Posts Categorized: Bill Holter

Posted by & filed under Bill Holter.

China recently announced they will trade oil for yuan “backed” by gold. The story has gotten some press (none of it mainstream mind you), and many have questions as to what it really means. While quite complicated as a whole, when you break this down into pieces I believe it is a quite simple and logical end to Bretton Woods.

For a background, China has had an exchange open for about a year where gold can be purchased with yuan, though the volumes so far have been miniscule to this point. China has also been all over the world inking trade deals (in yuan) and investing in all sorts of resources from oil to gold to grains, they have made no secret about this. With the most recent example here. They have trade arrangements and treaties with Russia, Iran and many other non Western nations. They have also “courted” many Western nations privately (remember their meeting with the King of Saudi Arabia?) and actually lured many with their “Silk Road” plans via the AIIB which was huge news last year (but nearly forgotten by Americans at this point?). We also know China has been a huge importer of gold for the last 4-5 years and done so publicly via Shanghai receipts and deliveries.

So what exactly does “oil for yuan” mean? In my opinion, China is basically leading a “mutiny FOR the bounty” (we’ll explain this shortly). The only things holding the dollar up from outright death for many years has been the oil trade (and other trade commerce) between nations and settled in dollars. Anyone wanting to buy oil had to first buy dollars in order to pay for the trade. Anyone getting out of step and suggesting they would accept currency other than dollars was dealt with swiftly and harshly (think Saddam and Mohamar). In other words, the U.S. military “enforced” the deal Henry Kissinger made with the Middle East (lead by Saudi Arabia) where ALL oil was settled in dollars. International trade settlement alone supported the dollar after the Nixon administration defaulted on its promise to exchange one ounce of gold for $35.

China is now suggesting THEY will be the ones to trade oil and not use the dollar for settlement. Instead, settlement will be in yuan. But why now? I believe for one of two reasons or more likely both. First, and as we have recently spoken about, it very well may be that the US. military technology has been cracked or leap frogged. It is looking like a distinct possibility and if so, China/Russia now have less fear of U.S. military “retribution”.

The other possibility pertains to gold. We have no way of knowing whether or not the “bottom of the barrel” as far as gold reserves is in sight but we can have a pretty good idea. Physical demand for gold has exceeded mine supply by some 1,500 tons for the last 20 years, “Scrap” supply can not have made up the shortfall. The only place the gold to supply for delivery can have come from are Western (think Ft. Knox) vaults. If the Chinese know their “supplier” of gold is at or near zero, this could also explain “why now”. My bet is both, military technology AND lack of gold supply are at work here.

The next question is this, does China want to become the world’s reserve currency? I do no think so as they have seen economies of the issuers of the reserve currency destroyed time after time throughout history. Rather, China wants to lead the parade away from the dollar or at least steer it. Whether via a larger slice of the SDR pie, or another as yet to be introduced currency I do not know.

What we do know: the U.S. is broke and very likely nearly out of gold. The U.S. has “led” the world with an iron fist and trampled many in its wake …pissing off nations all the while over the last 20+ years in particular. China knows this and also knows the rest of the world will follow them just as school kids will follow the one who stands up to the school bully. Besides, on the surface it certainly looks like better (more fair) trade and settlement terms for anyone who goes along.

Wrapping this up, we need to know “what” all this means? Most importantly it means the world will have an alternative to settling in dollars …which means less overall demand for dollars. This alone will weaken the dollar much further than the huge move we have already seen. A weaker dollar will mean much higher prices (inflation) for the imported goods we no longer manufacture at home. There is a bigger problem here that few are thinking of yet. How will the U.S. settle trade if the dollar becomes so weak it becomes shunned …AND we have no gold for international settlement left? This is a very serious question and one pertaining directly to the standard of living for Americans.

Answering the question as to the meaning of “mutiny for the bounty”, this is simple. You can think of “bounty” as “prosperity” if you will. Prosperity in today’s world means you produce goods and trade, trade, trade! By and large I believe the world wants peace and prosperity …which go hand in hand and are not mutually exclusive. If the world is offered a “more fair” way to settle trade, will they go for it? You bet! Especially if they are offered “cover” or protection from the U.S. military …for trading in a currency they deem more fair than dollars!

So it seems to me, China is leading a world that is ready to follow in a direction away from dollars. As for gold, it will explode in price in terms of a weakening dollar but there is potentially more. China without ANY DOUBT is THE largest holder of gold on the planet. It is for this reason China now has the ability to “price” gold wherever they want to. In other words, China can mark the price of gold to the moon which will do several things. It will make them the wealthiest nation on the planet while at the same time making it extremely expensive and difficult for anyone to catch up by amassing their own gold horde.

As to the yuan becoming gold backed, I doubt it in reality. I highly doubt they will ever “exchange” their current gold horde. It is more likely they will only exchange further gold accumulated from this point forward but that is a story for another day.

We have speculated for several years that China might try to supplant the dollar. It now makes sense and one would have to wonder why they wouldn’t lead the mutiny if they were to become the new captain?

