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Is a police state in the US possible? Absolutely.

That’s because people are essentially the same the world over, regardless of their culture, religion, race, or what-have-you. A certain percentage of them are sociopaths.

There is a standard distribution of sociopaths across time and space. It’s a function of Pareto’s Law, better known as the 80-20 rule. 20% of the people do 80% of the work. Another 20% are responsible for 80% of the crime. 20% of the population always winds up with 80% of the wealth. And so forth, through all areas of human endeavor. This observation can be represented by a bell-shaped curve—a “standard distribution”—with a small minority at each extreme, but the large majority in the middle. The people who will take us to a police state are sociopaths—criminal personalities who don’t respect the liberty or property of others. And sociopaths gravitate towards government, and eventually come to control it.

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My view is that 80% of human beings are basically decent, get along, go along types. 20% are what you might call potential trouble sources, that can go either way. But then you take 20% of that 20% and you’re dealing with the sociopaths.

When social conditions reach a certain stage these really bad guys come out from under their rocks and take advantage of the situation. We’re seeing that right now in the US, across the political spectrum. Just as we’ve seen in the past in hundreds of places throughout history.

A major tipping point occurred sixteen years ago, on September 11, 2001, with the attacks in New York and Washington. They were disastrous. But not nearly as disastrous as the government’s reaction to them.

Among them the creation of the Department of Homeland Security. Anybody that speaks German knows that a reasonable translation of Homeland Security is Geheime Staatspolizei, which is usually abbreviated to Gestapo. Anybody that goes through airline security these days should ask themselves, “Where the hell did they find these people? Didn’t they have jobs before they went to work for this moronic agency?” The answer is that there are people out there who like wearing costumes, are willing to boss, herd, interrogate, and go through the dirty laundry of their fellow citizens. They take their jobs seriously and you better not even look at them sideways. There’s no reason to believe it’s going to get better as they groove into their jobs, and their employer cements itself into place. More likely the trend will accelerate.

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Is America currently a police state? Well, let’s see. You can still get in your car and go anywhere, although you might be stopped by the police and you might be detained if your papers aren’t in order. Or the officer thinks you’re not properly respectful. Or you have “too much” cash.

Was there any particular day that Germany became a police state in the 1930s? I’m not sure you can put your finger on any one particular day, even after Hitler was legally and democratically elected. It was a progression, with new laws, new regulations, new taxes every day. While more fear and hysteria were worked up among the populace. Kristallnacht didn’t occur the day after the National Socialists took power.

It’s a case of the frog being put in a kettle of water where the temperature is gradually raised to a boil. That’s what’s occurring in the US. After 9/11, in addition to Homeland Security, we got the Patriot Act, with, among other things, its suspension of habeas corpus. That means that the government can lock anybody up for any reason and not even have to tell them why. Accuse them of being an “enemy combatant”—a neologism that justifies anything, and is robotically and thoughtlessly accepted by Boobus americanus —and anything is possible. Including a trip to a CIA black site in some Third World hellhole. This is something I thought was settled in Western Civilization with the Magna Carta and King John. But we’re going backwards in most areas of personal freedom. And America, of all places, is leading the way—even while falling behind economically.

I don’t know if I can put my finger on exactly when we’re going to go over the edge, but if I was going to guess I would think the real catalyst is going to be the next 9/11-type event. And I don’t doubt it’s going to happen.

How are we any different than the Germans in the 1930s? This was one of the most civilized, best educated countries in Europe and they fell into the abyss. I suppose we’re a bit different. Americans are addicted to welfare, anti-depressant drugs, food, and electronic devices. That should certainly give us a better outcome…

There’s a joke I like to tell. Let me ask you this: Which is the gravest danger? Is it the ignorance, or is it the apathy of the average American today? Stumped? Here’s the answer: I don’t know and I don’t care.

Regards,

When I was a boy, cartoonist Charles Schulz introduced a new comic strip called Peanuts. Its central premise was children having the same problems as adults, and it was an instant hit.

There were several recurring themes and, each autumn, the cartoonist would have his main character, Charlie Brown, attempt to fly a kite. At first all would go well, and Charlie Brown would build up his hopes, only to have them dashed when a tree would snag his kite and eat it.

This theme was endlessly enjoyable, as it reflected a syndrome familiar to all adults. The cartoonist was careful to ensure that he could do new variations on the theme every autumn, due to the fact that Charlie Brown never succeeded. At the end of the strip, the tree always ate his kite.

And so it often goes in the adult world. Albert Einstein famously said, “The definition of insanity is doing the same thing over and over and expecting different results.”

And, yet, in every era, we can see this strange behaviour play itself out, time and again.

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People go to casinos, imagining that, somehow, the casino will lose and they will win. They buy lottery tickets with odds of hundreds of thousands to one against them.

And, amazingly, they invest in the stock market, not just badly, but in the very same pattern that has historically proven to virtually guarantee loss. More amazingly, this is not the behaviour of the occasional loser; it’s the approach adopted by the great majority of investors and is one that they staunchly defend as “wise and informed investing,” right until the crash that cleans them out.

So what, then, is this pattern? Well, generally, a potential investor contacts his broker and asks him if there’s anything he can recommend. The broker virtually always says yes—that whilst some stocks do not earn his endorsement, there are others that he feels are almost certain to go up.

