What To Own When The Inevitable Currency Wars Begin

Fasten your bra straps and remove your dentures. Things are about to get bumpy.

Currency Wars

We’ve felt are the next logical step on the geopolitical landscape. And then last week we saw this

The Tehran News agency has reported that Iran intends to launch a gold-backed cryptocurrency. This comes less than a week after President Trump slammed virtual currencies on Twitter amid tensions between the historic foes. The New agency reported the development on its English website.

This will certainly raise blood pressure over at the Trump administration, though I don’t see how it solves Iran’s problem.

Iran’s shut out of the SWIFT network. As a result, their economy is starved of a godawful amount of trade, which would otherwise be conducted via the international banking system. Creating a digital currency — even one backed by gold — doesn’t solve that problem any more than creating another worthless piece of government-backed paper would.

Bitcoin

They’d be far better off using a currency they have no control over, but which incidentally nobody has control over. One that can be banned (as has already happened in many countries) but cannot be stopped because it’s decentralized.

They won’t though because governments always seek power and control, and this would deny them both of those things. So instead they’ll take the kernel of a good idea and go and completely cock it up.

What it does mean, though, is that at an international level, rather large players are increasingly looking at alternatives.

Why? Because they are being forced into a corner, and when folks are forced into corners they do things they’d have not dreamed of only a few minutes prior.

The interesting thing with Bitcoin is that its utility value actually increases when it is banned. Provided the government that is banning its use is simultaneously banning it because it provides an escape from their own mismanagement of their own currency, then its utility value becomes asymmetric.

To prove my point, all you need to do is go and look at the long list of countries where it’s worked spectacularly well. Zimbabwe, Venezuela, Cyprus, Argentina.

More often than not, when a government bans the use of Bitcoin, you’re looking at a precursor to currency carnage. And so if you’re smart you do exactly what you need to do to survive.

So the bearded boys over in Tehran figured out the crypto part is actually a rather revolutionary and, dare I say it, good idea.

Good for them, but creating a centralised cryptocurrency controlled by these folks —or any government for that matter — is useless.

Gold

One issue that many folks have with Bitcoin is that it’s not tangible. Fair enough, and perhaps those same bearded folks thought to themselves, “I know we’ll solve that one and we’ll back it with gold.”

“Iran’s cryptocurrency will be supported by gold, but its function is similar to other cryptocurrencies. The crypto asset is designed to maximize the use of Iranian frozen bank assets.”

But that begs the question for the rest of us. If the Iranians create a gold-backed digital currency, would you want to own it? Would anyone want to own it? Would others be happy to settle trade with it?

Let’s think about this.

For starters, anyone trading in that currency will very quickly find themselves being put on a black-list immediately by someone. And when I say someone obviously I mean “the Donald”.

So no. And though I read a nonsensical article from a marketer publisher who was trying to flog this Iranian gold idea as the death of the dollar or some hogwash, the fact is if you want to own gold, you know what you do? You go buy some. There ya go. I just saved you $49. Thank me later.

Which brings me to dollars.

Right now don’t look but there are some serious problems in Europe’s banking sector. And remember, European banks have issued a isht ton of dollars. That’s a wee bit of a problem as they now face a negative yield curve and a rising dollar.

That’s NOT dollar negative. In fact, it’s a perfect environment for them to hoard dollars, which incidentally is what they’re beginning to do.

The feedback loop here is that this pushes the cost of borrowing dollars higher, creating an increasing shortage of dollars in the system. And THAT sure ain’t bearish for the greenback.

Now while all of this is taking place, the shiny metal itself seems to be sniffing out the thing we’ve known all along.

The world’s currencies (those that matter) are managed by central banks, who’ve created a monstrosity not one of us could have envisioned a couple of decades prior. There is no “fix”. It’s a strange set of circumstances. One where the dollar looks set to run, even though ultimately it’s not going to be “fixed” and one where gold has broken out.

Now, I don’t have a crystal ball. And I don’t know how all of this actually “fixes” itself. But what I do know is that the markets right now are telling us something, and I also know that buying protection is still absurdly cheap.

In fact, within the gold mining sector the deals we’re seeing are remarkable. Remarkable because the industry has been and still is starved for capital.

Only Sensible Purchases

And on that note, one of the very reasons I brought on an experienced mining engineer (Jamie Keech) to join our merry band of men here is because when you see this sort of playing field in front of you, it’s only sensible to buy what’s on sale while few others will, and that means sorting out the wheat from the chaff when it comes to resource companies and deals. And THAT is something best left to men who actually enjoy rocks and understand the ins and outs of the resource markets.

Jamie has recently secured an amazing opportunity in a private gold deal with the veritable who’s who of industry leaders and financiers.

It is where a portion of my own capital is being allocated to and if you’re an accredited investor, I’d invite you to take a look. Right now we can show you exactly what the particular deal is which is an unusual situation but one you should take advantage of.

To sum it up, I think you should own gold. That’s easy as mentioned before. And if you want to leverage what is a rare setup, one which you get only while we’re still at the lows in the cycle, there really is nothing quite like private placements, which is precisely what we’re doing here.

-Chris

…those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold. Additionally, for reasons I will explain in the near future, most investors are underweighted in such assets…” — Ray Dalio, July 2019

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