Gold and Silver Sit Outside the Bubble
Gold and silver are not in a bubble. The leverage in that market points to the short side, not the upside. Everything else - real estate, stocks, bonds - carries leverage to the long side. That leverage has been used to lift paper financial markets and to push down real markets: commodities, gold, and silver.
The system has to come down first before it reboots. They can try to reflate. I don't think it will work this time. Even if it does, that only builds a bigger bubble and a bigger explosion. The everything bubble bursting is a matter of when, not if.
The Coming BRICS Currency: The Unit
The BRICS group is working on a real currency they call the unit. It would be 20% to 40% backed by gold, with the rest backed by other commodities, giving it real backing.
Will they pull it off? I call it mandatory. If the dollar goes poof, the world needs something to use. The numbers may end up at 50%. They must come up with something, because if the dollar goes away, nothing settles trade. You need a currency to do business.
Debt Has Replaced Gold as the Foundation
Every trick has been pulled out of the bag. The debt overall is not payable. Debt is the foundation of the entire financial system worldwide. Gold used to be that foundation; now it is debt. Debt can and will default.
The core problem is too much debt in the system. There was too much debt in 2008. The fix then was to throw more liquidity and more debt on top, which kicked the can down the road. That has now run 18 years. They played with negative interest rates along the way.
Central Banks Are the Strong Hands
The biggest warning is not falling gold prices. It is who is buying while everyone else gets shaken out. Over the last three to six months, weak hands were taken out of the paper market. The strongest hands buying are central banks - buying gold instead of dollars, euros, or yen, repairing their balance sheets. They know gold is money. Do what the central banks are doing.
Paper markets are going to become irrelevant. Gold, not so much silver, has also been used as an ATM. Liquidity got tight and gold served as a source of funds, with paper contracts hitting the market to suppress the price in a coordinated way.
Liquidity Is Tight and Credit Will Break
Liquidity is tight all over the world. China is stepping up to support its stock market. Central banks will have to add liquidity. The capital numbers being discussed for future AI build-outs simply do not exist as money, so the system will have to be flooded with cash.
A lot of the U.S. AI build-out will now slow down because of the election. With that slowdown, AI credit will start to break and defaults will appear. Don't look at the stocks - look at the bonds. Credit traders are always smarter than equity traders.
GDP has been strong, though the numbers may be massaged and cannot be fully trusted. The 10-year Treasury yield recently spiked above 5%. A 5% yield exposes weaknesses that upbeat GDP headlines hide. Equity markets can stay deceptively calm while bond markets show credit conditions getting worse.
Watch Credit - It Tells You Everything
Credit is the signal to watch over the coming months. If credit starts breaking in one area, it will break in another. It becomes a domino effect, and that is the problem.
Gridlock Speeds Up the Timeline
With one party now holding both houses, the upside is two years of entertainment - call it comedy or tragedy. There will be gridlock, and almost nothing will get done. Everything that needed to get done to fix the math still needs doing. For years the debt has been unserviceable; the math does not work. The only question is when, not if.
Two years of gridlock speeds up the timeline. No fixes get made, and confidence drops, which speeds it up further. This applies to both the broad economic reckoning and the gold and silver reckoning. The whole house is going to come down. Without gold and silver, you will not have money or capital when the system reboots.
Forced Selling of Paper, Forced Buying of Hard Assets
When this unwinds, there will be forced liquidations of paper assets and forced purchases of hard assets. The stock market can tank while gold and silver go straight up, driven by that forced selling and forced buying at the same time.
There is math behind it. Everything is priced in dollars. In a credit meltdown, the United States cannot survive one year without borrowing an extra $2 trillion on top of what it takes in. That is very dollar-negative. As the dollar loses purchasing power, everything from gold down to a cup of coffee or a stick of gum costs more, because the dollars are worth less.
This deflation of most assets, with gold and silver as the exception, plays out everywhere in the Western world and spills over into the non-Western and BRICS world. The Chinese market has already deflated, along with others.
The Scenario That Ends Dollar Confidence
Picture gold at $5,000 and silver at $80 combined with a Republican wipeout. That would be a complete blast off and the end of any confidence in the dollar. The unwind looks like it is speeding up.
For anyone saving, the real danger is confusing nominal portfolio stability with preserved wealth. Preserving purchasing power matters more than trusting financial promises.
