Some Clear Thinking About America’s “Downgrade”

Some Clear Thinking About America’s “Downgrade”

Notes From the Field By Simon Black Sovereign Man August 7, 2023

Last week, the credit rating agency Fitch downgraded the US national debt.  Predictably, senior officials like Treasury Secretary Janet Yellen claimed Fitch’s “flawed assessment was based on outdated data” and that the downgrade was “entirely unwarranted.”

What a joke.

Just consider the US government’s surging interest payments on the national debt — This Fiscal Year (which ends on September 30) the Treasury Department expects to spend a whopping $897 billion just to pay interest on the national debt. That’s up SEVENTY PERCENT over the past three years. It’s an unbelievable turn for the worst.

The national debt is already more than $32.6 trillion, and it’s climbing rapidly thanks to unrestrained spending.

Fitch called attention to this reality in citing the government’s “high and widening deficits”. And this doesn’t even factor in looming emergencies like the insolvency of Social Security.

The Social Security Administration itself admits that its key trust funds will run out of money within a decade... forcing the government to either default on the promises they’ve made to millions of retirees, or to engage in the largest bailout in the history of the US government.

Also factoring into Fitch’s US economic outlook is the absolute horrific level of governance in America.

Political institutions have lost the ability to cooperate, compromise, and make sensible decisions for the good of the nation.

Obvious risks are ignored until they balloon into major crises... yet politicians only implement a band-aid fix that kicks the can down the road a few more years.

Bizarrely, socialism is becoming more and more popular even though the federal government has an objectively horrible track record when it comes to spending money wisely.

And yet there is a growing contingent among voters that the answer is more government.

Another key issue denting US credibility is the rapidly deteriorating rule of law.

It’s ironic that a former President has been charged with “conspiracy to defraud the United States” by lying in order to disrupt the lawful function of government.

I’m curious why that standard has not been applied uniformly to other government officials.

It wasn’t that long ago when Senator Chuck Schumer disagreed with a Supreme Court decision and announced (rather menacingly) to Justices Gorsuch and Kavanaugh, “You have released the whirlwind and you will pay the price. You won’t know what hit you if you go forward with these awful decisions.”

Schumer’s words helped spark death threats, protests, and the attempted murder of a Supreme Court Justice. Was this not an attempt to disrupt the lawful function of government?

The same can be said of people like Fauci who told multiple lies and censored scientific debate, thus disrupting the lawful function of government during the pandemic.

Then there was Congressman Adam Schiff, who waged Holy War based on the Russian Collusion false narrative.

The investigation was full of lies and was meant to sway a Presidential election. Was this not an attempt to disrupt the lawful function of government?

This list is truly endless. But it shows more and more that the weaponization of government, from the IRS to federal police agencies, makes people less free.

Ironically, however, it’s a great time to be a criminal in America. Or simply ‘illegal’ in any sense of the word.

The immigration system is a mess, and rather than simply fixing it to make legal immigration more efficient, politicians gaslight anyone who thinks it’s a problem to have millions of people flowing across the border unchecked.

Woke prosecutors are downgrading or refusing to prosecute serious crimes; many have implemented ‘catch and release’ bail policies which immediately put criminals back onto the streets.

Yet they do prosecute good Samaritans who step up to protect themselves and others around them.

The level of lawlessness and overall disregard for basic human decency is just astonishing; we’ve all seen the videos of brazen shoplifters in California, or chaotic mobs on the streets in Philadelphia or Chicago.

Just don’t call it a ‘mob’. After several hundred teenage looters stormed downtown Chicago last weekend, the Mayor berated a reporter and said it’s “not inappropriate” to call it a mob, and insisted they should be called “large gatherings”... just like the “mostly peaceful” protests of 2020.

This level of youth crime is not surprising given that 69% of American 8th graders aren’t proficient readers. 73% don’t know math and science.

But who can blame them given how quickly math and science are being rewritten through the lens of diversity and inclusion.

While individual teachers can be amazing human beings, the same cannot be said about the bosses who control major teachers unions. The last thing these bureaucrats seem to care about is educating young people. They’re far more interested in indoctrination.

And this leads to an extremely polarized society which is hilariously ignorant about their fanatical beliefs.

I recently saw a video of a white kid being threatened because he had ‘culturally appropriated’ his dreadlock hairstyle; little did his accusers know that dreadlocks were worn by Bronze Age civilizations in Europe, and not invented by Bob Marley.

But why let truth get in the way of petty anger.

People are enraged, intolerant, and can’t seem to cope. Shootings, road rage incidents, and general violence are on the rise, and there’s very little sense of national unity.

Even a national emergency like the pandemic didn’t unify the nation; in fact, the irrational government response, nonstop propaganda, and politicization of science made people even more divided.

I’ve been writing about these issues since I started Sovereign Man more than 14 years ago. Back then it was ‘fringe’ to talk about Social Security’s insolvency, bank failures, huge debt problems in America, rising social chaos, decline in freedom, etc.

Today it’s all mainstream.

In downgrading US debt, Fitch’s arguments look like they have been taken directly out of these pages, and they’re echoed in publications like the Wall Street Journal.

All the above said, however, I think it’s also important to see all sides and be intellectually objective. Not everything is negative.

For example, the US still has a highly diversified economy with extensive capital markets, tremendous natural resources, and a deep pool of talent.

It’s curious to me that so many “experts” tend to choose one side or the other. There’s a lot of doom and gloom on the Internet, as well as mainstream voices who obsessively chant “USA #1”.

Warren Buffett is one of America’s most famous cheerleaders. Along with Joe Biden and Treasury Secretary Janet Yellen, Buffett seems dismissive of any problems in the US economy.

So which view is correct? Well, both of them.

For centuries, scientists (led by Isaac Newton) believed that light was a special particle of energy. But eventually Newton’s ‘particle’ theory of light was disproven, and scientists concluded that light was actually a wave.

It was’t until the early 20th century that physicists began to accept that light behaves both as a particle and a wave. Albert Einstein summed this up when he said,

“We are faced with a new kind of difficulty. We have two contradictory pictures of reality; separately neither of them fully explains the phenomena of light, but together they do.”

Similarly, there are two contradictory pictures of America. One is that the nation is still strong. The other is that it is in terminal decline. Just like light, they’re both right.

The ‘America strong’ reality is still valid. In fact I would argue that most of the world would still prefer US leadership over Chinese hegemony.

And despite such debilitating economic problems, I’ve written several times before that these challenges are still solvable.

There’s at least one historical instance we’ve talked about in the past of a superpower (Britain in the 1800s) that was able to grow its way out of terrible economic, social, and national defense challenges.

But I wouldn’t want to bet the house on this happening again. And that’s why it makes so much sense to have a Plan B.

Have another place to go. Take steps to reduce your taxes. Safeguard your retirement. Diversify your savings and investments outside of your home currency. Protect your assets. Etc.

That way, whatever happens, you will be able to respond from a position of strength.

To your freedom,  Simon Black, Founder   Sovereign Man

https://www.sovereignman.com/trends/some-clear-thinking-about-americas-downgrade-148001/

Why We Could Easily See $5,000+ Gold

Why We Could Easily See $5,000+ Gold

Notes From the Field  By Simon Black Sovereign Man June 28, 2023

On the 18th of September, in the year 324 AD, 52-year old Constantine the Great finally won the victory that he had been fighting for two decades to achieve: sole control of the Roman Empire.

At that point the Roman Empire had suffered more than a century of extreme turmoil– recession, inflation, invasion, humiliation, and endless civil wars, just to name a few of its challenges.

But after finally vanquishing his remaining political opponents, Constantine was ready to turn the page and institute some much needed reforms. And one of his first orders of business was to restore much-needed confidence in the currency.

Previous emperors had heavily debased Rome’s coinage to almost hilarious levels; the silver content in the denarius coin, for example, had been reduced 98% purity, all the way down to just 5% purity.

Nobody trusted Roman currency anymore. So in order to restore confidence, Constantine turned to gold.

