This past week saw the American President Donald Trump set out on his first international tour as leader of the free world. In an impressive coup, he announced hundreds of billions of dollars worth of business contracts and arms sale deals on just his first stop in the Kingdom of Saudi Arabia.
Saudi Arabia was only too happy to welcome the man who resets the U.S. relationships in the Middle East back to the way they were before the arrival of former President Obama. The Saudi Kingdom has now once again become the backbone of American strategy to defeat (or at least contain) regional powerhouse pariah state Iran whose ambitions go far beyond funding terror groups around the world and extend to goals of hegemony over or major influence in Iraq, Syria, Lebanon, Palestine, and the Arabian Peninsula as a whole.
Meanwhile, in the world of alternative safe-haven assets that happen to be digital, Bitcoin smashed through all previous records to reach over $2,200 per BTC in time for the seven year anniversary of Bitcoin Pizza Day (on May 22), widely recognized as the first commercial transaction ever performed utilizing the industry leading crypto-currency. The currency has now gained from .003 cents in 2010 to over $2,200 per BTC in 2017.
Over in Asia, China suffered a humiliating downgrade of its government credit rating for Chinese government debt. The Moody’s downgrade marked the first time the world’s second largest economy had seen its sovereign credit disrespected in almost 20 years, since 1989. Also, the North Koreans tested another intermediate range ballistic missile in what confirms their warhead guidance systems operating capability. Kim Jong Un now claims the missiles are ready for deployment.
Everywhere you turn, you see plenty of motivations for why you need a gold IRA. Gold is the one tangible physical asset you can count on to safeguard your IRA when all else fails. Time to learn what Germany and Kyrgyzstan already know that can protect your retirement portfolio.
President Trump’s Art of the Deal Brings Home $50 Billion In Saudi Contracts and $110 Billion in Weapons Sales
U.S. President Donald Trump took his Art of the Deal show on the road this past weekend with his first stops in the Middle East in Saudi Arabia before moving on towards Israel, Palestine, and eventually Sicily in Italy for the G7 leaders’ meeting. Trump’s arrival in Saudi Arabia was hailed as a major coup for both the U.S. president and the Saudi government as they announced a series of deals for joint venture projects, investment in American contracts, and massive weapons sales to take effect both immediately and over the coming ten years.
The White House broke the news on Saturday that the U.S. had inked a deal with an immediate weapons sale value of $110 billion now and $350 billion over ten years. The President’s office called it a “significant expansion of… [the] security relationship” between the two nations. Below is the enthusiastic welcome the Saudi king extended to the President:
At the same time, the Saudi Arabian government and quasi government-owned company Saudi Aramco signed a raft of investment and purchase deals with a number of American companies that totalled in at near $50 billion in what represented a significant achievement for both the still-new U.S. President and the Saudi Deputy Crown Prince. It is all a part of the Saudi push for major economic reforms to take the kingdom away from its heavily skewed multi-decade dependence on oil exports and prices.
The Saudis do pomp and circumstance quite well. This two day visit to the long-time American key Arab ally in the middle east provided President Trump with a deal-making victory that he could show off both at home and abroad as he continues his inevitable march towards the G7 meeting in Sicily later this week.
Saudi Arabia Becomes the Bulwark Against Iran In U.S. Administration Strategy
The President’s big trip to the Middle East did not start out in Saudi Arabia solely for lucrative American business deals. The enormous arms deal is intended to massively upgrade the military capabilities of the Saudi Arabian deterrent against Iran as would-be regional hegemon. Tensions are high and rising as the new U.S. administration has repeatedly threatened to tear up what they see as the misguided Obama-led detente arrangement with the Iranians over their nuclear aspirations and program.
Saudi Arabia now once again represents the American bulwark against Shiite Iran’s expansionist dreams of using terrorists as proxies and attempting to revive its old Persian Empire. Among the list of regional countries it has repeatedly interfered in or at one point dominated include Iraq, Syria, Lebanon, Palestine, Yemen, and Qatar. The White House statement explained:
“This package of defense equipment and services support the long-term security of Saudi Arabia and the Gulf region in the face of Iranian threats, while also bolstering the Kingdom’s ability to contribute to counter-terrorism operations across the region, reducing the burden on the U.S. military to conduct those operations.”
Bitcoin Roars Through $2,000 En Route to $2,200+ Per BTC
Just in time for the seven year anniversary of what is recognized as the first commercial transaction for the crypto-currency (called Bitcoin Pizza Day), Bitcoin smashed through all prior records and the psychological barrier of $2,000 in what amounts to a simply unimaginable percentage gain run over the last less than decade. A person who held $100 of BTC on May 22, 2010 and kept it through May 22, 2017 would have an incredible $72.9 million now.
This is not to say that it has been an entirely smooth ride by any means though. If your original hundred dollars in Bitcoin had been held at the one-time largest BTC exchange Mt. Gox in Japan, likely it would have vanished in the scandalous and spectacular collapse of the giant bitcoin exchange only a few years ago.
By the middle of Monday, Bitcoin soared to a high point of $2,251.61 after tearing through the psychologically important barrier of $2,000 through the weekend, per CoinDesk. The chart below demonstrates Bitcoin’s meteoric price rise in just the past year period:
Among the reasons cited for this seemingly unprecedented run in what has been called the newest safe haven asset are global political uncertainty and Japanese legislation that permits the country’s retailers to receive bitcoin for (legal currency) merchandise payments. This has significantly increased yen-based bitcoin trading to the point that it now comprises more than 40 percent of all BTC trade around the world. Thanks to these and other factors, the crypto-currency is up more than 120 percent so far year to date and over 450 percent in a year.
Moody’s Cuts China’s Government Credit Rating for First Time Since 1989
China endured a humiliating financial setback this past week as leading sovereign debt rating agency Moody’s Investor Service reduced its sovereign rating on the Chinese government debt in a first move since 1989. The action revealed the ratings analysis company’s belief that the government of China will not be able to reduce the dangerous economic leverage at the same time as they attempt to continue the blistering rate of economic growth the country has maintained for decades now. The Chinese economy may be living on borrowed time.
Moody’s referred to a significant probability for a “material rise” in the country’s debt throughout the economy. They fear the strain this will add to the finances of the Chinese state. As part of the downgrade, they moved the rating outlook from negative back to stable. Associate Professor Christopher Balding of the HSBC School of Business in Peking University revealed:
“It is a psychological blow that China will not take kindly to and absolutely speaks to the rising financial pressures.”
The government’s unwelcoming reaction to the ratings downgrade smacked of a similar response from the U.S. Treasury department back in 2011 when Standard & Poor’s downgraded the coveted Triple AAA credit rating on U.S. debt. This Chinese ratings cut raises doubts on the ability of the government of President Xi Jinping to shore up growth while slashing the excess leverage in the system at the same time as they undergo the once every five years’ top Communist party posts reshuffling of the Chinese government towards the end of 2017.
This and the other leading geopolitical stories of the week are all part of the reasons for why you should own gold in times of financial crisis. The yellow metal shines brightest in times of national and global instability. Gold offers insurance and market protection during market turbulence.