Gold Shock Incoming
- “A credible alternative to Western hegemony”
- The bull market meets turbulence
- You’re going to need a better chip
- An Apple a day (WON’T keep the lawyer away)
- How to solve a problem… Biden helped create!
“A Credible Alternative to Western Hegemony”
“The rise of the BRICS is one of the most interesting and important geopolitical developments of the 21st century,” says Paradigm’s macro expert Jim Rickards.
“In addition to the five founding BRICS members, there are currently eight nations that have formally applied for membership: Algeria, Argentina, Bahrain, Egypt, Indonesia, Iran, Saudi Arabia and the United Arab Emirates.” Seventeen additional countries have expressed interest.
“If Saudi Arabia and Russia are both members,” says Jim, “you would have two of the three largest energy producers in the world under one tent. (The U.S. is the other member of energy’s Big Three).”
A few other BRICS reality checks?
- Measured by landmass, Russia, China, Brazil and India are four of the seven largest countries in the world, “possessing 30% of the Earth’s dry surface, including related natural resources”
- China, India, Brazil and Russia — “with a combined population of 3.2 billion people” — account for 40% of the world’s population
- “China, India, Brazil and Russia” (alongside Saudi Arabia) generate “28% of nominal global GDP,” Jim says.
Plus, this ominous factoid: “Russia and China have two of the three largest nuclear arsenals in the world” — the U.S. being the third nuclear superpower.
“By every measure, BRICS is a substantial and credible alternative to Western hegemony,” says Jim.
“BRICS’ desire to ditch the dollar for international trade in goods and services has gone from a discussion point… to a novelty… to a looming reality in a remarkably short period of time,” he says.
“It’s impossible to check headlines without seeing a new story about major trading partners planning to substitute their local currencies (or in some cases a newly formed currency) for the U.S. dollar in payment channels supporting world trade.”
Jim forecasts: “All of these arrangements will soon be superseded by a new BRICS+ currency, which will be announced in Durban, South Africa, at the annual BRICS leaders’ summit conference on Aug. 22–24, 2023.
“This August meeting is by far the most important BRICS meeting since the founding of the organization in 2006,” Jim explains.
“The BRICS began this process by considering a new currency backed by a basket of commodities such as oil, wheat and copper,” he notes.
Courtesy: Twitter
President Xi Jinping (China), President Vladimir Putin (Russia), former President Jair Bolsonaro (Brazil), Prime Minister Narendra Modi (India) and President Cyril Ramaphosa (South Africa)
“John Maynard Keynes considered the same commodity basket approach in proposing a world currency at Bretton Woods in 1944,” Jim continues. “In the end, Keynes saw… that a single commodity, gold, would better serve the purpose of anchoring a currency.
“Twenty-five years later, in 1969, the IMF created a world currency, the Special Drawing Rights (SDRs) anchored to gold. However, the gold anchor was abandoned in 1974, and the SDR has been tied to a basket of reserve currencies ever since.
“Based on this history, and the impracticality of commodity baskets as uniform stores of value, it appears likely that the new BRICS+ currency will be linked to a weight of gold,” he reasons.
“Just over two months from now” — Aug. 22, 2023 — “will be the biggest upheaval in international finance since 1971,” Jim concludes.
“We know the exact date,” he adds, “but almost no one knows how to react. And the world is unprepared for this geopolitical shock wave.
“This monetary shock has the potential to displace the U.S. dollar as the leading payment currency and reserve currency in just a few years.
“The process by which this will happen is unprecedented, although it bears some resemblance to the elevation of the dollar under Bretton Woods (1944) and the creation of Special Drawing Rights.
“Bretton Woods, SDRs and the BRICS gambit do have one thing in common: gold,” Jim says.
“The dollar stands to lose in value measured in gold or BRICS currency. The dollar will also lose value due to inflation… It will take more dollars to buy imported goods or take vacations abroad, for example.
“Moving money to stocks, bonds or savings accounts won’t protect you because they’re all denominated in dollars,” he adds.
“There’s a simple solution to this coming currency crisis: Just buy gold,” Jim says. “That will preserve wealth and protect you from inflation. You can always sell the gold if you need cash; it’s just that you’ll get more cash than what you used to buy it.
“That’s what the BRICS are doing and you can too,” he says. “Time to hop on the BRICS bandwagon — with gold.”
[“A completely new form of money, made out of a thinly printed sheet of real gold, may be the single-best way to protect your wealth,” Jim says.
“There’s just one catch,” he says. “Since I have a limited number of these… and since it’s just one small part of a massive upgrade I’d like to make to your account…
“I need you to respond to this two-minute message TODAY which explains what this new money is, why it’s so important that you have some… and how to claim yours right away.”]
The Market Meets Turbulence
The 2023 stock market rally has hit an air pocket this week.
After yesterday’s losses, the major U.S. averages are all in the red again today. At last check, the Dow was holding up best — just barely holding the line at 34,000. The S&P 500 is down a third of a percent, sinking further below 4,400. The Nasdaq is down nearly 1% to 13,547.
Amazon is likewise down nearly 1% after word that the FTC is suing the company for “deceptive” practices surrounding sign-up and cancellation for Prime.
Otherwise, Federal Reserve pooh-bahs have resumed their speechifying schedule after last week’s “skip.” Chair Jerome Powell is sticking to his script about more increases on the way because the fight against inflation “has a long way to go.”
Gold is sinking further to $1,933, silver to $22.71. Crude, however, has bounced off the $70 level back to $72.26. And Bitcoin is back above $29,000 for the first time in six weeks.
You’re Going to Need a Better Chip
“The key to understanding recent advancements in AI is understanding a large language model (LLM)... and how big the AI boom could potentially be,” says Paradigm’s chief tech expert Ray Blanco.