The solidus gold coin had been originally introduced by one of his more notorious predecessors– Diocletian– in the early 300s. But the coin wasn’t really widely used.

Constantine chose the solidus as the gold standard for Roman currency, and he minted large quantities of it for circulation across the empire. More importantly, he standardized the coin at a fixed weight and high level of purity… and this standard remained untouched for centuries.

The value of the solidus was so stable, in fact, that it eventually became used for trade and commerce across the world– from the Mediterranean to the Silk Road.

By the 500s AD, the wide acceptance of the solidus became a source of pride for the Empire, leading one emperor to comment that the solidus was “accepted everywhere from end to end of the earth”, and that the coin was “admired by all men in all kingdoms, because no kingdom has a currency that can be compared to it.”

And he was right. Only the solidus was as widely accepted for international trade… sort of like the US dollar’s status today.

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The solidus certainly had a great run; its dominance lasted for centuries. But ultimately, as the Roman Empire (then known as the Byzantine Empire) decayed, emperors once again began to debase the solidus.

Over a period of about three decades in the mid 11th century, the solidus lost roughly two-thirds of its value.  This was a time in history when there were other rising powers in Europe. And these foreign kingdoms started thinking about alternatives.

Soon wealthy Italian city-states like Venice and Florence began minting their own coins– the ducat and florin. And as these coins quickly gained acceptance for international trade, the Roman solidus was displaced forever.

I’ve consistently argued that the US dollar would likely suffer the same fate as the solidus ever since I started Sovereign Man.

As far back as 2012, for example, I wrote:

History’s lesson is quite simple — when the issuing authority of the world’s reserve currency engages in wanton debasement, the market seeks an alternative. This time is not different, and the dollar will suffer the same fate.

 This will likely happen gradually rather than suddenly; over time, the US government will no longer be able to export the most deleterious effects of its monetary policy to destitute people in developing countries. The negative consequences will remain in the US, once and for all.

 The sensible course of action is to plan for this trend by trading out paper currency for real assets like precious metals and productive land that will hold their value over time.

11 years ago when I wrote that passage, the idea of the dollar losing its reserve status was controversial. In fact, most of what I wrote back then was considered highly controversial; I said that Social Security was in serious trouble, that the US government would eventually be unable to pay its debts, and that America was in serious decline.

Today these ideas are no longer controversial. And the proof is in the news headlines on an almost daily basis.

In particular, the dollar’s potential loss as the dominant global reserve currency is now a mainstream idea that is being openly discussed around the world.

(Naturally the Federal Reserve and US Treasury Department are completely ignoring the risk altogether.)

So what does the future hold? Does loss of reserve status mean that the US dollar will simply vanish?

No, of course not. And at this point I don’t necessarily that the Chinese yuan will become THE dominant reserve currency.

China is obviously a major player in global trade and one of the largest economies in the world. They’re big. They’re powerful. And at this point, they’re able to force many of their trading partners to start using yuan for trade.

Think about it like this: Australia currently exports around $150 billion each year to China. And right now, most of that trade takes place in US dollars… because the US dollar is STILL the world’s primary reserve currency.

This means that the central banks in both China and Australia have to stockpile large amounts of US dollars in order to facilitate this trade. And this is an ENORMOUS benefit for the US economy; the rest of the world is essentially forced to invest in America.

But what if China demands that all trade with Australia now be denominated in yuan, instead of dollars. Australia certainly wouldn’t want to alienate its biggest trading partner, so they might happily agree.

What does this mean in practice? Australia makes its exports to China. Instead of receiving $150 billion US dollars, they receive $150 billion worth of Chinese yuan.

What does Australia do with all that yuan? Well, there aren’t too many options. China has a very closed economy with highly regimented capital controls. You can’t freely move money in and out of China.

Now, Australia does import around $70 billion from China each year. So the easiest option is to pay for those Chinese imports using their new pile of yuan.

But that still leaves around $80 billion worth of yuan left over. And again, since it’s so difficult to invest that money in China, Australia will need to figure out something to do with it.

One solution is that Australia’s central bank could exchange its excess yuan for gold. Gold is a traditional asset that central banks around the world have always held. They can use it to settle debts and trade accounts, or simply keep it as a reserve.

So what does this mean for the gold price? Well, the math is fairly simple. China’s global trade surplus in 2022 was nearly $900 billion.

As China continues to push its trading partners to accept yuan, if even 20% of that trade surplus ends up being exchanged for gold, we could easily see a $5,000 gold price given gold’s current supply and demand fundamentals.

I’ll discuss this much more in future letters, but if you’re thinking about ways to hedge the risk of the US dollar losing some of its dominance as the world’s reserve currency, gold is a good place to start.

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https://www.sovereignman.com/trends/why-we-could-easily-see-5000-gold-147743/

America Has Less Than A Decade To Turn Itself Around

America Has Less Than A Decade To Turn Itself Around

Notes From the Field By Simon Black June 20, 2023

Well, that didn’t take long.

From the time the US government managed to sign the debt ceiling resolution, it took just thirteen days for the national debt to soar by nearly $600 billion.   At that pace, they added over $500,000 to the national debt every second.  The US national debt has now breached $32 trillion… meaning America’s debt-to-GDP ratio is now 121%. Historically, advanced nations tend to get into trouble when debt-to-GDP reaches around 90%. The US is way past that threshold — but I’ll return to that point in a moment.

First, any time there’s a discussion about the national debt, invariably some idiot says something stupid like “the debt doesn’t matter because we owe it to ourselves.”

This is one of these irrational aphorisms (like “silence is violence”) that people like to repeat over and over again until they believe it to be true. But it’s not true. The debt matters. But let’s first examine who owns it:

Foreign governments like China, Japan, and Saudi Arabia hold a combined $7.4 trillion of US debt.

The Federal Reserve owns $5.1 trillion of US debt.

Social Security owns another $2.7 trillion of US debt, which of course is money owed to American retirees. Similarly, the Military Retirement Fund holds about $1.36 trillion.

State and local governments hold about $1.55 trillion combined in US debt.

Mutual funds own another $2.84 trillion.

Banks own trillions worth of the national debt. Banks buy US government bonds with their depositors’ money, i.e., YOUR money.

JP Morgan Chase alone owns about $300 billion worth of US government debt. Silicon Valley Bank famously held about $120 billion of US government debt before they went bust.

Even the Federal Deposit Insurance Corporation, which is supposed to guarantee bank deposits up to $250,000, owns about $128 billion worth of US government debt.

Then there are countless businesses and individuals around the world who own US government debt, simply because Treasury Bonds are considered “risk free”.

Now, when people say that “we owe it to ourselves”, they mean that most of the debt is NOT owed to foreigners. And this is true. Foreigners own just under 25% of the debt.

But does that make it OK to default on the other 75%? Is it somehow acceptable to default on banks across America, which bought US Treasuries with their customers’ money? Is it OK to default on 50+ million Social Security recipients? Or military retirees?

That’s why the “we owe it to ourselves” crowd is completely delusional. They seem to think that it doesn’t matter if the government defaults on, say, the Federal Reserve, or Social Security. But doing so would cause disastrous consequences — global economic meltdown, national social crisis, etc.

So, in order to avoid a major catastrophe, the debt needs to be repaid.

But with the national debt at 121% of GDP, is repaying it even possible anymore?

Technically, yes. And it all comes down to growth.

Back in the 1980s and 1990s, the US economy grew an average of 3.3% per year after adjusting for inflation; economists call this ‘real’ GDP growth.

But real GDP growth since 2000 has been much lower, averaging just 2%. And it turns out that the 1.3% difference in growth has had an enormous impact.

To give you an example, if real US economic growth had remained at 3.3% for the past 20 years, government tax revenue (which averages ~18% of GDP) would have grown substantially.

Along with some very modest spending restraint, budget deficits would have melted away over the past two decades, and America’s debt-to-GDP ratio would today be less than 50%… and falling.

