Clown World: Gold v The Trillion Dollar Coin

You’ve got a better chance of seeing a $1 trillion coin than gold revaluing. [Morning Reckoning] August 22, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Clown World: Gold v The Trillion Dollar Coin Asti, Northern Italy August 22, 2024 [Sean Ring] SEAN RING Hi Reader, Did you ever get that feeling when you think you know something, and then someone unlocks a whole new level of understanding for you? My friend and teaching mentor Simon once told me, “The only thing I care about when teaching a class is seeing one student—just one—widen his eyes and gasp for air. It's the a-ha moment. I live to create those moments for my students.” I’ve just experienced one of those moments, thanks to a great piece Chris Powell wrote for Money Metals that [Zero Hedge]( up](. There are two things I thought I understood but didn’t. - Why the idiotic idea of minting a trillion-dollar coin isn’t as ridiculous as it seems. - Why the US government doesn’t revalue gold to get out of its financial hole. In this edition of the Rude, I’ll cover both and how they’re related. [CRITICAL Election Forecast Change From Jim Rickards]( I believe Donald J. Trump just won the 2024 election. But NOT for the reasons you may think… If I’m right, and crazy Kamala does what I’m predicting at the Democratic National Convention this week… The days leading to the election will cause complete and utter chaos in the markets. [Click here to see my updated 2024 forecast in my emergency election briefing.]( [LEARN MORE]( Remember When Jon Stewart Called Out Krugman? Before I get into this, let me be clear: minting trillion-dollar coins in the hope of evaporating existing debt is ludicrous. It’s just that there is an obscure Treasury statute that allows it. I remember when, in early 2013, the Obama administration floated the idea of minting a trillion-dollar coin. To anyone with a modicum of common sense, this was a ridiculous solution to the problem of government overspending. But what I remember even more than that stupid idea is the spat between Jon Stewart of The Daily Show and Paul Krugman, the Nobel Prize-winning blogger at The New York Times. Luckily, [Marc A. Thiessen over at the American Enterprise Institute chronicled the kerfuffle]( In the Washington Post this week, I noted that if the president could really create a trillion dollars out of thin air simply by minting a magic coin, why would he stop at one? He could mint 17 and eliminate the national debt — or 18 and have a trillion-dollar surplus. Well, apparently Jon Stewart had the same reaction, declaring on his Comedy Central show, “If we’re going to make shit up, I say go big or go home. How about a twenty-trillion dollar coin?” That did not go over well with the magic coin’s chief proponent, New York Times columnist Paul Krugman. Krugman blasted the comedian for “a lack of professionalism” in mocking the magic coin idea, adding, “Those people look dumb to me… he’s ruining his own brand.” Last night, Stewart fired back, declaring, “First of all, I’m pretty sure that is my brand. And second of all, if somebody is ruining their brand with a trillion-dollar coin idea, I don’t think it’s the non-economist.” Why isn’t this as dumb as it sounds? I hope you’re sitting down. The statute that allows the U.S. Treasury to mint platinum coins of any denomination is 31 U.S.C. § 5112(k). This section of the United States Code grants the Secretary of the Treasury the authority to mint and issue platinum bullion coins in any denomination, quantity, specifications, designs, varieties, quantities, and inscriptions as the Secretary may prescribe. The key text from the statute reads: "The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time." 31 U.S.C. § 5112(k) was enacted as part of the Omnibus Consolidated Appropriations Act of 1997, which President Bill Clinton signed into law on September 30, 1996. Here’s the onion: the provision was originally intended to give the U.S. Mint flexibility in producing platinum coins for collectors and investors. But its broad language has since become the basis for discussing other potential uses, such as a stupid, hypothetical trillion-dollar coin. It’s utterly ridiculous, isn’t it? But what's worse is that printing trillions of dollars in platinum coins allows the USG to retain hegemony in a way that revaluing gold doesn’t. Why Gold Revaluation May Be a Pipe Dream As always, it’s all about power. He who owns the most gold controls the world. And the United States won’t call the shots if it’s all about gold holdings. Credit: [World Gold Council]( Yes, Europe has more gold than the United States. Those intelligent Europeans repatriated their gold from the U.S. once they realized the USG printed far more paper than the gold bars they had. This position terrified the USG, especially the lately unlamented Henry Kissinger. But he asked the right questions. Koos Jensen (the then-pen name for gold researcher Jan Nieuwenhuis) found the minutes of an extraordinary meeting in the State Department archives in Volume 31 of "Foreign Relations of the United States, 1973-76." Secretary of State Kissinger wondered why we wouldn’t want gold in the monetary system. In an April 1974 exchange, Assistant Undersecretary of State for Economic and Business Affairs Thomas O. Enders [explained the situation to him]( Mr. Enders: It's against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings -- about $11 billion -- a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We've been trying to get away from that into a system in which we can control ... Secretary Kissinger: But that's a balance-of-payments problem. Mr. Enders: Yes, but it's a question of who has the most leverage internationally. If they have the reserve-creating instrument, by having the largest amount of gold and the ability to change its price periodically, they have a position relative to ours of considerable power. For a long time we had a position relative to theirs of considerable power because we could change gold almost at will. This is no longer possible -- no longer acceptable. Therefore, we have gone to Special Drawing Rights, which is also equitable and could take account of some of the less-developed-country interests and which spreads the power away from Europe. And it's more rational in ... Secretary Kissinger: "More rational" being defined as being more in our interests or what? Mr. Enders: More rational in the sense of being more responsive to worldwide needs, but also more in our interest. ... And there you have it. [Ben Bernanke lied to Congress after the Great Financial Crisis when Congressman Ron Paul (peace be upon him) asked him why we hold gold instead of diamonds.]