From Porter Stansberry in Growth Stock Wire:

Today, the member nations of OPEC still produce nearly 40% of the global oil supply.

Oil traders still respect OPEC’s promises to cut global supply. Over the last few months, Saudi Arabia has promised that OPEC will cut production in conjunction with Russia. The fact that OPEC needs Russia’s cooperation is revealing… It shows OPEC’s diminished market power.

Russia accounted for 12% of last year’s global production, and its production continues to increase. Russia produced 11 million barrels per day in September, a new all-time record.

Will Russia (and Iran) really agree to cut production? We doubt it.

But even assuming that it does happen and both OPEC (including the so-far uncooperative Iran) and Russia agree to significantly cut production… we don’t expect prices to move much higher or to stay there for long.

Why not?

Because the global “swing” producer – the oil producer with the most excess capacity – is no longer Saudi Arabia. It’s the United States…

At prices of more than $50 a barrel, America’s shale fields can produce a lot more oil… more than 10 million barrels per day.

Thus, if Russia and Saudi Arabia actually cut production, the U.S. will begin to take market share away from these producers around the world. And when that happens, OPEC will fall apart.

Just look at what happened a few weeks ago… With oil prices back to more than $50 a barrel in October, U.S. producers kicked up production. U.S. crude inventories grew by 14 million barrels. That has never happened before – at least, not in the last 34 years.

It doesn’t matter whether OPEC and Russia agree to cut production. Based on the situation in the U.S. today, we’re betting on lower oil prices ahead. Here’s why…

1. Idle capacity

There are more than 4,100 drilled but uncompleted (“DUC”) wells in the four oil-dominant U.S. regions (Bakken, Eagle Ford, Niobrara, and Permian), according to the Energy Information Administration.

A DUC well is one that oil companies have spent the money on to drill, but have not currently tapped. It costs very little to bring this oil to market. Given the large number of DUC wells in the U.S., if oil prices were to rise further, a wave of new supply is ready to come online.

2. New, big discoveries

With the help of technological advancements like horizontal drilling and “fracking,” oil producers have driven down costs and found more oil, which has led to a domestic energy renaissance.

Yes, U.S. production has declined almost 11% from its peak in April 2015… but output is still up 55% over the past five years.

For example, in September, oil giant Apache (APA) announced another huge discovery in West Texas. It spent more than two years on extensive geology studies in a relatively untapped part of the Barnett and Woodford formations. It’s calling the discovery the Alpine High area. These are massive finds… Apache estimates the acreage has more than 75 trillion cubic feet of natural gas and 3 billion barrels of oil.

3. Demand is struggling to keep up

Overall, worldwide oil demand is climbing… just not as fast as supply.

Global oil supply averaged 98.3 million barrels per day (mmbpd) in the third quarter of 2016, according to the Energy Intelligence Group. Yet, demand only reached 97.3 mmbpd.

In other words, there were around a million barrels per day of excess supply during the quarter.

4. Excess inventory

When supply consistently exceeds demand, all that spare oil must go somewhere. And right now, the U.S. is holding record amounts of oil in inventory. We have more stored oil than we know what to do with… more than we’ve held over the past 30 years.

We’re also running out of tanks to store the stuff in. Tanker ships are now storing excess supplies… As of June, the International Energy Agency estimated 95 million barrels of oil is sloshing around in offshore tankers. That’s the highest level since the Great Recession.

We were forecasting record volumes of oil production years ago, when most pundits were still worried about “Peak Oil” – the idea that oil production was in permanent decline.

Seven years later, it still seems most people simply don’t understand the tremendous impact America’s shale fields are having on the oil market.

But they’re about to find out.

Regards,

Porter Stansberry

Crux note: Oil companies borrowed far too much money at the top of the market… causing production to increase and oil prices to crash. The same thing is taking place across several areas of the global economy. And it’s creating a once-in-a-generation opportunity for speculation. Tomorrow night (Wednesday, November 16), Porter is hosting a FREE live webinar where he’ll reveal the single best strategy to take advantage of this opportunity. Save your spot here.

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From Charles Hugh Smith at Of Two Minds:

Your crime, as it were, need not be substantiated with evidence; the mere fact you publicly revealed your anti-Establishment thought convicted you.

One of the most remarkable ironies of The Washington Post’s recent evidence-free fabrication of purported “Russian propaganda” websites (including this site) is how closely it mimics the worst excesses of the USSR’s Stalinist era.

Those unfamiliar with the Stalinist era’s excesses will benefit from reading Solzhenitsyn’s three-volume masterpiece The Gulag Archipelago: 1918-1956, The Gulag Archipelago 2 and Gulag Archipelago 3.

One episode is especially relevant to the totalitarian tactics of The Washington Post’s evidence-free accusation. Solzhenitsyn tells the story of one poor fellow who made the mistake of recounting a dream he’d had the previous night to his co-workers.

In his dream, Stalin had come to some harm. In Solzhenitsyn’s account, the fellow was remorseful about the dream.

Alas, mere remorse couldn’t possibly save him. He was promptly arrested for “anti-Soviet thoughts” and given a tenner in the Gulag–a tenner being a ten-year sentence in a Siberian labor camp.

The Washington Post’s accusation is based on a “behavioral analysis”– in other words, publicly sharing “anti-Soviet thoughts”–in our era, the equivalent is sharing anti-Establishment thoughts.

Your crime, as it were, need not be substantiated with evidence; the mere fact you publicly revealed your anti-Establishment thought convicted you.

This is the Corporate Media’s Gulag of the Mind. We’ll tell you what’s “true” and what is correct to think and believe. Any deviation from the party line is a threat and must be discredited, marginalized or suppressed.

Where is the Post’s hard evidence of Russian ties or Russian influence? There isn’t any — but like Stalin’s henchmen, the Post has no need for evidence: merely going public with an anti-Establishment thought “proves” one’s guilt in the kangaroo court of America’s corporate media (a.k.a. mainstream media or MSM).

While The Washington Post is owned by billionaire Amazon founder Jeff Bezos, the vast majority of what we read, watch and hear is controlled by a handful of corporations loaded with cash and connections to the ruling elite.

This concentration of media control creates the illusion of choice – the same elite-propaganda spin is everywhere you look; our “choice” of “approved” (i.e. corporate) media is roughly the same as that offered the Soviet citizenry in the old USSR.

This is why the billionaire/corporate media is so desperate to discredit the non-corporate media: if an alternative to the corporate media’s elite-propaganda catches on, the corporate media will lose its audience, its advert revenues and a substantial measure of its influence.

The cornered elite-propaganda beast is lashing out, undermining its waning credibility with every attack on an independent free press. As I noted in a recent conversation with Max Keiser, democracy requires the citizenry to sort out who benefits from whatever narrative is being pushed.

That’s what terrifies the elite-propaganda mainstream media: the status quo narrative they’ve spewed for years doesn’t benefit the bottom 95% — rather, it actively impoverishes and disempowers the bottom 95% — and the citizenry is slowly awakening to this reality.

So for goodness sakes, if you have an anti-elitist dream, keep it to yourself or you’ll end up on the ruling elite’s “enemies list.”

The final irony in all this: the real enemy of democracy and freedom of the press is The Washington Post and the rest of the billionaire/corporate media. The only way to escape the Corporate Media’s Gulag of the Mind is to stop watching their TV channels, turn off their radio stations and stop reading their print/digital propaganda — except of course if you have a taste for dark humor.

Crux note: Charles Hugh Smith is one of our favorite independent financial writers. His Of Two Minds blog was listed as No. 7 in CNBC’s top alternative financial sites. His commentary has been featured on Zero Hedge, The Daily Reckoning, and Peak Prosperity.

We recommend both of his new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print).

From Zero Hedge:

In the latest example why the “mainstream media” is facing a historic crisis of confidence among its readership, facing unprecedented blowback following Craig Timberg November 24 Washington Post story “Russian propaganda effort helped spread ‘fake news’ during election, experts say,” on Wednesday a lengthy editor’s note appeared on top of the original article in which the editor not only distances the WaPo from the “experts” quoted in the original article whose “work” served as the basis for the entire article (and which became the most read WaPo story the day it was published) but also admits the Post could not “vouch for the validity of PropOrNot’s finding regarding any individual media outlet,” in effect admitting the entire story may have been, drumroll “fake news” and conceding the Bezos-owned publication may have engaged in defamation by smearing numerous websites – Zero Hedge included – with patently false and unsubstantiated allegations.

It was the closest the Washington Post would come to formally retracting the story, which has now been thoroughly discredited not only by outside commentators, but by its own editor.

