Emma’s Note: Emma Walsh here, managing editor of the Diary.
As regular readers know, Bill believes the feds’ crazy “stimulus” policies are to blame for a lot of our economy’s – and society’s – woes. As he has often explained in these pages, the rot set in almost half a century ago, when President Nixon severed the link between the U.S. dollar and gold.
Now, this week’s guest editor, Casey Research’s Nick Giambruno, believes the feds’ destructive policies and out-of-control money printing – or as he calls it, “legalized counterfeiting” – will usher in a new monetary era, one in which gold will once again take center stage.
When this long-discredited idea re-emerged a few years ago, many wrote it off as insane, with no chance of happening.
It was just too crazy to be true, much less taken seriously…
But now, it’s reality.
It’s as if a politician was promising to give every person in America a free pony… and then the public elected that person.
With disastrous economic ideas rapidly spreading across the U.S., it was only a matter of time before this ridiculous notion would manifest itself into actual policy.
I’m referring to Modern Monetary Theory (MMT), one of the latest buzzwords coming out of Washington, DC.
In short, MMT promises “free everything,” which the government’s printing presses finance – supposedly without consequence. The government prints money to meet its obligations.
MMT is the same economic quackery that’s brought misery to Argentina, Venezuela, Zimbabwe, and countless other places. Now, U.S. economists, politicians, and policy wonks are taking it seriously, too.
Contrary to its name, MMT is neither new nor “modern.” It’s an old economic poison in a shiny new bottle. And adding the word “theory” to something doesn’t make it scientific or credible.
Instead, let’s be clear and specific with our words and call MMT what it really is – the Classic Counterfeiting Swindle.
U.S. Representative Alexandria Ocasio-Cortez and Stephanie Kelton – Bernie Sanders’ former chief economic adviser – are leading advocates of MMT.
In the last couple of months, MMT – something most people regarded as a crackpot fantasy – has become a reality.
But it’s not just socialists who are advocating for it…
President Trump – the self-described “King of Debt” – and the Republicans have wholeheartedly endorsed this destructive policy.
Following the coronavirus hysteria, the entire U.S. political system has thrown out the last semblance of fiscal and monetary sanity.
For no better proof, look at this year’s staggering, record-shattering federal budget deficit.
The federal government expects to spend at least $3.7 trillion more than it brings in for 2020.
That’s likely to end up being too conservative. The actual deficit will probably far exceed $4 trillion.
No Turning Back
The government is financing this astounding amount of money by issuing more and more debt.
So who is buying all of this paper? The Federal Reserve is. By using “money” it creates out of thin air. (If this sounds like it’s a scam, that’s because it is.)
It’s legalized counterfeiting by another name.
For this reason, the Fed’s balance sheet has exploded in recent months. Note the sharp spike on the far right of the chart below.
In a more honest system, the government wouldn’t be able to finance itself through fraud. It would have to raise taxes or tap into society’s pool of savings by issuing debt at the market rate.
But the government could never get away with honestly financing $4 trillion in deficits.
That’s why it’s turning to money printing.
The Fed – which is to say, legalized counterfeiting – has become an indispensable tool for the U.S. government to finance its budget. That means the U.S. has already adopted MMT. And there’s no turning back.
It’s another frightening indication the U.S. has lost its collective mind.
Hedge fund legend Paul Tudor Jones put it this way:
The depth and magnitude of the economic drop-off took Modern Monetary Theory – or the direct monetization of massive fiscal spending – from the theoretical to practice without any debate. It has happened globally with such speed that even a market veteran like myself was left speechless.
New Monetary Era
The fact that fiscal and monetary policy are now irrevocably intertwined has revealed one of the biggest misconceptions about central banks.
Contrary to what the bobbleheads on CNBC and the rest of the mainstream media and academia tell you, central banks are not “independent.” They never have been.
They exist solely to give the government an easy option to finance itself by taxing the population (through inflation) in a way that perhaps not one in 100 will understand.
That brings up an important point…
Almost everyone takes central banks and “monetary policy” for granted, as a permanent fixture of the universe. But the truth is, they’re not only completely unnecessary, but destructive. They shouldn’t exist in a free society.
We don’t need a politburo to centrally plan the money supply and interest rates – which are the most important prices in all of capitalism. It only works to enrich politically connected insiders while impoverishing everyone else.
As central banks discredit themselves beyond repair by embracing MMT, it’s going to usher in a new monetary era. Alternative monetary goods – first and foremost, gold – will take center stage.
Gold Is Returning to Its Rightful Place
For over 5,000 years, gold has been mankind’s most enduring form of wealth.
Throughout history, many different civilizations around the world have reached the same conclusion: Gold is money.
That didn’t happen by accident.
It happened because gold has a set of characteristics that make it uniquely suitable as money.
Gold is durable, divisible, consistent, convenient, scarce, and, most importantly, a hard asset, which means its annual supply growth is insignificant relative to its existing supply. Its worth doesn’t depend on any government or counterparty.
Gold is the free market’s “monetary policy.”
And for the first time in over 50 years, gold is returning to its rightful place at the center of the international monetary system. That’s what makes this current gold bull market fundamentally different.
This gold bull is not going to be like previous ones. It will be riding the wave of an incredibly powerful trend: the re-monetization of gold.
I’m not talking about a garden-variety cyclical gold bull market, but the BIGGEST gold mania in history. And it’s already well underway.
Gold is skyrocketing. Late last month, it decisively took out its previous all-time high.
I think there’s an excellent chance that gold could exceed $10,000 as this all plays out.
That’s about a 5x return from here.
In fact, I think that could prove to be too conservative. It’s in line with how previous bull markets started out – as we can see in the chart below.
But the current bull market is likely to be much bigger.
That’s why I’m urging readers to position themselves now. Owning some physical gold – and keeping it in your own possession – is something everyone should do.
Chief Analyst, The Casey Report
P.S. Owning gold is one of the best ways to protect yourself against the government’s insanity I talked about above. And recently, I uncovered another swindle you should know about…
Politicians never let a crisis go to waste. And hidden in a pandemic stimulus bill is a sinister plan that would confiscate everyday Americans’ wealth… and even ban those who don’t comply.
Like what you’re reading? Send your thoughts to [email protected].