Should the investor then buy, he can count on the broker to push the prospect of further investment, whenever one of his recommendations has risen in value. (He’s less likely to get in touch if his recommendations go down.)

As each bull market unfolds, the broker advises his clients that, if they don’t continue to buy, they’ll be “missing out,” and the opportunity for enrichment will pass them by.

Each investor who’s roped in by this spiel reinforces the broker’s prediction, expanding the bull market and attracting more and more investors to get into the game.

Then, something very interesting happens.

In a major bull market, when investors have reached their limit, they’re advised that they can buy on margin and increase their position. This is acknowledged as being risky in normal times, but these are not normal times. This is the mother of all bull markets, and “the sky’s the limit.” The investors dive in.

When they become so strapped that they cannot buy on margin any further, many investors, believing that they’re on the cusp of getting rich, borrow money privately to buy on margin and, in so doing, become dramatically leveraged, but they do so because the broker promises that the bull market is going “to the moon.”

But, like all bubbles, this one, too, eventually pops. Naturally, Wall Street doesn’t want an uncontrolled collapse of the market (after all, they wish to get themselves out before a crash), so, their ideal scenario is to create a controlled crash. Once the writing is on the wall, they themselves sell out, just prior to a trigger that will collapse the market.

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In 1929, this was achieved through a sudden raise in interest rates. Since investors were up to their eyes in debt, any rise in interest rates meant that they’d default on their loans. The brokers would then unilaterally sell off their clients’ portfolios (as they are entitled to do in a margin call). They, of course, hope to salvage the maximum amount possible for themselves, so they do their best to liquidate everythingovernight.

The customary reaction by investors is to be stunned that a crash occurred that they didn’t see coming and that they woke up one morning to find that they’d sustained a massive loss.

In the early 2000s, a small number of people (myself included), predicted a stock market crash. I estimated its occurrence to be in 2007, so, in order to be out well ahead of time, I was out in 2006. (As it transpired, I was out earlier than necessary, for which I had no regret.)

Prior to the crash, I warned friends and associates, who invariably said, “All indicators say that the market’s still going up. If it starts to slide downward, then I may sell.”

I repeatedly reminded them that a major bull market never ends with a whimper. It invariably ends with a major upside spike, before it suddenly plummets downward.

And this is not a coincidence. It’s based upon the behaviour stated above.

What I find truly amazing is that most investors never learn. Even after they’ve been cleaned out once, they simply find another “better” broker and start all over. Incredibly, the average investor will work hard at his regular job and do all he can to get better at it, then, whatever savings he can create that year, he hands over to someone else to manage. He makes little or no effort to educate himself in the patterns of bull and bear markets so that he can avoid another failure.

He repeatedly takes his kite out to fly it amongst the trees.

Many investors make the same mistake over and over, throughout their careers, working hard for their pay, then literally throwing away their savings.

Today, we’re approaching the end of a major bull market. This one is especially interesting, in that, since 2008, we’ve been in a depression that virtually no one acknowledges. Those on Wall Street state with confidence that, despite increased unemployment, manufacturers leaving the country in droves, diminishing GDP, extensive business closures, etc., “This can’t be a depression if the market is up.”

Unfortunately, what we’re really witnessing is the world’s longest sucker-rally.

In the 1930s, a popular, if bitter-tasting, joke was that, “When every shoeshine boy is offering stock tips, it’s time to get out of the market.” That advice arrived too late.

We’re presently at that point again, except that the profession of shoeshine boy has disappeared.

Incredibly, even heads of banks and Wall Street firms are now warning that the end is near. Perhaps the most unlikely expert of all to join this group is Lord Jacob Rothschild, who has now said, in a semi-annual report,

We do not believe this is an appropriate time to add to risk. Share prices have in many cases risen to unprecedented levels at a time when economic growth is by no means assured.

Clearly, he was careful not to employ phrasing that would be overly alarming, but he did make the quote to explain why he has dumped massive amounts of US assets (i.e., he’s getting out before the crash).

Meanwhile, the average investor, who contributes the oxygen to create all bubbles, is once again flying his kite, convinced that the tree will not once again eat his kite.

Regards,

 

Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.

– Former U.S. Congressman Ron Paul

He who holds the gold makes the rules.

– Old saying

Chris Lowe: Why did you start researching the petrodollar system and its potential unraveling?

Nick Giambruno: This has been on my radar since 2006. That’s when Ron Paul, then a Republican congressman, spoke to Congress about the collapse of the dollar-based global monetary system.

As I recently told my Crisis Investing readers, I think it’s his most important speech ever. It’s called “The End of Dollar Hegemony.”

During the speech, Dr. Paul lays out why a global monetary order built around a fiat currency is doomed to fail.

Crucially, he pointed out the one thing that would precipitate the US dollar’s collapse—the end of the petrodollar system.

I recommend reading the speech in full. But this is the most important part:

The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros.

I discussed this with Dr. Paul at a past Casey Research conference. He told me he stood by his assessment.

In a nutshell, he’s saying we’ll know the dollar-centric monetary system is on its way out when countries start trading oil for gold instead of dollars.

