The Great Coming Storm For The US Dollar And Its Impact On Precious Metals
hchcoin
Posts: 4,829 ✭✭✭✭✭
Like many of you, I enjoy reading about financial news trying to use information to help guide my financial decisions. There is some big news regarding next week that I think warrants some discussion.
March 26th is the date that The Shanghai International Energy Exchange is introducing a crude oil futures contract denominated in Chinese yuan. It will allow oil producers to sell their oil for yuan. China knows most oil producers don’t want a large reserve of yuan. So producers will be able to efficiently convert it into physical gold through gold exchanges in Shanghai and Hong Kong. I am seeing a lot of predictions for 2 things to happen because of this. The demand for gold will increase. The demand and value of the U.S. dollar will decrease. This is predicted to be a slow death of the U.S. dollar which could take a decade or more to actually see the true impact.
U.S. President Donald Trump signed a memorandum that could impose tariffs on up to $60 billion of imports from China, prompting China to begin retaliatory measures and could lead to an all out trade war. This led to a decrease in stocks and the U.S. dollar while the price of Gold increased. Gold is seen as a safe place to shift investments in times of uncertainty. Many are predicting the U.S. will see large amounts of inflation which is another strong case for gold. Gold is a traditional hedge against inflation.
U.S. Dollar-denominated bullion is also helped by a weak U.S. dollar and by lower yields on bonds. This makes non-yielding gold more attractive to investors. Gold prices began rising strongly this week after the U.S. Federal Reserve gave guidance on the pace of interest rate rises that was less aggressive than some investors had expected. Higher interest rates push up bond yields and tend to strengthen the dollar, so a slower pace of increases to interest rates is good for gold prices.
So what does everyone think? Is the Petrodollar dead? Will Tariffs be good for gold? Are slower Fed rate increases going to have a long term effect on gold prices? Is the stock market going to have a big correction?
Comments
petrodollar is dead. Remaining dollars are dying.
Tariffs fuel inflation. Inflation fuels PMs.
Slower FED rate increases reveals they are not in control. Lack of faith in central bank is high octane for gold.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Don't worry the sun will still rise in the east.
Trade wars are typically short lived. Almost every President has placed tariffs on goods coming into the US during their term and the sky never fell.
You really think that holding physical gold is what producers want? How good is that? If the Yaun has to trade at a discount to unload I doubt that the Yaun will replace the dollar. We'll see on that.
Let's wait till middle of next week to see how the market reacts. Markets react to all sorts of stuff instantly only to reverse and resume within a few days. Only day traders take advantage of this stuff. And they can be and often are the short term market makers, but it's always short lived.
The Feds raising of interest rates is a must. We need growth and haven't had much for a decade or so. Rising rates is not a bad thing as long as it's controlled. The Feds seem to be doing just that.
I guess I'm on the other side of the fence having seen these scenarios many times in my 7 decades.
bob
I doubt very much that anything drastic will happen to the dollar next week... certainly, a minor tweak is possible...and no doubt, a successful endeavor by China to kill the petrodollar could have a long term effect. However, the U.S. is the leading oil producer once again... so that must also be considered. Cheers, RickO
Is China going to start exporting gold?
Hmmmm, US Dow up 669 today. Half of what was lost last week.
bob
Not until they get their official gold reserves up to 4,000-8,000 tonnes. They are in favor of their people holding gold....at least for now. Between the PBOC and the Chinese people they've accumulated 15,000+ tonnes of gold over the past 15 yrs. For the US people that number might be -5000 tonnes.
China's Hong Kong Gold Exchange shows significant physical gold actually trading hands. That's quite unlike the LBMA and Comex.
Autopilot 401ks still down craptastically ytd despite?
How much is the average 401k down YTD?
Knowledge is the enemy of fear
-3.25% on this guys.
It’s all electronic placeholders, backed by paper certificates held somewhere by anonymous third parties in an extremely-leveraged, debt-based system that’s opaque, rigged, and virtually unaccountable. What could possibly go wrong?
I knew it would happen.
The intelligent within the herd embrace volatility. It is rigged if it didn't correct. If the pie is not a fixed size then what is the top?
Loves me some shiny!
This comment got a like, a disagree and 3 flags. Interesting.
Knowledge is the enemy of fear
It would have received a “spinning head” if that was an option
m
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
"The combination of the Shanghai RMB-Oil-Gold contracts form the most important financial construct in a generation, which will bring sunset to the Petro-Dollar defacto standard." -Dr. Jim Willie
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Haha
Knowledge is the enemy of fear
The US government should be encouraging it's citizens to hold PMs, but that would drive the prices up and expose the fiat money Ponzi scheme. What a mess.
