Charlie Munger: The Currency is Going to Zero

Last week as the nation of Canada took further tiptoes into totalitarianism.

While multi-billionaire Charlie Munger stated the fiat US dollar is going to zero within a century.

While the highly successful 98-year old investor knows the power of compounding high dividend stocks over long timeframes, perhaps he underestimates the power of compounding increasingly underreported inflation decade after decade comeuppance. 

We and many other bullion bulls will take the under on his 100-year working thesis. Perhaps dividing his working hypothesis timeline by five or less. 

Given the combined underestimation of inflation’s past and future coming, combined with the speed of technological digital payment systems onboarding, the speed of change to come is unknowable but likely faster than one might guess based on the last century’s rate.

Real growth is unlikely to dig us out of this debt and unfunded liability problem. Are we going to stagnate for a century working painfully through these major debt and unfunded promise piles? 

Rather it seems more likely we’ll muddle and lie to ourselves for as long as we can, then once it becomes politically unpalatable, we may simply collectively rip the band-aid by ‘accident.’ 

For example, a future four-month hyperinflation scenario seems to still be the working theory of 50-year financial trader Victor Sperandeo over how this super debt cycle retreats to a sounder foundation in real value terms.

Central Bank Digital Currencies or CBDC payment systems are inbound to over 90% of the world's global domestic product-producing nations. 

These full central bank-controlled payment systems will most certainly be used for massive data collection and attempting to gain further control of nations' respective citizenries through new-age monetary policy tools gained. 

Central Bank Digital Currency systems will likely also be handy in helping better control massive secular inflationary policies to come as more anonymous payment systems get increasingly widdled out.

Another strong week of trading to upside for the monetary precious metals.

The gold spot price enjoyed its best weekly rise in the last nine months closing just under 1,900 oz for the week.

The silver spot price also finished slightly higher though it has yet to fully confirm and follow gold's strength of late.

As a result, the gold-silver ratio ends the week slightly up at 79, whereas in early June 2021, the last time gold was near 1900 oz, the gold-silver ratio was around 67 and the silver spot price was above 28 an ounce.

If gold somehow continues its move to the upside it will be interesting to see how silver responds. 

This week we got some updates on underlying physical bullion import-export data for last month, January 2022.

Swiss gold exports to China last month were the largest seen since late 2016, back when the then gold spot price dipped below $1200 oz.

Thus far in 2022, the Chinese see sub 12,000 yuan an ounce gold as good value judging by heavy Chinese gold bullion buying to begin this year.

Turning to silver bullion physical flows.

According to Metals Focus and India trade data, the nation had a strong month of Jan 2022 imports for silver. They imported around 777 metric tons of silver or roughly 25 million ounces last month alone. The chart that you see in this week’s video is only updated through Nov 2021, but you can see where 777 tons in one month stacks up compared to the last ten years of monthly data.

And while we don't expect that to become the norm for their average monthly silver imports for this year 2022. Recall that during the 2010s, India imported over 172 million ounces on average per year. 

And the nation imported less than half that on average over the last two wedding seasons locked down years 2020 and 2021.

It's fair to say there is pent-up silver demand in India, and we should continue seeing robust Indian silver bullion import data to come.

There was a good bit of celebrating this week for gold bulls upon seeing the Japanese yen gold price reach new all-time highs beyond 218,000 fiat yen per troy ounce of gold.

You can see the massive cup and handle breakout in the Japanese yen gold price chart linked above, covering this full fiat yen currency era.

Massive cup and handle charts can be seen for not just gold but also for silver in the fiat US dollar chart as well.

What is fascinating for me is how much further silver has to go in Japanese yen before getting anywhere near its 1980 high still. Closing this week around 2,750 fiat yen per troy ounce, the land of the rising sun needs to see its current silver spot price multiply by over a factor of four just to reach an over 40 year-ago high from January 1980.

Turning again to US inflation expectations, a recent late last month Gallup price inflation poll reveals nearly 80% of those polled believe inflation is going to continue going up. And while inflation is typically the end result of fiat monetary expansions, the risk here is a runaway psychological exception hard to bring back without crashing financial markets and kicking off a recession.

Here is an updated chart illustrating rigged US government BLS CPI inflation data through December of last year. And of course, while offshoring and increased productivity can mask some escalating costs in the last 21 years, the largest price escalations have been in the things US citizens absolutely need. 

On a relative basis, the good news remains prudent bullion price inflation wealth insurance remains relatively cheap and available, for now.

That is all for this week, as always to you out there.

Take great care of yourselves and those you love.

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...