Friday, 22 April 2022 — Burradoo, NSW, Australia

By Brian Chu Editor, The Daily Reckoning Australia

[7 min read]

• The rhyme of the past and present
• Lessons from the past
• Exploit the opportunities in gold!

Dear Reader,

As each week passes, you can sense that the demise of the fiat currency system is upon us.

The central bankers have lost their narrative about controlling inflation. Monetary policy, price controls, and regulations have failed.

I believe you're now witnessing this financial system meet its demise in the hands of its archenemy, gold.

Two months ago, gold demonstrated itself as the undisputed safe-haven asset when the Russia-Ukraine conflict broke out. Literally every asset class declined sharply. Gold stood its ground firmly.

At the end of March, the Russian central bank announced its strategy to strengthen the ruble by fixing its exchange rate to gold.

You may recall that I was quite excited about this news, as were many in the gold community. After all, this was gold firing a shot against the fiat currency system and hitting the mark.

But to win this monetary war is not simply a matter of one or two shots. The fiat currency system is a more powerful beast than that. And one wrong move could allow this beast to undo all the hard work to get to where we are now.

The rhyme of the past and present

You should know that those who run this financial system don’t take lightly to anyone that tries to threaten its interests. This means going against their wishes to solely use fiat currencies as the means of exchange. They have a lot of tools at their disposal to keep everyone in line, with dire consequences for those who defy.

Just ask Iraq’s Saddam Hussein and Libya’s Muammar Gaddafi. Their demise came as they dared to seek to use alternative means to sell their oil. Iraq and Libya fell to Western nations running ‘peacekeeping missions’ and ‘military interventions’.

The media machine justified these invasions by telling the world how these two leaders brutalised their citizens, stockpiled dangerous and illegal weapons, and supported terrorist organisations that created fear in our neighbourhoods. So it was our duty to send forces to remove these dictators.

We have come to realise over time that the invasions of Iraq and Libya were based on the media setting up false premises and broadcasting it to the public (where were the weapons of mass destruction that Saddam Hussein had stockpiled in Iraq?).

But this is nothing new to us. Moreover, the developments in recent months have only highlighted this further.

Just think about the recent revelations regarding the Hunter Biden laptop and how Hillary Clinton spied on President Trump in 2016 then smeared him as a Russian spy using a complex web involving intelligence agencies, partisan law, PR firms, and the mainstream media that would mutually confirm each other’s information sources to report it as if it was the truth.

And, of course, day after day, you will see footage and news commentary about how Russian forces are committing atrocities against the innocent and courageous Ukrainians who are resisting their invaders.

It’s the same playbook.

Mind you, there’s some truth in the reports of atrocities. I believe in a war, both sides will use heavy-handed and underhanded tactics to secure victory.

Invariably the biggest victims are the citizens…

…and the truth.

Lessons from the past

Now, there’s an angle in this monetary war between gold and fiat currency that many have been overlooked. It’s about the latest moves by the Russian central bank to ease the peg of the ruble to gold to a more flexible arrangement.

Two weeks ago, the Russian central bank announced that it would move to buy gold at a negotiated price from local banks and producers. This happened because the ruble had strengthened substantially. Therefore, there was no need to buy gold at a significant discount.

This was one reason. I suspect there’s another.

It has to do with game theory.

You need to go back to the 1990s and recall how renowned globalist George Soros used his hedge funds to launch a raid on the Bank of England and almost collapse the sterling pound, as well as the Asian Financial Crisis in 1997–98 when several ‘tiger economies’ (i.e. South Korea and Thailand) faced an assault from hedge funds that successfully toppled their currencies.

The reason these currencies attracted the attention of these hedge funds was that these countries had pegged their currencies. Doing so would have offered some stability in the country’s economy. Policymakers, institutions, and individuals would conduct their activities around the targeted exchange rate. However, this stability is also a vulnerability. Take out the target and the economy spirals out of control.

And these countries experienced it.

I suspect that Russia has learnt from the past and knew that it was dangerous to peg the ruble to gold, especially since gold is still a commodity that traders can manipulate. Buying gold at a negotiated rate creates some flexibility and may prevent hedge funds from coordinating raids that can weaken the Russian economy.

Therefore, it appears that Russia has fortified its economy using gold, rather than a fiat currency.

Exploit the opportunities in gold!

You should see that gold has clearly taken the unassailable position in our financial system now. It’s both a safe-haven asset and an anchor of value.

Sooner rather than later, gold will decouple from the US dollar (and perhaps other currencies, too), and the price of gold will take off as it did back in the late 1970s.

How could you position yourself to gain from this?

You can buy gold coins and bars. That is a safe option.

Another is to look for leveraged plays on the gold rally to try and earn spectacular profits.

But it’s no simple task choosing the winners.

There is a way to do it, and I would be glad to show you.

God bless,

Brian Chu,
Editor, The Daily Reckoning Australia

PS: Due to the ANZAC Day public holiday, there will be no Monday edition of The Daily Reckoning Australia. We hope you enjoy the long weekend with friends and family.

By Bill Bonner Editor, The Daily Reckoning Australia

Dear Reader,

One of the nice things about two countries going to war…when you’re not one of them…is that you get to watch. And learn.

