Dollar Vigilante Ed Bugos on Iran, Gold, Bitcoin, Monero & US National Debt

[bumjae1]

Edmond Bugos, gold analyst at the Dollar Vigilante, was kind enough to answer our questions. Thank you to Ed for his insightful, Austrian-minded look at current events and the gold market. Bugos talks geopolitical tensions in the Middle East, and how those might play out, as well as the implications there for gold. He also discusses how Bitcoin has been a boon for the precious metals market.

With the drone attack and news of Iran general Qasem Soleimani’s death, what could a destabilizing Middle East region mean for gold prices and why? What is unique today in 2020 about the relationship between gold and Middle East stability?

The destabilization seems to have one obvious result, it keeps US troops committed to being there longer. Some analysis has revealed that the US has been targeting that general for some time, and that Trump got suckered into a geopolitical play. Some of the motivations can be part of distracting from various problems at home, including the impeachment proceedings, a wilting boom, Epstein, who knows. The why’s in any situation like this are mind boggling, which is why Jefferson and Washington and others warned about entanglements with foreign governments.

The gold price has been strong all year on account of what has been happening in the economy, and how the Fed has dealt with it. Investors largely see through the artificial illusion driven by the piling on of debt. So gold is no longer cheap, not as cheap as silver. The Iranaian affair has hastened some of my upside targets. When these kinds of things occur you usually get a spike in risk premiums, gold drives higher, and then it fades away if the affair does, a peace dividend drives it back to where it was.

So it’s often good to short these moves. But something about the situation is troubling. The two sides have been simmering for some time. And both of the States are failing. Both of them need to point to some exterior demon to save face for what’s going on at home. So the potential for escalation at some point is likely to underpin gold prices for now.

There has been a lot of attention on Bitcoin over the past decade. Do you think this has taken attention away from gold and silver? How has the Bitcoin market affected gold and silver’s place in the world?

Not at all. Bitcoin is a gift to the gold story. It widens the audience for it. It’s the same story. They have the same enemies and the same friends. It’s just a shame you have some of the hard core gold bugs that refuse to attribute value to anything that is not tangible, as though the internet itself never produced an intangible asset. But humans are humans. On the crypto side you have the maximalists who believe crypto will destroy everything traditional. They remind me of the internet maximalists back in the nineties who thought of mining as part of an old economy that need not exist now that we had the internet. So they put off a lot of gold bugs because they are not that smart to begin with. A lot of them are hung up on the idea that bitcoin is not tangible, or that anyone can create a cryptocurrency since it’s just code (so they even call it ‘fiat’), or that it doesn’t satisfy Ludwig von Mises’s regression theorem, or that gold is better money, and so on.

All of these are misguided criticisms that puts them at odds with the crypto entrepreneurs, but not all of them are hardcore hard asset types. The Austrians themselves are divided over whether to place relevance on the fact that bitcoin had an original value as a commodity or not, and regardless that Walter Block answered this question by explaining what Mises really meant about the regression theorem. But a lot of gold bugs remember they are not necessarily all in the same political sphere. Some of them are neocons, minarchists, and even communists.

I now see four worthy and sounder opponents for government fiat currencies, including the US dollar: gold, silver, bitcoin and monero. The four amigos, I call them. They move together and they lead the commodity complex because as you know commodity cycles are largely monetary.

You tweeted in November “It is no longer in the interests of the American establishment to promote capitalism at home or abroad, especially abroad.”  What do you mean by this?

America used to promote freedom around the world when its rivals ran more totalitarian dictatorships, like the Soviets or the Chinese during the Cold War era. It had the world’s most capital friendly markets. If you were running from another government you could keep your capital in America relatively safe and private. The dollar was a black market currency around the world and thus enabled many humans to survive the atrocities of their governments. So, in effect, by promoting freedom it was undermining foreign regimes. But today, by promoting freedom, it is undermining its own regime, its own empire, its own criminal institutions at home and abroad.

Should anyone actually create a free market system anywhere on this planet of any magnitude it would hasten the dollar’s demise today. It would make for a bad comparison, undoubtedly.


Does the situation in Hong Kong have implications for the gold market? Why? Why not?

I’m not sure. But I do think the situation in Hong Kong is a symptom of the failure of “democracy” and of government in many places, not just HK. You see unrest everywhere because of untenable policies causing increasing discontent. In Chile. In Argentina. In Venezuela. In Nicaragua. In Greece. South Africa. Many places in the Middle East. Even in America and the UK. In France. It is everywhere. The reasons may all be specifically different but it is amazing to me that few people are looking for the common thread in all of it. Bad or oppressive policies.

