Lessons From Russia

March 11, 2022

If there was ever a time in history when one should hold gold, silver and hard assets now appears to be the time. Gold and silver, in particular, have shown their value in time of crisis. When Venezuela went into hyperinflation gold and silver- along with all the necessities of life went to unimaginable levels. The lesson: you could still afford (if you could find anything to buy) what you could have bought BEFORE the crisis. It would be a good idea to have your necessities in abundance BEFORE it is obvious that you need to do so. As advertised- gold and silver held their value (because they actually have intrinsic value) as fiat currencies collapse.

This is a major reason that the central banks and their owners- the major banks keep the price of gold and silver suppressed. They measure the US dollar’s worth against other fiat (backed by nothing also) currencies to give the illusion of dollar strength. This allows them to have a higher perceived than actual value. Of course, when you can create hundreds of trillions at virtually no cost and with no real tangible wealth created- just purchasing power- what is the value of THAT anyway?

The US dollar is, and has been, in my opinion, being destroyed on purpose to usher in a new currency system- likely Central Bank Digital Currencies. The lesson we are likely to learn is that when you have the world’s reserve currency it is meant to be a store of value and used to settle trades. It is also meant to be used by EVERYONE. Since the US has been weaponizing the dollar many countries have been actively looking to circumvent the US’s ability to shut them out of the economic loop.

The reserve currency status of the US dollar is ALL that has allowed us to live FAR beyond our means for far longer than anyone could have imagined and now we are likely hastening the world’s exit from the US Dollar system. When you can use a currency as a weapon and have shown yourself willing to do so then your “enemies” really have no choice but to find an alternative solution- which actually already exists and may grow exponentially in the next few months.

In the past this financial warfare was only used against smaller economies and against “enemies” that couldn’t really fight back. Now, the NATO allies are poking the Russian Bear which could lead to MASSIVE inflation because of all of the natural resources they produce. In addition, it appears that they have a friend in China that is more than willing to buy whatever the west declines. This would only lead to even higher prices both here and in Europe.

It appears we are losing friends quickly as Russia and China appear to have their own agenda and even our historical partners in the Middle East, like the UAE and Saudi Arabia are refusing calls from our president but are taking calls from Putin. They are also buying HIS military equipment- not ours. Even Turkey (NATO Member) chose the Russian missile defense system over ours because of its superior capabilities.

When all we do is “print” money and buy stuff that the rest of the world has been producing that can only last so long. Last year, for example, the US imported $1.1 TRILLION more than we exported in goods (actual hard products). Only by figuring in Financial Services, Travel and intellectual property rights was the reported trade deficit $859.1 BILLION- financed with DEBT.

I believe the world is noticing that the US is the most indebted nation in the history of the world and that those “Promises to Repay” just might be being made in a currency which will have FAR lower “value” than was originally anticipated.

Central Banks, who can crank out trillions with a few keystrokes have been buying gold in record amounts for the last 4 years. It appears to me they see the writing on the wall.

I’m sure they know the meaning of “Those who hold the gold make the rules”.

In the meantime, Russia’s stock market has been closed since the outbreak of the Ukraine war with no opening date in sight. This is another lesson we may learn. When markets collapse, those in charge will close down “markets” to, in all likelihood, make sure the entire complex doesn’t collapse and save the hides of the 1%ers who would be most injured by the action. Just last year we got a small glimpse when major players were getting hammered in a short squeeze and the rules changed in the blink of an eye to save those close to those “in charge”.

Of course, many will tell me that this couldn’t happen here. We are “printing” and feigning wealth just like Venezuela. Our prices are starting to resemble the beginnings of the Weimar Germany hyperinflation episode and our mainstream media are telling us we have a great economy as we watch it collapse right before our eyes just like in the old Soviet Union.

In times of crisis, you need to have assets available. Here in the USA the “markets” have been closed numerous times- the last couple were December 2008 when losses tripped the wire and the markets closed for the day. After 9/11 the markets were closed for 6 days. 1987 crash- closed for the day. 1914 at the start of World War 1 the markets were closed for 4 MONTHS. In 1873 for 10 days and in 1865 for a week when the president was assassinated.

Let’s not forget the “bank holidays” in the 1930s when banks were closed and many were never to reopen. Today we have the FDIC but they have only a fraction of a percent of the “money” they insure and the major banks- which are more like gambling casinos than banks have hundreds of trillions of dollars in derivative exposure that could never be covered in the event of an implosion in that space.

Since we can’t anticipate what may happen or for how long we may not be able to access funds I believe it is prudent to have cash, necessities of life and barterable goods on hand.

In my opinion the most likely outcome of all of this is that Russia and China will be offering a new sort of SWIFT system (they both have their own versions) and this will make the world’s reliance on the US dollar to fall. It is likely to start off slow and pick up steam. I believe that by the end of this year we could see a MAJOR dollar devaluation that is actually, long overdue. This is likely to lead to prices for food, fuel, energy and all the necessities of life to skyrocket.

For those with “money” in the bank- good luck. The reported inflation is 7.9% and is actually 15%. Your deposit, if it is earning 1/10th. of a percent, is losing you a fortune.

If you have $100,000.00 in the bank at 1/10th.% you would earn $100.00 for the year. 1% would earn you $1000.00.  At 7.9% inflation you would need $7900.00 more next year to have the same purchasing power you have now. At 15% inflation you would need $15,000.00 more than today. How “SAFE” is that?

I have written many times in the past decade that nothing is “safe”. I believe the only way to maneuver through this is to have assets everywhere and to be as diversified as possible. It appears that cash should be held not only in dollars but also other currencies. Gold and silver should, in my opinion, be a portion of everyone’s portfolio and that stocks should be bought with a keen eye on earnings, dividends and SOLVENCY. Companies that are over-indebted are far more likely to go to ZERO than a company with a strong balance sheet. It also appears that quality short-term bonds and foreign bonds may be more attractive than longer-dated and lower quality bonds as economic reality appears to be exposing itself. The 40-year lower interest rate cycle appears to be over.

The world is full of financial pitfalls at this time. It is likely that the decisions you make in the next few months could have a dramatic effect on your future financial position. Those counting on 60/40 portfolios and the “market always goes up” and the “Fed has our back” memes are, in my opinion, likely to be gravely disappointed.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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