That’s already starting to happen.

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Chris Lowe: To catch up real quick, why is the petrodollar at risk?

Nick Giambruno: Under the current petrodollar system, all global oil sales are made in dollars. However, the Chinese government recently announced a new mechanism that will allow oil producers anywhere in the world to trade oil for gold.

China’s new mechanism will totally bypass the US dollar and the US financial system… along with any restrictions, regulations, or sanctions from Washington. So for many oil producers, it will be much more attractive than the petrodollar system.

I call it China’s “golden alternative” to the petrodollar. Whatever you call it, though, it will allow for the large-scale trade of oil for gold, instead of dollars.

Here’s how it will work. The Shanghai International Energy Exchange is launching a crude-oil futures contract denominated in yuan, China’s currency. This will allow oil producers around the world to sell their oil for yuan.

Of course, the yuan is a fiat currency, just like the dollar. And most oil producers don’t want large stashes of yuan. The Chinese government knows this. That’s why it’s linked the crude-oil futures contract with the option to efficiently convert yuan into physical gold through gold exchanges in Shanghai and Hong Kong.

Chris Lowe: How soon will this new system be up and running?

Nick Giambruno: I spoke with officials at the Shanghai International Energy Exchange. They told me they plan to go live with it before the end of the year, or shortly thereafter.

Chris Lowe: But isn’t that a good thing? Isn’t gold, as a currency, more reliable than the dollar?

Nick Giambruno: I think it’s high time gold played a more central role in the global monetary system. The problem is ditching the petrodollar would negatively affect the US economy.

Think about it. If Italy wants to buy oil from Kuwait… or Argentina wants to buy oil from Brazil… they have to buy dollars on the foreign exchange market first.

This creates a huge artificial market for dollars.

It means the US can simply print dollars and exchange them for real things like French wine, Italian cars, Korean electronics, or Chinese manufactured goods.

It also helps create a deeper, more liquid market for US Treasury bonds. This pushes up prices… and pushes down yields… which allows the US federal government to finance enormous and permanent deficits.

The petrodollar has allowed Washington to spend astronomical amounts of money on welfare and other benefits for over half the population. This gives Americans a much higher standard of living than they would have otherwise. Most of them don’t know this or understand how it affects their everyday lives.

Thanks to the petrodollar, Washington can also sanction or exclude virtually any country from the dollar-based global financial system at the flip of a switch. By extension, it can also cut off any country from the vast majority of international trade.

Chris Lowe: Others have argued that this has led the US Deep State into military actions against anyone who threatens the petrodollar system. Is the Deep State that scared about the effects this could have on the economy and on its position as the world’s top power?

Nick Giambruno: Let’s put it this way, world leaders who have challenged the petrodollar system have ended up dead. Saddam Hussein and Muammar Gaddafi are prime examples.

In October 2000, Saddam started to sell Iraqi oil in euro only. He said Iraq would no longer accept dollars for oil because it did not want to deal in the “currency of the enemy.”

A little over two years later, the US invaded Iraq. After Baghdad fell to US forces, all Iraqi oil sales were switched back to dollars.

And thanks to WikiLeaks’ release of Hillary Clinton’s emails, we know that protecting the petrodollar—not humanitarian concerns—was the main reason for America’s involvement in the ousting and killing of Libyan leader Muammar Gaddafi.

According to the leaked emails, the US—along with France—feared Gaddafi would use Libya’s vast gold reserves to back a pan-African currency. This gold-backed currency would have been used to buy and sell oil in global markets. It would have likely displaced the CFA franc—a version of the euro used in 14 central and west African nations.

As I’m sure you recall, the US and France backed a rebellion that overthrew Gaddafi in 2011. After his death, plans for the gold-backed currency—along with Libya’s 4.6 million ounces of gold—vanished.

Chris Lowe: What’s Russia’s role in all of this?

Nick Giambruno: The dollar is not just a currency. It’s a political weapon… and Washington is not shy about using it.

Most recently, it tried to punish Russia for its actions in Ukraine by imposing economic sanctions. This made it harder for Russia to access the dollar-based financial system. So it’s no surprise that Russia struck a deal to sell oil and gas to China for yuan afterward.

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Chris Lowe: How big a deal is it that Russia is working with China on bypassing the dollar?

Nick Giambruno: Russia is one of the world’s largest energy producers. And China is the world’s largest energy importer. Historically, they would trade with each other exclusively in US dollars.

But the Shanghai International Energy Exchange futures contract will streamline and solidify the process of selling oil to China for yuan—or effectively for gold.

When two of the biggest players in the global energy market totally bypass the petrodollar system, it’s a very big deal.

And it’s not just Russia and China. Other countries want to sidestep the US financial system and US economic sanctions, too. China’s “golden alternative” will give them the option to do just that. This will make the US dollar a much less effective political weapon.

Take Iran, for example. It’s the world’s fifth-largest oil producer. And it’s now accepting yuan as payment for its oil. So is Venezuela, which has the world’s largest proven oil reserves. I think others will soon follow.

This all makes perfect economic sense. Oil-producing nations can continue with the petrodollar system and sell their oil for dollars. But there’s not much financial incentive to do that anymore. The Fed has deliberately pushed down US Treasury yields to “stimulate” economic growth. Plus, the system exposes US rivals to the whims of Washington.

