Doomberg: Gold Revaluation, Why The EU 'Must Dismantle' & War with Venezuela

Key Concepts

• Hydrocarbon Glut: A surplus of oil and gas due to increased production and substitution by cheaper alternatives.
• Gold as a Savings Vehicle: Gold is viewed as a store of value rather than a speculative investment.
• Neutral Reserve Asset: Gold's re-emergence as a neutral asset for settling international trade imbalances, driven by the erosion of trust in Western-based debt instruments due to sanctions.
• US Fiscal Situation: Concerns about the sustainability of US debt, evidenced by the short-term nature of debt issuance.
• Debasement: The erosion of the value of a currency, particularly the US dollar, through inflation and money printing.
• Soft Default: A gradual devaluation of currency rather than an outright default on debt.
• Co-production Economics: The complex economics of producing oil and natural gas simultaneously, where one can become a byproduct of the other.
• Energy as a Driver of GDP: The strong correlation between energy availability and economic growth.
• Geopolitics and Energy: The interconnectedness of political decisions and energy production/availability.
• Propaganda: The deliberate dissemination of biased or misleading information to influence public opinion, particularly in geopolitical conflicts.
• Color Revolutions: A series of protests and uprisings in post-Soviet countries, often alleged to be orchestrated by external powers.
• Military-Industrial Complex: The symbiotic relationship between a nation's military, defense contractors, and political figures.

Summary

The Global Hydrocarbon Glut and its Implications

The current global economic landscape is characterized by a significant surplus of cheap hydrocarbons, a phenomenon that emerged after the energy crisis of 2021-2022. This glut is driven by a gradual global shift towards cheaper energy sources, which in turn diminishes the incremental demand for oil. A striking example of this trend is China's massive conversion of coal into chemicals, exceeding the output of all other countries combined, including the production of diesel from coal. This abundance positions oil and gas companies as "deflationary powerhouses," constantly improving their efficiency in resource extraction.

Gold's Resurgence as a Neutral Reserve Asset

Doomberg, a geopolitical and financial analyst, views gold primarily as a savings vehicle, not an investment. He argues that gold's recent appreciation in US dollars simply means one can buy less gold with the same amount of dollars. The underlying driver, according to Doomberg, is a global repositioning of international trade, with gold reasserting its role as a neutral reserve asset for settling trade imbalances. This shift is a direct consequence of the "destruction of neutrality" of Western-based debt instruments, such as US Treasuries, due to sanctions imposed on countries like Iran, Russia, and China. While Western nations might not worry about the security of their US Treasuries, nations in the Middle East and Asia, or those allied with China, are increasingly concerned about the potential seizure of their assets. This erosion of trust in Western financial instruments is creating a "bid under gold" and simultaneously weakening the US dollar.

US Fiscal Crisis and the Need for a System Reset

Doomberg points to a looming crisis in the US fiscal situation, evidenced by the increasingly short-term nature of US debt. Central banks, he notes, ceased being net purchasers of US Treasuries in 2014, coinciding with Russia's shift towards gold. The unsustainable US debt situation is forcing a re-evaluation of gold as a reliable store of value, independent of any single entity's credit. Doomberg believes the Western-based US dollar financial system is untenable and requires a reset. He highlights the West's recent conventional war loss against Russia and its ongoing economic struggle with China as indicators of this reality.

The Potential for Gold Revaluation and a Global Financial Reset

A potential solution to the US fiscal predicament could involve revaluing its gold holdings at a significantly higher price. Citing analyst Luke Grumman, Doomberg suggests that China's trade imbalances could theoretically be settled at a gold price of $22,000 per ounce. While not predicting this exact figure, he posits that a world with gold at $20,000 would provide substantial "mark-to-market" gains for the US Treasury, offering greater financial flexibility. This prospect is a key reason for maintaining a significant gold position, as missing out on such a revaluation would be a significant oversight. Doomberg emphasizes that such inflection points in history are inherently risky.

The Historical Parallels and the Nature of Inflation

Doomberg likens the current economic climate to the late 1920s, characterized by booming stock markets followed by a potential crash. However, he notes a crucial difference: the interventionist role of central banks, creating a "Fed put" that prevents significant stock market declines. This intervention is necessary because a stock market crash would trigger a debt crisis due to tax receipts being linked to capital gains. The pressure relief valve for this situation, he argues, is inflation and dollar weakness. Doomberg's personal experience with inflation, particularly in health insurance premiums (15% annual increase) and out-of-pocket expenses (30% increase), starkly contrasts with official CPI figures, which he dismisses as a "joke." He believes the abundance of energy in the US is the primary factor keeping inflation in check, but the lived experience of the average citizen is one of significant price increases.

The Role of Stablecoins in US Debt Financing

Doomberg suggests that the push towards stablecoins, embraced by figures like Trump, is directly linked to the US funding crisis. Stablecoins act as an on-ramp to the crypto world, and their operators often park funds in short-term Treasury bills. This creates a scenario where the US government could potentially issue Treasury bills with reduced coupons to stablecoin operators, effectively a form of financial repression. Each trillion dollars in stablecoin market capitalization reduces the government's debt rollover concerns. The losers in this system are the stablecoin buyers, who receive a US dollar with essentially no yield.