Why do we need regulators to protect us from bitcoin for Pete’s sake? To me that’s just another data point exposing our situation for what it is, we are not free, we have slave masters.

What is meant by this quote of yours? “Investors are playing poker and calling the Fed’s hand.”

By pushing the stock market up before the Fed has decided to cut rates it forces the Fed to give in or face the consequences of a sell off. Sometimes the market plays dead, sometimes it is calling a bluff. In this case, it was calling a bluff. The Fed is out of resolve.

Any other thoughts on the state of gold and silver?

Many. I’m bullish. This next decade should go to precious metals bulls as the excesses and imbalances of the last ten years unwind, and the Fed inflates to try to offset the unwind. The public debt situation is untenable and not conducive to the Fed’s position because an inflation that produces real price rises is going to drive interest rates higher and wreak havoc on the government’s finances, which is likely to incentivize further inflation, and catalyze a vicious circle that can only end in stagflation, if it continues, or a systematic liquidation of public sector assets.

Unfortunately, the low interest rate policy has been around a long time now and has created a situation in debts both private and public that has eroded the central bank’s resolve.

In the late seventies the government debt to GDP ratio was just 10% so they could afford a reset and a spiral in interest rates. Back then, the Fed still had resolve. Today it is much weakened.

The US dollar’s role as a reserve currency has become obsolete and the incentives to keep capital in America are not so great anymore, comparatively speaking. As the speculative bubbles of the last decade unwind you will see a dollar crisis like no other that will drive gold to $5k, or $10k, maybe higher if someone like Sanders ever got in and turned America into Venezuela.

In the short term the gold market has accumulated some risk because of speculation about the Fed and Iran, so some caution is prudent here. But I can’t see anything bearish for gold or silver in the years ahead other than the odd correction after they have run for several months.

source: goldsilverbitcoin.com/dollar-vigilante-ed-bugos-on-iran-gold-bitcoin-monero-us-national-debt-the-dollar/

[alyssa85]

The US dollar’s role as a reserve currency has become obsolete and the incentives to keep capital in America are not so great anymore, comparatively speaking. As the speculative bubbles of the last decade unwind you will see a dollar crisis like no other that will drive gold to $5k, or $10k, maybe higher if someone like Sanders ever got in and turned America into Venezuela.

I disagree with the above.

Here is the IMF data on reserve currencies:



which comes from the following article:

https://wolfstreet.com/2020/01/02/us-dollar-as-global-reserve-currency-chinese-renminbi/

The dollar is very far from being obsolete, mainly because all the other currencies are performing worse.

[CryptoBry]

There has been a lot of attention on Bitcoin over the past decade. Do you think this has taken attention away from gold and silver? How has the Bitcoin market affected gold and silver’s place in the world?

Not at all. Bitcoin is a gift to the gold story. It widens the audience for it. It’s the same story. They have the same enemies and the same friends. It’s just a shame you have some of the hard core gold bugs that refuse to attribute value to anything that is not tangible, as though the internet itself never produced an intangible asset. But humans are humans. On the crypto side you have the maximalists who believe crypto will destroy everything traditional. They remind me of the internet maximalists back in the nineties who thought of mining as part of an old economy that need not exist now that we had the internet. So they put off a lot of gold bugs because they are not that smart to begin with. A lot of them are hung up on the idea that bitcoin is not tangible, or that anyone can create a cryptocurrency since it’s just code (so they even call it ‘fiat’), or that it doesn’t satisfy Ludwig von Mises’s regression theorem, or that gold is better money, and so on.

All of these are misguided criticisms that puts them at odds with the crypto entrepreneurs, but not all of them are hardcore hard asset types. The Austrians themselves are divided over whether to place relevance on the fact that bitcoin had an original value as a commodity or not, and regardless that Walter Block answered this question by explaining what Mises really meant about the regression theorem. But a lot of gold bugs remember they are not necessarily all in the same political sphere. Some of them are neocons, minarchists, and even communists.

I now see four worthy and sounder opponents for government fiat currencies, including the US dollar: gold, silver, bitcoin and monero. The four amigos, I call them. They move together and they lead the commodity complex because as you know commodity cycles are largely monetary.

People in the gold industry and who seem to have adopted an anti-Bitcoin stance should be hearing this man. He is making things at the right perspective, making gold and Bitcoin as really friends and not as enemies of each other. In fact, I believe that with Bitcoin we gold also highlighted as both can be considered as safe haven especially on times of economic and political distress. And yes, they can be growing together.

[davis196]

On the crypto side you have the maximalists who believe crypto will destroy everything traditional. They remind me of the internet maximalists back in the nineties who thought of mining as part of an old economy that need not exist now that we had the internet.

