IRL:Gold/2024/09
Liberty & Finance: The Gold Surge in a Debt-Based Collapse
Part One
As the world stands on the edge of a financial precipice, Francis Hunt from Liberty & Finance offers a sobering analysis: we are witnessing the beginning of the end of the fiat-based debt system. The global economic downturn, ignited by the COVID-19 pandemic, is accelerating a long-anticipated collapse. While crypto markets remain in a state of stagnation, one asset continues to shine brighter: gold.
Gold: Climbing to New Heights
With gold prices now surpassing $2,500 and moving steadily toward $2,600, Hunt sees this as just the beginning. According to him, we’ve only climbed the first step of a much larger ascent. In his view, the current monetary system—built on the fragile foundation of fiat currency and debt—is collapsing, and as this debt-based system unravels, gold is emerging as the safe haven.
The decline in the value of the dollar is undeniable. As faith in fiat currency erodes, more and more investors are fleeing to gold, a time-tested store of value. Hunt draws parallels to the 1971 Nixon Shock, when the U.S. dollar was decoupled from gold, causing gold prices to explode from $42 to $800. Now, we are seeing similar patterns, only this time the stakes are even higher, and the collapse more pronounced.
The Stagflation Dilemma
One of the key reasons for this surge in gold is the looming threat of stagflation—a toxic combination of high inflation and economic stagnation. Hunt notes that this situation is eerily similar to the 1970s under President Nixon, but far worse in scale. Today, central banks have fewer tools at their disposal, as interest rates are already low and monetary policy is constrained. In such an environment, gold is one of the few assets that can thrive.
The inflationary pressures seen in rising Producer Price Index (PPI) numbers indicate that inflation is far from being under control, despite official rhetoric. Producers are facing higher costs, but these price increases are not driven by surging demand, as central authorities might have us believe. Instead, they are a symptom of a broken economy. As inflation pushes consumer prices higher, while unemployment rises, we are entering a long-term structural stagflation that will deepen the crisis.
For individuals seeking refuge from this economic storm, gold offers a safe harbor. As the fiat system crumbles, the intrinsic value of gold continues to rise. Hunt suggests that this trend is only going to accelerate, with the potential for gold to reach $3,000 in the near future. With every economic indicator pointing toward deeper stagnation and higher inflation, the only way for gold is up.
The Crypto Conundrum: A Market in Limbo
While gold is on the rise, the crypto markets are relatively quiet. In times of necessity, like the one we are entering, people have less control over their spending, and disposable income dries up. This results in less money flowing into capital markets, including the speculative crypto space. Though cryptocurrencies have been touted as a hedge against inflation and fiat collapse, they are not yet essential assets in the same way gold is.
The reality is that in a year of financial crisis and necessity, gold remains the asset of choice. People need something tangible, a store of value that has withstood centuries of economic upheaval. Gold fits that role perfectly, while the volatility and speculative nature of crypto leave it sidelined in this environment.
The Future: All Eyes on Gold
In the coming months and years, the global economy may face unprecedented challenges. As central banks scramble to stave off collapse, the inflationary policies they adopt will only fuel gold’s upward trajectory. Fiat currency will lose its purchasing power, while gold’s value continues to appreciate.
The current surge in gold is not just a temporary spike; it’s a long-term trend. As Francis Hunt points out, this is merely the beginning. The debt-based system that has propped up global economies for decades is finally reaching its breaking point. And as it crumbles, those who hold gold will find themselves on the winning side of history.
In this debt-based collapse, gold is not just an investment—it’s a lifeline. The only direction for gold is up, and as the world continues to grapple with the economic fallout, it will remain the ultimate safe haven for those looking to preserve their wealth in these turbulent times.
Part Two
Liberty & Finance: The Eagle's Two Paths – Hyperinflation or Hyperdeflation?
As the global economic system teeters on the brink, many are asking what the future holds for the U.S. dollar. According to Francis Hunt’s analysis, we are at a critical juncture, where the collapse of the debt-based fiat system is all but certain. But the question remains: how will this collapse play out? There are two potential paths forward—Hyperinflation or Hyperdeflation—each with drastically different outcomes.