In what way would this "fiat money Ponzi scheme" be exposed?
Knowledge is the enemy of fear
First rule of sound money, intrinsic value.
So gold went from 1900 to 1100, is that sound money? What is the intrinsic value?
Knowledge is the enemy of fear
Then where are the other $800 of gold? Seems like that disappeared, no?
Knowledge is the enemy of fear
About $250 has returned. Sorry I didn't mean to get into an argument. New here and just here to learn. I don't wish to ruffle any feathers. I prefer PM's to paper and will respectfully bow out now. Thanks for your input.
Stack on, enjoy the low prices and let them all be smothered by their paper debt. Can't say you didn't tell them so.
The whole worlds off its rocker, buy Gold™.
Wasnt arguing. Just trying to understand your thoughts.
I guess you were warned.
Knowledge is the enemy of fear
1900 to 1100. . . you must be talking about dollars. Gold did not change; value of what it is priced in changed. And no, sound money is more stable.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
It didnt? Does it now take more ounces to buy the average house, car, share of stock today than in 2011.
A comment was made saying that high gold prices would expose some scheme. I was clearly looking for clarification. What did he mean?
Knowledge is the enemy of fear
I think he means we are jacked.
I can't personally go into detail because every time I attempt to around here I get flagged for abuse by the same group of old Rhinos. lol
I hope that you add some physical metal to your portfolio, even just a small amount. It's insurance if nothing else.
The whole worlds off its rocker, buy Gold™.
I bowed out of this thread, but for clarification I will say that if PM's had a big run up in value that some people may lose faith in unbacked paper money. Perhaps the term Ponzi scheme may have been too harsh, but has there ever been a time that unbacked paper held it's value long term? I think it was first tried by Kubla Khan and it failed. That is all I meant. PMs are not a good short term investment, but I like them as insurance I hope to never need. Now I will bow out of this thread for good.
Down year to date a bunch.......but long term no worries.
bob
To me the paper dollar is backed. It's. Backed by the good faith of the American people and its military. As long as we protect the free world the dollar will be accepted as the currency of choice no matter how much we are in debt. I would like another explanation of how we can be 20 trillion in debt and the dollar is still the world currency?
Anybody cohodave, Bailey, jmski, Derryb
Thanks
Martin
I think what gets lost in these discussions is that no one hold's any fiat for long term. It's always exchanged for some good or service or other asset. So really, what really is the purpose of talking about the demise of fiat? There are many other assets one can invest in, especially productive assets.
If nothing backs the US dollar, what backs gold? People's faith? Really? Think about that.
Martin, eventually debt will be a problem and ALL assets based on the dollar will appreciate in dollar terms...just as all assets have over the last 100 years. Which have done better, assets that generate or produce more dollars, or those that dont?
Knowledge is the enemy of fear
Assets are all cyclical. Stocks were well out of favor from 1930-1939, 1966-1982, 2000-2003, 2008-2011. When stocks and classic 'income' producing assets are out of favor, then other assets like previous metals, collectibles, commodities, etc. could be in favor. I submit that when gold went from $252 to $1923 from 1999-2011, it produced income for those who bought low and sold high (ie capital gains). If you held well thought of mining companies in that same period you could have seen multiples of the 7X gold and 13X silver gains. It's all about relative value and cycles. For someone like me who owned blue chip stocks from 1966 to the early 1980's, that was generally a "dead" period for stocks. 16 yrs is a long time to go sideways while other assets like gold/silver/collectibles/and some commodities were having a renaissance. The next regression to the mean will be severe.
https://en.wikipedia.org/wiki/List_of_countries_by_public_debt
As far as why the USDollar is widely accepted around the world despite a $21 TRILL sovereign debt? It's more than just the military power. It's also the fact that the USA's debt to GDP ratio is not that much different than many other significant economic powers. Look at Japan with over triple the US ratio. And the Yen is often considered a "safe haven" currency. Russia on the other hand with a low 13% ratio, isn't exactly the best currency out there, despite their military power and natural resources.
All of the primary world currencies have associated debt of other problems... they are all ugly. We have the "prettiest ugly currency" and therefore the world tolerates our $20 Trillion and increasing debt.
