America’s Biggest Bank Sounds the Alarm Bell

America’s Biggest Bank Sounds the Alarm Bell

Notes From the Field By James Hickman (Simon Black) April 8, 2024

Jamie Dimon, the CEO of JP Morgan Chase, did not open his annual shareholder letter with rosy language about the state of the world, or even enthusiasm about his bank’s record profits.

Instead, he describes “yet another year of significant challenges” including the war in Ukraine, war in the Middle East, extreme tensions with China, higher food and energy prices, turmoil in the banking sector, outrageous government deficits, and even major risks with the Federal Reserve’s monetary policy.

Dimon writes that “America’s global leadership role is being challenged outside by other nations and inside by our polarized electorate,” and that this is a “time of great crises”.

He went on with a few charts and thoughts about the bank’s business and financial performance over the last year… and then dedicated most of the remaining 57 pages of his letter to the serious problems which face the world.

His observations are wide-reaching-- from the decay of social cohesion to the prospect of war and higher inflation, to the serious potential for a reset of the Bretton Woods system (which made the US dollar the world’s reserve currency).

Frankly the letter almost reads as a manifesto written by someone who is completely fed up with government incompetence and positioning himself to run for office. I can’t agree with everything he says, but it’s obvious that his ideas are balanced and well thought out.

There are a few points in particular worth repeating.

1. Keep it in perspective; the world is not coming to an end

“If you read the newspaper from virtually any day of any year since World War II,” Dimon writes, “there is abundant coverage on wars — hot and cold — inflation, recession, polarized politics, terrorist attacks, migration and starvation. As appalling as these events have been, the world was generally on a path to becoming stronger and safer.”

This is absolutely a true statement. It’s easy to get caught up in the negativity while missing the abundance of growth and opportunity.

In the year 1918, most people probably thought that the world was coming to an end. The Great War was at its peak, economies were faltering, inflation was surging, rationing and shortages were everywhere… and then the Spanish flu popped up and killed tens of millions of people.

Bleak times indeed. And yet the next century was the most prosperous in human history… despite a very bumpy path along the way.

This is similar to where we are today. Yes, Inspired Idiots have caused a gigantic mess. But the general trajectory of the human species is still improving.

2. That said, long-term risks should not be underestimated. Especially for the West.

Dimon finds that there is “too much emphasis on short-term, monthly data and too little on long-term trends”, and he talks about inflation as a great example.

Economists and investors tend to be almost singularly focused on monthly inflation reports in an effort to divine if and when the Federal Reserve will cut interest rates.

They’re entirely missing the point, Dimon writes. Month by month, and even year by year, inflation numbers could vary wildly. But if you look at the big picture, you’ll see substantial evidence for future inflation.

We’ve been writing about this for a long time. In fact, since inception we’ve only been focused on long-term trends… and we see these as highly inflationary.

Similar to our view, Dimon understands how “ongoing fiscal [deficit] spending, remilitarization of the world, restructuring of global trade, capital needs of the new green economy, and possibly higher energy costs in the future” are all inflationary in the long run.

The inflation might not show up next month or next quarter, but he believes (as do we) that the coming years are full of “persistent inflationary pressures”.

There are also significant risks to the current US-led global order; America’s influence is waning, and Dimon writes that the “international rules-based order established by the Western world after World War II is clearly under attack by outside forces, somewhat weakened by its own failures [and] confusing and overlapping regime of policies.”

As part of this, he talks about the distinct possibility for a reset of the post-WW2 financial system (known as Bretton Woods) that anointed the US dollar as the global reserve currency. He puts it succinctly: “we may need a new Bretton Woods.”

We’ve been writing about this for years; the dollar’s decline is a long-term trend, but for us, it’s an obvious one. You cannot run multi-trillion-dollar deficits each year and still expect to be the world’s economic superpower.

It’s notable that even someone like Dimon can see this coming.

3. These problems are still solvable.

We’ve written extensively that the problems facing the US and the West are still solvable. For now. But every year that the problems continue to be ignored brings the country closer to a point of no return... where there is no way out but default.

Dimon is not shy about offering up suggestions, many of which we have written about in the past. He talks about border security, streamlining sensible regulations, and economic policies which prioritize growth.

“Unfortunately,” Dimon writes, “the message America hears is that the federal government does not value business — that business is the problem and not part of the solution.”

“There are fewer individuals in government who have any significant experience in starting or running a company, which is apparent every day in the political rhetoric that demonizes businesses and free enterprise and that damages confidence in America’s institutions.”

He says he finds it “astounding that many in Congress know what to do and want to do it but are simply unable to pass legislation because of partisan politics”.

He goes on to list a multitude of government failures and the “staggering number of policies, systems, and operations that are underperforming”, including pitiful public schools, broken healthcare, infrastructure woes (especially the energy grid), terrible immigration policy, Social Security’s looming insolvency, and more.

Dimon states very clearly that the federal government “needs to earn back trust through competence and effective policymaking.”

True statement. But I’m not holding my breath. Because in related news, the White House just announced that Joe Biden is working on yet another way to forgive student debt for 30 million Americans.

He doesn’t seem to care that the Supreme Court already rejected his previous effort to forgive student debt, saying he did not have the legal authority.

It’s pathetic that the cost of university education is so high… especially given how many degrees in an AI-world are useless. Plus many universities these days are just hotbeds of radicalization. It hardly seems worth taking on $80,000 of debt for such a dubious outcome.

But nevertheless, taxpayers have footed the bill for college and loaned out over $1 trillion to students across the country.

This is a basic tenet of capitalism (which Mr. Biden claims to embrace): debts have to be paid.

But because this guy’s poll numbers are so pathetic-- especially with young people-- he’s trying to score points by canceling their debts.

Well, canceling student debt means that taxpayers will lose hundreds of billions in loans that they made. So rather than taking steps to strengthen America’s balance sheet, the President is once again violating the law to make the balance sheet worse… all to improve his image among young voters.

This is hardly a way to restore trust in government. So again, I’m not holding my breath.

Dimon’s letter is worth the read if you have the time. You might not agree with everything he says, but it is rather telling that the CEO of the country’s largest bank is speaking so plainly about obvious risks.

It’s another reminder of why it makes so much sense to have a Plan B.

To your freedom,

James Hickman (Simon Black)  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/americas-biggest-bank-sounds-the-alarm-bell-150673/

Why Saudi Arabia’s Futuristic City Is A Sign Of Major Inflation To Come

Why Saudi Arabia’s Futuristic City Is A Sign Of Major Inflation To Come

Notes From the Field   By Simon Black/James Hickman  April 3, 2024

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

Did you hear about the new streamlined tourist visa to Saudi Arabia? I’m sure you’re standing in line for it already.

No? Me neither.

I was actually stationed in Saudi Arabia for a while when I was in the Army… and, the most unique ‘tourist’ attraction, at least for non-Muslims, is a place we used to call “Chop Chop Square” where they would do the public beheadings and dismemberments of convicted criminals.

Aside from that, Saudi Arabia has virtually nothing to offer tourists. At least for now.

But over the past few years the government has set itself on a path to building massive futuristic cities and giant resorts in an effort to bring tourists and diversify its economy-- including a recently streamlined visa process.

But to me, this screams of desperation… because it means that Saudi Arabia’s oil industry is in serious trouble.

As recently as just a century ago, what we know as ‘Saudi Arabia’ today was just a bunch of nomadic tribes roaming the desert who were constantly at war with one another.

Then one day a tribal leader named Abdulaziz Ibn Saud rose to power, a bit like Genghis Khan, and conquered everyone else. And in 1932, he declared himself sole ruler of the newly established Kingdom of Saudi Arabia.

