Nuclear War Greatest Threat since Kennedy

Since my IDW shown below is comprised of equities as well as commodities, this week’s IDW increase from 192.71 to 194.65 was triggered mostly by a historic equity market short-covering squeeze sending the S&P 3.67% higher. The short squeeze was no doubt enabled by a very timid Fed 14% rate rise, which places it still further behind the curve as inflation is continuing to rise even as the purchasing power of wage earners continues falling further behind. As David Stockman pointed out in his March 18 missive, over the past 10 months, inflation adjusted hourly wages have been negative eight times, with the February number being -1.3%.

Unfortunately, it’s not as if there will be any inflation relief any time soon, thanks to a host of events, including the war in Ukraine and a war against oil and gas companies by the Biden Administration. Supply chain issues stemming directly or indirectly from the war, starting with rising oil and gas prices, feed into everything else. Shortages of virtually everything are starting to appear so that a massive amount of debt manufactured money will have to be crated to give voters relief. Were new money not to be created, as in 1980, we would have an immediate deflationary depression that would make the 1930s look like child’s play. As it is, wholesale prices are already just a whisker under 10%. The sanctions that the U.S. is placing on Russia and threatening China with if China comes to the aid of Russia in the Ukraine conflict will likely cut back supplies all the more. 

As I pointed out in my talk at the MIF, titled, “Can the Fed Outrun Debt Deflation Without Destroying the Dollar?” I used charts supplied by former Federal Reserve economist Lacy Hunt to demonstrate how levels of debt to GDP in excess of 60% start to throw economic growth rates into reverse and when it’s over 90% it becomes extremely deleterious. The U.S. Debt/GDP is now 130%, which incidentally compares to Russia’s debt to GDP of < 20%. And so it should be no surprise that since the financial crisis in 2008, when massive money was manufactured with mountains of debt, the U.S. economy grew by an average of only 0.8% per annum from that time until February 2020. The markets turned giddy with a 17.2% growth during the next 13 months when the U.S. economy was shocked with $6 trillion of Covid bailouts and stimulus checks. But that fake growth would soon abate. Since March 2021 the real growth rate has been a negative 2.7%.

Wall Street is largely ignorant about money because they have been programmed in their university economic course to drink the Keynesian Kool-Aid. There are no free lunches in this world. Countries as well as governments eventually can’t consume more than they produce although Americans have been able to live under that illusion for a long time, in large part because our military was used to enforce the Petro-dollar system that is now nearing its end. Contrary to all the propaganda we are hearing regarding the Ukraine War, this is not a war in which NATO will prevail, because, unlike Russia, the west is financially bankrupt. And while China has a huge amount of debt, it not only owes it to itself but as a net exporter it also has accumulated huge amounts of foreign currencies and gold. So I do not believe the happy talk on our media suggesting Ukraine can win this battle against Russia, much as I admire their toughness and tenacity in trying to ward off the invaders.

By the way, Russia not only as a very low debt/GDP ratio of <20%, it also has a 17% flat tax and very limited regulations against business growth. As Alasdair Macleod has pointed out, Russia has a very libertarian economic policy compared to the U.S.  Regarding the issue of morality, while there is no denying that the Russian devastation against the Ukraine population is horrendous, what very few Americans are aware of is that the U.S. fell back on a couple of promises to Russia after the fall of the Soviet Union. First President Bush promised Russia that we would not annex former Eastern European satellites into NATO, which we subsequently reneged on as we added virtually all the satellite countries of the former Soviet Union. Putin has been saying for many years now that he would not permit the Ukraine territory to be added to NATO, but various pro-NATO forces have paid no attention to the understandable view of Russia, a country that has been repeatedly invaded by foreign enemies.

Then in 2014, unbeknownst to most Americans, the U.S., with the blessing of the Obama Administration and NGO’s reportedly funded by George Soros, staged a clandestine coup to overthrow the elected pro Russian elected leader of the Ukraine. Charges that the elected Ukrainian leader was corrupt were no doubt true. But clearly the U.S. wasn’t interested in curing corruption in Ukraine, based on the intervention of then-Vice President Biden, who threatened to withhold $1 billion from the Ukrainian government if they didn’t fire a prosecutor who was investigating a Ukrainian energy company upon whose board Hunter Biden served. That incident is well documented by a video in which Joe Biden bragged about forcing the Ukrainian government to fire the prosecutor seeking to investigate criminal activity.

The facts of Joe and Hunter Biden are very well known by our adversary nations and no doubt there are many more issues of corruption in which U.S. players are involved. Of course, corruption can go on for a long time but ultimately when an individual or company or an entire country becomes insolvent, the dynamics change very quickly. And that is where I believe the U.S. and the western world in general finds itself. We mortgaged our future and the future of our grandchildren and their children’s children when we went off the gold standard in 1971 and used our military might to force the world to pay for oil, using the dollar. Now Saudi Arabia, which was the country used by Kissinger to implement the Petro dollar system and dollar hegemony, won’t even pick up a phone call from President Biden. That country along with Iran, Syria, and China and likely the BRICS (Brazil, Russia, India, China, and South Africa) are all turning against the U.S. and in the aggregate, those are producing nations, unlike America, which has binged on debt-funded consumption that is now about to end. The dollar hegemony is about to end and when it does, we will long for the good old days.

Undoubtedly, those who have transferred paper money into gold and other tangibles should be in much better financial shape than those who have trusted propaganda from the Fed and the rest of the Military Industrial Complex—although that assumes we will continue to have a government that allows at least some property rights. Given the anti-capitalist rhetoric by Woke Democrats, there is no guarantee of that in the future. For eternal hope, joy, happiness, and well being, we really have only one source of hope and that is in our Creator. Given an American Military Industrial Complex that must continue to keep the fires of war flaming in order to keep profits rising and shareholders happy, the threat of nuclear war seems to be as great now as any time since President Eisenhower warned us that a Military Industrial Complex could end up controlling our nation.

Certainly, we hope and pray that the nuclear powers will remain reasonable. We have to hope and pray for the best but be prepared for the worst. As long as life on this planet prevails, a most reasonable thing to do is exchange Ponzi fiat money for the real money in the form of gold and silver.

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.