STEPHEN LEEB: This Shocker Will Cause Gold To Vault To $5,000 Virtually Overnight

Gold, clearly, stands out, and other critical commodities ranging from silver to copper to fertilizers will be near certain winners as well. Photo credit: Shutterstock, licensed.

NEW YORK, NY –  The war in Ukraine likely is a gift to China, a country that, far more than Russia, is our biggest rival and the greatest threat to our position in the world. That’s because, whatever the war’s outcome, the U.S. will lose on many fronts, as discussed below. But potentially, there’s a positive side to this – if the economic repercussions from the war make us more aware of the urgent need for global cooperation to manage looming resource scarcities. 

Absent such cooperation – which in addition to allocating resources in an effective manner also entails sharing technologies and science – efforts to transition to a sustainable world will likely be short-circuited, with devastating consequences for all mankind. In today’s world, all of us are as much citizens of the world as citizens of any particular country. 

The outcome is still uncertain. And in a world that remains fraught with uncertainties, the case for gold as well as other commodities remains utterly compelling.

Abusing The World’s Reserve Currency Can Backfire Catastrophically


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The war has already shown that our strongest claim to hegemony, control over the world’s reserve currency, can catastrophically backfire if thoughtlessly applied. The U.S. has the power via sanctions to limit economic trading among other countries. The sanctions we have applied to Russia have been severe and include blocking a big chunk of its foreign reserves, sharply limiting Russia’s ability to trade with any other country. We have done everything possible without completely destroying our own economy and those of our allies.

But it’s still clear that we’ll be inflicting greater economic harm to ourselves and our allies than to Russia. Commodity inflation, obvious before the war, has accelerated to where it is making our economy difficult to manage. If it gets to where we experience actual food shortages, it will be new territory for most Americans. Russians, by contrast, are more steeled to deal with shortages, and in the post-Cold War period often resorted to barter to obtain food and other essentials. I hope, and I do think, we will come to our senses before reaching these most dire outcomes – that the war will be a wake-up call rather than the beginning of the end for the U.S. and the West.

Gold Stands Out As A Clear Winner In All Of This

It seems almost crass to talk about investment implications. But the greater the economic uncertainty, the greater the need for a currency that will hold its value. Gold, clearly, stands out, and other critical commodities ranging from silver to copper to fertilizers will be near certain winners as well.

Meanwhile, the Fed will do everything in its power, i.e., print as much money as it can, to try to keep the economy above water. This could let the market continue to power along, or at least avoid a major crash, until all that is left is ever higher inflation accompanied by negative growth. We’re not at that point yet, but we’ve moved in that direction.

With their support of Ukraine, the U.S. and West are basically rekindling the 20th century’s Cold War rather than focusing on today’s far more important rivalry between rich and poor countries. The U.S. leads the rich, China leads the poor. With this in mind, I recently reread an article I first read in 1995, written by Eisuke Sakakibara, Japan’s finance minister at the time, and titled “The End of Progressivism, A Search for New Goals.”

At the time, many others, including most notably Francis Fukuyama, viewed the West’s triumph in the Cold War as signaling “the end of history” and the triumph of capitalism. Sakakibara disagreed. He saw the Cold War as a battle between “two extreme versions of progressivism – socialism and neoclassical capitalism.” Both shared the goal of rapid growth and fair distribution of material well-being. He argued that capitalism already was showing signs of failing to meet its goals. 

Prophetically, he cited growing inequalities in both the U.S. and Europe and environmental deterioration as evidence that progressivism would be challenged. He saw the Cold War as akin to a civil war, whose victor wouldn’t be the ultimate model for how to best govern. And he mentioned China’s economic model as a likely alternative to progressivism.

Since then, capitalism’s flaws have led to a U.S. arguably more fractured than since the Civil War. It’s hard to disagree with anyone who argues that capitalism has morphed into a form of corporatocracy in which a broad range of society is brainwashed into believing whatever narrative best suits the financial-technology (fintech) complex. Meanwhile, China has emerged as the West’s greatest competitor.

This Is When The Real Trouble Began

Where I disagree with Sakakibara is in seeing capitalism as practiced in the 30 years following WWII as flawed. Nor for that matter was the form practiced for the 50 years following the Civil War. The real problems emerged later, post 1971 after we abandoned the gold standard (as I elaborate in my book China’s Rise and the New Age of Gold). When a government has unlimited freedom to spend money, as occurred then in the U.S., the upshot is freedom for only that small group that then controls the narrative of the day.

It’s telling that the fintech industry eschews gold, despite the fact that gold has advanced nearly sevenfold since this century’s start compared to a less than fivefold gain in the S&P 500 with dividends reinvested. You cannot buy gold at a U.S. bank. The world’s largest investment advisor, Blackrock, which manages about $10 trillion in assets, has less than $1 billion dollars in assets such as ETFs directly related to gold – less than one-millionth of its asset base.

This isn’t an accident. The ruling fintech colossus owes its success almost entirely to gold’s absence from the monetary system, which took away the discipline necessary for a genuinely free country. The cracks in capitalism as practiced in the West that Sakakibara and others already saw in 1995 have grown steadily since then and in the last 20 plus years have been accelerating. Gold is a mortal enemy to those who have benefitted from a complete lack of financial discipline.