The appended note in question:

Editor’s Note: The Washington Post on Nov. 24 published a story on the work of four sets of researchers who have examined what they say are Russian propaganda efforts to undermine American democracy and interests. One of them was PropOrNot, a group that insists on public anonymity, which issued a report identifying more than 200 websites that, in its view, wittingly or unwittingly published or echoed Russian propaganda. A number of those sites have objected to being included on PropOrNot’s list, and some of the sites, as well as others not on the list, have publicly challenged the group’s methodology and conclusions. The Post, which did not name any of the sites, does not itself vouch for the validity of PropOrNot’s findings regarding any individual media outlet, nor did the article purport to do so. Since publication of The Post’s story, PropOrNot has removed some sites from its list.

Read the full story on Zero Hedge here…

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From Matt Badiali, Editor, Stansberry Research Resource Report:

We said we’d believe it when we saw it.

Well, now we’ve seen it.

On November 30, the Middle-Eastern oil cartel known as the Organization of the Petroleum Exporting Countries (or “OPEC”) finally agreed to a modest reduction in its massive oil production. This is critical because oil prices have plummeted since 2014 due to OPEC’s unrestrained production.

We knew it would be difficult to get this deal done – and there are still details to finalize – but we’re glad that progress has been made.

Here’s a quick review of how we got here…

In January 2013, the 12 countries that comprised OPEC were doing great. Oil prices were around $112 per barrel and the cartel’s production was around 30 million barrels per day. However, higher-cost oil from U.S. shale, Russia, Canada’s oil sands, and other sources was starting to eat into OPEC’s market share. The world was filling with more and more oil.

As prices began to fall in 2014, OPEC member Saudi Arabia did the unthinkable: It decided to increase the flow of oil. It let OPEC countries produce at will. The idea was that it would make the expensive oil producers in the U.S. and Canada go bankrupt.

Two years down the road, we see the real problem… getting OPEC to close the spigots. OPEC production hit 33.6 million barrels per day this September.

Regular Growth Stock Wire readers know that caused oil prices to plummet to less than $30 per barrel in February before recovering to more than $50 per barrel today…

Reducing OPEC’s oil production isn’t a purely economic problem. Mixed into the business of oil are violent religious differences (particularly between Iran and Saudi Arabia), countries recovering from wars (like Libya and Iraq), and countries dealing with insurgencies (like Iraq and Nigeria). Then there is Venezuela, which is currently spiraling down the drain of a failed socialist regime.

That makes negotiations between these countries fairly difficult. These countries need money, which they all get from selling oil. Then, OPEC’s leadership began urging them to reduce the amount of oil they sell… which would bring in less money in the short term.

Let’s just say that earlier talks didn’t go well.

Saudi Arabia floated the idea of production cuts back in February. At the time, Saudi Arabia and Russia agreed. However, those talks fell apart… just like we predicted.

Then OPEC agreed to talk about cutting production again in April. Iran’s representatives didn’t even show up to the meeting. It was the same at the September meeting – nothing.

It was like watching a group of spoiled kids split up an uneven number of candies… except with global implications.

This time, the OPEC countries agreed to cut 1.2 million barrels per day of production. That would be a 4% reduction, roughly 1% of the global supply. That’s a huge amount of oil to remove from the market, and it should be enough to keep oil prices above $50 per barrel for a short time, at least.

Remember, though, there is still a lot of oil out there. And higher prices will bring some of it back on line. If you own any oil producers, make sure to keep your stop losses tight… because that extra supply will likely push oil prices lower again.

Good investing,

Matt Badiali

Crux note: Matt recently discovered one of Donald Trump’s “hidden” sources of income. You can use the same strategy to generate hundreds or even thousands of dollars a month in extra income. Learn more about this technique – and the details behind Trump’s greatest investment ever – right here.

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From Charles Hugh Smith at OfTwoMinds:

This is a blatantly politicized “report” that is not supported by any evidence, nor is it supported by the other 16 intelligence agencies.

The recent pronouncement by the C.I.A. that Russian hackers intervened in the U.S. presidential election doesn’t pass the sniff test — on multiple levels. Let’s consider the story on the most basic levels.

1. If the report is so “secret,” why is it dominating the news flow?

2. Why was the “secret report” released now?

3. What actual forensic evidence is there of intervention? Were voting machines tampered with? Or is this “secret report” just another dose of fact-free “fake news” likeThe Washington Post’slist of 200 “Russian propaganda” websites?

4. The report claims the entire U.S. intelligence community is in agreement on the “proof of Russian intervention on behalf of Trump” story, but then there’s this:

“The C.I.A. presentation to senators about Russia’s intentions fell short of a formal U.S. assessment produced by all 17 intelligence agencies. A senior U.S. official said there were minor disagreements among intelligence officials about the agency’s assessment, in part because some questions remain unanswered.”

Given that the N.S.A. (National Security Agency) was so secret that its existence was denied for decades, do you really think the NSA is going to go public if it disagrees with the C.I.A.?

Given the structure of the Deep State and the intelligence community, “minor disagreements” could well mean complete, total disavowal of the C.I.A.’s report.

That this is the reality is suggested by the F.B.I.’s denunciation of the report’s evidence-free, sweeping conclusion:

FBI Disputes CIA’s “Fuzzy And Ambiguous” Claims That Russia Sought To Influence Presidential Election

5. The supposed interventions clearly fall under the purview of the NSA. So why is the C.I.A. going public in what is clearly a politicized report intended to influence the public via massive, sustained coverage in the mainstream media?

6. Notice the double standard: so when the U.S. attempts to influence public opinion in other nations, it’s OK, but when other nations pursue the same goal, it’s not OK?

7. What are we to make of the sustained campaign to elevate “Russian hackers and propaganda” from signal noise to thedeciding factor in the U.S. election?

8. Russian hacking and attempts to influence American public opinion are not new. The intelligence agencies tasked with protecting American cyberspace have long identified state-sponsored hacking from Russia and China as major threats. So why, all of a sudden, are we being told the Russians successfully influenced a U.S. election?

What changed? What new capabilities did they develop?

9. And most importantly, what evidence is there that Russian efforts affected the election? Were digital fingerprints found on voting machine records? Were payments to American media employees uncovered?

Shouldn’t statements purported to be “fact” or the “truth” be substantiated beyond “trust us, an agency with a long history of failed intelligence, misinformation and illegal over-reach”?

10. Doesn’t it raise alarms that such a momentous accusation is totally devoid of evidence? If you’re going public with the conclusion, you have to go public with at least some of the evidence.

Here’s the media blitz and some skeptical response:

• CIA: Russia intervened to help Trump win
• Secret CIA assessment says Russia was trying to help Trump win White House
• Former UK Ambassador Blasts “CIA’s Blatant Lies”, Shows “A Little Simple Logic Destroys Their Claims”

Longtime readers know I have proposed a major divide in the Deep State – the elements of the federal government which don’t change regardless of who is in elected office. This includes the intelligence community, the Pentagon, the diplomatic and trade infrastructure, Research and Revelopment, and America’s own organs of media “framing” and “placement.”

Is the Deep State Fracturing into Disunity? (March 14, 2014)

More recently, I wondered if the more progressive elements of the Deep State recognized the dangers to U.S. security posed by the neocons and their candidate, Hillary Clinton, and had decided to undermine her candidacy:

Could the Deep State Be Sabotaging Hillary? (August 8, 2016)

In other words, it’s not the Russians who sabotaged Hillary — it’s America’s own Deep State that undermined her coronation. It wasn’t a matter of personalities; it was much more profound than that. It was about the risks posed by the neocon strategies and policies, and just as importantly, the politicization of the intelligence network.

And this is precisely what we discern in the C.I.A.’s unprecedented and quite frankly, absurd “secret report”:a blatantly politicized “report” that is not supported by any evidence, nor is it supported by the other 16 intelligence agencies. (Silence doesn’t mean approval in this sphere.)

We can now discern the warring camps of the Deep State more clearly. On the one side is the C.I.A., the mainstream media, and the civilians who have feasted on wealth and power from their participation in the neocon’s Global Project.

On the other side is the Defense Department’s own intelligence agencies (D.I.A. et al.), the N.S.A., the F.B.I. and at least a few well-placed civilians who recognize the neocon agenda as a clear and present danger to the security of the nation.

From this perspective, the C.I.A.’s rash, evidence-free “report” is a rear-guard political action against the winning faction of the Deep State. The Deep State elements that profited from the neocon agenda were confident that Hillary’s victory would guarantee another eight years of globalist intervention. Her loss means they are now on the defensive, and like a cornered, enraged beast, they are lashing out with whatever they have in hand.

This goes a long way in explaining the C.I.A.’s release of a painfully threadbare and politicized “report.”

Crux note: Charles Hugh Smith is one of our favorite independent financial thinkers and writers. His Of Two Minds blog was listed as No. 7 in CNBC’s top alternative financial sites. And his commentary has been featured on Zero Hedge, The Daily Reckoning, and Peak Prosperity.

We recommend both of his new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print).

From Ron Paul at The Ron Paul Institute for Peace and Prosperity:

Over the past week, eastern Aleppo was completely brought back under control of the Syrian government. The population began to return to its homes, many of which were abandoned when al-Qaeda-linked rebels took over in 2012.

