CFTC, they hired some attorneys and pursued the civil action which produced the mountains of evidence the CFTC relied upon.

In any event, more enforcement action may be on the way. A number of other traders and banks have been implicated in market rigging.

More stuff that will be hard for the bureaucrats and Wall Street job seekers at the CFTC to ignore.

The sanctions against David Liew do represent a small step toward more honest metals markets. We’ll get more excited if we see high level executives being prosecuted and banks losing their licenses to trade. But we aren’t holding our breath.

The civil courts have a much better chance of making the crooked banks accountable than the captured CFTC.

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

The post Hell Freezes Over: CFTC Finds Trader Guilty of Metals Price Rigging appeared first on Gold Silver Worlds.

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David Morgan Exclusive: Gold and Silver at Breakout Point from 6-Year Downtrend

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Mike Gleason: It is my privilege now to welcome in our good friend David Morgan of The Morgan Report. David, it’s always a real pleasure to have you on with us and I’m especially excited to talk with you about some of the topics we’ve got on tap today. How are you?

David Morgan: I’m doing well Mike, thank you very much.

Mike Gleason: Well, as we begin here David, I want to talk to you about the danger of complacency because I think it’s a very appropriate topic for the times we’re in right now. To you and me and to many others in our space with a similar world view, we see a whole slew of reasons to own precious metals. We have threats of war in many places throughout the globe. We have a president here in the U.S. who the establishment hates and is hoping to oust if they get the chance. We have nation central banks printing new fiat currency at unprecedented levels all throughout the world.

An entire continent over there in Europe that appears to be potentially at risk of seeing their political and currency union falling apart, terror threats all over the place, the refugee crisis, the list goes on and on. But all the while we have this stock market continuing to make all-time highs with most people seeming to believe that everything is hunky dory while completely ignoring all of those geopolitical and monetary headwinds, or for those who seem to grasp all of that, all that’s going on, maybe starting to believe that it doesn’t matter. Because, after all, the feds and the central planners are going to be able to manage this thing forever.

So, talk about complacency here David, why aren’t we seeing more flock to safe havens, at least not here in the Western world, and discuss the dangers that exist if we let ourselves fall into the complacency or the “nothing is ever going to change” type of mindset.

David Morgan: Well, that’s a tough one. I would say first is eternal vigilance, I mean freedom depends on it, so my idea or ideal from the beginning has been that all fiat currency will eventually fail. And I also believe that it would happen within my lifetime and I’m certainly older than I was when I held that belief, yet I still hold it. So, really there’s a mandate to hold some portion of your wealth in a savings, in other words, the way capitalism is supposed to work you build from a savings base and that savings is put into a capital formation, which means you construct something be it software, hardware, a building, automobile, whatever, and that becomes a benefit to society at large and they vote in the marketplace with their dollars to further the projects so to speak. Make a profit, which returns to the initial investors and on it goes. So that’s the ideal.

My statement was that in times like these rather than be a true capitalist – which is what I just outlined – it requires further savings because there’s too many uncertainties out there with one certainty: every fiat currency on planet Earth in all of recorded history has always failed. So, to say that the dollar won’t is a misstatement, at least based on past history. Is it going to, for this time, be different? Eh, I guess it’s possible. But if we look at it objectively and we state, well, let’s really see what’s gone on with the U.S. dollar, if you look at the Federal Reserve Board’s own website, they will freely admit that the 1913 dollar is worth about three cents today. So, you have a 97% loss when their mandate was to basically keep the currency stable. They have failed miserably.

Most people that follow what you do, what I do, what the hard money camp, the gold/silver guys talk about, they understand this, but they are very tired out, worn out. I mean I coined the phrase a long time ago that “the silver market would either scare you out or wear you out.” We are definitely at the wear you out phase. And this is where complacency sits, in where they’ve manipulated the market, we even have proof Deutsche Bank admits it, there is a new CFTC ruling that’s gone on, that they’ve singled out an individual that’s going to turn over evidence and probably bring others into the mix on spoofing the market in the silver market, and yet we don’t really see any real significant price change.

So, the complacency (mindset) is, look, I know what’s going on but it doesn’t matter because these guys have got control and they are always going to have control. You know, it brings to mind, the adage, the dark comes before the dawn, the big struggle for seed to germinate, that last little oomph that is required and I think we are very close to the tipping point and I’ll add onto that.