BRICS and the Organization of Global Trade Outside the Dollar System

Doomberg believes that BRICS nations are not aiming to replace the dollar but rather to organize global trade outside the Western-based US dollar system. A key constraint to this is the reluctance to hold large sums of other countries' currencies. He suggests that BRICS currencies, potentially backed by gold, are being considered. The growth of payment rails like Alipay and WeChat Pay, which bypass Western banks and are sanction-proof, exemplifies this trend. He invokes "Tib's Law," which states that shortages are followed by gluts, arguing that artificial shortages created by restricting access to the US dollar will inevitably lead to alternative trading mechanisms. The demand for global trade is inelastic, meaning it will occur regardless of the currency used. Sanctions, he contends, often backfire, leading to increased production in targeted sectors, as seen with China's semiconductor industry. Doomberg asserts that the US has lost its military and economic escalation dominance, and its bluffs are being called.

China's Dominance in Critical Supply Chains and the Trade War

Doomberg believes the US has lost the trade war with China, a fact that is downplayed due to the US cultural aversion to admitting defeat. China's dominance in rare earths, a critical component for many industries, gives it significant leverage. He criticizes the West for allowing China to systematically achieve monopoly positions in critical materials through practices like illegal dumping and subsidies, while stock markets prioritized short-term gains over national security risks. While Trump recognizes this issue, Doomberg is uncertain if the US can rectify it quickly enough. He anticipates further export restrictions on critical commodities, but notes that the market has largely priced this in, and the easy money has likely been made. He warns of boom-and-bust cycles in critical mineral stocks, predicting that many will eventually become worthless due to future gluts.

The Myth of Peak Oil and the Abundance of Hydrocarbons

Doomberg strongly refutes the concept of "peak oil," calling it a myth. He argues that there are vast quantities of hydrocarbons available, and technology is continuously improving extraction efficiency. He dismisses "peak oil demand" as even more fallacious, stating that the demand for energy is essentially infinite, driven by the human desire for a better standard of living. He posits that "every molecule of hydrocarbons produced will be burned by somebody somewhere," with the privilege of doing so shifting based on local restrictions. The primary constraint on oil production is politics, not geology, citing Venezuela as an example. He believes the concept of peak oil is perpetuated by those who wish for higher oil prices. Doomberg's analysis suggests that the long-term real price of most commodities, excluding gold, is lower.

US Energy Abundance and Economic Growth Potential

Doomberg asserts that the US possesses an incredible foundation for economic growth due to its abundant and cheap energy resources, particularly natural gas. He suggests that a $6 per million BTU floor price for natural gas could double US production. This energy advantage is a significant factor in his prediction of the European Union's collapse, as it lacks comparable domestic hydrocarbon production. He refers to his "Mosaic Theory" to explain geopolitical developments in South America through the lens of energy. While acknowledging the US has a governance issue and significant federal mismanagement, he believes the country's resource base allows it to remain powerful despite these challenges.

The European Union's Energy Crisis and Inevitable Dismantling

Doomberg argues that the European Union's structure is unsustainable due to its severe energy deficit. He highlights that the 27 member states consume vastly more hydrocarbons than they produce, necessitating massive imports. He criticizes the EU's decision to cut off cheap Russian gas and dismantle its nuclear power sector, calling it a self-inflicted wound that cripples its industrial base. He believes Germany's industry cannot recover without a fundamental shift in its energy policy, a realization that seems absent in current EU discourse. Doomberg predicts the EU will eventually dismantle itself, with cracks already appearing in member states like Hungary, Slovakia, and the Czech Republic. He believes the recognition of the war in Ukraine as a loss will be the catalyst for the EU's end.

Propaganda and the Importance of Contrarian Thinking

Doomberg discusses the pervasive nature of propaganda, particularly in relation to the war in Ukraine, which he describes as the "worst of the worst." He contrasts the narrative presented by legacy media with the reality on the ground, which can be accessed through internet-based research. He believes that propaganda around climate change and energy created market inefficiencies that his Substack, Doomberg, has capitalized on by offering an industrial and physics-based perspective. He advocates for thinking like a contrarian to discern signal from noise in an information-saturated world. He uses the example of a Financial Times article on Ukrainian corruption, questioning the timing of its publication and suggesting it indicates a desire to remove Zelensky.

The US and Potential Conflict in Venezuela and Mexico

Doomberg speculates on a potential US military intervention in Venezuela, driven by its vast hydrocarbon reserves and the needs of the military-industrial complex. He views this as a cynical but explanatory model for geopolitical events, especially in the context of the US potentially disengaging from the Ukraine conflict. He also notes quasi-color revolutions in Mexico, suggesting US involvement aimed at regime change and replacing existing cartels with American ones, all under the guise of addressing cartel influence and securing energy resources. He believes that all wars are ultimately energy and resource wars, and that the Western Hemisphere is undeniably under US influence.

The Iran-Israel Conflict and Missile Defense Vulnerabilities

Doomberg offers a contrarian view on the recent Iran-Israel conflict, suggesting that Israel initiated the attack and subsequently sued for peace due to its vulnerability. He points to Iran's successful piercing of Israel's air defense systems as validation of this assessment. He argues that Iran has achieved mutually assured destruction with Israel, capable of making the country uninhabitable by targeting critical infrastructure like power plants and water treatment facilities. He believes further conflict is unlikely, especially if the US becomes preoccupied with Venezuela, and that Russia and China are bolstering Iran's air defense. He highlights the overarching trend of missile technology outpacing missile defense technology, rendering nations increasingly vulnerable.

Doomberg's Substack and Classic Literature

Doomberg outlines his work on two Substack platforms: Doomberg.com for energy, finance, and geopolitical analysis, and Classics Read Aloud (classicsreadaloud.substack.com) for curated classic literature. He emphasizes the importance of an industrial lens and physics as guides for his analysis, which has contributed to his growing popularity.