June 26, 2025 • 46 mins
The headlines say the economy is crashing again... but what does the actual data say? Because when I dug into the numbers myself... what I found was shocking. It’s nothing like the headlines would have you believe. In fact—there’s one stat that could flip the entire narrative upside down. If you’re just doom-scrolling headlines and sitting in fear, you could miss the biggest wealth window of this decade. I’m Mark Moss. I’ve spent 20 years tracking boom-bust cycles and helping investors cut through the noise and what I’m about to show you might completely change how you see the economy.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Every time that we've seen a substantial weakening of the dollar,
we actually see redollarization. If the dollar becomes weaker against
your domestic currency, you can now borrow more dollars and
that old debt that you have is easier to pay off.
Speaker 2 (00:13):
Did you ever think it was realistic that, of course
we're going to two hundred percent tariffs against China and
that was never going to come off, we'd never do
traders in again, or was it always that was going
to be sort of that negotiation point, the anchoring, if
you will, to allow us to come back off of
that into some negotiation.
Speaker 1 (00:26):
We've offshored our industrial base, and so if you're going
to impose massive terrorists, you know that transition period could
definitely cause a very severe recession. Gold and bitcoin have
worked to, you know, hedge against debasement, against inflation for decades,
and of course gold has been theorized to be suppressed.
That's been suppressed by central banks and by bullion banks
(00:48):
for the last twenty thirty years. But that suppression is
finally coming to an end.
Speaker 2 (00:52):
Do you think we end twenty twenty five higher than
we are now? Gold s and P five hundred and bitcoin.
Speaker 1 (00:58):
Yes, to all three. The reason why is because.
Speaker 2 (01:00):
The fact, all right, peb, you've been warning that Trump's
tariffs could be the final nail in the dollar's coffin
as the world reserve currency. You've talked a lot about
bitcoin potentially taking its place over what time frame do
you see these types of things happening?
Speaker 1 (01:19):
You know, that's a difficult question to answer, and a
lot of people have posed that same question to me,
especially when I've given talks in person, like I did
just a few weeks ago in Vancouver, Canada. But it
really depends on, you know, the geopolitical chess match that
all these different players play, right, what are the moves
that they're going to make? The fundamental issue that is
(01:40):
that you know question here, right, is the actual structure
of the global monetary system, which is basically subject to
something called Triffan's dilemma. And this dilemma basically implies that
the US has to export dollars in order to fund
the global economy or to provide enough liquidity to the
global economy to allow trade to occur and now, and
for those dollars comes from many different sources, from the
(02:02):
euro dollar market, from international trade and settlement, from foreign
exchange and currency reserves for foreign central banks as well
as obviously the petro dollar system. And so all this
external dollar demand essentially needs to be supplied with dollar liquidity,
and this means the US has to choose whether they're
going to supply that supply that liquidity or not. Now,
(02:23):
if they don't do that, then we have a global
recession like you know two thousand and eight or even
before in the nineteen nineties, if the US decides to
not fund global liquidity enough. But if we do decide
to fund that global liquidity, we print too many dollars,
as Triffin said, under our gold reserve ratio, and that
causes us to break the gold pig, which we obviously
(02:44):
eventually did. So our system switched from a gold based
reserve system to what I would call a treasury based
reserve system. Right, the dollar is the reserve currency, but
the treasury is now the reserve asset. Now, this kind
of quasi balance was able to hang for as long
as the treasury bond remains money good in real terms. Right,
(03:06):
if you're earning real returns on your treasure bonds and
eure a foreign central banker, it makes sense for you
to hold these things. But the minute that the FED
decides to hike rates in a very very rapid fashion
to defeat inflation like they did in twenty twenty two,
you start to see negative real returns on the treasure bonds.
And not only that, like you said earlier, the teriffs
that Trump has announced in the escalating wars essentially economic
(03:30):
war that has been playing out over the month of
April has basically meant that the stability and structure of
this monetary system has now been called into question. And
it's pretty clear if you look at global central banks
on net they're funding much much less global of treasury
issuers than they were in twenty eight to twenty fifteen,
(03:51):
and if you look at even private entities, they're not
buying at the same pace that they were in years prior.
The marginal funder for US debt therefore has to eventually
become the fat, which is what I've said before in
dollar endgame, right like we'll have to do QB again
on a larger scale. And so all this means that
I think the tariffs and Trump's response to other countries
(04:12):
instituting retaliated retaliatory teriffs means that the equity markets, the
bond markets, everything starts to trace very very rapidly. And
that's why Trump had to basically recant a lot of
the insane terror phraates that he was proposing of, like
two hundred and three hundred percent on China and other countries.
Speaker 2 (04:32):
Perfect framed it up very very well, all right. I
took lots of notes, lots of places for us to
dig in on that. Thank you for setting the stage
for that. So let's let's dig into some of the
pieces of this. So let's talk about Triffin's dilemma, which,
to the point that you made ended in nineteen seventy one. Basically, right,
Nixon took us off the gold standard, and now we're
in this free floating Fiat era treasury system or whatever
(04:53):
you want to call it. And you talked about the
need for the US to continue to supply dollar liquidity,
but you also mentioned.
Speaker 3 (05:02):
Like the euro dollars, So the euro dollars.
Speaker 2 (05:04):
Are outside of the US's control, right, so there is
dollar equity being created that the FED is not doing.
We also have now stable coins US dollar stable coins,
which are sort of another euro dollar standard. I would
say we could argue that and both of those things
could provide dollar liquidity to the world without the FED
(05:25):
necessarily having to do that upfront, right or.
Speaker 3 (05:28):
No, Yes and no.
Speaker 2 (05:30):
Right.
Speaker 1 (05:31):
If you study the euro dollar system, and if you've
read Jeff Snyder's work, you'll come to understand that the
Euro dollar system is essentially synthetic dollars, and same with right,
you know, ustt stable coins, these kinds of things, because
unless they show proof of reserves, unless we know for
a fact that they are backed one to one by
real dollars, we can, you know, basically assume that this
functions similarly to the Euro dollar system, which is basically
(05:54):
entirely synthetic dollars. Now, those synthetic euro dollars, right, they
are backed by a portion of real US dollar reserves
held that correspondent banks in the United States. So it's
not to say that the system is complete fabrication. But
if let's say twenty percent of them are held as
US dollars and the system grows substantially every single year,
(06:16):
then that obviously increases real dollar demand, which is why
the US has to export dollars, i e. They have
to do the opposite of the trade balance, which means
import goods and create a trade deficit in order to
sustain the global economy. And I've seen people on Twitter,
like Parker Lewis and others who have claimed, you know,
this isn't how the system works. We don't actually need
(06:37):
to export dollars. That's all a lie. And to them,
I would show them the chart of the US central
bank liquidity swap lines that the FED opened post two
thousand and eight and post twenty twenty in the aftermath
of obviously the Great Financial Crisis and COVID nineteen. And
those charts are pretty telling because you see very quickly
(06:57):
how the FED has to offer hundreds of billions of
dollars in liquidity swaps basically meaning a US dollar for
their domestic currency swap to all these regional banks. And
why because they need their own banks, right, all these
central banks, correspondent banks, these smaller commercials need liquidity. They
need real US dollars to back up the euro dollar
(07:18):
basically like fake dollars that they've created.
Speaker 2 (07:21):
And just to put some numbers on that for the audience,
we have the real problem is approximately three hundred trillion
dollars of US dollar denominated debt and only about one
hundred trillion dollars of dollars, right, and so we need
more dollars to pay off the dollar denominated debt. It's
going to demand the dollars to pay that off the
(07:41):
US dollars table coins. I can understand you saying that
because in order to get the stable coin you have.
Speaker 3 (07:45):
To have a dollar. You have to pledge a dollar
to get a dollar.
Speaker 2 (07:47):
Back, So it's somewhat of like a one for one,
if you will. The euro dollar market is not backed
by anything other than the confidence in the banking system overall.
Speaker 3 (07:58):
But I guess that's that's a whole other.
Speaker 2 (08:00):
Issue that we can get into. But you did speak
about the FED doing less treasury issue and how it's
gone down, and so the FED has been less involved,
but yet US treasuries are still being sold.
Speaker 1 (08:12):
Now.
Speaker 2 (08:12):
We do know that if you look at like central
banks net purchases, that they've been going up in golden
down in US treasuries, but it's almost like at the
same time the demand has stayed there. So it just seems,
like you said, it depends on how bad this like
system degrades, if you will, right, But it seems like
it's been holding pretty good.
Speaker 3 (08:35):
All things considered.
Speaker 1 (08:38):
Yeah, I would say it has been. But the main
reason's been holding together, you know, so to speak, is
because of actions behind the scenes that the central bankers
and the monetary authorities have been doing. So just like
what you described right there, right, the FED has been
tapering off their treasury supply right essentially doing QT. If
you actually look behind the hood or below the hood,
(09:00):
you see that all things aren't really equal in terms
of prior quantitative tightening cycles. The FED in this cycle
did not sell on net anything past ten years, meaning
you know, during the kiwi's run up, they bought a
ton of bills, they bought a ton of notes, they
bought a ton of bonds, ten year, twenty year, and
thirty year bonds. And then during the taper and I
(09:21):
have a chart for this and I can send it
to you if you want to display it on the
screen now, where when they started the taper everything past
ten years they actually did not sell. In fact, they
kept increasing their holdings of the ten year, twenty year
and thirty year bonds while they decreased their holdings of
bills and notes. And so this meant that on the surface,
while their overall size of their balance sheet continued to decrease,
(09:42):
the actual holdings of bonds remained high and continued to climb,
and so that meant that, in my opinion, right, the
Fed understood that they could not lay off this amount
of bonds without causing yields to completely blow out, and
so they did this intelligent you know, behind the scenes,
you'd call it STEALTHI liquidity, where while they were tapering,
(10:02):
they just ensured that they didn't sell any of the
long term bonds and in fact bought more to provide
support for the bond market. And the reason why this
is important, of course, is because of duration risk. Right,
banks can much more easily hedge against a short duration
bond than a long duration bond, just because a long
duration bond has much more interest rate risk than a
bill for example.
Speaker 3 (10:21):
Right, Yeah, I definitely saw that this week. We can
see some of the reports on that.
Speaker 2 (10:26):
Now that's the dilemma, that's sort of where we're at,
and we can just frame it up with the rock
of the hard place, right do we keep printing?
Speaker 3 (10:34):
Do we keep manipulating? If so, like how long can
that last?