And by 2033, the US national debt would be zero. Social Security would be completely funded. The US would have no financial challenges whatsoever. And the US dollar’s dominance would be sacrosanct.

Economic life today would be a completely different reality… if the US economy had only grown more quickly.

It’s not like an additional 1.3% growth isn’t achievable; again, the US consistently hit this number for decades.

You’d think that politicians would understand something so obvious, and that they’d do everything in their power to maximize growth. They’d embrace capitalism, cut red tape, create incentives for production, support small businesses, make taxes more efficient, etc.

Or at a minimum, they’d simply stay out of the way.

But instead, they do the opposite. They paid people to stay home and not work. They single out critical sectors (like energy companies) and punish them. 

They constantly threaten businesses, invent new regulatory burdens, stifle innovation, and attempt to systematically destroy capitalism, brick-by-brick.

So, no, based on current trajectory, it looks like the debt problem will keep getting worse… until the catastrophes of default are unavoidable.

The federal government has already acknowledged that Social Security’s trust funds will run out of money in about 10 years. This means that, at best, America has less than a decade to turn itself around.

Again, technically this IS possible. But time is running out. And this is why it makes so much sense to have a Plan B.

To your freedom,  Simon Black, Founder   Sovereign Man

https://www.sovereignman.com/trends/america-has-less-than-a-decade-to-turn-itself-around-147721/

The Most Important Companies In The World Are Absurdly Cheap

The Most Important Companies In The World Are Absurdly Cheap

Notes From the Field By Simon Black   June 19, 2023

1866 was not an auspicious year to start a business in the United States.

America had just been devastated from a five year long civil war-- one of the bloodiest conflicts in US history. Plus the country was in the midst of a severe economic recession.

1866 was also the year that a major investment firm in London went bankrupt, triggering a worldwide financial panic. Capital was scarce. Interest rates were high. And overall business conditions were pretty dismal.

But despite such obvious challenges, 36-year old Hiram Bond Everest of Rochester, New York still saw tremendous opportunity in the burgeoning oil sector, and he started a business called Vacuum Oil Company.

Oil was primarily used for lighting in kerosene lamps at the time. But Everest, a former science teacher, conducted extensive experiments with vacuum distillation and discovered a way to produce a special heat-tolerant oil that was incredibly effective as a machine lubricant.

He called it ‘Gargoyle’ as a play on the word ‘oil’, and it took the market by storm.

The Industrial Revolution was still going strong in the 1860s, and businesses were constantly trying to find ways to improve their machinery’s output. But traditional lubricants like vegetable oils and animal fats were prone to smoking and overheating, which often caused machines to jam or break down.

Everest’s breakthrough product solved this problem; ‘Gargoyle’ could operate at very high temperatures and keep even the most complex machine parts running smoothly.

In fact Gargoyle was so effective that inventors were able to design far more advanced engines, including those used in automobiles and airplanes. Even the Wright Brothers relied on Vacuum Oil’s products for their historic first flight.

The company became wildly successful. In fact Vacuum Oil Company still exists today… though after a series of mergers and acquisitions over more than a century, it is now known as ExxonMobil.

No doubt there are countless activists who probably wish that Hiram Bond Everest had been a miserable failure… and that ExxonMobil didn’t exist at all. Big energy companies have long been the target of climate fanatics whose “science” is defined by Greta Thunberg.

Don’t misunderstand me-- I recognize that the climate is changing. It’s obvious. I also want my children to enjoy clean air and clean water, and I’ve invested pretty heavily in projects that benefit the environment.

But I’m also a practical, independent-minded person, and I reject irrational hysteria.

Many leading climate fanatics, for example, refuse to acknowledge the obvious economic and environmental benefits of nuclear power.

Instead their solution is to take away our gas stoves, force feed inefficient energy solutions like wind and solar onto the world, and destroy companies like ExxonMobil which produce conventional energy.

And the climate fanatics almost succeeded.

Two years ago, in fact, a climate activist hedge fund called ‘Engine No. 1’ managed to take over ExxonMobil’s Board of Directors after winning support from key investors. And their primary mission is to turn ExxonMobil green.

This victory opened the floodgates. Suddenly the climate fanatics thought that they were unstoppable and could take over every company in the world.

We’ve seen this attitude everywhere; over the past few years, woke fanatics felt empowered to take over everything-- mainstream media, major corporations, the education system, government, and more.

And frankly it’s been worrisome to see their relentless march.

But, finally, the sane people in the world are starting to say ‘enough is enough’.

We’ve seen entire school boards get voted out, and replaced with rational, non-woke citizens. We’ve seen people push back against idiotic brands like Target and Bud Light who feel the need to thrust social issues in their customers’ faces.

Cable news ratings are laughably low because nobody trusts them and people have tuned them out.

There are even signs of students pushing back against mandatory pride events at their schools; the kids aren’t intolerant, they just don’t want to be subjected to propaganda.

And now finally even investors have had enough.

Akio Toyoda is the Chairman of the Board for Toyota. And last year he committed the most obscene heresy when he defended gasoline engines and said that automakers shouldn’t ONLY produce electric vehicles.

Ever since then he’s been in the climate fanatics’ cross-hairs. And they recently tried to oust him at Toyota’s annual meeting last week.

But the climate fanatics failed miserably. Akio Toyoda won nearly 85% of the vote.

Similarly, a group of fanatical hedge funds also tried to push through a proposal that would require the company to jump through all sorts of silly climate hoops “to reduce risks for the company from climate change.”

But Toyota's shareholders shot this one down too.

This is more proof that rational people are really starting to push back.

It’s not about climate change, or any other social issue for that matter. It’s about rejecting a tiny, hysterical, out of touch elite who thinks they should dictate how the rest of us ought to live.

This trend is still nascent, but it’s growing. And that may make for an interesting opportunity ahead.

Thanks to these woke climate fanatics (plus their friends in government and media), shares of oil and gas companies are at laughably cheap levels.

Bear in mind that energy companies produce one of the world’s most critical resources, so these businesses are essential to the global economy.

Most of them are also highly profitable. Out of 51 large exploration and production companies (with a market cap over $1 billion), 49 of them are profitable.

But because the climate fanatics have made them so unpopular, their valuations are incredibly low, with an average P/E of just 5.8.

By comparison, Coca Cola stock trades at 27x earnings. Nike stock trades at 32x earnings. Even AB In Bev (Bud Light) stock trades at 20x earnings.

In contrast, energy companies are absurdly cheap. But if this trend continues and the climate fanatics keep getting rejected, they might not stay cheap for long.

To your freedom,  Simon Black, Founder  Sovereign Man

https://www.sovereignman.com/investing/the-most-important-companies-in-the-world-are-absurdly-cheap-147712/

Would You Honestly Hire The Federal Reserve To Manage Your Finances?

Would You Honestly Hire The Federal Reserve To Manage Your Finances?

June 12, 2023  By Simon Black Sovereign Man

On August 4, 1964, two US Navy destroyers were conducting intelligence patrols in the Gulf of Tonkin off the coast of Vietnam, when the task force commander grabbed the radio and reported that they were under attack by three North Vietnamese torpedo boats.

The news traveled very quickly all the way to the Pentagon, and Defense Secretary Robert McNamara briefed President Lyndon Johnson on the situation.

They demanded retaliation. And only a few days later, Congress passed the Gulf of Tonkin Resolution… which essentially authorized full blown military conflict in Vietnam.

The only problem, of course, is that the supposed August 4th attack in the Gulf of Tonkin never actually happened.

McNamara himself admitted decades later that the attack was made up, and a declassified report from the National Security Agency showed that there weren’t even any North Vietnamese patrol boats in the area.

Despite the complete fabrication, however, the US went on to engage in a long and costly war. And the man who headed up the effort was a four star general named William Westmoreland, a career officer who had been described by his Pentagon bosses as “the best we have, without question.”

Westmoreland aggressively expanded the war, increasing the number of American troops on the ground by nearly 50x. And he was constantly on TV telling the American public how great the war effort was going and predicted victory by 1967.

