Here is look at $10,000+ gold and China as a feared rival.
December 5 (King World News) – Dr. Stephen Leeb: As any self-help book would tell you, you can’t change the past. You can only try to learn from it to shape the future by choosing to act in wiser, more productive ways. That goes for countries as well as for individuals.
When I look back at the past half century of U.S. history, I’m almost devastated by all the what-ifs that seem so glaring. I don’t think it’s too late to turn things around. But we don’t have infinite time: A lot of critical decisions will need to be made relatively soon. The right decisions could lead to a path of growth and well-being, with America once again a beacon for human rights and creativity. The wrong ones could accelerate the decline we’ve been on for decades.
Either way, there will be price to pay. But for smart investors, that price can be more than fully cushioned by gold. The difference is that in one case, if we make the right decisions, it will mean unmatched gains in gold and strong gains in many other assets for as long as the eye can see. In the other, gold likely vaults well into five figures (over $10,000), but few assets follow, and the time horizon for enjoying the gains may be shorter.
The Road To $10,000+ Gold
One of the biggest what-ifs was going off the gold standard in the early 1970s. That fateful choice, in the context of the dollar remaining the reserve currency, let us abandon monetary discipline and long-term planning. It led to the dominance of an increasingly bloated and empowered financial sector focused on immediate gratification and short-term gains. And it allowed America, which once led the world in innovation, to be overtaken by other countries in critical new technologies. Once we lost the discipline imposed by a gold standard, our technology hegemony was doomed.
Every time I hear of another instance of China taking a lead in a technology, it burns me up, particularly since virtually all of China’s tech prowess is based on inventions and discoveries made in America. And it’s not just China. In the world’s most important foundational technology, the manufacture of semiconductor chips, the leading players are Taiwan-based Taiwan Semiconductor Company and Netherlands-based ASML. But we have no one to blame but ourselves. To borrow from Walt Kelly, the enemy is us.
Some of our rivalry with China concentrates on semiconductors, which are the backbone of information technology. Also true, China remains the leading provider of 5G wireless infrastructure despite our sanctions against Huawei and our aggressive lobbying of other countries about the dangers of Huawei equipment. We have also sanctioned solar modules from China and decry China’s expertise in AI. We constantly accuse the Chinese of stealing our secrets with their cyberattacks. I have no doubt China has stolen whatever it could. But that’s because they could. As I pointed out in my previous interview, the head of cyber research at the Pentagon declared our neglect of cyber technology was putting Americans and their children at risk. Yet all these technologies and many more were created in America…
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Big Mistake With Bell Labs
One egregious example of past mistakes has to do with the breakup of AT&T. Don’t get me wrong. I’m against monopolies. But in the breakup of AT&T, the focus was on the profit-making parts of the company. Little thought was given to Bell Labs, arguably the greatest research powerhouse in history. The government proposed the breakup in a legal action in 1974. The decision to split the company into multiple parts was issued in the early 1980s, and it wasn’t until the early 1990s that the parts were fully operational as new entities.
In other words, about a generation passed between the initial lawsuit and its completion. In those years the cash register for the financial colossus continued to ring as the critical middleman in the largest breakup in history. I doubt that anyone has an exact number, but I would bet that the inflation-adjusted payday for the financial for their service in the breakup set records that will never be topped.
In their handling of Bell Labs, those enriched middlemen bear at least partial responsibility for inflicting the single biggest blow to our position as the world’s greatest creator of technologies. During all the glory years when it flourished under the aegis of the government-regulated AT&T monopoly, Bell Labs turned out one invention and theoretical breakthrough after another. They included the transistor, the laser, the foundation of information theory, the foundation of quantum mechanics, the internet, superconductivity, solar modules, and for good measure the Big Bang theory, the foundations of astrophysics.
Bell Labs easily could have been placed under the shared care of the Baby Bells or become a ward of the government. Instead, it was attached to the company most vulnerable to the competitive pressures of a marketplace obsessed with short-results. That company went through multiple transformations before the last iteration as Lucent went bankrupt in the wake of the tech bubble. Bell Labs, a shadow of its former self, is now owned by Nokia. Can anyone be surprised that Nokia was one of the companies we turned to as an alternative to Huawei in the 5G battle?
China As A Feared Rival
China has become both a feared rival and a scapegoat for American failings. Its ruthless tactics, culture of cheating, and lack of human rights are among the few things politicians on all sides seem to agree on. Many of the claims have merit, while some are wildly exaggerated – Xingjian province is not in any way equivalent to the Holocaust. A more accurate example of China’s ruthlessness was its quick befriending of the Taliban after U. S. withdrawal from Afghanistan. When it comes to acquiring natural resources like those with which Afghanistan is endowed, China is utterly ruthless.
But if China’s autocratic government, its silencing of anyone who questions the party line, is at odds with American values, it doesn’t mean we can blame all our problems on China. China’s not responsible for the ever-widening inequalities here (which widened dramatically since we ditched the gold standard). Worth mentioning is that America’s slide has happened in equal measure regardless of which political party was in power.
How do we stop the slide? First, we should start cooperating with China. That likely will include participating in a new reserve currency, a basket of currencies backed by gold that China is on track to propose in the not-too-distant future. (And if I am wrong on this, we should beat them to it and propose something ourselves, anything that will impose monetary discipline on the U.S. and the rest of the world.
We also should cooperate with China on the existential issues the world faces, including the urgent need to transition to renewable energies. That doesn’t mean giving up even a scintilla of our sovereignty. If the world doesn’t come together, we are likely to sink together.
One final observation that might inspire some optimism: Modern science requires a highly focused empirical approach, which is particularly well suited to a Western tendency to focus on the central feature of a problem. The Asian perspective tends to be broader-based, which has its advantages but is not as conducive the kind of scientific creativity that made America great.
Father Of China’s Scientific Accomplishments Banned In U.S.
Indeed, the father of much of the foundation of China’s scientific accomplishments was Qian Xuesen, who emigrated from China to the U.S. in the 1930s. His many achievements in the U.S. included contributing to the Manhattan Project. Then, during the McCarthy era, without a shred of evidence he was blacklisted and banned from scientific activities.
So he returned to China, where he led a scientific renaissance that included the development of nuclear weapons. In his obituary, in Nature in 2009, it was noted that: “He…reminisced, with great affection, about the intellectual ethos and creative spirit fostered at Caltech. He contrasted these with China’s academic culture and science infrastructure, which he thought had not, and would not, lead to any real scientific innovation.”
I think he was right. China’s many technological accomplishments generally are a matter of improving on something already there. The U.S. is the real father of Chinese accomplishments. If the U.S. had only maintained its monetary discipline, who knows how far we might have advanced. But since we can’t go back, cooperating as we go forward could enable us to once again become top dog in finding worldwide solutions to existential problems.
Gold’s Role
And, as I said earlier, whatever happens, gold will be your only sure protection against the period of tumult that lies ahead. The only question is whether multifold gains in the metal will signal the start of a decades-long uptrend or be a warning of far more tumult to come.
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