More About the Metropolitan Plan
More about the 'Metropolitan Plan'... The international race for gold... The 'Lone Ranger' and the coming dollar collapse... Meet Dr. Gideon Gono, paid-up subscriber...
Editor's note: In Friday's Digest, Porter shared one of the most incredible stories we've ever heard...
He had a private meeting with one of the most important men in both finance and government. He told Porter about high-level government meetings to stop a global run on the dollar should we see negative interest rates in the United States. These officials are developing a plan to return America to the gold standard... a move that would send gold prices soaring to around $10,000 an ounce.
If you didn't read that Digest, stop whatever you're doing and read it now. It's one of the most important things we've published in the history of Stansberry Research. You can find it right here.
We followed up Porter's Digest with another e-mail Sunday morning telling you about an Emergency Briefing we're hosting where Porter will share the details of his meeting... and how he thinks you should prepare.
Unfortunately, the signup link in that e-mail was broken. Turns out, Salesforce, the lauded business-software company we use, had a massive server failure over the weekend.
Our apologies for the inconvenience. But you can still reserve your spot for the free Emergency Briefing we're holding on Wednesday at 8 p.m. Eastern time. It's likely going to be the most highly attended event we've ever hosted. Sign up here.
"It'll be a race," he said. "Between us and China. Whoever wins will control the reserve currency of the next 50 to 100 years."
Last Friday, I (Porter) wrote about a dinner meeting I had a few days ago. One of the most powerful figures in America had invited me to dine at his table at the Metropolitan Club in New York. I've dubbed the plan he told me about – to exchange the Federal Reserve's bond holdings for gold – the "Metropolitan Plan." Assuming the exchange took place today, it would establish a new dollar/gold price of around $10,000 per ounce. Could this really happen?
I don't know, of course. But the fact that such a plan exists and is being discussed at the highest levels of America's financial circles and politics is shocking to me. Honestly, the meeting left me speechless... and shaken.
When I got back to my office, I did what I would want you to do for me if our roles were reversed... I got to work.
I sent two of my best analysts to Vancouver and set up meetings for them with our best contacts in the gold-mining industry. I got on the phone with half a dozen friends who have been in and around the gold market for 30 and 40 years. I looked up an old friend – someone I believe is the best gold stock analyst in the world today – and offered him almost $4 million to work exclusively for us. (More about this later.)
The point is, given all of the things I already know about the risks to our currency and the global paper currency system, this meeting and the Metropolitan Plan was an urgent wake-up call for me.
Over the next three days, I'd like to show you what I've learned so far.
I hope you'll join me for a live discussion about all of these developments, where I will answer all of your questions. You'll not only hear from me, you'll also hear from Steve Sjuggerud, Jeff Clark, and my team of analysts. I'll share the work we've done to build a gold-centric portfolio that will allow you to participate in a way that's conservative and safe.
Let's start with what I believe is the most important part of the Metropolitan Plan for you to understand. Why would the government want to tie the dollar to gold again? Wouldn't that drastically limit its power and financial flexibility?
The only reason the government would tie the dollar to gold again would be to immediately re-establish the credibility of the currency and stop a global "run on the bank."
But how could the dollar possibly fail? Our economy is immense and resilient. We control the world's most powerful military – which is distributed across more than 100 different countries. Why would anyone want to sell the dollar?
It's true that the dollar is by far the strongest of all the world's paper currencies. But this strength is also a tremendous weakness. The ubiquitous status of the dollar is a kind of Achilles heel. You see, the vast majority of U.S. dollars are held overseas.
According to the Federal Reserve, roughly two-thirds of all $100 bills are held overseas – almost $1 trillion worth. Foreign demand for $100 bills since the fall of the Berlin Wall has caused production of $100 bills to soar. Far more $100 bills have been printed than any other denomination.
Of course, it isn't only cash that is being held overseas. Foreign banks hold trillions in dollar-denominated bonds. The top five foreign holders of U.S. Treasury bonds (China, Japan, Ireland, Brazil, and the combined members of the Organization of the Petroleum Exporting Countries) have $3.1 trillion in dollar-dominated bonds. And those are just the major holders. The U.S. dollar is the currency of choice for banking reserves in almost every nation in the world.
