Q: Would the election of Donald J. Trump be bullish for the price of gold?
A: On balance yes.
Q: What are the reasons?
A: It would be a very public and global indication that the political climate in the USA has turned toward reality and away from the fantasy of fiat money expansion being a viable alternative to production suited to the market. It is more than a stretch to believe that politicians and bureaucrats can spend money more wisely than the producers.
Q: But the USA is already bankrupt. Is it not too late for the USA economy?
A: Yes, it is too late to save the USA from a crash and burn. That is inevitable irrespective of who wins the white house. Trump has experience in bankruptcy proceedings. Four of his projects have gone through reorganizations that have resulted in creditors having to write off more than a billion USD. On balance he would be positive for the USA and the price of gold.
Q: Why exactly for the price of gold?
A: Trump has not given any details for how he would handle a reorganization of USA government debt. To do so would lose him votes. He has, so far, given the standard political line that his policies will grow the economy out of all debt problems and not require a cutback for Social Security and Medicare. This is another fantasy. Trump has repeatedly said that we are bankrupt. He has no reason to make excuse or promote the existing monetary system. It is more likely that a reset of the monetary system would happen earlier in a Trump presidency than the alternative.
Q: What do you think a Trump reset would look like?
A: Just a guess: an 80% to 90% write down of existing debt and proportionately a 10 to 20 times increase in the price of gold. If this is coupled with a sale of Federal government land, it could be widely popular as well as simulative to private market activity.
Q: How would the write down of debt occur? Would not this be a default?
A: Nominally no. It would most likely be done through a currency swap. There are many examples. War is frequently manufactured as a cover story excuse. In any case, we are living in interesting times. And remember: Carthage must be destroyed.
by Arthur Fixed
[box type=”info” style=”rounded” border=”full”]Commentary from Arthur Fixed the author of the Art of Speculation during Civil War – Sun Tzu Meets Jesse Livermore is a private manuscript copyrighted 2012 by Art Fixed.[/box]
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