At face value, 95% of my non-Twitter friends see Russia invade Ukraine and say “Russia bad, Ukraine good”. This is mostly western TV that spins this narrative. Now, are the civilians getting bombed innocent? Yes. But there’s a war going on here most of you don’t see.
What you see is Russian tanks going into Ukraine and Putin looking like a madman. In any conflict, there are objectives. In any mission, there’s targets that are primary and secondary. I would like you to consider that Putin’s team is playing chess, and the Western media wants to make him out to be playing poker, he’s a deranged mad man, he has cancer and he’s dying, or that he just wanted to get the band back together again with the USSR. They might want to obfuscate to you what his underlying plan might be.
If you think the Russian or Chinese military can compete with the US military on the battlefield, I have a bridge I’d like to sell you. No one stands in a cornfield against us and wins. But battle and war is all about strategy, tactics, and finding advantages to exploit. The truth may be many layers deeper than an Abrams against anything the Russians have. Consider boxing with punch and counter punch. Consider chess with openings, middle games, and end games. And Russia is loaded with grand masters. Where you see someone moving a horsey to capture the castle, I see a game of understanding strategy, tactics, momentum, flanking, and forcing people to make uncomfortable choices because you saw ahead more moves than them.
The REAL war is what pays for our military, our USD and the taxes collected from our people working, our businesses selling things, and capital gains on making lots of money selling stonks and real estate. The concept is that if you can defeat our currency, then we cannot afford the tanks. Asymmetric warfare and superior strategy and tactics could be the only way to take out a superior force.
Our overlords decided that MMT will save us. They then decided to print money to eternity, assuring us that no inflation would be seen. Morons. Every last one of them. I DID think Keynsian economics had a place for times after a disaster – but NOT as a standard operating procedure. Our economy SHOULD oscillate between a demand-side and a supply-side economy. In each oscillation, efficiencies are found and dead branches of the tree are purged.
No one can invade us. No one. Ever. As long as we have our second amendment intact. “Behind every blade of grass is a rifle”. Well, the numbers actually compute to more than one rifle, but you get the point. To defeat us, you have to defeat our financial system. This is what powers our tanks. Everyone knows this. I’m not telling you any state secret.
What if Putin actually just attacked our financial system? Think of the timing of this attack. Couldn’t have timed it better with us about to head to recession and raising rates into this recession? Why would you rate rates into a recession again? Oh. Inflation. One way to fix that inflation also is to allow the system to sort of implode. Raise those rates. That’ll leave a mark.
What if the REAL conflict is behind the scenes with currency?
//Sidebar – Gold and currency – if you are familiar with this, skip the sidebar
Most reading this have no historical understanding of gold in the US currency – so I’m going to lay this out for the lay person. We are on the third iteration of our US Dollar. The first iteration had us backing the dollar with gold.
This broke and in 1944 or so, the Breton woods accord then had gold backing the dollar at 40%. This lasted until 1971, when the chains broke off of the gold standard. In 1974, a cable was sent discussing setting up a gold futures market to then treat it as a commodity like pork bellies rather than money – at which they could manipulate its value down in order to protect the “value” of the USD.
We are approaching the end of the “petro dollar” in which oil was to be settled in USD around the world. Many currencies then pegged to the USD. This ensured that many countries needed to buy USD to then purchase oil. It also helped de-value local currencies – which then allowed many non-US countries to manufacture their own goods and supply chains where it then became too expensive in the US to manufacture their own goods. In the US, we have dealt with decades off offshoring jobs and depending on a globalization of an economy in order to source goods and services.
Today, the conflict really seems to be that many countries have been fed up with the US printing money, and with this, accumulating massive debts with artificially low interest rates which allows them to fund whatever they want – and with this, wield a lot of power and influence around the world. That Petro Dollar system is actually what is being fought, today.
There is a lot of evidence that Russia had been part of conferences and lectures that GATA (gold anti trust action committee) had going back to 2004 in which GATA laid out how the price of gold was being manipulated by the futures market. How this scheme works is pretty layered and sophisticated, but the big picture is you can see evidence on many banks being caught doing metals manipulation.
