Canada, Greenland, a Canal, and Crypto
"The largest opportunities arise out of the largest gaps between perception and reality, expectations and reality, like where we are right now." —Simon Mikhailovich
Do you see what Trump sees in Canada, Greenland, and the Panama Canal? Born in Queens, New York, by a successful real estate developer, Trump has spotted the perfect opportunity with great timing. It goes back to 1626 and the art of the deal. Before Trump moved to Manhattan and built the Trump Organization, the Dutch purchased Manhattan Island from the Lenape people through a trade agreement with the colonist Peter Minuit for $24 worth of beads and trinkets. I wonder, is Trump related to Peter Minuit? And will he use Dogecoin, Bitcoin, Fartcoin, or the Dollar to seal the deal? All joking aside, I think it’s a great idea...much better than tariffs.
In 1912, J.P. Morgan testified before Congress, "Gold is money. Everything else is credit." And we have a lot more credit than we have money. While most central banks have been buying gold, the U.S. Federal Reserve hasn't bought gold since Executive Order 6102 in 1933, when it transferred all of its holdings to the U.S. Treasury in exchange for gold certificates. It did this because the Gold Reserve Act made it illegal for the Fed and other U.S. entities to hold gold for monetary purposes. After confiscating all the gold of the people for $20.67 per ounce, the U.S. government then increased its value to $35 per ounce, before the free market bid it up more.
Today the book value of that U.S. Treasury gold is $42.22 per troy ounce. Regardless of the current market value, the U.S. Treasury has held the value of its gold holdings at this price. Confusing, I know, but this is likely for legal reasons surrounding the default that happened in 1971 under President Richard M. Nixon. You see, in 1971 the U.S. had the same problem it has today...the overvalued dollar was undermining the nation's foreign trade position. This is what prompted the President and his top economic advisers to implement the following program of action:
Cut taxes and put a 90-day freeze on prices and wages
"Suspend" the dollar’s convertibility into gold under the Bretton Woods Agreement (and this was supposed to be only temporary)
Levy an extra 10 percent tariff on all dutiable imports (to adjust the value of the U.S. and its trading partners' currencies upward, trade barriers downward, and allow for more imports from the U.S.)
It's also what prompted the free market action on gold. See Gold Prices - 100 Year Historical Chart and notice how quickly the price rose.
In response to Nixon's plan of action, the Group of Ten (G–10) industrialized democracies set fixed exchange rates around a devalued dollar. Nixon called this “the most significant monetary agreement in the history of the world.” In February 1973, free market pressure led to a further dollar devaluation and another set of exchange parities. This led to the following New York Times publication on the 13th: U.S. Orders Dollar Devalued 10 Per Cent; Japanese Yen Will Be Allowed to Float; Nixon to Submit Trade Plan to Congress. It's hard for me to remember the 1970s but there seems to be lots of parallels today.
Just weeks later, financial markets again subjected the dollar to heavy pressure. So in March 1973, the G–10 worked out an arrangement "wherein six members of the European Community tied their currencies together and jointly floated against the U.S. dollar, a decision that effectively signaled the abandonment of the Bretton Woods fixed exchange rate system in favor of the current system of floating exchange rates." See the Office of the Historian, Foreign Service Institute of the United States Department of State for more details. Ever since then, the U.S. has been subsidizing its growth with credit. Problem now is it's running out of ways to do this.
There hasn't been much attention on U.S. gold holdings since credit has taken center stage. The vaults at Fort Knox have been opened only twice since it was built. The first time was in 1974 for journalists (year of the new petrodollar arrangement which saved the dollar as the world reserve currency), and again in 2017 for a "historic" visit during Trump’s first term. Obviously, if the government were to buy gold, it would undermine their interest in the dollar, but that's changing too. For a long time, the dollar was inversely correlated with gold, but in 2024, the price of gold increased by 26% to 27% in the face of a strong dollar.
Let's now look at some recent facts that will surely influence the new administration. One year ago, the BRICS added Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and UAE to their intergovernmental organization. With Egypt’s membership came the Suez Canal. With Iran’s membership came the Straits of Hormuz. This created "check" (as in the game of chess) against their opponent, NATO (the United States), cornering all major choke points for energy/trade passage. Now that Indonesia is joining BRICS as a full member, Trump is eyeing the Panama Canal. And with respect to Canada and Greenland, I'm sure he's thinking about the resources we will need to secure the nation's foreign trade position again.
