China, Iran Are on the March

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There is so much focus on the COVID-19 pandemic right now that Americans can’t be blamed if they’re not spending much time studying other developments.

That’s understandable, but inattention may be as dangerous as the virus itself. That’s because America’s adversaries are taking advantage of the situation by challenging U.S. interests in a set of geopolitical hot spots.

They believe we’re too distracted by the virus containment effort to mount a firm response.

At the same time, geopolitical confrontation is a classic way to rally a population against an outside threat, especially when they’re still hurting from the pandemic and the economic consequences. It’s one of the oldest tricks in the books to get the people behind the government.

This appears to be the case with China and Iran right now.

China in particular is trying to divert attention away from its own cover-up of the pandemic, which allowed it to spin out of control. So it’s engaging in a global propaganda campaign to try to blame the U.S. for the spread of the virus.

Both China and Iran have lied about the damage caused by the virus in their own countries. China officially reported about 4,600 fatalities and Iran officially reported about 6,200. But reliable sources suggest that the actual count of fatalities may be at least 10 times greater in both countries.

This could put actual fatalities in China and Iran about equal to the U.S. (over 70,000 dead).

Meanwhile, the U.S. has been reeling economically, and there’s no reason to believe that China and Iran are feeling any less pain. Let’s first consider China…

Not surprisingly, China has tried to take advantage of the situation by acting aggressively in the South China Sea and threatening Taiwan.

The South China Sea is a large arm of the Pacific Ocean surrounded by China, Vietnam, the Philippines, Malaysia, Brunei and Indonesia.

All six countries have claims to exclusive economic zones that extend several hundred miles from their coastlines.

Parts of the sea are international waters governed by the Law of the Sea Convention and other treaties. All of the other nations around the South China Sea have rejected China’s claims. But they’ve been pushed back to fairly narrow boundaries close to their coastlines.

China has ignored all of those claims and treaties and insists that it is in control of the entire body of water including islands, reefs and underwater natural resources such as oil, natural gas, undersea minerals and fisheries.

China has also become even more aggressive by designating the South China Sea reefs as city-level administrative units to be administered by mainland China.

And China has pumped sand onto reefs to build artificial islands that have then been fortified with airstrips, harbors, troops and missiles.

China has said it will never seek hegemony, but that’s clearly not true. It most certainly seeks hegemony in the region.

And it’s willing to enforce it. Several encounters have happened lately where Chinese coast guard vessels have rammed and sunk fishing boats from Vietnam and the Philippines.

But China’s aggression in the South China Sea can also jeopardize U.S. naval vessels.

The U.S. operates “freedom of navigation” cruises with U.S. Navy ships to demonstrate that the U.S. also rejects China’s claims. It’s not difficult to envision an incident that could rapidly escalate into something serious.

It’s also fair to assume that a weakened U.S. Navy has emboldened Chinese actions recently.

The two aircraft carriers the Navy has in the western Pacific, the Theodore Roosevelt and Ronald Reagan, were both taken out of action due to outbreaks of the coronavirus among their crews. That’s been a dramatic reduction in power projection in the region.

But neither side will back down, as neither wants to appear weak. This makes warfare a highly realistic scenario. It’s probably just a matter of time.

Meanwhile, Iran has harassed U.S. naval vessels in the Persian Gulf, launched new missiles and continued its support of terrorism in Iraq, Yemen and Lebanon.

These actions are more signs of weakness than strength, but they are dangerous nonetheless.

In the past 10 years, we’ve been through currency wars, trade wars and now pandemic.

Are shooting wars next? Pay attention to China, Iran and, yes, North Korea. They haven’t gone away either.

The world is a dangerous place — and the virus has only made it more dangerous.

Regards,

Jim Rickards
for The Daily Reckoning

The post China, Iran Are on the March appeared first on Daily Reckoning.

Don’t Mess With the U.S. (Financially)

This post Don’t Mess With the U.S. (Financially) appeared first on Daily Reckoning.

I’ve been documenting financial warfare in my articles for years, but it still doesn’t get the mainstream attention it deserves.

Because as you’ll see below, it can directly impact your wealth.

Financial warfare tools include account seizures and freezes, expulsion from global payment systems, secondary fines and penalties on banks that do business with targeted entities, embargoes, tariffs and many other impositions.

These tools are amplified by the unique role of the U.S. dollar, which is the currency behind 60% of global reserves, 80% of global payments and almost 100% of transactions in oil.

The U.S. controls the banks and payments systems that process dollar transactions. This leaves the U.S. well positioned to impose dollar-related sanctions.

Much has been made of the recent killing of Iranian terrorist mastermind Qasem Soleimani. Many say it was an act of war. But guess what, folks?

We’ve been in a full-scale war with Iran for two years now. It’s just that most people don’t realize it.

It’s not a kinetic war with troops, missiles and ships (except Iran’s use of terrorist bombs and the U.S.’ use of drones). And it’s severely damaged the Iranian economy, which has led to protests against the regime.

