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It would seem the time is prime for a reset of the global financial community. Its ben done before with varying degrees of success, but non has given sustainable, balanced solutions,

The 1922 reset was the Genoa Economic and Financial Conference a formal conclave of 34 nations held in Genoa, Italy in 1922. It was planned by British prime minister David Lloyd George to resolve the major economic and political issues facing Europe post WW1, and to deal with the pariah states of Germany and Russia, both of which had been excluded from the Paris Peace Conference of 1919 - not a good move. The conference was particularly interested in developing a strategy to rebuild a defeated Germany, as well as central and eastern European states, and to negotiate a relationship between European capitalist economies and the new Bolshevik regime in Soviet Russia. However, Russia and Germany signed a separate agreement at Rapallo and the result at Genoa was a fiasco with few positive results. The conference did come up with a proposal for resuming the gold standard that was largely put in place by major countries.

My guess is a lot sooner than 3 years. I think it is as soon as the full extent of the economic mess (es) becomes in view. September 2020 is going to be the first set of glimpses of the global and national messes. In Oz the University sector I suspect is insolvent, International students are being flown in (?!). The Tourism sector likewise, Aviation ditto, hospitality ditto, wine industry (I get heavily discounted offers daily, so much so I have filled the cellar and lounge room!), Victoria locked up (except for International sutudents?) in disarray (25% of Australian Economy). Rent forgiven, loan repayments suspended, unemployment benefits skyrocketing, job retention benefits...and who and how is it all payed for? To top up, we pick a trade war with one of our major customers, and then announce we are fortifying our forces to protect our 60,000 km long coast line...when we have sold more than half of the Australian assets out now ...
Gary Schilling has an intersting take, and has warned investors to not be fooled by the recent rebound in stock prices. Shilling draws strong and highly informed parallels between the current market downturn, the 1929 market crash and the 1930s great depression to sound the alarm on "the most disruptive financial and social event since World War II." "Bear markets that accompany recessions last about 11 months, far longer than the recent slump," Shilling said of the current US equity index rallies.
Shilling warned that in 2021 he believes stocks could fall as much as 40%. So where does an investor go ... Cash in the bank in Oz runs at effective -1.95% interest rate!
Prior to the 20s, Shilling wrote, the Dow had seen a matching 48% fall from January 19, 1906 to January 7, 1907 during the financial crisis spurred by the Panic of 1907 - the period that led to the creation of the Federal Reserve system (!)..although there was widespread interest in equities in the 20s, according to the Federal Deposit Insurance Corporation, only 10% of Americans owned any. The buyers that stepped in pushed stocks up 48% until April 17, 1930 but the bullish times didn't end well as the Dow eventually ended up losing 89% from its September 1929 high...etc
Shilling wrote the pandemic is "likely to be the most disruptive financial and social event since World War II with equally long-lasting consequences."
There has been a global lack of quality new gold discoveries (lack of epxloration$, deeper orebodies, grey matter retiring), there is an increase in the time from discovery to development due to environment, social liscense, archeological, anthroplogical issues (no end in sight) and with present prices of course production has been at all time highs, reserves not being replaced.
So for me gold will be sharply on the investment agenda now and into the forseeable future.

Good luck all, but my allocation to gold investment is coming from my cash reserves
best
the gnome

Indeed there is much going on in the world of gold, but in the world of make believe and money all is amazing. The tsunami certainly insight, and in fact is almost with us. I have my Modern Money Theory Primer as bedside reading now, so I can understand some of what is shaping as the new wave of the Millenia, written by an Economist. Coincidentally of course, in February 2019, the first academic textbook based on the theory was published..sigh, worry...students will be forced to study it?