Initially he wasn’t King of much at all; Saudi Arabia was mostly just a desert backwater in the early 1930s.

But things began to change quickly when a major oil discovery was made in early March of 1938. And over the years, Saudi Arabia’s prominence in the world grew dramatically.

By 1970, Saudi Arabia had overtaken the United States as the world’s #1 oil producer, with daily output more than tripling over the course of that decade to roughly 10 million barrels per day.

Ever since then there has been almost a Homeric mythology that Saudi Arabia has a sort of inexhaustible ocean of oil, and they could just turn on a spigot and fill up millions of barrels.

But that’s simply not true.

In fact, more than 40 years later, Saudi Arabia produces less oil today than they did in 1980. And there has long been speculation that Saudi oil reserves might actually be running low.

Not long ago, in fact, the Saudi government announced that they would make investments in their oil infrastructure to increase their maximum production capacity to 13 million barrels per day… but nothing further.

In other words, they set a hard ceiling for how much oil they were capable of producing, essentially shattering the mythology of their infinite oil capacity.

Then, just two months ago, they reversed their plans, and announced that their maximum drilling capacity would be 12 million barrels, and not 13 million.

Both of these should have been taken as obvious indicators that Saudi Arabia’s oil reserves are well past their peak… and that they know it.

But there is perhaps no greater indicator than the Saudi government’s desperate attempt to give its economy a gigantic sexy makeover.

For example, Saudi Arabia is building a ski resort in the desert mountains... where it occasionally dips below freezing in the winter. Then there’s Neom, the futuristic megapolis planned for the coast of the Red Sea featuring flying cabs and an artificial moon.

Then there’s The Line, a city stretching for 170 kilometers across the desert. And of course there’s the Red Sea Project, a luxurious resort the size of Belgium.

The more Saudi Arabia launches these sorts of projects, the more obvious it becomes that they are running out of oil and are desperately trying to diversify their economy while they still have time.

The fact that Saudi Arabia even started selling off small pieces of its state-owned oil company, Saudi Aramco, back in late 2019 is another indicator.

They could have IPO’d in 1988… or 2005… or any other time. But they didn’t. It seems like they know they’re in decline, and they’re trying to monetize the mythology of their oil reserves while they still can.

Now, Saudi Arabia isn’t going to run out of oil anytime soon; rather, the larger point is that supply and demand fundamentals will likely lead to much higher oil prices in the future.

And this is very inflationary.

Oil is the most important energy commodity in the world, and so its price influences the price of just about everything. If oil prices spike, then it’s not just the price of gasoline that goes up.

The cost of operating data centers with racks of servers and GPUs will increase. Food costs will increase. Manufacturing costs will increase. Virtually everything will increase in price.

Energy prices, like just about all prices, are ultimately about supply and demand. And the demand side is pretty easy to see— it will most likely continue increasing as emerging economies and global population grow.

Yes, there may be a time off in the future where oil is no longer necessary. But that’s still a long way out. Because guess what critical commodity you need to produce solar panels and wind turbines? Oil.

Meanwhile, on the supply side, it’s clear that one of the world’s biggest oil producers is in decline. At a minimum, they won’t be able to increase production commensurate with the increase in demand. And they’ve flat out admitted to that.

Meanwhile, another of the world’s biggest oil producers, the United States, is going out of its way to obstruct oil companies.

They create special taxes to penalize them. They refuse to follow the law and auction off concessions. They never miss an opportunity to demonize them.

Even in the financial industry, bankers and investors deprive the industry of the funds necessary for exploration. Hedge funds have taken over the Boards of major oil companies and forced them into inefficient green energy projects.

The United Nations hosts entire summits about phasing out oil production.

And let’s not forget about the fanatics who vandalize art museums and glitter bomb public sporting events to demand that the world “just stop” producing oil.

So, we have rising demand coupled with policies that restrict supply. The end result, predictably, has been rising oil prices, which are now hovering around $85-$90.

This is one of the reasons why the inflation numbers remain high; again, expensive energy impacts core inflation.

I write a lot about why we think the future is inflationary, and a lot of it has to do with the tidal wave of debt and government spending.

But that’s just one source of inflation. Higher energy prices are another.

Like the debt problem, however, the energy problem is also solvable. There’s plenty of oil in the world-- the issue is just misguided policy. There are also other technologies (like nuclear) which can provide abundant, cheap, clean energy.

 There doesn’t seem to be much appetite among the environmental fanatics who enjoy complaining, but not actually solving any problems.

Now, one way to offset this oil cost inflation is to own shares of the oil companies themselves; and right now, several of them that are very cheap since it’s apparently not socially acceptable to own them.

In our investment research newsletter the 4th Pillar, we highlighted a highly profitable oil producer that is practically debt-free, and trading at a very attractive Price/Earnings ratio of just 3.4.

The company was able to turn a strong profit when oil prices were low, and they’re positioned to do extremely well as oil prices go higher.

Of course, no one can be happy about the prospect of future inflation.

But there are solutions. And if you understand what’s likely coming, you can take steps now to reduce the impact or even potentially benefit from inflation.

To your freedom,  James Hickman  

Co-Founder, Schiff Sovereign LLC

PS. I mentioned an oil company we have researched for our investment research newsletter the 4th Pillar. So far, we have added three to our portfolio. But oil isn’t the only critical real asset we discuss.

We’ve also detailed gold miners, iron works, shipping companies, agriculture, and so many more vital investments that make the world go round.

They all have something in common— they are great investments to guard against, or even benefit from, inflation, and they are all trading at extremely low valuations.

You can learn more about the 4th Pillar here.

https://www.schiffsovereign.com/trends/why-saudi-arabias-futuristic-city-is-a-sign-of-major-inflation-to-come-150337/

“It looks like fly crap to me. . .”

“It looks like fly crap to me. . .”

Notes From the Field by Simon Black / James Hickman  March 25, 2024

I’m on my way back home from Mexico City after an incredible weekend event here with more than 100 of our Total Access members.

First things first, if you’ve never been to Mexico City, I highly recommend it. A lot of people have a misconception that the city is some kind third world dump. It’s not. And most first-time visitors are stunned by the vast green areas, expansive parks, tree-lined streets, museums, architecture, and modern lifestyle.

In my opinion it also has some of the best restaurants in the western hemisphere. You can eat extremely well in Mexico City, but you don’t pay very much for it.

The event we held for our Schiff Sovereign Total Access members was also pretty great.

I started off the conference explaining why we should expect higher inflation in the future-- and I’ve written about this extensively. The US government’s own projections call for $20 trillion in additional debt over the next decade. And frankly we think they’re woefully underestimating the problem.

But even $20 trillion will likely prove catastrophic. That would mean the US national debt will reach $55 trillion.

If yields remain at today’s levels (roughly 4.5%), then the government will have to spend nearly $2.5 trillion per year, just to pay interest on the debt. That would make interest on the debt the #1 expense of the federal government, triggering a vicious cycle in which the Treasury Department would have to borrow more and more each year just to be able to pay interest on the money they’ve already borrowed.

To say this is unsustainable would be a massive understatement. And we believe that the Federal Reserve will step in to bail out the government by slashing interest rates to zero (or even negative levels).

Think about it-- if the national debt is $55 trillion, but the interest rate on that debt is literally 0%, then the government’s annual interest bill is zero… essentially saving them $2.5 trillion per year.

Sounds great. But it would come at substantial cost.

For the Federal Reserve to lower rates, it would require them to dramatically increase the money supply, what we typically refer to as ‘printing money’. They’re not actually printing physical currency-- it all happens electronically. But the effect is the same: it’s highly inflationary.

When the Fed ‘printed’ $5 trillion during the pandemic, the US economy saw 9% inflation. So, if the Fed prints $20 trillion or more to push interest rates down to zero, how much inflation will be see then?