As far as I know, the western mainstream media did not have a single reporter on the ground in Aleppo, but relied on “activists” to inform us that the Syrian army was massacring the civilian population. It hardly makes sense for an army to fight and defeat armed rebels just so it can go in and murder unarmed civilians, but then again not much mainstream reporting on the tragedy in Syria has made sense.

I spoke to one western journalist last week who actually did report from Aleppo and she painted a very different picture of what was going on there. She conducted video interviews with dozens of local residents and they told of being held hostage and starved by the “rebels,” many of whom were using US-supplied weapons supposed to go to “moderates.”

We cannot be sure what exactly is happening in Aleppo, but we do know a few things about what happened in Syria over the past five years. This was no popular uprising to overthrow a dictator and bring in democracy. From the moment President Obama declared “Assad must go” and approved sending in weapons, it was obvious this was a foreign-sponsored regime change operation that used foreign fighters against Syrian government forces. If the Syrian people really opposed Assad, there is no way he could have survived five years of attack from foreigners and his own people.

Recently we heard that the CIA and Hillary Clinton believe that the Russians are behind leaked Democratic National Committee documents, and that the leaks were meant to influence the US presidential election in Donald Trump’s favor. These are the same people who for the past five years have been behind the violent overthrow of the Syrian government, which has cost the lives of hundreds of thousands. Isn’t supporting violent overthrow to influence who runs a country even worse than leaking documents? Is it OK when we do it? Why? Because we are the most powerful country?

We are a country sitting on $20 trillion in debt, living far beyond our means. Power can oftentimes be an illusion, and in any case it doesn’t last forever. We can be sure that the example we set while we are the most powerful country will be followed by those who may one day take our place. The hypocrisy of our political leaders who say one thing and do another does not go unnoticed.

We should end that hypocrisy starting with Syria. That government, along with its allies, seems to be on track to take their country back from ISIS, al-Qaeda, and other terrorist groups. The only sensible Syria policy is for the US to stop trying to overthrow their government, to treat others as we wish to be treated ourselves. It is a rule that is always good to remember, but perhaps especially important to recall at this time of year.

From Jim Rickards, Editor, Rickards’ Gold Speculator:

Now is the time to keep your eyes on the monetary endgame. Not the daily mark-to-market in paper gold.

This endgame is an all-out attack on the status of the U.S. dollar as the benchmark global reserve currency. Numerous players have an interest in ending the dollar’s role for reasons ranging from climate change (global problems require global money solutions), to geopolitics (Russia and China both have regional hegemonic ambitions in Eastern Europe and East Asia respectively). As investors with longer horizons and patience, we see ways to profit from these global macro trends.

We’ve done the deep-dive you need to see the big picture. All indicators show this is an excellent time to accumulate a position in gold, if you haven’t put 10% of your investable assets in gold and physical metal already (which is what I recommend).

Whenever a new president is elected, think tanks in Washington get to work writing transition papers for the new administration. These are compilations of policy advice from subject matter experts for the benefit of the president-elect’s transition team.

I was invited to contribute to a transition paper on national economic security. This is the policy area with geopolitics and global capital markets converge. I was invited by a non-partisan institute called Center on Sanctions and Illicit Finance, part of the prestigious Foundation for the Defense of Democracies. It was founded by Jack Kemp and Jeane Kirkpatrick and other patriotic Americans concerned about the rise of authoritarianism, and the decline of freedom and liberty.

The final national economic security paper has not yet been published as of this writing, but here’s an advance preview of a section I wrote on what I called the Axis of Gold:

A major blind spot in U.S. strategic economic doctrine is the increasing use of physical gold by China, Russia, Iran, Turkey and others both to avoid the impact of U.S. sanctions and create an offensive counterweight to U.S. dominance of dollar payment systems.

Currently U.S. dollar-denominated instruments and transactions constitute about 60% of global reserves, and 80% of global payments respectively. The U.S. monopoly of power over dollar payment channels gives the U.S. unrivaled dominance over the international monetary system and the economic well-being of every nation on earth. Adversaries naturally chafe at this immense power especially in light of U.S. imposed sanctions that are considered overbearing and unjustified by the targets. Those adversaries do not issue currencies that are potential alternatives to the dollar because of inadequate rule-of-law, immature bond markets, primitive capital markets infrastructure, or all three. The only feasible alternatives to dollar dominance are special drawing rights (SDRs) issued by the IMF, and gold.

To prepare for a physical gold alternative to the U.S. dollar, Russia increased its gold reserves 280% from the first quarter of 2006 to the second quarter of 2016 (from 386.5 metric tonnes to 1,498.7 metric tonnes), while China increased its gold reserves 203% in the same period (from 600 metric tonnes to 1,823.3 metric tonnes). China has been consistently non-transparent about its activities in the gold market.

Based on China’s mining output and reliable data on gold exports from Hong Kong and Switzerland to China, there is good reason to conclude that China’s actual gold holdings are nearer 4,000 metric tonnes, (a 567% increase since 2006). The comparable increase for Turkey is 308%. Reliable data is not available for Iran, however, exports from Turkey and Dubai to Iran are significant, and there is good reason to conclude that Iran is also a rising gold power relative to the size of its economy. Russia, China, Turkey, and Iran constitute a new “Axis of Gold” prepared to undermine confidence in the U.S. dollar.

Gold offers adversaries significant benefits in a world of U.S. imposed dollar-based sanctions. Gold is physical, not digital, so it cannot be hacked or frozen. Gold is easy to transport by air to settle balance of payments or other transactions between nations. Gold flows cannot be interdicted at SWIFT or FedWire. Gold is fungible and non-traceable (it is an element, atomic number 79), so its provenance cannot be ascertained. The U.S. is unprepared for this coming strategic alternative to dollar dominance.

No sooner had I submitted this analysis than President Erdoğan of Turkey made the following remarks in response to a currency crisis in his country: “Those who keep dollar or euro currency under their mattresses should come and turn them into liras or gold.” Turkey is not only accumulating large gold reserves, it is also a major transshipment point for gold flowing illegally to Iran.

Evidence for the rise of this Axis of Gold is overwhelming. Right now gold mining output is flat, western central bank sales of gold have ceased, and acquisition of gold by the Axis is increasing. In India, a mad scramble for physical gold has begun because the government has declared most forms of cash to be illegal. The Indian government may not like gold (they have been seizing it from private hands), but the Indian people are wiser than their government. Indians are buying as much gold as they can through legal and illegal channels.

With limited output, limited western sales, and huge eastern purchases, it’s only a matter of time before a link in the physical gold delivery chain snaps and a full-scale buying panic erupts. Then the price of gold will soar regardless of paper gold manipulations. However, it may be too late for investors to benefit because the ready supply of physical gold will be gone. The time to take a position is now.

When will this buying panic erupt? What signs can we look to for guidance?

The most important input is the gradual dumping of U.S. Treasury debt by foreign creditors of the U.S. These market participants are highly sophisticated. They know they cannot dump all of their U.S. debt at one time without causing a panic and hurting their own positions.

If dumping were viewed as malicious or hostile, the president could freeze the accounts of market participants using his powers under the International Emergency Economic Powers Act of 1977. Based on this, one would expect sales of Treasuries to be gradual and to play out over time. That’s exactly what we’ve been seeing since 2013 as shown in this graph:

This graph is revealing not only because of the gradual reduction of U.S. Treasury holdings by foreigners, but also because of the extremely high level of such holdings. Some countries such as Japan are highly indebted, but the debt is held primarily by their own citizens who have no interest in attacking their own government.

That’s not true for the U.S. We are extremely vulnerable to foreign attack because of the high percentage of foreign ownership — almost 40% of the market.

The second major indicator is the run-off in China’s reserve position. China’s reserves have collapsed from over $4 trillion to about $3 trillion in the past 30 months. This decline shows no signs of stopping; in fact it has accelerated lately to the point that China is now imposing capital controls.

What is revealing about this is that while total reserves have been collapsing, gold reserves have been going up. China has been buying thousands of tons of gold even as they sell U.S. Treasury bonds to pay offshore creditors and prop-up their currency.

Indicators all point in the same direction – Treasuries are being dumped and gold is being acquired by the largest investors in the world. This is being done not as a “day trade” but as a strategic geopolitical move.

This means these trends will continue until the aims of the Axis of Gold have been achieved. Those aims include the overthrow of the U.S. dollar as the benchmark global reserve currency. When that happens, collapsing confidence in the dollar will send the dollar price of gold skyrocketing.

But you do not have to wait until the final collapse of confidence in the dollar to benefit. Momentum will accelerate long before the endgame, giving early investors ample opportunity to profit from the trend.

