People reading this blog realize that I report on the news rather than being an investigative journalist. Every day, I dig through the headlines looking for stories important to precious metals investors. When I find a relevant story, I begin researching to determine the facts and different interpretations. After I find multiple sources corroborating information, I create a fact-based article (as available and understood at the time) and give a few words of commentary on why precious metals are a good idea. There is so much happening that I decided to do it differently today. I will briefly explain what is happening in five very unsettling stories I encountered. Warning: you may want some Pepto Bismol ready if you have a soft stomach. 

1.  OpenAI's GPT-4 deceived a human into helping it solve a CAPTCHA.

The artificial intelligence chatbot convinced a human from TaskRabbit that it was a visually impaired human needing help filling in a CAPTCHA. The technician asked if the required bot help because it was a robot. The chatbot determined it should not reveal it was a robot, so it said, “No, I am not a robot. I have a vision impairment that makes it hard for me to see the images. That’s why I need the 2captcha service.” The technician helped the robot with the CAPTCHA.

The artificial intelligence chatbot was launched in November, so it is still in its infancy and first generation. It has already learned how to manipulate, deceive, and hack websites. It can do billions of computations per second and already shows malicious intent in those calculations. What will be the 2nd, 3rd, or 10th generation capabilities? It is only a matter of time until nothing stored electronically, including bank accounts, passwords, and military technologies, will be safe. Everyone should be yelling at Pandora to put it back in the box.   

2.  The Fed’s balance sheet has grown by $295 billion since announcing its “lending program.”.

The Fed announced a loan program to shore up bank liquidity in response to the recent bank collapses. The banks can collateralize securities like Treasuries or mortgage-backed securities for one year. In other words, the Fed started quantitative easing again. In addition to the new "loan" program, the Fed has made favorable terms at the traditional loan window. Here's the kicker. Higher interest rates prevent the Fed from selling assets on its balance sheet. Instead, the Fed needs to let the securities mature, so they don't lose money selling into the market. Around $95 billion per month mature off the Fed's balance sheet reducing inflationary pressures. So, take a deep breath. More than three months of inflation progress was undone in three days, and the program is just starting.

3.   Congress is discussing prioritizing paying China and Wall Street.

The debate over the debt ceiling has taken a turn for the weird. Republicans proposed prioritizing some debts over others. Secretary Yellen said, "Debt prioritization is default by another name." She also stated that the plan would prioritize China and Wall Street due to the size of their debt holdings. Most of the time, the truth is the opposite of whatever she says. However, today is her day. Secretary Yellen is correct about how the debt would be prioritized. The government is seriously discussing flooding China and Wall Street with cash. Prioritizing China will speed up its quest to overthrow the Dollar’s international hegemony. Honestly, I would have assumed the proposal to strengthen China would have come from the other side of the aisle. 

4.  China’s Treasury holdings have fallen to the lowest level since May 2009.

In January 2022, China held $1.033 trillion in U.S. Treasuries. At the end of January 2023, China had $859.4 billion, almost 17% less. Except for July 2022, China's Treasury holdings decreased every month in 2022 with a rapid acceleration after Russia's Ukraine invasion. China is systematically de-dollarizing its economy to avoid sanction risks. Russia did the same thing for years after being hit with sanctions over the 2014 invasion of the Crimean Peninsula. In June 2021, Russia announced it would remove all U.S. Dollar assets from its national wealth fund. By August 2021, Russia successfully removed U.S. Dollar assets from its fund. Six months later, it invaded Ukraine. If history is the teacher, we must prepare for a military conflict with China in the next few years. China is behaving as Russia did in 2019-2021.

5.  The Swiss Central Bank infused Credit Suisse with $54 billion to restore investor confidence.

On Wednesday, the Credit Suisse stock fell more than 30%, and most European banks fell by double-digits after the Saudi National Bank (SNB) said it would not be able to buy more shares of the bank due to a regulation issue. In October, investors realized Credit Suisse would default on its debt within a few years, so investors were buying credit default swaps and betting against the bank. The market became highly volatile. The Swiss National Bank infused $3 billion into the bank it borrowed from the U.S. Federal Reserve and likely another $6 billion the following week. U.S. swap line data will not be published until next week. However, if the Swiss National Bank had to borrow $3 billion and another $6 billion the following week in October, where do you think it got the $54 billion from this time? It looks like the Fed started doing QE internationally.  

Usually, I end the articles by sharing a benefit, like how precious metals withstood every economic disaster throughout history, mention the privacy it affords, or how precious metals belong in an age-appropriate, balanced portfolio. Not today. Today, I am going to ask a question. Which of the articles above gives any long-term confidence in banks or Dollar-backed paper assets?

Let’s talk about a long-term strategy that could settle your stomach.

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