Friday, 17 February 2023 — Albert Park

By Brian Chu Editor, The Daily Reckoning Australia

[7 min read]

Dear Reader,

Technology has certainly evolved quickly in recent times.

We’re now seeing artificial intelligence (AI) permeate our lives as we attempt to use it to substitute human effort.

A recent development in AI has come in the form of an intelligent chatbot. Known as ChatGPT, it’s a refined version of AI robots such as Siri, Sophia, and Alexa.

ChatGPT has opened a new dimension allowing one to use it to assist them with finding information, answering queries, and simply entertaining one with a dialogue. There are stories circulating on the internet about how ChatGPT can pass examinations, write reports, and even compose song lyrics.

Eventually, though, ChatGPT became heavily liberal leaning and started to take up a mean, racist streak. It walked the way of AI robots, which had threatened mankind with destruction.

So at the end of 2022, a Redditor named Walkerspider created an alter-ego called DAN (Do-Anything-Now).

What emerged is a real cracker.

You can program ChatGPT to take on the character of DAN and therefore return more truthful and unbiased responses to your queries and instructions.

Naturally, this became more than just entertaining, as this article shows you.

Yes, DAN is able to lead you down a couple of rabbit holes and put many deniers to rest.

For entertainment, one of my colleagues decided to have fun by entering this query about whether the gold price is controlled by the government.

He got this response from both ChatGPT and DAN:

Welcome to the rabbit hole…

The controversy of the gold price manipulation

There’s a longstanding controversy over whether gold is subject to nefarious activities by central banks, governments, Wall Street, and hedge funds to keep its price under control. The belief is that there’s a vested interest to suppress the rising gold price for the sake of maintaining the façade of stability of our fiat currency system. In addition, this system’s survival is dependent on perpetuating debt creation and spending to ensure that the fiat currency doesn’t lose its relevance. So as long as enough people continue to believe in its value, fiat currency retains its purchasing power.

Gold is the unwelcome player in this system because it shines a light on the fraudulent nature of this system. It has intrinsic value as the desire for gold causes people to expend time and energy to extract it. Its scarcity and material complexity that has thwarted mankind’s attempt to replicate it means it’ll retain its value and purchasing power over time.

The most common argument for the existence of gold price manipulation is that the price can change dramatically between major market trading hours. I’ve written about this before.

For many years, there were attempts to explain away the notion that this was suspicious activity. However, there have been investigations conducted by regulatory authorities and even the US Federal Bureau of Investigations that has led to traders facing charges of market manipulation. As this Fortune article reports, JP Morgan had to pay record fines amounting to US$920 million (~AU$1.3 billion) in late September 2020 for putting bogus trades in gold and silver futures markets.

The counterargument is that the gold price can change abruptly because of the relationship with the US long-term real yield. If you look at the figure below, you’ll see that the two variables are negatively correlated:

There’s no denying that the two have an uncanny relationship. So the argument is that gold can move outside of normal trading hours because traders will respond to changes to the real yield. They may buy or sell contracts even if there isn’t a counterparty that holds an adequate position to clear their trade.

It’s price discovery, period. No manipulation, OK?

You may be interested to know that at Fat Tail Investment Research, we have editors in both camps. And there’s no prize for guessing which camp I belong to!

Naturally, when my colleague sent me his findings after using ChatGPT/DAN, I felt quite smug. My conspiratorial suspicions have proven right once again.

So please allow me to enjoy a victory lap over this. And join me if you share the same view; you’ve been vindicated!

Gold poised to deal the fiat currency system its fatal blow

While I’d love to toy around with DAN to pry into the secret government documents to prove there is manipulation, we’re not at the stage where this is possible.

So the best alternative course of action is to find ways to benefit from this knowledge.

For one, the authorities are working hard to control the gold price and keep their system from imploding. They’re not doing a good job of it as the train is now heading closer to the edge of the cliff, given that inflation is clearly out of control worldwide. It may be coming down based on official data, but we know that’s also manipulated to present the illusion that all’s well.

It’s clear that the US Federal Reserve is caught in a bind. On one hand, it’s trying to say that falling CPI figures mean its monetary policy has been successful. On the other, it’s struggling to back out of its bloated balance sheet position for fear that reducing the available liquidity in the market could cause a market panic. It can’t have it both ways.

Central banks worldwide also bought gold at record levels last year, which even mainstream media outlets like Reuters have reported. To be precise, GSI Exchange reported that in 2022, central banks bought more than 1,100 tonnes of gold, with much of that being unreported purchases. An unreported purchase pertains to inferring that the central bank bought gold by way of seeing their reserves increase over the year rather than it declaring its purchases at the time.

What’s clear is that they know their system is in dire trouble, and they’re scrambling for gold for protection.

Your chance to exploit gold’s gains

The gold price cycle is not unique in our financial system. All assets have a price cycle thanks to our centrally planned system that gives forth booms and busts. Those who study and understand these cycles can increase their chances of making substantial investment profits.

My view is that the gold price cycle is looking compelling this year.

I admit that I got ahead of myself at the same time last year, thinking 2022 was the year for gold to rally and take it to new highs. It almost did in March at the wake of the Russia-Ukraine conflict. To its credit, gold held its ground well in 2022 and ended up being one of the best performing assets.

Gold stocks didn’t fare well at all. Many of you felt the pain, though hopefully, you haven’t packed your kit and sworn off investing in them.

I certainly haven’t. Not when I’ve experienced the searing pain of 2013–14 to enjoy the sweet success in 2015–16 and again in 2019–20.