Now oil producers have a second option. Through China’s “golden alternative,” they can sell their oil for yuan, then quickly and easily convert it to gold.

Unlike the dollar, gold is an international form of money with no political risk. From the perspective of an overseas oil producer—especially one with a poor relationship with the US—this is a no-brainer.

Chris Lowe: Russia may be one of the world’s largest oil producers. But Saudi Arabia is still the world’s largest oil exporter. And a lot of that oil goes to China, the world’s largest oil importer. The Saudis were also America’s partner in the petrodollar agreement back in 1974. Can’t the House of Saud use this influence to protect the petrodollar system?

Nick Giambruno: For now, the Saudis are refusing to participate in China’s “golden alternative.” That’s because selling oil for anything but dollars would break the petrodollar deal they made with the US back in 1974. Remember, the Saudis agreed to sell their oil exclusively in dollars in return for US arms and military protection.

Last year, on the campaign trail, Donald Trump said, “If Saudi Arabia was without the cloak of American protection, I don’t think it would be around.” He’s absolutely correct. If the Saudis started selling oil for yuan, they would immediately lose American diplomatic and military protection.

But Saudi Arabia is already looking for alternatives to American protection.

Chris Lowe: Who is it turning to?

Nick Giambruno: This is where the story gets really interesting. Russia and Saudi Arabia have been enemies for decades. The Saudis, along with the US, supported the Afghan mujahideen that drove the Soviet Army out of Afghanistan. The Saudis also supported a number of Chechen rebellions against Russia. And more recently, the Saudis and Russians have been on opposite sides of the Syrian Civil War.

But recently, the Saudi king—along with 1,500 members of his royal entourage—visited Moscow. It was the first official visit by a Saudi king to Russia. The trip coincided with a $10 billion Saudi investment in Russian energy projects and a $3 billion arms deal.

As part of that deal, the Saudis will buy Russia’s S-400 missile system. It’s arguably the most capable air defense system in the world. It’s a powerful deterrent to even US fighter jets.

Chris Lowe: I didn’t know the Saudis bought Russian weapons systems.

Nick Giambruno: They didn’t… up until now. Ever since the birth of the petrodollar, the Saudis have depended on American military protection. After all, it’s what they get in return for pricing their oil in dollars.

Chris Lowe: So why would the Saudis enter into an arms deal with Russia?

Nick Giambruno: The Saudis are hedging their bets. First, they’re not buying an American-made air-defense system. Second, they’re buying a Russian air-defense system that’s capable of deterring an American attack. The House of Saud is making significant moves, in other words, to give itself alternatives to American protection.

Chris Lowe: Is there any other evidence that Saudi Arabia is moving away from the US?

Nick Giambruno: Last August, Saudi Arabia announced it was willing to issue “Panda bonds” to finance its government spending deficit. These are yuan-denominated bonds from non-Chinese issuers that are sold in China.

This is remarkable. The Saudi currency, the riyal, is pegged to the dollar. Up until this point, Saudi Arabia has exclusively used US dollars for all of its major financial initiatives. Issuing debt in yuan is a significant move. It means that financially, Saudi Arabia is drifting closer to China.

Chris Lowe: Why does Saudi Arabia need to hedge its bets like this?

Nick Giambruno: A few years ago, Saudi oil made up over 25% of Chinese oil imports. They were Beijing’s No. 1 supplier. Today, the Saudis’ market share has dropped below 15%.

The Saudis are losing massive market share and getting pushed out of the biggest oil market in the world—mainly because they refuse to sell oil to China in yuan.

China has made itself clear. It’s willing to expand business with anyone who will accept yuan as payment.

Chris Lowe: If the Saudis bow to Chinese pressure, where does all that leave the petrodollar system?

Nick Giambruno: The Saudis haven’t made a clean break with the US and the petrodollar—yet. But they are drifting toward China financially and Russia militarily. These moves are already sidelining the petrodollar. The Saudis are clearly setting up the option to dump the petrodollar.

If the Saudis start to sell oil to China in yuan, it would kill the petrodollar overnight.

Short of that, things still look very dire for the petrodollar. What is baked into the cake—thanks, in large part, to China’s “golden alternative”—is the petrodollar’s significant erosion.

Chris Lowe: What specific advice do you have based on this prognosis?

Nick Giambruno: The increased demand for gold from China’s “golden alternative” to the petrodollar is going to shock the gold market. And this demand shock clearly hasn’t been priced into the gold market yet. As many of your readers will be aware, gold is still down significantly from its 2011 peak.

That’s why I am so bullish on gold right now. As the petrodollar dies, gold is going to replace it as the go-to currency for the oil trade. That makes the yellow metal the single best way to profit from this major shift in our monetary order.

I started warning about the end of the petrodollar late last year. That’s when I told Crisis Investing readers that the death of the petrodollar would be the No. 1 black swan event of 2017.

Eventually, people will look back and see China’s “golden alternative” as the catalyst that made it happen.

Editor’s Note: Few people appreciate how unstable America’s monetary system is. Our colleague and financial world legend Bill Bonner has an unparalleled track record for making spot-on political and economic predictions… and he says we’re teetering on the edge of a full-fledged economic shutdown. Click here for more straight from Bill.

