Street Analysis

In a previous post, we spoke of the height of imbalances in USA and the creation of a half-trillionaire as a contrast. Now, the shutdown of federal government has completed its two weeks time period and more pain may still ensue as effectively neutering, if not dismantling, of Affordable Care Act (ACA), one of the most successful legislation pieces of a modern history as well as one of the ONLY lesson learned and/or positive outcome from the Great Financial Crisis (GFC) of 2008 is at stake. This oft tried destruction cannot materialize without much pain and of course even more brutal fighting between the two political parties – Democratic and Republican.

There have been at least 70 Republican led attempts to repeal ACA in last 15 years since its inception in March 2010 as shown here on a wiki page and they have not been able to put any dent to it yet. So, is it rational to expect that the Republicans may succeed around this time to dismantle ACA without much repercussions after all these failed attempts? Probably not…

What is more ominous is the revolt of a yellow metal – gold, the real money – price of which is surging at a very unusual and fast pace exhibiting a climb as if something bad were to happen. The growth in gold price is indeed explosive especially compared to its traditional pace of slow and steady rise (or even decline) for a valid reason.

1. Gold price at over $4,200 rose about 5% from $4,000 in just last one week alone in addition to about 50% rise year-to-date and more than double the price in 3 years
2. U.S. government missed publishing the employment data (unemployment rate) on October 3 due to shutdown
3. U.S. government missed publishing the inflation data (consumer price index – CPI) on October 15 due to shutdown

Hence, the net effect…businesses and governments (federal, city and state) need to fly blind without much needed data and be subject to major accident(s). In about three days, it already is on its way to be the third-longest shutdown in a recent history after the 35 and 21 days long shutdown beginning in Dec 2018 and Dec 1995 respectively as shown here.

Cherry on the top…for the first time in 20 years, U.S. passport has lost the standing from the top 10 rankings of all countries in the world as per Henley Passport Index. It ranks 12^th now in the world tied with Malaysia and behind our good old neighbor Canada who is ranked 9^th as well as several eastern European countries and of course the western European countries. Since, the index assigns the same score to multiple countries, there are actually 36 countries ahead of U.S. in the list. Clearly, it shows how fast we are declining when we were #1 in 2014.

U.S. dollar is getting weaker. Hence, the gold is getting stronger on a relative basis. Money printing is easy. Gold discovery and digging (mining) is hard. Fiat currencies have only so much value whereas gold acts like real money and keeps up with the eroding power of inflation, a major pain point of today’s consumer in USA.

Is it 1970s all over again as it comes to hyper-inflation time period? Probably, that is what we may well end up seeing as the Federal Reserve (Fed) is gradually caving in under the political pressure from the President of the United States (POTUS), Donald J. Trump. Both, Fed well as POTUS are already in the box as covered in an earlier post.

Both are boxed in. How exactly? Fed is fighting the specter of stagflation and POTUS fights the total collapse of U.S. economy under his watch by surging budget deficits, slowing economy from self-inflicted wounds of tariffs, debt service expense crowding out major outlays and catastrophic assaults on democracy as well as immigration.

Interest expense alone at over $1 trillion, more than half of the U.S. budget deficit and more than the defense expenditure, is a serious matter. Add to that very fragile situation, the lethal mix of potentially higher interest rate from inflation and the entire system collapses. Monumental rise in the gold price is only a manifestation of that risk.

While these bad things are happening, bond holders are still sleeping or rather have been sleeping for the longest time one can imagine and the stock holders are partying like anything. Though, gold? It is acting as ever-vigilant and as a good Samaritan. It is a harbinger of things to come…

While the dollar debasement debate and slow-motion action have been in place for some time, the actual trade reflecting the same is well underway for long. Explosive rally in gold price reflects just that with well over 50% gain this year alone. Gold has literally or effectively revolted against the debauchery of dollar and is asserting its full control.

This is a move that will end up costing USA dearly as the endless manipulation and abuse of U.S. dollar, the fiat and reserve currency of the world, is finally coming home to roost after U.S. abandoning the gold standard in 1971 under then President Richard Nixon’s watch.

Gold preserves the value regardless of inflation whereas the fiat currency does depreciate against the crippling effects of inflation. Gold price is not tied to the banking system or any government that can directly influence, if not manipulate, the ‘price of money’.

World’s major central banks are diversifying away gradually from U.S. dollar and into gold and other currencies to hedge and protect their holdings in light of all geopolitical events and specter of inflation in U.S.

What all this means is that flight to safe havens shall continue and hedge against the mounting debt of U.S., currently sitting at $38 trillion dollar and increasing by $2 trillion dollars a year or 6% deficit-to-GDP ratio will be the ‘trade of the decade, if not the trade of the century’.