First of all, I want to back up a second Mike. As you know, and you’re on my service, I put an alert early in the morning about the second week of May and I said I think this is it. Meaning, the fundamental significant shift between paper assets and hard assets, I think, we don’t know yet, that gold and silver had turned to the up-side and stocks to the down-side. Now, since I made that statement, stocks have made a new high, so let me get that on the record. However, it looks to me as if we are getting a confirmation on that with gold right now. Because gold is right at the breakout point from a six year down trend and it’s mostly safe haven buying, but it’s not the people that I just referred to, it’s basically the smart money, which means big investors, large hedge funds, and China primarily.

China’s gold demand is set to surge about 50% to about 1,000 metric tons this year. Their demand for gold bars are on track to make a 50% move in 2017. The geopolitical risk internationally is probably at an all-time high and this is leading to safe haven demand again, for smart money, nation states, people in the know, people that have basically sold off their stocks quite some time ago near the highs, that have capital sitting on the side lines and that is starting to filter into the gold market. And then you’ve got of course, a lot to do with the U.K. election, terrorism, the risking tensions in the middle east, and all of this is supportive of the gold, especially after the attacks in London that took place recently.

And the other fact, is that gold is 12% higher for the year and it’s actually out performing stocks. Yet, if you stopped the average investor on the street and asked them what’s doing better this year, I’d say about 90%, probably higher than that, probably 98% would say, well stocks are doing better than gold.

Mike Gleason: Yeah, it’s a very valid point. As a follow up here, and this is kind of an open ended and very broad topic, but comment on counterparty risk, because I know that is something that you’ve been covering in The Morgan Report recently. Take it wherever you want, but share your thoughts there, because part of this complacency is failing to recognize the tremendous amount of counterparty risks that exist in the world today, give us your thoughts there David.

David Morgan: Yeah, I could go on, I’ll try to be succinct. First of all, the belief system is so strong, and yet the truth is sometimes actually opposite of a very, very strongly held belief. The belief globally for all of the establishment economic system, which means all nation states, big hedge funds, all banks, etcetera, believe that the safest place that you can be in is the United States bond market, be it a treasury bill, a T-note, a long bond, anything in between. If you own the full faith and credit of the United States debt, you are buying something extremely safe. And the truth is, it’s the exact opposite. It is probably the once place that at some point in time, everybody is going to want to get out of it, perhaps at the same time or close to it.

How can I say that? Well, going back to what I stated, all fiat currencies eventually fail, so this is proven time and time again, yet the belief system has yet to shift in a dramatic way. However, the cryptocurrencies are a bit of a tip off that somebody understands what is going on, and I admit, the best place that you could have possibly been over the last 30 years, for a long term buy, hold and forget it trade, would have been the U.S. bond market, this is true. But nothing grows to the moon. I mean, all trees grow as high as they grow and then they stop. It’s the same thing with the bond market.

So, there is a huge debt bomb that we talked about in The Silver Manifesto, that’s waiting to go off and when that happens, and it doesn’t necessarily mean one day, boom it goes, and everybody understands it. It’s more likely to take place slowly, slowly, slowly and then all of a sudden. Which means that a lot of savvy people will be exiting the dollar, which we have seen for years now. We’ve seen a lot of nation states that have basically abandoned the dollar slowly, sometimes fairly quickly: China, Russia settling their payments between each other in their own currencies. A lot to move from the AIIB (Asian Infrastructure Investment Bank). I mean there is a lot of periphery situations that savvy people are aware of that have been a way for, not only individuals through the cryptocurrency situation, but nation states to exit exposure or much exposure, or to mitigate their exposure to the U.S. dollar. And this is a harbinger for what will take place at some time in the future. So, these things always end, the longer you add, to coin (a phrase) and give credit to Jim Sinclair, “pretend and extend,” you pretend that everything is okay and these guys pretend they can manipulate it forever and extend the problem, the worse it becomes, and this is the state that we’re in right now.

Mike Gleason: A follow up there on cryptocurrencies, David we’ve seen a real boom in those lately. Now, I think we would probably both see value in owning some Bitcoin or one of the alternatives, but one thing that we should say is that digital currencies are not and should not be viewed as a substitute for owning gold and silver, which have stood the test of time as money and have been money all throughout history, comment on that if you would.