And then there are the big foreign accounts of U.S. corporations, which hold more than $2 trillion overseas. Adding up only these big numbers... you can see a huge amount of dollar currency and debt ($6 trillion-$10 trillion) is held overseas. And that's not to mention foreign-held U.S. real property, like real estate, stocks, and corporate bonds – all of which are denominated in U.S. dollars.
Unlike, say, Japan, where almost all of the currency and government debt is held locally, the U.S. dollar is the de facto global currency. In the event of a bona fide global bank run, it won't be possible for the U.S. government to simply shut down the banks and halt the panic. Almost all of the "banks" are overseas, and almost all of the currency is held overseas. That's the huge difference between today and the last time our government defaulted on its obligations (back in 1933). This is the Achilles heel of our currency that most people don't understand... and that many of our policymakers won't see coming.
In the event of a real run on paper currencies, the U.S. government won't be able to stop the panic by simply closing domestic banks and stock exchanges. It doesn't have an easy way to stop the panic because so many of the dollars are held overseas.
Meanwhile... it should be pretty obvious to any rational person that sooner or later, millions of people around the world who hold dollars are going to begin to doubt the safety of their savings. After all, when just about every major bank in the U.S. was at the point of insolvency, the Fed simply printed 4 trillion new dollars to bail out the system.
Wouldn't that make you wonder about the future purchasing power of those dollars? And besides, who in his right mind would own any government bonds that charged investors to own them, guaranteeing losses? Who would pay for the "right" to own a bond that pays no interest and is denominated in a currency whose value can't be controlled and isn't backed by any fungible commodity?
Someday, historians will look back on today's negative interest rates and be amazed that such conditions could have existed. This sovereign bond bubble is truly the greatest mania in the history of finance.
But we might not even need negative interest rates to spark the panic...
Just imagine what might happen if a major presidential candidate began telling global media outlets that America was heading for a massive economic crisis and that now was a terrible time to buy American companies or other U.S. assets. Imagine if this candidate began calling himself the "Lone Ranger." Imagine if he promised to eliminate all U.S. government debt, most of which is owned by foreign investors.
Actually, you don't have to imagine. That's exactly what Donald Trump just told the Washington Post yesterday.
You can bet millions of Americans – who don't understand anything about our currency's dangerous dependence on foreign investors – will cheer these promises. But what will the world's largest banks, the biggest insurance companies, and the wealthiest families think about these promises? How will the world's black markets for drugs, guns, and money-laundering – all of which use $100 bills – react?
It's a safe bet that all of these hard-nosed, foreign holders of our currency would rather own gold than a U.S. dollar that's subject to negative interest rates, new trade restrictions, capital controls... or outright repudiation from the "Lone Ranger."
Believe me... these folks won't wait for a panic to move out of the dollar. They're selling as fast as they can, which explains the huge move in gold we've seen so far this year. But this is only the beginning...
The Metropolitan Plan (swapping the Federal Reserve's paper holdings for gold) is the only way the U.S. government can stop a real, global dollar panic. It's the only way to regain the dollar's credibility with overseas creditors and dollar holders. Fortunately, the U.S. government owns the world's largest gold reserve. That's a huge weapon it can use, if necessary, to stem the panic. But you should know something... the Chinese understand this game. And nobody is buying more gold than the Chinese...
This is hard to prove, of course. The Chinese government doesn't advertise how much gold it's buying. Bloomberg estimates its holdings grew from around 1,000 tons of gold in 2010 to 3,500 tons by the end of 2015. But... it could be a lot more.
Almost all of the gold that China imports comes through Hong Kong, which reports trade data. Since 2010, almost 5,000 tons of gold has passed through Hong Kong into China. And it's against the law to export gold from China, so in addition to all of the gold it has been buying, China is also keeping all of the country's domestic production.