Whats modern money...what was ancient money ...?
Knapp, writing in 1905, argued that "money is a creature (I think he meant creation) of law" rather than a commodity. It is to serve societies needs, and try to make up for all of the shortcomings of various ideologies (there are quite a few!) and economic theories which seem to run the world, and generally run amok. Knapp contrasted his state theory of money with the Gold Standard view of "metallism", where the value of a unit of currency depends on the quantity of precious metal it contains or for which it may be exchanged. Unfortunately gold is not elastic enough to cope with the shortcomings of various ideolgies and theories (hence characterised as a barabaric relict of the past), and threatens to hold those accountable, by exposing the continuing devaluation of the paper money . created at need of the politicians for the need of the people (and on it goes). He argued that the state can create pure paper money and make it exchangeable by recognizing it as legal tender, with the criterion for the money of a state being "that which is accepted at the public pay offices". Profound stuff, the full virtuous circle. The state in effect creates the money which it accepts..funny about that.
Economists are well meaning people, with theories which have little to do with reality (which most of them have never experienced first hand) and hence oddly enough never seem to be able to predict very much of use at all, even great catastrophies (now) ... but when they take over the Central Bank of the world, with various theoretical models with odd assumptions (preclude human nature, avarice, etc) Recalling one of the more sensible things said of recent by an economist ... "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." A Greenspan. CAN, WILL AND DOES, hence its strength, underlain by control of foreign exchange, equity markets etc...
MMT's main tenets are that a government that issues its own fiat money:

Can pay for goods, services, and financial assets without a need to collect money in the form of taxes or debt issuance in advance of such purchases;

Cannot be forced to default on debt denominated in its own currency;

Is only limited in its money creation and purchases by inflation, which accelerates once the real resouources (labour, capital and natural resources) of the economy
Are we there yet Dad?

Nearly

1

A sledge-hammer approach, to say the least downunder ...Treasury estimates that we will see close to a $4 billion reduction in economic activity per week!

But Australian Industry Group chief executive Innes Willox said the border closure "puts up a Berlin Wall between our two biggest states" and cuts in two the country’s main economic artery.

"It is a sledgehammer approach when what is required is focused strategy that is community and hotspot based, and not based on arbitrary borders (BORDERS CHOSEN SO LONG AGO NO ONE REMEMBERS) that split communities," he said.

"Despite any promises that may be made by the states to keep businesses operating across borders, it can be guaranteed that the economic disruption will be immense.

"Albury-Wodonga is a freight hub which will now be divided by a 'show me your papers please' mentality."

Business Council of Australia chief Jennifer Westacott called border closures extreme and said Australia faced living with outbreaks of COVID-19 for a long time.

"We have to manage them as they occur to protect vulnerable people and Australian livelihoods," she said

In Victoria ...It’s not just that Premier Andrews will simply not answer key and very obvious questions about how and why he allowed this debacle to build, instead deflecting such awkward issues to a judicial inquiry conveniently not due to report until September. In Melbourne, the immediate results are increasingly dramatic and damning of the government’s methods over the past few months, as well as being a harsh reminder of future risks...and now there is talk of a lockdown of the Melbourne CBD.

The Vic Govt is now belatedly replacing private security firms with supervision by Corrections Victoria, which is only now recruiting prison guards and parole officers and even out-of-work airline staff. Victorian police hurriedly assembled to patrol the towers only discovered their new duties as they arrived last Saturday afternoon, with the Police Association secretary demanding urgent safety briefings to avoid police unwittingly becoming vectors themselves.
“This is not going to be a pleasant experience for those residents but I have a message for those residents: this is not about punishment but protection,” the Premier of Vic said at after another sombre press conference on Sunday. Its a hell of a lot more sombre for the people of Victoria in lockdown!

go gold
the Gnome

and finally from downunder .... We expect the unemployment rate to peak near 8.4 per cent
in the September quarter before easing toward 7 per cent by December quarter 2021 (and lest not talk about undermployment, those who have retired early etc) .
? The good news for the government is that the Budget was
balanced before the virus crisis hit (magnificent?). That has allowed the
Federal – as well as State and Territory governments – to
provide all the necessary support for economies (was, is past tense?). We
estimate that around $295 billion of fiscal and financial
support (almost 15 per cent of GDP) has been provided by
all governments and the Reserve Bank...read tax payers...
? Budget deficits near $130 billion are expected in 2019/20
and 2021/21 (around 7 per cent of GDP). Net debt may lift
from around 20 per cent of GDP to around 30-35 per cent of
GDP – still low compared with other advanced nations...whew!
? The cash rate is expected to remain at 0.25 per cent until
2022, or until the world can afford to leverage up.
...
? In terms of the sharemarket, last year we noted: “Over
the coming year CommSec expects the All Ordinaries
index to be near 6,700-7,000 points in December 2019
and 6,800-7,100 points in June 2020.” The first forecast
was achieved. Clearly COVID-19 has ensured that the
June 2020 forecast won’t be achieved..nor 2021, 2022 etc
? Over the coming year CommSec expects the All
Ordinaries index to be near 6,100-6,400 points in
December 2020 and 6,500-6,800 points in June 2020.”
? The Aussie dollar is expected to trend higher over the
coming year in line with expectations of economic
recovery at home and abroad (basis for this imaginings?). CommBank currency
strategists are tipping the Aussie dollar to lift to US72 cents by December 2020 and US76 cents by June 2021. But the strategists warn “The increasingly fraught relations between US-China and Australia-China (who is achieving what?) will be an intermittent downside risk to AUD/USD. Some of these tensions reflect ‘great power’ rivalry between the US and
China that will not go away soon.”