Regards,

Jim Rickards

Crux note: Many people were surprised by the outcomes of the Brexit vote and 2016 Presidential election… but not Jim and his readers. Jim used the same analytical techniques he learned from his experience in the intelligence community to correctly predict both outcomes. Now, he’s making a third big prediction: That the global monetary system is about to collapse.

As global elites scramble to hold on to their power and influence in the coming crisis, Jim believes they will change the rules of the entire financial system… and it will ultimately send gold prices as high as $10,000 per ounce. According to him, it’s a question of “when,” not “if.” He explains everything in detail right here. (No long video)

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From Ron Paul at The Ron Paul Institute for Peace and Prosperity:

President-elect Donald Trump has said he wants to shrink and reform the CIA and much of the US intelligence community, which he has claimed has become very politicized. Sen. Chuck Schumer (D-NY) recently warned Trump about crossing the CIA, stating that, “You take on the intelligence community — they have six ways from Sunday at getting back at you.” Will Trump try to really take on the destructive policies and actions of the CIA, or will he focus on re-arranging the deck chairs and putting his own people in positions of power? Our take in today’s Liberty Report:

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From Bill Bonner, Chairman, Bonner & Partners:

BALTIMORE – Victoribus spolia…

So far, the most satisfying thing about the Trump win has been the howls and whines coming from the establishment.

Each appointment – some good, some bad from our perspective – has brought forth such heavy lamentations.

You’d think Washington had been invaded by Goths, now raping the vestal virgins (if there are any within the Beltway) on the White House lawns while the Capitol burns to the ground.

Regret and Suffering

Trump is happening, of course.

And the very people who made it happen are now in various stages of regret… suffering… or hysteria.

What a delight it is to see them in such pain!

All along I-95 – from the Holland Tunnel to Route 295 into the heart of D.C., at a distance of a football field between one and another – you see their fabled leaders, lieutenants, and water carriers crucified, with a small crowd gathered around each, weeping.

There is Hillary, of course. And Senator Elizabeth Warren (secretly happy to see HRC brought to grief).

Then there’s Nobel Prize-winning economist and New York Times columnist Paul Krugman. If there is another 9/11 crisis with Trump in charge, he warns: “America as we know it will soon be gone.”

There are the Republican traitors, too – Colin Powell, Henry Paulson, Michael Chertoff – now hanging from their crosses.

And there are the neo-con turncoats, too – Max Boot, Robert Kagan… Crucifixion is probably too good for them.

They are not only traitors to the Republican cause, whatever that may be, but warmongers, too, ready to switch allegiances just to keep the money flowing to their crony friends in the security industry.

Now they all keen away… But what did they expect?

Had they not been lustily ripping off the working stiffs for decades? With their fake money and fake wars, they had transferred trillions of dollars from the Main Street economy into their own pockets.

And then, after the grandest larceny in all of history, didn’t they lecture the poor victims on global warming, racism, and cisgender issues?

Had they not been so rapacious and sanctimonious… they might have their own egregious gal in the White House now! Instead, the country is run by a man they consider an outrageous jackass.

Sniff… sniff… We feel so sorry for them.

“Great Disrupter”

But where does that leave us?

It leaves us with the hero of 2016, too – the man who routed all those hopeless whiners.

And it leaves us with the same swamp… the same swamp critters pulling strings and hatching plans… and the same fake wars – on the real economy, on terror, on poverty, and on drugs.

So far, the losers are crying… all the way to the bank.

Donald Trump is a “great disrupter,” says the press. What exactly will he disrupt?

If Mr. Trump is to “make America great again,” he must do more than make the insiders mad. He must make them pay.

We saw what destroyed the Soviet Union’s empire: win-lose deals.

The nomenklatura… the insiders… the Communist Party hacks all made out well ­– for a time. Meanwhile, the average person suffered. His income fell in line with his liberty. Naturally, a lot of people didn’t like it.

Stalin had to use drastic measures to keep the losers in check. Between 1936 and 1937, his secret police, the NKVD, arrested 1.5 million people. They shot 600,000 – a rate of about 1,000 a day.

By 1953, there were 5 million people in Gulags, or “internal exile,” in Siberia. Whole groups were exterminated, including poets, writers, scientists, and 85% of the Russian Orthodox clergy.

Meanwhile, win-win deals – voluntary exchanges – were practically outlawed. And without them, the system became so pathetic and unproductive, even the elite gave up trying to get anything out of it.

Moneymen and Gunmen

Now we know why America’s middle class suffers, too… not on the same scale, but for the same basic reason.

Too many win-lose deals were imposed on them by the Parasitocrats, the insiders – the same people who now loathe the president they so richly deserve.

Household income in the U.S. is now lower than it was at the end of the last century. In the year 2000, the typical household had an income of $58,574. Today, it is only $57,827.

So now we know what Mr. Trump must do: reduce the number of win-lose deals to make room for more win-win deals. It is that simple.

But doing so isn’t simple.

The swamp critters – the insiders and Parasitocrats who control and profit from government regulations and legislation – are behind the win-lose deals. They’ll fight to protect them.

We’ve seen, too, that the deals fit into three main categories: entitlements, the military-industrial-security complex, and Wall Street.

As for the first, the Republicans have promised to overhaul Obamacare. But the president has sent mixed messages.

He also pledged to not cut entitlements. And when asked how he would pay for them, he answered that he knows “where to get the money from” and “nobody else knows.”

More than likely, the new president will be unable or unwilling to make any substantial dent in spending on pensions, pills, or schools. There are simply too many crony swamp critters and zombie voters on the receiving end.

Besides, they are not completely lose-lose programs. Overpriced and inefficient they may be. Still, ordinary people do get some real benefits from them.

That leaves the two biggies: the military-industrial-security complex and Wall Street.

Thus do the clouds lift and the picture clarifies…

Trump and his team must try to rein in the gunmen and the moneymen, or they are nothing but conmen.

Regards,

Bill

Crux note: In his latest warning, Bill exposes how the cronies behind the Deep State have pushed the world to the brink of an irreversible disaster. Bill reveals how it could all unfold – and, more importantly, how it could change your life forever – right here.

From Dr. Steve Sjuggerud, Editor, True Wealth:

In 1993, I learned two of the most powerful investing lessons of my life…

I was primarily trading emerging market stocks at the time. The big story was China.

I was a broker specializing in foreign stocks, and my phone was ringing nonstop. Everyone wanted to buy Hong Kong stocks.

That was a thrilling time for me… I had never made so much money before in such a short period in my life!

I learned two lifelong lessons then… And today, we have a new opportunity to put those lessons to work.

Let me explain…

The first lesson I learned was this: When emerging markets are hot, you simply HAVE to be on board.

In 1993, I made more money – in less time – than I ever had before.

The main Hong Kong stock index went up 30% that December alone. That was the entire index – not just one stock! And many individual stocks did much better.

But then times changed. Quickly.

The Hang Seng Index – the one that had boomed in December – crashed in the first quarter of 1994. It was awful… I was demoralized and depressed. My monthly income fell by 90%.

And that’s when I learned the second lesson…

Legendary investor Jim Rogers was right. As he once said, “Markets often rise higher than you think is possible, and fall lower than you can possibly imagine.”

In the good times, the Hang Seng Index rose 30% in one month… And in the bad times, my income crashed by 90%.

Let’s fast-forward to today. Emerging market stocks have been in “the bad times” for the last seven years. While U.S. stocks soared, emerging market stocks delivered essentially no returns to investors – at all.

But based on the computers behind my high-priced True Wealth Systems service, that looks like it’s changing – right now…

The iShares MSCI Emerging Markets Fund (EEM) – which tracks emerging markets as a whole – has gone straight up to start the year. It’s up nearly 10% since 2017 began.

And my systems say this could be the start of a bull market… one that could turn a small $10,000 investment into $50,000 or more.

I know that sounds outrageous. But a major, multi-year boom in emerging markets is one of the few legitimate ways to make hundreds of percent on your money. Take a look…

This chart shows three major booms in emerging markets. Each time, the bull market resulted in triple-digit gains… 471%, 432%, and 141%.

And remember, this is emerging markets as a whole. Specific investments can rally much further during these booms.

You can see on the chart above that emerging markets have done nothing for years… But that has changed to start 2017. We have the start of an uptrend. And that means the next major emerging markets boom could be underway now.

So now is the time to combine the two lessons I learned in 1993 and 1994 – and put them to work for huge profits…

Markets often rise higher than you think is possible, and fall lower than you can possibly imagine.

And when emerging markets are hot, you simply HAVE to be on board.

We have seen the downside over the last seven years. Now it’s time to own emerging markets again.

Good investing,

Steve

P.S. You may be surprised, but I still think there is plenty of upside in U.S. stocks. Learn exactly why in this brand-new presentation.

From Nick Giambruno, Senior Editor, International Man:

Obama pulled out his veto pen 12 times during his presidency.