( The real reason is that gold is indeed money, and whoever holds the most controls the world economic system. Wrap Up This is why a trillion-dollar platinum coin is a more likely outcome than revaluing gold in our ridiculous Clown World. If the USG gets away with the platinum coin solution, only they will have increased reserves. But if gold is revalued, every government holding gold will increase its reserves, and that’s not what the USG wants. Do we still think the people we call Deep State or The Swamp are the good guys anymore? Have a great week ahead! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( [Elon Musk’s Genius Plan to Save the US Dollar from Collapse?]( [Click here to learn more]( Elon is about to flip the switch on [his new money project…]( And it could trigger the biggest change to our financial system since the creation of the federal reserve in 1913. Could this save the US dollar from a complete collapse? [Click here to see the details because]( Elon said he could flip the switch “as early as mid 2024.” [LEARN MORE]( In Case You Missed It… Bad Earnings Aren’t Really “Bad” Greg Guenthner, Editor [Greg Guenthner] GREG GUENTHNER Good Morning Reader, It’s once again that magical time of the quarter when investors become confused, angry (or both!) when stocks don’t react as they expect after filing their quarterly updates. Why are earnings so tough on armchair investors? It might have something to do with all the confusing numbers and analyst estimates floating around. Or maybe it’s because the financial media stirs the pot by quick-calling after-hours reactions, only to update their coverage when a stock abruptly changes direction following the conference call Q&A. But the most frustrating part about earnings season is that stocks don’t react appropriately once the numbers hit the wire – at least, not in the minds of most investors. More often than not, a stock will behave differently than one might logically expect, even when earnings perfectly adhere to analyst expectations. Unfortunately, there’s no quick fix that will make earnings season more palatable for the average investor. Companies will continue to dish out fresh reports every three months, and investors and traders will simply have to do their best to navigate the uncertainty. As long as you’re involved in markets, you’ll have to deal with the occasional earnings shenanigans. So it’s best if you learn to embrace the madness… Today, I’ll show you that it is possible to ride the earnings wave without losing your mind. The secret to earnings zen doesn’t involve scouring estimates, analyst reports, or insider transactions. You simply need to learn how to put the earnings announcements into context with the forces affecting a stock’s price and trend. Let’s check out a couple of recent high-profile earnings reactions that have frustrated the investing masses… A Tale of Two Mega-caps… Earnings are hard to predict… We can see stocks like Tesla Inc. (TSLA) rally off 52-week lows after reporting an earnings miss. On the flip side, a stock like Meta Platforms Inc. (META) can crater after beating both top and bottom-line estimates. Moves like these are why so many people are distrustful of the stock market. They have no idea what to make of price action not matching up with top and bottom-line numbers parroted on the financial news. The Tesla news alone unleashed more than its fair share of angry comments across social media… Demand for EVs is falling off a cliff! Tesla’s free cash flow flipped negative! Profits are hitting 3-year lows! But none of these facts prevented Tesla shares from rocketing off their lows as traders appeared blissfully unaware that anything could be wrong with the company’s business prospects. Meanwhile, Meta has been a Wall Street darling since it bottomed in early 2023. Shares were up 450% from their 2022 lows ahead of its earnings announcement last week. The stock was also up 40% year-to-date ahead of earnings — the opposite action we had seen from Tesla during the first quarter. While Tesla’s financials were a mess, Meta actually posted some impressive numbers. The company beat earnings and revenue expectations for the quarter, extending its fiscal comeback from the dark days of its metaverse pivot in late 2021 - early 2022. But slightly lower second-quarter expectations stuck out to investors despite the strong Q1 showing. After a perfect start to the year, sellers came out in full force and sent the stock lower by double-digits to its worst showing in 18 months. What Did You Expect? To truly understand why the market reacted as it did, we have to zoom out and place the earnings into the context of the bigger price trends shaping these two popular stocks. On one hand, we have sputtering TSLA shares. TSLA broke from its Magnificent Seven brethren in late December and spent most of the first quarter digging itself into a deep hole. Most investors expected the worst. In fact, sentiment couldn’t have been more bearish heading into last week’s announcement. Combine that with the strong downtrend and breakdown to fresh lows, and you have a recipe for a big bounce on mediocre results. Tesla only needed a report that was slightly better than apocalyptic to spark a short covering rally. And that’s exactly what happened! The opposite was true for Meta. The stock was on a historic run, posting one of the best-looking charts amongst the mega-caps extending back to the 2022 bear market lows. This strong uptrend plus the fact that Meta shares extended to new all-time highs following its previous earnings beat left little room for error. Anything less than a “perfect” earnings report would of course entice investors to take profits — which is exactly what happened. Tesla just needed to prove the wheels weren’t falling off their cars to attract buyers, while Meta needed to dazzle analysts and investors to maintain its Heck, even if this premarket drop holds, META shares won’t completely fill the earnings gap higher from early February (the stock jumped 20%-plus following its quarterly earnings release). Bottom line: earnings reactions are all about expectations — just not the expectations everyone talks about. You have to separate the financials from how the herd feels about a stock. The best way to do that is to analyze prices and trends. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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