Welcome to our Friday mailbag edition!
Every week, we receive some great questions from your fellow readers on our recently published essays. And every Friday, I answer as many as I can.
This week, readers wrote in with more questions on central bank digital currencies (CBDCs)… following ongoing reader discussion from last week’s mailbag edition.
While others share concerns about what will happen to their money in the event that China invades Taiwan… and how that will further The Great Distortion.
But up first, one reader has a question after watching my video update from the Rule Symposium on Natural Resource Investing in Florida…
Hello Nomi. I have trusted your opinion for many years. Since you were at the Rule Natural resource Investing Symposium, I have a question for you. Rick Rule is very bullish on the Uranium sector, like many other people. I don’t remember you talking about this sector as a very important source of energy of the future. Why? Thanks in advance and keep the good work.
– Yves E.
Hi Yves, thank you so much for writing in and following my work over the years.
You’re right. Rick Rule is a proponent of uranium and its role in nuclear energy. This is an important component of the energy space and investment in that space.
Uranium falls under my distortion theme of New Energy. And as I wrote about this week, money is about to flood into the sector of New Energy… courtesy of the Inflation Reduction Act (IRA) that the House of Representatives will be voting on today.
Uranium is an important component because uranium atoms split apart easily. That’s why uranium is commonly used to power commercial nuclear reactors that in turn produce electricity.
While mining and processing uranium isn’t exactly CO2 emissions free, nuclear power itself is completely zero-emission.
According to a recent report by the International Energy Agency (IEA), nuclear power has the potential to play a major role in helping countries to transition to New Energy economies. That’s because it can help them reduce reliance on fossil fuels.
An increasing number of countries around the world are starting to realize that… which is why I think we will see more nuclear power around the world in the years to come. This will bolster demand for uranium.
Case in point: United Kingdom.
The nation recently announced plans to triple its nuclear power generation capacity by 2050. That would entail eight more nuclear reactors, which could be approved on existing sites.
The U.K. is Europe’s second-biggest economy, so that’s no minor development. It will also allow the country to generate about a quarter of its electricity from nuclear power.
But it’s not only the U.K…
In Japan, for the first time in more than a decade, the majority of Japanese now support restarting idled nuclear reactors, according to a poll in the country’s top business newspaper.
Ten of the country’s 33 operable nuclear reactors have already been restarted. That’s a major shift for a country that suffered one of the most devastating nuclear disasters in history.
Japan is the world’s third largest economy.
Now, some countries are still pulling away from nuclear energy, and safety remains a top priority. But the evidence over six decades shows that nuclear is a safe means of generating power.
Even in America, nuclear power is getting a new push because of challenges of meeting clean energy goals, with politicians on both sides seeking to prolong (and expand) reactor use.
This is an extensive topic, and I will definitely be writing about it in the near future. So, thank you for bringing this up. Stay tuned.
Next up, readers Tom and Barry both share concerns about their money if China invades Taiwan… and how an invasion would impact The Great Distortion…
I am concerned that China is going to attack and take Taiwan. Do you have advice for your audience as to what to do to protect their assets against that eventuality?
– Tom B.
Brilliant! Your calming voice with the calming approach is a necessity for all investors. Thank you for being you.
My question is theoretical in nature and that is if and when China invades Taiwan, how will your distortion approach be affected or further distorted?
– Barry M.
Hi Tom and Barry, thank you for your emails. You both touch on what would happen from an asset or distortion perspective if China were to attack Taiwan.
First off, this has been considered a pending issue for years. I do discuss it in my forthcoming book, Permanent Distortion.
I don’t believe China will unilaterally attack Taiwan, because it doesn’t want to deal with the same kind of sanctions imposed on Russia for attacking Ukraine.
However, if this were to happen, it would just strengthen the distortion between the financial markets and the real economy globally.
That’s because the People’s Bank of China, China’s central bank, would do more of exactly what it’s doing now – keep rates low and enact China’s ongoing version of quantitative easing to fund China’s military maneuvers…
That in turn, would keep this avenue of cheap money in the global financial system which is what amplifies the distortion.
From the standpoint of assets, though, there would be more supply chain disruptions, notably in the semiconductor space.
See, 75% of global semiconductor manufacturing is in Asia. Mainland China and Taiwan take the largest share of that. Meanwhile, 12% of global semiconductor manufacturing is in the U.S.