Speaker 2 (10:37):
But maybe that leads us into the next big topic,
which is the tariffs that we have so far. A
couple of things that you mentioned. One was that, you know,
we had these insane tariffs, you know, one hundred and
forty five percent against China and then two hundred and
forty five percent against China and things like that, And
you mentioned I forget the exact word you use, but
you know, Trump backtracking or coming off of that, right.
(11:00):
A lot of the mainstream media headlines that you would
see or like he's caving or things like that. But
from an analyst perspective, I mean, did you ever think
it was realistic that, of course we're going to have
two and fift percent tariffs against China and that was
never going to come off, we'd never do trade with
him again. Or was it always that was going to
be sort of that negotiation point, the anchoring, if you will,
(11:21):
to allow us to come back off of that into
some negotiation.
Speaker 1 (11:25):
I think it was. I mean, I think it was.
It was basically like a retaliatory, almost like show of force. Right.
It was a chicken game, if you will have two
cars racing at each other, right, And Trump thought that
he held a much much stronger hand than he actually does.
Because again, the issue comes when you realize the implications
(11:47):
of Triffin's alma as well as obviously the results of it.
The implication is that we need to fend out dollars
on net to the global economy to fund basically global trade.
But the other implication, obviously is that we've shorter industrial base,
and so if you're going to impose massive terrorists in
the you know, desire to move us back to an
(12:08):
autarcic economy, basically an economy that's self sufficient, that doesn't
need to have maybe much import export, that can basically
provide everything that it that it needs just by itself.
It's going to take a lot of time to reshore
industrial bases, to retrain American workers, and then there's obviously
like the cost implications for high end manufacturing iPhones, consumer electronics, cars.
Speaker 3 (12:31):
Et cetera.
Speaker 1 (12:32):
And that you know, that transition period could definitely cause
a very severe recession. But even more importantly than that,
obviously it would cause an unwind of a lot of
these carry trade and pro liquidity effects that have taken
place with regards to this Tripan's dilemma that's been playing
out for the last thirty to fifty years. And so
that means that equity markets and bond markets are going
(12:52):
to fall, you know, substantially. And I don't think Trump
was ready for that amount of economic pain. And I'm
not saying that, you know, whether it's right or wrong
that we should move back towards a more self sufficient
and more reshort industrial economy, or if we should let
our manufacturers move overseas and basically ship away all of
our jobs. But there's always trade offs, right. This is
(13:15):
a world of nuanced there's never anything simple, and so
if you want to do that, that path you're going
to cause, you know, incur a lot of economic pain.
And so yeah, I think that two forty five percent
was just a almost like a bloviating show move, if
you will. That was just meant to scare people. But
in reality that that kind of thing would not hold
long term if you want to basically retain our global
(13:38):
monetary system as it is.
Speaker 2 (13:39):
And I don't think that was ever the plan, right,
I mean, obviously he wrote the book Art of the Deal,
which is anchoring, right, you go high, you set a low,
so it opens the door for negotiations.
Speaker 3 (13:48):
I think a couple of things in that as well
that I think.
Speaker 2 (13:51):
About is that you know, Stephen Moran, who's his economic
Trump's economic advisor, wrote a paper before Trump became president
and basically coined the term mar Alago Accords. And so
he sort of laid out this playbook that seems to
be sort of what the Trump administration is following down now,
this playbook into this mar A Lago Accords.
Speaker 3 (14:11):
Maybe not exactly.
Speaker 2 (14:12):
I think maybe he's moved more aggressively than was laid
out in the paper. But I think also in that
so the two hundred and forty five percent was much
more aggressive. There's been a lot of talk about this
potential game of chicken. I think as you called it,
I would agree with that. Forming like this game of chicken,
like who could go longer China or the US? Realistically,
(14:32):
neither of us could survive without each other. I mean
it'd be very rough if we did, right, And I thought, man,
I mean, China welded people in their frigging houses during
the pandemic, like they can go through a lot of pain,
Like the US isn't going to put up with that.
Right as of like yesterday and today, though, it looks
like China is like caving like super fast. Right, they
already switched to easing. They're like begging for a meeting.
(14:56):
It's looking like they want to deal pretty quickly. I
don't know if you've been paying attention to that.
Speaker 1 (15:01):
Yeah, no, and I'm not surprised that they do. You know,
while the CCP can maintain basically, like you know, monetary
and economic harsh conditions much longer than the US can,
it does not behoove them to do that at this
current juncture. Right, We've seen a Chinese economy for the
(15:22):
last two or three years that's been in basically recession
or complete contraction due to the real estate and banking
sectors starting to fall from their massive shadow real estate
bubble that's been imploding. We saw the you know, the
bankruptcy of Country Garden and Evergrand and several other large developers,
as well as defaults of major property developers all across
(15:45):
China and their failure to pay dollar bonds as well
as on shore yuan bonds, and so the Chinese economy
essentially has kind of reached this I think severe inflection
point where they now need to choose what they're going
to go forward with a path of deflation and let
their estate bubble basically burst in slow motion essentially like
two thousand and eight, or are they going to reflate
(16:05):
the bubble and print the yuan and let the UoN devalue.
And that's a difficult decision to make because either way,
obviously there's economic pain, but the winners and losers are
different in each scenario. Right, If you choose the deflationary path,
then obviously the equity holders and the bond holders are
going to get wiped out, but you might be able
(16:25):
to retain that yuan seven point three to the dollar
peg for a lot longer. And then if you go
the other way, obviously you're going to see a blood
in your currency. But on the plus side, the exports
become much more competitive, so China, and China has been
trying to show this strong face, right, this poker face.
But again, if you look at I mean even the
(16:46):
data like I was looking at this yesterday. Ever since
twenty twenty two, they've stopped publishing most of their economic
data publicly. If you look at youth unemployment, you look
at factory orders, you look at new homes and new
home leases in China, all the figures just won't be
reported anymore. By their version of the BLS and so
that tells me that things are pretty bad there right now.
(17:09):
They just don't want the US to know because obviously
that would weaken their hand.
Speaker 3 (17:13):
Yeah. Yeah, but it is a game of chicken.
Speaker 2 (17:16):
The way I see it is back to these mariologue
with chords was like obviously put pressure on China. And
I think there's even in the Biden administration with sort
of this stance on China trying to put them back.
Speaker 3 (17:27):
In their place.
Speaker 2 (17:27):
I think it's probably more from the intelligence community than
just the Biden or Trump administration. But you know, Biden
is the one that took away their ability to get
microchips for example, right advanced microchips, right to limit their
their technology, and then started the Chips Act to start
bringing on shore and some of that back.
Speaker 3 (17:43):
And when you think about that, it's terrorists are really about.
Speaker 2 (17:45):
Like more strategic moves, right. So it's like the US
doesn't need to make T shirts and sneakers here, like
we gave those jobs up a long time ago. But
it's like there are strategic things that we should be
doing here, like you know, rare earth elements having to
steal in copper so we could actually make things. So
I think there's like things that are strategic. It was
never about bringing all the jobs back. It's like, what
are the jobs that we need here, and let's just
(18:06):
bring those back. We don't need to grow mangoes or
coconuts like we can let other people do those things
as well. And that seems to be happening at a
pretty breakneck speed. As a matter of fact, if you
saw the latest GDP numbers that came out, right, we
had a negative print, but that was adjusted for what
a forty one percent increase surgeon imports. But when you
(18:29):
look at the investments that were going on in the US,
I mean, Trump announced eight trillion dollars of investments going
on in the United States, it looks like we're going
into some sort of like a reindustrialization that we haven't
seen since like the nineteen forties.
Speaker 1 (18:41):
Almost, Yeah, I mean, I would hope so, right, because again,
the negative effects, right, the knock on effects of the
offshoring of our industrial base are is pretty substantial. It's
you know, pretty sad to see as well. Like the
you know, in the rost belt States, one of the
leading causes for death now is opioid detention and depression
(19:03):
and basically economic malaise is now kind of common young
young men, especially in those areas. And so when you
destroy the ability of especially a large section of the
middle class to make money and to provide for themselves,
and you offshore that to foreign countries where they just
do it cheaper, and they still don't treat their workers
well obviously, right in Southeast Asia, that just demoralizes the people,
(19:27):
and it obviously impacts the local economies very very severely.
And so I think reindustrialization obviously should happen. But the
question is, of course, like you said, what things should
we bring back? And I think high technology things that
are critical to defense, you know, lithium, copper, cadmium, things
that are needed for battery and ev production obviously, but
(19:48):
like you said, agricultural products, certain consumer goods, we don't
necessarily need to produce those here. So I think it's
a balancing act.
Speaker 3 (19:55):
The problem with.
Speaker 1 (19:56):
The tariffs as they're constructed now is that tru you know,
came out guns blazing with this tariff policy, thinking that
essentially the US was invulnerable, and then very quickly saw
the market start to retrace. Right. We saw the twenty
year and the thirty year bond hit five percent within
like a week, and credit spread start to blow out
in early April, and that signaled him quickly that things
(20:19):
were not going to go as smoothly as he had hoped,
and so we started announcing basically exclusions. So he said, Okay,
we're going to apply terrorifts except for iPhone you know manufacturing,
and except for automotive manufacturers, and except for you know, X,
Y and Z industries that need to have their cheap
goods in order to produce cheap finish goods here in
(20:42):
the US. The issue with that is that.
Speaker 2 (20:45):
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Speaker 1 (21:28):
This excludes small businesses, right, so small businesses won't be
won't be able to benefit from those exemptions that the
large businesses are able to. And so that means that
small businesses, if these teriffs are held in place as
they're currently structured, the small businesses are going to be
damaged quite significantly by the terrafs. And you know, that's
(21:52):
where I think Trump needs to make some readjustments in
his overall tariff policy to make sure that small business
businesses and small business owners, especially small manufacturers and goods,
don't get walloped by these things.
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now part of the Marilogo Accords, and even the name
(22:59):
sort of spells it out Accords kind of echoing rhyming
the Plaza Accords of nineteen eighty five, very similar to also,
you know what was done probably in nineteen forty four.
So we have these periods of time, these historical moments
where the global monetary system sort of gets realigned. So
you know, obviously nineteen forty four Bretwood Agreement, the whole
world agreed nineteen eighty five, and those moments were like
(23:22):
really getting the world to sort of agree to peg
back to the US dollar to allow the US dollar
to devalue. And that appears to be the same sort
of goal of this these type of cords, the Marlago
coords is get in the US to sort of repeg
back to the US dollar and allow the dollar to
devalue as well. That's the way that it seems to
(23:44):
be right now. Part of that is realigning trade. So
if we can get about forty percent of global trade
to be aligned to the US dollar, we can keep
the US currency as sort of this like I think
he wants to keep it about sixty percent right now,
we're about fifty nine percent of global trade.
