Jeftovic: Canada's Multi-Generational Gold Gaffe

Successive BoC Governors & PMs Have Compounded Failure and Spurned Opportunity

After looking poised to rack up fresh all-time-highs (in USD terms) earlier this year, the gold price has experienced somewhat of a dump lately. It’s possible the market believes the likes of Paul Krugman – who is taking victory laps for taming inflation (he calls it a win for “Team long transitory”, whatever that‘s supposed to mean).

However you wouldn’t know that from watching the rate at which central banks around the world are hoovering up the yellow metal, setting a fresh record over the first half of 2023 at over 200 tonnes.

Which banks are backing up the truck?

Not many surprises there, (except maybe the ECB) and the Q2 net numbers were dampened because Turkey – who has been in a slow motion firefight with high inflation for over twenty years had to sell off a boatload to support the Lira. The takeaway from that is they had gold reserves to support their financial system.

Fourth largest gold producer in the world.

Of the top gold producing nations in the world, Canada is number four.

Via World Gold Council

Canada stands out contrary to all the other top gold producing nations, as it is the only top ten producers where the central bank’s FX reserves holds no gold. Zero, nada.

Even Ghana, the sixth top producing nation, whose national GDP is about the same size as Oakville, Ontario has 8 tonnes of gold squirrelled away.

After steadily selling down its gold reserves since the 60’s…

Via Ceicdata

Justin Trudeau’s first finance minister, Bill Morneau, emptied out Canada’s remaining gold reserves in 2016, pretty well bottom-ticking the gold bear market that started in 2011.

His predecessor, Mark Carney – who was appointed by Stephen Harper made an oblique “barbarous relic” comment in 2010 – channeling, as many central bankers and Nobel Laureates do, John Maynard Keynes’s famous quip from 1924.

Few, if any of them realize that Keynes underwent three distinct phases over his investment career and he made that pronouncement during the middle phase, and later changed course. At the time of his death he had fully 2/3 of his net worth invested in South African gold miners (fewer still, understand that Keynes was a Fabian Socialist and that his economic prescriptions, if implemented, would inexorably lead to communism).

It’s not just gold that Canadian policymakers hate

Canada is sitting on the third largest oil reserves in the world (after Saudi Arabia and Venezuela). Instead of maximizing the opportunity of becoming an energy powerhouse, one based in a politically stable, democratic jurisdiction;  Ottawa has  instead embarked on an ideological crusade against the oil and gas industry, framing it as the antagonist in some mythological, shared psychosis of climate alarmism.

It has left Albertans feeling so demonized by Ottawa’s insular political class, that the idea of #Wexit, which wasn’t even a thing prior to the election of Justin Trudeau, is practically baked-in now. Especially if the Liberals squeak out another election win (that’s doubtful, but if they do, Alberta is out).

In late 2022, German chancellor Olaf Scholz made a rare foreign trip, coming to Canada practically begging us to sell his country natural gas, given that their primary supplier, was Russia. Trudeau told him to suck it, and offered him sell him unicorn farts instead (hydrogen, ten years out).

Germany went on to sign a 15 year deal for natgas with Qatar.

Not long after that, Trudeau told the same thing to Japan. They ended up entering into a long term deal with the Abu Dhabi National Oil Company (ADNOC).

In other words, Canada is divesting out of hard assets, trying to kill its energy sector, while going long wokery and even collectivism.

The Era of Woke Capitalism is Over

This is something I’ve been covering in The Bitcoin Capitalist for over a year (and Why Wokeness is Doomed, here):

The era of Woke capitalism is over. The entire ESG “model” can only work within the heady exuberance of an Everything Bubble, and the Everything Bubble ended along with a 40 year bull market for bonds and the end of cheap capital.

Reality is now reasserting itself, and all that woke crap is finished. In some places faster, and some places (like Canada), more slowly. But it’s done.

While other central banks around the world are have been sensing a tectonic shift in the global financial system and loading up on gold (namely, de-dollarization within a multi-polar monetary world), Canada is completely wrong footed and in denial about it.

We’re busy honouring literal Nazis, launching grocery store price monitoring bureaus, and generally looking like retards.

We expect this to worse before it gets better. Even if the central banks of the world do pivot and reignite the printing presses (and they probably will), it will no longer be a heady, feel-good sequel to the Everything Bubble, and it will not bring about an era of Fully Automated Luxury Communism (a.k.a MMT). Instead, it will be a hyper-stagflationary currency war against the backdrop of a rapidly shifting global financial system – and those central banks holding the gold will be the ones setting the rules in the post-post-Bretton Woods Era.