Gold: Monetary Truth Serum

The Truth About Strong Dollar Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] Gold: Monetary Truth Serum - The dollar just keeps getting stronger… - The dollar just keeps getting stronger… - Then Jim Rickards shows you how to go on your own personal gold standard… Recommended Link [Attention! Before You Read Any Further…]( Before you read any further in today’s issue, an urgent situation needs your immediate attention. If you don’t plan on claiming this new upgrade to your Strategic Intelligence subscription, you’re missing out on a huge opportunity. Right now is your chance to grab one of the biggest (and most valuable) upgrades our company has ever made to a newsletter. I’m taking Strategic Intelligence to an entirely new level and I’d hate to see you left behind. [Click Here To Claim Your Upgrade]( Portsmouth, New Hampshire January 10, 2022 [Jim Rickards]Dear Reader, In a recent reckoning, I asked the question: Will anything dethrone King Dollar? My answer then was no, at least in the short run. I supported this conclusion with a long list of strong dollar factors including higher interest rates, Fed tightening, the inflation narrative (which suggests even higher interest rates in the future) and the desire of trading partners (especially in Japan and Europe) to cheapen their own currencies to promote exports and export-related jobs. All of these factors converged to produce a strong dollar. I also explained why this state of affairs would not last indefinitely. The U.S. economy is not as strong as many observers assume. Eventually, the Fed tightening will slow the U.S. economy at which point the U.S. will take its turn at bat in the currency wars and weaken the dollar to promote our own exports and economy. Still, we’re not at that stage yet. In fact, all the strong dollar factors have moved even more in favor of the dollar since I wrote in December. The U.S. dollar index (DXY) has inched from 95.89 to 95.96. That’s obviously not extreme (currency moves seldom are) but coming on top of an already strong dollar it confirms that King Dollar is still king. Key factors supporting King Dollar are also the same, only more so. The yield-to-maturity on the 10-year Treasury note has risen from 1.479% on Dec. 8 to 1.780% as of today. The Federal Reserve has accelerated their timeline for quantitative tightening (the so-called “taper”) and now plans to halt net new purchases of bonds and mortgages by March instead of the prior target of June. This also brings forward the expected date of the “liftoff” for a new round of hikes in the target rate for Fed funds. Markets now expect three rate hikes in late 2022, instead of the one or two hikes expected earlier. High inflation has also persisted beyond the anticipated base effects of April–July 2021. The base effects (comparison to a weak 2020) were over by August 2021, but inflation persisted through year-end 2021, and is expected to continue in early 2022. Higher inflation portends higher rates. In short, the stars have aligned perfectly for the continuation of a strong dollar relative to the other major currencies. Despite the strong dollar trend, there is at least one indicator that suggests the dollar might not be quite as strong as it appears. That indicator is the dollar price of gold. Over the same one-month time period we have been considering (Dec. 8, 2021–Jan. 10, 2022), gold has risen from $1,785 per ounce to $1,801 per ounce. That’s not a huge gain and it puts gold right at the $1,800 per ounce central tendency it has exhibited for the past 15 months. Still, it is a gain against the dollar at a time when the dollar has been gaining against almost all other major currencies. When the dollar price of gold rises, it means the value of the dollar has declined. In this case, a dollar would buy 1/1,785th of an ounce of gold on Dec. 8 and only 1/1,801th of an ounce today. Simply put, your dollar buys less gold. Of course, gold is not considered a currency, although I do consider it a form of money. Gold is the best way to benchmark the dollar and other currencies. This is because gold is the only major form of money not issued or controlled by a central bank. In that sense, gold is like a yardstick that can be used objectively to measure all other forms of money. So today, yes, we are still in the age of King Dollar. What this means is that most major currencies are falling against the dollar. But the dollar is falling against gold, and the other major currencies are falling even faster. This may say more about confidence in all central bank currencies that it does about the dollar itself. The dollar may be the strongest of the major currencies. Yet, gold may be the strongest form of money. It’s not unusual for gold to take a breather between major moves. The rally from Dec. 16, 2015–Aug. 6, 2020, was a 97% gain in gold prices in 56 months. Gold fell from the peak of that rally and has been consolidating around $1,800 per ounce for the past 17 months. Another 97% rally would take gold to $3,550 per ounce. The first leg of that rally would put gold at $2,070 per ounce later this year. The next liftoff is about to begin. It’s not too late to join the crew for what will be an enjoyable ride. Below, I show you how you can go on your own personal gold standard and why that might be the best thing you can do as the world faces monetary chaos. Read on. Regards, Jim Rickards for The Daily Reckoning P.S. [This could be the most important message you see all year if you are serious about securing your financial future.]