Standing watch,

Bill Holter

Holter=Sinclair collaboration

Posted by & filed under Bill Holter.

10,000 contracts (50 million ounces) in two minutes is what took silver from positive to negative.
And 20,705 contracts (2,075,000 ounces) in gold in 1 minute is what flash crashed the metals. Something must be on fire behind the scenes, no one would sell metal like this on the cusp of a breakout…unless they did not want it to break out?

Bill

Posted by & filed under Bill Holter.

Our dear extended family,

Bill has come out of the successful operation. He wishes to thank all those that sent their best wishes and sincere prayers.

Sincerely,

Jim

Posted by & filed under Bill Holter.

Kathryn and I are returned from our recent trip, my surgery will be Monday at O:dark early. For the first time in years I went several 24 hour periods staying off the internet and two 48 hour stints …without the slightest withdrawal symptoms. Rest assured your e-mails with comments and questions were all read, but few if any were answered as I needed some down time. Many have sent well wishes and prayers, I appreciate the well wishes and welcome ALL prayers!

Our weekly recording for subscribers will be done over the weekend and posted as will one premium article prior to Monday. Next week’s commentary will depend on the speed of recovery and clarity of thought during the recovery.

The most blatant stupidity while we were away has to be the attempt to erase …and rewrite American history. While they are at it, why not “erase” the value of those pieces of paper with the evil slave owning dead presidents on them? This will happen with or without seditious help. If you cannot see this as a coup attempt, please awaken. One topic for this weekend’s work.

Bill

Posted by & filed under Bill Holter.

After listening to Jim’s 3 part autobiography, please send your questions regarding Jim’s life experiences to bholter@hotmail.com.  These questions will be this weekend’s topic.  Nothing is off limits …unless Jim decides to take the fifth!

Bill

Posted by & filed under Bill Holter.

I had to chuckle after getting caught up in the ZeroHedge click bait headline. First we should look at the article itself and then analyze the stupidity prevailing even among large and supposedly “wise” money managers.

As for the article, it was penned by Michael Snyder who has done some very good work in the past as he did with the legwork for this one. The problem(s) I see are that first, the mystery investor did not make a $262 million bet. This is the maximum amount he might be able to make between now and October. The original “investment” is far less than this and would normally be considered the amount of the “bet” if this was the amount they could possibly lose.

But herein lies the problem, the “bet” has literally an unlimited loss potential because in a complete blowout market, this trader is essentially short 262,000 VIX Oct. 25 call contracts. Never mind all the other bells and whistles in this trade, should the market crash and fear run unbridled, the net/net is this uncovered short call position of 262,000 contracts. So, the title is misleading in the first place because the original bet was only a small fraction of $262 million but the potential loss could certainly be in the multiple $billions … not like any lottery ticket I have ever seen or would even touch!

Taking this the extra yard, let’s talk about “what” this or any trader will “win” should they be that fortunate. First, you will notice I wrote “should they be that fortunate”…which means someone else (or collective someone else’s) will be unfortunate enough to be standing atop an equal sized loss. The obvious question is whether they will have the ability to payout on the “lotto ticket”? From a systemic standpoint, I absolutely 100% guarantee in a free market not backstopped by central banks, another 2008 experience cannot be settled. 2008 could not be settled upon and thus the reason the Fed secretly lent out $16 trillion across the globe, settlement HAD TO OCCUR or the jig was up. The number this time around will have to be far larger and probably many multiples.

Now, carrying the question all the way through, traders, investors, money managers etc. who believe they are “hedged” or have safe strategies in place are sadly mistaken. How can I say this broad brush and what makes me so smart? Don’t worry, I have not turned arrogant by any stretch, I can say this by looking at the problem with logic that long ago left our casino markets. You see, the problem is these players for the most part are playing for dollars, euros, yen etc. Even IF they believe they are playing for gold, I assure you they are not because out of the millions of ounces represented to create the current pricing, only a very small fraction and less than one percent of real metal exists and underlies the trades.

Getting to the heart of what I wanted to convey, the bottom line is even if the winners all do get paid (a mathematical certainty they cannot because of defaults), they will be collecting fiat paper chits that will not perform in a credit meltdown. This is not rocket science or voodoo economics, all fiat currencies are “credit based” in the first place so their “value” only functions while credit markets are standing with good faith and confidence. When confidence in central banks and sovereign treasuries does break, so will all fiat currencies. This will appear to be a hyperinflation when in reality it will be the MOTHER OF ALL DEFLATIONS in terms of gold!

To finish, we live in a world where the casinos themselves are broke but still functioning while they can still obtain credit. It will not matter whether you won or lost if you have not left the casino when the lights go out. The only way to truly win is to cash your chips in and fully exit the casino with real money in hand… BEFORE it is widely understood that no matter how many casino chips you have …you still have nothing! The mathematical explanation of this is “zero times anything is still zero”! Please think this article through thoroughly, the games are being played for the wrong winnings…

Standing watch,

Bill Holter

Holter-Sinclair collaboration

Comments welcome bholter@hotmail.com