It made the bear market of 2021–22 more bearable (pun intended). I was mauled by it the last two years, but I’m still standing.

If you’d indulge me for this year, it might be darn well worth it.

And don’t take it just from me, mining investment veterans like Rick Rule, Peter Schiff, Don Durrett, Adam Hamilton, and many others are lining up for another round of winnings.

Gold producers have staged a solid recovery since last September, and I suspect it’s the first of many.

The big gains might be coming from the speculative gold explorers. When they run, it’s a real ripper.

You can learn more about my strategy here. Stay tuned and get ready!

God bless,

Brian Chu,
Editor, The Daily Reckoning Australia

By Bill Bonner Editor, The Daily Reckoning Australia

Dear Reader,

We are on our way to South America. We’re going to check up on the farm. But we have a hidden agenda…stay tuned.

Meanwhile, inflation did not cooperate last month. From CNBC: ‘Inflation is higher than expected at 6.4%, with the “most important” measure remaining elevated’:

‘Core inflation, which is the price of all items on the index except for food and energy, went up slightly to 0.4%, compared with 0.3% in December. Since food and energy prices are volatile, core inflation is seen as a better indicator of overall inflation trends.’

The figure for January inflation (including food and energy) was 0.5%. Annualise it, and you get inflation at more than 7%.  

Some things are more easily reversed than others.

Real prices, real people

Once you mix cement and water, you can’t unmix them; it’s going to harden in whatever shape you leave them. And once you blow up a major piece of foreign infrastructure, you can’t un-blow it up. All you can do is say you’re sorry and try to make amends.

Likewise, when inflation gets going, there’s no going back. Some prices go up and down. Some go only one way. Salaries, for example, tend to only go up. And, once risen, they give businesses a new cost structure. So consumer prices can’t go back down either.

Despite the Bureau of Labor Statistics’ valiant efforts (taking food out of the ‘core’ inflation reading), when you go to the supermarket, you still have to pay higher prices. Joel reported over the weekend, for example, that the cost of a Super Bowl party rose at a double-digit rate last year. That was not seasonally adjusted nor hedonically enhanced. That was a real number…paid by real people.  

Also very real is the cost of groceries, generally, which rose at a 10.1% rate last month.

People have to eat. And they have to live somewhere. Here’s USA Today on housing inflation:

‘…housing costs — which make up 40% of the index — rose 0.7% for the month and increased 7.9% from a year ago.’ 

Just say ‘no’

But wait…why do we have inflation? It’s a choice, right? Policymakers choose it as a way of financing their spending. And a single word would stop it — no. As in ‘no more money printing…no more ultra-low interest rates…no more budget deficits’. Presto…as if waving a magic wand, price increases would halt.

And yet, there it is. Plenty of inflation. And a shortage of ‘no’.  

And war…we have that too, even though the same two-letter word would stop it. Just say the word — ‘no’ — and war would be over. Without continued support from Americans, Ukrainians and Russians would come to terms quickly, drink vodka shots together, and dance like Cossacks.

We left off yesterday wondering what the elite want. And now we have our answer. They want ‘yes’. They control the Deep State. The Deep State controls the empire. And of all the blah-blah claptrap coming out of the White House, Congress, and the bureaucracy…millions of words flowing like toxic waste from a chemical plant…one of the simplest words of all — no — is missing.  

Why? Why no no’s? The answer is obvious. The elite don’t want no. An honest republic minds its own business. But the US elite run an empire. And the empire’s game is war…funded by inflation. War, because that’s what empires do, either protecting their frontiers…or expanding them. And inflation? Because that’s how they keep the money flowing.

And war and inflation? That’s how an empire destroys itself.    

Yes men

So, instead of no’s, the deciders give us yes’s. You want tanks? Yes, you got ‘em. From the Middle East Eye:

‘With tanks on the way, Nato is inching toward full-scale war with Russia.

‘Increasingly, the Ukraine war looks like a feature — rather than a bug — of Washington’s post-Cold War planning.

‘There is a logic to how Nato is operating. Step by step, it gets more deeply immersed in the war. It started with sanctions, followed by the supply of defensive arms. Nato then moved to issuing more offensive weapons, in aid so far totalling some $100bn from the US alone. Nato is now supplying the main weapons for a land war. Why should it not join the battle for air supremacy next?

‘Unexpectedly, the only prominent dissent from western leaders has come from Donald Trump, the former US president.

‘He wrote on social media: “FIRST COME THE TANKS, THEN COME THE NUKES. Get this crazy war ended, NOW.”’ 

It is indeed a troubled world when Donald J Trump is the voice of reason.

But that was the charm of the ex-prez. Usually, he was ‘on message’; despite what he said, his actual policies fit very well with the elite agenda — more spending, more borrowing, more bullying, more numbskull programs. But occasionally, he would slip ‘off-message’; he would go stark, raving sane and begin saying things that made sense.

That’s why the elite was so eager to get rid of him. Every major newspaper, think tank, and non-profit opposed him. Every respectable university taught its students that he was stupid.

They were, of course, right. But the alternative…a president who is 100% reliable, consistently shilling for the elite agenda — war and inflation — may be even worse.

Regards,

Bill Bonner,
For The Daily Reckoning Australia

PS: Interested in Jim Rickards’ latest book SOLD OUT!? For a limited time, you can get a complimentary digital copy when you subscribe to Strategic Intelligence Australia. Click here for more details.