It’s testament to America’s greatness pre-1971 that even after nearly 20 years of decline, we still managed to vanquish the Soviet Union. It is tempting and maybe on some level correct to suggest that with the war in Ukraine, the West is trying to prove it can still beat its former rival. And let’s not kid ourselves, this isn’t war between Ukraine and Russia but between the U.S. and Russia. We have spent billions of dollars financing Ukraine’s military. Who knows how many hundreds of billions of dollars the incremental inflation resulting from sanctions will cost those who can least afford it in our country as well as in the E.U.

Recklessly Calling For The Ouster Of Putin

On Saturday, Bloomberg led off with the following: “U.S. President Joe Biden called for the ouster of Vladimir Putin, an unscripted and revealing aside that risks emboldening an already erratic and paranoid Russian leader who ordered the invasion of Ukraine.” I am sure most Americans are nodding their heads in agreement with the notion of Putin being gone. I would probably join them if I listened only to mainstream news. Like any war, the war he launched is brutal, the attacks on civilians and children horrendous. But still, you have to ask if there’s another side.

To find a news source, especially given our technology giants’ tendency to ban sources whose message is counter to the approved narrative, takes some searching. I’ve found two whose provenance makes you realize how crazy things have become here. You can find both on YouTube.

One is “Democracy Now” which features Amy Goodman, whom I used to not watch because of her ultra-left-wing leanings. Today if she’s tainted it is because of her integrity rather than her politics. Recently she interviewed Jack Matlock Jr., who served under President Kennedy during the Cuban missile crisis. The alert nonagenarian argued that Putin had been provoked because he viewed NATO membership of Ukraine as an existential threat in that Russia would then be surrounded by NATO countries. Paranoid? Maybe. But Matlock’s argument, which he originally made before Congress in 1997, was that the eastward expansion of NATO could lead to a situation akin to the 1962 Cuban missile crisis. Then a courageous President Kennedy overruled his Joint Chiefs of Staff, who argued for an all-out attack on the missiles and on the Soviet troops, ships, and aircraft in Cuba. It is widely agreed that such an attack would have led to a nuclear exchange between the Soviet Union and America. The late George Kennan, viewed by many as the most influential foreign policy advisor of the post-WWII era, felt the eastward expansion of NATO would be a “strategic blunder of potentially epic proportions.”

Similar arguments are made by various Indian news stations that broadcast on YouTube. I watch WION, which is considered the most objective. They all share the view that despite it being well known that Putin is monstrous, the U.S. continued to provoke him. When Biden talked with Putin in December, it would have been easy to promise that Ukraine would never become a member of NATO in exchange for a promise by Putin not to attack. No offer was made, which some argue was tantamount to ensuring Putin’s invasion.

It’s not surprising that India has stayed neutral in the conflict. Though India is the world’s largest democracy, it’s also a very poor country that sees its Asian trading partners, including China, as stronger and more reliable assets than the U.S. Worth mentioning is that Google, a major fintech player and the owner of YouTube, banned WION for seven days. It was forced to reverse its position following an overwhelming worldwide outcry.

Even regime change in Russia wouldn’t change anything. Before Putin, Russia was experiencing an historic economic meltdown. In the early 1990s Russian life expectancy declined by nearly four years. By way of comparison, during the Depression, U.S. life expectancy rose. The U.S. was in part responsible for Russia’s extraordinary peacetime pain. U.S. advisors urged the country to engage in a kind of shock therapy to quickly bring about capitalism and democracy. I doubt the Russian populace has forgotten the suffering this failed experiment caused. Under Putin, Russia’s living standards have dramatically improved. Were Putin somehow sidelined, I don’t believe the country would accept a U.S. puppet.

I could also mention Ukraine’s role in the Holocaust and our past failed attempts elsewhere at regime change, which have cost close to $10 trillion and countless deaths. But I don’t want to overemphasize the negative. Rather, I’d like to reiterate my hope that something good can still come out of this.

As I said earlier, my hope is that the nearly assured losses this war will bring to all involved will be a wake-up call for the U.S. Those leaders will emerge here with the wisdom and charisma to work with China and other major economies to impose a worldwide reserve currency backed by gold. That, in turn, would foster the kind of monetary discipline that in time could bring this country back to its former greatness.

This Shocker Will Cause Gold To Vault To $5,000 Virtually Overnight

Meanwhile, whether or not it’s a formal part of a monetary system, gold should be the center of your portfolio. Commodities and especially silver and copper should also play a prominent role. Lately there have been signs that gold and silver manipulation has lessened, possibly because of massive gold buying by central banks and individuals in the face of huge short positions held by financial institutions trying to hold gold down. Still, further manipulation can’t be ruled out. The point is to not let any shorter-term volatility in gold frustrate you. Gold has embarked on an historic bull market that I still believe will ultimately see the metal reach $20,000 – and before that, it could easily vault to $5,000 virtually overnight if the metal starts to be mentioned as forming part of a new monetary system. So I urge you to buy gold – and to take a look at Indian news channels.

Editors Note: This story originally appeared in King World News and within the pages of Stephen Leeb’s own website. Dr. Stephen Leeb’s material is republished in The Published Reporter® with his explicit permission.


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