No one knows. But it probably won’t be their magical 2% target.

My partner Peter Schiff came on the stage later and made similar comments. And with this inflationary scenario in mind, we sketched out a number of strategies, both personal and financial, that would make sense in the coming years.

It would be easy to study this problem and come away with a sense of dread. After all, a $55+ trillion national debt and $2.5 trillion in annual interest expense looks pretty scary. (Remember, these are based on the government’s own forecasts.)

But if you can understand the trend and its consequences, then you can also take completely rational steps to reduce their impact. That’s the entire concept behind a Plan B.

Peter and I both see overwhelming evidence of substantial inflation in the future. But this means we can prepare for it now, rationally. And we outlined a number of strategies to do so.

One rather obvious one is gold. And we talked about why gold will likely become very important in the future. My personal view is that gold will eventually displace the dollar as the global reserve standard, i.e. how foreign governments and central banks settle their accounts.

With a $55+ trillion projected national debt, and $2.5 trillion in annual interest expense, it’s hard to imagine the rest of the world continuing to allow the US dollar to remain the dominant reserve currency.

And it would be a similar outcome if the Fed ‘prints’ tens of trillions of dollars.

Either way, we see the dollar’s reign as the dominant reserve currency coming to an end over the next decade.

But since no one trusts the Chinese government, or some new ‘BRICS dollar’, gold is the most likely candidate to replace the US dollar since every government and central bank on the planet already owns it… and has confidence in it.

Gold has the added benefit that no single government controls it. And so single country dominates gold production; China, Russia, the United States, Canada, etc. all produce substantial quantities each year.

We later heard from a colleague of mine who runs one of the largest precious metals storage facilities in the world, based in Singapore. He gave me an insider’s view of the gold and silver markets, and sketched out why there may be a shortage coming, especially in silver.

He explained how many of the world’s largest commodities and metals exchanges have seen dwindling stockpiles… while many mines are doing direct ‘offtake’ agreements with large industrial consumers (like electronics companies).

The end result has been a trend of declining physical silver availability, and he believes this will ultimately drive the silver price much higher.

He added that silver is currently quite cheap compared to gold, with the silver/gold ratio currently at about 90:1, versus its historic average over the past several years of roughly 70.

We also had a presentation from a venture capital firm that talked about buying shares of prominent startups (Airbnb, SpaceX, etc.) in the secondary market, i.e. from employees or early-stage investors seeking liquidity. It’s an interesting way to take a discounted position in a high growth business whose value could explode in an inflationary environment.

As one could expect right now, there was also ample discussion about cryptocurrency, including a mini-debate between Peter and our guest Mark Moss, who also spoke at the event. More on that another time.

Perhaps my favorite part was hearing from the former President of Mexico, Vicente Fox. He spoke in the morning about how many short-sighted and dangerous leaders are ruining the world… and I couldn’t agree more.

During a Q&A session later, he told the crowd about the time that George W. Bush came down to Mexico to convince him to support the war in Iraq.

Former President Fox told us that Bush’s team rolled out maps of Iraq onto his desk and pointed at a tiny speck, saying, “There are the weapons of mass destruction.”

Fox stared closely at the table and brought his face closer to where they were pointing, and said, “It looks like mierda de mosca to me…” That’s Spanish for ‘fly shit’.

I want to extend my sincerest thanks to all the members who joined us for a wonderful weekend in Mexico City. The event, the restaurants, the personal discussions with each of you, and the camaraderie were all unforgettable.

And if you’re not currently a member but interested in joining Total Access, you can find out more about it here.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

 [Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

https://www.schiffsovereign.com/trends/it-looks-like-fly-sht-to-me-150313/

Uranium Hasn’t Been This Critical Since The Days Of Oppenheimer

Uranium Hasn’t Been This Critical Since The Days Of Oppenheimer

Notes From the Field By Simon Black – James Hickman 3-12-24

If you saw Christopher Nolan’s blockbuster Oppenheimer, you might remember the scene in which Dr. Oppenheimer travels to Chicago to meet with physicist Enrico Fermi, who had just achieved the world’s first ever self-sustaining nuclear chain reaction.

This really happened-- it was December 2, 1942, and Enrico Fermi’s experiment was a massive scientific breakthrough.  Fermi and his team proved that a fission reaction could be controlled… and therefore the vast amount of energy inside of an atom’s nucleus could be harnessed for other purposes.

Obviously, the US government was singularly focused on turning that immense nuclear energy into the biggest bomb the world had ever seen. But Fermi’s discovery also paved the way for nuclear power.

Proponents envisioned a world powered by nuclear energy where the cost of electricity would be practically free… and the benefits to mankind incalculable.

It all came down to efficiency; the amount of nuclear power that could be generated from a single rock of uranium was equivalent to thousands of tons of coal in a conventional power plant.

The cost of electricity would plummet. And that cheap energy would mean that consumers would pay far less for utilities, saving plenty of money that could be put to other uses.

Cheap energy also means that the production costs of just about everything would fall; cars, houses, food, etc. all become cheaper.

Cheap energy also helps countries develop more rapidly and increase economic growth, resulting in greater national prosperity and more tax revenue for the government.

The promise of nuclear energy was extraordinary-- it was a win/win/win. So naturally when other nations began to develop the technology on their own, it set off an arms race to stockpile as much uranium as possible-- mostly to ensure that no one else could make weapons.

The United States government bought up entire warehouses full of it and made an exclusive deal with the Belgian Congo (which had the world’s largest uranium reserves), simply to make sure that other countries couldn’t get their hands on any nuclear fuel.

Then, over the years, the US government slowly sold down its uranium inventory, little by little.

Mining companies also added new supply to the uranium market, ensuring there was plenty of uranium to meet growing demand.

But then a series of infamous accidents took place-- Chernobyl, Three Mile Island, etc. The public freaked out, and the entire nuclear power industry nearly vanished.

Now, an objective analysis shows that, any way you slice it, far more people have died from accidents related to coal, oil, natural gas, and other forms of electricity production than have ever died from nuclear power accidents.

In fact, more people have died from accidents related to wind power than have died from nuclear.

But nuclear power still suffered a terrible blow to its reputation, and it remained that way for a very, very long time.

Power companies scrapped their plans for new nuclear power plants, and the demand for uranium collapsed, prompting many mining companies to shut down their operations.

The existing nuclear power plants that remained in business, however, continued buying uranium from the government… so those stockpiles from the 1950s continued to dwindle.

And that takes us to today: nuclear is finally making a comeback.

Unfortunately, most of the West (as usual) is missing the boat; the vast majority of new reactors will be in China, India, and other rapidly growing nations who understand that no other energy technology offers the same advantages as nuclear.

Western politicians are still stuck in their idiotic, Dark Age beliefs that wind and solar are the way to go. But these are both completely inefficient and extremely expensive technologies.

The amount of energy it takes to produce solar panels relative to the electricity that solar panels actually generate is a laughable pittance; this is known as ‘Energy Return on Energy Invested’, or EROEI… and with nuclear power, it’s off the charts.

Plus, nuclear power also has one of the lowest levels of CO2 emissions of any energy source.

 (It’s also worth noting that emerging nuclear reactor technology promises to slash costs even further and increase safety.)

This means that nuclear has the potential to provide massive economic AND environmental benefits. Virtually no other technology has that capability… which is why it’s only a matter of time before the world ‘rediscovers’ nuclear.

Again, it’s already happening in Asia. In fact, it’s possible to literally count all the planned / in-progress nuclear power plants that will be coming on line in the next few years, and then estimate the annual uranium demand.