I am an accountant and financial analyst by trade and I have never understood why countries measure debt as a percentage of GDP. In business, we look at debt to assets or capital to assets as our measure of financial leverage and solvency. The amount of debt the US holds as a percent of its assets is probably very small considering the natural resources, military and nuclear arsenal we have (but these are not liquid assets like gold and silver). That is also another reason a country would want to hold gold, because it is an asset that improves the countries debt/asset ratio and it is very portable, measurable and liquid. That is why a country like China may be hoarding gold. It is a way to prove to the world that it holds liquid assets that can be used to back that countries currency. Why do they call the U.S. dollar a Federal Reserve Note? This implies that every dollar is a note payable of the United States. In the old days, that note could be redeemed for an asset (gold or silver). Once the government realized we were too dumb to realize any better, they did a slight of hand and made the dollar redeemable for nothing but other goods and services. It is only backed by what people perceive its exchange ability for goods and services is worth, not physical assets such as gold and silver held by the government.
China is stockpiling the liquid asset gold to back its currency to create confidence and creating a way for oil producing countries to use that currency instead of the Petro dollar to buy and sell oil. Some analysts think this is the end of U.S. financial domination. You won't notice it overnight, it is a slow process that will take years and maybe decades to happen but the mechanism is now in place for China to finally make its move in the world currency and financial markets.
Do I think they will do it in the short term? No. Is the world going to end or the sun stop coming up in the morning? No. Could it happen to my kids or grand kids generation? You bet your asset!
Its easy to dismiss the argument if it probably won't affect you in your lifetime but the point of the argument is that the possibility of this happening just went up dramatically. In other words, $hit just got real.
The "scheme" refers to the financial tag-team approach that goes on between the federal government and the privately-owned Federal Reserve Banks. There is no value created by the government when it issues US Treasuries, and there is no value created when the privately-owned Fed banks use newly-created imaginary fiat money to purchase the government's debt instruments or when they can lend out, for interest - 10X more imaginary money than the privately-owned Fed banks actually hold on their books. That is the "scheme".
The fact that you or I would be arrested for counterfeiting or fraud if we did exactly the same thing simply means that there are two sets of laws going on - depending on who you are - which is basically unethical and wrong. From the government's perspective, it's all cool because no matter which "party" is in power, the politicians are able to conjure up new money for whatever the heck they want at any given point in time. It's real convenient to have two "parties" because they can switch back & forth often enough to dole out freebies to their dependents/constituents (each party has their own special group of freebie recipients) every other cycle which serves to keep the public's attention off of the nature of the corruption that keeps the system going.
Fiat DOES get held long term - in the form of government debt, and the interest paid on that debt is a drag on the economy in that it competes with the financing of productive enterprises by draining capital away from private businesses in the form of invisible taxes - including both inflation and/or capital destruction from low or negative interest rates.
The fix was in, in 1999 when Glass Steagall was repealed so that the banks could rip off municipalities and pension funds who were scrambling for yield - using highly-leveraged, opaque, multiple-tiered financial derivatives by misrepresenting the risks involved. The entire debt accounting structure managed to spill over into the banking system in 2008, and when FASB decided to re-define bad derivatives as good assets on the books of the insolvent banks - so, the fix was in again. Moral hazard - another way of saying "criminal enterprise". More corruption, and the only winners were the guys who created the bogus instruments in the first place and suffered no personal consequences when the system went down. Google any one of Bill Black's utube videos if you want to know anything about the financial malfeasance that went down and has never been addressed.
How can "we" be 21 $trillion in debt and still be the world's reserve currency? The fact is that nobody else is in position to offer a reliable alternative for world trade, but the movement to do just that is in motion - and the problem for us is that the movement is being undertaken by US adversaries. If regional or bi-directional trade agreements take place that don't involve the dollar - and they are taking place as we speak - the upshot is that the dollar will lose position (and long term value) even if it doesn't fail. These trends would be occurring whether or not the US has it's financial house in order, but running an unaccountable, corrupt fiat system with no accountability is not good policy.
The reason our debt-based system is a problem is because it's clear to every single one of our allies and business partners that if our system goes down, so do they. The difference between now and 1945 is that we are using a totally corrupt financial accounting scheme now. It wasn't quite so corrupt back in 1945, even less so in 1913 - because the debt was more manageable. This development telegraphs a bad message that gives our adversaries fodder to criticize our dealings with the rest of the world. The irony of the situation is that we are no more corrupt or unreliable than any other country's governments, but it's a sad state of affairs either way.
