Summary
Transcript
What if I told you the U.S. Federal Reserve could be contemplating a move so big, so radical, it sounds completely crazy, except for the fact it’s actually been done before in the past. Now this move is so big. We’re talking five trillion dollars big and it involves the Fed, the U.S. Treasury, dollars, gold, and ultimately a power struggle over the future of the monetary system. And again, all we have to do is look back in history to see this could be done again the same way, and maybe sooner than later. So in this video, I’m going to break down why the U.S.
might be forced to make another massive historic move, how this drastic move would impact the U.S.-China economic power dynamic. We’re going to look at the potential risks and global implications of this move, and of course, what this all means for our investments. Now real quick, if you’re new to the channel, my name is Mark Moss. I founded, exited multiple tech companies, I developed multiple aid figures worth of real estate, and then 2008 came and made me realize that I was missing the bigger picture, the macroeconomic picture, and it cost me big time.
I’ve been studying it for now the last 12 years. I’ve been teaching it here on this channel for about five years, and I want to help you avoid the same mistakes that I made. And this move that’s setting up today could be really big, and it seems almost a certain move. So let’s jump right in. All right, jumping right in, we are going to jump right into history. My favorite subject, the only one I really liked in school, and of course, that’s why I use them in all my videos. And more importantly, the reason why I use history in all my videos is because, yes, history rhymes.
Those who don’t know history are bound to repeat it. And so what I’m going to talk about today seems completely crazy, except for it’s been down in the past. So if you don’t know your history, you think it could never happen, except for it has, and it most likely will again. We don’t know exactly when, let’s jump in. So history rhymes. Now let’s go backwards to 1934. We’re coming out of the Great Depression, not just the United States, but the rest of the world, we’re going through sovereign debt crisis. All the governments of the world won bankrupt because of the world wars that were being fought, and the United States coming out of the Great Depression was suffering from a sovereign debt crisis.
Basically, the United States didn’t have enough money to pay its debt and obligations. Now, people in the government, Biden, Janet Yellen, et cetera, they’re going to tell you the never defaulted. Of course, that’s absolutely not true. So in 1934, the US, the rest of the world and the US was in a massive debt crisis. The problem was that the US government owed a lot of money. And at that time, gold was money. Dollars were not money. Dollars were debt obligations. They were a claim to the gold. Gold was money at this time.
It’s not anymore, but it was at that time. So the government owed gold, not dollars, the government owed gold. Now, so what happened is at the present at that time, we’re talking about FDR, he decided to do an executive order known as 6102. Now, basically, it was called the Gold Reserve Act of 1934. You can look it up, executive order 6102. And basically, what happened is they, one, decided to just seize all the gold from Americans. That was only part of it. But really, what they did is they defaulted on their debt.
They seized the gold. Congress devalued the dollar from $20 to $35 an ounce, which reduced the power, purchasing power by 40% overnight. Now, again, to Janet Yellen saying that the government’s never defaulted. Well, they have. The US offered to pay its creditors in paper dollars, but only in new devalued dollars. So the government owed gold. They said, we’re not going to give you gold. We’re going to give you dollars. And as a matter of fact, we’re going to give you these brand new devalued dollars, 40% devalued. The constitution default on these Liberty bonds constituted a default on Liberty bonds because they owed the bonds payable in gold since the Supreme Court noted in Perry versus the United States.
So this is not really open for debate. The Supreme Court ruled on this Supreme Court Perry versus the United States and said, this was a default. Okay. I’m not going to get super deep into that, but we need to understand why this happened. Okay. So the base of the monetary system was in gold. The government didn’t have enough money to pay the gold. So what they did is they revalued the gold. This is the key piece. They revalued the base. By doing that, they expanded the money, monetary supply. So they went from $20 an ounce, right? And they increased it and they expanded the money supply.
So now let’s fast forward to today and see where we’re at. Well, we’re in a very similar situation today. The U S government has $35 trillion of debt. It’s a mountain of debt, but the problem with the debt, isn’t that it’s just so big, 35 trillion it’s managing the debt. So for example, right now our debt to GDP is 120%, maybe a little bit over that. Now the problem with that is per Hirschman capital, no governments have survived being in that much debt. Once you get over 125% debt to GDP, it’s pretty much game over.