One of the best researchers in this field, by far, is my colleague Adam Rozencwajg, who has spoken at a few of our Total Access events; Adam has gone through the trouble to count up all the new reactors and their projected uranium needs, and the answer is very clear:

Bottom line, uranium demand is set to skyrocket. Yet supply isn’t going anywhere, not for a while.

It takes many years to get a new uranium mine up and running-- sometimes even longer than it takes to build a new nuclear power plant.

So, you can see how there’s likely going to be a massive imbalance in uranium supply and demand.

I first started talking about uranium in September of 2022 when spot prices hovered around $40 per pound.

Today, uranium trades for more than $90 per pound. But I think it could go much, much higher from here.

In fact, global uranium demand already exceeds new mining production. In the past, whenever this happened, there were always vast government stockpiles to keep the power plants supplied.

But now the government stockpiles have dwindled. So, we could easily see a major uranium shortage… and prices go through the roof.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/uranium-hasnt-been-this-critical-since-the-days-of-oppenheimer-150247/

Why Gold Might (Weirdly) Be A Contrarian Investment Right Now

Why Gold Might (Weirdly) Be A Contrarian Investment Right Now

Notes From the Field By Simon Black/James Hickman  March 5, 2024

[Important Reminder: (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

It’s hard to say with a straight face that an asset hovering near its all-time high could be a “contrarian” investment. But I’m going to say it anyhow-- I think gold may be a contrarian play right now.

Now, it would be easy to assume that gold is near its all-time high because everyone is buying. And normally that would be true; typically, whenever an asset soars to a record high, it’s because individual investors are piling into the market.

We’ve seen this countless times, from Bitcoin to meme stocks; once something becomes the hot thing to own, small investors-- and occasionally professionally managed funds-- drive the price higher.

But that’s not happening with gold. In fact, investors have been abandoning gold for years.

Publicly available data from more than 100 gold ETFs (all of which are conveniently aggregated by the World Gold Council) show that western investors have been selling off their gold ETFs for most of the past few years.

WGC data show that North American and European investors dumped over 700 metric tons of gold since May of 2022, equivalent to nearly 20% of ETF holdings.

In fact, outflows for the month of January alone (the most recent month of published data) totaled more than 50 metric tons-- the second highest outflow in a year.

Most notably, however, North American, and European investors dumped 179.6 metric tons of gold September 2023 through January 2024.

This is important, because during that time period, the price of gold surged from $1820 per ounce to nearly $2100.

Strange, right? If investors were selling off substantial quantities of gold, it seems like the price should have fallen. Instead, it rose 15%. How is that possible?

Well, the reason that gold keeps going higher is because, while individual investors are selling, there’s another group that’s buying.

In fact, this group of buyers is completely price insensitive. They don’t care how much they pay per ounce. They are not even looking for a return on investment. And they have mountains of cash to spend.

The group of buyers I’m talking about is central banks and governments.

And not just the usual suspects like China and Russia either (though China did buy more than 200 metric tons in 2023). Others like Poland, India, Singapore, Czech Republic, Philippines… and even Iraq.

To me this is an obvious signal that the global financial system is probably going to change sooner rather than later. And long-time readers know we have been writing about this for years.

Reserve currencies throughout history have always come and gone.

There was a time when the Greek drachma dominated trade and commerce in the Mediterranean (due in large part to the conquests of Alexander the Great). It was displaced by the Roman denarius, then the Byzantine gold solidus, then the Venetian ducat.

Reserve currencies rise to prominence because people have confidence in the issuer, i.e. the Roman Empire, or the Republic of Venice, or the Spanish Empire.

But eventually that confidence wanes-- especially as the empire debases its currency and runs up massive debts.

That’s the situation the United States is in right now.

The national debt is already $34.4 trillion. And the Congressional Budget Office expects it to rise by at least $20 trillion over the next decade.

The dollar became the global reserve currency back in 1944 when there were no other nations to rival the US.

The US was the only country that hadn’t been completely obliterated by war. It boasted the largest, freest, most productive economy. It possessed the best technology and manufacturing capacity. It had the largest pool of savings.

And it also had one of the world’s largest and most rapidly growing populations.

Yet even with such an impressive socioeconomic resume, the rest of the world wasn’t willing to blindly trust the US government with the world’s reserve currency… not without first putting some critical checks and balances in place.

First, while other nations agreed to fix their currencies to the US dollar, the US agreed to fix the dollar to gold at a rate of $35 per troy ounce.

And second, the US government had to guarantee that the dollar would be freely convertible to gold; that way, if any nation ever lost confidence in the Treasury Department or Federal Reserve, they could easily redeem their dollars for gold.

This is a pretty critical point to understand: immediately following World War II, the US was at the peak of its power. Every other developed nation on earth had been devastated by the war. Farms and factories had been destroyed. Chaos and hunger were rampant. Entire governments had been toppled.

Yet even with such a tremendous power imbalance (i.e. the US was in pristine condition compared to Europe), allied nations still weren’t willing to go all-in on the US dollar. And they demanded the gold convertibility as a guarantee.

That was 80 years ago. And it’s safe to say that the US is nowhere near the peak of its geopolitical power anymore. Adversary nations are everywhere, and the US government’s finances are an embarrassing catastrophe.

When I see central banks buying up gold at record high prices, this suggests to me that they are preparing for a new global financial system-- one that is based on gold instead of the US dollar.

After all, this is the most logical scenario.

It would be naive (and deliberately ignorant of history) to believe that the dollar will go on indefinitely as the world’s dominant reserve currency, given the pitiful trend of US government finances. Even the IMF has called for a reset in the global financial system.

It’s also hard to believe that any new financial system would be centered on a Chinese currency; no one trusts the CCP, nor should they.

Gold is the most viable option to replace the dollar as the global reserve currency because it doesn’t require any convincing. Governments and central banks all over the world already own gold, just as they have for thousands of years.

And it’s a lot easier for everyone to have confidence in an asset class that no single nation controls.

Given the trend of their large-scale gold purchases, it appears that foreign governments and central banks may be preparing for this potential new financial system.

I’ve argued before that a gold-based financial system could send prices beyond $10,000 or more.

So, yes, even though gold is near a record high, it’s important to remember that individual investors are selling at a time when central banks are gobbling it up even more quickly.

And it’s possible they’re buying for a very deliberate reason.

To your freedom,   James Hickman  Co-Founder, Schiff Sovereign LLC

Even The FDIC Doesn’t Want To Pay Its Tax Bill…

Even The FDIC Doesn’t Want To Pay Its Tax Bill…

Hotes From the Field By Simon Black/James Hickman February 28, 2024

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

Almost one year ago to the day-- on February 24, 2023-- Silicon Valley Bank released its 2022 annual report. And senior executives must have been pretty nervous since the report showed that the bank was nearly insolvent.

The bank had acquired a massive portfolio of more than $100 billion of US government bonds-- supposedly the ‘safest’ asset class in the world-- during 2020 and 2021 back when interest rates were at historic lows.

But then the Fed started hiking rates very quickly in 2022. And higher rates cause bond prices to fall-- even the ‘safest’ ones like US Treasury bonds.

By the end of 2022, Silicon Valley Bank’s portfolio of US government bonds was down by more than $15 billion. And with barely $16 billion in total capital, Silicon Valley Bank was nearly wiped out.

Their 2022 annual report communicated this insolvency risk very clearly. And the bank’s leadership must have probably been expecting the stock to crash almost immediately.

And yet it didn’t. After the annual report was released and all the ‘experts’ on Wall Street had a chance to see the alarming data, Silicon Valley Bank’s stock price barely budged.

Then, just ten days later, the Chairman of the Federal Reserve testified to Congress that the Fed’s rapid interest rate hikes presented absolutely zero risk to the financial system:

“Nothing about the data suggests to me that we’ve [raised rates] too much. . .” he said.