You see, we are in a war: World War III to be exact. The alliances are NATO (West) and the BRICS (East) and they are fighting over money and resource control. This is why we are seeing crazy unexplainable events happening almost daily now (fires, drones, shootings, balloons, UFOs, and who knows what next). NATO wants international trade to be dominated by credit (which means the dollar), while BRICS wants it to be dominated by resources (with an energy proxy like gold). BRICS is not okay with the U.S. exploiting the rest of the world’s labor and resources for depreciating currency. They are not okay with modern forms of slavery, such as child labor behind smart phone and electric car batteries.
Perhaps Trump understands that real value is in real resources and real energy, not in NFTs and currencies, and this is the only way to get ahead of the BRICS, who combined, have a lot more of real resources than we do. Perhaps he also understands The Art of the Deal, since he wrote the book. If you're not familiar with the real wealth behind the BRICS, take a look at 10 Countries With the Most Natural Resources by Craig Anthony. As you might expect, Russia is first. Then comes the United States, Saudi Arabia, and Canada. Do you see now why Trump might be interested in Canada? Greenland is also packed with goodies...
Minerals: Gold, silver, copper, lead, zinc, graphite, olivine, cryolite, marble, rare earth elements, titanium, and precious stones.
Hydrocarbons: Oil and gas.
Rare earth elements: Used in energy transition technologies.
Lithium: Used in electric vehicles, wind turbines, and transmission lines.
Anorthosite: Used in paints, plastic coatings, and special varieties of glass.
Now, change gears a bit and think about AI and Big Tech and the Magnificent Seven Stocks...what makes them all work? What gives them life and makes them breathe? That's right, energy and resources. They are not kings…they exist in an ecosphere that is not independent. They rely on electricity, Internet, suppliers, etc. I'm a visual person and it helps to “see” how the market caps of all stocks listed on US stock exchanges measure up by sectors and industries. As you can imagine, I was very happy to find finviz. In this first finviz image, try to find the resources and energy sectors amidst the extremely overvalued behemoths. You can also visit this finviz link for a better experience.
Did you notice how small the entire gold mining industry is right now? Remember, gold represents money for the BRICS nations and for any nations who want to trade with them in the future. Since the U.S. government can't continue to borrow and pay interest on the borrow forever, this means that the money printers will change hands at some point. Gold miners are the money printers of the future. I see this situation as the buy of a lifetime, but this is not financial advice. Real money (old money and money of the future), energy, natural resources, rare earth minerals is now a fraction of the price of NVDA, AAPL, GOOG, META, MSFT, etc. And do you know how much energy and resources go into big tech companies? Without them, or a shortage of them, and these companies are toast, reliant on cheap energy, suppressed by the U.S. dollar, to stay in business.
I remember how much Trump liked gold during his first term in office. Remember his gold apartment? If he can't buy it outright, surely he will get it in the ground from Canada and Greenland, and maybe even Mexico. Canada is full of gold, and in August 2023, Mine featured an article: Why the world finds itself in a Greenland ‘gold rush’: Melting ice is exposing Greenland’s critical mineral resources. Isabeau van Halm looks at how mining companies, governments and billionaires are all eyeing what lies beneath the permafrost. Just wait until he seals the deal. When the U.S. is better positioned against the BRICS, then gold will be permitted to soar.
And as it turns out, there's some fascinating history about the United States offering to purchase Greenland for $100 million in gold. This proposal came during the presidency of Harry S. Truman in 1946, and was a part of America's plan to secure strategic territories during the post-World War II period. After all, territories are a lot more valuable than paper and digits in the real world economy as well as international trade. It looks as if we are getting there again, back to a sane world where natural resources and energy matter, and where underappreciated territories become relevant again for the things we will need to survive and thrive.
History doesn't repeat but it sure does rhyme...and the rhythm is crystal clear. Please like and share this post, as it's important for other people to get a clue. The mainstream media is not helping, and those who don't understand what's happening will be left behind. The best charlas I saw last week are listed below. Enjoy!
Well written and the essentials are well understood, - thank you!