A Golden Ruble?

The unintended consequences of backing Putin into a financial corner...

(Source: Getty Images)

Joel Bowman, reckoning today from Buenos Aires, Argentina...

Right out the gate, a big thanks to Byron King and all the dear readers who attended our special discussion thread on Thursday. It was a blast.

The question(s) on the table, in case you missed it: How will the Russia-Ukraine conflict impact the dollar... energy markets... inflation... global commodity supplies... geopolitical stability, etc.?

There’s a lot to unpack there, and given the partisan and reactionary state of so-called “public discourse” these days, it’s refreshing to get a good faith discussion going on the subject. Here’s a snippet of the conversation, which you can peruse in full at your leisure, here.

Reader Joeb writes: 

Did none of our elite geniuses see that telling Mr. Putin he was no longer invited to trade in dollars that he might...just might seek another medium in which to trade? And did NOBODY consider that if a new medium could be found that the real bully on the block - the USD - might get kicked to the curb? I suppose not because if any of the puppeteers had a lick of sense they'd have realized that the last domino is their power to print unlimited money. I suppose there really is no accounting for stupid. I'm buyin' gold man.

Responds Byron: 

I think that Mr Putin is way ahead of the herd. He's been accumulating gold for Russia since at least 2014. Here in the West, gold is disdained as a monetary tool. Friend Jim Rickards has written books on the subject. I think more people ought to read up on the matter. Time to dust off those old library books on the Gold Standard, if modern librarians haven't sent them to the landfill. And yes, when people responsible for administering the so-called "global reserve currency" exclude entire nations from using it, it is more than likely that the outsiders will form their own new system. Russia has prepped for this over many years. (Russia-China, along with numerous allies.)

Chimes reader Gordon:

I read the other day that when the people representing the Fed heard about the decisions to kick Russia out of SWIFT and block their bank accounts, they protested strongly (but internally). In any case, the decision had already been made - and announced publicly - by the politicians who are ignorant of anything but posturing, so the Fed's objections were ignored, and the Fed was told to "shut up and soldier." I can't confirm that this is actually true, but it seems to fit the facts. Certainly the majority of the people in the Cabinet do not appear capable of thinking with anything but their political ambitions.

And I realize that your reference to "elite geniuses" was sarcasm, but if there is anyone around Biden who is really intelligent, I fail to see it. I would describe most of them as "A genius in their own mind."

And back to Byron:

It seems to me that professional monetary managers would not want to wreck the credibility of SWIFT. While politicians tend not to understand complex systems, and break them all the time. It's one of the reasons why we cannot have nice things.

Isn’t that swell... an adult discussion about important topics, without censorship, canceling and de-platforming? (Shout out to Substack here, too, for providing what may well prove to be one of the last frontiers for free expression in the “civilized west.” Kudos!)

We’ll endeavor to host many more such discussions in the future. In fact, we’re working right now to gather a panel of experts to delve deeper into this and other relevant monetary matters. There’s a worrying tendency in the mainstream media (perhaps you’ve noticed?) to present only one side of the story (theirs!). We think it’s worth asking tough questions, even if some folks don’t like the answers. 

Now, while some of these BPR events will be public, others will be reserved for paying subscribers only. If you want to make sure you don’t miss a single one... and that you’re receiving all our special investment reports, personal Zoom call invites with Bill’s private network, exclusive webinars, twice-weekly market updates and all the bells and whistles... make sure you’re on our member’s list. At barely $2/week, consider it priced at “mates’ rates” and join us here...

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And here’s a note from our Investment Director, Tom Dyson...

Bull rallies within a bear trend

We continue to believe that the major stock market averages are in a bear market. Thirty years of experimental monetary policy and the greatest speculative bubble of all time are about to come crashing down. Measured against gold, we expect the major averages to fall at least 75% from current prices. 

When I say ‘measured against gold,’ by the way, I’m allowing for the possibility that in nominal terms (not measured against gold, and not adjusted for inflation) the stock market may not fall, and may even appear to rise. This has been the case in places like Venezuela and Turkey, where the currency devalues so quickly, assets appear to rise in price.

We’re not interested in relative returns or nominal gains. We’re interested in avoiding ‘the big loss’ and preserving as much of your purchasing power as possible through the crash. That way, on the other side, you can reinvest it in the shares of deeply discounted productive enterprises. 

But right now? Right now is not March 2020. It is not time to load up on stocks. Rates are headed higher and QT (at least for a while) will be a big headwind for stocks. Stay in Maximum Safety Mode. 

Why do we prefer to measure the stock market in terms of gold? Because gold’s supply only increases by about 2% a year, whereas the global money supply has grown between 5% and 10% a year for most of the last decade and then hit 21% growth in 2021. 

Gold is therefore a more stable yardstick to measure stock market performance against. Measured against gold, the bear market began in 1999 at a Dow/Gold ratio of 44. By 2008, it had fallen 85%... to just above 6.

Tom’s Gold Report can be found in the “Research Reports” section at the top of the website, along with our Trade of the Decade write up, Dan’s Investment Strategy report, transcripts and recordings of our private briefings and plenty more. Again, all this is available for paying subscribers at the jolly low price of $2/week. Do yourself a favor and get on board today, here...

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And now for Bill Bonner’s missives from the past week...

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And that’s all from us for today. We’re off to the campo to spend the Easter Holiday with friends and family. We’ll send a few pics from the road... 

Whatever you’re up to this weekend, enjoy the break.

Cheers,

Joel Bowman

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