Speaker 3 (24:00):
Then we can allow the US to sort of have
this coordinated devaluation. That's what I'm picking up. What do
you think the ultimate goal of this is?
Speaker 1 (24:09):
No, I absolutely think that you're right on the money
with that. If you look at statements from you know,
a Cent even Lutnik right as well as that paper
that you mentioned which I've I've read excerpts from, they
do seem to be basically an agreement on weakening the
dollar substantially. And the weakening dollar thing is actually a
(24:30):
very intelligent strategy if you look at it from a
geopolitical standpoint. The way that the system is structured is
very counterintuitive, right, because again we most of us would
think that, especially goldbugs, would go out and claim that
a weaker dollar means that gold is going to rip,
the dollars is going to collapse, Dixie to thirty, and
Peter Shift will be vindicated in the end. Right, we
(24:51):
can all, we can all throw a party rit with
Mike Maloney and Peter Shiff in their warehouse. But if
you look at the fundamental reality again of how the
EU at all system works, of how the global monetary
system works, that's not the case. I wrote a paper
about this back in mid April. But every time that
we've seen a substantial weakening of the dollar, we actually
(25:11):
see redollarization. So that means, you know, if the dollar
becomes weaker and you're a foreign let's say you know,
you're a consumer goods manufacturer in Pakistan, U owe dollar
debt already via the euro dollar system. Right, if the
dollar becomes weaker against your domestic currency, you can now
borrow more dollars and that old debt that you have
is easier to pay off. So that means, on net,
(25:35):
the whole system actually starts to increase their borrowing of
US dollar and US denominated debt, and so that means
obviously that the system becomes even more reliant on the
dollar over time with a weaker comparatively weaker dollar, and
so de dollarization is not when the dollar's falling in
this case, that's redollarization, and a spike in the dollar
(25:56):
is actually the you know rush for liquidity that all
these corporate rits and countries and banks are doing in
order to fund their dollar debt. So a higher Dixie
is actually emblematic of a breakdown in the global monetary system,
not a lower one. And so that's why we saw
obviously a very high Dixie in the nineteen eighty five
Plaza Cords. That's why they had to devalue, because they
(26:17):
had to reset the global monetary system and allow enough
liquidity to flow out to settle all these dollar denominated debts.
And so, you know, Brent Johnson has been running about
this for a long time as well. Right, this this
lower dollar actually strengthens the milkshake and it extends the
lifetime of the you know, dollars dominance in the global
(26:37):
monetary system.
Speaker 2 (26:39):
Yeah, when you look at the dixie a dollar index
compared to a basket of other top currencies, we're nowhere
near the top where we were in the nineteen eighty
five Plaza cords. But I was just looking at a
chart of from the BIS of the US dollars relative strength.
So it's like an adjusted matrix and we're like a
but weal well above historical levels. So when you look
(27:01):
at it from that perspective, But even if you look
at from the Dixie, I mean, maybe a more historical
number might be eighty five or ninety I mean, which
if you look at it from that perspective, if you
think maybe the goal is to.
Speaker 3 (27:12):
Devalue the dollar, would it revert to the mean? What
is the mean?
Speaker 2 (27:16):
Is that eighty five or ninety? Is that a ten
to fifteen percent drop from here? And then what does
that mean? How do you think about that math or
that mechanic?
Speaker 1 (27:25):
Sure, yeah, you're right, you know what very long term
Dixie averages is eighty five, eighty seven, you know, up
to ninety. So a ten to fifteen percent drop from
here is basically bring us back to baseline. And like
I said, that means that you know that weaker dollar
will help to restabilize let's say the euro dollar market
(27:46):
and to provide liquidity for all these banks. But more importantly, obviously,
it will help these other countries who need to earn
dollars into you know, essentially hold those dollars as foreign
exchange reserves for future money crisis, like the like the
Japanese have been doing with their interventions, or even like
you know, the the BOE or the ECB may have
(28:08):
to do in the future to defend the euro or
the pound. And a higher dollar is basically restricting all
of those.
Speaker 3 (28:17):
All of those goals.
Speaker 1 (28:18):
Now, a week of dollar will impact obviously tourism for Americans.
They'll be harder for us to buy go a boat
and buy goods and services if we're if we're going
and traveling, But overall, it's a net benefit for the
global monetary system as it is.
Speaker 2 (28:34):
So that seems to be perfectly in line with this plan,
because what Trump wants is more manufacturing in the US,
less exports, and so if we have a week a dollar,
that's exactly what it does. It makes us more competitive
on our exports, and it makes it harder for people
to import into the United States exactly.
Speaker 1 (28:49):
And if you can switch, remember again they still need
to provide dollars. So if you can switch the dollar
funding line from just exports and trade for goods, which
is just you know, quid pro quote transaction where I
give you dollars and you give me a bunch of
Chinese electronics or Taiwani semiconductors. Right, if you switch that
from a you know, let's say, like trade based arrangement
(29:11):
to a financial arrangement where instead of saying, hey, I'm
going to be you know, giving a bunch of dollars
for your manufactured goods, I'm going to swap a bunch
of dollars for your you know, own currency reserves. That
allows that the system to reindustrialize, I guess much better
than it would if you were stuck on that first mode.
And so what they're trying to do is this kind
(29:32):
of game of geopolitical chess where they're trying to figure
out how to manage their supposed mandate of reshowing the
American industrial base and solving the problems that the populacets
have basically proclaimed to be plaguing America, as well as
working with the global monetary system as it works today, right,
not allowing a global monetary crisis to develop under their watch.
Speaker 2 (29:54):
Let's just say that switching the in total entire global
monetary system is not a smooth There's all types of
unintended consequences that will happen throughout that it can't be
a smooth process. We could certainly argue for and against
the case that Trump moved too fast or was too aggressive, but.
Speaker 3 (30:14):
I would say, like zooming out. I don't know if
maybe you retweeted.
Speaker 2 (30:17):
Or I saw somewhere online, but uh oh no, it
wasn't you with somebody else. But they're just saying, like
after Powell's announcement today that like he's a he's a legend.
Speaker 3 (30:25):
Like I mean, he.
Speaker 2 (30:26):
Seemingly might have pulled off a soft landing, which nobody
thought was possible. China's coming around to negotiation looks like
a deal with India's done.
Speaker 3 (30:36):
The dollar devalues a.
Speaker 2 (30:37):
Little bit, the world gets what they want, we bring
some manufacturing back to the US. I mean, I kind
of see a path here with unintended consequences all throughout.
I'm just kind of bullish. What's your view?
Speaker 1 (30:54):
Yeah, I would, I would broadly, you know, agree with
that statement, although I would give some right so obviously,
you know, after that first kind of you know, Mayhem
with Liberation Day slash liquidation Day and the credits bed
flowing out and spy falling, as well as nick Ay
and DAX index falling substantially in early April. They've they've
(31:17):
been able to reshuffle their their chestboard and make the
best moves that they can given the circumstances. The issue,
you know, comes when you start to like visualize the
long term problems that are still plaguing in the US. Right.
Although we can again restructure some things within the global
monetary system like resource some industrial manufacturing, or provide liquidity
(31:39):
via dollar swap lines to these other central banks and
then weaken the dollars substantially like we did in the
positive courts in nineteen eighty five, the long term problems
of the debt and the deficit are not solved. And
even given Elon Musk Doge Project and you know, substantial
pushes from Republicans and a few Democrats to reduce the
(32:00):
deficits meaningfully, nothing has really been done. And the actual,
you know, put, the actual accomplishment of that goal is
much much more difficult than most people realize, right because
there's so many vested interests that have basically money being
that's being made from the government deficits, and so we
(32:21):
don't solve the debt problem. Even with rates here, we
don't solve the deficit problem. We don't solve the eventual
need for QI or for finding some other source of funding.
And even if the FED continues to do their sealth
qui by you know, shifting issue INCE or the treasure,
that can do the same thing, right, the treasure can
shift issue INCE from the long end to the short
end and essentially provide quasi self liquidity via that mechanism.
(32:43):
Nothing fundamentally has been solved about the thirty seven trillion
dollar debt and the one trillion plus of interest six
months we have every single year. And so that's the
issue that I still see hurting the United States.
Speaker 3 (32:54):
Yeah, then ain't being solved. There ain't no solution for that.
Speaker 2 (32:59):
I mean, there's a there's a small chance potentially through
some high inflation for a couple of years, like Luke
Grama talks about, maybe through super you know, double digit
inflation for three four years, we can bring the ratio
of debt down potentially and if you know, some miracle
with efficiency gains through AI through Trump repealing, you know,
twenty thirty percent of the regulations and unleashing the American economy.
(33:22):
Maybe we can make a dent and growing out of
it a little bit. I don't see us making a
lot of ground on that. So that's just kind of
like is what it is, is like the it's like
the modern medical system, like we'll just treat the symptom.
Speaker 3 (33:30):
We can't really cure it.
Speaker 2 (33:32):
We let's just manage the sickness kind of a thing.
So in that frame, which we're both sort of agreen,
then really it comes down to the rate of degradation,
like how how bad does it get in how fast?
But the direction that we're going is pretty set, so
we have to think about then how do we protect ourselves?
Speaker 3 (33:51):
Or I like to think abou how do we make
money through this?
Speaker 2 (33:53):
Right?
Speaker 3 (33:54):
I know you like to talk about gold and bitcoin,
as do I.
Speaker 2 (33:58):
Two assets that are sort of not only outside of
that financial system, but out of outside of any country
as well, maybe as lifeboats. How do you look at
them in regards to the mechanics of this debt bubble
that we're in.
Speaker 1 (34:14):
Sure, so I've written several pieces about gold and bitcoin
and their correlation to global liquidity, and Michael Howells also
touched on this as well. There are several other macro
analysts you can check out, but essentially, what I found
is that gold has been a pretty prescient front runner
of global liquidity waves by about twelve to eighteen months,
(34:35):
and bitcoin has been unfortunately the laggard, but obviously a
much more extreme and you know, volatile laggard in the
in the sense that if gold will go up, you know,
let's say ten to twenty percent, bitcoin can go up
sixty percent seventy percent, just because of the nature of
its electronic means of payment as well as obviously smaller
market cap. But gold and bitcoin have worked to you know,
(34:59):
hedge against debase, against inflation for decades. And of course
gold has been theorized to be suppressed, and I think
that there are there's credence to that claim. That's been
suppressed by central banks and by bullion banks for the
last twenty thirty years. But that suppression is finally coming
to an end. And the reason why it's coming to
an end is something I talked about in a podcast
in March as well as a written piece in February.