When I visited the memorial at Pearl Harbor, I briefly wondered if the Japanese were simply suicidal.

Why start an uncertain battle with a much more powerful opponent?

Japan’s leaders knew the US military was far superior when they attacked Pearl Harbor, Hawaii on December 7, 1941. The attack killed over 2,400 people and brought the US into World War 2.

But Japan’s leaders had a powerful reason to gamble with their nation’s fate…

Access to energy.

For Japan—an island nation totally dependent on imports—access to oil was a matter of life and death. The country needed to secure its energy supply. That made attacking Pearl Harbor a practical proposition.

Turns out, the Japanese thought not attacking Pearl Harbor was suicidal.

Here’s why…

In the early ’40s, Japan had big plans to dominate East Asia. The imperial Japanese military was on the march. And the US was the only country that could stop it.

The US wanted to block Tokyo and protect its geopolitical position in the region. So it moved to restrict Japan’s access to oil, which Japan needed to feed its economy and war machine.

Not surprisingly, the Japanese considered this hostile and aggressive. The US government didn’t expect it to provoke an attack, though.

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The Assistant Secretary of State for Economic Affairs at the time, Dean Acheson, said, “No rational Japanese could believe that an attack on us could result in anything but disaster for his country.”

The Japanese disagreed.

They knew they would run out of vital commodities soon. So they had two choices… let the US slowly strangle their country and ultimately surrender… or take their chances on a risky war against a vastly superior opponent.

In Japan’s samurai culture, surrender was the ultimate disgrace.

Death in battle was better. So they chose option two. It was the only honorable choice.

Japan’s leaders thought the Pearl Harbor attack could knock the US Navy out of the Pacific for at least six months. This would give Japan a sizable window to secure its energy sources without US interference—and to fortify its military positions across the Pacific.

By the time the US could respond, it would face a deeply embedded opponent and decide it was best to leave East Asia to Japan.

That was Tokyo’s plan, at least.

In reality, Japan did successfully capture Singapore from the British. It was an enormous victory. Winston Churchill called it the “worst disaster” in British military history.

And, after a string of big wins during their six-month window, the Japanese were entrenched. They appeared unbeatable. Their leaders hoped this would sap US morale so much that Washington would seek a compromise.

But President Roosevelt did not want to compromise.

Many believe he was actually waiting for the perfect pretext to sell a hesitant US public on another world war. Some even claim the US had deciphered Japan’s military code and knew the Pearl Harbor attack was coming.

In any case, the Japanese could not have been more wrong. Ultimately, their decision to strike Pearl Harbor culminated in the atomic bombings of Hiroshima and Nagasaki, total defeat, and unconditional surrender. Even today, the US still maintains military bases in Japan.

Today, Japan is in the midst of another energy security crisis.

Right now, it depends on imports for over 90% of its energy needs. Tokyo won’t go to war over it this time. But this crisis could lead to enormous profits in the world’s most hated resource market.

Earlier this year I traveled over 25,000 miles to Japan—and Kazakhstan—to find out how to profit from this historic opportunity.

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The World’s Most Hated Commodity

On March 11, 2011, one of the largest earthquakes in history hit off the coast of Japan. The earthquake, and the tsunami that followed, killed thousands of people and caused over $200 billion in damage.

The tsunami also caused a nuclear meltdown at Japan’s Fukushima power plant, which released radioactivity into the air. It was the worst (and only) nuclear disaster since Chernobyl. Afterward, Japan took all 54 of its nuclear reactors offline.

Japan suddenly needed a major new source of energy.

The country has a law dating back to the 1970s that requires it to stockpile at least five years’ worth of energy supplies. Uranium, which fuels nuclear power plants, is the only feasible way for Japan to do that. It’s simply not practical for Japan to stockpile enough coal, oil, liquefied natural gas (LNG), etc.

For now, Japan is making an emergency exception to its five-year law because of Fukushima. But this puts it in a very vulnerable geopolitical position, especially since tensions with China, its historical rival, are increasing.

The Japanese know that relying on the kindness of foreigners for their energy security is foolhardy. This situation can’t continue indefinitely.

Eventually, Japan will have to bring most of its nuclear power plants back online. However, restarting idled plants is not as simple as flipping a switch. And, with LNG prices near recent lows, they haven’t had an immediate need to do so.

Nonetheless, Japan recently stated that it would like nuclear power to account for as much as 22% of its energy mix by 2030.

Japan is just one factor driving the coming uranium boom.

Even if Japanese demand for uranium doesn’t return soon, the enormous amount of new demand from China’s new nuclear plants will more than offset it.

Before Fukushima, Japan was a major source of demand for uranium. The country had embraced nuclear energy in the 1960s, despite being devastated by nuclear weapons in World War 2.

Not surprisingly, global demand for uranium tanked after Fukushima. A global supply glut followed.

The uranium price crashed from around $85 to under $30. Then it continued sliding to around $18 per pound, far below the cost of production.

That was last November, and it appears to have been the bottom.

That same month, I said uranium had entered a new bull market and recommended a “best of breed” uranium company in Crisis Investing.