Given these facts, it wouldn't surprise me to learn that China already has close to as much gold as we do (a bit more than 8,000 tons). Given the size of its economy, it probably has more gold than we do on a relative basis, meaning that it would be possible for China to use gold as its currency reserve, too.
And... why would it? Again, no government would choose to limit its power or its financial flexibility by tying its currency (and its debts) to gold. But in a race to stem a global panic, in an effort to re-establish the credibility of your banking system and currency, governments have no great "trump card" to play.
According to my Metropolitan source, in the event of a global currency crisis, there would be a "race" between the U.S. and China to tie their currencies to gold and establish the world's most elite and stable currency. Doing so would mean controlling the world's reserve currency for the next 50 years or more.
These ideas are very important. They're important enough for me to risk the ridicule and the suspicions I was sure would erupt. Writing about gold, even in general terms, is bad enough. I don't want to spend the rest of my life arguing with conspiracy theorists about how much gold is in Fort Knox. (For the record, I don't know. My Metropolitan Plan source appeared to believe the auditors.)
I'm not advocating selling everything you own and buying gold and ammunition. I'm simply telling you that a crisis is coming. I've spoken to many of the world's foremost experts in economics and financial history. There's no question that we're approaching a major financial reckoning, whether it's simply a serious credit-default cycle or the collapse of the global paper money system... nobody knows. Not me. And not my source for the Metropolitan Plan.
So please... before you bash me... before you accuse me of making all of this up... or of becoming a "pawn" in some elaborate scheme to push up the price of gold... just think to yourself: Either the ideas and the proof behind them make sense or they don't.
But to answer the main question I've received about my source's motivations to tell me about this plan... I can answer that easily: I was invited to the Metropolitan Club meeting because I'm one of the most widely read authors in the world on economic issues. I've been focused on the risks to the U.S. dollar for years. In fact, here's a picture of Alan Greenspan and me having a similar debate in 2014...
"You own gold, don't you, Alan?"
"Of course, I'm not stupid."
Like Greenspan, my source for the Metropolitan Plan is a well-known senior economic forecaster and leader. He feels an obligation to help warn people about the risks we face. I believe, like most people, that he's proud of his work. He thinks this plan could save our country and our currency.
Finally... a note about how widely read this little financial journal has become. It's hard for me to believe, but my newsletter has come to be one of the world's most-read for these kinds of ideas, for information about risks to the global paper money system. How widely read?
Last night in Zimbabwe, my friend Doug Casey was having dinner at Dr. Gideon Gono's house. Dr. Gono is the former head of the Zimbabwean Central Bank. You might recall that Zimbabwe suffered a massive currency crisis that began in the mid-2000s. Dr. Gono orchestrated the crisis at the behest of Zimbabwe's dictator (Africa's version of the "Lone Ranger"). The point is, if anyone in the entire world knows what a currency crisis really looks like firsthand, it's Dr. Gono.
What did Dr. Gono tell Doug? He made his son get his laptop computer. He explained that there was an American financial writer who really understood where the world was heading. "It's like I wrote this myself," Dr. Gono explained. He asked his son to show the computer to the group... And he began playing my End of America documentary, which I produced in 2011.
There's just no way I could make this stuff up. Life is truly stranger than fiction.
Tomorrow, I'll continue with this theme. I want to take a much closer look at Wall Street's new interest in gold and gold mining and talk about what I think it means. Don't forget to sign up for our live webinar on Wednesday night. It's free. And it might be the most valuable evening of your life. Reserve your spot right here.
New 52-week highs (as of 4/1/16): Ciner Resources (CINR), Johnson & Johnson (JNJ), Coca-Cola (KO), McDonald's (MCD), 3M (MMM), Altria (MO), Nuveen Premium Income Municipal Fund 2 (NPM), and Sysco (SYY).
Several subscribers share their thoughts on the Friday Digest. Send yours to feedback@stansberryresearch.com.