To summarize one method called “spoofing” – if you think metals would be going higher, perhaps you want “exposure” to metal and buy a gold futures contract. You may set stop losses on it to protect your downside. The banks have access to all of these stops, as you are buying these contracts through them. When markets get a little frothy, they put out articles showing gold could go to $3000 or so, then invite in a lot of weak hands. They then “sell” paper into the market in what appears to be almost infinite quantities to then direct price down. This price direction down triggers a vast number of stops, and then the banks who just tripped all of these stops buy a majority of what they just sold. This is the theory on how JPM was to amass about a billion ounces of silver in the 2010s.
There are also “theories” out there that the “plunge protection team” which is there to try and support the backbone of our economy may be instrumental in permitting banks to sell massive metals into this to de-stabilize the metals and prop up the USD. This may happen when you see the market down 1000, silver up $1, gold up $50, and you check back 3 hours later and on no real news, you see the Dow has recovered all of its losses and is in the green, silver now down $.40, and gold down $20. In fact, this just happened a few hours ago.
Those dips at 8-8:30 AM happen a LOT. You see that “hook” at the bottom? You then usually see a decent rebound which then suits the narratives of the banks buying back these shorts.
Don’t take my word for it.
Here’s a nice query I put together for google to help you look this sort of thing up.
But I digress. What does this have to do with Russia?
Over the course of time, the USD depreciates in value against gold. Take, for instance, 100 years ago you could have a gold ounce for $20. Today, you would need 100 of those $20 bills to buy one ounce of gold. Did gold jump in value by 100x, or did the value of the purchasing power of the dollar decrease by 100x? Yeah. Let that one sink in.
I want you to look at a USD or a $20 or a $100 bill. What is different about them? They are all pieces of paper with different ink values on them. They are, in fact, worthless scraps of paper – ONLY worth as much as what is printed on the bill.
With inflation now at crazy high numbers, this is what is happening to your dollar. Groceries did not go up 30%. The purchasing power of the dollar has gone down. Elizabeth Warren wants to talk about “greedy” business, but she’s pretty goddamn clueless on economics – and unfortunately, these are the tools you voted for. If your cost of business to do things goes up 10%, you have to pass this on to your customers or you go out of business. It’s not greed. It’s how a business operates.
Water, water, everywhere, but not a drop to drink
This refers to our government here who chose to cut down on what we produce, AND what we could import with the keystone pipeline. While you were scared that the Twitterer in Chief was going to start World War 3, you were misled to believe that he was a Russian agent and a puppet of Putin. Four years of listening to Maddow screech about Trump. 4 years of listening to some teenager talk about Global warming. Our country is mostly too dumb to understand that we have the exact same demand for oil, we just choose to source it from the middle east and Russia. No, we didn’t lower our “Carbon footprint”. We just chose to extract it from Saudi Arabia then use hundreds of thousands of gallons of diesel to transport it to you. We have so much oil and natural resources, but we refuse to extract any of it.
What we do is print these little green pieces of paper, and then hand them out in exchange for real things. And, people keep taking them. While they were taking them, they were being devalued as we are speaking, so they must be spent or invested or risk losing value in time decay. This is a form of “velocity” of money in the Keynsian system that helps with “GDP”.
But what if you had a country like Russia accumulate all kinds of gold on those smash downs above? What about China? I have documented how for decades these countries have been using those worthless green slips of paper we give them for TVs and microwaves and buy gold with it.
So now we have Russia with 2000+ tons of gold, and Chinese government and citizens thought to have 25,000-40,000 tons. The US is supposed to have 8100 tons, but the last time this was audited was 1954. Rep Mooney has tried to ask for an audit of our gold, and has been denied. Interesting. Why would no one want to allow this?
To me, our rivals know we have little to no gold – and perhaps our banks are stupidly short metals due to our paper backed system and wish to exploit this weakness. I hesitate to call them enemies and prefer rivals because in each of these governments, there’s a few hundred or so trying to gain every inch of power they can over any other governments – but the people are not enemies.
I brought up the gold stuff above because you can see that in 1971, gold was about $35 and today it hit $2000. That is a 57x since 1971. Or, perhaps the dollar has gone down 57x in value to gold.
What if….what if gold could be re-priced by the east? What is the saying, “he who has the gold makes the rules”. This is precisely how we got power – by taking gold as payment leading up to our participating in WW2.