( That’s because we’re witnessing a rare occurrence in the gold market that we haven’t seen for years, and it has serious implications… I urge you NOT to invest in anything until you hear this, gold included. Don’t even buy a single ounce of gold [until you see this message.]( What am I talking about? And why is it potentially so important to you? [Click here to see my urgent briefing.]( Recommended Link [URGENT: Your New Crypto Book Is Awaiting Shipment]( [Read more here...]( If you’ve kicked yourself for not investing in cryptocurrency… Watching Bitcoin go from $61… To $1,000… To over $60,000… Then pay close attention. Famous crypto millionaire James Altucher just released a brand-new book on crypto… And he’s releasing a limited number of books to folks who click here now. We have a copy reserved in your name, and we just need to hear back from you. [Get In Touch Here To Claim Your Copy]( The Daily Reckoning Presents: Why wait for the rest of the world to go on a gold standard?… ****************************** Your Own Personal Gold Standard By Jim Rickards [Jim Rickards]Following the Panic of 1907, John Pierpont Morgan was called to testify before Congress in 1912 on the subject of Wall Street manipulations and what was then called the “money trust” or banking monopoly of J. P. Morgan & Co. In the course of his testimony, Morgan made one of the most profound and lasting remarks in the history of finance. In reply to questions from the congressional committee staff attorney, Samuel Untermyer, the following dialogue ensued as recorded in the Congressional Record. Untermyer: I want to ask you a few questions bearing on the subject that you have touched upon this morning, as to the control of money. The control of credit involves a control of money, does it not? Morgan: A control of credit? No. Untermyer: But the basis of banking is credit, is it not? Morgan: Not always. That is an evidence of banking, but it is not the money itself. Money is gold, and nothing else. Morgan’s observation that “Money is gold, and nothing else,” was right in two respects. The first and most obvious is that gold is a form of money. The second and more subtle point revealed in the phrase “and nothing else,” was that other instruments purporting to be money were really forms of credit unless they were redeemable into physical gold. These days I believe it’s more important than ever to remind readers of these facts, especially in light of the unprecedented credit creation the Fed conducted since last March. Of course, elites are extremely hostile to the idea that gold should have any role whatsoever in the monetary system. To them, gold is truly a barbarous relic, as John Maynard Keynes was supposed to have said. Except Keynes never said gold was a barbarous relic. What he did say was more interesting. In his 1924 book Monetary Reform, Keynes in fact wrote “the gold standard is already a barbarous relic.” Keynes was discussing not gold but the gold standard. There might not seem to be a difference, but there is. In the 1924 context he was right. The classical gold standard ended in 1914 with the outbreak of WWI. To pay for the war, combatants printed massive amounts of money. After the war many wanted to return to the pre-war gold standard. In 1925, for example, the British Exchequer was Winston Churchill. He wanted to return to the old gold price, ignoring the fact that the wartime money printing demanded a much higher gold price. He in effect overvalued the pound. Keynes told Churchill this would be a deflationary disaster. If Britain was to go back on a gold standard, it would have to set the gold price higher. But Churchill ignored his advice. The result was massive deflation and depression in Great Britain, years before depression struck the rest of the world. These days, there isn’t a central bank in the world that would voluntarily go back to a gold standard. But if gold is such a barbarous relic, if gold has no role in the monetary system, if gold is a “stupid” investment, then why are central banks stockpiling gold? Are they stupid? Well, I’ve spoken with many of them and I can assure you they’re not stupid. But that’s not the point. The question is whether they will have to restore a gold standard in order to restore confidence in the system. Inflation is steadily rising. If there’s a run on paper currencies (which is entirely possible) or borderline hyperinflation (also possible), central banks may have to go to a gold standard. Not because they want to, but because they find it necessary to calm the markets. But you can essentially put yourself on your own personal gold standard, no matter what the central banks do. How? Just by buying gold. In other words, if you think that the value of paper money will be in some jeopardy, or confidence in paper money may be lost, one way to protect yourself is by buying gold. And there’s nothing stopping you. Recommended Link [George Gilder: “5G will soon be exposed as hype and hustle.”]