Trump Is About To Make Us Gold Bugs Very Wealthy Again

Authored by Adem Tumerkan via Palisade-Research.com


I always ask myself one thing when looking at investments.
 

“Is this fragile, robust, or positioned to be anti-fragile? What’s my risk and reward?”

I use a top down approach to try and forecast longer term probabilities for success or failure. When measuring macro-situations, my analysts and I call this our Macro-Fragility Index (MFI).

And lately it’s buzzing that the U.S. is dangerously fragile. . .

 

Just today, President Trump said in a radio interview that the U.S markets might be in for some “pain” because of the trade war with China.

But afterwards he said that in the long run, America will be better off (said by every protectionist – ever).

We have to do things that other people wouldn’t do. So, we may take a hit, but you know what, ultimately, we’re going to be much stronger for it. . . It’s something we had to do…”

 

But the question is: how much pain can we expect, and from where?

 

After the Trump’s administration slapped trade tariffs targeting $50 billion on imports from China earlier this week – the Chinese fired back.

Less than 48 hours later, China announced a plan to impose 25% tariffs on $50 billion worth of US exports – 106 items like soybeans and chemicals will be affected.

The following day, Trump announced he’s looking at increasing tariffs from $50 billion to $100 billion. . .

Then, Today, China stated they will retaliate tit-for-tat and at any cost, in this trade war.

We can expect Trump will do the same – as he’s already said he’s putting up with short term pain for long term gain. 

So don’t be surprised if he doesn’t say anything to calm markets in the short run. . .

But there was one comment that no one else seems to be picking up on. If you read between the lines of what China said, it really got me worried. . .

China said that they will “firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people. . .”

What are these “new comprehensive countermeasures” that China is talking about?

 

For starters – they started threatening the US Dollar hegemony in the oil markets.

Many who know about the petro-dollar will tell you that this secretive agreement made in the 1970’s between Henry Kissinger and Saudi Arabia is what has secured the dollars reserve currency status.

The gist was that if any country wanted to buy oil from Saudi Arabia – which was then the worlds largest and cheapest oil producer – they would have to convert their local currencies into US Dollars. Otherwise they wouldn’t accept payment.

So if China wanted oil, they couldn’t buy Saudi oil with their Yuan. They would have to convert their Yuan on the Foreign Exchange market into dollars. Then they would be able to buy the oil from Saudi Arabia.

Hence how it got the name petro-dollar.

 

This deal by Kissinger and the Saudi Royal Family has been genius for the US. . .

It allowed the United States to always have constant global demand for their dollars.

And since major countries needed to have dollars on hand to buy oil every-day – they all kept ample dollar reserves.

Oh, and what did Saudi Arabia get out of all this? The U.S.’ assurance that their military will back and protect the Saudi Royal family.

And with the collapse or Iraq, Egypt, Libya, and Syria – we can see how well that has worked for them. 

 

So it’s no surprise that to break free from the U.S. Dollar – China must establish their own oil market and payment system for it.

And this is exactly what they did recently when launching the Petro-Yuan. . .

This isn’t something that happened overnight. China has been quietly working their plan to rollback the United States grip on international trade for years.

But in late March 2018, they finally went through with what many called a “conspiracy theory” and the first ever Yuan-backed crude oil contracts traded on the Shanghai stock exchange.

 

China is the world’s largest oil importing/consuming nation. Gold-backed petro-yuan futures trading began Monday on the Shanghai International Energy Exchange, part of the Shanghai Futures Exchange – letting Chinese and foreign traders buy oil in yuan instead of dollars.

 

In the first day of launching, demand was high.

By removing themselves from the grip of the petro-dollar, China just hedged themselves from any potential sanctions by the U.S. in the oil markets – just like they did to Russia, Iran, and Venezuala.

What other “comprehensive countermeasures” does China have to use against the U.S?

It doesn’t help that China is our largest foreign debt holder – totaling $1.2 Trillion.

This is by far their ‘nuclear’ option.

If China started dumping U.S. debt, that would be a catastrophe – for everyone, including China. 

They know this – so it isn’t something they would do freely. But if they have to, they will.

If that nuclear option does happen, the U.S. Dollar would plummet.

