The Eerie Echoes of the Fall of Rome

Not a week goes by without our leaders and influential public figures getting embroiled in drama that’s absurd or downright humiliating.

It’s like the dying days of Rome, except it’s gone global and digital!

Earlier this week, the US House of Representatives ousted the Republican Speaker of the House, Kevin McCarthy, in a tight vote. This makes him the shortest serving Speaker since 1876.

The irony was that his own party members crossed the floor to join the Democrats in voting for his removal!

His sin? An under-the-table deal to provide funding to Ukraine, against the wishes of the hardliners in his party and a majority of the US population who are tired of sending funds overseas when their homeland is in decay.

Last Tuesday, the Speaker of the House in Canada, Anthony Rota, stepped down after the world witnessed the Canadian Parliament recognise a Ukrainian, Yaroslav Hunka, with a standing ovation for his role in fighting the Soviets in World War 2.

What made this scandalous and awkward was the revelation that Yaroslav served in a Ukrainian Nazi unit that was condemned for war crimes. To top it off, the Polish government initiated a move to extradite Yaroslav to face these charges, adding to the reputational disaster for Canadian Prime Minister Justin Trudeau and his party.

Meanwhile, we have at the head of the world’s most powerful country, US President Joe Biden — who’s barely able to speak coherent sentences or conduct his official duties without suddenly wandering off or blanking out in front of the cameras.

At the same time, his opponent — Former President Donald J. Trump — is facing charges that are piling up as prosecutors hellbent on finding something that’d stick might thereby railroad his campaign to win back the office that he claims was stolen from him in 2020.

You may recall a couple of months ago I said this could be ‘the show of the century’.

Looks like it’s getting even juicier as the weeks roll on…

There are many more things that’s happened in the past week. But I don’t need to labour my point.

As government leaders and public figures fail their duties to serve the interests of the people, preferring instead to pander to their corporate donors and engage in flicking mud at their opponents, it all serves as a smokescreen to the true malaise that matters…

Yes, it’s the economy, stupid!

While the bread and circuses are happening, the global economy cracks

Most of you may’ve suffered stiff losses last month as almost everything started pulling back.

Historically, September is a turbulent month. This year has an added turbulence.

There’re many reasons for that — traders return to their desks after the Northern Hemisphere summer break, the harvest season leading to primary producers participating heavily in the commodities markets and the auspices of various cultures that could move markets, to name a few.

But 2023 has seen the muck from the humungous debt pile thrown into the mix as central banks struggle furiously to keep it under control.

It’s the financial equivalent of the Aegean stables.

But I don’t see the likes of US Federal Reserve’s Jerome Powell, European Central Bank’s Christine Lagarde, Bank of England’s David Bailey, etc. being Hercules to clean the mess they created. More like they’re the cattle that contributes the most bullsh!t (pun intended).

The levels that the markets have reached are largely driven by the unprecedented amount of currencies created by central banks and governments to keep everything going since the subprime crisis threatened to implode the system we live in.

Meanwhile, governments, economists and the mainstream media try to convince us that rising prices are a result of a healthy, growing economy.

Many would buy into this belief. But most of you likely see through this illusion. The reason why you’re invested into the market is that you don’t want to be holding something that’s losing value over time.

This strategy worked very well the past 15 years or so. As central banks slammed the interest rates down to near-zero, with some even going below zero, the price of almost everything rallied.

Let’s have a look at the major market indices and how they performed since 2008:

But the rate rises from 2015–19 forewarned us that the system isn’t as stable as those at the helm want us to believe.

And what we’ve experienced since March 2022 with even more aggressive rate rises has shown us the dreadful reality that this system is disintegrating.

We’re now at a point where interest rates aren’t quite high enough and inflation is again making a comeback, causing the economy to teeter on the edge.

Moreover, each nation is now facing the pressures of the growing internal unrest and dissatisfaction due to social instability, economic uncertainty and a lack of confidence in their leaders.

As mentioned before, it’s getting increasingly obvious that the agenda of those at the top don’t align with the people.

But do these people steering the system care?

I’m sure you know the answer!

The right places will deliver you the right solutions

Besides the obvious signs that those at the top don’t care in their hypocrisy of not practising what they preach, they’ve taken some subtle steps to hide the problems in plain sight.

And they’ve even employed techniques to convince you that you’re seeing what’s not there when you’re on the right track.

Let’s look at the gold price to illustrate this.

There’re many other ways to do it. But this one will stand out like dressing up as a Viking at a toga party.

Over the past 15 years, the price of gold in US dollar terms more than doubled…though not in a straight line.

It surged in 2009–11 before taking a pummelling in 2013–15. Then the secular bull market saw it double in five years from 2015–20, setting an all-time record of US$2,080 in August 2020.

Now most of you know that gold traded over US$2,000 this year in May to July. Even with the recent pullback, it’s trading less than 15% below its all-time highs.

But during this time, the US dollar wasn’t stable. In fact, when gold reached as much as US$1,921 an ounce in September 2011, the US Dollar Index [DXY] was sitting at 75. In 2020 when gold broke this record, the US Dollar Index was 102.

Another important point to note is that the price of gold is closely correlated with the US long-term real yield, or the inflation-adjusted return of US long-term treasury bonds (the 10, 20 and 30-year bonds). They move in opposite directions, as you can see below:

As an aside, many claim that the price of gold is manipulated and that rightfully it should be US$10,000 an ounce or more.

I’ve addressed this in a past article, explaining why that might not be a good thing.

It’s important to note that since early-2021, the real yield rose quickly to levels last seen in 2009.

At that time, gold traded at US$1,000 an ounce. Today it’s $1,825 an ounce, so over 80% higher.

This doesn’t give you the precise picture though.

Let me show you what the relationship between gold and the US long-term real yield like when you adjust the value of the US dollar, which has varied during this period in the figure below:

This figure shows a more pronounced increase of the price of gold since 2009. Gold was worth around US$750 an ounce, compared to US$1,953 an ounce now when we adjust for the US Dollar Index.

That’s a gain of 160%, or double the return that we’re made to believe!

It mightn’t seem obvious to many right now. But more than ever, it’s time to get your hands on gold to protect your wealth.

Many would rather scramble to cash given the recent change in sentiment in the markets.

Fact is, the central banks are up to their necks in their own mess and those in power are now fearing the wrath of the populace.

As government leaders fear that they’re going to hang from the lamp posts, they’ll no doubt exert pressure on the central bankers to backtrack and cut rates.

Then where will inflation go? And what about gold?

History mightn’t repeat itself exactly. Given the world is now in what resembles the dying days of the Roman Empire, we might see the past rallies on steroids play out!

So consider moving some of your assets into precious metals. And it’s not just bullion coins and bars. There’re several ways to play this.

Why not check out my ‘Ultimate Gold Game Plan’ and the story behind why governments around the world are doing whatever it takes to own gold?

Click here to learn more!

God Bless,

Brian Chu,
Editor, The Daily Reckoning Australia