"Dear Porter, I read with great interest your detailed description of your meeting at the Metropolitan. It's fascinating to me that this is now actually being spoken about. I own a small, niche product, international company. We ship products to around 50 countries. I have lived in many countries and have a base in overseas manufacturing for about 30+ years now. I was discussing these very same topics with foreign businessmen as early as 2006. In 2007 I began to prepare my small company for a 25-30% reduction in business in the U.S.A. I knew the housing bubble was going to end badly. In reality we lost maybe 4% in the downturn (mainly because we are the only people that make what we make).
"During this time and many years prior I had purchased gold and precious metals (I still have gold acquired in the first run up of the late 1970's). In my discussions with Chinese, Thai and Indian business people, we discussed the possible outcomes for the dollar. The fact that the gold standard would return one way or another. We arrived at the $10,000 per oz. gold figure as well. I believed it was approximately correct then and I believe it is approximately correct now.
"Were we ahead of everybody in our early deductions? I don't think so, I just think we all lived day to day watching currency fluctuations, knew intuitively that the 'fixed point of reference (gold)' for the dollar had been chucked into an ocean of growing debt and printed paper since 1974 and that at some point the world economy would become lost. After all, how can one possibly know the relative value of any asset without a fixed point of reference?
"I have been called by the pejorative term 'Gold Bug' more than once. Am I a 'Gold Bug' because I don't speculate in gold, I buy gold and keep it? NO! Those who use the term 'Gold Bug' are simply showing their ignorance about what the role of gold is in one's portfolio. The role of Gold as I see it is pure and simple 'Insurance'. Gold really doesn't do anything. You won't get interest or dividends on bullion. I mean it just sits there and stares at you! However, it will act as the ultimate insurance against true loss of wealth. That's its role.
"I have purchased many of your recommendations, your research is second to none. I'm happy you're talking about the coming currency problems our country and the world face and I plan to continue to prepare for what promises to be a very interesting world in a very short time." – Paid-up subscriber M.C.
"Hi Porter, I have been an investor for over 30 years, yet my real investing education did not begin until I became a subscriber to many of your services back in 2010. From your 'End of America' video, I was hooked, and began acting on the education that you and your team have provided me.
"I am not sure which newsletter it was, but you offered some silver coins as a 'sign on' bonus. That was my initial step into my insurance plan to catastrophe proof the little wealth that I had. From that time, I have purchased physical gold and silver each month – yes, I also bought gold when it was at $1800 oz. But, my sensei (Stansberry Research) have taught me that isn't the point – it is my hedge against disaster!! It is dollar cost averaging – right?
"So, today, I own a good bit of the precious metals (roughly 5-10% of my net worth). And, while I don't feel that I am as prepared for the coming tide as I would like, I do feel that I am more prepared than 80% of everyone else. And, as the great southern comedian Jerry Clower used to say when speaking of the time that he and his friend, Marcel, were running from a bear, and Marcel yelled, 'Jerry, we have to run faster or the bear will get us!' Jerry yelled back, 'I don't have to be faster than the bear, I just have to be faster than you.'
"Today, I don't necessarily have to run from the coming tide, as my 'learnings' from your team's work has better prepared me for it. I can, to some degree, walk bravely into the storm. My family and I are grateful for all of the insights and education that have been provided me over the past few years! Very best regards." – Paid-up subscriber Mike D.
"Never sure I'm completely prepared, but I do own gold and silver coins, gold and silver stocks and building up cash reserve outside the bank. Adding more as money is available. Looking forward to April 6 to learn what else can be done. Thank you, Porter." – Paid-up subscriber A.R.
"I manage a family partnership and have always recognized that gold/silver plays some part in the investment mix. Our thoughts over the years have evolved, but in one way or another we view precious metals as very, very cheap financial insurance. In fact, there are no annual premiums and at some point you get all of your investment back plus handsome returns. I wish house and car insurance worked the same way.
"The big debate we have internally is the allocation percentage. We have settled on 20% which tends to be a little high based on most expert opinions, however, in a world of possible negative interest rates and excessive government debt the chance that our insurance will come into play in some manner currently seems elevated. If the monetary system stabilizes we may cut our allocation but do not see this happening in the foreseeable future." – Paid-up subscriber E.J.
Regards,
Porter Stansberry
Baltimore, Maryland
April 4, 2016
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