We've benefited for so long in a country that has had such great industry and so many resources that financial malfeasance and waste didn't drag us down, but that has changed. In my opinion, too many productive enterprises have been destroyed by offshoring the work, and too many entrenched systems have been created that encourage waste without liability or personal responsibility. Things do have to change, for the better if the system wants not to be destroyed. I just don't see a way out of the financial and government funding mess that doesn't involve outright default, and that brings on even more serious results. We shall see.
I knew it would happen.
So to bring this all atound, how would high gold price expose some scheme?
Do high equity prices expose some scheme? How about high real estate prices? What is exposed?
The theory of relativity Mr. Einstein didn't know. Allocation people, allocation.
Knowledge is the enemy of fear
There's a storm coming alright, April snow forecast for Tuesday.
I don’t know that a high gold price exposes anything other than it indicates a more widespread recognition of such a scheme and thereby endangers the objectives of the schemers.
High equity prices used to be based on the fundamentals of earnings and growth potential. I haven’t been convinced that this is true since about 2006 or before.
High real estate prices have always been fueled by demand and by low interest rates that make development worthwhile, or not. It seems obvious enough that the Fed, Fannie May, and Freddie Mac all stoked the real estate market in 2006-2008 with as much easy money as it took to foment speculation in real estate while the regulators turned a blind eye to buyer qualification.
Note that the banking system is ALWAYS the initial beneficiary of debt issuance as it gives them more free capital, with zero risk. Then, if the bankers sell a bunch of high-risk, mis-represented tranches to an unsuspecting buyer and the thing self-destructs, they get the rules changed, no longer have to carry it on the books as mark-to-market, and voila’ - balance sheet is “repaired”.
After that, the taxpayer sees another round of deficit- financing by the treasury and shakes his head about prolifigate gov.com spending - wonders where the money all goes, worries about tax increases but can’t do a thing about it.
The scheme is hidden in plain sight but most people don't even know what fiat currency or fractional reserve banking is, so the schemers never get called out, except for when someone like Ron Paul calls them out.
I knew it would happen.
What are high gold prices? Prices relative to other assets? For example, if in 1982 it took 200 ounces of gold to buy the average house (lets say $80k) and in 2025 it takes 200 ounces to buy the average house (500k), are those high gold prices?
What if the price was 1000 then went to 3000 in 5 years, then fell to 1000 again, was anything exposed? What is high? And more importantly, as has always happened in the past, are those high gold prices traded for dollars? Why do folks trade high gold for dollars? Kinda makes you think about what scheme are we really talking about.
Re: real estate prices....check this out. https://www.census.gov/const/uspricemon.pdf Remember those high interest rates in 1980-1982? Look what the average and median house was. Rates went from 10% in mid 1980 to 15% in mid 1981. Golly!!!....house prices went up!!!!
I really do appreciate the thoughts and ideas of many of the forum members, but most times y'all are wrong. I do get the populist mantras and soundbites, but most of the phrases used round here are nothing more than fake news.
The problem with good intention is that it is usually run off the rails by facts.
Knowledge is the enemy of fear
There’s a regression line for any asset, and I would be so bold as to say that, barring some meaningful technological breakthrough - any and all assets follow a regression to the mean over time. If an asset is breaking a long term trend line, going asymtotic when there is no rational explanation, then there is manipulation.
Debt creation, “money” out of thin air - is manipulation by its very nature, in addition to being inequitable on its face. In the real world, when the rate of change in an asymtotic function starts going vertical, the system will blow up and a reversion to the mean will self-correct. This is just as true for debt as it is for real estate, the stock market, gold, or any other asset. That is why you recommend diversification of assets and portfolio rebalancing over time, is it not?
The difference here, is that precious metals have the advantage of being at least one degree further removed from the effects of fiat debt-money that is simply key stroked into existence or the serious counter party risks of non-payment inherent in a debt-based economy. The value of precious metals isn’t measured entirely by the conversion rate to dollars.
Ever play “musical chairs”, cohodk? Not everyone gets to know when the music is going to stop. In the meantime, we all play it the way we see it.
I knew it would happen.
Be ready for the bad times does not mean one cannot enjoy the good times.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Knowledge is the enemy of fear
I like Flags.
It's almost such that I can find out what's happening in the world by checking the price of gold before checking the news.
I almost made a bullion buy yesterday, but I dragged my feet and I'm kinda glad I waited. Still waiting.......don't know why......
I knew it would happen.