(35:20):
But what I essentially was getting at was if you
look at the comax and the physical orders and the
physical deliveries that are now being made. It's starting to
reach epic proportions, right even rivaling what we saw during
twenty twenty in March during the COVID nineteen shutdown and
the massive withdrawal of liquidity from the global banking system.
(35:40):
So the question now becomes, right, who is doing this,
Who's drawing this liquidity, and who's drawing this physical gold
out of the system, and who is trying to front
run at what they view, in my opinion as a
new global liquidity wave. And I think that is mainly
the Chinese and now the Americans. If you look at
(36:01):
the physical gold orders from Shanghai, from the Shanghai Gold Exchange,
they've been very very consistently showing an increased appetite for
gold ever since twenty twenty two, and especially a delta
in the difference between the Shanghai physical gold rate, which
is their cash basically like their spot market for physical
gold and the COMEX. You see like a fifty sixty
(36:23):
to seventy dollars delta open up at sometimes, and so
that allows traders to arbitrage the trade between those two nations,
and so that was responsible for the first leg of
gold appreciation from let's say twenty twenty two to late
twenty twenty three mid twenty twenty four, and that shifted
obviously once especially once Trump took office, we saw a
(36:45):
massive amount of gold deliveries and what I believe to
be a rush of physical redemptions for Fort Knox. Now,
again this isn't confirmed because the government won't release this data.
But according to stone X, which is one of the
exchanges in the LBMA and one of the market makers
(37:07):
that settles physical gold trades, they found that there was
around you know, seven hundred tons of physical gold that
was shipped from London to the United States in the
two months of January and February of this year. Now,
the official import numbers are for thirteen hundred tons, so
that means that, you know, if we shipped in seven
(37:29):
if they declared seven hundred tons shipped to the COMEX
and then there was thirteen hundred tons total, where's that
other eight hundred tons going? And a move of that size,
obviously is in two months what the US would normally
import in a year or two years, and so it's
a huge move and the only type of gold that
doesn't have to get outright claimed on our import export
(37:53):
numbers is what's called monetary gold. So this is gold
in four hundred ounce bars. And so that monetary gold
would only really be going to one place, and that's
Fort Knox. And so again you just use the equals
be A plus equal C. Rationalization is that the US
is now starting to I guess you could call it
reshore or call in its gold reserves and basically called
(38:16):
a bluff on the l B m A and on
the Bank of England on their paper gold certificates that
they've that they've sent out. And so that's why the
lease rates in London exploded in January and February. That's
why we saw massive gold backlogs, redemption backlogs at the
Bank of England. And that's probably why they don't want
to do the audit just yet. Even though Elon Musk
and Trump have talked about auditing the gold reserves at
(38:38):
Fort Knox. It's because they're still waiting to refill all
of the empty vaults with with physical gold because right
now what they have is mostly IOUs in there.
Speaker 3 (38:49):
It's an interesting theory. We'll see how that shakes out.
I did a video talking about this number one. Obviously,
that talk got.
Speaker 2 (38:55):
Really big about why don't we audit it? Which seems
so simple, like why don't we audit it?
Speaker 3 (39:00):
And they're like, of course we audit it happens all
the time. This is not public, so I don't know.
We'll see about that.
Speaker 2 (39:07):
But I also talked about in a video that potentially,
potentially what if we found out there was more gold
than Fort Knox, then that could be equally as bad,
if not even worse, because.
Speaker 1 (39:21):
Why did you say that?
Speaker 2 (39:22):
I would say it'd be worse because what if we
had more gold in Fort Knox than we thought we had?
Speaker 3 (39:26):
So then why would the US be buying more gold?
Speaker 2 (39:28):
They're preparing for some sort of currency collapse that they're
trying to shore up.
Speaker 3 (39:32):
What do they know that we don't know? Should we
be shoring up our currency? Right?
Speaker 2 (39:36):
I would I would think it would signal a weaker standpoint.
I think the US could argue why it doesn't have gold.
I mean Canada has no gold, right, Like the US
could argue getting rid of some of the gold, oh
we have it on loan whatever, But having more gold
almost seems like it could be worse. Like if the
US thinks their currency is going to collapse, they're buying
more gold. Maybe we should so I thought that was
an interesting caveat, but yeah, we don't really know.
Speaker 3 (40:00):
I do. I did see last night breaking news.
Speaker 2 (40:02):
I haven't been able to find out if it's true
or not, so I didn't want to talk about it publicly.
But you probably had seen it, talk of China and
Saudi opening up a gold settled oil window.
Speaker 3 (40:17):
I don't know if you saw that last night yesterday.
Speaker 1 (40:19):
No, I didn't.
Speaker 2 (40:20):
So that's that's big news. I haven't been able to
really verify that. I've seen it from from a few
people talking about it. But yeah, potentially having you know,
gold and oil settled by China and Saudi Arabia could
be a pretty big deal.
Speaker 3 (40:36):
What about the bitcoin piece?
Speaker 1 (40:39):
Sure, so bitcoin right has been trading as this. I
guess you'd call it like levered proxy for global liquidity
for the last let's say three four years, and really,
you know, this is not new or just unique to
just bitcoin. Again, gold trades, although at a at a
different timescale, meaning like like I said, gold will front
(41:00):
run the liquidity waves and the contractions and the sp
FIE hundred and QQQ also are very very close in
their correlations to global liquidity. If you stack a chart
of global money supply or global central bank balance sheets
minus obviously the TGA and the reverse repo window, and
then you compare that to the SPY, is like a
(41:21):
zero point eight eight correlation, which in finance, of course
is extremely strong. So it's not just obviously Bitcoin that's
been sensitive to global liquidity. It's literally every single financial asset,
especially in the US. But Bitcoin has been trading this
kind of like quasi range here and between seventy and
ninety for the last few months, and I think that
(41:44):
that's indicative of where we are in the global liquidity cycle. Right.
The FED began their taper just a few years ago,
and they've continued their taper, albeit at a slower rate,
and then we've found out, like I said earlier, that
they've been really just tapering the short bonds, not anything
past ten years, which means that on net, the liquidity
drain on the system isn't as bad. And now they're
venture this area where they're kind of in a limbo, right,
(42:07):
just like with other cycles, they aren't set on cutting
the rates to zero yet, and they aren't set on
doing Q yet, but they also aren't telegraphing that they're
going to hike rates anytime soon or keep them here
for the next three or four years. There is a
plan to slowly reduce interest rates. So because of that,
Bitcoin has been also in limbo as well. Because global
liquidity is kind of in this doll drums, Bitcoin's been
(42:30):
in these doll drums as well, and we probably won't
see a breakout above one hundred and twenty K until
we see major easing by at least one of the
large global central banks.
Speaker 2 (42:40):
Well, you mentioned Michael Holley yesterday, I'm on his newsletter.
Nice you mentioned how earlier yesterday on his newsletter he
put out that global equity hit a new record all
time high and it's been on the uptrend, and he
said that he actually changed his forecast.
Speaker 3 (42:57):
He thought that global equity would peek out Q four.
Speaker 2 (42:59):
Twenty two, twenty five because it runs on these you know,
five year cycles, he calls it. But now, because of
what's happening with with the major central banks, he thinks
it's going to go well into twenty twenty six. So
we have seen global equity taking off quite a bit.
Just seems like the US hasn't quite jumped on board
with it.
Speaker 1 (43:17):
Maybe sure, but even that still you know, that still
doesn't take them to count the lack right like we like,
if you've seen the chart of the global M two
and bitcoin three months still lags by. Yeah, it's still
lags by quite a few months. And of course we
said bitcoin is you know, sense of for global equidity.
But there's obviously a lot of caveats, right, there's, uh,
(43:38):
the the moment to moment reshuffling of debt, there's the
the refinancing of the treasury bonds. There's the tariff wars, right,
and what what banks and corporations are going to do
with regards to you know, their currency reserves in the
in those cases. So it's not a simple picture, right.
That's why when people ask me, like, what's the fund
(43:59):
of mental benchmark global liquidity? What is it? Like, tell
me one number, it's very difficult to caulle It's not
one because there's so many.
Speaker 3 (44:05):
Yeah, it's not one number one numbers of all.
Speaker 1 (44:07):
Yeah, but it's also it's like if they change the SLR,
for example, and exempt treasuries from being in the leverage ratio,
that would change how liquidity is flows throughout the system.
But it wouldn't come up on any screen. You wouldn't
see the number of Michael Howell's calculation change. That would
just be a regulatory change, right. And so those kinds
(44:29):
of like I guess, esoteric or abstract impacts are are
hard to quantify and hard to parse out. So and again,
remember this is a it's a strong correlation, it's not
a perfect correlation. Doesn't mean that tick for tick, where
global liquidity goes, bitcoin goes that single day. There's still
obviously a market.
Speaker 2 (44:45):
For I like Michael Howell's model. I like the Bitcoin
layers model. I think Real Vision has a good model.
Those are the kind of the three that I look at,
and they're all kind of tracking pretty similar. I want
to wrap this up, and so let's just let me
let me throw you an easy one here. Dig into
your crystal ball, but polish that thing up and I'm
gonna lay give you a layup here though, But do
(45:07):
you think we end twenty twenty five.
Speaker 1 (45:09):
Higher than we are now in the bitcoin price?
Speaker 2 (45:14):
And let's just say markets overall.
Speaker 1 (45:17):
Yeahcoin, yes, all three, Yes to all three. And again
the reason why is because the fundamental factors that are
pushing all three higher. Haven't changed, right, We're still looking
at you know, potentially, like you said, higher global liquidity.
And then in the coming few years, and especially by
(45:37):
the end of the year, we're still seeing the carry
trade impacts and the dollar recycling impacts of Triffon's dilemma,
pushing US dollars back into US equity markets. And you know,
debasement is still inevitable given the current US debt levels
and the fiscal situation. So because of those three reasons,
I don't see any any strong argument as to why
(45:58):
at least you know, or even one of those three
should be lower. I think all three are going to
be higher, substantially so. And I think gold, especially like
I said, it's telling of more inflation coming in the
future in twelve to eighteen months, just because it's been
such a good predictor in the past of coming inflation waves.
Speaker 3 (46:17):
Yeah. Perfect, all right, I'm going to wrap it up
with that. Thanks for joining.
Speaker 2 (46:23):
You really laid that whole whole sort of global chessboard
out very well, and I agree with you on the
sort of inevitability of where we're at, at least for
the foreseeing future. Here, I want to link down in
the show notes down below. You have your was it
a dollar in game? Your newsletter that you're right, which
is great yep, so linked that down below, and your
Twitter handle anything else that you want to call out
for everybody to go check out.
Speaker 1 (46:44):
I have a YouTube channel as well. I talk about markets,
talk about gold, bitcoin, commodities, equities obviously, so that's just
at Peruvium Bowl, so you can check that out as well.
