Looking over into the Abyss

How can anyone really take the deflation argument seriously now? Sure, an accident could happen, but we saw again this week that at the first sign of a market meltdown, the Fed will give in. Eventually there will be a market meltdown but that may happen not in numerical terms but in real terms as a debased dollar nears a state of worthlessness. Chairman Powell uttered comforting words to stock market junkies this week and so you can see that everything with the exception of U.S. Treasuries rose in value this week and that was because there were still a few people drinking the Fed’s Kool-Aid earlier this week when there was an abundance of taper talk by several Fed board members. But we could be sure Chairman Powell would have equity market investors’ backs.

Regarding the dollar, I do not think you can ignore the events of this week in Afghanistan. The intrinsically worthless U.S. dollar has been made the world’s currency with the backstop of military power that is used to force, in one way or another, countries to use the dollar for international trade, starting with the Nixon Administration to guarantee the royal family’s safety in exchange for a guarantee that OPEC require payments for international oil sales in U.S. dollars. That provided a bid under the dollar after President Nixon reneged on our obligation to send an ounce of gold oversees in exchange for paper dollars when foreign banks requested that.

This week an article caught my eye that was not published in the U.S press, noting that the Saudis signed a military cooperating agreement with Russia. If this is a breakdown in the arrangement between the U.S. military and Saudi Arabia on top of the lost credibility America has suffered as a result of President Biden’s withdrawal disaster and a dollar whose purchasing power is being inflated to oblivion, that provides an even more clear handwriting on the wall, saying, “The end is drawing near for the dollar.”

I asked my friends James Turk and Alasdair Macleod about their thoughts regarding Russia warming up to Saudi Arabia. Here were their remarks:

James Turk: I’m not a geopolitical strategist but this move was probably inevitable. The new Saudi leader is a wild card. Logically one would expect the USD to weaken on this news, and it is down today. But who knows? Everything these days is totally crazy, including how cheap are gold, silver, and their miners in view of all the inflationary pressures. 

Alasdair Macleod: I think the Arab world has seen their future more tied up with China/Russia than with the U.S. for some time. I heard from a Swiss refiner that Arabs were sending him LBMA bars to recast into the Chinese 1k 9999 standard as long ago as 2014. The interesting thing about this military deal is what it might say about Saudi and Iran—both aligning themselves with Russia. 

As I recently wrote about Afghanistan, the U.S. backing out is a clear sign that through the Shanghai Cooperation Organisation, China and Russia now control all the Eurasian continent, with the exception of Western Europe. SE Asia is run by ethnic Chinese as well. 

I think it has come about through a combination of America making some bad errors and the Chinese just being patient. As Sun Tsu said, “[A General] wins his battles by making no mistakes. Making no mistakes is what establishes the certainty of victory, for it means conquering an enemy that is already defeated.”

On a separate note, my cotton farmer friend from Texas, Tommy Thiltgen, wrote to me to express his views on the market. I think it is worth taking the time to read what this experienced money manager and businessman has to say about the markets. Here are his thoughts at the start of this past week.

Dear Jay, 

As I write this, the S&P 500 is making a new all-time high. To say there is euphoria in the equity market may be the greatest understatement since 1929. I will point out that as of Friday, Aug. 20, 2021, the New York Stock Exchange had -14 52 wk new highs (highs -lows). Out of 4700 stocks, there were more new lows than highs. Also, the daily advance -decline has had a triple failure, i.e., the market has made three successive new highs while the advance -decline line has made three lower highs. These are just some of the indicators that are flashing a red light for equities. 

Probably much more important than a possible equity crash, is the potential for a dollar collapse. Jay, you have known my record on the U.S. Dollar for years, but today, August 23, 2021, may be the start of what many of the Dollar bears have been looking for (and wrong) for 30 years. The U.S. Dollar is down hard today because of a sea change in the world’s belief that the power of the U.S. military will help support the U.S. Dollar’s status as the reserve currency of the world. The utter collapse of our withdrawal from Afghanistan and the visible incompetence of the President and his military and civilian advisors is so in your face, that every country in the world is standing and saying that we are being run by fools. 

The unfolding tragedy that is taking place in Afghanistan and the thought of what might happen to military personnel and civilians on the ground after August 31 is unthinkable. Whatever happens, we will not be trusted by our allies for decades to come. Without a deep-down belief that America has their back, other countries will now find alternatives that will weaken this country. 

The destruction that the Biden Administration has wrought on this country in such a short time is unfathomable. The crisis on the border is so bad that it has become a national security threat. The border is being overwhelmed by over 200,000 people per month that are being caught and an estimated 40-70 thousand that are not. Since Jan. 20, 2021, more than 1,500,000 people from 160 different countries have entered this country illegally. Many, upwards of 15%, have the covid virus. They are being bused and flown to cities in predominately red states. 

The government spending is so out of control that no one even talks about the fact that we are creating so much debt and that no one has any intention of paying it off. Once people around the world come to this realization it will put additional strain on the U.S. Dollar’s reserve currency status and the U.S. Dollar itself. 

More than 50% of U.S. citizens now believe that Biden was elected fraudulently, and this further divides the nation. The government is trying to hide all of these problems by trying to force Americans to take mRNA vaccines that they admit are now only 39% effective. It is all an attempt to exercise power over the people. It is now time to call these people out for what they are. Not socialists, but Marxists. If we don’t call them out now, in a few more years many young people will take this as normal and good. Remember, they are taught nothing and history is at the top of this list that they know least about. 

As of this month, 61% of the people in this country pay no federal income tax. They now feel that they are entitled to the fruits of other people’s labor, and the sad thing is that they like it, as the last year has shown. They would rather not work as long as the taxpayers support them. Maybe this is rational, but the damage that is done to the work ethic cannot be recovered from easily. 

Maybe the best outcome is a massive equity crash (60+ percent) and a severe multiyear depression that wipes out phony money and reprices assets to their earning capacity.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.