Of course, the Fed’s rapid interest rate hikes were precisely the reason why Silicon Valley Bank’s bond portfolio had lost so much value.

But again, neither Wall Street nor the Fed (which, as a financial regulator, had unfettered access to Silicon Valley Bank’s real-time financial condition) thought there was any risk whatsoever.

We know what happened next, and Silicon Valley Bank collapsed within a week.

But there’s now a new, and even more bizarre chapter to the story.

Typically, when banks in the US fail, one of the federal banking regulators (usually the FDIC, or Federal Deposit Insurance Corporation) steps in to take over. 

And that’s what happened with Silicon Valley Bank: the FDIC took over operations almost immediately to try and sort out the mess.

Bank restructurings, however, are almost always chaotic. They take time. The FDIC must liquidate assets in an orderly manner to maximize the value of the balance sheet, then prioritize claims against those assets.

Depositors obviously need to be paid. Creditors and lenders want their money too. And so, of course, does the government.

It turns out that Silicon Valley Bank also owed a tax bill to the IRS… $1.45 billion to be exact.

And since the FDIC became the legally responsible party of Silicon Valley Bank, the IRS went knocking on the door of its fellow government agency to ask for the money.

The FDIC refused.

In fact, according to the FDIC, they owe absolutely zero tax and will pay nothing.

Hilarious, right? This is literally government agency versus government agency in a dispute over taxes. And they can’t even settle the matter like grown adults, so the case is now going to federal court.

This raises an obvious point: if even a government agency like the FDIC is going out of its way to minimize its tax bill, then why shouldn’t everyone else?

There are way too many hard-core Marxists in the United States these days who insist on higher taxes, new taxes, punitive taxes. Activist groups like Pro Publica have published the illegally acquired tax returns of wealthy Americans in an effort to shame people… as if following the tax code and taking completely legitimate steps to reduce what you owe is some mortal sin.

But this case between the FDIC and IRS only proves the point made by Judge ‘Learned’ Hand decades ago, that “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury.”

Taking legal steps to reduce your taxes is completely sensible. And frankly tax reduction isn’t even part of a Plan B; it should be Plan A!

Fortunately, there are plenty of ways to do this. In 2024, for example, you can reduce your taxable income by $23,000 (or $27,000 if you're 50 or older), through pre-tax contributions to a Traditional 401(k).

For those who are self-employed or have a side business, a solo 401(k) allows an even greater tax-free contribution of up to $69,000 (and $76,500 for those aged 50 or older).

Plus, you have more freedom to invest your money as you see fit-- real estate, crypto, and more.

And while you do eventually have to pay taxes when you withdraw the funds in retirement, most retirees will be in a lower tax bracket at that point. Plus, your investments will have grown and compounded tax-free for that entire time.

If you’re willing to move across state lines, you can reduce or eliminate state and local taxes. If you are willing and able to move abroad, you can potentially eliminate federal taxes as well.

For US citizens living abroad, the Foreign Earned Income Exclusion (FEIE) allows you to earn up to $126,500 as an individual, or $253,000 as a couple, tax-free (though this does not include investment income).

Plus, you can exclude even more as a housing expense, which varies depending on where you live overseas.

And for people who move to Puerto Rico, as both myself and my partner Peter Schiff did, tax rates go down to 0% on capital gains, and just 4% on business income.

To your freedom,   James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/even-the-fdic-doesnt-want-to-pay-its-tax-bill-150216/

Even Warren Buffett’s Legendary Optimism Is Fading

Even Warren Buffett’s Legendary Optimism Is Fading..

Notes From the Field By Simon Black/James Hickman February 26, 2024

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

Early in the spring of 1956, only weeks after Elvis Presley released his debut studio album, and actress Norma Jean Mortenson had her name legally changed to Marilyn Monroe, a budding 25-year-old businessman from the American Midwest fatefully registered his first-ever company.

His name, of course, was Warren Buffett. And the company he founded was called Buffett Associates-- which was formed with $105,000 of capital from his friends and family.

The US economy at the time was absolutely booming. Interest rates in 1956 were at historic lows. Inflation was practically zero. Economic growth was a dizzying 7%. Productivity growth was strong.

The US was no longer at war. And the national debt-- which had reached a peak of 120% of GDP in the 1940s due to the costs of World War II-- had been cut in half… and was falling further each year.

America was proudly capitalist, and the government actually made sound and effective investments, like the US federal highway system. Businesses reaped the benefits: corporate earnings across the S&P 500 index soared.

Yet, at the time when Buffett formed his business in 1956, stocks were still cheap… trading at less than 12x earnings (versus nearly 30x today).

It’s hard to imagine better economic or market conditions: a high growth, capitalist economy with low inflation, low debt, high productivity, and cheap stocks? Buffett could have hardly picked a better time to get started.

And, although there were plenty of ups and downs along the way, those pristine conditions lasted throughout the first several decades of his career.

Buffett is obviously one of the most talented investors to have ever lived, and he surrounded himself with other incredibly talented people.

But (and he would probably be the first to admit) his success would not have been as great without the power and dynamism of the US economy behind him.

And this is why Warren Buffett has long been one of America’s biggest economic cheerleaders.

Over the past 15+ years, Buffett has had an insider’s view of some very concerning trends. The US national debt has been rising out of control. The Federal Reserve has made a mess of the dollar. Woke fanatics have hijacked capitalism.

Yet through it all, Buffett has maintained a calm, persistent optimism in America; he routinely dismisses concerns over the debt, or the dollar, or the future of the US economy, and has seemed to believe that nothing could ever derail American progress.

But as I read through his annual letter this past weekend, it seems that even Buffett’s legendary optimism is starting to crack.

First, it’s clear that even Buffett thinks that government regulation has gone way too far.

Buffett explains, for example, that utility companies were “once regarded as among the most stable industries in America” because of their consistent profitability.

Yet he laments that the utility companies he acquired were a “severe earnings disappointment” in 2023 due to over-regulation from fanatical politicians.

Buffet complains that “the regulatory climate in a few states has raised the specter of zero profitability or even bankruptcy (an actual outcome at California’s largest utility and a current threat in Hawaii).”

“In such jurisdictions,” he writes, “it is difficult to project both earnings and asset values in what was once regarded as among the most stable industries in America.”

In the end, he tells shareholders that he “did not anticipate or even consider the adverse developments in regulatory [changes] and . . . made a costly mistake in not doing so.”

He goes on to talk about America’s dilapidated infrastructure, which is in critical need of maintenance and reinvestment. And Buffett cites the case of BNSF Railway (the largest freight rail in the US) which he acquired in 2009.

BNSF, he explains, has had to spend tens of billions of dollars to fix up its rail network “simply [to] maintain its present level of business. This reality is bad for owners. . .”

But it’s not just BNSF. And it’s not just railways. Almost ALL infrastructure in the US is in serious need of repair.

Obviously, the US government made a halfhearted attempted to address infrastructure challenges when it passed a $1 trillion investment package in 2021. But “the consequent capital expenditure” that’s truly required to fix it, Buffett writes, “will be staggering.”

One final point worth mentioning is Buffett’s comments on size. Again, when he started his first partnership in 1956, he only had $105k to invest, and he could move nimbly in and out of the market.

Today, Buffett’s company has almost $170 billion in cash, which is virtually impossible to manage efficiently. He writes that it’s “like turning a battleship”, and that the days of being quick and nimble “are long behind us; size did us in...”

Buffett, of course, is talking about his own company (Berkshire Hathaway). But the same could just as easily be said for the US government.