David Morgan: Well, there’s two theories on money. One is that money is whatever the government says it is, which is a legal fiction, and of course you could be the argument that it’s salt, or it’s cow hides or it’s sheep or it’s whatever. Well, certainly that’s been tried throughout history, but the argument is either it is a legal fiction or it’s specie: it’s something of value that has value in and of itself and I would argue silver actually has more value than gold, because you can use silver for medicinal purposes, you can use it for electronics, you can use it as money or barter, and it fulfills actually more services to whoever owns it than gold does. But regardless of my thoughts on the two metals, gold and silver from time in memorial all of recorded history have been chosen by the free market as money of substance. And this is where you can’t get around the argument, I mean, a lot of people have been brainwashed into believing that gold and silver have no purpose today, they really aren’t money, and on and on it goes. So, the idea that you can create something out of nothing and it has value has been tested time and time again, and again they always fail.

On the cryptocurrencies, I’m not against them first of all, in fact I just gave a lecture about them. I talked about gold, silver and the blockchain, of course I mentioned Bitcoin primarily because it’s the leader, bitcoin is unusual, I mean let me again back up slightly Mike.

First of all, to be intellectually honest, would a cured fiat system work in theory, and the answer is probably yes, to be intellectually honest. If and only if you had a limited supply of dollars and they only grew as the economy grew, you would have in theory, a pretty good paper system.

However, that has never been the case, even when the gold-standard-basher’s bash gold, they’ve said well, the gold standard has never worked. Well, yes and no. The gold standard would work because what gold’s purpose is, is to keep that money supply growing basically at 2% a year, which is probably what a lot of the people on the left side would like, which is sustainable growth. And in a real, true economic system that is backed by physical reality rather than a make-believe set of derivatives that is unimaginable at this time, you have an economic system where each dollar over time becomes more and more valuable. But that is not where we’re at. So, we’re in a situation where there is a challenge to the system, and the main challenge really isn’t coming from the precious metals, the main challenge is coming from the cryptocurrencies.

Bitcoin is obviously the leader, I look at it Mike, right now with 750 different cryptocurrencies out there, being similar to what happened in the tech wreck, where a lot of these domain names were getting huge valuations for a very short time and a lot of people were piling in. And yet today we still have Yahoo.com, Amazon is a big leader, there are certainly companies out there that were the real deal, stood the test of time, and a lot of these dogs and cats went away very rapidly. I think the same thing will take place in the cryptocurrencies. I do think that some of them are here to stay, I think Ethereum is really not a coin, I think it’s a platform. I think few people really understand it’s potential. I think it’s one I’m favorable to. Bitcoin, it’s hard to argue against, I mean, the markets certainly voting very strong for that one. Dash is an interesting one, I certainly don’t know them all, I don’t claim to be an expert.

But one place I really do have some concerns is security. And I gave that main concern at this lecture I did in Vancouver recently, and of course I got some blow back on it and people were telling me, you can take your account and write it down on a piece of paper and hide it under your desk and that type of thing, I get that, I understand that. But there’s already been security issues with Bitcoin and a lot of people won’t do that. I mean, just because you have the potential to make it more secure doesn’t necessarily mean that most people will. So, there is some vulnerabilities out there and this is not me speaking, these are someone’s at a recent tech conference, and these were high level people that were talking about the internet of things and how vulnerable all this internet of things model is with this, what’s called big data, that is taking place before us right now, has security issues. And they do, so that’s something to bear in mind.

Now, as far as, how much to put into Bitcoin or whatever, certainly I’m free market, you decide for yourself, but I think Bitcoin’s got a long ways to go and I say that based on technical work. I mean, I looked at the chart before I did my presentation because I work pretty hard on these presentations as you know, and the volume was tremendously large in Bitcoin over the last couple months, which means it’s got a lot higher to go, there’s no question about it. And momentum feeds on momentum, especially when you’re making new highs, there is nothing more bullish to the market than a new high because everyone that owns it wants to hold it, because they don’t know how high is high, so there is very little that sells back. There will be some profit taking, but not much, because everyone is concerned with, “wow, I made this much percentage today, I wonder how much I’ll make tomorrow.” So, there’s not much selling pressure. And it will continue to go up. Very interesting market, from a couple places, the main one I would emphasize, which is a probably a different view point from many, is it is a competing currency to the present system and obviously it’s taking off rapidly.