and fact the MAIN STREAM MESS is trying to push the China Oz relationship through the brink, and into the ridiculous (wine industry under $1.3 b threat of wine flow to France, Int students under racial threats), for the benefit of whom? I still think the Oz economy is a mess, funding is all but clear, University sector in denial, mining and exploration have further falls in productivity and discoveries are dismal at best, Unions are ascendant...

good luck all
Gold is good for us!!!
Best
the Gnome

Investment returns
? Total returns on Australian shares have fallen by 6.4
per cent over 2019/20 which, if maintained, would be
the first decline in returns in eight years. Returns on
dwellings have lifted by 12.3 per cent while returns on
government bonds have lifted by 4.3 per cent.
Sectors & size groupings
? Of the 22 identified industry sub-sectors, only eight
have recorded gains in 2019/20.
? Leading the gains is Consumer durables & apparel (up
by 45.9 per cent) followed by Pharmaceutical &
Biotech (up 32.3 per cent), Software & services (up
19.9 per cent) and Retailing (up 15.2 per cent).
? At the other end of the scale, Energy has fallen the
most (down 29.2 per cent) from Banks (down 27.9 per
cent) and Insurance (down 23.9 per cent).
? Of the size categories, the MidCap50 has outperformed (down 2.1 per cent) from the Small Ordinaries (down 5.4 per cent), the ASX100 (down 10.6 per cent)
and the ASX50 (down 12 per cent).
What are the implications for investors?
? Now it’s all about COVID-19. The economic outlook depends on the success or otherwise achieved by
governments, health authorities and communities in suppressing the spread of the virus. If the virus is contained
and the active case load remains manageable, then more parts of the economy can re-open and a degree of
normality can return to society and the economy.
? As economies re-open, setbacks can be expected in suppressing the spread of COVID-19. There is no road map
to follow, governments will need to quickly respond to changes in circumstances.
June 24 2020 4
Economic Insights: Year in Review; Year in Preview
? Ideally, a vaccine or treatment will be found. But economies
can still rebound from lockdown-driven lows in the absence
of a vaccine. If and when a vaccine is found, it will still take
time for testing and commercialisation. The main short-term
implication of finding a vaccine is a boost to confidence,
encouraging businesses to invest and hire workers and
encouraging consumers to spend.
? Prospects for sharemarkets will depend on businesses
returning to normal and people returning to their
workplaces.
? CommBank Group economists tip a 3.2 per cent fall in the
global economy in 2020 and then a 4.7 per cent lift in 2021.
In Australia, the economy is tipped to fall 3.9 per cent in
2020 before recovering 3.0 per cent in 2021. The recovery
in Australia will be restrained by the drying up of external
migration, affecting tourism, education and real estate
markets.
? We assume that Australian governments and the Reserve
Bank will live up to the promise of doing “whatever it takes” to
restore the economy to full health – especially restoring
health to the job market. This means leaving the cash rate at
record lows and continuing to provide fiscal support
measures.
? Governments will need to balance health risks with economic
risks. But we expect the Federal Government to live up to the
mantra of protecting jobs. There are still

What does the data show?
Interest rates
Over 2019/20 there have been four interest rate cuts,
each of 25 basis points. The cuts occurred on July 3,
October 2, March 4 and March 20. The cash rate now
stands at a record low of 0.25 per cent or 25 basis points.

The rate cuts in July and October, 2019 were made with
the intention of speeding up the economy and driving
unemployment lower. The rate cuts in March 2020 were
designed to shore up the economy against the
depressing economic effects of COVID-19.