The other problem is that the interest on the debt is unmanageable. It’s over a trillion dollars interest on the debt, which is more than we spend on the military. And so the problem is when you want to get out of that, you don’t have a lot of options. You’d have basically four. Number one, you could have a miracle and you could grow your way out of it. Uh, that’s highly unlikely at the rate that the monetary base or the debt’s expanding and the rate, the rate of GDP growth. So that’s unlikely. Uh, number two, you could tax your way out of it, except for if we seized a hundred percent of the wealth from the billionaires, it would barely be a drop in the bucket.
Uh, three, what you could do is, uh, go in massive austerity. So just slash the budget and try to live under your means. That’s probably not gonna happen. So then number four, the fourth option is a default like was done not that long ago. So what does that look like and what options do we have? So, uh, if we want to revive the playbook from back then, again, I know it sounds crazy, except for it was done before, uh, what we could do is we would revalue Fort Knox. So in the United States, Fort Knox holds all the gold there’s about rumored to be allegedly, we don’t know, it’s never been audited.
Uh, 147 million ounces or somewhere a little over 8,000 tons of gold is sitting there in Fort Knox. Now the book value of this was set in the 70s before we started to get off the gold standard. And so the book value is at $42 an ounce. So we’re sitting on 147 million ounces at only $42 an ounce. Now, one thing the government could do, and again, sounds crazy, but it was done in the past is to revalue the gold, to re monetize the base and expand the base. So we could take the gold from $42 an ounce to $20,000 an ounce.
Now, before this, uh, you, you, you click off and think this is crazy. Let’s break this down. If we did this, if we took the goal from $42 an ounce to 20,000 an ounce, and most people think that the gold has been suppressed and they don’t want the price of gold to rise, which has maybe been true. They don’t want it to rise until they’re ready for it to rise. So, uh, just like they did went from $20 an ounce to $35 an ounce, they could take it from $42 an ounce to 20,000 an ounce.
And that would add $5 trillion to the U S treasury’s balance sheet. Now, when there’s $35 trillion of debt, $5 trillion doesn’t sound like a whole lot of money. However, it is in some regards. So for example, that debt, that $5 trillion could be paid onto the long-term debt, which is the highest interest rate. And so that could greatly reduce the amount of interest debt that that’s owed. Uh, so that makes the debt service much more manageable. So we have interest rates coming down already. We pay off the big debt that has the higher interest rates.
We can bring this debt service number way down, which makes it more, um, much more serviceable. The other thing that would do is we’d increase the dollar perception. So right now, other governments of the world see the fiscal problem that we have in the United States, how much money is being printed, how quickly the base is being debased. And, uh, there’s a lot less demand for treasuries that we see the rise of the bricks and Russia and China, and they don’t want to store their wealth on us treasuries anymore. The, they’re buying gold instead and things like that.
And if they were to do that, it would increase the perception of the dollars now being stronger. The debt to GDP would be lower. It’d be backed by gold. And so then it might have more demand for the United States. There’s a lot of reasons why the U S would want to do this. However, it’s not just that simple. There’s another reason why the U S would want to do this. And this really comes down to the economic power struggle that’s going on between two Titans, the U S and China. Of course, the U S is the basically the dollar base monetary system that we’ve had.
And China has been the rising power that’s now threatening, challenging the supremacy of the U S dollar. So here’s where things get interesting. Would the U S want to just do this out of the goodness of their art? Of course not. Would they want to do this to save their debt situation? Maybe, maybe we’re not that far along, but in the face of what China’s doing, this is where things get interesting. So what am I talking about? In the game, in this global economic game, you have a first mover advantage.
So China is ramping up to do something. And if they do it first, the U S would be left out in the cold. However, the U S moves first, they could basically neutralize China’s advantage. Let’s break this down. Okay. So China we know has been increasing the amount of gold they’ve have now, China doesn’t really tell the world how much they have, I guess, similar to how Fort Knox hasn’t really been audited either. But what we do know is at least over the last decade, China has allowed massive amounts of companies to come in and mine gold in China.
However, that the gold can’t leave China. So come mine in China, but then sell it to China. China has also been importing massive amounts of gold. They don’t really report this properly. They buy it through proxy banks and things like this. So it’s all sort of hidden, hidden off the books. There’s a couple of reasons why they would do this. Number one, they don’t want to show the world how much gold they’re buying. Cause that could push the price of gold up too much. You don’t want to tell the world, uh, you don’t want to push the price of gold up.