At first, everyone believed him. The government still had credibility back then, so few people questioned the commanding general’s assurance that the war was going well.

Westmoreland himself became wildly popular; Time magazine made him the “Man of the Year” in 1965, and his name was even thrown around as a potential candidate for US President.

Little by little, though, it became clear that the war in Vietnam was NOT going as well as Westmoreland had claimed. And in 1968 when the North Vietnamese launched a ferocious assault known as the Tet Offensive, it was obvious that America was losing.

People were shocked; Westmoreland had over 500,000 troops, vastly superior weapons technology, and nearly infinite financial resources at his disposal. And yet he still couldn’t win.

America’s reputation for invincibility was tarnished. The consequences for the US economy were devastating. Social chaos at home was rising-- in large part because of the failed war effort.

And the government’s credibility would never recover… also in large part to Westmoreland’s fabricated claims of success.

You’d think that a guy whose leadership had caused so much damage would have been fired swiftly. But Westmoreland not only kept his job… he was actually PROMOTED to Chief of Staff of the Army.

Sadly this is a common theme in government: failure is rarely punished. It is often rewarded.

The pandemic is a great example. There were so many colossal policy failures at every level of government, resulting in trillions of dollars of debt, supply chain dysfunction, a broken labor market, severe educational losses, a mental health crisis, and much more.

And yet there have been practically zero investigations, zero apologies, zero public inquiries. Most of the key architects of the worst policy ideas got to keep their jobs or retire with distinction on their own terms. Everyone else is still suffering the consequences.

The same can be said for the Federal Reserve and its handling of inflation.

Remember, as America’s central bank, the Federal Reserve was responsible for slashing interest rates to zero and flooding the US economy with a tidal wave of money in 2020 and 2021-- a time when the government was literally paying people to stay home and NOT work.

Even a high school economics student with a basic grasp of supply and demand could have seen inflation coming: when you pay people to NOT work, supply falls. When you give people free money, demand rises. Falling supply and rising demand mean higher prices. Duh.

I was one of the many people who predicted inflation as far back as April 2020.

Yet the Fed completely failed to anticipate it.

Then, when inflation started becoming a problem in early 2021, they failed to even acknowledge it.

Then when they finally acknowledged inflation, they failed to properly diagnose it… and instead labeled it as “transitory” (meaning that it would resolve itself and go away on its own).

Then, even after they stopped pretending that inflation was “transitory”, they failed to take any action to do anything about it while there was still time.

Then, once they finally did take action by aggressively raising interest rates at the fastest pace in decades, they failed to anticipate any negative consequences from doing that.

We’ve discussed before that one of the most important (and immediate) consequences of interest rate hikes is that banks tend to suffer heavy losses on their loan and bond portfolios.

And yet, just THREE DAYS before a wave of bank failures swept across the US financial system a few months ago, the chairman of the Federal Reserve insisted that everything was just fine.

Silicon Valley Bank went bust 72 hours later. And the Fed failed to see it coming.

This is especially problematic given that the Fed is one of the top regulators in the US banking system. One of the Fed’s key roles, in fact, is to supervise and monitor US banks for signs of problems.

Silicon Valley Bank’s problems didn’t pop up overnight; SVB had been reporting its losses to the Fed for several months prior to the bank’s collapse.

Yet the Fed STILL failed to anticipate any problems in the financial system.

It’s been three months since that debacle. US inflation is still way too high.

The underlying problem that caused the bank failures to begin with (major bond losses due to high interest rates) hasn’t gone away. In fact the FDIC recently estimated that banks’ unrealized losses now amount to more than $1 trillion.

Debt levels have gone sky high. The dollar is at serious risk of being replaced as the global reserve currency. And there’s more risk in the US financial system than there’s been in years.

So in short, the Fed failed to anticipate any problems. They haven’t solved any problems. And they’ve managed to create more problems.

But not one of them has been fired. And when the Fed meets tomorrow to decide what do with interest rates, the core leadership team will be largely the same people who have been consistently wrong for the past few years.

Ask yourself a serious question: would you really hire those people to manage your finances? Because if you hold 100% of your savings in US dollars, that’s essentially what you’re doing.

If your answers is “no”, then you may want to strongly consider owning some real assets… and especially gold.

Simon Black, Founder   Sovereign Man 

https://www.sovereignman.com/trends/would-you-honestly-hire-the-federal-reserve-to-manage-your-finances-147678/

National Humiliation Is Just Another Tuesday Afternoon In America

National Humiliation Is Just Another Tuesday Afternoon In America

June 6, 2023  By Simon Black  Sovereign Man

When Sextus Julius Africanus was born in the city of Jerusalem around the year 160 AD, the Roman Empire was still near the peak of its power.  By the time Sextus was born, Antoninus Pius had ruled the empire with a steady hand for more than twenty years; his reign was peaceful and highly effective, and he left behind a strong economy and vast public treasury.

The following year in 161 AD, when Sextus was still just a baby, Marcus Aurelius became emperor and ruled wisely for nineteen years as an assiduous, diligent philosopher king.

Sextus was a young man just starting to make his way in the world when Marcus Aurelius passed away in 180 AD. And this is when things really started to unravel in Rome.

Marcus Aurelius was followed by his complete dirt bag of a son, Commodus (who was probably every bit as evil and insane as he was portrayed in the film Gladiator).

Commodus ruled brutally for twelve years until his assassination in 192 AD, after which several more emperors rose to power and were assassinated within a matter of months.

Finally Septimus Severus rose to power in 193 AD and ruled for 18 years; he nearly bankrupted the empire with his constant warfare and expansion of the state, and he heavily debased the denarius coin from 81.5% silver to 54% silver.

Septimus Severus was succeeded by his son Caracalla, whose first order of business was to murder his brother… and then further debase the currency and bankrupt the treasury.

Caracalla was assassinated after six years and succeeded by Macrinus, who himself was overthrown and executed barely a year after becoming emperor.

Macrinus was succeeded by the sexually tormented adolescent Elagabalus, who is purported to have offered half of the empire to any doctor who could turn him into a woman.

Elagabalus was slain after four years in power, then succeeded by his cousin Severus Alexander. His 13-year reign was marked by a massive border crisis and further debasement of the currency; but most notably, during the reign of Severus Alexander, his imperial troops began running wild outside of the law and began indiscriminately assassinating anyone they wanted.

By the time Severus Alexander himself was assassinated in 235 AD, the young baby boy I told you about in the beginning of this letter-- Sextus Julius Africanus-- was 75 years old.

Sextus was born at the end of the Roman Empire’s period of dominance. And throughout the course of his life, he witnessed and lived through Rome’s gradual-- then sudden-- decline.

As a child and young adult, Sextus lived in a Rome that was powerful and unparalleled, and he enjoyed an incredible era of peace and prosperity.

By the time he entered adulthood, the cracks were already visible. Inflation grew rampant. The economy began stagnating. Multiple pandemics had taken place. The barbarians started flooding across the border. The treasury was depleted. And the imperial government became completely dysfunctional, incapable of even basic administration or responsibility.

Sextus Julius Africanus experienced all of this decline first hand. It must have been exasperating. And frankly, many of us today can probably empathize.

When I started Sovereign Man back in 2009, I had a very clear thesis in mind: the United States (along with the West in general) is in decline.

Back then that was a controversial statement to make. Today it’s painfully obvious.

What’s more, the decline seems to be accelerating, conforming to the mathematic model of logarithmic decay; it’s similar to how Hemingway described going bankrupt in The Sun Also Rises: “gradually, then suddenly.”

And we can see it just about everywhere.

From a fiscal perspective, the US is a complete train wreck. The national debt is about to pass $32 trillion as I write this, equivalent to roughly 122% of GDP-- a record high.

On top of that, though, the government continues to overspend by trillions of dollars each year, making the debt problem even worse. And Social Security’s trust funds are set to run out of money within ten years.