Speaker 3 (46:53):
Yep, we'll link to that down below.
Speaker 1 (46:55):
Thanks for jumping on, Sweet, Thanks for having me
Every time that we've seen a substantial weakening of the dollar,
we actually see redollarization. If the dollar becomes weaker against
your domestic currency, you can now borrow more dollars and
that old debt that you have is easier to pay off.
Speaker 2 (00:13):
Did you ever think it was realistic that, of course
we're going to two hundred percent tariffs against China and
that was never going to come off, we'd never do
traders in again, or was it always that was going
to be sort of that negotiation point, the anchoring, if
you will, to allow us to come back off of
that into some negotiation.
Speaker 1 (00:26):
We've offshored our industrial base, and so if you're going
to impose massive terrorists, you know that transition period could
definitely cause a very severe recession. Gold and bitcoin have
worked to, you know, hedge against debasement, against inflation for decades,
and of course gold has been theorized to be suppressed.
That's been suppressed by central banks and by bullion banks
(00:48):
for the last twenty thirty years. But that suppression is
finally coming to an end.
Speaker 2 (00:52):
Do you think we end twenty twenty five higher than
we are now? Gold s and P five hundred and bitcoin.
Speaker 1 (00:58):
Yes, to all three. The reason why is because.
Speaker 2 (01:00):
The fact, all right, peb, you've been warning that Trump's
tariffs could be the final nail in the dollar's coffin
as the world reserve currency. You've talked a lot about
bitcoin potentially taking its place over what time frame do
you see these types of things happening?
Speaker 1 (01:19):
You know, that's a difficult question to answer, and a
lot of people have posed that same question to me,
especially when I've given talks in person, like I did
just a few weeks ago in Vancouver, Canada. But it
really depends on, you know, the geopolitical chess match that
all these different players play, right, what are the moves
that they're going to make? The fundamental issue that is
(01:40):
that you know question here, right, is the actual structure
of the global monetary system, which is basically subject to
something called Triffan's dilemma. And this dilemma basically implies that
the US has to export dollars in order to fund
the global economy or to provide enough liquidity to the
global economy to allow trade to occur and now, and
for those dollars comes from many different sources, from the
(02:02):
euro dollar market, from international trade and settlement, from foreign
exchange and currency reserves for foreign central banks as well
as obviously the petro dollar system. And so all this
external dollar demand essentially needs to be supplied with dollar liquidity,
and this means the US has to choose whether they're
going to supply that supply that liquidity or not. Now,
(02:23):
if they don't do that, then we have a global
recession like you know two thousand and eight or even
before in the nineteen nineties, if the US decides to
not fund global liquidity enough. But if we do decide
to fund that global liquidity, we print too many dollars,
as Triffin said, under our gold reserve ratio, and that
causes us to break the gold pig, which we obviously
(02:44):
eventually did. So our system switched from a gold based
reserve system to what I would call a treasury based
reserve system. Right, the dollar is the reserve currency, but
the treasury is now the reserve asset. Now, this kind
of quasi balance was able to hang for as long
as the treasury bond remains money good in real terms. Right,
(03:06):
if you're earning real returns on your treasure bonds and
eure a foreign central banker, it makes sense for you
to hold these things. But the minute that the FED
decides to hike rates in a very very rapid fashion
to defeat inflation like they did in twenty twenty two,
you start to see negative real returns on the treasure bonds.
And not only that, like you said earlier, the teriffs
that Trump has announced in the escalating wars essentially economic
(03:30):
war that has been playing out over the month of
April has basically meant that the stability and structure of
this monetary system has now been called into question. And
it's pretty clear if you look at global central banks
on net they're funding much much less global of treasury
issuers than they were in twenty eight to twenty fifteen,
(03:51):
and if you look at even private entities, they're not
buying at the same pace that they were in years prior.
The marginal funder for US debt therefore has to eventually
become the fat, which is what I've said before in
dollar endgame, right like we'll have to do QB again
on a larger scale. And so all this means that
I think the tariffs and Trump's response to other countries
(04:12):
instituting retaliated retaliatory teriffs means that the equity markets, the
bond markets, everything starts to trace very very rapidly. And
that's why Trump had to basically recant a lot of
the insane terror phraates that he was proposing of, like
two hundred and three hundred percent on China and other countries.
Speaker 2 (04:32):
Perfect framed it up very very well, all right. I
took lots of notes, lots of places for us to
dig in on that. Thank you for setting the stage
for that. So let's let's dig into some of the
pieces of this. So let's talk about Triffin's dilemma, which,
to the point that you made ended in nineteen seventy one. Basically, right,
Nixon took us off the gold standard, and now we're
in this free floating Fiat era treasury system or whatever
(04:53):
you want to call it. And you talked about the
need for the US to continue to supply dollar liquidity,
but you also mentioned.
Speaker 3 (05:02):
Like the euro dollars, So the euro dollars.
Speaker 2 (05:04):
Are outside of the US's control, right, so there is
dollar equity being created that the FED is not doing.
We also have now stable coins US dollar stable coins,
which are sort of another euro dollar standard. I would
say we could argue that and both of those things
could provide dollar liquidity to the world without the FED
(05:25):
necessarily having to do that upfront, right or.
Speaker 3 (05:28):
No, Yes and no.
Speaker 2 (05:30):
Right.
Speaker 1 (05:31):
If you study the euro dollar system, and if you've
read Jeff Snyder's work, you'll come to understand that the
Euro dollar system is essentially synthetic dollars, and same with right,
you know, ustt stable coins, these kinds of things, because
unless they show proof of reserves, unless we know for
a fact that they are backed one to one by
real dollars, we can, you know, basically assume that this
functions similarly to the Euro dollar system, which is basically
(05:54):
entirely synthetic dollars. Now, those synthetic euro dollars, right, they
are backed by a portion of real US dollar reserves
held that correspondent banks in the United States. So it's
not to say that the system is complete fabrication. But
if let's say twenty percent of them are held as
US dollars and the system grows substantially every single year,
(06:16):
then that obviously increases real dollar demand, which is why
the US has to export dollars, i e. They have
to do the opposite of the trade balance, which means
import goods and create a trade deficit in order to
sustain the global economy. And I've seen people on Twitter,
like Parker Lewis and others who have claimed, you know,
this isn't how the system works. We don't actually need
(06:37):
to export dollars. That's all a lie. And to them,
I would show them the chart of the US central
bank liquidity swap lines that the FED opened post two
thousand and eight and post twenty twenty in the aftermath
of obviously the Great Financial Crisis and COVID nineteen. And
those charts are pretty telling because you see very quickly
(06:57):
how the FED has to offer hundreds of billions of
dollars in liquidity swaps basically meaning a US dollar for
their domestic currency swap to all these regional banks. And
why because they need their own banks, right, all these
central banks, correspondent banks, these smaller commercials need liquidity. They
need real US dollars to back up the euro dollar
(07:18):
basically like fake dollars that they've created.
Speaker 2 (07:21):
And just to put some numbers on that for the audience,
we have the real problem is approximately three hundred trillion
dollars of US dollar denominated debt and only about one
hundred trillion dollars of dollars, right, and so we need
more dollars to pay off the dollar denominated debt. It's
going to demand the dollars to pay that off the
(07:41):
US dollars table coins. I can understand you saying that
because in order to get the stable coin you have.
Speaker 3 (07:45):
To have a dollar. You have to pledge a dollar
to get a dollar.
Speaker 2 (07:47):
Back, So it's somewhat of like a one for one,
if you will. The euro dollar market is not backed
by anything other than the confidence in the banking system overall.
Speaker 3 (07:58):
But I guess that's that's a whole other.
Speaker 2 (08:00):
Issue that we can get into. But you did speak
about the FED doing less treasury issue and how it's
gone down, and so the FED has been less involved,
but yet US treasuries are still being sold.
Speaker 1 (08:12):
Now.
Speaker 2 (08:12):
We do know that if you look at like central
banks net purchases, that they've been going up in golden
down in US treasuries, but it's almost like at the
same time the demand has stayed there. So it just seems,
like you said, it depends on how bad this like
system degrades, if you will, right, But it seems like
it's been holding pretty good.
Speaker 3 (08:35):
All things considered.
Speaker 1 (08:38):
Yeah, I would say it has been. But the main
reason's been holding together, you know, so to speak, is
because of actions behind the scenes that the central bankers
and the monetary authorities have been doing. So just like
what you described right there, right, the FED has been
tapering off their treasury supply right essentially doing QT. If
you actually look behind the hood or below the hood,
(09:00):
you see that all things aren't really equal in terms
of prior quantitative tightening cycles. The FED in this cycle
did not sell on net anything past ten years, meaning
you know, during the kiwi's run up, they bought a
ton of bills, they bought a ton of notes, they
bought a ton of bonds, ten year, twenty year, and
thirty year bonds. And then during the taper and I
(09:21):
have a chart for this and I can send it
to you if you want to display it on the
screen now, where when they started the taper everything past
ten years they actually did not sell. In fact, they
kept increasing their holdings of the ten year, twenty year
and thirty year bonds while they decreased their holdings of
bills and notes. And so this meant that on the surface,
while their overall size of their balance sheet continued to decrease,
(09:42):
the actual holdings of bonds remained high and continued to climb,
and so that meant that, in my opinion, right, the
Fed understood that they could not lay off this amount
of bonds without causing yields to completely blow out, and
so they did this intelligent you know, behind the scenes,
you'd call it STEALTHI liquidity, where while they were tapering,
(10:02):
they just ensured that they didn't sell any of the
long term bonds and in fact bought more to provide
support for the bond market. And the reason why this
is important, of course, is because of duration risk. Right,
banks can much more easily hedge against a short duration
bond than a long duration bond, just because a long
duration bond has much more interest rate risk than a
bill for example.
Speaker 3 (10:21):
Right, Yeah, I definitely saw that this week. We can
see some of the reports on that.
Speaker 2 (10:26):
Now that's the dilemma, that's sort of where we're at,
and we can just frame it up with the rock
of the hard place, right do we keep printing?
Speaker 3 (10:34):
Do we keep manipulating? If so, like how long can
that last?
Speaker 2 (10:37):
But maybe that leads us into the next big topic,
which is the tariffs that we have so far. A
couple of things that you mentioned. One was that, you know,
we had these insane tariffs, you know, one hundred and
forty five percent against China and then two hundred and
forty five percent against China and things like that, And
you mentioned I forget the exact word you use, but
you know, Trump backtracking or coming off of that, right.