If you’re trying to buy a bunch of it, number two, maybe a sneak attack. They want to come out and just announce what they have and set the world into a shock. And that’s exactly what we’re talking about. So what China has been doing is buying lots of gold. There’s reports, maybe up to 2023, they had 2000 tons of gold. Uh, Jim Rickard says that they probably have up to 4,000 tons of gold. They could have even more. We don’t really know. We know that China, so with their private holdings might be as much as 28,000 tons of gold.
Um, and I guess they could seize that like the U S did at one point, they are a communist nation. And so the China has been buying all this gold. Now we know that they are starting to back their currency with gold, which has now started to facilitate a lot of trade over for oil and Saudi Arabia, things like that. So they are already responsible for pushing the price of gold up by using it with their currency. So they’ve been cornering the gold market. They’ve been buying a lot of gold and they’re already starting to back their currency with gold, which is pushing the price of gold up.
And so one day they could just say, okay, we’re going to be fully backed by gold, at least to some percentage, which could push their currency up into a lot of demand. But the problem is that would then push the U S dollar out. So we already have these bricks power struggle over which currency to use, where to store their savings. And so if China were to do that, if you start to pull away from the dollar, go to China. However, if the U S does at first, they could basically squash China’s ambitions by U S doing that, it would reinforce the dollar strength.
So it’s already got the network effects. It’s already there. It’d become very strong. Number two, it would discourage all these nations from moving away. So all these bricks nations, it could bring them back into the fold. And so really what we’re talking about is geopolitics, the power struggle over the world, more than just economics. All right. So you have to look at both. You have to understand the power struggle as well as the economics of this, but really it’s a gamble, right? It’s a gamble. What happens if this, if this happens and if like, like all issues, there’s good and bad things are good and bad at the same time.
So there’s risk and reward of this happening. What would be the rewards of the United States doing this first pre-emptying the move? Well, obviously $5 trillion could go into the economy, bring down the debt, bring down the jet debt to GDP levels. We would see better debt service, right? And be able to manage that better reduce the debt burden. We’d have a buffer against any downturn. So now the US treasury would sort of have this war chest. So if there’s any more recessions or anything like that, trade wars, they’d have a buffer against that.
And again, like I said, it would also reinforce the dollar’s reign. So now as sort of countries are starting to try to move away from the dollar, it would bring all that back in and sort of cement King dollars position, at least temporarily. However, there’s also risks. So some of the risks would be one massive inflation. Now, you know, I’m an inflation bull. All I talk about is get ready because there’s a lot of inflation coming. And so we can see a lot of inflation by bringing $5 trillion direct into the economy.
You think in 2022 with all the stimulus that we had, we got up to 9.1% CPI consumer price inflation. That might be nothing if we were to see that. Number two, we could see tensions with trade partners. So obviously the whole world depends on each other. The United States specifically depends on lots of nations like China to give us goods. And so if we did that, if we create a lot more attention with these potential trade partners, it could instigate start off a lot more currency wars, because obviously the US is doing this to manipulate their currency and other nations would then start to manipulate their currencies in response to that.
We could also have a lot of domestic opposition to this. So there’s, you know, the United States government is not a monolith. We’re supposed to be a constitutional republic. And so there’s a lot of people inside the government that have different opinions, as well as the people in the United States. And there could be a lot of domestic opposition to this. So potential risks and potential rewards. But the game theory is here, China looks to be going this direction. The rest of the world is starting to move over towards China. And if the US wants to save itself, it would have to do this before China announces it.
And we don’t know when China is going to announce it. So the game theory is in effect. Now, what are we gonna do about it? What’s our move as investors as pawns in this game? Before we get to that, I want to just take a quick second just to tell you about one of the show sponsors that sponsoring this episode, talking about US gold mining, they trade on the NASDAQ with the ticker symbol USGO. And what I really like about this company is that they have no debt, they have about $8.2 million in cash, their stock prices around $9 a share, give or take when when you watch this video, and right now the stock is all the way down about 40% from their 2023 IPO price.
And this is an important piece to understand because back in April of 2023, gold was only $1930 an ounce today, gold’s worth $2600 an ounce, almost 40% more. And now finally, we’re starting to see that the gold miners are starting to catch up to this. Now, one rule of thumb, you know, from investing is that you buy when assets are cheap. But also, you never want to catch a falling knife either, right? So what I like about USGO is that they’ve been cheap for a long time, and it still is, but the knife seems to have stopped falling, and it’s actually back on the uptrend.