Cryptocurrencies (e.g. Bitcoin) do not make the cut here since they are nothing but a ‘rat poison squared’ as the investment legends – Warren Buffett and Charlie Munger stated back in 2018. Alternatively, they can be called as the gambling play or the instruments to play into a ‘greater-fool’ theory, not the ‘real’ asset class like a fiat currency backed by the guaranty of any government (no matter how weak), stocks, bonds, real estate or precious metals – in other words, all real asset classes.

If we were to enumerate or summarize all the reasons, not necessarily in the order of importance, for an underlying thesis, here are those main driving factors behind the revolt of gold, a safe haven asset, that comes in quite handy in the event of some sort of government failure or even a major collapse.

1. U.S. Federal Government shutdown since Oct 1, 2025 and still counting days…
2. Specter of stagflation much like 1970s that created one of the worst recessions in U.S. history
3. Transformation of USA financial picture from a net creditor nation in early 1980’s to the net debtor nation with the ever-increasing debt-to-GDP ratio and inability to service the debt without painful consequences
4. Healthcare tsunami in the making: Most everyone knows and acknowledges including congressmen that the healthcare system is in shambles and completely broken. It may implode and collapse anytime barring any major or complete reform
5. Ill-fated, self-defeating and suicidal tariff moves since early 2025 and insanity by POTUS continues with no end in sight. Instead, U.S. needs to be more strategic much like China and many other countries making advancements on various fronts
6. TACO trade, as known in the Wall Street and an acronym given to POTUS – ‘Trump Always Chickens Out’ since global tariffs announcement on April 2 also known as ‘Liberation Day’ only to walk back in days after seeing a major global market rout, occurred once again on Oct 10 and 13 after the repeat meeting the same fate as April – threat of additional 100% tariff for China imports on Friday, Oct 10 only to withdraw on Monday, Oct 13, after seeing another market rout. Essentially, the POTUS is hellbent on taking a country down with him like many of his prior business engagements into bankruptcy. Remember he is big on debt? Well, it is time to pay the bills. It is a major irony or unfortunate reality that the big part of the country has not yet woken up to that fact and reelected such a whining loser and is still supporting several self-destructive moves as if the mishandling of COVID crisis and adding several trillion dollars in debt was not enough under his watch during first administration
7. Wealth Transfer is at its peak, which is in the making for the last 4 decades owing to both political parties with their much-misaligned policies that gave a rise to ‘Trumpism’ and why Trump got elected and even re-elected with one term hiatus when people voted more rationally. Wealth and income inequality is at its worst ever in the good old USA and the middle class is fast evaporating – dividing America into two parts – have’s and have-not’s. Gini coefficient measures the wealth and income inequality and U.S. has one of the worst rankings amongst the developed nations. It is essentially a rigged economy in favor of rich and powerful that gave a rise to ‘Trumpism’ and MAGA band (Make America Great Again, which consists of primarily uninformed, self-interested or plain evil) in the first place
8. Two Americas: Due to wealth transfer as described above, part of America (relatively small portion) does phenomenally well just as the stocks have continued to march higher and higher for years making countless millionaires and billionaires, hack even half-a-trillionaire (guess who?) versus the majority that struggles even for the groceries as of late. In fact, a crowdfunding website ‘GoFundMe’ CEO just stated a couple days ago that he is seeing an alarming trend of people raising funds from his site to buy the groceries. Buy groceries? Are we really an advanced nation? Further, folks are even going into debt to purchase life essentials by putting them onto credit card carrying balances or splitting payments using BNPL (Buy Now Pay Later) methods that is also seeing fascinating growth
9. Insanity of stock holders, namely Mag 7 and AI cool-aid drinkers, adding major contributing factor to the tail-risk (unforeseen events) potentially pushing the global economy into a major recession. AI investments are now crowding out the ‘real’ economy as it leaves very little or no growth outside of AI in the real economy. Institutional investors, certain company managements and sell-side pimps are acting like morons without any rational thinking that feasts on the money from retail and uninformed investors with an extreme level of greed. Remember Buffett’s wise words? Be fearful when everyone is greedy. As a result of it all, these super expensive financial assets, namely stocks, exhibit mega moves, completely unprecedented, in several large cap stocks including some innocent ones by these ‘Trigger Happy’ and ‘High’ investors
10. Bond holders are pacified in slumber zone or even in a deep sleep that may one day arise and roar like a lion and drop their moron hat by demanding sharply higher interest rates. Clearly, they are complicit in the making of a current messy situation
11. Fed Independence: Attack on the Federal Reserve and attempts to take over the control and guide its policy is so lethal that it is beyond the comprehension of our ‘man-child’ president. Hence, the U.S. dollar enjoying the status of world’s reserve currency and treasuries being the risk-free assets are under a great threat, if not a grave danger. Violent rise in the price of the yellow metal, gold, reflects precisely just that. U.S. dollar and treasuries no longer hold the safe haven status from what we can see. A gradual move for refuge from the self-harming government policy is well underway and gold price is a good proxy for that. Silver price is also at an all-time high reflecting the same trend
12. Sheepish and weak constituency of congressmen, business CEO’s, law firms, media firms and even country heads bending their knees after being bullied by a petulant and evil ‘man-child’ President. Caving into abolition of DEI initiatives (Diversity, Equity & Inclusion) and major infringements on, if not nullifying, the rights of LGBTQ+ community regardless of the shortcomings of initiatives is one good example. Major exceptions are China, Russia, India and Brazil – the BRIC countries that are standing up to the reckless demands and whims of a madman and not giving into it regardless of their own issues
13. Our President and the government stand for only ‘half’ of the country, alas, not even half of the country, just for their ‘MAGA’ base, unfortunately, instead of standing up for all Americans. A good government is “of, by and for all of the people” not just a few privileged ones as these wise words were uttered by the President Abe Lincoln in his Gettysburg address. Unfortunate reality is that most are unaware of this malice and pledge their ‘tribalism’ to these evil forces disguised as good ones or change makers sometimes in a sophisticated manner
14. U.S. – China Rivalry: China has been taking all the right steps whereas U.S. has continued to shoot in its own foot and now a suicidal president shall help us get there faster into the abyss, unfortunately. It is a sheer jealousy of China that does not get us anywhere. In order to beat China be it from the economical, technological or military might, we simply need to be better than China, not just attack China. We have been ‘frenemies’ (friends with enemies) for about last 3 decades and reducing reliance on China needs to be a ‘strategic’ and ‘gradual’ move, not an abrupt and whimsical one, certainly not suicidal one
15. Geopolitics: ‘America First’ approach with the break from the global trade order and upending the very institutions and the methods of how the business and commerce works in a highly interconnected world in 21^st century is nothing short of foolish, if not outright suicidal. Unfortunately, wars and conflicts are always there between countries. We do not need any self-manufactured crisis and conflict on the economic and business side of the world on top of the man-made geographical boundaries and related struggles and strife

