Luke Gromen: Why the CIA Doesn’t Want You Owning Gold, & Is Fort Knox Lying About Our Gold Reserve?

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So it's amazing to me to watch countries spending, a bunch of countries, spending so much effort, money on gold at a moment where technology dominates the conversation and crypto and AI are the future. And gold is the oldest and most primitive medium of exchange.
I mean, cultures have been using gold around the world,

every culture around the world for at least 6,000 years

as a store of value, and they still are.

Why?

Because it's worked. It is when things get spicy, gold has a 6,000-year track record.
And I think store of value, your point store of value is really critical, right? Because currency has medium exchange, unit of account, store of value. Those are the three functions of money.
And we have moved on from gold as a unit of account. We don't, our bank accounts aren't denominated in gold.
We moved on from gold. I'm not walking around with gold coins in my pocket.
Unfortunately.

But it has always retained that store of value component of money and, and critically, at the highest levels of finance. the global central banks who are running our currency and monetary system,

as much as we have moved away from gold and those other functions,

as much as we've moved to fiat currency, as much as technology has developed,

as much as we have moved away from gold and those other functions, as much as we've moved to fiat currency, as much as technology's developed, as much as our economies have developed, they have always continued to hold their gold. And in the last 10, 11 years, I think one of the big origin stories of macroeconomics as they have developed over the past 10 years has been the fact that global central banks on net in 2014 stopped growing their holdings of treasury bonds so global central banks have not bought a treasury bond on net in fact they've sold about 300 billion dollars worth u.s treasury u.s treasury since 2014 in their, they're called FX reserves, which is basically their piggy bank.

And they've bought about $600 billion worth of gold.

That doesn't, I mean, okay, that doesn't make any sense at all.

In an era of biotech and nanotechnology and AI and, you know, everything is abstract and digital.

Everything is technology.

Why would gold, which doesn't have, like, great inherent, like, value, what is gold actually worth? Like what, you can't eat it. You can't eat your house with it.
Why the stranglehold on human beings from gold? And why did it emerge in these separate cultures? We know from the archaeological record on separate continents had no contact with each other. At roughly the same time, they all decided that gold was the most valuable thing.
Like, what is that? There is a mystery at the heart of gold, no? Yeah, I think it ultimately evolved to that because it isn't used for anything, right? So, there's something called stock-to-flow in commodities, if you analyze commodities. And stock-to-flow is just what is the stock of inventory of that commodity and what is the flow? How much of it do you use a year? And the lower the stock-to-flow ratio, the more it is a commodity.
And the higher stock-to-flow ratio, the more it is like money. And so, for example, oil has a stock-to-flow ratio.
When Now, oil inventories are globally a really high stock to flow of oil might be 1.2.