Now, there’s two big catalysts for this, one being that the price of gold, like I said, is going up, and it’s going fast, it’s almost up 40%. And like I said, the stock is starting to catch up. But the bigger news on September 30, they released great data about what their drilling results have been. And this has really been a catalyst for the stock, we can see this report, I’ll link to it in the show notes down below if you want to read it. But this came out September 30, right here.
And it says that this Whistler deposit, one of their big deposits right here, they found high grade core 652 meters, 73 grams per ton. And so this report finding this really good gold is what’s pushing the market back up. So we’re starting to see a massive shift in what’s going on. But even though the price of the stock is being pushed up, it’s still really cheap. Like I said, the company’s market caps about 108 million right now. And their flagship gold, copper, you know, the silver projects include three gold deposits totaling 3 million ounces equivalent in the indicated category plus an additional 3.4 million gold equivalent ounces in the inferred category.
So I believe that this move right here, their latest drilling report is a really big deal. Now, it’s not just a big deal on their drilling reports. Of course, as any investor, we don’t just want cheap plays. What we want is companies that have great leadership that can actually build the company and push the value for shareholders. And USGO has some of the best leadership running the show. The CEO here Tim Smith came to US gold mining from Newmont. Now you might know that name. It’s a hundred year old producer. It’s the largest gold mining company in the world.
And let’s just say that he’s sort of connected in Alaska. And especially in this region. Here he is with the governor of Alaska, Dunleavy. And while he was there visiting the company and the Whistler project, he was talking about his goal to build access roads to support this economic growth in Alaska. Specifically, he wants to build roads to this Whistler region with this transportation infrastructure that they’re doing to really bring this economic activity, which of course is really going to help this mining project. This is huge. Now back to the CEO Tim Smith.
Before Newmont, he worked for Goldcorp. Now that’s one of the biggest gold producers in the world. And then they merged. Now before that, he worked for Kamenet Gold Corporation, which discovered the coffee deposit in the Yukon. And he advanced this resource until Goldcorp acquired it for about 520 million Canadian. This is one of the most legendary buyouts of the past decade. Now, so far, gold miners have been cheap, right? They’ve been hated, which is what smart investors want. We want cheap and hated. But we want them when they’re ready to move to the upside.
And this is exactly what the market seems to be thinking. As a matter of fact, Michael Hartnett, he’s the chief investment officer for Bank of America is saying that the best plays are recessionary commodities and resources, which is also a big hedge in 2023. So gold miners have been cheap, and they’ve been hated, which is what smart investors look for, right? Cheap and hated. But we want them when they’re ready to move on the upside. And this is exactly what the market is thinking. Now recently, Michael Hartnett, he’s the chief investment officer for Bank of America, he said that the best plays are recessionary commodities and resources, right? So he thinks this is the place to be we have gold on the move globally, we have gold and gold stocks finally starting to catch up and break out.
I’ve been talking about them for a long time. It’s been longer than expected, but they’re breaking out. We have finally not just the Fed, but other central banks are in a rate cut cycle. It’s just getting started. And USGO is still about 40% off of where it was previously on its old time high. All right, now that’s it for the sponsor. Check it out. I’ll link it down below. If you want to give it a look, at least put it on your watch list. It’s definitely one you should be watching. But let’s go back to what we should be thinking as US and China finished this power struggle that they have.
So as I kind of said, I’m an inflation bull. Inflation seems inevitable. Regardless of which way the US government goes, even if they don’t do this play, then they’re gonna have to deal with this debt, which means they’re gonna have to continue printing, or they do this play and they get more debt. And we’re still going to see the power start with other countries, and that’s going to be more inflation. And so inflation seems inevitable. Also, currency manipulation is coming. So whether the US just continues printing, that’s manipulation, or they do a gold revaluation, or China, we’re going to see currency manipulation, which leads us back to more inflation.
Because of that, we want to be buying gold and other hard assets, right? They’re going to be climbing. So gold, other hard assets, Bitcoin, real estate, things like that. And we want to front run the news. Again, we know what’s inevitable. I don’t know the timeframe, but we know it’s inevitable. We can see China already angling, you can look at the news with Saudi Arabia and trading with gold. And so we have an opportunity to front run the news knowing what’s inevitable and move into these positions before it’s too late. All right, that’s what I got.
Let me know what you think about this video. Give me a thumbs up if you like it, thumbs down if you don’t, that’s okay. At least leave me a comment and tell me why. And that’s what I got. All right, to your success. I’m out. [tr:trw].
See more of Mark Moss on their Public Channel and the MPN Mark Moss channel.
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