So far over the last 15 months the USD has been in steady decline as economic problems mount. . .

President Trump is piling on massive debts and the U.S. is running huge deficits – this is the time where the Treasury needs someone to buy even more of their debt and bonds.

 

Investors worry that if China purchases fewer Treasuries, the US government would have to find alternative buyers.That could prompt a rise in the rate of interest it pays and increase the cost of serving America’s vast national debt.

 

Imagine if you are investing in a friend’s business. He plans to expand in the short run with much more debt with hopes to jump-start long term growth. But all of a sudden, he gets into a fight with his creditors and the bank who is financing his business.

It’s not a good idea for investors to be putting more money into a business that needs substantially more loans from the very person they’re fighting with. . .

China has that over the United States – it’s the ace up their sleeve.

All these quick-fired exchanges of tariffs and trade war escalations between the world’s two largest economies is unsettling.

Especially that both refuse to back down.

This has made the United States extremely fragile.

As an investor, you need to see these things from afar – have some imagination and independent thinking – and start positioning yourself properly.

The Petro-Yuan didn’t come up overnight and the talk of Trade War between the U.S. and China didn’t either.

Right now the market is volatile trying to decide how things are going to go.

wrote an article earlier this week about using gold and gold mining equities as a portfolio tail-hedge – it’s a must read with how fragile things are.

Having gold right now in the portfolio will offset any losses from blowback of a trade war, a collapsing stock market, and a fragile U.S. economy.

There’s a reason China and Russia have been buying and mining huge amounts of gold.

There will be a lot of short term pain – and contrary to what Trump believes – no long term gain from this trade war. Especially with our largest foreign debt holder.

History tells us that much. . .

Don’t get caught off guard from China’s “comprehensive countermeasures.”

Just like China said, “We don’t want a trade war, but we are not afraid of one.

Comments

jin187 Tue, 04/10/2018 - 07:04 Permalink

Anyone buying gold to "get wealthy" is stupid.  It's a hedge bet against fiat.  Gold never increases in value.  It's always worth gold.  It merely keeps up with inflation 99% of the time, with occasional spikes due to kneejerk changes in demand.  The price of gold in fiat has increased roughly 300% in the last 20 years.  So has power, real estate, food, the Dow, and most other things of tangible value.  Guess the smart money was on Snickers back in 1995, when they cost half as much, and were twice as big.  Had someone offer me a house back in 1990 for 10k, and I saw the same house selling a few years ago for 45k.  Man I shoulda jumped on that.  I'd be rich!

snblitz Indelible Scars Tue, 04/10/2018 - 15:48 Permalink

They really only seized the gold in the banks.  And the gold possession became legal again. So gold did what it was supposed to do and retained its value for those who did not create third party risk for themselves.

You need to purchase gold, seal it in a PVC tube and bury it in your yard.

Your "performance" on you "savings" will be 66 times that of US dollars.

gold 1917 ($20 per ounce), gold 2017 ($1325).

gold 1325 / 20 = 66

US dollar 20/1325 = 0.015

So the US dollar retained 1.5% of its value, and gold retain 100% of its value. 

In terms of maintaining value gold out performed the us dollar by 66 times.

How to measure that gold retained it value?

Steak meal in 1913 (25 cents) or 1/80 an ounce of 1913 gold.  1/80 of ounce of current 2017 gold is 1325/80 or $16.45.  Can you buy a steak meal for $16.45?

Outback steakhouse sirloin dinner $19.

Aside from burying gold in your yard, you need to vote the thieves out of government.

Since the robbery is so overwhelming.  Please vote them all out and vote in independents without family members who have foreign interests.

How overwhelming is the robbery?  They stole 98.5% of you and your families wealth over the last 100 years, they have stolen $21 trillion of your future wealth already, and they are stilling about a trillion more every year.

Please help me stop them. Vote independent.

https://www.finitespaces.com/2018/04/07/why-gold-is-a-terrible-investment-and-will-save-the-lives-of-your-children/

 

In reply to by Indelible Scars

snblitz jin187 Tue, 04/10/2018 - 15:36 Permalink

It really depends on which way you look at it.