When they're low, they might be 1.1. If they get below 1.1, you're going to know because you're going to see prices skyrocketing at the pump.
Very low stock-to-flow. Wheat, copper, similar types of low stock-to-flows.
Silver is, I don't know, as of a few years ago, around 30 to 1, right? Because silver is both a monetary metal and an industrial metal. Gold is 60 to 1 or more.
And so I think ultimately, I don't know that these ancient cultures were thinking about gold in terms of stock to flow. But I think ultimately what they were looking at is stock to flow means it keeps well, right? You can put gold in, it's the most money-like commodity there is.
And that's why I think independently around the world, all these cultures, excuse me, arrived at gold as the savings store of value par excellence. that's so interesting so you I said, well, how weird that gold would be, you know, the most enduring store of value because you can't eat it or heat your house with it.
And you're saying that's why it's the most enduring. It's precisely why.
I mean, it's easily divisible, right? Even in old days, using old technology, thousands of years ago, you could divide into very small amounts. It doesn't rust.
And so there were obviously in the old days in particular very practical applications. You store a bunch of your wealth in wheat, and it gets mold, and it's all gone, right? Oil, you have a spill, it's all gone.
The gold, it's much more portable. It's divisible.
It's malleable. It doesn't rust.
So there's, I think, some practical things. But I think ultimately, it's the most money-like thing with those physical aspects.
And it has always been for all recorded history. I do think there's something at the core there that I don't understand.
But it's just demonstrable. It's just true.
It's true. And it endures even in this hyper-technical age.
I would say one more thing about gold that I find fascinating is that it is the most private of all currencies. So the great lie of my lifetime is that crypto was going to be private and was going to free us from surveillance and control.
And that is just not proven true. And no one's really tried hard to make it true, which tells you a lot about how much people lie and what the real agenda is, which is control.
But gold can actually be moved around privately and stored privately. I mean, there's not a digital record of gold.
And that leads to my question, which is like, what the hell is going on with gold flows around the world? Gold physically moving from one country to another. Why isn't that transparent? This is public money.
The reserves of different countries is owned by the public of those countries. And there's no sort of transparent record of it.
Am I missing something? The transparency varies, right? So in the end, it isn't very transparent. That's very attractive.
How can a country move its part of its gold reserve to another country without telling its population? And the funny thing is – No, but like is that outrageous or am I just missing something? Well, they would say, well, we tell you. You just have to pay very close attention, right? So you can look in the U.K.
trade statistics. They show you how much gold is leaving London.
They don't want to advertise that, but there are times- Do they tell you where it's going and why? The Swiss data are very, very good. They show you- The Swiss data, right.
Wow. Swiss data are always good.
The Swiss are very precise. So you have an idea, but again, when I say it's transparent or not, those data, as long as it is what they classify as non-monetary gold,

according to IMF shipping classifications, we'll call them, however they, you know, industrial classifications, non-monetary gold gets recorded. Monetary gold, to your point, doesn't have to be declared as it moves, is how I understand the rules.
And so when you see the monetary gold movements, there is still very much an element of secrecy and non-transparency.

And yes, some of that is the public's money and it's not being disclosed why it's moving and how much exactly.

It's almost like being in the movie Jaws, right?

Where early on, you know, there's a shark out there, and you see the impact of the shark, and every now and then you'll get a glimpse of it, but you don't really fully see the shark very often. Whenever you have secrecy, you have deception and fraud, period.
Generally, that's true. That's the purpose of it, I would argue.
Privacy being different from secrecy. But something that should be disclosed that's not is not disclosed for a reason.
And so when you have huge movements, you tell me if I'm overstating this, but there are now big movements of gold between countries right now, correct? Correct. And we're not exactly sure why.
Correct. And we don't really know the volume as you just said and so someone's getting rich and someone's getting poor but none of this is public like i i smell scam afoot you know it's one of these things where gold has long been the competitor to the dollar system.

And once you start getting into competitors to government currencies, which are, as you noted, the method, a very effective method of control, right? This is why we use dollar sanctions, why we've been using dollar sanctions. That quickly gets into the reason for, I think, at least some of the reason for the secrecy around gold as it relates to governments, which is, number one, as Greenspan said, the only currency that's better than the dollar is gold.
And it's been that way for a long time. And he said that in 2013 or 2014.
And so that, number one, is there's a perception, right, where if you're trying to be a manager of the dollar, as the US government is, that is a perception you are trying to manage. And so I think there's some element of that.
I think there are other countries that have been, for example, the Chinese have been buying lots of gold. They have long said, you can find it in WikiLeaks documents from 2009, that China's buying gold to kill two birds with one stone.
It's number one, it will build up and help internationalize the Renminbi over time and also the americans and the europeans they specifically said have historically tried to prevent gold from rising too much in order to increase the prestige and the attractiveness of their own currencies and so we're buying gold for that reason so you get into this gold is very much a geopolitical metal because when you think of it in those terms, if you're China and you're buying lots and lots of gold, as China has done at times over the last 15 years after the great financial crisis, let's be clear. That can be construed in certain circles in Washington and in Brussels and in London as a tax on those nations' currencies.
And so it is in the interest of nations that might want to diversify from the dollar, from the euro reserves, in which FX reserves are primarily denominated. It behooves those nations to have a level of secrecy around it as well.
So it's that element of trying to manage currency systems from two opposite sides of the coin.