The currency is also in the dumps. The Federal Reserve debased the US dollar as heavily as the Romans debased their own currency, causing rampant inflation.

Plus, between the Fed’s incompetence and the US government’s irresponsible spending, the dollar is on the verge of losing its status as the world’s dominant reserve currency.

Socially we can see the country coming apart as well. Socialism is on the rise. Cancel culture and censorship reign. Sociopolitical divisions are high.

The education system is crumbling… and the teachers’ unions couldn’t possibly care less. Homeless and crime rates are appalling. Public trust levels are at record lows.

Many politicians at the highest levels are either stupid, incompetent, corrupt, dangerously narcissistic, medically unfit, or all of the above. And the most recent debt ceiling fiasco shows their ineptitude to even be able to negotiate a timely solution among themselves. 

Throughout all of this chaos, tensions with Russia, China, and Iran are on the rise… while the US military is being weakened by woke politics, fiscal mismanagement, and terrible leadership.

It seems like every few days there’s another major embarrassment… from a guy who never met a staircase he can’t fall up, to the humiliating withdrawal from Afghanistan, to a major crisis in the US banking system, to ‘mostly peaceful’ protests, to the debt ceiling soap opera.

And every one of these emboldens America’s adversaries.

Many of us are old enough to remember a time when such things were unthinkable, when America’s reputation for strength was unquestionable.

But these days, a major, national humiliation is just another Tuesday afternoon in the Land of the Free.

It’s exasperating. And Sextus Julius Africanus probably felt the same way, shaking his head in disbelief as he lived through the decline.

To be clear, even despite America’s gargantuan challenges, it is still possible to solve these problems and navigate out of this mess. And the basic ideas are quite simple: Capitalism. Productivity. Fiscal restraint. Self-reliance.

But the people in charge don’t seem to have a clue what they’re doing. And this is why it makes so much sense to have a Plan B.

To your freedom,  Simon Black, Founder  Sovereign Man

https://www.sovereignman.com/trends/national-humiliation-is-just-another-tuesday-afternoon-in-america-147644/

America Can't Even Negotiate With Itself Anymore...

America Can't Even Negotiate With Itself Anymore...

Notes From the Field By Simon Black  June 5, 2023

This is really starting to look a lot like ancient Rome

In the late summer of 408 AD, a barbarian army under the command of Alaric, king of the Visigoths, set out on a leisurely march across the Italian countryside towards the city of Rome… so that he could burn it to the ground.

Alaric had been promised money by the Roman government in exchange for a military alliance between Rome and the Visigoths; but just before the money was supposed to have been paid, the Romans canceled the deal.

Talk about a bonehead move.

Alaric was a decorated warrior at the head of a powerful army. And the Western Roman Empire, by comparison, was barely even functional anymore. The government was bankrupt, the currency was a joke, the economy was in the dumps, the military was weak, the borders were nonexistent… and there was no sense of unity in Roman society.

So it clearly made no sense to turn Alaric into an enemy. But then again, the emperor in the west was a weak, incompetent stooge named Honorius, whose legacy is so horrendous that he consistently ranks among the worst emperors in Roman history. And there’s some pretty stiff competition on that list.

Alaric, to his credit, actually tried to avoid conflict with the Romans and work out a resolution. But Honorius refused to negotiate… so Alaric gathered his troops and marched towards Rome.

Now, at that point in history, the city of Rome itself wasn’t even the capital of the western empire anymore; it had been moved to Milan, and then to Ravenna. But Rome was still among the largest and most prominent cities in the world, even in the early fifth century. And Alaric knew that sacking it would send shockwaves across the empire.

Alaric and his barbarian army were practically unopposed on their way to Rome; according to the ancient historian Zosimus, in fact, their march was so leisurely it was as if they were “at some festival” rather than heading to war.

They arrived in the fall of 408 AD and encircled the city, cutting it off from any resupply… meaning it would only be a matter of time before residents all starved to death and the Visigoths plundered the city.

The destruction of Rome was an unthinkable cataclysm. And so, with the barbarians literally at the gates, Honorius finally agreed to negotiate a deal. And it was a costly one-- many times more expensive than their original agreement.

That should have been the end of the story… and yet Honorius found a way to screw it all up again.

Early the following year in 409 AD, Honorius tried to double-cross Alaric by sending troops to ambush the Visigoths. The attack failed, and Alaric was infuriated by this violation of their treaty.

Again, to his credit, Alaric tried to negotiate a peaceful solution, and he asked for lands, titles, and tribute as compensation.

But Honorius-- who at that point was a highly experienced diplomat-- instead sent an insulting letter back to Alaric. Talks quickly broke down, and Alaric turned back towards Rome in late 409.

Once again-- and only after the barbarians were at the gate-- the government finally agreed to Alaric’s demands… and the destruction of Rome was narrowly avoided for a second time.

Yet then Honorius managed to screw it up for the third time in a row.

The following year, in 410 AD, Alaric and Honorius were set to meet near the capital city of Ravenna to discuss peace and cooperation.

But Alaric and his men were ambushed just prior to the meeting by Roman troops. He survived. And, completely fed up with Honorius, Alaric took his troops back to Rome for the third (and final) time in two years.

The Visigoths entered the city on August 24, 410 AD through Rome’s Salarian Gate, about 3 kilometers north of the Colosseum.

Alaric and his men spent three full days sacking the city. Almost everything of value was stolen or destroyed. Cultural treasures were defaced, monuments were ripped down, buildings were burned to the ground, and the city’s residents were killed or enslaved.

It was difficult to not think of this story when news broke about the debt ceiling ‘resolution’ late last week, because the two situations share many parallels.

The sack of Rome in 410 AD was a crisis of their own making. Decades of terrible strategic and financial decisions had reduced Rome to a shell of its former greatness, weakening the western empire considerably. Their enemies noticed.

The United States is in a similar position; decades of terrible decisions have led to a $31+ trillion national debt that grows by leaps and bounds every single year. Through its completely irresponsible addiction to spending, the government has weakened the country considerably… and America’s adversaries have noticed.

In the early 400s, Rome was led by a complete buffoon who, despite all of his years in government service, engineered a crisis by refusing to negotiate or to take an obvious risk seriously… only to ultimately cave and narrowly avoid an earth-shattering catastrophe.

This is a clear similarity to the debt ceiling fiasco that we saw play out over the last few months. The risk was obvious… and yet the guy who shakes hands with thin air refused to negotiate until the last minute, just barely averting disaster.

Waiting until the last minute to just barely avoid a major catastrophe is not a viable problem solving strategy. Neither is kicking the can down the road.

Yet every few years the debt ceiling becomes a major crisis. They consistently wait until the last minute, hastily negotiate a short-term patch, and kick the can down the road for another few years while they take the country even deeper into debt, until the whole cycle begins anew.

The Romans tried to do the same thing with the Visigoths: negotiate a terrible, last minute solution. Make the problem worse. Repeat.

This approach didn’t work in the early 400s, and it won’t work today. As the sack of Rome demonstrated, when you’re constantly taking things to the brink of disaster, eventually someone is going to go too far.

A worldwide financial meltdown triggered by the United States defaulting on its debt was very narrowly avoided. This time. Who’s to say that when this comes up again in 2025 that some idiot politician won’t take things too far?

The really ridiculous thing about the debt ceiling crisis was that it shows the inability of the US government to negotiate responsibly… with itself! This was literally a case of American politicians trying to resolve their differences with other American politicians.

How is this going to work out when the people on the other side of the table aren’t from another US political party… but from the Chinese Communist Party?

It’s worth thinking about given how the specter of conflict continues rising; just over the weekend, a Chinese naval vessel intentionally maneuvered to within 150 meters of US and Canadian ships in the Taiwan Strait. And this was just one of many obvious escalations in recent months.

The last point worth mentioning is that the sack of Rome illustrates how dangerous complacency can be.

When Alaric showed up in 408 AD for the first time, the city’s destruction was avoided. When he showed up the second time in 409 AD, the city’s destruction was avoided again.