Uranium is now on a confirmed uptrend, but it’s still far below the cost of production. It’s still near the moment of maximum pessimism.

No other commodity has more upside and less downside right now.

The uranium market is one of the best crisis investing opportunities I’ve ever seen.

Psychology plays a big part in all this. After Hiroshima, Nagasaki, Chernobyl, Three Mile Island, and of course Fukushima, it’s easy for certain media and politicians to villainize uranium.

Besides that, investors are terrified that uranium prices have fallen over 85% from previous highs. I don’t know of a market where the sentiment is worse.

This is all good news for us.

Nuclear power delivers immense value to its users, there’s no substitute for it, and production is falling while demand rises.

This situation only has two possible outcomes:

1. Uranium prices don’t go up. Miners have no incentive to produce. Nuclear power plants run out of uranium, and the lights go out for billions of people.
2. Uranium prices go up and incentivize enough production to meet the demand.

There are no other options. Which one do you think is more likely?

Right now, the current uranium supply/demand imbalance is setting the stage for the next uranium boom.

Now is the time to get positioned for the same kind of explosive returns we’ve seen in previous uranium bull markets.

Until next time,

Nick Giambruno
Senior Editor, International Man

A few words are in order about the likely new Chairman of the Federal Reserve, Jerome Powell.

I don’t know the man personally. Not that it would make any difference; denizens of the swamp within the Beltway usually present well, and a brief meeting rarely allows you to penetrate someone’s social veneer. But I’m pretty confident that if we dined together it would be tense and unpleasant. We’d have no common ground, after the obligatory two minutes on the weather and the state of the roads.

He’s a lawyer, has been a Fed Governor for five years, and appears to be a “steady as she goes” so-called moderate Republican. He’s a lifelong Deep State player. But let’s not waste time psychoanalyzing this bureaucrat; he’s just a cog in the machine. And the machine, at this stage, has a life of its own.

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Many of my friends in the alternative press deplore Trump’s appointment of yet another conventional money printer. They were hoping for a “hawk,” who would start liquidating the Fed’s $4.5 trillion balance sheet, and raising interest rates. And they’re right. That $4.5 trillion of super money has driven stock, bond, and real estate prices to insane levels. And today’s artificially low interest rates are discouraging saving, and encouraging people to live above their means.

In an ideal world there would be some radical changes. The best thing for the US in the (famous) long run is to go “cold turkey.” To abolish the Federal Reserve, fire its thousands of employees with their worthless PhDs. Return to 100% reserve banking with a strict separation of demand and time deposits. Depoliticize money by using gold, not Federal Reserve Notes. And default on the national debt, which is rewarding crony capitalists, and will turn future generations of Americans into serfs. And massively deregulate. And abolish the income tax, while cutting spending 90%. Etc. Etc.

The chances of that happening are exactly zero. So let’s talk, instead, about what is going to happen.

We’re going to have much higher levels of inflation. The new Fed Chair will open a monetary hydrant, at least if he doesn’t want to be hung from a lamppost by his heels. But I’m quite pleased Trump has appointed the guy. That may sound shocking. Let me explain why.

A sound economist would work to stop money printing and let interest rates find a market level. But that would precipitate a deflationary collapse after decades of monetary debasement. And the powers of darkness would again be able to paint sound policies and the free market as the cause for the problem, when actually it’s the only cure for economic problems.

From an economic point of view an inflationist like Powell is a disaster. It’s too bad he’s nominally a Republican, since for some reason they’re associated with the free market. As is Trump. Wearing our speculator hats, we’d likely be better off under Hillary—even more inflation, even more distortions to capitalize on. Even wearing our economist hats we might be better off under her, because if the whole rotten structure collapsed on her watch, it might discredit her ideas for at least a few years. But, as ever, I suspect I’m being too optimistic.

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For decades—at least since I started following these things in the early ‘70s—free market economists have argued whether the Fed’s ever-increasing money printing would result in a deflationary depression, or a hyperinflationary depression.

As to why a catastrophic depression is inevitable—despite the fact most people try to produce more than they consume, and despite the fact science and technology are advancing exponentially—is beyond the scope of this brief article. I refer you to these pieces (here and here ) I’ve done in the past on that topic.

It will be a deflationary collapse if the Fed doesn’t continue buying debt and creating new dollars. And a hyperinflation if they do.

If they stop printing, the banks would fail, and the public would lose a good portion of their deposits. The economy would slow down considerably, causing indebted corporations to default, unemploying their workers. Tax revenues would fall off, and governments wouldn’t be able to fund welfare programs. The stock, bond and real estate markets would collapse, wiping out the asset base of rich people.

It would be a huge social upset. But most of the real wealth in the world would still exist, it’s just that a lot of it would change ownership. And the dollar would still exist—there’d just be many fewer of them. Production and commerce could continue. At least until the cries go out for the government to “do something.”

But hyperinflation will be an even bigger disaster. And that’s what we’re going to get. Money will drop radically in value, making production and consumption much, much harder. Foreigners will dump trillions of them, sending them back to the US in exchange for real wealth. There’ll be even more unemployment than with deflation. But the profligate—those who’d borrowed a lot to live above their means—will be rewarded, while prudent savers will be punished. Shaky, overindebted corporations might survive, while productive ones with fat balance sheets will lose. Worse, governments will have their debts erased, and therefore might even grow in power. They’ll definitely “do something,” they always do in time of chaos. Stocks and real estate could first crash, then soar as people try to get out of dollars and into assets. This will benefit the rich, at least in relative terms.