(11:00):
A lot of the mainstream media headlines that you would
see or like he's caving or things like that. But
from an analyst perspective, I mean, did you ever think
it was realistic that, of course we're going to have
two and fift percent tariffs against China and that was
never going to come off, we'd never do trade with
him again. Or was it always that was going to
be sort of that negotiation point, the anchoring, if you will,
(11:21):
to allow us to come back off of that into
some negotiation.
Speaker 1 (11:25):
I think it was. I mean, I think it was.
It was basically like a retaliatory, almost like show of force. Right.
It was a chicken game, if you will have two
cars racing at each other, right, And Trump thought that
he held a much much stronger hand than he actually does.
Because again, the issue comes when you realize the implications
(11:47):
of Triffin's alma as well as obviously the results of it.
The implication is that we need to fend out dollars
on net to the global economy to fund basically global trade.
But the other implication, obviously is that we've shorter industrial base,
and so if you're going to impose massive terrorists in
the you know, desire to move us back to an
(12:08):
autarcic economy, basically an economy that's self sufficient, that doesn't
need to have maybe much import export, that can basically
provide everything that it that it needs just by itself.
It's going to take a lot of time to reshore
industrial bases, to retrain American workers, and then there's obviously
like the cost implications for high end manufacturing iPhones, consumer electronics, cars.
Speaker 3 (12:31):
Et cetera.
Speaker 1 (12:32):
And that you know, that transition period could definitely cause
a very severe recession. But even more importantly than that,
obviously it would cause an unwind of a lot of
these carry trade and pro liquidity effects that have taken
place with regards to this Tripan's dilemma that's been playing
out for the last thirty to fifty years. And so
that means that equity markets and bond markets are going
(12:52):
to fall, you know, substantially. And I don't think Trump
was ready for that amount of economic pain. And I'm
not saying that, you know, whether it's right or wrong
that we should move back towards a more self sufficient
and more reshort industrial economy, or if we should let
our manufacturers move overseas and basically ship away all of
our jobs. But there's always trade offs, right. This is
(13:15):
a world of nuanced there's never anything simple, and so
if you want to do that, that path you're going
to cause, you know, incur a lot of economic pain.
And so yeah, I think that two forty five percent
was just a almost like a bloviating show move, if
you will. That was just meant to scare people. But
in reality that that kind of thing would not hold
long term if you want to basically retain our global
(13:38):
monetary system as it is.
Speaker 2 (13:39):
And I don't think that was ever the plan, right,
I mean, obviously he wrote the book Art of the Deal,
which is anchoring, right, you go high, you set a low,
so it opens the door for negotiations.
Speaker 3 (13:48):
I think a couple of things in that as well
that I think.
Speaker 2 (13:51):
About is that you know, Stephen Moran, who's his economic
Trump's economic advisor, wrote a paper before Trump became president
and basically coined the term mar Alago Accords. And so
he sort of laid out this playbook that seems to
be sort of what the Trump administration is following down now,
this playbook into this mar A Lago Accords.
Speaker 3 (14:11):
Maybe not exactly.
Speaker 2 (14:12):
I think maybe he's moved more aggressively than was laid
out in the paper. But I think also in that
so the two hundred and forty five percent was much
more aggressive. There's been a lot of talk about this
potential game of chicken. I think as you called it,
I would agree with that. Forming like this game of chicken,
like who could go longer China or the US? Realistically,
(14:32):
neither of us could survive without each other. I mean
it'd be very rough if we did, right, And I thought, man,
I mean, China welded people in their frigging houses during
the pandemic, like they can go through a lot of pain,
Like the US isn't going to put up with that.
Right as of like yesterday and today, though, it looks
like China is like caving like super fast. Right, they
already switched to easing. They're like begging for a meeting.
(14:56):
It's looking like they want to deal pretty quickly. I
don't know if you've been paying attention to that.
Speaker 1 (15:01):
Yeah, no, and I'm not surprised that they do. You know,
while the CCP can maintain basically, like you know, monetary
and economic harsh conditions much longer than the US can,
it does not behoove them to do that at this
current juncture. Right, We've seen a Chinese economy for the
(15:22):
last two or three years that's been in basically recession
or complete contraction due to the real estate and banking
sectors starting to fall from their massive shadow real estate
bubble that's been imploding. We saw the you know, the
bankruptcy of Country Garden and Evergrand and several other large developers,
as well as defaults of major property developers all across
(15:45):
China and their failure to pay dollar bonds as well
as on shore yuan bonds, and so the Chinese economy
essentially has kind of reached this I think severe inflection
point where they now need to choose what they're going
to go forward with a path of deflation and let
their estate bubble basically burst in slow motion essentially like
two thousand and eight, or are they going to reflate
(16:05):
the bubble and print the yuan and let the UoN devalue.
And that's a difficult decision to make because either way,
obviously there's economic pain, but the winners and losers are
different in each scenario. Right, If you choose the deflationary path,
then obviously the equity holders and the bond holders are
going to get wiped out, but you might be able
(16:25):
to retain that yuan seven point three to the dollar
peg for a lot longer. And then if you go
the other way, obviously you're going to see a blood
in your currency. But on the plus side, the exports
become much more competitive, so China, and China has been
trying to show this strong face, right, this poker face.
But again, if you look at I mean even the
(16:46):
data like I was looking at this yesterday. Ever since
twenty twenty two, they've stopped publishing most of their economic
data publicly. If you look at youth unemployment, you look
at factory orders, you look at new homes and new
home leases in China, all the figures just won't be
reported anymore. By their version of the BLS and so
that tells me that things are pretty bad there right now.
(17:09):
They just don't want the US to know because obviously
that would weaken their hand.
Speaker 3 (17:13):
Yeah. Yeah, but it is a game of chicken.
Speaker 2 (17:16):
The way I see it is back to these mariologue
with chords was like obviously put pressure on China. And
I think there's even in the Biden administration with sort
of this stance on China trying to put them back.
Speaker 3 (17:27):
In their place.
Speaker 2 (17:27):
I think it's probably more from the intelligence community than
just the Biden or Trump administration. But you know, Biden
is the one that took away their ability to get
microchips for example, right advanced microchips, right to limit their
their technology, and then started the Chips Act to start
bringing on shore and some of that back.
Speaker 3 (17:43):
And when you think about that, it's terrorists are really about.
Speaker 2 (17:45):
Like more strategic moves, right. So it's like the US
doesn't need to make T shirts and sneakers here, like
we gave those jobs up a long time ago. But
it's like there are strategic things that we should be
doing here, like you know, rare earth elements having to
steal in copper so we could actually make things. So
I think there's like things that are strategic. It was
never about bringing all the jobs back. It's like, what
are the jobs that we need here, and let's just
(18:06):
bring those back. We don't need to grow mangoes or
coconuts like we can let other people do those things
as well. And that seems to be happening at a
pretty breakneck speed. As a matter of fact, if you
saw the latest GDP numbers that came out, right, we
had a negative print, but that was adjusted for what
a forty one percent increase surgeon imports. But when you
(18:29):
look at the investments that were going on in the US,
I mean, Trump announced eight trillion dollars of investments going
on in the United States, it looks like we're going
into some sort of like a reindustrialization that we haven't
seen since like the nineteen forties.
Speaker 1 (18:41):
Almost, Yeah, I mean, I would hope so, right, because again,
the negative effects, right, the knock on effects of the
offshoring of our industrial base are is pretty substantial. It's
you know, pretty sad to see as well. Like the
you know, in the rost belt States, one of the
leading causes for death now is opioid detention and depression
(19:03):
and basically economic malaise is now kind of common young
young men, especially in those areas. And so when you
destroy the ability of especially a large section of the
middle class to make money and to provide for themselves,
and you offshore that to foreign countries where they just
do it cheaper, and they still don't treat their workers
well obviously, right in Southeast Asia, that just demoralizes the people,
(19:27):
and it obviously impacts the local economies very very severely.
And so I think reindustrialization obviously should happen. But the
question is, of course, like you said, what things should
we bring back? And I think high technology things that
are critical to defense, you know, lithium, copper, cadmium, things
that are needed for battery and ev production obviously, but
(19:48):
like you said, agricultural products, certain consumer goods, we don't
necessarily need to produce those here. So I think it's
a balancing act.
Speaker 3 (19:55):
The problem with.
Speaker 1 (19:56):
The tariffs as they're constructed now is that tru you know,
came out guns blazing with this tariff policy, thinking that
essentially the US was invulnerable, and then very quickly saw
the market start to retrace. Right. We saw the twenty
year and the thirty year bond hit five percent within
like a week, and credit spread start to blow out
in early April, and that signaled him quickly that things
(20:19):
were not going to go as smoothly as he had hoped,
and so we started announcing basically exclusions. So he said, Okay,
we're going to apply terrorifts except for iPhone you know manufacturing,
and except for automotive manufacturers, and except for you know, X,
Y and Z industries that need to have their cheap
goods in order to produce cheap finish goods here in
(20:42):
the US. The issue with that is that.
Speaker 2 (20:45):
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Speaker 1 (21:28):
This excludes small businesses, right, so small businesses won't be
won't be able to benefit from those exemptions that the
large businesses are able to. And so that means that
small businesses, if these teriffs are held in place as
they're currently structured, the small businesses are going to be
damaged quite significantly by the terrafs. And you know, that's
(21:52):
where I think Trump needs to make some readjustments in
his overall tariff policy to make sure that small business
businesses and small business owners, especially small manufacturers and goods,
don't get walloped by these things.
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now part of the Marilogo Accords, and even the name
(22:59):
sort of spells it out Accords kind of echoing rhyming
the Plaza Accords of nineteen eighty five, very similar to also,
you know what was done probably in nineteen forty four.
So we have these periods of time, these historical moments
where the global monetary system sort of gets realigned. So
you know, obviously nineteen forty four Bretwood Agreement, the whole
world agreed nineteen eighty five, and those moments were like
(23:22):
really getting the world to sort of agree to peg
back to the US dollar to allow the US dollar
to devalue. And that appears to be the same sort
of goal of this these type of cords, the Marlago
coords is get in the US to sort of repeg
back to the US dollar and allow the dollar to
devalue as well. That's the way that it seems to
(23:44):
be right now. Part of that is realigning trade. So
if we can get about forty percent of global trade
to be aligned to the US dollar, we can keep
the US currency as sort of this like I think
he wants to keep it about sixty percent right now,
we're about fifty nine percent of global trade.
Speaker 3 (24:00):
Then we can allow the US to sort of have
this coordinated devaluation. That's what I'm picking up. What do
you think the ultimate goal of this is?