“Basically, an LLM is everything a computer has ‘learned’ from an enormous, user-provided set of data,” he says.
“Each ‘lesson’ taught to the model is called a ‘parameter,” Ray explains. Parameters “could be as simple as ‘stop’ being the opposite of ‘go’” — or more complex parameters, for example, such as idioms being metaphorical rather than literal.
“Models are considered to be large language models if they contain more than a billion of these parameters,” says Ray. ChatGPT’s LLM? “The number of parameters… rumored to be around 100 trillion.
“If a parameter represents a lesson learned, the ‘neural network’ is designed to learn how to apply these lessons. This is where machine learning comes in.
“The hardware required to power these complex LLMs is what has driven the biggest AI-related gains in the market,” Ray says.
“Manufacturers of powerful graphics processors, like Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD), have seen demand for their products soar in 2023.
“The performance of companies that have invested heavily in AI has been the difference between the S&P 500 being comfortably in the black for the year and potentially being in the red,” he notes.
And as Goldman Sachs analyst Ben Snider says: “Over the next 10 years, AI could increase productivity by 1.5% per year. And that could increase S&P 500 profits by 30% or more over the next decade.”
Ray’s takeaway: “Artificial intelligence has been very lucrative so far this year, more than most people realize. And it’s likely just the beginning.”
An Apple a Day (WON’T Keep the Lawyer Away)
Since 2017, Apple Inc. has been attempting to trademark the apple in Switzerland… and beyond.
Although the Swiss Institute of Intellectual Property (IPI) partially denied Apple’s request last year, “citing that generic imagery of common items are considered to be in the public domain,” says Mashable. Apple is appealing (a-peel-ing?) the IPI’s decision.
At stake, for instance, would be the logo of the 111-year old organization Fruit Union Suisse (FUS)…
Courtesy: Twitter
“We have a hard time understanding this, because it’s not like they’re trying to protect their bitten apple [logo],” says Jimmy Mariethoz of FUS.
“While the case has left Swiss fruit growers puzzled, it’s part of a global trend,” says Wired. “Apple has made similar requests to dozens of IP authorities around the world, with varying degrees of success.” Japan, Turkey, Israel and Armenia, to name a few, have surrendered to Apple’s whims.
Even the Beatles got roped into a decades-long legal dispute with Apple.
In 1980, “the late George Harrison noticed an advertisement for Apple Computers in a magazine and argued there was a potential for trademark conflict with [iconic record label] Apple Corps,” says The Guardian.
The matter was finally resolved in 2007… with the late Steve Jobs saying: “We love the Beatles, and it has been painful being at odds with them over these trademarks.”
Whatever.
How to Solve a Problem… Biden Helped Create!
“Given that the student debt payments will be started again in the fall, what other way is there to help students who just can't afford the payments?” a longtime reader writes, responding to our request for comments on the end of the federal student-loan moratorium.
“Here's an idea,” he says, “modify the rules governing bankruptcy to allow students to claim it. Yeah, I remember it was Sen. Biden who cut student debt out of the bankruptcy system almost two decades ago. Does he have any remorse?
“If Biden is sincere about helping students, he should write an executive order to allow student debt to be included in bankruptcy filings.”
Emily responds: “Until 2005, private student loans were eligible for bankruptcy protections just like other forms of private credit,” The Guardian says.
But that year, then Sen. Biden broke ranks with most fellow Democrats, helping to pass the Bankruptcy Abuse Prevention and Consumer Protection Act, which granted protections to credit lenders. Notably, the self-same lenders who donated a half million dollars to Biden’s senate campaigns (2003–2008).
Technically, one could still file bankruptcy on federal and private student loans, but the rules were opaque — and even subjective — since the “undue hardship” a borrower had to prove was ill-defined.
The result? “The sum of outstanding educational loans borrowed from private financial entities shot up from $56 billion in 2005 to $150 billion in just 10 years,” The Guardian says.
In November 2022, the Justice and Education departments made changes to streamline the process for broke borrowers seeking to discharge or restructure student loans via bankruptcy. We’ll see…
In the meantime, President Biden has never taken personal responsibility for his role in the student-loan debacle.
“I still do not understand why student loans were paused (skipped) in the first place… and for sooooo long,” says our final contributor today.
“People were being paid to stay home and work, saving huge amounts of money on commuting, lunches out, etc. Actually, I do understand why. Politicos are so far left they had to throw in another bone to ensure they would win elections and pump up the economy.
“I paid my student loans and it was a challenge to do so; however, I also understand that I was the responsible party in this arrangement. Many young people have not been taught responsibility.
“Furthermore, I've long stated that universities — sitting on mountains of cash — should have some skin in the game. They should be on the hook, not taxpayers.”
Emily responds: As someone who worked several years in the treasurer’s office at an Ivy League-adjacent university, “mountains of cash” pretty much nails it. (I’ll never forget fraught December days when bona fide members of the one percent would try to sneak in their end-of-year charitable donations at the eleventh hour — sometimes for staggering sums and, sometimes, actually calling in-person. Yeah, I’ve got some stories!)
For years, Harvard’s monstrous endowment locked in top position among university endowments; however, for a couple years now, Stanford’s current $75 billion pile has outstripped Harvard’s by about $2 billion. Still, here’s an eye-popping stat for you: Harvard’s endowment per student is $1,745,235.
“When Harvard’s total admitted freshman class is 1,400 people,” snarked Professor Scott Galloway of NYU in 2021, “they’re not a nonprofit, they’re a hedge fund educating the children of their investors.” Word.
We appreciate your feedback! Join us tomorrow for another 5 Bullets episode.
Best regards,
Emily Clancy
Associate editor, Paradigm Pressroom's 5 Bullets