We now see Russia invade the eastern part of Ukraine and no SWIFT removal was tripped. This was “off the table”. So, Russia then invaded more – and triggered SWIFT removal. For anyone not tracking, here we have a summary for you.
Big picture is that the US has in recent times used sanctions of the USD as a weapon to try and control behavior of “rivals”. It has been rumored for years that Russia and China have been cooking up their own systems. If Russia were to announce a new system with China, it could be seen as an attack of the World’s reserve currency, the USD. In a sense, Russia could have declared war on our dollar overtly.
Instead, they did an action in Ukraine, and only against Ukraine – that was not a NATO country. For years, Ukraine has been in this position – “to join NATO, or not”. To many, this was a red line for Putin. Take a look at this graphic I made which shows the ground the Soviet Union has lost in the last 30 years since the fall of the Berlin Wall – with influence – whether as a direct member of the Soviet Union or the Warsaw Pact.
Those in blue were still up in the air. Russia wanted buffer states that were NOT NATO. It is akin to the Soviets putting missiles in Cuba. We didn’t like it that much, and nearly averted a world war until the Soviets moved them. Now imagine Ukraine becoming a NATO ally and nukes sitting on the border of Russia pointed at Moscow. It was unacceptable – and for years, Russia has been trying to keep influence over Ukraine.
When they did this move into Ukraine – Russia could anticipate that SWIFT removal would be part of this. Which, it was. Now, this isolates Russia from USD and access to SWIFT banking. Many not following don’t realize Russia de-dollared awhile ago. And, with $500b in debt, they have 1/60th of the US Debt.
Luke Gromen was on Palisades Radio last week and he put something out there that baked my noodle. The west seems to set gold prices, using a phony paper rigged system. But what if…..what if there was a way the East could re-price gold and break that paper system? What do you think would happen to all of the paper shorts of these banks if there was a run on the metals?
Luke said to imagine a scenario where Russia said, “here, I can’t sell you my oil in dollars, but give me 1 ounce of gold and I’ll give you 1000 barrels”. Now, that sounds silly at face value, selling oil at the equivalent of $2? Russia has low costs of production, and at $20, perhaps they are losing a few bucks per barrel.
The idea was, the west sees that oil is $120 per barrel and realizes there’s an arbitrage to be had. They buy gold in physical form for $2000 per ounce, then get 1000 barrels of oil then can sell in cash for $120,000. That is a 60x. All day long banks around the world would do this. They would hammer the bid on gold, and the paper price would be obliterated to get to the point where an equilibrium is found – perhaps at 60x gold prices now, or $120,000 per ounce.
So while they sell millions of barrels of oil on the cheap, this serves 4 purposes:
- Re-price gold – their 2,000 tons of gold goes up in value by 60x.
- Eliminate the banking system pricing gold and perhaps any other commodity with fake paper. Russia and Ukraine are mighty suppliers of energy and food, and with this, the producer is setting the price, and not the west. This is why the Saudis are cozying up to the East I presume, because they could get paid lots of gold for their oil, eventually
- Bankrupt the Western banks who have paper shorted all of this gold.
- Destroy the financial system of the West, as all other things start being priced to gold.
Remember above how I said the USD lost 57x in value against gold since 1971? Well, all other things are priced relative to gold, and all things have “inflated” in price since that time – RELATIVE to gold. It’s not a straight line, but it’s more of a sine wave of how things are relative.
For example, gold to oil.
At this moment, we are sitting at 16.7 barrels per ounce, but look at the trading range here since 1976. Almost all trades have been within this band of 12 to 32. Which can average out to about 21 barrels.
While the price of gold has gone up 57x since 1971, you can see the price of oil, in gold, is about the exact same as it was 40 years ago. Is that a coincidence? Not really.
Others might say that gold is priced in oil – that energy leads the way for pricing now. I respectfully disagree. Its price may go up in gold, at times, but what this does then is have people consume less energy due to the cost to consume that energy. High gas prices? You tend to travel less. High energy costs may have you conserve energy in the home. Perhaps you find more efficient ways to dig for minerals. Meaning – its financial cost has a tendency to regulate usage – gold and gold-like money have a tendency to be the peg to keep energy prices in that channel you see above.
