At The Crossroads. The Future Of Gold.

[Luigi1]

Here's an article of GCR interests...the future of gold & where it's headed...

 

 

 

James Hickman:   What’s Next After $5,000 Gold?

ARTICLE:  In the year 578 AD, a Korean immigrant named Shigemitsu Kongo arrived in Japan at the invitation of the royal family.  Buddhism was flourishing & the Japanese needed someone who knew how to build temples.  Kongo was their man.

 

He founded a construction company—Kongō Gumi—that would go on to build some of Japan's most iconic Buddhist temples.  And, somewhat miraculously, the company stayed within the same family for over fourteen centuries.

 

That's roughly 40 generations. The company lived through the rise & fall of the samurai, the Meiji Restoration, two World Wars & the atomic bomb.

 

But in 2006, after 1,428 years of continuous operation, Kongō Gumi went bankrupt.

 

Japan experienced a legendary financial bubble in the 1980s; asset prices exploded.  And, like many Japanese companies during that decade, Kongo Gumi borrowed heavily to invest in real estate.

 

But eventually the bubble burst.  Asset prices crashed.  And all that remained was the debt... which Kongō Gumi could not repay.

 

The world's oldest company— which had survived 1400+ years of war, natural disaster, and literally even two nuclear strikes, was undone by too much debt.

 

It's a powerful reminder: it doesn't matter how long you've been around.  What matters is your current financial reality.  History doesn't protect you from math.

 

And this same principle applies to sovereign nations.

 

Japan has the worst debt-to-GDP ratio on the planet—256%— more than double the United States.

 

But, like the US, the Japanese government has gotten away with this insane debt level for a long time.

 

Part of the reason was that their central bank (the BOJ) held interest rates at near zero so that the government could borrow at almost no cost.

 

If interest rates are 0%, in theory you could borrow unlimited quantities of money without any consequences but ONLY as long as interest rates remain at zero.

 

Unfortunately for Japan, the bond market looks like it has finally had enough.

 

On January 19th, Japan's new PM Sanae Takaichi announced a 21.3 trillion Yen (about $140 billion) stimulus package.  The bond market's response was immediate & visceral.

 

Within days, Japan's 40-year government bond yield soared to 4.24%—a record high & the first time a Japanese sovereign maturity has breached 4% in over three decades.

 

The 30-year yield surged to nearly 4%. Even Japan’s 10-year government bond hit 2.38%, the highest since 1999.

 

Higher rates are a five-alarm fire for any heavily-indebted country.  And we've seen this movie before.

 

In October 2022, British PM Liz Truss announced a tax-cut plan that would have resulted in a higher budget deficit.   The bond market wasn’t having any of that.  Government bond yields skyrocketed &the British Pound plummeted.

 

It was so bad that the Bank of England had to launch emergency interventions & the PM resigned after just 49 days in office— the shortest tenure in British history.

 

You can probably see the pattern.  Bond markets first revolted in Britain, the world’s 6th largest economy.  Now it’s revolting in Japan, the world’s 4rth largest economy.

 

How long until bond markets start to revolt against the world’s largest economy?

 

Billionaire investor Ken Griffin connected these dots explicitly when he said last week, "What happened in Japan is a very important message to the [US] House & to the Senate.  You need to get our fiscal house in order."

 

We've been saying this for years: politicians in Congress think that, because America is the largest economy with the world’s reserve currency, the rules don’t apply to them & that they can run endless, outrageously high deficits without any consequence.

 

This is completely delusional.

 

If the US doesn’t get its fiscal house in order, the Dollar won’t be the world’s reserve currency for much longer.   In many respects this shift is already happening.

 

Just look at China: right before the 2008 Global Financial Crisis, China held less than $500 billion of US government bonds— roughly 5% of the total US nat'l debt at the time.

 

By 2011, just three years later, they had increased their holdings to $1.3 trillion—nearly 10% of total US government debt.

 

But China has been selling off its UST holdings rapidly over the past two years.  They've cut their position by roughly 50%, down to about $682 billion, or less than 2% of the nat'l debt.

 

To be clear, I'm not rooting for China to own a larger share of the US nat'l debt.  I'm rooting for a lower national debt.

 

But that ultimately requires Congress to be sensible & realistic.

 

And it’s not like cutting the deficit is some impossible task.

 

A 23-year old YouTuber was able to singlehandedly uncover billions of Dollars of fraud in just one city.  All Congress has to do is stop it.  But they are unwilling to do so.

 

With such unserious, low IQ politicians in Congress, foreign governments & central banks are thinking twice about investing in UST bonds. 

 

Many (like China) are selling & starting to diversify in other asset classes, including gold.

 

In fact, rising demand from governments & central banks around the world has been one of the key drivers in gold’s rising price.

 

But it's not just central banks anymore.  Pension funds & insurance companies have been increasing their gold allocations as a long-term asset.

 

And this makes sense.  Pension funds & insurance companies traditionally invest in very long–term bonds (like the 30-year) because they have to match their assets to long-term policy liabilities (like life insurance).

 

Clearly these companies are worried that after adjusting for taxes & inflation, owning US government bonds for THREE DECADES is simply too risky.  So they’re turning to gold instead.

 

I don’t know where gold prices are going today, tomorrow, or next month.  But the long-term trend is pretty clear: as long as Congress continues to be unserious about fixing the deficit, gold will keep going higher.

 

And that means companies in the real asset (especially gold) business are primed to do extremely well.

To your freedom,   James Hickman  Co-Founder, Schiff Sovereign LLC.

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[Luigi1]

Here's MZs two cents worth...Washington wants to write the cabinet lineup...

 

 

Some highlights by PDK-Not verbatim.

THREAD:  Washington Wants To Write The Cabinet Lineup.

Member: Good Morning Mark, Andy & community.

Member: Anything on the bond front Mark?

MZ: I wish there was an update on the bond front. Going on day 2 of absolute silence. Don’t know if it’s a good thing. Don’t know if it’s a bad thing. Don’t know if its an anything?  Just frustrating.

Member: Could it be the No news on bonds is because they are under an NDA? Being hopefull.

Member: I have such fatigue waiting for this RV when we gonna see some good stuff. Arrests? RV? Asset backed currency?

MZ: In Iraq: “Challenges if the next government. Washington wants to write the cabinet lineup. Factions prepare shrouds. A general siren” It’s a freak out going on in Iraqi politics. The US doesn’t want anyone with Iranian ties.

MZ: Postponement of the President’s election. Only in Iraq. Political deals” are a higher authority than the constitution & the law. They have agreed to ignore the constitution on this as they were supposed to have this vote today but postponed it again. Maybe kicking the can a couple more days while they deal with internal issues? This article is a good breakdown.

MZ: They are in meetings as we speak.

MZ: “Mark Savaya: We are working to form a Iraqi government without militias & we have a database of corrupt officials” He is doing his job & laying out the facts.

Member: Why is the world letting Iraq hold everything up. The world should go ahead with the RV & leave Iraq behind.

Member: Melania rang the bell at the NYSE today. She was all in all black. Predicting Black Swan event?

Member: I heard a Deutsche Bank all its executives were fired.

Member: Mark, this morning on Charlie Ward News he made a huge announcement. He stated we are now inside the 180 days of the collapse of the old system & the new system is being implemented.

MZ: I will agree with that take but I think its on the much shorter of those days. I think they are now rolling it out & testing.

MZ: I have group folks thinking this thing is imminent but they don’t know timing either.

Member:  If you cannot do great things, do small things in a great way.

Member: Thanks to everyone & stay safe. Stay warm. Have a good day.