Speaker 1 (24:09):
No, I absolutely think that you're right on the money
with that. If you look at statements from you know,
a Cent even Lutnik right as well as that paper
that you mentioned which I've I've read excerpts from, they
do seem to be basically an agreement on weakening the
dollar substantially. And the weakening dollar thing is actually a
(24:30):
very intelligent strategy if you look at it from a
geopolitical standpoint. The way that the system is structured is
very counterintuitive, right, because again we most of us would
think that, especially goldbugs, would go out and claim that
a weaker dollar means that gold is going to rip,
the dollars is going to collapse, Dixie to thirty, and
Peter Shift will be vindicated in the end. Right, we
(24:51):
can all, we can all throw a party rit with
Mike Maloney and Peter Shiff in their warehouse. But if
you look at the fundamental reality again of how the
EU at all system works, of how the global monetary
system works, that's not the case. I wrote a paper
about this back in mid April. But every time that
we've seen a substantial weakening of the dollar, we actually
(25:11):
see redollarization. So that means, you know, if the dollar
becomes weaker and you're a foreign let's say you know,
you're a consumer goods manufacturer in Pakistan, U owe dollar
debt already via the euro dollar system. Right, if the
dollar becomes weaker against your domestic currency, you can now
borrow more dollars and that old debt that you have
is easier to pay off. So that means, on net,
(25:35):
the whole system actually starts to increase their borrowing of
US dollar and US denominated debt, and so that means
obviously that the system becomes even more reliant on the
dollar over time with a weaker comparatively weaker dollar, and
so de dollarization is not when the dollar's falling in
this case, that's redollarization, and a spike in the dollar
(25:56):
is actually the you know rush for liquidity that all
these corporate rits and countries and banks are doing in
order to fund their dollar debt. So a higher Dixie
is actually emblematic of a breakdown in the global monetary system,
not a lower one. And so that's why we saw
obviously a very high Dixie in the nineteen eighty five
Plaza Cords. That's why they had to devalue, because they
(26:17):
had to reset the global monetary system and allow enough
liquidity to flow out to settle all these dollar denominated debts.
And so, you know, Brent Johnson has been running about
this for a long time as well. Right, this this
lower dollar actually strengthens the milkshake and it extends the
lifetime of the you know, dollars dominance in the global
(26:37):
monetary system.
Speaker 2 (26:39):
Yeah, when you look at the dixie a dollar index
compared to a basket of other top currencies, we're nowhere
near the top where we were in the nineteen eighty
five Plaza cords. But I was just looking at a
chart of from the BIS of the US dollars relative strength.
So it's like an adjusted matrix and we're like a
but weal well above historical levels. So when you look
(27:01):
at it from that perspective, But even if you look
at from the Dixie, I mean, maybe a more historical
number might be eighty five or ninety I mean, which
if you look at it from that perspective, if you
think maybe the goal is to.
Speaker 3 (27:12):
Devalue the dollar, would it revert to the mean? What
is the mean?
Speaker 2 (27:16):
Is that eighty five or ninety? Is that a ten
to fifteen percent drop from here? And then what does
that mean? How do you think about that math or
that mechanic?
Speaker 1 (27:25):
Sure, yeah, you're right, you know what very long term
Dixie averages is eighty five, eighty seven, you know, up
to ninety. So a ten to fifteen percent drop from
here is basically bring us back to baseline. And like
I said, that means that you know that weaker dollar
will help to restabilize let's say the euro dollar market
(27:46):
and to provide liquidity for all these banks. But more importantly, obviously,
it will help these other countries who need to earn
dollars into you know, essentially hold those dollars as foreign
exchange reserves for future money crisis, like the like the
Japanese have been doing with their interventions, or even like
you know, the the BOE or the ECB may have
(28:08):
to do in the future to defend the euro or
the pound. And a higher dollar is basically restricting all
of those.
Speaker 3 (28:17):
All of those goals.
Speaker 1 (28:18):
Now, a week of dollar will impact obviously tourism for Americans.
They'll be harder for us to buy go a boat
and buy goods and services if we're if we're going
and traveling, But overall, it's a net benefit for the
global monetary system as it is.
Speaker 2 (28:34):
So that seems to be perfectly in line with this plan,
because what Trump wants is more manufacturing in the US,
less exports, and so if we have a week a dollar,
that's exactly what it does. It makes us more competitive
on our exports, and it makes it harder for people
to import into the United States exactly.
Speaker 1 (28:49):
And if you can switch, remember again they still need
to provide dollars. So if you can switch the dollar
funding line from just exports and trade for goods, which
is just you know, quid pro quote transaction where I
give you dollars and you give me a bunch of
Chinese electronics or Taiwani semiconductors. Right, if you switch that
from a you know, let's say, like trade based arrangement
(29:11):
to a financial arrangement where instead of saying, hey, I'm
going to be you know, giving a bunch of dollars
for your manufactured goods, I'm going to swap a bunch
of dollars for your you know, own currency reserves. That
allows that the system to reindustrialize, I guess much better
than it would if you were stuck on that first mode.
And so what they're trying to do is this kind
(29:32):
of game of geopolitical chess where they're trying to figure
out how to manage their supposed mandate of reshowing the
American industrial base and solving the problems that the populacets
have basically proclaimed to be plaguing America, as well as
working with the global monetary system as it works today, right,
not allowing a global monetary crisis to develop under their watch.
Speaker 2 (29:54):
Let's just say that switching the in total entire global
monetary system is not a smooth There's all types of
unintended consequences that will happen throughout that it can't be
a smooth process. We could certainly argue for and against
the case that Trump moved too fast or was too aggressive, but.
Speaker 3 (30:14):
I would say, like zooming out. I don't know if
maybe you retweeted.
Speaker 2 (30:17):
Or I saw somewhere online, but uh oh no, it
wasn't you with somebody else. But they're just saying, like
after Powell's announcement today that like he's a he's a legend.
Speaker 3 (30:25):
Like I mean, he.
Speaker 2 (30:26):
Seemingly might have pulled off a soft landing, which nobody
thought was possible. China's coming around to negotiation looks like
a deal with India's done.
Speaker 3 (30:36):
The dollar devalues a.
Speaker 2 (30:37):
Little bit, the world gets what they want, we bring
some manufacturing back to the US. I mean, I kind
of see a path here with unintended consequences all throughout.
I'm just kind of bullish. What's your view?
Speaker 1 (30:54):
Yeah, I would, I would broadly, you know, agree with
that statement, although I would give some right so obviously,
you know, after that first kind of you know, Mayhem
with Liberation Day slash liquidation Day and the credits bed
flowing out and spy falling, as well as nick Ay
and DAX index falling substantially in early April. They've they've
(31:17):
been able to reshuffle their their chestboard and make the
best moves that they can given the circumstances. The issue,
you know, comes when you start to like visualize the
long term problems that are still plaguing in the US. Right.
Although we can again restructure some things within the global
monetary system like resource some industrial manufacturing, or provide liquidity
(31:39):
via dollar swap lines to these other central banks and
then weaken the dollars substantially like we did in the
positive courts in nineteen eighty five, the long term problems
of the debt and the deficit are not solved. And
even given Elon Musk Doge Project and you know, substantial
pushes from Republicans and a few Democrats to reduce the
(32:00):
deficits meaningfully, nothing has really been done. And the actual,
you know, put, the actual accomplishment of that goal is
much much more difficult than most people realize, right because
there's so many vested interests that have basically money being
that's being made from the government deficits, and so we
(32:21):
don't solve the debt problem. Even with rates here, we
don't solve the deficit problem. We don't solve the eventual
need for QI or for finding some other source of funding.
And even if the FED continues to do their sealth
qui by you know, shifting issue INCE or the treasure,
that can do the same thing, right, the treasure can
shift issue INCE from the long end to the short
end and essentially provide quasi self liquidity via that mechanism.
(32:43):
Nothing fundamentally has been solved about the thirty seven trillion
dollar debt and the one trillion plus of interest six
months we have every single year. And so that's the
issue that I still see hurting the United States.
Speaker 3 (32:54):
Yeah, then ain't being solved. There ain't no solution for that.
Speaker 2 (32:59):
I mean, there's a there's a small chance potentially through
some high inflation for a couple of years, like Luke
Grama talks about, maybe through super you know, double digit
inflation for three four years, we can bring the ratio
of debt down potentially and if you know, some miracle
with efficiency gains through AI through Trump repealing, you know,
twenty thirty percent of the regulations and unleashing the American economy.
(33:22):
Maybe we can make a dent and growing out of
it a little bit. I don't see us making a
lot of ground on that. So that's just kind of
like is what it is, is like the it's like
the modern medical system, like we'll just treat the symptom.
Speaker 3 (33:30):
We can't really cure it.
Speaker 2 (33:32):
We let's just manage the sickness kind of a thing.
So in that frame, which we're both sort of agreen,
then really it comes down to the rate of degradation,
like how how bad does it get in how fast?
But the direction that we're going is pretty set, so
we have to think about then how do we protect ourselves?
Speaker 3 (33:51):
Or I like to think abou how do we make
money through this?
Speaker 2 (33:53):
Right?
Speaker 3 (33:54):
I know you like to talk about gold and bitcoin,
as do I.
Speaker 2 (33:58):
Two assets that are sort of not only outside of
that financial system, but out of outside of any country
as well, maybe as lifeboats. How do you look at
them in regards to the mechanics of this debt bubble
that we're in.
Speaker 1 (34:14):
Sure, so I've written several pieces about gold and bitcoin
and their correlation to global liquidity, and Michael Howells also
touched on this as well. There are several other macro
analysts you can check out, but essentially, what I found
is that gold has been a pretty prescient front runner
of global liquidity waves by about twelve to eighteen months,
(34:35):
and bitcoin has been unfortunately the laggard, but obviously a
much more extreme and you know, volatile laggard in the
in the sense that if gold will go up, you know,
let's say ten to twenty percent, bitcoin can go up
sixty percent seventy percent, just because of the nature of
its electronic means of payment as well as obviously smaller
market cap. But gold and bitcoin have worked to you know,
(34:59):
hedge against debase, against inflation for decades. And of course
gold has been theorized to be suppressed, and I think
that there are there's credence to that claim. That's been
suppressed by central banks and by bullion banks for the
last twenty thirty years. But that suppression is finally coming
to an end. And the reason why it's coming to
an end is something I talked about in a podcast
in March as well as a written piece in February.
(35:20):
But what I essentially was getting at was if you
look at the comax and the physical orders and the
physical deliveries that are now being made. It's starting to
reach epic proportions, right even rivaling what we saw during
twenty twenty in March during the COVID nineteen shutdown and
the massive withdrawal of liquidity from the global banking system.