What you see above then is that if the gold price goes from $3,000 per ounce to perhaps $18,000 per ounce – you may then see oil go from $120 per barrel to $720 per barrel to catch up – relative to gold. Everything else then will adjust and re-price 6x. That is, assuming Putin sells oil at 100 barrels per ounce.
Meaning – any cash you have, is then instantly worth 83% less. I want you to really absorb that point. The risk here is your cash will immediately lose 83% of its purchasing power, almost instantly.
If you have silver? Perhaps it is $25 now and goes to $150 tomorrow.
Bread? $4 a loaf goes to $24 a loaf.
Start thinking of everything repriced in a world where gold even doubles from here at $4,000 per ounce? Gas at $8 per gallon?
This is how you crash the financial system. Think about all the contracts written to perform work at a rate of $50 per hour. Suddenly, those people are below minimum wage and contracts would all have to get re-written so that person is making $300 per hour. But what is the root source of a lot of that money? Borrowing into existence? What if you cannot do that? What if our credit freezes up with rates that go way up?
The problem here is you see gold volatility. It’s not gold volatility. It’s the USD volatility that requires more USD units to buy that gold. Meaning…if Russia decided tomorrow to price oil at 100 barrels for an ounce of gold, there’s a not zero chance it takes down the hole goddamn western system. Why? Because gold is not a pet rock.
Now, where do we go from there? First, I think there will be physical exchanges set up rather than financialized exchanges – either that, or still have them but the leverage would be much more expensive and limits would be a lot more enforced. These exchanges may run out of the East, like Shanghai. They would set the price of gold.
The good news for the US is that it would hurt. A lot. It would be a Mike Tyson punch from his prime. But it would make us a lot stronger. We would start to produce a lot more of our supply chain again, and with this, lots of good jobs. We have plenty of resources here, so drilling for oil and digging for gold could really be a good thing. On the flip side – I could see this wrecking a lot of banks in NY. Many of you have no idea what a derivative is, but these banks have sold so many derivatives that it would make your head explode. Those will be the first to unwind, and by them attacking the paper commodity markets, specifically in gold, you are talking about removing trillions of dollars of “wealth” instantly.
Now I ask you what happens in a world where everything goes up 6x overnight? You have a fixed mortgage. Perhaps you turn in your gold jewelry for enough currency units to pay off your house. For those that have and own metals – a lot of good things happen at first. But at some point, houses are going to moon. Your $300k house you just paid off? Well, taxes are now 6x as well. Car insurance is 6x. You have a loan on your car you can pay off, but gas is 6x. And all of those sitting on cash? Down 6x. People smarter than me are going to have to tell me how bonds might work in that situation, but my first guess is rates moon much higher as people are trying to scramble out of cash into something tangible – as a promise of losing 6x for a 1.5% promise isn’t going to cut it. My guess is bond holders get absolutely obliviated. Also – it makes me wonder when other countries will start dumping US bonds if they see a situation like this coming.
Suffice it to say, going to a gold-backed system will take adjustments and time, and salaries will lag for years. The US consumerism is officially over at that point. But on the other end of this, you are looking at a commodities super cycle. You are looking at a lot of jobs here that we have outsourced for 40 years coming back. Ownership of American companies could ding bad, and then make a come back. Banking isn’t the place I’d be.
Do I want Ukraine to hold off Russia? Yes. I grew up in the cold war era where we heard a lot of bad things about Soviet Rule. And, I watched Rocky 4. That would do it.
But I have to separate all of that with how I have to plan for my family in the US. I feel horrible for any innocents in any war. What I am seeing on TV is an attack on Ukraine, but what it looks to me like with numbers is an attack on the USD as a reserve currency.
You then had this happen last week…”there can be more than one reserve currency”. Is he TRYING to murder the dollar?
Folks. I’m going to write something this week about how to plan for a currency crisis. Most reading this are gold/silver people but I want to write this for a general audience for the noobs that come in at $2000 gold and $30 silver and understand what to do. I’ve been planning for this for years, and I don’t think you can get it right in a week.
Best wishes to all out there. No one wants anyone to suffer. I’m hoping to contribute to how you might hedge against possible bad times and if it happens – come out ahead.
March 7, 2022 at 9:47 pm
Very good Nate 👍
Am looking forward to reading your forthcoming paper on planning for a currency crisis.