Mining Sector Ideas

[bigworld]

gfp: I finally have a day off. And it's raining here which is what usually happens on my days off.
Here is the Rinear article I wanted to forward to you.Logo3.gif
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Financial Intelligence Report

The Newsletter for people willing to take control of their financial future

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Greetings Friends!
This is today's issue of the Financial Intelligence Report

Contributing Editors: Bob Rinear, Ted, Chuck and the Crew!

Wall Street Lunacy donated by Jerome Powell, and Central Bankers the world over! Who else can print money and buy stocks?!

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Part 1: General Commentary
Part 2: Market Commentary




Gold is still moving

Not too much interests me more than what role gold is playing on the global scene and so far, there's no question that "people want it." China's still buying, India is buying, and the price while not at the recent spike high, is significantly higher than last year.

So what brings my attention to Gold today? Well, Tick tock and "X" ( former twitter) are interesting places, where you can see just about anything. But one theme that continues to make the "news" on both is the debt clock site.

https://www.usdebtclock.org/

Every once in a while, something pops up on that site, almost like they're giving us hints of something coming. Well, one video maker saw what he thought was "proof" that the US is going to revalue gold, as the way to erase our insane debt. In his calculations, gold would have to be $175,000 dollars an ounce. Wow, I wish. But it brings up some history, many don't know of.

Did you know that in the past, the Federal Reserve had to "cover" a percentage of their fiat dollars, with US Treasury gold certificates? Yep, indeed. Back in the 50's and early 60's, the Federal Reserve and it's member banks, had to hold gold certificates equaling over 40% of their Federal Reserve note "liability." Yeah, really.

Well then in 1965 they dropped the requirements for the member banks to cover, and thus the "collective Fed" only had to hold gold notes to cover 25%.

Now, we all know that Nixon closed the so called "gold window" in August of 71, concerning international transactions, what almost no one knows is that LBJ, REMOVED the cover requirement for the Fed to hold gold notes, in March of 68. The stage was being set for a "different way" to run the country.

The post-1965 increase in Federal Reserve Note liability (i.e., dollars because they weren't covered by gold) paralleled the rapid increases in both the U.S. federal budget and the U.S. Federal budget deficit associated with President Johnson's "guns and butter" policies, otherwise known as the "Great Society" and the Vietnam War. LBJ's focus on "guns and butter", and his removal of the gold cover, ushered in a new paradigm in how the U.S. economy would be run. Free market capitalism was "out"; government controlled debt system was in... and has ruled us, and the rest of the world, ever since.

The old form of money, i.e., backed by gold reserves, had to be earned. The gold had to be mined and refined, which required labor and capital. To get the gold to back the currency, governments had to tax, which meant seeking permission from the taxpayers (voters) to levy the necessary taxes. And the taxpayers (voters) had to earn dollars by working and investing. At the same time, banks had to maintain substantial deposits with the Federal Reserve against their loan portfolios.

The system was real, with real restraints and real interest rates that allocated capital rationally. Bubbles were squashed expeditiously by the free market, and business cycle down turns were relatively short-lived, with successive recoveries quickly exceeding their previous cycle peaks

But after LBJ's changes, politicians quickly realized that they no longer had to increase taxes (unpopular among the voters) in order to increase spending, especially vote-buying spending on their favorite special interest groups. The government could borrow to fund ever increasing deficits, secure in the knowledge that their servants at the Federal Reserve, freed by LBJ from the weight of any necessary gold reserve to back their Federal Reserve notes, would simply create the money out of thin air and buy the debt obligations not absorbed by the credit market (the definition of quantitative easing).

Moreover, banks, as a result of substantially reduced reserve requirements, courtesy of the Federal Reserve, could easily create even more money simply by making new loans. For the first time in human history, it appeared that there actually was a "free lunch" (as well as free dinners, free healthcare, free education, free ...). Just borrow and roll the debts forward, at successively lower Fed-engineered interest rates, forever (or until some distant generation had to pay the price for "free").


With money no longer having to be earned, it simply appeared as blips on the computer screens of the Federal Reserve, and lending to governments, to businesses, to consumers, exploded and has never stopped to this day.

So, while Nixon stopped the world from taking every ounce of gold we "might" have had at the time, it was Johnson that actually created this debt based fiat society we have. And look what it's done to us. Our dollar is crap, worth 4 cents. Our debts are in the tens of trillions, And there's 1) no way to pay it back and 2) no intention of paying it back.

Which leaves just a couple choices. 1) we continue the kick the can down the road game we've been playing since the late 60's and run the debt up to infinity, or 2) destroy this system and replace it with something else.

Is it possible we return to some form of gold backed currency, but with gold revalued incredibly higher? I guess it's possible, remember the "trillion dollar coin" idea from back 2011? The trillion-dollar coin was a concept that emerged during the United States debt-ceiling crisis of 2011 as a proposed way to bypass any necessity for the United States Congress to raise the country's borrowing limit, through the minting of very high-value platinum coins. The concept gained more mainstream attention by late 2012 during the debates over the United States fiscal cliff negotiations and renewed debt-ceiling discussions. Obviously, it was shot down.

But that fact that it was brought up again in 2020 in Congress, shows that crazy ideas don't die easy.

In any event, for the here and now, demand for gold is still growing, and yes I totally believe the BRICS want their own trading currency and that it is tied to some percentage of gold backing. Isn't that quaint? A system we had here in the US for years, but was discarded for pure Fiat, is being talked about in the BRICS. You can't make it up.

The world knows we're broke. They don't want our Treasuries any more. Frankly they don't want much of anything from the US any more. So it's my guess that to continue global trade, at some point the present system will be pulled down and replaced with something more fiscally sound. What that looks like is a mystery for now. But it's coming. Oh and if we just went back to forcing the fed to cover their Fiat with 40% gold certificates, Gold would have to be 27,000 an ounce. I wish!


Stay tuned.