I agree with Ed Bugos about that.Many naive people here think that cryptocurrencies will destroy fiat money in ten years.That's not how the civilization works.Blockchain technology(with or without crypto coins) will become a new technological layer over the existing layers of technology and finance.
He's right about what's happening in the Middle East,but I don't share his views about the future of US dollar.

[Wexnident]

There has been a lot of attention on Bitcoin over the past decade. Do you think this has taken attention away from gold and silver? How has the Bitcoin market affected gold and silver’s place in the world?

Not at all. Bitcoin is a gift to the gold story. It widens the audience for it. It’s the same story. They have the same enemies and the same friends. It’s just a shame you have some of the hard core gold bugs that refuse to attribute value to anything that is not tangible, as though the internet itself never produced an intangible asset. But humans are humans. On the crypto side you have the maximalists who believe crypto will destroy everything traditional. They remind me of the internet maximalists back in the nineties who thought of mining as part of an old economy that need not exist now that we had the internet. So they put off a lot of gold bugs because they are not that smart to begin with. A lot of them are hung up on the idea that bitcoin is not tangible, or that anyone can create a cryptocurrency since it’s just code (so they even call it ‘fiat’), or that it doesn’t satisfy Ludwig von Mises’s regression theorem, or that gold is better money, and so on.

Indeed. BTC has actually put more Gold more often towards the front end of the news, Since because of the comparison that is continuously being made against BTC. This put a faction of those whom are more favored towards Gold, and some whom are more favored towards BTC or cryptocurrency in general.
There's also a probable reason for bullish prediction in Gold and Silver. BTC has had some FOMO of it reaching new ATH for the reason of halvings, and most possibly, a failure to reach this would cause a massive rejection towards crypto, which could probably move traders towards the gold market. Just a possibility though.

[panganib999]

I doubt the usage of the USD as the reserve currency is dead as he says though. I mean, without it, the market would probably spiral down in quite a huge market crash and without anything to replace it that actually has the status to afford to do so, I doubt it would go anytime sooner. If you actually compared it to other currencies, there are only a few that could contend to it, and USD being priced lower than them is because the banks are intentionally pushing out USD towards the market.

[el kaka22]

This is an amazing post and the questions were great as well, whoever decided to do this and ask these questions gets my kudos for sure. I for one would love to hear Ed to talk about how the stablecoins as well because there has been many things bothering me about it as well.

Just for one, if the stablecoins in the market are basically same value as the fiat currencies that are backed, would that mean the "price" of 1 USDT is actually staying still but "value" of 1 USDT is actually going down since dollar is something that loses value overtime as well? Or what could be done to make sure there is gold related stablecoins which attempts have been shown recently and even seen right now but usually has hard time achieving it easily? Would a stablecoin pegged to gold or any other commodity could strengthen the connection between bitcoin and gold?

[Febo]

I now see four worthy and sounder opponents for government fiat currencies, including the US dollar: gold, silver, bitcoin and monero. The four amigos, I call them. They move together and they lead the commodity complex because as you know commodity cycles are largely monetary.

Four amigos are known. But the big question is will all four of them be relevant at next economic collapse or only sold and silver. That is a billion dollar question. Are Bitcoin and Monero ready for central banks to see them as one of the four amigos.

[olumyd]

I now see four worthy and sounder opponents for government fiat currencies, including the US dollar: gold, silver, bitcoin and monero. The four amigos, I call them. They move together and they lead the commodity complex because as you know commodity cycles are largely monetary.

Four amigos are known. But the big question is will all four of them be relevant at next economic collapse or only sold and silver. That is a billion dollar question. Are Bitcoin and Monero ready for central banks to see them as one of the four amigos.

Doubt if central banks are in any position to decide whether Bitcoin and Monero should be among the four amigos. Hell, I hate to admit it, but if banks get smarter with their CBDC, talks about bitcoin and monero may become 'phantomized'. But if/when we do encounter another economic crisis, bitcoin performance as both a hedge of value and medium of exchange would play critical roles to cryptocurrencies in general.

[1Referee]

Four amigos are known. But the big question is will all four of them be relevant at next economic collapse or only sold and silver. That is a billion dollar question. Are Bitcoin and Monero ready for central banks to see them as one of the four amigos.

I think that every one of the assets will sink deep to lows people thought to not be possible anymore due to the fundamental growth and whatnot.

Fiat will always be a safe haven, especially in times where fiat is the only form of money that gets the bills paid, and in times where people lose jobs, sell everything to pay their bills, fiat will most likely be the only in-demand asset. People usually only focus on the USD, but there are more large currencies that are able to function as safety net.

I sincerely hope that I am wrong on that and Bitcoin will do well, but given its speculative nature, it's very hard to believe.