So you can probably imagine that when Alaric and his barbarian army were on the way to Rome for the third time in 410 AD, the city’s residents probably felt confident that their leaders would once again figure out a last minute solution.

That misplaced confidence in their incompetent leaders cost Romans dearly.

It’s worth remembering that you don’t have to bet everything you’ve worked to achieve on today’s pitiful leadership; there are plenty of steps you can take to reduce your exposure to the risks that they’ve created (and continue to ignore).

You can, for example, hold a portion of your savings in an alternative asset like gold, which has a 5,000 year history of holding its value, especially in times of crisis.

You can set up more robust structures to help you save for retirement… which makes a lot of sense given the looming insolvency of Social Security’s major trust funds.

And you can even establish legal residency or citizenship in a foreign country, giving you a place to go in the event that you ever need to leave.

Some of these options take time to establish. And you don’t want to make the same historical mistake of waiting until the last minute-- just before a crisis-- to start taking action.

To your freedom,  Simon Black, Founder  Sovereign Man

https://www.sovereignman.com/trends/this-is-really-starting-to-look-a-lot-like-ancient-rome-147625/

America Is Becoming Too Broke To Fight

America Is Becoming Too Broke To Fight

May 2, 2023   Simon Black  Sovereign Man.com

George Washington was already on his heels in late 1777.

The British army had recently taken New York and Philadelphia, plus Washington had suffered recent defeats at the Battles of Brandywine and Germantown.   Washington knew that unless he could regroup, rearm, and retrain his beleaguered forces, the fledgling American Revolution could soon be lost. So on December 19, 1777, his army of 12,000 marched to their winter encampment site in southeastern Pennsylvania-- an area known as Valley Forge.

According to George Washington himself, his men lacked clothing, shoes, food, blankets, etc. giving rise to an almost mythological level of suffering that winter.

And it’s true-- conditions were incredibly harsh. There were very few supplies available, and nearly 1 out of every 5 soldiers died from disease, cold, or starvation at Valley Forge during the winter of 1777-1778.

Washington was exasperated; the situation was so bad that his army barely had any ammunition to fight… and he pleaded with the Continental Congress to provide more funds for war.

But Congress had no more money.

The brand new United States of America, which at that point hadn’t even existed for 18-months, was completely bankrupt. Tax revenue was almost nonexistent. Credit was difficult to obtain. And the national currency-- the Continental Dollar-- was so weak it was practically in hyperinflation.

Washington’s army was simply too broke to fight. And if the situation had remained that way, the British could have probably won the war in 1778.

(Fortunately for the United States, though, France stepped in the following spring with major military and financial support, giving George Washington the resources he needed to win.)

Nearly two and a half centuries later, the US is rapidly heading towards a similar situation: too broke to fight.

Treasury Secretary Janet Yellen announced yesterday that the federal government could become unable to pay its bills as early as June 1st-- just 30 days from now-- if Congress and the President don’t reach a compromise on the debt ceiling.

It’s so shameful that the United States of America-- supposedly the wealthiest and most advanced democratic nation in the world-- finds itself in this position every few years.

On one hand this fiasco demonstrates an appalling level of political dysfunction-- the complete inability of politicians to honestly discuss complex problems, make good faith compromises, and execute sensible solutions.

But more importantly, it lays bare the US government’s perennial lack of fiscal discipline. And this is not a single party issue: the federal government has not run a budget surplus in 25 years, during which time both parties have been in control of Congress and the Presidency.

There’s always some reason, some excuse, to go deeper into debt every year. And that’s why there have been SIX debt ceiling crises or government shutdowns just since 2011. That’s basically one major fiscal emergency every two years.

And every time it gets worse. The US national debt is now $31.5 trillion, which is actually THE statutory debt limit as allowed by law. As soon as they raise the debt ceiling, the national debt will likely soar beyond $32 trillion.

Bear in mind that the size of the entire US economy is only $26.5 trillion. So the “debt-to-GDP” ratio is 120%.

Today’s debt-to-GDP ratio, in fact, is MORE than it was back in the 1940s when the United States borrowed heavily to fight World War II.

At least back then they were fighting the Nazis and had a good reason to rack up mountains of debt. But what does the nation have to show for all of its debt today? Spending trillions to pay people to stay home and NOT work. Abandoning $100 billion worth of military equipment to the Taliban. Spending billions of dollars to make highways less racist.

The level of waste is astonishing. And there’s no end in sight.

The Congressional Budget Office projects that the US will rack up an additional $20 trillion in debt over the next decade, essentially averaging a $2 trillion budget deficit every year for the next 10 years.

But America doesn’t have ten years to get its fiscal house in order.

I’ve written extensively in the past that the US government’s days of reckless spending are numbered… and running short.

Think about it-- what would happen in India if the President was fiddling (or shaking hands with thin air) while their government was 30 days away from defaulting on their national debt? Most likely their bond market could collapse and the currency would plummet.

But in the Land of the Free, there are no consequences… simply because the US dollar is still the world’s reserve currency.

Every other country, government, central bank, and large corporation in the world uses US dollars for international trade-- mostly because of tradition, the perception of American supremacy, and the fact that Saudi Arabia sells oil in US dollars.

But these conditions are rapidly changing. Saudi officials are mulling a deal to accept Chinese yuan for oil. And, with so many humiliating episodes of US government failure, perception of American supremacy around the world is falling.

Several countries, including Brazil, Russia, and China, have already agreed to distance themselves from the dollar, and the anti-dollar momentum continues to build.

As this trend continues and foreign countries reduce their dollar holdings, the US government will simply be unable to go into debt and spend as much money as it wants.

America will then be just like every other country-- forced to live within its means. And that means steep budget cuts… including to military spending.

Bear in mind that critical national defense assets are already becoming worn out or obsolete.

The average US Air Force fighter aircraft is more than 32 years old. And due to budget constraints, pilots are unable to fly a sufficient number of training missions to ensure that they are combat ready.

The US Navy, meanwhile, is a total train wreck. The fleet is shrinking, the ships are old, and the maintenance infrastructure is even older. In short, the Navy doesn’t have the resources to keep its fleet ready for battle.

One notable example is the USS Rushmore, an amphibious warfare ship that was recently scheduled to conduct a training exercise with the 31st Marine Expeditionary Unit.

Now, the 31st Marine Expeditionary Unit is a rapid-response force that’s supposed to be able to deploy on a moment’s notice. And the training exercise was specifically planned to take place in the north Pacific as a sort of flex against China.

But unfortunately the USS Rushmore was so badly in need of repairs that the training exercise had to be canceled at the last minute. The rapid-response force was grounded. China noticed.

These obviously aren’t Valley Forge conditions. But as these trends continue to play out, America may soon find itself too broke to fight.

To your freedom,   Simon Black, Founder   Sovereign Man

https://www.sovereignman.com/trends/america-is-becoming-too-broke-to-fight-147225/

The Dollar’s International Decline Is Becoming Really Obvious

The Dollar’s International Decline Is Becoming Really Obvious

May 15, 2023  By Simon Black  Sovereign Man.com

On the morning of February 23, 1944, US President Franklin Roosevelt sent an important telegram to two of his key allies overseas-- British Prime Minister Winston Churchill, and Joseph Stalin of the Soviet Union.   World War II was still raging. And while the allies had seized the upper hand, peace was more than a year away.

Surprisingly, though, Roosevelt didn’t write to his allies to discuss the war. He was already thinking about what the world would look like AFTER the war was over… and in the telegram, Roosevelt invited them to participate in a conference on “postwar economic collaboration”.

The United States was already the largest and most powerful economy in the world. America was the only major power that hadn’t been devastated by war. And, most importantly, the US was so RICH that they were the world’s primary creditor.

Britain, in fact, was heavily in debt to the United States… and at the time was actually negotiating to borrow even more money. So Churchill couldn’t exactly refuse Roosevelt’s invitation.