Path 1: Hyperinflation (The Fire)
Hyperinflation is the specter that looms largest in the minds of many investors. The sheer amount of fiat currency flooding the system due to reckless money printing during crises like the 2020 pandemic has led to the fear that the dollar will lose all value. This would mean the rise of hard assets—Gold chief among them.
In a hyperinflationary scenario, the value of fiat currency collapses entirely, leading to a flight to safety in tangible assets. Gold, the antithesis of fiat, would skyrocket, increasing in value exponentially until it equals the debt amassed by governments and corporations. In other words, as asset prices rise to meet debt levels, the system can reset—this time with the fiat dollar potentially losing its global reserve status.
Historically, we’ve seen something similar happen when inflation runs high. In periods of high inflation, both stocks and gold tend to rise because wealthy investors still believe in the underlying currency. However, when hyperinflation sets in, faith in the currency evaporates, and the wealthy start to offload stocks, moving their wealth into gold and other real assets.
The belief is that hyperinflation will cause a complete collapse of the U.S. dollar, as the flood of money becomes unmanageable and trust is irreparably broken. Gold, which has maintained value across centuries of crises, would then become the ultimate store of wealth, absorbing the outflow from fiat currencies.
This path assumes that hyperinflation is inevitable. Many believe that the floodgates have been opened and that the value of the U.S. dollar will be reduced to nothing. The only way to preserve wealth, in this case, is to own gold. As fiat money loses its purchasing power, the rush to gold becomes a firestorm, driving its price to unprecedented heights.
Path 2: Hyperdeflation (The Ice)
The second potential outcome is hyperdeflation, a less discussed but equally plausible scenario. In this path, central banks and governments take extreme measures to reduce the money supply as much as possible, halting inflation through aggressive debt contraction. How is this achieved? By maxing out debt levels and then hiking interest rates to punishingly high levels for an extended period.
This approach, aimed at eliminating Phantom Wealth—the illusory wealth created by over-leveraged assets—would result in massive deflation. Debt levels would decrease dramatically as phantom wealth is wiped out, creating room to restart the system. The catch is that, in this scenario, no one has money to drive up the price of gold or any other asset for that matter.
In a hyperdeflationary world, liquidity dries up, and people’s access to wealth becomes severely restricted. This tactic ensures that debt is liquidated without inflating away the value of the currency. The result? The U.S. dollar survives.
This hyperdeflationary reset may feel counterintuitive, but it would mean that gold, while a safe store of value, wouldn't experience the same explosive growth seen in hyperinflation. Instead, the collapse of phantom wealth would ensure that there’s simply not enough cash to fuel a surge in gold prices. Stock markets and other asset bubbles would deflate alongside, bringing the entire financial system down to a more sustainable level.
The endgame in this path is that USD remains the dominant currency, having survived by purging the excesses that led to the crisis in the first place. It’s a painful reset, but it allows the dollar to endure—avoiding the fate of hyperinflationary collapse.
Hyperinflation vs. Hyperdeflation: Which Path Will We Take?
These two potential outcomes paint drastically different pictures of the future. In a hyperinflationary scenario, we see the collapse of fiat currency, and the ascent of gold as the ultimate store of value. In a hyperdeflationary scenario, wealth evaporates, and the dollar survives through painful economic contraction.
So which is more likely? Right now, the world is waiting to see. Central banks are trying to manage inflation with higher interest rates, but they are also constrained by the need to maintain economic growth. If they overshoot, hyperdeflation could take hold. If they continue to stimulate, hyperinflation may be the outcome.
One thing is clear: in both scenarios, the era of fiat dominance is coming to an end. Whether gold rises to meteoric heights or stays relatively stable, it will remain a key asset in the uncertain future. The debt-based collapse that Francis Hunt describes is unfolding before our eyes, and as it accelerates, individuals and governments alike must prepare for whichever path the economy takes.
For now, the U.S. dollar hangs in the balance, teetering between fire and ice. The future of global finance hinges on which path we take—and the implications for gold, and for all of us, will be profound.