( [Read more here...]( Gilder believes a radical paradigm change is taking place in the tech world – one that could disrupt the existing 5G industry. It isn’t the first time he’s shocked the tech world… Gilder predicted the smartphone in 1991… identified Amazon in 1998, before it rose 243,000% over 23 years… and helped his followers make 40x their money in less than four years on Qualcom in the late 1990s. Now he’s at it again… [Get His Full Prediction Here]( As long as you can own gold, you can put yourself on your own gold standard by converting paper money to gold. I recommend you do that. I’m not suggesting you convert all your dollars to gold. Not at all. But I do recommend having 10% of your investable assets in gold for the conservative investor, and maybe 20% for the aggressive investor — no more than that. Those are very high allocations relative to what people have. Most people own no gold. If demand spiked suddenly, there’s not enough gold in the world — at current prices — to satisfy that demand. Gold prices would have to rise dramatically to bring them in line with demand. If some scenarios play out, you are going to see the price of gold rocket to the moon. And it may happen in a very short period of time. You shouldn’t expect a steady, gradual increase. Gold may to drift along sideways, going nowhere for a period. Then you’ll see a spike, then another spike, and then a super-spike. It could happen within months. That’s because it’s not just the price of gold going up. It’s the dollar going down. It’s like taking the temperature of a patient with a fever and blaming it on the thermometer when it reads 104. The thermometer’s not to blame for the fever; it’s just telling you what’s going on. And gold at the levels I’m talking about would mean that you’ve now verged into hyperinflation, or something close to it. Ultimately I expect gold to reach $10,000-$15,000 an ounce or more. Those figures are not made up. I didn’t come up with them to be provocative. They’re a product of the actual math. They’re the numbers you get when you simply divide the money supply by the amount of gold in the market. When the super-spike happens, you’re going to have two Americas. You’re going to have one America that was not prepared. Paper savings will be wiped out; 401(k)s will be devalued; pensions, insurance and annuities will be devalued through inflation. I suggest you buy your gold at current levels — around $1,800 — and ride the wave up to much higher levels. It’ll protect your wealth in the days ahead. Like every market, it will fluctuate. Nothing goes up in a straight line. But you want to focus on the longer term picture. And it looks very bright for gold. But some people argue, “What’s the point of owning gold? They’re just going to confiscate it, like Roosevelt did in 1933?” But I find that extremely unlikely. In 1933, we’d just come through four years of the Great Depression, and Roosevelt was new in office. People talk about the first hundred days, but he closed the banks right after he was sworn in. And he confiscated gold only a few weeks later. And it wasn’t as if Elliot Ness was going door to door, breaking into your house and taking gold. They wanted to get a small number of people who had 400-ounce bars in bank vaults. And they got those people because they were able to close the banks and use them as intermediaries to confiscate that gold. But now, gold is far more dispersed, and there’s far less trust in government, especially in light of its bungling of COVID. If the government tried to confiscate gold today, there would be various forms of resistance. The government knows this. So they wouldn’t issue that order, because they know it couldn’t be enforced, and it might cause various kinds of civil disobedience or pushback. So I invite you to go on your own personal gold standard. One day, the rest of the world may join you. Regards, Jim Rickards for The Daily Reckoning P.S. [This could be the most important message you see all year if you are serious about securing your financial future.]( That’s because we’re witnessing a rare occurrence in the gold market that we haven’t seen for years, and it has serious implications… I urge you NOT to invest in anything until you hear this, gold included. Don’t even buy a single ounce of gold [until you see this message.]( What am I talking about? And why is it potentially so important to you? [Click here to see my urgent briefing.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [James Rickards][James G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is the author of The New York Times bestsellers Currency Wars and The Death of Money. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. 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