Think about it-- if someone of Buffett’s extraordinary talent admits that he cannot efficiently deploy $170 billion, how are Joe Biden or Transportation Secretary Pete Buttigieg supposed to be able to invest that $1 trillion infrastructure money?

Quite poorly, I’d imagine.

Buffett does acknowledge that “America has been a terrific country for investors.” And he’s absolutely right. It still is, for the most part.

Nvidia is an easy example: it simply would not have been able to achieve the same level of success had it been based in most other countries. If Nvidia were a Chinese company, for example, it would have been taken over by the CCP long ago, and CEO Jensen Huang would have probably been disappeared.

But one of the most important caveats of investing applies to the US economy as well: “past performance does not guarantee future results.”

Warren Buffett enjoyed some of the most pristine economic conditions imaginable for the vast majority of his nearly 70-year career. And as I have written several times, it is absolutely possible that America’s best days are still ahead.

There is clearly a future scenario in which small-scale nuclear reactors generate clean, low-carbon, ultra-cheap energy which powers highly productive AI and robotic automation. Economic growth is off the charts, and tax revenue soars as a result. The national debt eventually melts away, and the US re-establishes its primacy by out-producing and out-innovating the competition.

But at the moment there are serious issues to contend with.

US productivity is anemic. So is economic growth. War, inflation, cyberattacks, border crisis, social conflict, the rise of adversary nations, decline of the US dollar’s dominance, etc. are all pervasive challenges.

(Not to mention potential near-term consequences-- like the impact of Russia, China, North Korea, and terrorist groups sending so many of their operatives across the southern border.)

The government not only isn’t fixing these problems, but they seem to be making them worse by the day.  So, it’s important to take notice when even someone as optimistic as Buffett starts complaining.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/even-warren-buffetts-legendary-optimism-is-fading-150201/

It’s Not A Prediction. It’s Arithmetic.

It’s Not A Prediction. It’s Arithmetic. 

Notes From the Field BY Simon Black (James Hickman)  February 7, 2024

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

Thousands of years ago during the late Bronze Age-- most likely between 1100 and 1200 BC, two ancient civilizations were exhausted after nearly a decade of warfare.

On one side was the ancient Achaean peoples led by the Mycenaean king Agamemnon. On the other was a legendary Hittite city that had already been in existence for more than 2,000 years.

Back then the city was called Wilusa. Today we know it as Troy.

The general consensus among historians today is that, most likely, the war did take place. But it obviously lacked the drama and intrigue of Homer’s epic tale, the Iliad.

We all know the story: after nine grueling years of war, Odysseus hatched a plan to sneak through the impenetrable gates of Troy. Guided by Athena, the goddess of wisdom and warfare, the Greeks built a hollow statue of a horse and hid their soldiers inside.

The horse was left as a gift for the Trojans with an inscription of goodwill and peace. And, according to Homer’s legend, the Trojans took the bait.

But there were a few people who predicted severe consequences, including a Trojan priest named Laocoon, who famously warned, “Timeo Danaos et dona ferentes.”

Translation: “Beware of Greeks bearing gifts.”

This was a time in human history in which oracles and prophets were a normal part of life. People in the ancient world regularly sought counsel from ‘seers’ who claimed to have some special power to predict the future.

And frankly this addiction to prophesy lasted for thousands of years. Even famous historical leaders into the 19th and 20th centuries like Napoleon, Joseph Stalin, and Adolf Hitler reportedly took advice from fortune tellers and astrologers.

But if we really analyze Laocoon’s legendary warning about the Trojan Horse, he wasn’t making a prediction about the future. He was just looking at obvious facts and exercising good judgment and common sense.

That’s what good ‘predictions’ are anyhow. No one has a crystal ball to see the future like some prophetic oracle from ancient mythology.

And I wanted to be clear about this point… because when we write about future financial consequences, like a debt crisis down the road, or the US dollar losing its reserve status, etc., we’re not making ‘predictions’.

Rather, we’re looking at obvious facts and trends, then exercising good judgment and common sense. And the facts are very clear.

We don’t peer into a crystal ball when we say that the US national debt is set to increase by $20 trillion over the next decade. This is publicly available information pulled directly from the Congressional Budget Office’s own forecast.

It’s not some magical prophesy when we say that Social Security’s trust funds will run out of money in a decade. This information comes directly from the official report of the Social Security Board of Trustees.

Nor are we exercising any special powers when we say that the Federal Reserve is completely insolvent. We’re just looking at the Fed’s own quarterly financial statements which show an unbelievable $1.3 TRILLION in unrealized losses.

You get the idea. There’s nothing mystical about the ‘predictions’ we’re making; we’re simply citing official reports and connecting the dots that almost everyone in the ‘expert class’ chooses to ignore.

Sure, we think that an insolvent Federal Reserve, plus $20 trillion in new debt, plus Social Security’s bankruptcy, will probably have consequences. But we’re also careful to acknowledge where we might be wrong.

I’ve written several times that the US government still has a very narrow window of opportunity to get its house in order. Sadly, they are not taking advantage of that window.

It’s also possible that an AI-led economic boom could dramatically increase productivity and tax revenue in the US, similar to the Internet boom in the 1990s.

But given that there are so many prominent figures in both government and within the AI community itself, trying to restrain AI’s growth, I’m skeptical that an economic boom will happen in time to forestall the most severe consequences of America’s gargantuan debt.

This is why we feel that our analysis is on very solid ground. And that leads me to solutions.

There’s an old Danish proverb (frequently mis-attributed to Mark Twain) which translates as “Predictions are hard. Especially about the future.”

But sometimes they’re not. Or better yet, I’d say that predictions are hard… except when you’re not actually making predictions.

Again, we’re looking at clear and obvious facts.

Social Security, for example, states that the program will “become depleted and unable to pay scheduled benefits” within 10-12 years. That’s not a ‘prediction’. That’s arithmetic.

For rational, thinking people, however, this should not be a cause for panic. Instead, it should be a reason to take action and solve the problem on an individual basis… rather than wait for Inspired Idiots in the government to fix it.

And there are plenty of options. Setting up a more robust retirement structure like a solo 401(k), for instance, allows you to contribute a lot more money for retirement, plus it provides a wider range of investment options like real estate, crypto, and more.

And even if the Inspired Idiots miraculously come together to solve the Social Security problem, you won’t be worse off for having set aside more money for retirement.

Ditto for other risks we discuss.

Real assets, for example, generally tend to perform very well during inflationary periods. Yet many real asset producers are currently trading at historic lows.

There are highly profitable, debt-free, dividend-paying companies out there whose share prices are extremely cheap. And if the future inflation scenario we’ve outlined takes hold, those types of companies typically experience extreme gains.

But if we turn out to be wrong, it’s hard to imagine being worse off buying shares of a successful, dividend-paying business at historic lows.

This is a great way to think about a Plan B: consider solutions that make sense regardless of what happens (or doesn’t happen) next.

To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

https://www.schiffsovereign.com/trends/its-not-a-prediction-its-arithmetic-150109/

The Fed Asks America To Fill In The Blanks _______

The Fed Asks America To Fill In The Blanks _______

Notes From The Field By Simon Black (James Hickman)  February 5, 2024 

It’s interesting to see how so many mainstream voices are starting to express concern about the gargantuan size of the US national debt.

For most of the past decade, even as the debt spiraled out of control and passed $20 trillion, $25 trillion, $30 trillion, etc., hardly anyone in the media said a word about it. If anything, they would insist that the ‘debt doesn’t matter.’

That tune is finally starting to change. And the latest example came last night when 60 Minutes interviewed the Chairman of the Federal Reserve, Jerome Powell.

The US national debt now stands at more than $34 trillion. It will surpass $35 trillion by the summer and likely $36 trillion by the end of the year.