From the U.S. side, it’s a financial war. People need to stop thinking about financial sanctions as an extension of trade policy, for example.

This is warfare. It’s just a different form of warfare.

It’s critical to understand that financial war is not a sideshow. It may actually be the main event in today’s deeply connected and computerized world.

North Korea is also the current target of a U.S. “maximum pressure” campaign, where harsh sanctions are applied to a wide range of banks, companies and individuals.

As with Iran, sanctions have been instrumental in destabilizing the regime and bringing North Korea to the bargaining table to discuss its nuclear weapons programs.

Now, Iraq is the latest country to feel the sting of U.S. dollar sanctions.

Following the killing of Soleimani on Iraqi soil, Iraq threatened to expel all U.S. troops from Iraq. Trump answered in two parts.

He said U.S. troops would not leave until Iraq repaid the U.S. for building bases and other infrastructure in Iraq. Trump also warned that Iraq’s access to its account at the Federal Reserve Bank of New York could be terminated.

That would make it impossible for Iraq to purchase and sell oil in dollars. It could also cause Iraq to lose access to about $3 billion currently held in that account.

Iraq has heard the U.S. threats loud and clear. As of now, U.S. troops are still in Iraq and not planning to leave anytime soon.

The fact that Iraqi policy could be conditioned without a shot being fired shows the raw power of financial warfare.

The trouble is private businesses and investors can get caught in the crossfire of financial warfare.

According to one survey, last year saw a 42% increase in cyberattacks on private companies around the world (attributable to foreign governments).

About 20% of businesses reported daily attacks, many in the banking and financial services sectors. Only 6% of businesses in the survey claimed they weren’t targeted by a cyberattack in 2019.

You as an investor trying to mind your own business or build wealth or expand your portfolio may get caught in the crossfire of a financial war. So you have to take that into account in your portfolio allocations and risk management.

In today’s world, everyone’s a potential casualty of financial warfare.

Regards,

Jim Rickards
for The Daily Reckoning

The post Don’t Mess With the U.S. (Financially) appeared first on Daily Reckoning.

Gold Year End Breakout Finally Boosting Junior Miners $GLD $GDXJ

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Several weeks ago when the TSX Venture was on its back due to tax loss selling I warned its planting time not selling time predicting a year end breakout in gold and the junior miners.  Now gold has rallied pretty much everyday for 2 straight weeks making it short term overbought after a powerful breakout move into new 7 year highs.

Don't be surprised for a little profit taking along the way as precious metals bulls who have been beaten down for so long are finally able to take some gains as gold is overbought because of the recent instability in Iraq over the killing of the Iranian General by the USA.

I believe after a little bit of a breather in gold we could be on our way to new record highs in gold in 2020 past $2000 USD.  There are real weaknesses with the economy and there are not many tools left for the bankers to employ.  War is one possible fix to boost inflation but the American Public may be tired after close to 20 years of fighting in the Middle East.

For years the West has been trying to appease and keep a balance in the Middle East between the Shiites and Sunnis all for the sole purpose of a steady supply of oil.  When one side gets too powerful the other is assisted.  Recently Isis and Al Qaeda were devastated leading to the Shiites led by Iran to have control.  The last thing the West wants is Iran to take over Baghdad which could lead to the next step which is war with Saudi Arabia over Mecca.

Trump made an interesting point that the USA doesn't need the Middle East oil anymore as the Country in now energy independent.   Question remains what would happen if USA pulls troops out of region and leaves it for Nato to solve.  Even many oil rich countries are looking for better energy alternatives such as nuclear and solar and the consumers are pushing for electric vehicles as Tesla overtakes the traditional automaker market.

Finally the junior gold miners are breaking out especially the explorers ready to drill.  For years the majors have neglected exploration and they are running out of reserves.  New discoveries are being looked at and some major exploration teams are getting permitted, funded and starting to drill.

For weeks I highlighted this little junior recommended by the top newsletter writers in the industry such as Eric Coffin, Brien Lundin, Bob Moriarity, Jordan Roy Byrne and Gwen Preston among others especially when I saw the Placer Dome Geo who discovered the major mine for Barrick Newmont join the team.

The overall team is amazing with an all star roster but this recent addition along with raising money indicated smart money is following this drilling program.  The project is adjacent to Barrick-Newmont's largest gold mine in Latin America which produces over a million ounces of gold a year at all in sustaining costs under $650. 2020-01-08_13-28-42

This is not just an area play...they have historical drill results already which shows its inline with the large system next door.  They have 8 untested magnetic anomalies that have not been tested at all.  They are fully financed and permitted for drilling which may get started any day now.  The share count is still low around 100 million shares with almost a third of the float in the hands of insiders and strategics. The chart looks amazing.

Listen to my recent interview recorded before the Holidays with the CEO by clicking here...

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