This Coming Financial Crisis Is Different, but Gold Is the Same as Ever
Gold is the best defense in a financial crisis of privacy, property and ownership
Stansberry Research’s George Gammon joined Daniela Cambone in an in-depth interview detailing the imminent financial crisis. One of the primary assertions Gammon makes is that the crisis is going to differ from previous ones. That much has already been beaten in, to the point of even the IMF saying it will be unlike previous crises. But what’s the difference?
Gammon believes central bank digital currencies (CBDCs) are going to take center stage in what’s shaping up to be a decade-long financial tumult. It will have similarities to 1940s, along with some rather controversial developments. In fact, Gammon tells us we was roundly criticized in 2019 for promoting “conspiracy theories.“ A lot of these predictions have either already materialized or are in the works. The Federal Reserve is rolling out FedNow, while both the International Monetary Fund (IMF) and the Bank of International Settlements (BIS) are having ominous meetings over some kind of global digital currency.
FedNow, says Gammon, isn’t a CBDC per se, but the groundwork to implement a digital dollar more rapidly.
Interestingly, Gammon feels that despite FedNow’s existence, the U.S. might be the nation most intolerant to a national digital currency. (For some background on this, check out Lance Wallnau’s recent article What, Exactly, Is the Point of a Digital Dollar?)
How would the federal government implement such an unpopular solution, then? Gammon says the crisis of regional banks is the perfect excuse to roll out CBDCs, because a central bank can’t go bust even if it goes negative. Other incentives could include access to the Federal Reserve’s much higher interest rates (currently 4.83%) compared to those offered by commercial banks (current average 0.24%, or 1/20th the rate offered by the Fed, directly to banks). That, alone, might be enough to encourage significant and even enthusiastic adoption by citizens more afraid of inflation than of the government.
In a scenario where a CBDC is rolled out in the U.S., every citizen’s money will be moved to the Fed’s balance sheet. From there, the implementation of the good old social credit score and monetary controls would be trivial – there are probably off-the-shelf software packages already for sale that would enable comprehensive financial surveillance.
And “financial surveillance“ is only the beginning – just a short step away from “economic enslavement.“ Gammon uses the example of limiting citizens’ access to their money if they aren’t “environmentally friendly” enough.
While we watch the troubling saga of CBDCs unfold, we have more overt issues in the form of inflation and interest rate manipulation on another. Gammon likens the coming decade to the 1940s, where the U.S. would go to 20% inflation, then dip into deflation, and then back. On one hand, Gammon feels like near-term inflation might have peaked. On the other, experts are expecting a pullback by as much as a hundred basis points by the Fed by year’s end. So it looks like another CPI spiking cycle is in the books.
Gammon is forecasting $3,000 gold, joining a growing number of pundits who have named this figure as of late. The reasons to buy and hold gold will become more obvious by the day, and will move away from just price appreciation. Instead, every individual will increasingly ask themselves the question that de-dollarizing central banks are: why hold an asset that’s losing value and that can be taken from me if I can own gold instead?
Citi’s analysts see silver above $30 in this bull cycle
It’s all too easy to forget about silver these days. If nothing else, it’s probably all those gold/silver ratio normalization predictions that we’re waiting to materialize. But, as Citi’s analysts have recently pointed out, silver has quietly been building up steam in gold’s shadow, posting gains that can be seen as just as impressive.
Despite its recent pullback from $25, silver gained some 29% over the past six months. Not bad for a supposedly static asset, but Citi goes on to say that silver is seeing near-perfect conditions in what is an ongoing bull market.
Now, $30 silver sounds like the kind of price target that will shock people awake, but as Citi’s team notes, it would only represent an 18% gain from current levels. Based on the kind of price action that the metal has seen over the past months, it’s far from a stretch. Indeed, Citi views $30 as a moderate forecast while saying that $34 (a 36% jump from today’s price) in the next 6-12 months is a distinct possibility.
Citi’s bullish silver forecast is far from a lone example, with many other analysts sharing similar thoughts. FxEmpire’s Christopher Lewis said that clearing the $27 resistance level would put silver on a run similar to those where its price hit $50/oz. MKS Pamp Group’s Nicky Shiels agrees that silver could climb above $30 this year.
A recent Kitco survey of 1,482 retail investors showed that the average silver price target is $38 by the end of this year. (Most of these forecasts have to do with projections of further weakness in the dollar—and there are lots of those.)
Paul Krugman urges minting a $3 trillion platinum coin to end the debt ceiling stand-off
The craziest thing about Paul Krugman suggesting a $3 trillion platinum coin to solve the debt ceiling crisis is that it isn’t a novelty idea. Actually, the craziest thing is probably that it would work. U.S. law states that the government can issue commemorative coins, which have a face value. The face value of $3 trillion would be just enough for the federal government to get its affairs in order for the time being, and would aggravate U.S. creditors the least.
Was Krugman motivated by platinum’s recent performance, where it has climbed back from historically low levels to $1,100 and seems to want to correct as quickly as possible? He lists premium bonds as an alternative option. Either way, Krugman’s solution comes as the U.S. faces yet another debt ceiling issue.
If it feels like we’ve been here before, that’s because we have. A lot of drama is created over the debt ceiling being reached, along with uncertainty over what will happen if it doesn’t rise. Indeed, failing to raise the debt ceiling will make the government unable to pay its bills, and something worse than the Great Depression will happen.
The debt ceiling is so irrelevant that the Obama administration actually suspended it. It exists only as a form of pretense that there are some kinds of financial controls placed on the federal government. This round of debt ceiling will be no different than the nearly a hundred ones prior to that: the debt ceiling will be raised again, with the slight difference in that whereas we used to raise it in the billions, it’s being inched up by the trillion these days.
If anything, the platinum suggestion would only do more harm than good to precious metals while offering only a temporary solution. The way things are right now, in the absence of a very well-laid out gold standard, it’s best to let bullion do what it’s supposed to. The same goes for fiat currencies, as their real goal is invariably to eventually self-destruct.
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