On March 20, the Reserve Bank also set a target for the
3-year government bond yield at 25 basis points. The
Reserve Bank also implemented a term funding facility
designed to provide financial assistance for small and
medium sized businesses.
Currencies
? The Aussie dollar began the financial year near US70
cents and is ending the year near US69 cents. But those values mask some volatility, especially in 2020. The
high for the Aussie was US70.82 cents on July 19. The low (actually a 17-year low) was set on March 19 at
US55.06 cents. The low point largely corresponded to lows for global sharemarkets and marked the peak of the
virus panic – the fears about the spread of the virus and the implications for economies. It has been the most
volatile year for the currency in five years.

Over 2019/20 we have calculated that the Aussie is the
70th strongest currency against the US dollar of 120
currencies tracked (down 1.7 per cent). The currencies of
Netherlands Antilles, Taiwan, Afghanistan and Malawi all
rose 4.0-5.5 per cent. The weakest currencies were from
the economies of Argentina, Brazil, Zambia, the Seychelles
and South Africa. Only 19 currencies of 120 currencies
have lifted against the greenback over the year.

In the first six months of 2020, the Aussie dollar has also
fallen 1.6 per cent against the US dollar, making it the 73rd
strongest of 120 currencies tracked. The currencies of
Japan, Switzerland and Taiwan have lifted by around 1-2
per cent. The weakest currencies are from the economies
of Brazil, Zambia, the Seychelles and South Africa. Only 13
currencies have lifted against the greenback so far this
year.
Commodities
Commodity prices eased over the second half of 2019/20 as COVID-19 fears dominated. The Commodity Research Bureau futures index fell by 24 per cent over 2019/20, but the CommSec daily index eased by only13 per cent.

The difference between the two indexes is gold, with its price up 26 per cent over 2019/20 while beef has risen by 7 per cent and sugar is down by only 4 per cent. Amongst base metal prices, nickel has lifted by almost 1 per cent and copper is down 1.5 per cent. Oil has fallen 31 per cent, while spot natural gas has slid 54 per cent and iron ore is down by
13 per cent.
Sharemarket
The Australian sharemarket started 2019/20 with the All
Ordinaries near 6,700 points and the ASX 200 near 6,620
points. The All Ords is ending the year near 6,060 points
(down 9.4

End Games in times of strife, well there is good form here...
...it has been the prime asset that authorities confiscate when monetary systems fail, and fail they have done, and fail they will...
In 1907, former U.S President, Franklin D. Roosevelt, enacted Executive Order 6814 banning American citizens from owning the gold. In 1959, the Australian Government signed the Banking Act into law allowing Aussie authorities to seize citizen’s precious metals. And in 1966, the British government blocked gold imports and banned Brits from hoarding more than four precious metal coins. These are just a few of the many wealth confiscation episodes over the past century.
Past governments approved these actions without their citizen’s consent to achieve “order” and remove “chaos”, but this is code-speak for theft via temporary authoritarianism. So when the U.S dollar inevitably collapses, if you think this 21st-century U.S administration won’t pursue your precious metals stash, you’ll be in for a surprise when the debtor-in-chief’s “sound-money hit squad” knocks down your door, empties your safe, and gives you nothing in return.
Unfortunately, protecting your purchasing power from a fiat currency system isn’t as straightforward as buying gold, silver, and Bitcoin, and storing it down at your local JPMorgan branch. When it matters, the state will seize your property and will remove your rights to restore — what they believe to be — monetary order, whether that’s via a government-created cryptocurrency backed by gold or a new fiat currency backed by IMF (International Monetary Fund) SDRs (Special Drawing Rights): “the international reserve currency”.
“You’ll be in for a surprise when the debtor-in-chief’s “sound money hit squad” knocks down your door, empties your safe, and gives you nothing in return.”
For the elites to create a new monetary paradigm, they will use any excuse to try to steal your hard-earned wealth when things go wrong. Italian dictator, Benito Mussolini, encouraged citizens to hand over their gold in exchange for steel wristbands bearing the inscription “Gold for the Fatherland”, the Soviet Union banned large private ownership of gold altogether, and Saddam Hussein, the deceased Iraqi dictator, cleaned out citizen’s gold, jewelry, and other valuables while holding them at gunpoint — they traded their assets for their lives.
Despite past events, elites will tell you gold is nothing more than a barbarous relic, a useless lump of shiny rock with no purpose in modern-day society while continuing to amass vast quantities of gold bullion. Since 2000, Russia has increased its reserves by 680%, China has increased its reserves by 393%.. U.S gold reserves remain, backed by a galaxy of debt ...good luck, goodnight
the Gold Gnome

(and there is a bit on gold)
This brings me to the end game under this new monetary regime which will be the devaluation of the US dollar. It will be sudden and come out of nowhere, but the only way out of our mounting debt will be a devaluation. Overnight, tens of trillions of government debt will be wiped out and become worthless to those who hold this debt, be it foreign governments, pensions, companies, or individuals. History is repeating itself or rhyming as Mark Twain once said. There is a lot of rhyming in the decade ahead of us.

