Populism Goes Global; The Smart Money Is Buying Gold. Why?, by Al Martin

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by Al Martin

Populism Goes Global; The Smart Money Is Buying Gold. Why?

(4-4-16) Populism is growing around the world – but it comes in two flavors – Right and Left. And both are rising amid increased political tensions around the world. Why? Because the world’s political cohesion is destabilizing. This cohesion however was artificially created in the aftermath of the Second World War.

Angry at business-as-usual politics and the do-nothing establishment, people have been radicalized and are going Far Left with Bernie Sanders or Far Right with Donald Trump. Now we are seeing the remnants of the political center being dissolved. Globally. This is a result of global stress due to a global political and economic unwinding which is now occurring and has been ongoing since 2008.

The unwinding is divisive politically because people have given up hope and no longer have any faith in the established political parties to address increasing global disunity. However this was all part of the agenda from the beginning – that there would be an unwinding. Now we see a slow-motion unwinding of the artificial constructs after the war that were essentially put together by the United States as a certain economic theorem about capitalism, the belief that capitalism could produce the greatest wealth for the greatest number – even if you corrupted it with politics. Thus crony capitalism is the norm around the world.

So who came up with this agenda of a slow motion collapse? It should be remembered that there was a pre-war military-industrial complex but it was small and not particularly well-organized. In the post-war regime there came into being a much bigger and better-organized military-industrial complex which Eisenhower tried to warn the American people about. First there were the IMF meetings in 1944 as well as the Bretton Woods agreement and then the codicils that got added to those agreements in 1946-47. Then there were the National Security Acts. This was all part of government’s ability to control in a way they had not been able to control in the past.

And how do corporations fit into the picture? It is the corporations that generate the wealth that governments dispose of. Also it is the corporations who through their ownership that act to consolidate wealth. People like to make a distinction and they shouldn’t because all governments are nothing but large corporations. People have always been fed the line that there is a line between government and business and industry, whereas there is no such distinction.

The United States is a corporation just as all nation-states are since a nation-state is nothing more than a large corporation or large business entity. The only difference is that governments don’t go out of business. They simply go from being First-World Powers to Second-World Powers and Third-World Powers. That’s the means by which nation-states are effectively liquidated and the control of them is effectively transferred, for example every Third World nation-state in Africa or all of sub-Saharan Africa. All of the countries started out as European colonial powers and as the Europeans began to unwind their empires, the balance of power shifted. That’s why there were so many in the Roosevelt Regime and even Truman himself who wanted to see the European empires unwound, so American corporations could step in and fill the vacuum – which they largely did. America is its own empire and it is the largest empire on the planet.

However the American Empire is in trouble because the plug is effectively being pulled. So what is the evidence? Government is hamstrung and is unable to proffer any useful fiscal legislation or new fiscal stimulus measures which are desperately needed. Instead they put it on the back of the Fed and all other governments are doing the same forcing their central banks to pull double duty as it were vis-a-vis monetary stimulus which can only go so far.

What is needed now is global fiscal stimulus where governments come in with coordinated tax cuts which is the very essence of fiscal stimulus – and that’s not happening.

The prognosis for the future is that without fiscal stimulus GDP will gradually fall globally as it is doing now. The consequences of that is that there will eventually be a redux of 2008 that becomes far less controllable. The unwinding that began in September 2008 and brought the world very close to teetering on the brink, but central banks still had the ability to control the unwinding of the principal houses like Lehman Brothers Bear Stearns that were involved. Central banks still had the financial resources to manage the unwinding of these problems. Now after so many Quantitative Easing programs have occurred in 2009 till now central bank balance sheets are severely stretched and it’s unlikely that today they have the resources to manage another calamity.

Internet chatter has promoted this idea that the United States will do what Cyprus banks did which is take bank deposits and convert them to bank stock to prop up the banks. The fallacy of that, however, is that US banks are still strong enough and you can’t make the comparison between Cypriot banks and most US banks. The small town banks and even the regional banks – that’s not where the problem is in the United States. The problem is in the large international banks that have more leverage and more exposure and more marginal international debt.

The problem isn’t on Main Street which should be exerting pressure on the political parties to get something done – but they don’t see the problem. There’s no lobby for Main Street and Main Street does what it’s told by the government line. In fact most political parties manipulate Main Street because they know that Main Street doesn’t know the difference.

In fact the great advantage in the post-war regime was having 82% of the US population and 82% of the other principal nation-states constituting the Great Global Unwashed who understand little about economics and markets. That’s what allows manipulation to occur -- the fact that the Great Unwashed know so very little about economics and markets.

To get back to the Global Populist Movements… What’s coming is what makes a difference and markets are telling you what’s coming, namely that the planet is going to enter another deflationary period but unlike deflationary periods in the past, all currencies are going to begin to decline together.

To wrap it up – the fact that the price of gold is defying deflationary pressures in the planet’s economy and, as mentioned before, there are some dark clouds on the horizon. The implications are that gold is reasserting itself as the currency of last resort and that’s why people are accumulating it now. That’s always dangerous. There’s always been a small percentage of the population – maybe 5% - the Die Hard Gold Bugs who just keep buying the gold – no matter what – and burying it in the back yard or whatever. However when you see Big Smart Republican Money buying physical gold, the situation has changed.

The European countries have stopped selling their gold, even as it was the European central banks that had been the principal sellers of gold in the last twenty years. They sold gold because they had to.

Russia had bought gold but stopped doing it in 2012. China hasn’t increased its central bank gold reserve and stopped buying in 2014. The major purchasers at this point are what are called closely-controlled hedge funds and individuals. What you’re seeing however is that the type of individual who is buying gold has changed – and that’s what’s so troublesome. It’s changed from the traditional 5% Doom & Gloomers who don’t understand anything about markets and economics to now gold being accumulated by the top 5% who do understand markets and economics. You’re seeing that it is coming out of equities, debt instruments, and real estate and is moving into physical gold. And that’s a worrisome sign when the top 5% start to move into gold.

Now people who actually do understand markets and economics are seeing where the planet is going to be 10 or 20 years time. That’s why people watch what the top 5% do. They are the ones making decisions that affect markets and economics and that’s when you know there are dark clouds on the horizon.

Stay tuned…

* AL MARTIN is an independent economic-political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. As a former contributor to the Presidential Council of Economic Advisors, Al Martin is considered to be a source of independent analysis for financially sophisticated and market savvy investors.

After working as a broker on Wall Street, Al Martin was involved in the so-called "Iran Contra" Affair as a fundraiser for the Bush Cabal from the covert side of government aka the US Shadow Government.

His memoir, "The Conspirators: Secrets of an Iran Contra Insider," (http://www.almartinraw.com) provides an unprecedented look at the frauds of the Bush Cabal during the Iran Contra era. His weekly column, "Behind the Scenes in the Beltway," is published weekly on Al Martin Raw.com, which also publishes a bimonthly newsletter called "Whistleblower Gazette."

Al Martin's new website "Insider Intelligence" (http://www.insiderintelligence.com) will provide a long term macro-view of world markets and how they are affected by backroom realpolitik.

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