In conclusion, both political parties are equally responsible for the mess that we are in, however, more so Republicans now that the party has been taken over and led by the evil forces needing ‘exorcism’ as in the famed movie ‘Exorcist’. Evil forces always need replaced by good and noble forces for the mankind to progress further. Republican party has lost its soul and need to regain it, a tall order, whereas Democratic party needs to root out any ills that the party is facing.

Blaming and bullying by the leaders of the Republican party is not just rampant, though, pervasive or rather a life blood instead of cooperation with the Democratic party to make any tangible progress. Democrats for their part are unwilling to budge at times only contributing to a mess that has become bigger and bigger in last 4 decades. America then and now is a day and night difference

Democrats are people too! So, are ‘illegal’ immigrants. Sending federal troops to blue (Democratic) states and harassing them is no good governance whereas the red (Republican) states are spared due to tribalism. Just because, our lame congress cannot enact a good legislation and enforce the ‘rule of law’ to efficiently govern ‘all’ people including legal and illegal immigrants, it does not mean that we can treat any party or any individual as an animal or non-human being. Alas, we are not even supposed to give that treatment to many animals. Of course, no one shall condone any criminal activities, yet, the basic fact of life is that even the hard-core criminal is a human being and deserves certain basic rights. We shall not ever forget that.

So now what…officially, we have entered the civil war category of crisis in this once-great nation and the fullest extent of dire consequences, unfortunately, cannot be known until after few more years. As mentioned earlier, sheepish congressmen, businesses, law firms, media firms, universities and even country heads only contribute to that in the meaningful ways on top of the ignorant masses and tribalists.

Separately, not to delve much into the concept of government shutdown itself, it is fair to think that the entire concept is so silly and appears nothing but a child’s play as opposed to serious adults or leaders engaged in solving world’s real problems. The whole concept needs to go away forever so that the U.S. population can never be held hostage to the whims of the politicians.

We can end the note with these words from some wise men:

“Unscrupulous and evil men and groups can usurp the power of government and use it to their own ends”

— First line in chapter 10 “Support a Government Designed and Run for All the People” of “Way to Happiness Digest” written by L. Ron Hubbard

“When a clown moves into a palace he doesn’t become a king, the palace instead becomes a circus”

— Turkish proverb shared by Dan Rather