But you can’t trust the mainstream media to report the facts honestly. The US press has taken sides. So its ‘news’ is more like propaganda than real intelligence.

For example, the media tells us — with unconcealed glee — that the Russians are ‘bogged down’. They are ‘taking heavy casualties’, including ‘many generals’. They are running out of food and ammunition, etc. etc.

Apparently, the Ruskies are getting whipped. Here’s The Guardian:

‘Russia’s war in Ukraine is not going according to plan. The sinking of the Moskva — the flagship of the Black Sea fleet — is the latest major military setback. In the course of almost two months, Russia has lost six major generals and between 15,000-20,000 troops, all the while failing to secure any appreciable gains.

‘Reports of low morale and defection, coupled with sightings of mercenaries deployed by the Kremlin, hint at recruitment problems. This, along with Russia’s apparent inability to replenish lost military equipment — a consequence of western sanctions — has led some observers to wonder whether the Russian war machine is running out of road.’

The real facts on the ground may not be so one-sided. Both sides are losing men and materiel. Both must be making mistakes.  

A changing of the guard

But one thing must be troubling Pentagon observers — the loss of heavy tanks and the Russian ship, the Moskva. Retired Army Colonel David Johnson comments:

‘Is the value of the tank in modern warfare zilch? That’s the lesson many observers are taking from a flood of images depicting Russian tanks mired in the mud, their turrets blown off, having been ambushed and destroyed by Ukrainian forces armed with cheap anti-tank weapons. These images are often pointed to alongside feeds from Turkish-produced drones destroying tanks, seemingly with ease. After the recent Nagorno-Karabakh war, in which Russian-produced tanks were destroyed by the same model of drones, this is heady stuff for those ready to proclaim the death of the tank.

‘We already see comparisons of armor advocates to the battleship admirals before World War II, who refused to see the importance of carrier aviation, or Maj. Gen. John Herr, the last U.S. Army chief of cavalry, who continued to insist on the relevance of the horse on the battlefield even after the Nazi blitzkriegs against Poland and France.

‘…Army chief of staff Gen. George C. Marshall used his executive-order authority, given after Pearl Harbor, to get rid of all the horses in the Army — and Herr.

‘…The question before us now is whether the tank is the modern equivalent of the…horse.’

We will pose a different question: is this how the empire dies?

By our reckoning, the US empire peaked in the 1960s. It dilly-dallied until the late ‘90s…and then began a serious dive to the downside with the ‘war against terror’. Since then, the US has sunk by almost every measure you can think of.

But empires do not go gracefully into that good night. They rage…and make things worse for themselves. That is what we have seen thrice this century — in response to the terrorist threat (whatever it was)…in the attempt to prevent a correction on Wall Street in 2008–09, and more than a decade of negative interest rates (in which the Fed tried to stimulate growth back to pre-decline levels), and in the COVID Panic, with its trillions in gimmie/stimmy schemes, again, trying to make up for real lost output with ‘printed-up’ dollars.

The American people understood better than their leaders what was going on. Given a chance, they voted to ‘Make America Great Again’ in 2016.

But the slippage got worse, not better. And the only solution the elite could think of was to spend more money. But where could they get the cash? They had to print it. This is what led to today’s inflation. And left unchecked, it will lead to civil disorder, war, recession, economic chaos, and poverty.

Costly errors

The end of one empire is usually marked by the rise of another…and often accompanied by a decisive battle, in which the gods of war switch sides and the dying empire loses.  

The US has a huge, very costly military with a gilded officer class. It was hard to imagine how it might be humbled on the field of battle. But now, even The New York Times can read the writing on the wall:

‘The sinking of the Moskva on Thursday was a grave blow to the Russian fleet and a dramatic demonstration of the current era of warfare in which missiles fired from shore can destroy even the biggest, most powerful ships…’ 

The sinking of the Moskva is a clear sign that the future has arrived.

‘You go to war with the army you have, not the army you might want or wish to have at a later time’, said Donald Rumsfeld, who wisely went to war with an enemy that had, in comparison, no army at all.  

The problem with going to war with today’s US armed forces is now on display. Too much money begets too many old, slow-moving armies with too much brass and too much bureaucracy. The US has more tanks and ships than anyone else. But these Second World War-era armaments are extremely vulnerable to new, faster, smarter, cheaper weapons. We’ll be going to war with thoroughbreds, in other words.

In Afghanistan, for example, the Taliban had no navy…no air force…no military pensions…no veterans’ hospitals…no military bands…no tanks…no armoured troop carriers…and no phalanx of lobbyists to angle for more money. The amounts it spent would scarcely be enough to finance the Pentagon’s officers’ lounge. But for more than 20 years, its fighters persisted…and won.

And the trouble, beyond the obvious ones, with going to war with horses today, is that your tactics must be those of cavalry officers. The US is loaded up with cumbersome, complex, sophisticated weapons. Its battlefield tactics are built around its equipment. And its equipment is what you get when you have a lot of money and an invincible corps of lobbyists to push for bigger and more costly weapons systems.

But if its tanks and ships can be put out of service quickly…and cheaply…the US will be defeated.

Whether that will actually happen…or not…we don’t know. But the gods of war wouldn’t be especially surprised if it did.  

Regards,

Bill Bonner,
For The Daily Reckoning Australia