At this late stage either type of depression will result in not just financial and economic, but in social and political chaos. It won’t be fun. In a depression everybody loses. The winners are just those who lose least. And a few speculators that get lucky. Hopefully we’ll be among them.

Given a choice—and they have a choice, based on whether they keep printing or not—the government and the Fed will definitely veer towards more inflation. Everyone in office just hopes to kick the can down the road for at least one more cycle.

Frankly, I was surprised that things didn’t go over a cliff in 2008 when we entered this most recent hurricane. And I’ve been surprised that things have held together as well as they have during the long “eye of the storm.” But governments and central banks around the world have already printed up scores of trillions of new currency units, and reduced interest rates to zero and below. What can they do when we go into the trailing edge of the hurricane?

My guess is that they’ll repeat their actions so far. Print more money and try to take interest rates even lower. The result will be hyperinflation, or close to it. And lots of new government controls of all types.

Why is this—strictly relatively speaking—good news for us? Because more money printing means more bubbles will be created. And while bubbles are the enemies of a sound economy, they’re the friend of the speculator. The current mania in Bitcoin and other cryptocurrencies is an example.

In particular, I’m looking forward to a bubble in commodities in general (most are down 50% from the previous peak in 2011), and precious metals in particular. And not just a bubble, but a hyper bubble in mining stocks.

So, if I’m right, in the next few years we could stand to make a fortune while the world is falling apart. I know—that sounds harsh to be eating caviar while the masses are forced to grub for roots and berries. But, as Ayn Rand said when asked what you should do about the poor: “Just make sure you’re not one of them.”

Regards,

Doug Casey
Founder, Casey Research

Nick’s Note: Todd Scattini isn’t your typical marijuana entrepreneur.

He graduated from the United States Military Academy at West Point in 1996, and became an Army officer.

But Todd recently hung up his fatigues to serve as CEO of Harvest 360, a marijuana consulting and management firm.

My colleague Justin Spittler, editor of the Casey Daily Dispatch, met Todd at Harvest 360’s headquarters in Denver a few weeks ago. There, they discussed how he’s using cannabis to solve one of the military’s deadliest problems.

Todd’s story could completely change how many people think about cannabis.

Below is a transcript of their conversation. I encourage you to share it with anyone who still sees marijuana as just another “street drug.” It may just change their mind…

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Justin: Todd, I’m not used to seeing “cannabis” and “Army officer” in the same sentence. So, can you tell me how you became interested in the plant?

Todd: I became interested in 2011. I was in Paris at the time, and I was asked to serve as a special advisor for General John Allen. He was the Commander of the International Security Assistance Force (ISAF) back then.

ISAF was a NATO-led security mission. It’s the largest military coalition ever assembled. At the time, it was 51 nations.

Its main purpose was training the Afghan National Security Forces and assisting Afghanistan in rebuilding key government institutions. It was also engaged in the war with the Taliban insurgency.

I was helping manage the General’s relationship with the Coalition through bilateral engagement and normal security cooperation functions.

One evening, our special staff was asked to come up with creative ways to engage with the Afghans using the domestic resources they had so that they could create an industry without relying on outside assistance.

And I thought, “Geez. The Afghans don’t have many resources.”

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They had minerals, but the Chinese had purchased the rights to them long ago, and it would take nearly a decade to build the infrastructure to mine them effectively.

They had heroin, too, but I certainly didn’t think that could be the basis for an industry.

And they had cannabis. A lot of cannabis that they grew was smuggled outside of the country and sold on the black market for huge profits to fund terrorist operations.

So, I thought, “why don’t we transition them to a hemp industry?” It has 25,000 different uses such as food, fuel, fiber, and medicine. And humans have been using it for 8,000 years. We have essentially evolved with this plant.

Justin: How’d that suggestion go over with your supervisors?

Todd: It was not well-received. I don’t believe my concept was ever even briefed to the General. I was kind of laughed out of the room, to be honest. They called me “Major Cheech & Chong” and things like that.

But I learned so much about the plant by studying it, including its medical potential.

And I thought, “there are some military applications here.”

So, I continued to read, study, and talk to everyone I could about the plant. I learned so much that I became a master at talking to generals, other officers, and ambassadors about marijuana.

Justin: So, do they still call you Major Cheech & Chong?

Todd: I still get a giggle or pot pun when I talk about it. But I’m no longer laughed out of the room. So, yes, I’ve convinced a lot of people that this is a very interesting proposition and might be a way to address reducing suicides from post-traumatic stress disorder (PTSD), Traumatic Brain Injury (TBI), and chronic pain; all significant issues that often result from our service.

Justin: How did you change people’s minds?

Todd: I just became so passionate and well-studied about the plant, the roots of its prohibition, and its potential to help people.

So, now when speaking with generals and other senior leaders I tell them, “Sir, this is serious, and I think it could save soldiers’ lives.”