Investment Crossroads
We are at a key pivot point in investment history. The monetary environment is going to change the investment landscape going forward. I have found there are very few investment cycles in an investor’s lifetime. These are periods or cycles where the rules of the investment game are altered. The vast majority of investors continue to play by the old rules and end up losing out, or worse, losing money or missing opportunities.

Investors have been following the deflationary trend of the last decade. This was a period when paper assets such as stocks and bonds did well. This led to the index bubble and the proliferation of passive investment strategies. It didn’t matter if you owned stocks or bonds, both made money over the last decade. Simply invest in an index fund, sit back, and enjoy the ride.

Indexing led to extreme market valuations as the index favored large-cap stocks which drove the indexes higher and higher. The result was most of the index returns were concentrated in a handful of stocks as shown in the graph below (chart of S&P 500 sector and member weights).
Indexes are unmanaged and cannot be invested into directly. Note: Past performance does not guarantee future results.
That trend is still present today with the market’s rebound driven by a handful of large-cap stocks shown above. Most stocks within the S&P 500 are still selling at below book value.

The strategy worked until it didn’t. The investment allocation of 60/40 stocks vs. bonds did not protect investors in the fast and furious downturn of February and March 2020. Bonds and stocks lost money. There was only cash and gold.

In my humble opinion, a new trend is rising to take its place as paper money depreciates and loses its value. This will foster a trend towards natural resources, things, and hard assets. In future articles, I will lay out the fundamental shift from paper back to things. I wrote a similar article at the beginning of the 2000s called The Next Big Thing, outlining the merging bull market in commodities (see here: https://www.financialsense.com/contrinbutors/james-j-puplava/next-big-thing).
I have found throughout my long investment career that an investor needs to make very few investment decisions in their lifetime. More at ...
https://www.financialsense.com/blog/19654/end-money-paper-things
Its not just the older people who forget!
best
the Gnome

They don’t need taxes or borrowing for spending since they can print as much money as they need as they have a monopoly on issuing currency.

Translation: they can deficit spend as much as necessary. They can simply print the money to pay for it as they are now doing. Deficits no longer matter nor does debt according to this “new” economic theory.

There is a new book explaining this philosophy that just hit the bookshelves this month. It is titled The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy by Stephanie Kelton. Kelton is an economics professor at Stony Brook and was an economic advisor to the Bernie Sanders campaign. She was also the chief economist for the Democratic staff on the U.S. Senate Budget Committee. The bad news is that her arguments are very readable and will strike the reader of her book as reasoned, plausible, persuasive, and intelligent.

Her argument boils down to a few simple points. Because the government has the legal capability to print unlimited dollars there is no need to worry about spending money or the deficits they create. Thus making it possible to provide funds for any government program the people demand. The government simply prints money to pay for anything the voters or politicians want to provide. MONEY IS SIMPLY FREE. The government doesn’t have to worry about saving or earning money through taxes in the same way as ordinary businesses or households do.

Her arguments are persuasive and give the illusion that sovereign governments are different than you and me. They aren’t confined by the same constraints of money as the corporate and household sector. It is because they have a monopoly on money and the ability to print as much of it as they need.

This philosophy now permeates the country’s elites from government, Wall Street, to academia. Everyone is on board the easy money train which has now left the station. Wall Street loves the idea of free money as it inflates investment markets. Politicians of both parties endorse it as it gives them a license to spend as much money as the public demands. It is also a favorite of academics as is supports the progressive ideas of socialism.

The problem: no one is paying any attention to history and the financial disasters of the past. It is the oldest political trick in the book. Everyone from kings, dictators, prime ministers, and American presidents have tried this approach before. They have all ended in disaster. This was tried in the 70s under Nixon and Carter which led to double-digit inflation and interest rates. Back then there wasn’t the level of debt that now exists in our economy.

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