Mike Gleason: You’ve always focused primarily on the silver market throughout your career and I know part of why you’re such a big believer in the white metal over the long run – and feel that it could really outperform gold and all other hard assets for that matter – is that fact that the moves can be so explosive because it’s such a small market, something like 1/10th the size of the gold market I believe. So, talk about that dynamic and then remind folks about the need to recognize that the moves can be pretty substantial in the silver market and not just to the down side but also to the up side.

David Morgan: Well, exactly. What I just outlined earlier was China’s buying more gold this year, and the last, and the smart money can move into gold, I mean, gold is a small market relative to the total financial markets. But they can protect themselves with gold. It’s impossible for really big money to move into the silver market, it’s just too small a market. And what will happen, is once gold breaks free, whatever that means, actually we’re at the cusp of breaking through a 6-year down trend, and it’s not going to be the next day, David. It’s going to be in a time frame, probably 2018 when we’re going to really see some momentum in both of these markets.

But if you look at the total asset base of the world, physical gold makes up about 1%, but silver makes up .02%, and there is a lot of people that at some point will want to turn some of their Bitcoin profits into hard metal. I’m not saying everyone, I’m saying some percentage, but there will be a move into the metals, and once the move into the metals starts in earnest, like we saw in 2011, you will see a lot of money, “money”, moving into the precious metals because it will be apparent at some point in time, that what I started this interview with, that the dollars demise is upon us and no one is going to trust it. It’s a confidence issue, it’s a trust issue. And what’s trusted more than anything else, even more than Bitcoin, at least history shows, is the precious metals.

So, there will be people that will be exchanging some of their Bitcoin profits for metal, there will be people on other currencies doing the same, there will be people that have huge bond holdings that will want to get out and move into the metal. And once gold starts moving to a level that a lot of people question if they can afford it or not, that will spill over into the silver market. But the silver market is so tiny, that it will take it much higher, because people really won’t care too much about the price, they’ll care about protection at that point. And that means, that “while I can afford silver it’s only, we’ll think of a number, $50, and gold is at $5000, its a 100 to 1 ratio, I can buy silver, I can afford it so I’m going to buy it.”

We will see, this is what happened in the 1980’s model, and this is what basically some Arabs and the Hunts taking a large position in silver early, before it made its big move. It was actually retail buying that took it to the height, it wasn’t Hunt, he was already positioned. It will be similar, I think, this time, except it’s a global based market, and we have the internet. Which means, that people that have never bought a silver or gold coin in their lives can almost instantly google how to buy silver, look it up and see how to do it and do it within a matter of a few minutes on the internet, so this is going to put huge pressure on the markets that they’ve never experienced in the past.

Mike Gleason: As an aside, we have been seeing a big uptake in the Bitcoin orders that we have been taking on our website MoneyMetals.com, we have accepted bitcoin for a good two years now and it’s really starting to actually move the needle, believe it or not.

Well, David as we begin to close here, the metals markets of course are a major focus for you, but we’ve also come to value your insights when it comes to broader issues such as, honest money and personal freedom.

Now, the Liberty Movement got an enormous boost in 2008, the financial crisis and Ron Paul’s rise to prominence were among the major catalysts. A whole lot of people were confronted with the problems in our governments and our monetary system. However, nearly 10 years have gone by since the financial crisis and precious little has been fixed, but people have gotten tired or complacent like we talked about at the top of the interview. Take an issue like Audit the Fed for instance, college kids chanted that slogan at rallies a few years back, but the establishment fended off the effort and the momentum appears to have faded there. Now, a good argument can be made about that effort being a waste of energy because beating Congress and Wall Street in their own rigged game is never going to happen, but what are your thoughts on the state of the Liberty Movement today. What efforts do you see working and where are the challenges?

David Morgan: Oh, well that’s a real tough one. First off, I’ll start from the bottom up. Number one is take care of your personal self and your family, I mean, you want to be healthy, wealthy, and wise to coin Ben Franklin. So, really change what you can, make sure that you’re eating right, make sure that you’re exercising, make sure that your health is number one. When I sign off The Morgan Report, from day one, I always sign it off “wishing you health above wealth.” There is a reason for that. Wisdom beyond knowledge. Having the knowledge of something doesn’t mean much unless you implement it. Being wise is meaning you know how the world works and working with it and that’s working with the truth. So that’s the bottom line, I think control what you can.