I always point them to the federal government’s patent on cannabidiol as a neuro-protectant, anti-inflammatory, and antioxidant. This is U.S. Patent 6630507.

Justin: Why’s that patent so important?

Todd: These days, many of our soldiers encounter improvised explosive devices (IED) on the battlefield. An IED strike can be devastating to multiple vehicles and soldiers in an instant.

And, if an IED goes off near you, there’s a good chance you’ll experience a TBI. TBI is a very serious concussion possibly leading to permanent or temporary impairment of cognitive, physical, and psychosocial function. We find that soldiers who have experienced a TBI are at a higher risk for PTSD and suicide.

Justin: How does an IED give TBI?

Todd: When an IED goes off near you, there’s a massive blast wave. The air from the blast creates a wall of pressure that hits a soldier’s hard skull and rattles the soft brain around inside of it, and a dangerous chemical process begins inside the skull.

This can lead to a stroke, which is what usually kills a TBI victim.

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Justin: How does the military currently treat TBI?

Todd: Today, there’s very little done to treat it. And, aside from improvements made to some vehicles, there’s really no protocol for preventing this sort of injury.

I want to change that with my project, The Athena Protocol.

I want to use formulations of non-psychoactive cannabinoids (especially cannabidiol) and a few added elements as a daily supplement to essentially “armor a soldier’s brain,” and help protect the brain’s neuroreceptors. Studies suggest that this approach could also increase the elasticity of the neurons, preventing them from calcification and potentially reducing the instance of PTSD among our soldier and veteran population.

Justin: How do you plan to prevent these sorts of things?

Todd: Well, we do this in two phases. The first is the prep phase. This happens “left of the boom,” as we say in the military. This means this is the preparation done prior to an IED strike. This includes the supplementation of cannabinoids which help “armor the brain” in preparation for a traumatic event.

Hopefully no one ever gets “right of the boom,” or experiences an IED strike. But, if they do, I would propose administering an immediate supplemental dose of non-psychoactive cannabinoids and other elements very, very rapidly.

Justin: What made you want to focus on TBI?

Todd: I became interested after I lost a platoon leader of mine. His name was Captain Andrew Houghton.

Andy was a fellow West Point graduate. He was class of 2001, and he was like a little brother to me.

In 2004, he was struck in the head with a rocket-propelled grenade (RPG) while deployed in Iraq. The RPG didn’t explode. But it did massive damage to his head.

The battlefield medics, which are so good today, performed a soldier-to-soldier blood transfusion on-site in his vehicle. They stabilized him in-country and transported him to the Army hospital in Germany.

There, his brain continued to swell.

The rocket did so much damage that they had to remove a large portion of his brain to release the pressure. He was then sent to Walter Reed Medical Center in Washington, D.C., where I was present when they pinned a Purple Heart on him. He passed away the next day.

If I can prevent something like that from happening again, I will be very satisfied and feel that I will have done my duty.

Justin: I’m terribly sorry to hear about your loss, Todd.

But it’s inspiring that you’re trying to prevent this sort of thing from happening to other soldiers.

That said, how can you be so confident that The Athena Protocol will work? After all, no one’s ever done anything like this before.

Todd: So, a portion of that is the federal patent I was telling you about. This study says cannabidiol is an effective neuroprotectant and anti-inflammatory.

More recent studies have also shown that victims of car accidents who have THC (an active ingredient in marijuana) have a higher percentage of survivability in TBI incidents.

Plus, we know that cannabinoids pass the blood barrier much more rapidly than most pharmaceuticals.

So, we’d be able to administer and see anti-inflammatory effects very rapidly.

But, you are right. Of course, this theory must be tested. The unfortunate thing is that we are prevented from testing this in the United States due to cannabis’ Schedule I status on the federal government’s list of Controlled Substances. I would propose to circumvent this by studying this outside of the U.S. or gaining special permission to do so in the U.S.

Justin: Would The Athena Protocol only be used to treat TBI injuries suffered in combat? Or are there applications beyond the military?

Todd: Absolutely. Soldiers aren’t the only ones who suffer TBI injuries. According to the Centers for Disease Control and Prevention (CDC), 2.5 million people go to U.S. emergency rooms every year for TBI. And about 300,000 of those people die from their injuries.

This includes everyone from car crash victims to people who slip and fall.

So, this kind of treatment could really be used everywhere. And the sooner first responders and hospitals can administer this, the better.

Justin: And how’s the project coming along?

Todd: Right now, we’re at the research and development (R&D) level, but we have submitted for a provisional patent for the entire protocol and sub-patents for each formulation and method of administration. Specifically, we’re working on jamming as much cannabidiol into a single drop of water as possible. And we’ve already gotten some incredibly high levels of concentration. So, it’s coming along very nicely.

Justin: Got it. You’re doing some incredible work, Todd. But I have to ask you one last thing before I let you go… Where’d the name, The Athena Protocol, come from?

Todd: The name, and I’m not kidding, came to me in the middle of the night. I shot out of bed and wrote it down.

Athena is the Greek Goddess of Wisdom, Good Counsel, and War. She also wears a helmet. And Athena’s helmet adorns the West Point crest.

Justin: Wow. It sure seems like you picked the perfect name.

Thank you for taking the time to speak with me. And best of luck with everything.