(35:40):
So the question now becomes, right, who is doing this,
Who's drawing this liquidity, and who's drawing this physical gold
out of the system, and who is trying to front
run at what they view, in my opinion as a
new global liquidity wave. And I think that is mainly
the Chinese and now the Americans. If you look at
(36:01):
the physical gold orders from Shanghai, from the Shanghai Gold Exchange,
they've been very very consistently showing an increased appetite for
gold ever since twenty twenty two, and especially a delta
in the difference between the Shanghai physical gold rate, which
is their cash basically like their spot market for physical
gold and the COMEX. You see like a fifty sixty
(36:23):
to seventy dollars delta open up at sometimes, and so
that allows traders to arbitrage the trade between those two nations,
and so that was responsible for the first leg of
gold appreciation from let's say twenty twenty two to late
twenty twenty three mid twenty twenty four, and that shifted
obviously once especially once Trump took office, we saw a
(36:45):
massive amount of gold deliveries and what I believe to
be a rush of physical redemptions for Fort Knox. Now,
again this isn't confirmed because the government won't release this data.
But according to stone X, which is one of the
exchanges in the LBMA and one of the market makers
(37:07):
that settles physical gold trades, they found that there was
around you know, seven hundred tons of physical gold that
was shipped from London to the United States in the
two months of January and February of this year. Now,
the official import numbers are for thirteen hundred tons, so
that means that, you know, if we shipped in seven
(37:29):
if they declared seven hundred tons shipped to the COMEX
and then there was thirteen hundred tons total, where's that
other eight hundred tons going? And a move of that size,
obviously is in two months what the US would normally
import in a year or two years, and so it's
a huge move and the only type of gold that
doesn't have to get outright claimed on our import export
(37:53):
numbers is what's called monetary gold. So this is gold
in four hundred ounce bars. And so that monetary gold
would only really be going to one place, and that's
Fort Knox. And so again you just use the equals
be A plus equal C. Rationalization is that the US
is now starting to I guess you could call it
reshore or call in its gold reserves and basically called
(38:16):
a bluff on the l B m A and on
the Bank of England on their paper gold certificates that
they've that they've sent out. And so that's why the
lease rates in London exploded in January and February. That's
why we saw massive gold backlogs, redemption backlogs at the
Bank of England. And that's probably why they don't want
to do the audit just yet. Even though Elon Musk
and Trump have talked about auditing the gold reserves at
(38:38):
Fort Knox. It's because they're still waiting to refill all
of the empty vaults with with physical gold because right
now what they have is mostly IOUs in there.
Speaker 3 (38:49):
It's an interesting theory. We'll see how that shakes out.
I did a video talking about this number one. Obviously,
that talk got.
Speaker 2 (38:55):
Really big about why don't we audit it? Which seems
so simple, like why don't we audit it?
Speaker 3 (39:00):
And they're like, of course we audit it happens all
the time. This is not public, so I don't know.
We'll see about that.
Speaker 2 (39:07):
But I also talked about in a video that potentially,
potentially what if we found out there was more gold
than Fort Knox, then that could be equally as bad,
if not even worse, because.
Speaker 1 (39:21):
Why did you say that?
Speaker 2 (39:22):
I would say it'd be worse because what if we
had more gold in Fort Knox than we thought we had?
Speaker 3 (39:26):
So then why would the US be buying more gold?
Speaker 2 (39:28):
They're preparing for some sort of currency collapse that they're
trying to shore up.
Speaker 3 (39:32):
What do they know that we don't know? Should we
be shoring up our currency? Right?
Speaker 2 (39:36):
I would I would think it would signal a weaker standpoint.
I think the US could argue why it doesn't have gold.
I mean Canada has no gold, right, Like the US
could argue getting rid of some of the gold, oh
we have it on loan whatever, But having more gold
almost seems like it could be worse. Like if the
US thinks their currency is going to collapse, they're buying
more gold. Maybe we should so I thought that was
an interesting caveat, but yeah, we don't really know.
Speaker 3 (40:00):
I do. I did see last night breaking news.
Speaker 2 (40:02):
I haven't been able to find out if it's true
or not, so I didn't want to talk about it publicly.
But you probably had seen it, talk of China and
Saudi opening up a gold settled oil window.
Speaker 3 (40:17):
I don't know if you saw that last night yesterday.
Speaker 1 (40:19):
No, I didn't.
Speaker 2 (40:20):
So that's that's big news. I haven't been able to
really verify that. I've seen it from from a few
people talking about it. But yeah, potentially having you know,
gold and oil settled by China and Saudi Arabia could
be a pretty big deal.
Speaker 3 (40:36):
What about the bitcoin piece?
Speaker 1 (40:39):
Sure, so bitcoin right has been trading as this. I
guess you'd call it like levered proxy for global liquidity
for the last let's say three four years, and really,
you know, this is not new or just unique to
just bitcoin. Again, gold trades, although at a at a
different timescale, meaning like like I said, gold will front
(41:00):
run the liquidity waves and the contractions and the sp
FIE hundred and QQQ also are very very close in
their correlations to global liquidity. If you stack a chart
of global money supply or global central bank balance sheets
minus obviously the TGA and the reverse repo window, and
then you compare that to the SPY, is like a
(41:21):
zero point eight eight correlation, which in finance, of course
is extremely strong. So it's not just obviously Bitcoin that's
been sensitive to global liquidity. It's literally every single financial asset,
especially in the US. But Bitcoin has been trading this
kind of like quasi range here and between seventy and
ninety for the last few months, and I think that
(41:44):
that's indicative of where we are in the global liquidity cycle. Right.
The FED began their taper just a few years ago,
and they've continued their taper, albeit at a slower rate,
and then we've found out, like I said earlier, that
they've been really just tapering the short bonds, not anything
past ten years, which means that on net, the liquidity
drain on the system isn't as bad. And now they're
venture this area where they're kind of in a limbo, right,
(42:07):
just like with other cycles, they aren't set on cutting
the rates to zero yet, and they aren't set on
doing Q yet, but they also aren't telegraphing that they're
going to hike rates anytime soon or keep them here
for the next three or four years. There is a
plan to slowly reduce interest rates. So because of that,
Bitcoin has been also in limbo as well. Because global
liquidity is kind of in this doll drums, Bitcoin's been
(42:30):
in these doll drums as well, and we probably won't
see a breakout above one hundred and twenty K until
we see major easing by at least one of the
large global central banks.
Speaker 2 (42:40):
Well, you mentioned Michael Holley yesterday, I'm on his newsletter.
Nice you mentioned how earlier yesterday on his newsletter he
put out that global equity hit a new record all
time high and it's been on the uptrend, and he
said that he actually changed his forecast.
Speaker 3 (42:57):
He thought that global equity would peek out Q four.
Speaker 2 (42:59):
Twenty two, twenty five because it runs on these you know,
five year cycles, he calls it. But now, because of
what's happening with with the major central banks, he thinks
it's going to go well into twenty twenty six. So
we have seen global equity taking off quite a bit.
Just seems like the US hasn't quite jumped on board
with it.
Speaker 1 (43:17):
Maybe sure, but even that still you know, that still
doesn't take them to count the lack right like we like,
if you've seen the chart of the global M two
and bitcoin three months still lags by. Yeah, it's still
lags by quite a few months. And of course we
said bitcoin is you know, sense of for global equidity.
But there's obviously a lot of caveats, right, there's, uh,
(43:38):
the the moment to moment reshuffling of debt, there's the
the refinancing of the treasury bonds. There's the tariff wars, right,
and what what banks and corporations are going to do
with regards to you know, their currency reserves in the
in those cases. So it's not a simple picture, right.
That's why when people ask me, like, what's the fund
(43:59):
of mental benchmark global liquidity? What is it? Like, tell
me one number, it's very difficult to caulle It's not
one because there's so many.
Speaker 3 (44:05):
Yeah, it's not one number one numbers of all.
Speaker 1 (44:07):
Yeah, but it's also it's like if they change the SLR,
for example, and exempt treasuries from being in the leverage ratio,
that would change how liquidity is flows throughout the system.
But it wouldn't come up on any screen. You wouldn't
see the number of Michael Howell's calculation change. That would
just be a regulatory change, right. And so those kinds
(44:29):
of like I guess, esoteric or abstract impacts are are
hard to quantify and hard to parse out. So and again,
remember this is a it's a strong correlation, it's not
a perfect correlation. Doesn't mean that tick for tick, where
global liquidity goes, bitcoin goes that single day. There's still
obviously a market.
Speaker 2 (44:45):
For I like Michael Howell's model. I like the Bitcoin
layers model. I think Real Vision has a good model.
Those are the kind of the three that I look at,
and they're all kind of tracking pretty similar. I want
to wrap this up, and so let's just let me
let me throw you an easy one here. Dig into
your crystal ball, but polish that thing up and I'm
gonna lay give you a layup here though, But do
(45:07):
you think we end twenty twenty five.
Speaker 1 (45:09):
Higher than we are now in the bitcoin price?
Speaker 2 (45:14):
And let's just say markets overall.
Speaker 1 (45:17):
Yeahcoin, yes, all three, Yes to all three. And again
the reason why is because the fundamental factors that are
pushing all three higher. Haven't changed, right, We're still looking
at you know, potentially, like you said, higher global liquidity.
And then in the coming few years, and especially by
(45:37):
the end of the year, we're still seeing the carry
trade impacts and the dollar recycling impacts of Triffon's dilemma,
pushing US dollars back into US equity markets. And you know,
debasement is still inevitable given the current US debt levels
and the fiscal situation. So because of those three reasons,
I don't see any any strong argument as to why
(45:58):
at least you know, or even one of those three
should be lower. I think all three are going to
be higher, substantially so. And I think gold, especially like
I said, it's telling of more inflation coming in the
future in twelve to eighteen months, just because it's been
such a good predictor in the past of coming inflation waves.
Speaker 3 (46:17):
Yeah. Perfect, all right, I'm going to wrap it up
with that. Thanks for joining.
Speaker 2 (46:23):
You really laid that whole whole sort of global chessboard
out very well, and I agree with you on the
sort of inevitability of where we're at, at least for
the foreseeing future. Here, I want to link down in
the show notes down below. You have your was it
a dollar in game? Your newsletter that you're right, which
is great yep, so linked that down below, and your
Twitter handle anything else that you want to call out
for everybody to go check out.
Speaker 1 (46:44):
I have a YouTube channel as well. I talk about markets,
talk about gold, bitcoin, commodities, equities obviously, so that's just
at Peruvium Bowl, so you can check that out as well.
Speaker 3 (46:53):
Yep, we'll link to that down below.
Speaker 1 (46:55):
Thanks for jumping on, Sweet, Thanks for having me
Host
Mark Moss
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