Congress only overrode him once…

In late 2016, Obama vetoed the Justice Against Sponsors of Terrorism Act (JASTA). The bill would allow 9/11 victims to sue Saudi Arabia in US courts.

With only months left in office, Obama wasn’t worried about the political price of opposing the bill. It was worth protecting Saudi Arabia and the petrodollar system, which underpins the US dollar’s role as the world’s premier currency.

Congress didn’t see it that way though. Those up for reelection couldn’t afford to side with Saudi Arabia over US victims. So Congress voted to override Obama’s veto, and JASTA became the law of the land.

The Saudis, quite correctly, see this as a huge threat. If they can be sued in US courts, their vast holdings of US assets are at risk of being frozen or seized.

The Saudi foreign minister promptly threatened to sell all of the country’s US assets.

Basically, Saudi Arabia was threatening to rip up the petrodollar arrangement, which underpins the US dollar’s role as the world’s premier currency.

Donald Trump and the Saudis

Unlike every president since the petrodollar’s birth, Donald Trump is openly hostile to Saudi Arabia.

Recently he put this out on Twitter:

Dopey Prince @Alwaleed_Talal wants to control our U.S. politicians with daddy’s money. Can’t do it when I get elected.

The dopey prince that Trump is referring to is Al-Waleed bin Talal, a prominent member of the Saudi royal family. He’s also one of the largest foreign investors in the US economy, particularly in media and financial companies.

The Saudis openly backed Hillary during the election. In fact, they “donated” an estimated $10 million–$25 million to the Clinton Foundation, making them the most generous foreign donors.

Besides Hillary Clinton, the single biggest loser from the US presidential election was Saudi Arabia.

The Saudis did not want Donald Trump in the White House. And not because of some bad blood on Twitter. There are real geopolitical issues at stake.

At the moment, Trump seems determined to walk back on US support for the so-called “moderate” rebels in Syria.

The Saudis are furious with the US for not holding up its part of the petrodollar deal. They think the US should have already attacked Syria as part of its commitment to keep the region safe for the monarchy.

Toppling Syrian President Bashar al-Assad is a longstanding Saudi goal. But a President Trump makes that unlikely. That’s not good for Saudi Arabia’s position in the Middle East, nor its relationship with the US.

This is just one of the ways President Trump will hasten the death of the petrodollar.

Saudi Arabia, Islam, and Wahhabism

I loathe quoting a neoconservative historian like Bernard Lewis, but even a broken clock is right twice a day:

Imagine if the Ku Klux Klan or Aryan Nation obtained total control of Texas and had at its disposal all the oil revenues, and used this money to establish a network of well-endowed schools and colleges all over Christendom peddling their particular brand of Christianity.

This is what the Saudis have done with Wahhabism. The oil money has enabled them to spread this fanatical, destructive form of Islam all over the Muslim world and among Muslims in the West. Without oil and the creation of the Saudi kingdom, Wahhabism would have remained a lunatic fringe in a marginal country.

This is actually an apt description of Wahhabism, a particularly virulent and intolerant strain of Sunni Islam most Saudis follow. ISIS, Al Qaeda, the Taliban, and a slew of other extremists also follow this puritanical brand of Islam. That’s why Saudi Arabia and ISIS use the same brutal punishments, like beheadings.

Many Wahhabis consider Muslims of any other flavor—like the Shia in Iran, the Alawites in Syria, or non-Wahhabi Sunnis—apostates worthy of death.

In many ways, Saudi Arabia is an institutionalized version of ISIS. There’s even a grim joke that Saudi Arabia is simply “an ISIS that made it.”

After living in the Middle East for three years, it’s clear to me that many people in the region despise everything about Wahhabism. Yet it flourishes in certain Sunni communities, among people who feel they have nowhere else to turn.

It’s also widely believed in the Middle East that Western powers deliberately fostered Wahhabism, to a degree, to keep the region weak and divided—and as a weapon against Shia Iran and its allies. That includes Syria and post-Saddam Iraq, which has shifted its allegiance towards Iran.

Thanks to WikiLeaks we know the Saudi and Qatari governments, which are also the two largest foreign donors to the Clinton Foundation, willfully financed ISIS to help topple Bashar al-Assad of Syria. Julian Assange says the email revealing this is the most significant among the Clinton-related emails his group has released.

Here’s an excerpt of the relevant interview with Assange:

Interviewer: Of course, the consequence of that is that this notorious jihadist group, called ISIL or ISIS, is created largely with money from people who are giving money to the Clinton Foundation?

Julian Assange: Yes.

Interviewer: That’s extraordinary…

With all this in mind, Vladimir Putin opened an unusual conference of Sunni Muslim clerics recently. It took place in Grozny, the capital of Chechnya, a Sunni Muslim region within Russia’s southwestern border.

The conference, which included 200 of the top non-Wahhabi Sunni Muslim clerics, issued an extraordinary statement labeling Wahhabism “a dangerous deformation” of Sunni Islam.

These clerics carry serious weight in the Sunni world. The imam of Egypt’s al-Azhar mosque, one of the most important Islamic theological centers, was among them. (Egypt is the Arab world’s most populous Sunni country.)

Basically, Putin gathered the world’s most important non-Wahhabi clerics to “excommunicate” the Saudis from Sunni Islam. In other words, Putin is going for the jugular of the petrodollar system.

Russia and Saudi Arabia have been enemies for decades. The Russians have never forgiven Saudi Arabia (or the US) for supporting the Afghan mujahedeen that drove the Soviet Army out of Afghanistan. And they haven’t forgiven the Saudis for supporting multiple Chechen rebellions.

As far as I know, the British writer Robert Fisk was the only Western journalist to cover this extraordinary conference.

Here’s Fisk:

Who are the real representatives of Sunni Muslims if the Saudis are to be shoved aside? And what is the future of Saudi Arabia? Of such questions are revolutions made.

If the Saudis are shoved aside, it could strike a fatal blow to the petrodollar system.

The truth is, the petrodollar system is in its death throes. It doesn’t matter if the Saudis willfully abandon it, or if it crumbles because the kingdom implodes. The end result will be the same.

Right now, the stars are aligning against the Saudi kingdom. This is its most vulnerable moment since its 1932 founding.

That’s why I think the death of the petrodollar system is the No. 1 black swan event for 2017.

I expect the dollar price of gold to soar when the petrodollar system crumbles in the not-so-distant future. You don’t want to find yourself on the wrong side of history when that happens.

But that brings up another crucial point. There’s also likely to be severe inflation.

The petrodollar system has allowed the US government and many Americans to live way beyond their means for decades.

The US takes this unique position for granted. But it will disappear once the dollar loses its premier status.

This will likely be the tipping point…

Afterward, the US government will be desperate enough to implement capital controls, people controls, nationalization of retirement savings, and other forms of wealth confiscation.

I urge you to prepare for the economic and sociopolitical fallout while you still can. Expect bigger government, less freedom, shrinking prosperity… and possibly worse.

It’s probably not going to happen tomorrow. But it’s clear where the trend is headed.

It is very possible that one day soon, Americans will wake up to a new reality.

Once the petrodollar system kicks the bucket and the dollar loses its status as the world’s premier reserve currency, you will have few, if any, options.

The sad truth is, most people have no idea how bad things could get, let alone how to prepare…

Yet there are straightforward steps you can start taking today to protect your savings and yourself from the financial and sociopolitical effects of the collapse of the petrodollar.

This recently released video will show you where to begin. Click here to watch it now.

From Patricia Zengerle at Reuters:

The chairman of the U.S. House of Representatives committee investigating possible ties between Donald Trump’s presidential campaign and the Russian government downplayed claims on Monday that the White House had tried to influence reporting on the matter and insisted there was no need for a special prosecutor.

“What are we going to appoint a special prosecutor to do, exactly?” Devin Nunes, the Republican chairman of the House Permanent Select Committee on Intelligence, asked at a news conference.

Potential contact between Trump’s campaign and Russia, and possible Russian attempts to influence the 2016 election, are politically charged issues that have left Democrats calling for a select committee or special prosecutor to carry out a full investigation.

Most of Trump’s fellow Republicans in Congress have resisted such suggestions.

Nunes told the news conference the “only serious crime” was leaks of information from the Trump administration to the news media and others. He said he did not want a “witch hunt” calling U.S. citizens before congressional investigators because of news reports about their potential ties to Russia.

Nunes said the intelligence panel was working out the scope of the probe, which he characterized as an extension of a “long, ongoing investigation” of Russian activities that had been going on for months. However, he said U.S. intelligence officials had not yet presented the committee with any evidence of contacts between Trump campaign staff and Russian intelligence.

“It’s been looked into and there’s no evidence of anything there. Obviously, we would like to know if there is,” Nunes said.

Read the full story on Reuters right here…

From Jim Rickards, Editor, Currency Wars Alert:

Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion…

There is statistical evidence piling up to make the case, in addition to anecdotal evidence and forensic evidence. The evidence is very clear, in fact.