From 1913 to 2017 US dollars lost 98.5% of their value, or gold increased in value 66 times.

If you were holding dollars you lost big time.  If you are holding US dollars now you continue to lose big time.

Do you want to call "holding its value" 'performance'?  Is so then gold out performed US dollars by 66 times.

In reply to by jin187

Farqued Up Tue, 04/10/2018 - 07:22 Permalink

Every time I read this type article I stack some more. I am restless by nature, OH GOD GRANT ME PATIENCE BUT GRANT IT TO ME NOW GODDAMMIT, so my confidence in the self induced myth that one day the Cabal will be flushed and real markets will be re-rooted and the balance restored is waning rapidly. In my more enlightened days I get a glimmer of the reality that balance cannot be restored intellectually through nonproactive mental masturbation.

The only thing that this bunch of control freaks understand is raw unbridled force that threatens them and their families physically as well as financially. It is already baked in and is awaiting someone with the balls to unleash the dogs of torture on their asses. I hope that Trump follows through the next time he sends troops to Langley because the people want it, and they expect great things from him.

Well, Mr Prez, the Reichstag was burned by the DoJ and FBI with the break-in, both subs are in the Executive thus under your control, what are you waiting on? You are the hooking bull so the buck stops with you. Sic'em, the people are behind you, evoke emergency and expel the enemy to Gitmo and let them sweat with the mosquitoes. Then time is on your side until July when you start the wholesale proceedings against some of the big dogs. The people will crawl to the polls to vote for your supporting cast.

U. Sinclair Tue, 04/10/2018 - 08:05 Permalink

Every household should at least have an ounce of AU or 20 ounces of AG as a financial insurance.
Mankind is doomed to repeat it's mistakes over and over again and on a bigger scale!
Why do the BRICS countries have a better knowledge of history on this matter?

gmak Tue, 04/10/2018 - 08:19 Permalink

"Cans of tuna. Bags of rice and beans. Salt. Toilet paper. Source of heat off the grid. Source of water off the grid. Now. You want me to give you this for shiny yellow metal?" *sound of 10 guns and rifles being cocked *

The above is the zombie apocalypse scenario.  Just remember if it all goes to sh%t that the elites will be sitting in bunkers and New Zealand. 

 

Too bad mine is at the bottom of a lake due to unfortunate timing and bad weather.

Farqued Up Aireannpure Tue, 04/10/2018 - 10:50 Permalink

Gold clad tungsten has taken its position of prominence. The innard gold had been lifted by the Babylonians decades ago. It was lifted again when the Twin Towers were being wired. It’s probably outside the USA now since the USA is being ransacked by the same Babylonians using their counterfeit currencies. This is instant replay of Russia when the USSR collapsed and the oligarchs stole everything. The oligarchs lost it all to the pissed off Russians under Putin and the reconstituted Generals.

The oligarch Babylonians are trying to get the Big One popping to prevent the USCorp from being dismantled, and after the destruction, recover their spilled global marbles plus the Russian resources. Who cares if 6 billion people perish as long as they maintain control.

Aint gonna work out that way, their heads on stakes on Victory Drive will grace the boulevard.

In reply to by Aireannpure

pitz Tue, 04/10/2018 - 10:16 Permalink

Petrodollars are just conspiracy theory bullshit.  Shame on Zerohedge for perpetuating such.  If China wants to buy oil, they pay in Yuan.  If a European country wants to buy oil, they pay in Euros.  Canadians pay in Canadian dollars.  Etc.  Very few if any countries of substance ever bought USD$ to buy oil, and certainly the sellers of said oil always had the option whether or not to retain any USD$ derived from the value of such.  

Of course, with the US having minimal exports, and being historically one of the world's largest importers, reserves of the oil exporters naturally are going to be skewed towards USD$.  Although as the US becomes less of an oil importer due to higher domestic production and reduced domestic demand due to a collapsed economy, it naturally follows that fewer USD$ will be exported overseas.

 

 

Mattman Tue, 04/10/2018 - 11:21 Permalink

The only problem is that Nassim Taleb doesn't seem to think the US is fragile, and he's the guy who invented the Antifragility theory.