It’s growing so quickly that the interviewer asked about the debt, “Thirty years from now, it is projected to be $144 trillion. . . [I]s the national debt a danger to the economy in your view? I have the sense this worries you very much.”

The answer to almost any sentient human being, of course, is “absolutely yes.” And the Fed Chairman admitted as such. Sort of. He said:

“In the long run, the US is on an unsustainable fiscal path. . . Over the long run, of course it does [worry me very much] . . . It’s time for us to get back to putting a priority on fiscal sustainability. And sooner is better than later.”

Now a term like “the long run” is a funny thing because it can mean just about anything. To some people in finance and economics, “the long run” can mean five years. To others, fifty years.

Saying “the long run” is like asking your audience to fill in the blanks with whatever timeframe they think that means.

But this is intellectually dishonest… and it frankly makes the country worse off.

We’ve written about this extensively here at Schiff Sovereign: the US government’s own internal projections (which come from the White House and the Congressional Budget Office) forecast that the debt will increase by $20 trillion over the next decade.

And this is a true crisis in the making.

Consider that, by 2033, the government will have to spend 100% of federal tax revenue simply to pay for THREE things: Social Security, Medicare, and Interest on the Debt.

EVERYTHING else in government, including military spending, veterans’ benefits, and the electricity bill at the White House, will have to be funded with more debt… which only makes the problem worse.

This will be a fiscal black hole from which there is no escape. And it’s less than 10 years away.

We’re not being sensationalist or dramatic here; this is a simple arithmetic problem based on the government’s own projections. And frankly those projections are optimistic.

Their estimate for $20 trillion in new debt, for example, does not include any money for Social Security, which will require a multi-trillion-dollar bailout over the next decade. Their estimate also assumes there will be no war, no new pandemic, no national emergency, and no new idiotic, expensive legislation.

So, a more conservative estimate of the national debt is probably closer to $60 trillion or more by 2033. This means that interest payments on the national debt will take a greater and greater share of tax revenue.

The Congressional Budget Office forecasts admit this, stating that as the national debt increases, “the cost of financing the nation’s debt grows, [and] net outlays for interest increase substantially. . .”

The US government’s interest expense “rose by 35% last year, [and] are projected to increase by 35% again this year.”

No institution, not even the US government, can possibly expect to stay solvent when their interest expense grows by large double digits each year.

Now, it’s not like this is top secret information. The Congressional Budget Office posts this forecast on its website for the entire world to see. Surely the Fed has access to the Internet. Surely, they’ve seen these projections.

Yet the way 60 Minutes set up its question-- by referencing the debt 30 years into the future-- to how the Fed Chairman kept saying “the long run” and “sooner is better than later”, all gives people a false sense of security that the US has more time to resolve this crisis than it actually does.

This is an arithmetic problem, plain and simple. And the realistic window of opportunity to solve it is 5-7 years, at most.

The other disingenuous part about the Chairman’s comments was that, in addition to using terms like “the long run”, he encouraged “fiscal sustainability” without mentioning any specifics.

To some, “fiscal sustainability” might mean slashing welfare programs. To others, raising taxes on corporations and wealthy people.

So once again the Fed Chairman tacitly asked the audience to fill in the blanks and imagine for themselves what “fiscal sustainability” means.

This is also intellectually dishonest.

Social Security is, by far, the #1 most expensive line item in the federal budget. It dwarfs even Defense spending.

So, there is no “fiscal sustainability” at this point without making major cuts to Social Security. Nothing else-- no other budget cuts-- will matter unless there is a complete overhaul of retirement benefits and qualifications. It’s the only real lever the government has to balance the budget.

Ultimately this means defaulting on decades of promises that the US government has made to people currently in the work force.

Naturally no one wants to talk about this… including the Fed Chairman. So again, it’s left to the audience’s imagination to fill in the blanks.

Personally, I’m not holding my breath a solid majority in Congress will have the willingness and courage to cut entitlements. And frankly I presume the Inspired Idiots in charge will keep making things worse.

But the good news is that there is still a reasonable window for any independent-minded individual to take completely rational steps to reduce the consequences of what lies ahead.

And we’ll continue to talk about more of these solutions in the future.

To your freedom,   James Hickman  Co-Founder, Schiff Sovereign LLC

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

https://www.schiffsovereign.com/trends/the-fed-asks-america-to-fill-in-the-blanks-_______-150091/

Good Reason For a Plan B

Good Reason For a Plan B  SB

This Story From The 3rd Century Will Sound Quite Familiar To You

January 29, 2024  James Hickman / Simon Black

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

When Publius Licinus Valerianus (known as Valerian) became Roman emperor in September of 253 AD, people across the empire must have breathed a sigh of relief.

“Finally,” many Roman citizens probably thought, “There’s an adult in the room.”

The Roman Empire at that point was in the midst of its infamous ‘Crisis of the Third Century’. The Empire was recovering from a nasty pandemic known as the Antonine Plague. Inflation was soaring. Conflict with their enemies-- especially in the Middle East-- was intensifying. Social tensions were growing. Crime was rising. Trade was declining. The economy was on the ropes. Taxes were going up.

 And there had been far too many years of political instability in the Empire prior to Valerian’s ascension.

But Valerian was a guy with decades of experience. He was a longtime Senator, plus he had previously held one of the top positions in Rome’s executive branch. So, people naturally thought he would be the solid leader that Rome needed.

Unfortunately, Valerian turned out to be a complete disaster.

Valerian continued bankrupting the Roman treasury and running sky-high deficits. He zealously demanded ideological conformity and persecuted anyone (most notably Christians) who expressed philosophical or intellectual dissent.

He promoted his son-- a moronic, free-spending playboy-- to a position of high power.

And perhaps most importantly, Valerian was completely incompetent when it came to Rome’s border, and the empire became overrun by barbarians during his rule.

By 260 AD, after seven years of Valerian’s destructive reign, Romans were fed up… especially those who lived near the border.

Fortunately, the emperor traveled East to personally supervise Rome’s war against Persia (modern day Iran), a rising power that had grown more belligerent.

So, with Valerian distracted in Iran, a Roman military officer who was in command of the empire’s key border on the Rhine River decided to take matters into his own hands.

The commander’s name was Postumus. And in 260, he fought back against the barbarian invaders who had been coming across the border for years. In fact Postumus delivered such a decisive blow that the barbarians wouldn’t dare try crossing the Rhine for another ten years.

Finally, someone had taken real action against the migrant threat after years of the Emperor doing nothing. Citizens in the border provinces (modern day France and western Germany) were thrilled.

So thrilled, in fact, that they declared independence from Rome and made Postumus their leader.

Valerian was powerless to stop it. Literally. At that point he had been captured by the Persians and spent the rest of his life in captivity. True story.

***************************

Obviously, this historical tale probably rings familiar to many readers. Not that we wish for Joe Biden to end up in an Iranian prison like Valerian did. But clearly the guy has a lot to answer for.

Yesterday Iran attacked a US military installation in Jordan, killing three and wounding dozens more American service members. And it’s not a one-time thing. Iran has attacked US military targets over 150 times in the past few months alone.

But the guy with decades of experience has hardly done a thing in response. The fact is that no one on the planet is intimidated by Joe Biden, who is rightfully perceived as a weak, inspired idiot with unimaginably bizarre priorities.

America’s border catastrophe is a perfect example; it’s clear the federal government isn’t doing its job to keep illegals out.

It’s also clear that the surge in migrants at the southern border has caused, at a minimum, massive financial strain in many US cities.

The federal government knows there’s a problem. Yet they do nothing about it. And they waste resources to try to prevent the State of Texas from doing anything about it.