Okay, so let me, this is directly to your point.

This is the Google result if you type in which countries own the most gold.

Who's got the biggest gold reserves in the United States? Have you seen this list? I have. I'm reading this to you because it's just so clearly bullshit.
It's so clearly not true. So this is in order, the countries with the largest gold reserves.
U.S. won.
Okay. Number two, Germany.
Number three, Italy. Italy.
Okay. It's got an economy like the size of Ohio.
france russia china uh switzerland japan india netherlands you're telling me that china is one two three four five is number six and india's number nine that's a lie that's just a flat-out lie like that is not the actual ranking that's not there and there is no you're telling me france has bigger gold reserves than china and this is why when i say it's a political and a geopolitical metal right because those are those are the official monetary reserves chinese have been bringing in thousand plus tons of gold every year have been the indians have been stockpiling gold for thousands of years i mean to their great credit i'm not criticizing oh yeah yeah the chart of gold in indian rupees looks like apple in dollars it's up and to the right forever so i guess the only point i'm making again and again and again is at the heart of this incredibly important phenomenon the movement of gold around the world is a lie like there's like we don't actually know what the state of play is. There's not great clarity.
No. Not great clarity.
Right. There's massive lying.
And again, whenever there's massive lying, there's going to be massive fraud. And there's a reason for it, right? There's always a real reason why that is.
Why, you know, for that clarity. So Fort Knox is one of the places, the physical places in the United States where we're told our gold is stored.
Half maybe, supposedly, of our reserves or some big time. Yeah, I want to say, yeah, there's some there.
There's some in Denver. There's some at West Point.
Right, right. Spread around.
But Fort Knox is the famous one. Yep.
And, you know, members of Congress, almost all of them with the last name Paul, have been calling for an audit of Fort Knox for, I mean, just decades. And if you really press, it doesn't look like Fort Knox has been actually audited for close to 100 years since the 30s.
I think that's right. I'm going to stand open to correction.
They said it was audited in the 70s, but it wasn't actually audited. It was like some of it was audited.
Why is it so hard with a federal workforce, including contractors, like 10 million people, to just go through the contents of the vaults and weigh them and make sure that they're not gold-plated titanium and make sure they're all there and then figure out who owns them like why is that so hard we're told oh that's too complicated really no i don't think it's anything to do to your point it's not complicated at all um i think it comes down to policy and that gold is a geopolitical metal. And if you go back to, again, declassified documents of conversations and memos around a lot in the 70s, and you'll see some familiar names there, Volcker, Kissinger, Weintraub, some of those types of names.
the U.S. in the 60s was losing a lot of gold, right?

The system was essentially dollar is pegged to gold, $35 an ounce. Everything else is tamed to the dollar.
And it started becoming clear as we got deeper and deeper in Vietnam and guns and butter with LBJ that we didn't have the gold to cover our debt offshore at $35 an ounce. And were countries trying to redeem their wealth? They were.
Yeah, we went from, I want to say after World War II, we had 18,000 tons of gold, official gold. And by the time we got to call it 71, we were down to the 8,100 we have today.
And that's where- No way. So we shipped out about 10,000 tons of gold to satisfy these deficits.
Actual physical gold. Oh, absolutely.
Like, here are my dollars, send me my bars. If I recall the story correctly, the French sent warships into New York to pick it up.
Oh, yeah. No way.
Oh, yeah. And we were sending, if I recall correctly, we were sending an airplane a month to Riyadh with bullion to settle gold deficits as we had agreed to.
By the way, Saudi, one of the richest countries per capita in the world, is not even in the top 10 for gold holding.

Saudi owns so much gold.

It's just not on the official list.