The way to invest around potential disruptions in Asia would be to take long positions in U.S. semiconductor companies, such as Intel or AMD. But it’s important to understand that chip production doesn’t just ramp up overnight. So this would be a long-term investment.
Similarly, I’d suggest, as we have, investing in rare earth and other types of similar commodities, that the U.S. and its allies would look to source outside of China, for economic and geo-political reasons.
I’ve written recently about rare earth elements and have made a few suggestions for ETFs to get you started in this sector. For a refresher, check out the April 21 Inside Wall Street.
And up next, on the topic of CBDCs… Reader Kevin questions the government’s motives for pushing a digital dollar… And offers an alternative…
As a means of providing some stability to the U.S. fiat, do you think that pegging the U.S. dollar to gold, at a price of $8,000 or $10,000 an ounce, is a viable alternative to implementing a CBDC?
It seems to me that the real rationale for the imposition of a CBDC is more about providing the Fed with the ability to impose negative interest rates at will?
It would be a far more honest and transparent communication strategy by the Treasury Department and The Fed if they admit that a primary reason they wish to put into place a CBDC is to monitor and control the use of individuals’ own money.
– Kevin C.
Thank you for question and observations, Kevin!
Before we get to the Fed’s motives, let me answer your question about pegging the dollar to gold.
Gold takes power away from central banks. If you peg your currency to gold, you can’t print it on a whim.
That undermines central bankers’ power over the financial system and economy. That’s the last thing that the Federal Reserve – or any central bank – wants.
On the other hand, CBDCs help strengthen central banks’ power over the financial system. That’s because CBDCs will be highly centralized.
Yes, they will use a form of blockchain tech. This is the same as most decentralized digital assets, like Bitcoin.
But CBDCs have a different raison d’être… power and control. And that brings us to your second question.
We don’t know for sure just yet. But many speculate that, as time goes by, CBDCs’ centralized blockchains will allow central banks and other government agencies to track every transaction.
The possibilities and implications are limitless. They range from taxation to interest rates, as you pointed out. But, again, we just don’t know for sure at this stage.
What we do know, however, is this:
90 central banks are in the process of planning the digitalization of their currency,
80% of global banks are exploring digital currency,
And overall, 105 countries are already exploring digital currencies.
If you’d like to learn more about this, I just recorded an urgent video presentation to help you end up on the right side of this shift.
In it, I go into more detail on what a digital dollar could mean for our financial system, for regular Americans, and for our money. To watch it – for free – just click here.
And lastly, a new subscriber, Fady, has similar concerns to Kevin… and asks me to shed light on potential government intrusion and control if we transition to the digital assets world…
I just became a subscriber recently and I can’t tell you enough how excited I am to devour all the material and reports you published and the future ones. Your insights and experiences are indispensable, especially in these epic times we live in.
One issue that worries me is the talk about a biometric ID and vaccination as we transition to the digital assets world… and the ability of the government to control our lives with these things… For instance if you’re not vaccinated and boosted you can’t have certain financial freedoms as others who are and what are they going to do with cash? I would really appreciate it if you shed light on these topics. Thank you.
– Fady B.
Thanks for writing in, Fady! Appreciate your kind words too.
As our lives become increasingly more digitized, governments, international institutions, and multinational big-tech companies are seeking to develop ways to regulate them more. That’s a fact.
On the other hand, things you mention aren’t bad per se. But, much like the internet itself, they can be used to the detriment of society.
For instance, the digital dollar (aka the Fed coin) could give the Fed a powerful tool for economic control and unprecedented intrusion into the private financial lives of billions of people.
There’s an argument to be made that Western nations should scrap CBDC plans altogether and promote stablecoins instead. But, as the recent TerraUSD debacle showed, those need some work too.
Smart and responsible regulation could be the answer but it won’t happen overnight.
At the end of the day, despite all our problems here in the U.S., we don’t live under an autocratic regime.
We can and should keep our leaders in check (while working towards more personal freedom as individuals).
And that’s it for this week’s mailbag! Thanks again to everyone who wrote in.
If I didn’t get to your question this week, look out for my response in a future Friday mailbag edition.
I do my best to respond to as many of your questions and comments as I can. Just remember, I can’t give personal investment advice.
And if there are any other topics you’d like me to write about, I’d love to hear from you. You can write me at [email protected].
Editor, Inside Wall Street with Nomi Prins