When I first bought Newmont Mining shares in May 2002, it was due to my expectation the dollar was “overvalued” relative to other fiat currencies – and thus, dollar-priced gold (and silver) would rise. By mid-2002, I was all in Precious Metals – where I remained for the ensuing 15 years.
Until the 2008 financial crisis, this was the primary basis of my Precious Metal position. However, as I learned more about fiat currency’s hideously destructive history; and became well-known as a regular contributor to the GATA website; my view expanded to a belief that as all fiat currencies are ultimately destroyed by Central banks, the same would occur again. Only this time, due to the abandonment of the gold standard in 1971, for the first time in history ALL fiat currencies were simultaneously unbacked. Thus, my ever-expanding expectation of a future, catastrophic fiat collapse.
However, it wasn’t until the 2008 crisis when this inevitability turned imminent – as in my view, the system that had been blatantly propped up since the dotcom crash had passed the point of no return…when the debt creation it catalyzed was no longer possible to be repaid; and thus, must be defaulted or hyperinflated away.
That said, what Central banks attempted in the 2008 crisis’ wake was a thousand-fold more dangerous and destructive. Between cutting rates to zero (and below!); QE to Infinity; 24/7 manipulation of ALL financial market; rigging of economic data; and for all intents and purposes, collusion between bankers, politicians and industrialists to steal the world’s wealth; an unprecedented “everything bubble” was created, featuring towering debt vastly larger than anything before it. To wit, the U.S. National Debt was “just” $10 trillion in 2008 - compared to $23.5 trillion today, plus $5 trillion “off balance sheet” debt from the 2009 nationalization of Fannie Mae and Freddie Mac.
Thus, I become increasingly vocal - first in the Precious Metal community; and then Bitcoin, which I started aggressively acquiring in January 2016; that the fiat End Game MUST mathematically arrive. Given the level of market manipulation and fluidity of global political, economic, and financial dynamics, there was no way of knowing WHEN this would occur. However, it was no longer a question of IF.
As usual, the WHY came out of leftfield – as no one could have imagined a global health pandemic in the year 2020 - which, before it has actually done REAL damage, has caused a 2008-style liquidity crisis; and as well, a post 9/11-like shutdown of several major economies.
The difference being, that in 2008, the psychotic desperation measures Central banks deployed were unprecedented; whilst balance sheets were, whilst still ugly, manageable. Today, we are entering this crisis with historic debt levels; interest rates ALREADY at or below zero; and Central banks with little or no credibility – in the U.S.’s case, CLEARLY taking marching orders from the President himself.
Two weeks ago, the Fed blew nearly all its remaining ammunition, in cutting rates 50 basis points to 1.0% - and through numerous, historic “liquidity measures,” launched the equivalent of QE5 without actually calling it that. And what did it accomplish? NOTHING!
So, with Dow futures down again tonight by – gasp, 5% – the Fed went ALL-IN on destroying itself, by cutting rates the final 100 basis points to ZERO, and introducing a new $700 billion buyback program that even they admit is QE5…or, as I have said all along, QE to Infinity – as once it starts, it can NEVER stop.
I’m sure gold will do fine, but thanks to Bitcoin, its days are numbered as the world’s best sound money alternative. This is why Bitcoin was born, and this is why last week’s liquidity crash represents the best buying opportunity, of ANY asset, of ALL TIME!