Sorry.

I'm just, again, I'm making the same point again, which is the numbers are lies.

Right.

So, but, and I think the reason why the numbers are lies is when you, or why there's not great clarity, right? Why they manage the optics in the way they're clearly managing the optics is you can go back. Once we closed the gold window in 71, Nixon said, hey, no more gold.
The dollar is now free-floating. You can read from these declassified documents that the U.S.
very much had an interest in getting gold out of the system. We didn't want – because there was one of the declassified documents in question.
There is – there was a proposal that was afoot in 73, 74 by the Europeans to revalue their gold to settle oil deficits, right? Because Europe doesn't have a whole lot of oil. They were importing a bunch of oil.
Oil had gone up a bunch in price, so they had a bunch of oil deficits. They were looking to basically revalue gold and then settle deficits with OPEC in gold.
And the Americans in question, excuse me, Kissinger, Weintraub, Volcker said, this isn't in our interest't our interest this is not we want we want the Saudis not getting gold we want them getting treasury bonds and so right the famous Bill Simon deal and so I think I think I can't believe they took that deal yeah I think it might have been a gold or the lead type of deal at that point in time um you know we'll give you not you take the gold or you take the lead. And the gold is we'll provide you protection.
We'll provide you weapons. We'll let you access to our markets.
And if you don't do it, we're going to regime change you. And oh, by the way, we'll give you maybe a sweetener on your – I think it's very possible they were getting higher than market interest rates on the treasury bonds for decades as part of that deal.
Who knows? What do you mean, who knows?

It's not something that's ever been disclosed. Well, how can we give countries specific interest rates on treasuries?

I think I have heard credible rumblings from people that were around then

that part of that deal may have been, not just countries, just Saudi,

may have gotten a sweeter deal than other countries.

But how can that not be disclosed?

Thank you. that part of that deal may have been, not just countries, just Saudi, may have gotten a sweeter deal than other countries.
But how can that not be disclosed? That's how you get a $10,000 wrench at the Department of Defense. Wrenches don't cost $10,000.
It's right. You move stuff around a little.
This is why they're always encouraging us to get mad at each other about race and the tranny stuff. You know what I mean? It because the big things are just not even not even well like you know in fairness i i think you know it's always about power and control right this is about control of the system this is the dollar system clearly 71 was a default in the gold and so we were trying to sort of get around this and so i think sort of the original sin or again the original origin story of the refusal of wanting to even talk about what is an audit, what is, is, as it relates to audits of Fort Knox is, once we close that gold window, I think that generation of leadership, 70s, 80s, didn't want to talk about gold.
And going into audit it brings gold back up and brings it back up that, hey, we defaulted on our gold clauses. Twice in the past 80 years, by the way, FDR defaulted on gold clauses to the domestic Americans.
So I think the original origin story was about this reticence about is the gold there? Has it been audited? What is an audit? Has it been fully audited? Has it been fully assayed? All of the things you would think are pretty easy to do. I think go back to that policy of petrodollar.
We don't want gold back in the system. The Europeans do.
We don't. This is the deal.
We threw our weight around in the 70s. And sending people into Fort Knox to show them we have the gold doesn't help us remove gold from the system.
And ultimately, why do we want to remove gold from the system? Control. And it's easier to run deficits without tears.
Sure, because gold is an anchor in reality. Correct.
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That's 1-800-780-8888. What's so interesting, boy, you're teaching me a lot.
Thank you. they don't want to talk about gold when they haven't since the default of 71, which is never described, by the way, as a default.
And it was. Well, of course, right.
You're not making good on your promise. Of course, it's a default.
And they don't want to talk about gold. The U.S.
government doesn't want to talk about gold. Ever since then, which is my whole lifetime, people who are interested in gold have been derided as, quote, gold bugs.
And it just occurred to me, it's one of those phrases that's so devastatingly effective. You're a nutcase.
You're buggy. You're crazy.
Bug house. Mental patient.
And it reminds me so much of the term conspiracy theorist. So CIA, possibly with the help of a foreign government, murders the president of the United States.
And it's super obvious that that happened in 1963, and nobody believes the Warren Commission, and it's like it doesn't make any sense, actually. And so they start calling anyone who raises questions about it a conspiracy theorist.
And that was a phrase that was devised by the intel community to discredit people who asked uncomfortable questions. And you sort of have to wonder if the phrase gold bug, this is just occurring to me now, isn't a species of that, right? It's entirely possible.
Shut up, gold bug. It's entirely possible.
Even to this day, people who, and I know some of them, who are interested in gold and sort of follow its global movements and buy gold, physical gold, non-abstract gold, they're embarrassed of it.