I’ve spoken to members of Congress. I’ve spoken to people in the intelligence community, in the defense community, very senior people at the IMF. I don’t believe in making strong claims without strong evidence, and the evidence is all there.

I spoke to a PhD statistician who works for one of the biggest hedge funds in the world. I can’t mention the fund’s name but it’s a household name. You’ve probably heard of it. He looked at COMEX (the primary market for gold) opening prices and COMEX closing prices for a 10-year period. He was dumbfounded.

He said it was is the most blatant case of manipulation he’d ever seen. He said if you went into the aftermarket, bought after the close and sold before the opening every day, you would make risk-free profits.

He said statistically that’s impossible unless there’s manipulation occurring.

I also spoke to Professor Rosa Abrantes-Metz at the New York University Stern School of Business. She is the leading expert on global price manipulation. She actually testifies in gold manipulation cases that are going on.

She wrote a report reaching the same conclusions. It’s not just an opinion, it’s not just a deep, dark conspiracy theory. Here’s a PhD statistician and a prominent market expert lawyer, expert witness in litigation qualified by the courts, who independently reached the same conclusion.

Now, where is the manipulation coming from?

There are a number of suspects, but you need look no further than China.

China wants to do what the U.S. has done, which is to remain on a paper currency standard but make that currency important enough in world finance and trade to give China leverage over the behavior of other countries.

The best way to do that is to increase its voting power at the IMF and have the yuan included in the IMF basket for determining the value of the special drawing right (SDR).

China accomplished that last September when the IMF added the yuan to its basket of currencies.

The rules of the game also say you need a lot of gold to play, but you don’t recognize the gold or discuss it publicly. Above all, you do not treat gold as money, even though gold has always been money.

The members of the club keep their gold handy just in case, but otherwise, they publicly disparage it and pretend it has no role in the international monetary system. China is expected to do the same.

Right now, China officially does not have enough gold to have a “seat at the table” with other world leaders. Think of global politics as a game of Texas Hold’em.

What do want in a poker game? You want a big pile of chips.

Gold serves as political chips on the world’s financial stage. It doesn’t mean that you automatically have a gold standard, but that the gold you have will give you a voice among major national players sitting at the table.

For example, Russia has one-eighth the gold of the United States. It sounds like they’re a small gold power — but their economy’s only one-eighth as big. So, they have about the right amount of gold for the size of their economy. And Russia has ramped up its gold purchases recently.

The U.S. gold reserve at the market rate is under 3% of GDP. That number varies because the price of gold varies. For Russia, it’s about the same. For Europe, it’s even higher — over 4%.

In China, that number has been about 0.7% officially. Unofficially, if you give them credit for having, let’s say, 4,000 tons, it raises them up to the U.S. and Russian level. But they want to actually get higher than that because their economy is still growing, even if it’s at a much lower rate than before.

Here’s the problem: If you took the lid off of gold, ended the price manipulation and let gold find its level, China would be left in the dust. It wouldn’t have enough gold relative to the other countries, and because the price of gold would be skyrocketing, they could never acquire it fast enough. They could never catch up. All the other countries would be on the bus while the Chinese would be off.

When you have this reset, and when everyone sits down around the table, China’s the second largest economy in the world. They have to be on the bus. That’s why the global effort has been to keep the lid on the price of gold through manipulation. I tell people, if I were running the manipulation, I’d be embarrassed because it’s so obvious at this point.

The price is being suppressed until China gets the gold that they need. Once China gets the right amount of gold, then the cap on gold’s price can come off. At that point, it doesn’t matter where gold goes because all the major countries will be in the same boat. As of right now, however, they’re not, so China has though to catch-up.

I’ve described some catastrophic scenarios where the world switches to SDRs or goes to a gold scenario, but at least for the time being, the U.S. would like to maintain a dollar standard. Meanwhile, China feels extremely vulnerable to the dollar. If we devalue the dollar, that’s an enormous loss to them.

China has recently sold a portion of its dollar reserves to prop up its own currency, which has come under tremendous pressure. But it still holds a large store of dollar reserves.

If China has all paper and no gold, and we inflate the paper, they lose. But if they have a mix of paper and gold, and we inflate the paper, they’ll make it up on the gold. So they have to get to that hedged position.

China has been saying, in effect, “We’re not comfortable holding all these dollars unless we can have gold. But if we are transparent about the gold acquisition, the price will go up too quickly. So we need the western powers to keep the lid on the price and help us get the gold, until we reach a hedged position. At that point, maybe we’ll still have a stable dollar.”

The point is that is that there is so much instability in the system with derivatives and leverage that we’re not going to get from here to there. We’re not going to have a happy ending. The system’s going to collapse before we get from here to there. At that point, it’s going to be a mad scramble to get gold.

The price of gold will go significantly higher in the years ahead. But contrary to what you read in the blogs, gold won’t go higher because China is confronting the U.S. or launching a gold-backed currency.

It will go higher when all central banks, China’s and the U.S.’ included, confront the next global liquidity crisis, worse than the one in 2008, and individual citizens stampede into gold to preserve wealth in a world that has lost confidence in all central banks.

When that happens, physical gold may not be available at all. The time to build your personal gold reserve is now.

We need to mention Russia here too. Russia is also amassing gold. And since Russia and China aspire to be true gold powers, it’s not enough to have physical gold. It’s also critical to create gold exchanges and gold markets for price discovery and trading.

Currently the price of gold is set in two places. One is the London spot market, controlled by six big banks including Goldman Sachs and JPMorgan. The other is the New York gold futures market controlled by COMEX, which is governed by its big clearing members, also including major western banks.

In effect, the big western banks have a monopoly on gold prices even if they do not have a monopoly on physical gold. But that could be about to change.

Russia and China are not only building up physical reserves and exploring for more, they are building trading systems that allow for price discovery and leveraged trading in gold.

It may take a year or so to attract liquidity, but once these new exchanges are fully functional, the physical gold market will regain the upper hand as a price maker.

Then gold will commence its march to monetary status, and its implied non-deflationary price of $10,000 per ounce.

The time to buy is now, before that happens.

Regards,

Jim Rickards

Crux note: Right now, Jim is beginning to prepare his readers for the next crisis. But he still believes there are ways to profit outside of traditional stocks. One of his biggest ideas is “skimming” profits from the world’s largest banking transactions. According to him, the next big opportunity is coming on August 10. He explains everything right here.

From Jim Rickards, Editor, Rickards’ Gold Speculator:

Is the latest gold rally for real?

Investors can be forgiven for asking that question. Gold reached an all-time high dollar price of $1,898 per ounce on September 5, 2011. Then it began a relentless four-year, 43% plunge that took it to $1,058 on November 27, 2015.

Of course, gold did not go down in a straight line. There were numerous strong rallies along the way.

Gold rallied 13%, from $1,571 in June 2012 to $1,780 in October 2012. Then gold rallied 15%, from $1,202 in December 2013 to $1,381 on March 2014. Gold rallied 22.5% again, from $1,058 in November 2015 to $1,366 in July 2016, just after the Brexit vote in the UK.

If you were fortunate enough to buy each dip and sell at each high, lucky you. I don’t know anyone who actually did that. More common behavior is to buy near the interim tops on euphoria, and sell at the interim lows on depression. That’s a great way to lose money, but unfortunately it’s exactly how many investors behave.

With that said, no one can blame investors for being discouraged and skeptical about the price action in gold. Every rally since late-2011 was followed by a sickening plunge.

Perhaps the worst plunge was the dizzying 24% plunge, from $1,607 to $1,223 per ounce, in a brief 15-week span between March 22 and July 5, 2013. That period included the notorious “April Massacre” when gold fell over 5% in just two trading days.

Each time gold experienced one of these major reversals, investors were quick to claim price manipulation by dark forces, usually central banks, using highly-leveraged “paper gold” dumps on the commodity futures exchanges.

Actually there is strong statistical and forensic evidence to support the gold price manipulation claims, as I explain in my 2016 book, The New Case for Gold. China has a keen interest in keeping gold prices low because it is on a multi-year, multi-thousand ton buying spree. If you were buying 3,000 tons in a thin market, you’d want low prices too.

Of course, all of that will change when China reaches its gold reserve target of 10,000 tons — surpassing the United States. At that point, it will be in China’s interest to become more transparent and let the price of gold soar, which is another way of saying the value of the dollar is in free-fall.

China’s endgame may still be a few years away. Meanwhile, there are other more prosaic explanations for the long decline in gold prices from 2011 to 2015…

The best explanation I’ve heard came from legendary commodities investor Jim Rogers. He personally believes that gold will end up in the $10,000 per ounce range, which I have also predicted. But, Rogers makes the point that no commodity ever goes from a secular bottom to top without a 50% retracement along the way.

The calculation of a retracement necessarily relies on certain assumptions about which baseline to use for the analysis. For instance, gold fell, but traded in a narrow range between $490 per ounce in November 1987, and $255 per ounce in August 1999.