Moving up from there, what can you do. Well I’m more or less a pacifist, so I think for example, what Ted Butler did over all these years, to give a shout out to Ted, I mean he was instrumental and spearheaded this whole idea of what was going on in the CFTC and it’s been pretty thankless for him for a long time, yet he has maintained his position and asked people to help him write to the CFTC and investigate the manipulation of the silver market, and for years nothing really happened. But this little guy that is being held up as someone spoofing the market and then building a case against him, is probably due to some of the efforts that Ted did, in fact most recently.

So, you can make your voice heard, you certainly don’t want to give up. Congress does respond to the populous, it really, really does. So a phone call is much better than an email, and a written correspondence carries a lot more weight than an email and it doesn’t have to be a lengthy manifesto, it can just be simply, “I support freedom and you aren’t,” or something even better from my politically, perhaps questionable point of view, but it’s spot-on legally, is “you took an oath to defend the constitution from all enemies, foreign and domestic and I’m starting to question whether or not you are upholding that oath, write me back.” Something along those lines will wake them up, whether or not you’ll get a response I doubt it, there’s probably a computer form letter that has anything with the word Constitution in it that will probably pop out a form letter and send it back to you.

But regardless of that, you certainly can make it. And I’m for peaceful protest, the problem we have now is this “anarchy” with what’s going on from a certain political belief system, where burning things up and bashing windows, that doesn’t solve anything and it’s deconstructive, not constructive. Yet, there seems to be an element that actually relishes making that kind of a statement, which is very sad indeed, and it falls back on us as a society on what’s really being taught to the population at large and what are the moral values and what does make us great. What makes us great is we have high integrity, we were telling the truth. That’s what made America great, it wasn’t the financial system. If the financial system was honest, that helps a great deal. But as I’ve said many times, but probably bear repeating one more time Mike, as I close out, is there is a direct correlation between the integrity of the money system and the moral integrity of the population at large. The more the monetary system deteriorates, the more the moral society deteriorates with the population. They go hand in hand and we are witnessing that as we speak.

Mike Gleason: Very well put, we’ll leave it there. Well, as we wrap up here David, talk about some of the things you’re working on there at The Morgan Report, maybe mention the recent book and let people know how they can get their hands on that if they haven’t already, and anything else you want to leave our listeners with today.

David Morgan: Yeah, just go to the main website, TheMorganReport.com. I just wrote weeks ago, the silver forecast for 2017. If you’re already on the email list, you can go ahead and download that for free. The system is smart enough to know if we already have your email. And then if you’re interested in the book, just pull down the books tab on the website, you can order either book, The Silver Manifesto or Second Chance. And Mike I appreciate you mentioning that for me.

Mike Gleason: Well, outstanding insights as usual David, it’s wonderful stuff to hear and we’re very grateful for your time and for giving us your thoughts on these important matters. We appreciate talking to you today and we wish you an enjoyable summer and look forward to catching up with you before long. Take care my friend.

David Morgan: Thank you very much.

Mike Gleason: Well, that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David just visit TheMorganReport.com. We urge everyone at the very least to go ahead and sign up for the free e-mail list and start getting some of his commentary on a regular basis. And if you haven’t already, check out The Silver Manifesto and/or his new book, co-written with our mutual friend David Smith, titled Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave. Both of which are available on the MoneyMetals.com and other places where books are sold. Be sure to check those out.

Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

 

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How Would Markets React If Trump Is Actually Forced Out of Office?

Donald Trump’s policy agenda – and his very presidency – are in jeopardy…

…at least if you believe the chatter on cable television.

Yes, for weeks now, the big media outlets have been stirring up talk of impeachment. One narrative after another – Russia, Comey, Kushner, etc. – yet no conclusive evidence of any “high crimes and misdemeanors.”

Still, Democrats in Congress smell blood in the water… and they have readied articles of impeachment for introduction as soon as an opportunity presents.

But investors don’t seem particularly concerned about the implications of political turmoil intensifying in Washington.

The stock market keeps edging higher with minimal volatility.