44 allied nations ultimately attended what would become known as the Bretton Woods Conference that took place in July 1944. This event famously established a new, post-war monetary system in which the United States and US dollar became the epicenter of global commerce and finance.

What a lot of people don’t know is that a sort of ‘pre-conference’ took place the month before, in June 1944, in Atlantic City.

That site was chosen specifically for its cooler weather. British economist John Maynard Keynes suffered from a terrible infection in his heart valves, and hot weather made him feel much worse.

Keynes even pleaded to senior Treasury official Harry Dexter White, “For God’s sake do not take us to Washington. . .” where the weather was sweltering in the summer.

In the end they settled on Atlantic City, specifically for Keynes’s health. And the first meeting to shape the new global financial system even took place on the beach!

Despite the balmy setting, however, Keynes was a thorn in the side of the American delegation; he was adamantly opposed to a post-war economic system in which the US dollar had total dominance.

As an alternative solution, Keynes advocated for competing reserve currencies… as well as a special central bank reserve currency that he wanted to call the ‘bancor’.

In the end, though, Keynes was overruled. The United States was the only country capable of calling the shots, and the rest of the world accepted America’s new dominance.

It’s been this way for the past 80 years. Even today, the US dollar continues to be used for the the majority of cross border trade, foreign reserves, and international financial transactions.

But as I have written many times before, this status is not written in stone. And it’s beginning to change very rapidly.

One very recent development is that, in China, the yuan just overtook the US dollar as the most widely used currency for international trade.

China has essentially been the manufacturer to the world for decades and does business with nearly every country on the planet.

Yet, up until last month, most of China’s trade was conducted in US dollars. If a Chinese manufacturer sold machinery to a Brazilian company, for example, or if a Chinese producer bought cobalt from Indonesia, those transactions traditionally took place in US dollars.

Over time, however, China has been gradually using its own currency for trade. And other countries have been happy to go along.

So now, for example, China might buy cobalt from Indonesia using yuan instead of US dollars.

This means that other countries will start holding more and more yuan to trade with China… and hence fewer and fewer US dollars.

This is not an accident. Back in 1944, the US was very aggressive in whipping the rest of the world into accepting the US dollar. China is following the same playbook-- aggressively rallying other countries against the US dollar and towards the yuan.

And it’s really becoming obvious.

After a recent visit to China, French President Macron urged Europe to move towards independence from US foreign policy, and to rely less on the US dollar.

France... which is literally America’s oldest ally, one of the largest economies in Europe, and a key leader of the European Union, is pushing against the dollar.

In addition, China and France recently completed their first yuan-settled LNG (liquified natural gas) trade. Again, this shows a shift from France solely using the US dollar for foreign trade, to also using the yuan.

Just before that, China and the United Arab Emirates made history with the first ever LNG trade settled in yuan. Then Brazil and China reached a deal to ditch the US dollar and trade in their own currencies.

Malaysia’s Prime Minister has proposed an “Asian Monetary Fund” to reduce dependence on the US dollar. Malaysia also struck a deal with India to trade in the Indian rupee.

India and Russia are settling oil deals without US dollars.

Then there is “BRICS”— Brazil, Russia, India, China, and South Africa which account for about 40% of the global population and a quarter of the global economy.

At a Bretton Woods-esque summit planned for this summer, BRICS will discuss creating a new currency, potentially pegged to gold, which they can use to trade.

Most importantly, Saudi Arabia is open to breaking the petrodollar and to start selling oil in yuan; on top of this, Saudi’s crown prince recently stated that he was “no longer interested in pleasing the US”.

The pace at which countries are turning away from the US dollar reminds me of the Hemingway line I mentioned recently about going broke: “gradually, then suddenly.”

I’ve been warning readers about the decline of the dollar’s reserve status for over a decade. And it may have seemed controversial back then that the dollar could be dethroned.

Now it is blatantly obvious. This is no longer a prediction, it’s happening in front of our very eyes.

To your freedom,  Simon Black, Founder   Sovereign Man

https://www.sovereignman.com/trends/the-dollars-international-decline-is-becoming-really-obvious-147404/

These People Are Incapable Of Playing The Long Game

These People Are Incapable Of Playing The Long Game

Simon Black   May 10, 2023

On the afternoon of Sunday, June 7, 2020, a 36-year-old Chinese national named Wang Xin was at Los Angeles International Airport waiting to board Air China flight 988 back to his native Tianjin.  Things were tense in the US; Covid-19 was still raging, George Floyd protests were erupting all around the country, and Wang couldn’t wait to get home.

But he never made it. Before boarding his flight, Wang was approached by several men who flashed their badges and identified themselves as US federal agents. Wang was then taken into custody and questioned… and he eventually told the agents the truth.

Wang had already been in the US for 18 months at that point working within the University of California system to conduct cutting-edge genomics research. One of the published papers that he co-authored in late 2019, for example, focused on “TMEM131 family proteins in intracellular collagen assembly”.

Some of his work had even been funded by the National Institutes of Health.

But Wang confessed to federal agents that day that he was actually a People’s Liberation Army officer with the rank of Major, and that he had been ordered by his PLA superiors to “bring back information” about the University of California’s research, laboratory, personnel, and more.

This is all tantamount to industrial espionage. And Wang is far from alone.

At an event I attended this past weekend, I had the chance to spend a lot of time with a former CIA officer who spent more than 20 years working at the agency. As a former intelligence officer myself, he and I had a lot to talk about.

He reminisced about how one of his early assignments at the CIA was to track some Chinese intelligence operatives who were posing as university students in the United States… which is something he said is incredibly common.

Quite often Chinese intelligence operatives spend 6-8 years in school, completing PhDs in difficult “STEM” subjects like electrical engineering of advanced genomics.

But China doesn’t stop at just sending its operatives to American universities. They make sure their people subsequently get hired at prominent US companies, especially in industries like technology, energy, pharmaceuticals, etc.

Yet even then, as my CIA colleague explained, the spy’s value is minimal to the Chinese government. It takes another 15 to 20 years for them to work up the corporate ladder and have access to critical technological secrets.

Only then can the spy provide the Chinese Communist Party with highly prized secrets.

China is essentially willing to patiently invest DECADES of painstaking effort to achieve its intelligence objectives. And that’s pretty normal for the Chinese; their leadership tends to establish clear goals and long-term strategic visions that often look 30+ years into the future. A single decade is nothing for them.

Now, China’s authoritarian government obviously has a mountain of reprehensible flaws, and they have no intention of changing for the better. But one thing’s for sure: they know how to play the long game… and use it to their advantage.

Contrast this with the US government, which at present cannot even plan beyond the next few weeks.

Remember that the legal limit for the national debt was breached on January 19, 2023. And ever since then, the Treasury Department has had to resort to “extraordinary measures” in order to keep the government funded.

Now, it’s utterly pathetic that the federal government of the largest and supposedly ‘most prosperous’ economy in the world has to borrow trillions of dollars each year to make ends meet.

Consider that the Treasury Department collected a record $5 TRILLION in tax revenue last year; as recently as 2019, $5 trillion would have been more than enough to fund the entire government AND STILL run a budget surplus.

And yet, today, even $5 trillion is not enough money. So, the US government still needs to go deeper into debt in order to keep the lights on. Like I said, utterly pathetic.

But what’s worse is their inability to resolve this problem.

The guy who shakes hands with thin air insists that he will not negotiate a single penny of spending cuts in order to reach a compromise with Congress on raising the debt ceiling.

Obviously, it’s silly to think that the federal government shouldn’t cut spending. And it’s downright impossible to argue that there isn’t plenty of fat to trim.

Yet POTUS simply refuses to make a single cut, even though it’s precisely what the country needs.

And we can’t just chalk it up to the guy being senile and demented, either-- this is a criminal level of incompetence, because it is deliberate and reckless.

Maybe he’ll change his tune before it’s too late. But it’s not just the debt ceiling issue. Nor is this short-sightedness a problem that is unique to Joe Biden.