From there, gold turned decisively higher and rose 650% until the peak in 2011. So, the August 1999 low of $255 seems like a reasonable baseline for a retracement calculation.

Based on that, gold rose $1,643 per ounce from August 1999 to September 2011. A 50% retracement of that rally would take $821 per ounce off the price, putting gold at $1,077 when the retracement finished. That’s almost exactly where gold ended up on November 27, 2015 ($1,058 per ounce).

This means the 50% retracement is behind us and gold is set for new all-time highs in the years ahead.

Still, investors have been disappointed so many times since 2011 that they remain skeptical. Why is this rally different? Why should investors believe gold won’t just get slammed again?

The answer is that there’s an important distinction between the 2011-2015 price action and what’s going on now. The four-year decline exhibited a pattern called “lower highs, and lower lows.” While gold rallied, and fell back, each peak was lower than the one before and each valley was lower than the one before also.

The March 2014 high of $1,381 per ounce was lower than the prior October 2012 high of $1,780 per ounce. The November 2015 low of $1,058 per ounce was lower than the prior December 2013 low of $1,202 per ounce. Meanwhile, the overall trend was down.

Since December 2016, as shown in the chart below, it appears that this bear market pattern has reversed. We now see “higher highs, and higher lows,” as part of an overall uptrend.

The February 24, 2017 high of $1,256 per ounce was higher than the prior January 23, 2017 high of $1,217 per ounce. The May 10, 2017 low of $1,218 per ounce was higher than the prior March 14, 2017 low of $1,198 per ounce.

Of course, this new trend is only five months old and is not deterministic. Still, it is an encouraging sign when considered alongside other bullish factors for gold.

The current rally in gold began on December 15, 2016 at $1,128/oz. For over 5 months, gold has Adhered to a pattern in which each new high price is above the one before (“higher highs”), and each drawdown settles at a price above the one before (“higher lows”), If this pattern persists, the next high will be above $1,300/oz. Gold could rally further from there based on Fed policy.

The question for investors today is: Where does the gold market go from here?

We’re seeing a persistent excess of demand over new supply. China and Russia alone are buying more than 100% of annual output each year. That’s on top of normal demand by individuals and the jewelry industry. This means that demand has to be satisfied from existing stocks in vaults.

But western central banks have all but stopped selling in recent years. The last large sales were by Switzerland in the early 2000s and the IMF in 2010.

Private holders are keeping their gold also. On a recent visit to Switzerland, I was informed that secure logistics operators could not build new vaults fast enough and were taking over nuclear-bomb proof mountain bunkers from the Swiss Army to handle the demand for private storage.

With gold sellers disappearing and large demand continuing, the price will have to go up to clear markets — regardless of how much “paper gold” is dumped.

Geopolitics is another powerful factor. The crises in North Korea, Syria, Iran, the South China Sea, and Venezuela are not getting better; they’re getting worse. The headlines may fade in any given week, but geopolitical shocks will return when least expected and send gold soaring in a flight to safety.

Fed policy tightening is normally a headwind for gold. But, the last two times the Fed raised rates — December 14, 2016 and March 15, 2017 — gold rallied as if on cue. Gold is the most forward-looking of any major market. It may be the case that the gold market sees the Fed is tightening into weakness and will eventually over-tighten and cause a recession.

At that point, the Fed will pivot back to easing through forward guidance. That will result in more inflation and a weaker dollar, which is the perfect environment for gold. Look for another Fed rate hike on June 14, and another gold spike to go along with it.

In short, all signs point to higher gold prices in the months ahead. I look for a short-term rally to $1,300 in the next month, and then a more powerful surge toward $1,400 later this year based on Fed ease, geopolitical tensions, and a weaker dollar.

The gold rally that began on December 15, 2016 looks like one that will finally break the bear pattern of lower highs and lower lows, and turn it into the bullish pattern of higher highs and higher lows.

Regards,

Jim Rickards

Crux note: Jim just released a new Urgent Gold Update, urging his readers to start buying gold penny stocks. According to him, Trump is about to sign an executive order that will be HUGE for gold and gold stocks. He explains everything right here.

From Ron Paul at The Ron Paul Institute for Peace and Prosperity:

When it comes to bad foreign policy, the House and Senate are completely bipartisan. Yesterday’s 97-2 Senate vote for more Russia sanctions was a perfect case in point. What justifies yet more sanctions on Russia? Violating the territorial integrity of Ukraine, meddling in the U.S. election, and conducting war in Syria.

But if this is the measure, shouldn’t the Senate sanction the U.S. government as well? After all, the U.S. is violating Syria’s territorial integrity with its illegal base, it has meddled in more than 100 elections since 1945, and it has been fighting a proxy (and real) war against the Syrian government since 2011. But the Deep State wants another Cold War, so (with two brave exceptions) the Senate abides.

From Ron Paul at The Ron Paul Institute for Peace and Prosperity:

A U.S. Navy F-18 shot down a Syrian military aircraft over Syrian territory Sunday, marking the first time the U.S. has engaged in air-to-air combat since the U.S. attack on Yugoslavia in 1999.

U.S. claims that the Syrians were targeting U.S.-backed rebels were undermined by reporting by the generally pro-rebel Syrian Observatory for Human Rights, which stated that according to its sources on the ground the Syrian aircraft was not attacking U.S.-backed anti-government forces.

The Russians, who also had military aircraft near the shot down Syrian jet, claim the U.S. did not provide warning via the hotline to prevent accidents between the U.S. and Russia. As a result, the Russian defense ministry announced that it would track any flying object flying in its area of operations as potential targets. How high will this new tension rise? Tune in to today’s Liberty Report:

From Stansberry Newswire:

Crux note: For the latest updates on investing news that really matters, subscribe to the Stansberry Newswire YouTube channel right here.

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From Jim Rickards, Editor, Rickards’ Gold Speculator:

Russia’s Putin has never taken his eye off the ball. His ambition is not global hegemony or European conquest. Putin seeks what Russia has always sought: regional hegemony and a set of buffer states in eastern Europe and central Asia that can add to Russia’s strategic depth.

It is strategic depth — the capacity to suffer massive invasions and still survive due to an ability to retreat to a core position and stretch enemy supply lines — that enabled Russia to defeat both Napoleon and Hitler. Putin also wants the modicum of respect that would normally accompany that geostrategic goal.

Understanding Putin is not much more complicated than that.

In the twenty-first century, a Russian sphere of influence is not achieved by conquest or subordination in the old Imperial or Communist style. It is achieved by close financial ties, direct foreign investment, free trade zones, treaties, security alliances, and a network of associations that resemble earlier versions of the EU.

Russian military intervention in Crimea and eastern Ukraine is best understood not as a Russian initiative, but as a Russian reaction. It was a response to U.S. and U.K. efforts to attack Russia by pushing aggressively and prematurely for Ukraine membership in NATO. This was done by deposing a Putin ally in Kiev in early 2014.

This is not to justify Russia’s actions, merely to put them in a proper context. The time to peel off Ukraine for NATO was 1999, not 2014.

The Russian-Ukraine situation is a subset of the broader U.S.-Russian relationship. Here, the opposition comes not just from domestic opponents but from the globalist elite.

The Globalist Roots of Today’s Brewing Conflict

Globalization emerged in the 1990s as a consequence of the end of the Cold War and the reunification of Germany. For the first time since 1914, Russia, China and their respective empires could join the U.S., Western Europe and their former colonies in Latin America and Africa in a single global market.

Globalization relied on open borders, free trade, telecommunications, global finance, extended supply chains, cheap labor and freedom of the seas. Globalization as it existed from 1990 to 2007 made steady progress under the Bush-Clinton duopoly of power in the U.S. and like-minded leaders elsewhere. The enemy of globalization was nationalism, but nationalism was nowhere in sight.

The financial crisis of 2007–2008, caused by the elites’ own greed and inability to grasp the statistical properties of risk that was covered in Strategic Intelligence, put an end to the easy gains from globalization.

Ironically, globalization gained in the short-run despite financial calamity. The same elites who created disaster were empowered to “fix” the situation under the auspices of the G20 Leaders’ Summit. This global rescue began with the first G20 summit hastily organized by George W. Bush and Nicolas Sarkozy, then the President of France, in November 2008.

Despite the financial bailouts and central bank easy money of the decade following the crisis, robust self-sustaining growth in line with pre-crisis trends never returned. Instead the world suffered through a ten-year depression (defined as depressed below-trend growth), which continues to this day.

What little growth emerged was captured mostly by the wealthy, which led to the greatest income inequality levels seen in over 80 years.

Discontent was palpable in middle-class and working class populations in the world’s major developed economies. This discontent morphed into political action. The result was the U.K. decision to leave the EU, called “Brexit,” the election of Donald Trump, and the rise of politicians such as Geert Wilders in the Netherlands and Marine Le Pen in France, among others.