ALANBEEKMAN Tue, 04/10/2018 - 11:56 Permalink

Xi gave a speech yesterday where he intimated that they are going to substantially lower the tariff on US car imports and open up their market further.

Did someone just blink?

dvfco ALANBEEKMAN Tue, 04/10/2018 - 22:07 Permalink

He's going to lower them from 300% to 50%. 

I'd expect a loaded citizen of China would look to Europe to show off their Yuan rather than the US.  I'm thinking Benz / BMW / Lambo / Bentley, etc.

Any shit car company can make a rental car-quality economy car.  The Chinese ain't buying a Chevy Lumina.  [I take it back.  Russians cannot make small cars i.e. Lada, GAZ, UAZm etc.]

In reply to by ALANBEEKMAN

dvfco ALANBEEKMAN Tue, 04/10/2018 - 22:07 Permalink

He's going to lower them from 300% to 50%. 

I'd expect a loaded citizen of China would look to Europe to show off their Yuan rather than the US.  I'm thinking Benz / BMW / Lambo / Bentley, etc.

Any shit car company can make a rental car-quality economy car.  The Chinese ain't buying a Chevy Lumina.  [I take it back.  Russians cannot make small cars i.e. Lada, GAZ, UAZm etc.]

In reply to by ALANBEEKMAN

Hubbs Tue, 04/10/2018 - 13:00 Permalink

It's kind of like the kid who is getting bullied and knows that the bully is about to beat him up. What do you do? Either way, you're going to get the crap beat out of you, so might as well throw the first punch and see if you can catch the bully off guard.

And then there was the softie on the high school football team who would actually pay his teammates if they didn't hit him in practice.

UndertheDRADIS Tue, 04/10/2018 - 13:06 Permalink

Investors worry that if China purchases fewer soybeans, the US agricomplex would have to find alternative buyers. That could prompt a rise in the rate per bushel it pays and increase the cost of tofu.

rent slave Tue, 04/10/2018 - 13:48 Permalink

One good sign for gold:The Phillies are 4-2 in games not started by their two big pitchers.When they start winning those games,gold should start moving upward.The two entities have moved up and down in tandem ever since gold's re-legalization in 1975.

PGR88 Tue, 04/10/2018 - 17:13 Permalink

"I always ask myself one thing when looking at investments...."

Bullshit. The language he uses is from Nassim Taleb's "AntiFragile" which only came out 5 years ago. So it can't have been "always."

Herdee Tue, 04/10/2018 - 21:52 Permalink

I hold gold bullion mainly because of the disgusting war, poverty, greed, destruction of the environment, animal cruelty, corrupt politicians, you name it, that's all around us like a sick disease. Gold happens to be one of the best forms of economic insurance that you can have. It is THE international currency of the world. Extremely liquid anywhere. Oh, did I mention the fact that the monetary system at present is designed so that the U.S. Dollar will eventually go to Zero? In fact, it just went under the 4% mark of the purchasing power that's left in it. Gold doesn't have that problem. It doesn't move because "It Just Is". The paper fiat currencies are the ones that move but tragically are all destined to have the same fate as the dollar. To become worthless just like all others before them. A track record of 100% odds. You know because eventually hyperinflation is the only way out. And that's only IF a nuclear holocaust doesn't destroy us all.

dvfco Tue, 04/10/2018 - 22:00 Permalink

I'm guessing regardless of the Petro-Yuan the metals are going to make a solid run over the next year.  Much shit is about to hit the fan.

We've got Syria about to get the shit bombed out of it for the false flag attack that may have actually been pulled-off by Israel.  Who would have done that with the US saying we're pulling out soon?  Only someone who wanted us to stay.

Trump's either going to fire everyone in the FBI & Justice Dept. and ride out impeachment OR maybe the Republican Congress will hold Rosenstein & Wray in contempt.

 

No matter what, things are going off-the-tracks in the U.S.  Then we've got Europe, Brexit & a bunch of stabbing visitors. 

Finally, the US Gov't is crushing the F.A.N.G. portion of the stock markets, which could take a few thousand points off the DOW and NASDAQ, especially throwing in Microsoft, Intel and other related stocks.

Buy a couple stacks of American Eagle USD coins in silver or gold and bury them for a year or two.