Both Congress and the White House, for example, understand that Social Security’s trust funds are set to run out of money in less than ten years. And yet both sides and both political parties have agreed to take Social Security ‘off the table’. No changes to the program. No discussions. No solutions.

There’s a looming deadline to fix Social Security… and yet they’re happy to just kick the can down the road… just as previous Congresses and administrations have done.

These people are incapable of thinking long-term and solving challenges that are 10+ years out. At the moment they can’t even compromise on the next month’s debt ceiling crisis.

Quite simply they’re unwilling and/or unable to play the long game. And the country is worse off for it. The whole world is worse off for it.

This is why it makes so much sense to have a Plan B-- something which requires long-term thinking.

We just talked about Social Security and how they refuse to do anything about it. But we can easily think long-term and set up the right kind of structure, like a solo 401(k), which provides more flexibility to save money for retirement.

We can also acknowledge the risks of America’s obvious financial and social decline and think about long-term solutions.

One option is to establish legal residency in a foreign country you enjoy visiting, which, over a few years, can lead to a second passport for your entire family. This will give you more freedom and opportunity, and act like a sort of insurance policy if you ever need it.

It takes time to set up, of course. But this isn’t a problem for people who play the long game… and recognize that there’s no downside in being prepared for obvious risks.

To your freedom,  Simon Black, Founder   Sovereign Man

https://www.sovereignman.com/trends/these-people-are-incapable-of-playing-the-long-game-147382/

They’re Taking A Wrecking Ball To The “American Reality”

They’re Taking A Wrecking Ball To The “American Reality”

May 1, 2023  By Simon Black Sovereign Man

Last September-- a bit more than seven months ago-- my father died. Technically he was my step-father, but he was every bit my dad, and I loved him. The loss was hard.  We didn’t do a memorial service right away, though. My mother understandably just wasn’t in the right frame of mind. So we waited… until last weekend, and held the memorial service at the George Bush Presidential Center at Southern Methodist University in Dallas.

It was a good thing my mother booked such a large venue; the memorial service was incredibly well attended, and nearly 500 people came to pay their respects.

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After the service was over, I wanted to get my mind off the day’s events, so some friends and I popped upstairs to check out the Bush presidential museum… which was currently presenting an exhibit aptly named “Freedom Matters”.

I couldn’t agree more.

Access to the museum, however, is tightly controlled. And you can only enter after going through an airport-style security checkpoint. You know the drill-- empty your pockets, take off your clothes, and submit to an angry authority who treats you like you’ve just been booked at the county jail.

My friend Jim was lucky enough to receive extra screening; after setting off the metal detector, he was pulled aside and assumed the “I surrender” pose while gruff security personnel waved a magnetic wand near his genitals.

Curiously the security wand kept going off, prompting the increasingly irate guard to demand “what is this? What’s in here?”

I couldn’t help myself and shouted, “It’s his dignity!” Apparently Jim forgot to remove it before going through security.

The irony seemed to be lost on the guards, whose brusque treatment of museum visitors was taking place directly in front of an exhibit literally called “Freedom Matters”.

At the front of the exhibit was a large banner-- I snapped a photo-- defining freedom, according to a former Soviet dissident:

“Can a person walk into the middle of the town square and express his or her views without fear of arrest, imprisonment, or physical harm? If he can, then that person is living in a free society. If not, it’s a fear society.”

I thought about this quote for a few moments, glanced back at the security guards wanding another unlucky visitor, and quickly realized-- based on this definition-- that the US is quickly becoming a fear society.

You can no longer freely express views without fear of reprisal anymore-- especially if those views conflict with the radical woke left.

Personal opinions can easily be viewed as hate speech, misinformation, violence, etc. And we’ve all seen too many instances of people’s lives being ruined by cancel culture. But I’ll come back to this.

After wandering around the museum for a while and enjoying some jokes with my friends, I finally returned home to the AirBnb I’m renting with my family, very close to where I grew up in the Dallas area.

It’s the quintessential American suburb: clean, quiet, safe, and stable. The house where I’m staying is at the end of a picturesque tree-lined cul-de-sac, and on the other end of the street is a large park where small children were playing organized sports in the afternoon.

Parents chatted with each other on the playground while their kids bounced around the jungle gym. Retirees were out walking their dogs. Even the postman drove by and greeted some of the residents by name. Everyone was happy… and it was basically perfect.

This isn’t the famous ‘American Dream’. It’s not a dream. This is real life as it’s supposed to be… the pinnacle of civilization, the product of more than two centuries of hard work and responsibility. It is the American Reality.

That’s why it’s so frustrating to watch the people in charge dismantle it. Brick by brick, neighborhood by neighborhood, they’ve been chipping away at this vast, enviable middle class prosperity, ripping it away in front of our very eyes.

They’ve encouraged “mostly peaceful” violence and caused an alarming rise in crime as a result of their soft “criminal first” policies.

They’ve sent the cost of living to record highs, and yet have no understanding how their spending practices could have possibly contributed to inflation. They’ve expanded the national debt to a record high $31.5 trillion and plan to keep overspending tax revenue by trillions of dollars every year.

They’ve worked hard to re-engineer childhood education (and have succeeded in many school districts). Biology has been rewritten to conform to new woke ethics. Math is racist. And parents who complain about the decline in educational standards are threatened by the federal government.

The most comical part of this suffering is the abject political dysfunction that’s on display every single day of our lives.

Consider that, amid deadly and toxic train derailments, airplanes around the country that have been grounded, total chaos at the national seaports, Transportation Secretary Pete Buttigieg’s priority right now is ensuring that Ford and General Motors use female crash test dummies.

It’s so ridiculous it almost sounds made up. And yet it’s completely true.

Or consider that the Treasury Department is now weeks away from defaulting on the national debt, once again, having reached its statutory debt limit. Congress is required to pass a law to raise the debt ceiling.

Yet the President of the United States refuses to negotiate a single penny in spending cuts in order to reach a compromise with the House of Representatives. Not a penny.

Simultaneously the guy was shown on video recently unable to remember how many grandchildren he has, or even the fact that he had recently returned from a trip to Ireland.

These examples of extreme incompetence never end. It’s so aggravating. Even terrifying.

That’s why I write so much about taking simple, sensible steps to reclaim control.

For example, if you think Pete Buttigieg is doing a great job as Transportation Secretary, then by all means, please continue to overpay your taxes and give him as much of your money as possible.

If, on the other hand, you recognize that he is demonstrably incompetent, completely unqualified to be Transportation Secretary, and was only given the position because he checks a diversity box (and agreed to endorse candidate Biden in 2020) then you might want to consider the multitude of completely legal ways to reduce your tax bill… and stop giving Pete so much money to waste.

It’s perfectly normal to feel angry or disgusted with America’s terrible leadership. But it’s a lot more effective to channel some of that energy into reducing their impact on your life.

There absolutely are ways to reduce your tax bill, to mitigate the effects of inflation, to still make phenomenal investments, to fund your retirement, and to ensure that you’re in a position of strength no matter how destructive they become.

There’s no downside in doing this. If this decline reverses and America starts to dig its way out of this hole, you won’t be worse off for putting yourself in a stronger position.

And that is actually still a possibility. This country has so much potential upside from its entrepreneurial brilliance, talented workforce, immense resource wealth, and more. That’s why it’s so bewildering to see how badly the people in charge are screwing it up.

At the moment, though, it’s difficult to see any real change on the horizon. As President Biden said in his re-election announcement, he wants to “finish the job”. By that I presume he means completely destroying the country.

This is nothing new; history is full of superpowers who eradicate themselves from within. They lay waste to the very ideals that made them strong and prosperous to begin with, they create divisions and disunity, and they subject themselves to horrendous, weak leadership.

But it’s one thing to understand the decline of empires and civilizations through the lens of history. It’s quite another to watch it happen from your living room window.

To your freedom,  Simon Black, Founder  Sovereign Man

https://www.sovereignman.com/trends/theyre-taking-a-wrecking-ball-to-the-american-reality-147087/