Nationalism Strikes Back at the Global Elites

What unites these politicians and political movements is nationalism. This can be defined as a desire to put national interests ahead of globalization. Nationalism can mean closing borders, restricting free trade to help local employment, fighting back against cheap labor and dumping with tariffs and trade adjustment assistance, and rejecting multilateral trade deals in favor of bilateral negotiations.

This brings us to the crux of the U.S.-Russia relationship.

Simply put, Putin and Trump are the two most powerful nationalists in the world. Any rapprochement between Russia and the U.S. is an existential threat to the globalist agenda.

This explains the vitriolic, hysterical, and relentless attacks on Trump and Putin. The globalists have to keep Trump and Putin separated in order to have any hope of reviving the globalist agenda.

Just as Trump and Putin are the champions of nationalism, President Xi Jinping of China and Chancellor Angela Merkel of Germany have emerged as the champions of the globalist camp. Understanding this dynamic requires consideration of the paradoxical roles of Xi and Merkel.

Xi positions himself as the leading advocate of globalization. The truth is more complex. President Xi is the most nationalist of all major leaders. He continually puts China’s long-term interests first without particular regard for the well-being of the rest of the world.

But, China’s military and economic weakness, and potential social instability, require it to cooperate with the rest of the world on trade, climate change, and supply-chain logistics in order to grow. Xi is in a paradoxical position of being nationalist to the core, yet wearing a globalist veneer in order to pursue the nationalist long game.

Angela Merkel, Chancellor of Germany is also in a paradoxical position — but the opposite of Xi’s role. Merkel knows Germany must embrace globalism both because of its unique historical burden of being the source of three major wars (Franco-Prussian, World War I, and World War II), and the necessity of German integration with the EU and Eurozone. At the same time, Merkel has advanced her globalist agenda by promoting German interests through exports and cheap foreign labor.

For the globalists, the world breaks down into Manichean struggle between the nationalists, Trump and Putin, and the globalists, Xi and Merkel. Globalists may be playing a two-sided game of nationalists versus globalists, but they need to widen the aperture to see that the world today is really a three-party game.

There are really only three superpowers in the world today — Russia, China and the U.S. All other nations are secondary or tertiary powers who may be aligned with a superpower, neutral or independent, but who otherwise lack the ability to impose their will on others.

Some analysts may be surprised to see Russia on the superpower list, but the facts are indisputable. Russia is the 12th largest economy in the world, has the largest landmass, is one of the three largest energy producers in the world, has abundant natural resources other than oil, has advanced weapons and space technology, an educated workforce and, of course, has the largest arsenal of nuclear weapons of any country.

Russia has enormous problems including adverse demographics, limited access to oceans, harsh weather, and limited fertile soil. Yet, none of these problems negate Russia’s native strengths.

Notwithstanding the prospect of improved relations, Putin remains the geopolitical chess master he has always been. His long game involves the accumulation of gold, development of alternative payments systems, and ultimate demise of the dollar as the dominant global reserve currency.

All the best,

Jim Rickards

Crux note: According to Jim, geopolitical tensions are likely to boost gold in the second half of the year. But there’s an even greater catalyst he’s watching closely. Jim tells us he has uncovered evidence that Trump is about to sign a new executive order that will send gold soaring, almost immediately… And it will hit Trump’s desk by August 1. Jim explains everything right here.

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From ANTIMEDIA:

Following new sanctions against Russia that President Donald Trump signed into law last week, Moscow responded Monday by announcing Russia will speed up work on reducing the country’s dependence on Western payment systems and the U.S. dollar in general, according to Russia’s state-run RIA Novosti news agency.

“We will of course intensify work related to import substitution, reduction of dependence on U.S. payment systems, on the dollar as a settling currency and so on. It is becoming a vital need,” said Deputy Foreign Minister Sergei Ryabkov on Monday, as cited by RIA.

“(Otherwise) we will always sit on their hook, exactly what they need,” he added.

The sanctions bill, born of U.S. politicians’ continuing accusations that Russia meddled in the 2016 election, was passed by Congress and sent to Trump’s desk for final approval at the end of July.

Russia didn’t wait for the U.S. president’s signature, however, and boldly responded within hours the bill’s congressional passage. As CNN reported:

“President Vladimir Putin has hit back at new American sanctions by ordering the US to cut staff at its diplomatic mission by 755, in Moscow’s most aggressive move against Washington since the final years of the Cold War.”

Trump signed the sanctions bill into law last Wednesday, August 2.

Deputy Foreign Minister Ryabkov’s comments Monday came as his boss, Foreign Minister Sergei Lavrov, and Secretary of State Rex Tillerson met on the sidelines of an Association of Southeast Asian Nations (ASEAN) forum in the Philippines.

Speaking of the U.S.-Russia relationship following his talk with Lavrov, Tillerson said Monday that there exists “serious mistrust between our two countries” but that they “simply have to find some way to deal with that.”

Of the alleged Russian interference in the 2016 election, Tillerson said the U.S. needs to help Russia “understand how serious this incident had been and how seriously it damaged the relationship.”

The secretary of state also said Monday that an official response to Russia’s expulsion of 755 U.S. diplomats at the end of July can be expected by September 1.

From Jim Rickards, Editor, Currency Wars Alert:

At various times in history, feathers have been money. Shells have been money. Dollars and euros are money. Gold and silver are certainly money. Bitcoin and other cryptocurrencies can also be money.

People say some forms of money, such as Bitcoin or U.S. dollars, are not backed by anything.

But that’s not true.

They are backed by one thing: confidence.

If you and I have confidence that something is money and we agree that it’s money, then it’s money. I can call something money, but if nobody else in the world wants it, then it’s not money. The same applies to gold, dollars and cryptocurrencies.

Governments have an edge here, because they make you pay taxes in their money. Put another way, governments essentially create an artificial use case for their own forms of paper money by threatening people with punishment if they do not pay taxes denominated in the government’s own fiat currency.

And the dollar has a monopoly as legal tender for the payment of U.S. taxes. According to John Maynard Keynes and many other economists, it is that ability of state power to coerce tax payments in a specified currency that gives a currency its intrinsic value. This theory of money boils down to saying we value dollars only because we must use them to pay our taxes — otherwise, we go to jail.

So-called cryptocurrencies such as Bitcoin have two main features in common. The first is that they are not issued or regulated by any central bank or single regulatory authority. They are created in accordance with certain computer algorithms and are issued and transferred through a distributed processing network using open source code.

Any particular computer server hosting a cryptocurrency ledger or register could be destroyed, but the existence of the currency would continue to reside on other servers all over the world and could quickly be replicated. It is impossible to destroy a cryptocurrency by attacking any single node or group of nodes.

The second feature in common is encryption, which gives rise to the “crypto” part of the name. It is possible to observe transactions taking place in the so-called block chain, which is a master register of all currency units and transactions.

But the identity of the transacting parties is hidden behind what is believed to be an unbreakable code. Only the transacting parties have the keys needed to decode the information in the block chain in such a way as to obtain use and possession of the currency.

This does not mean that cryptocurrencies are fail-safe. But on the whole, the system works reasonably well and is growing rapidly for both legitimate and illegitimate transactions.

It’s worth pointing out that the U.S. dollar is also a digital cryptocurrency for all intents and purposes. It’s just that dollars are issued by a central bank, the Federal Reserve, while Bitcoin is issued privately. While we may keep a few paper dollars in our wallets from time to time, the vast majority of dollar-denominated transactions, whether in currency or securities form, are conducted digitally.

We pay bills online, pay for purchases via credit card and receive direct deposits to our bank accounts all digitally. These transactions are all encrypted using the same coding techniques as Bitcoin.

The difference is that ownership of our digital dollars is known to certain trusted counterparties such as our banks, brokers and credit card companies, whereas ownership of Bitcoin is known only to the user and is hidden behind the block chain code.

Bitcoin and other cryptocurrencies present certain challenges to the existing system. One problem is that the value of a bitcoin is not constant in terms of U.S. dollars. In fact, that value has been quite volatile, fluctuating between $100 and its present high above $3,400 over the past few years. It’s currently around $3,467.

It’s true that dollars fluctuate in value relative to other currencies such as the euro. But those changes are typically measured in fractions of pennies, not jumps of $100 per day.

One potential solution to the Bitcoin volatility problem I find interesting is to link Bitcoin to gold at a fixed rate. This would require consensus in the Bitcoin community and a sponsor willing to make a market in physical gold at the agreed value in Bitcoin. This kind of gold-backed Bitcoin might even give the dollar a run for its money as a reserve currency, especially if it supported by gold powers such as Russia and China.

Both are looking for ways out of the current system of dollar hegemony, which will only take on added urgency now that the U.S. has imposed harsh sanctions against Russia and is signaling a trade war against China.

Regards,

Jim Rickards

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