The only hint of politically driven jitters all year came on May 17th. The Dow Jones Industrials slid by nearly 400 points as reports surfaced that former FBI Director James Comey was asked by President Trump to stop his investigation of former national security adviser Michael Flynn.

A few days later, the Dow rallied back up to its previous highs. The traditional safe-haven of gold is up modestly on the year but has yet to see any major sort of panic buying. Perhaps investors don’t believe the Trump presidency is at risk – or perhaps they don’t think it matters much if Trump gets pushed out of office.

Markets Appear Unconcerned by the Theatrics in Washington

What would a Nixonian crisis in Washington mean for Wall Street and, more importantly, main street? Probably not a whole lot in terms of major trends in the economy and in asset prices.

Premiums on pre-1965 dimes and quarters are as low as 77 cents!

Consider the recent history of presidents who have gotten themselves into trouble. Neither the resignation of Richard Nixon nor the impeachment (and subsequent acquittal) of Bill Clinton caused the stock market to crash. Precious metals markets didn’t move much around these momentous political events, either.

President Nixon resigned on August 8, 1974 with gold trading at $152/oz. Gold began the year at $117 and finished at $195/oz. Nixon’s resignation occurred within a major year-long rally and doesn’t seem to have altered its trajectory.

Far more significant than Nixon handing over the keys of the White House to Gerald Ford was Nixon’s fateful decision on August 15, 1971 to close the gold window.

Previously, U.S. dollars had been redeemable in gold by foreign countries. But the Nixon administration feared a run-on U.S. gold reserves.

Henceforth, the U.S. dollar would be a fiat currency with no formal link to gold. As a consequence, inflation fears began to build – slowly at first, but then manically by 1980 with gold prices spiking to $850/oz.

The Watergate scandal that made Nixon infamous didn’t really have anything to do with what unfolded in markets the ensuing years.

The real Nixon legacy is what happened to the dollar after he ended its redeemability in gold. The consequences of the dollar’s lost status as a hard currency are still playing out.

Contrary to popular misconceptions, Nixon wasn’t actually impeached. But Bill Clinton was. The House of Representatives initiated articles of impeachment against President Clinton on December 19, 1998. On February 12, 1999, the U.S. Senate voted to acquit Clinton and leave him in office.

Around that period, gold prices were in a long bottoming out process after having been in a bear market since the $850/oz peak of January 1980. From the time Clinton was impeached to his acquittal, gold essentially did nothing but meander around $290/oz. Interestingly, silver popped from $4.95 to $5.65/oz, and the S&P 500 also made slight gains.

The bottom line is that political turmoil doesn’t necessarily translate into market turmoil or even a detectable market reaction. But major policy changes (or failures) can have significant short-term and sometimes long-term effects on markets.

Trump entered the White House with a bold reform agenda on a scale that hasn’t been tried since Ronald Reagan had been sworn in 36 years prior. Corporate America wasn’t fully aboard the Trump train, but it certainly wants to see the regulatory and tax relief that could generate higher rates of economic growth. Investors seem to be pricing in at least some partial successes for the administration’s policy goals.

Trump Stymied by Swamp Politicians Blocking His Agenda

So far, the White House hasn’t gotten much help from Congressional Republicans. President Trump’s penchant for generating controversy has distracted from his policy aims and eroded his legislative leverage. GOP Senators John McCain, Lindsey Graham, and John Cornyn each declared Trump’s recent budget proposal, which calls for cuts in some domestic agencies and programs, “dead on arrival.”

Career lawmakers never take well to requests for spending cuts. As Ronald Reagan once observed, “No government ever voluntarily reduces itself in size.

Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!”

Only a president who is truly an outsider and willing to fight the D.C. establishment at every turn can have any hope of fundamentally changing it. Donald Trump vowed to “drain the swamp” but is so far having little success.

If he were to resign or be forced from power by Congress, then Vice President Mike Pence – a former member of Congress – would become the Commander in Chief.

We doubt Trump has anything to worry about – at least in terms of any real possibility of being forced from office. But either way, the White House will remain Republican for at least a few more years.

During the last period of Republican rule under George W. Bush, precious metals vastly outperformed stocks. There is a good chance that metals will resume leadership when the trumped-up hype and hope for U.S. stocks finally dissipates.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

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