Again-- unimaginably bizarre priorities.

It’s not just the US, either. The United Kingdom has been overrun by hundreds of thousands of pro-Palestine supporters, many of whom chant for “Jihad” and “Hamas” and advocate for Sharia law in the UK.

But the government’s priority seems to be making sure the ‘mostly peaceful’ Islamists aren’t offended by angry Brits who are shocked at what their country has become.

In Canada, police in Quebec have advised residents to NOT post camera footage of thieves stealing packages from their front porches… because we have to respect the criminals’ privacy.

Another city in Ontario allowed a 50-year-old man (who identifies as a 15-year old girl) to compete in a girl’s swim meet, with concerned parents shielding their daughters in the locker room.

These developments aren’t accidents. They don’t just spontaneously occur.

They are the deliberate result of the inspired idiots in charge who think their nation’s priority should be criminals’ privacy. Or the well-being of illegal migrants. Or 50-year men who think they’re teenage girls. Or not offending angry Islamists.

*****************************

YOU are NOT their priority. And you never will be.

They view you as nothing more than a financial dairy cow to be milked in order to pay for their idiotic ideas. And if you question them, you get labeled as “anti-science” or “xenophobic” or some such nonsense.

I spend a lot of time writing about the economic consequences of this ‘Rule by Inspired Idiots’ (which is the dominant political system in the West, whether it’s Joe Biden or Justin Trudeau).

And the economic consequences are-a-plenty.

In the US alone, the BASELINE government forecast over the next 10-years is an additional $20 trillion in NEW debt; and I’ve written that this will likely lead to major inflation, loss of reserve status for the dollar, and other major catastrophes.

But the social consequences of Inspired Idiots are equally great and cannot be ignored.

This is why it’s critical to understand that a Plan B is more than just protecting one’s savings and investments.

It’s about taking completely rational steps to reduce social and safety risks as well.

I’m not a pessimistic person. Quite the contrary, I’m wildly optimistic about the future and opportunities to come.

But I also recognize that Rule by Inspired Idiots presents vast and growing social risks that could become much worse over the next several years.

We’ll talk about some ideas for how to get started soon.

James Hickman / Simon Black / Sovereign Man

Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/this-story-from-the-3rd-century-will-sound-quite-familiar-to-you-150032/

This is a Blueprint for How the Dollar Goes Kaput SB

This is a Blueprint for How the Dollar Goes Kaput  SB

Notes From The Field By Simon Black  January 19, 2024

That infernal clanging you might have heard outside your bedroom window this morning was the sound of the proverbial can being kicked down the road, yet again.

With no agreement on spending anywhere on the horizon for the current fiscal year, the US Congress passed yesterday a ‘Continuing Resolution’ to keep the government temporarily funded for another six weeks.

This is nothing new; in fact, Congress has passed more than 50 Continuing Resolutions just since 2010, primarily because they almost NEVER manage to figure out the budget prior to the start of the fiscal year on October 1st.

But now there is far greater need to get it right than ever before.

I’ve been writing about this a lot lately, because, frankly, it is a critical issue. Failing to fix the spending problem spells disaster for the United States… and for the US dollar.

I wrote recently how the Congressional Budget Office projects the US government will add $20 trillion to the national debt through 2033.

$20 trillion is an absurd amount of new debt. And there are very few groups and institutions capable of loaning such a vast sum of money.

Social Security, for example, was one of the biggest buyers of US government bonds for several decades. And at this point they own roughly $3 trillion of the national debt.

But Social Security is now bleeding so much money that the program is no longer able to loan the Treasury Department any more money.

Foreigners also used to be highly reliable buyers of US Treasury bonds; even as recently as a few years ago, foreign ownership of US federal debt was more than 33%.

But foreigners are rapidly losing their appetite for US government bonds, and their ownership has plummeted to 22% very quickly.

Now, in many ways it’s good that the US no longer owes so much of its debt to foreigners.

Except that this only leaves one reliable institution remaining to buy up all that new debt: the Federal Reserve.

Remember, the Fed’s unelected Federal Open Market Committee (FOMC) holds periodic closed-door meetings to make decisions about the US money supply.

When they expand the money supply, they give it a very technical sounding name (like “Quantitative Easing”). But ultimately what this means is that they conjure trillions of dollars out of thin air with the click of a button.

It’s actually quite bizarre when you think about it; they make a few entries into an electronic ledger, and, poof, new money exists.

(It’s essentially the electronic version of having a printing press, which is why we often just say that the Fed ‘prints money’.)

The Fed then lends that money to the federal government, and the mechanism for this is buying US Treasury bonds.

Because the Fed has this special ability to print money-- something which no one else is legally allowed to do-- there is realistically no limit to how many bonds they can buy. If the government needs to borrow $20 trillion, the Fed has the capacity to print and lend $20 trillion.

And this is the key issue: when individuals, corporations, or even foreign governments buy US Treasury Bonds, they are buying those bonds with existing money that’s already in the system.

But when the Fed buys US Treasury Bonds, they do it by conjuring new money out of thin air.

And this new money creates more inflation.

This isn’t some wild theory; we all experienced the effects firsthand during the pandemic; the US government spent so much money in 2020 and 2021 that the national debt increased by more than $6 trillion.

The Fed created about $4 trillion of new money to buy the biggest chunk of that debt. And the end result of so much sudden, new money was 9% inflation.

So, if $4 trillion in new money caused 9% inflation, how much inflation will $20 trillion create? No one can predict the effect precisely, but it probably won’t be zero.

Remember, this $20 trillion figure for new debt is the government’s own forecast over the next ten years (and it might be on the low side).

But most of this amount, i.e. $15+ trillion, will accumulate over the next 5-7 years. So this is really the time frame for increased inflation risk… and serious threats to the US dollar.

Because with an explosion in US government debt-- and renewed inflation-- there is a very strong chance that foreigners will finally demand a change.

The United States and the US dollar have been in command of the global financial system ever since the Bretton Woods Agreement was signed at the end of World War II.

This agreement made the US dollar the world’s dominant reserve currency, forcing every nation, every major bank, every large corporation to hold US dollars for international trade and financial transactions.

The dollar’s reserve status is a very special privilege for the United States. But if the world finally demands a new, de-dollarized system, then foreigners would no longer need to hold US dollar assets-- including US government bonds.

Even though foreign ownership of US debt is already dwindling, losing reserve status would cause that percentage to drop very quickly. And the Fed would need to print even more money to make up for the loss of foreign investors… causing even more inflation.

Now, I’ve written before that, at least for the moment, there are still a handful of ways that the US could navigate out of this mess. But options are narrowing and the window to act is closing.

Watching Congress kick the can down the road yesterday, yet again, rather than make tough decisions or even DISCUSS necessary actions like entitlement reform, etc. does not give me much confidence that they will figure this out.

And if no action is taken, the scenario I outlined above is likely to play out over the next 5-7 years.

Fortunately, this gives every intelligent, independent-thinking individual a healthy window to prepare for what’s coming.

What I wrote above is not the end of the world. I am not predicting doom and gloom. I am, however, making a strong case for an inflationary future.

But there is plenty we can do now to prepare so that future inflation won’t have a significant impact on our lives.

Energy prices, for example, could likely soar. And yet many energy producing companies are remarkably cheap right now. This is a pretty good hedge.

Gold is also worth discussing; even though it’s near an all-time high, there’s a good chance that the future financial system I mentioned earlier becomes based on gold, rather than any single currency.

And if that happens, we could easily see $10,000 gold or more, likely by the end of the decade.

More on that soon.  Simon Black, Founder  Sovereign Man

https://www.sovereignman.com/trends/this-is-a-blueprint-for-how-the-dollar-goes-kaput-148658/