Oh, yeah. I mean, there's like a social sanction to even talking about gold.
Oh, it's fascinating. I've been working in investment research for 30 years and at high levels at major institutions around the U.S., around the world, doing investment research for major money managers.
And it's fascinating what you say because there is always, not amongst all of them, but amongst a lot of investment professionals, they watch gold. They watch it more than you would think, more than the average American would think.
They own it. But there is that stigma where it's sort of you know you know hey you see gold you know it's it's it is there is there is a stigma is too strong a word but there's a kind of a little bit I was with one of the richest people in the world the other day a very famous investor I'm sure you know I'm a wonderful guy and somebody said to me you know he buys gold and I said to him off camera do you buy gold and he's like yeah among you know among other things sure i said do you buy a lot of gold yeah buy a lot of gold but he clearly just didn't want it it's even even to someone you know open minded brilliant person it's not something that people talk about in public it's almost like admitting you have some kind of weird fetish or something it and i dress up in a chicken.
I don't want to talk about it. You know what I mean? Well, and it's fascinating, right? Because it is, I think it goes back to that original point of why those movements are shrouded in secrecy, which is gold on some level is a hedge or an insurance policy against the existing system as it has been allowed to evolve over the last 50 years.
And so once you get to a certain level of wealth, power, influence within that system, you clearly understand the Achilles heels and the risks and how that system will at some point, mathematically, certainly, it could be next week, it could be 50 years from now, will at some point need to be reset in some fashion. You understand that.
And it is not in your interest, socially, financially, et cetera, to advocate or advertise that you are hedging or insuring against the collapse of that system. No, right.
Or the restructuring of that system. No, I mean, no, you make a great point.
And I shouldn't, thank you for saying that. Because it's not just yet another Intel community-inspired conspiracy, though it is that, obviously.
But it's also, it is in some sense like almost unpatriotic to say, you know, I'm land or whatever about physical assets because what you're saying is I don't believe in the system of the U.S. government.
Well, which is horribly ironic because if you go back to 1948, Warren Buffett, famous investor, poo-poo's gold every chance he has.

I understand.

And his father, Congressman Howard Buffett from the state of Nebraska, wrote a missive.

You can still find it online saying gold convertibility is essential to human freedom. In which on the first page, he says, look, the first thing autocrats and evil empires that we just got done fighting, right? This is 1948.
First thing they did when they got to power was remove the convertibility of their currency to gold. So it's ironic.
It's always ironic to me. People say, well, you own gold.
You're anti-American. I said, there's nothing more American than gold.
People say, well, what does gold do? It's useless. I said, no, no.
Gold, the very use of gold is that as long as you can convert your currency into gold, you are still a free person.

When you can no longer do that, your vote really doesn't matter because they control the currency, right?

It's the famous statement.

Give me control of a nation's currency.

I care not who makes its laws.

The Warren Buffett thing, man, that's like, I mean, right.

He's famously mocking gold buyers, right?

Of course.

I would say Warren Buffett, you know, so much to admire there and be impressed by, and I am and all that. But he's a political player, among many other things.
He's a very powerful political player, and in particularly for the banks. Think about who they go to.
Of course. 1989 or 6 with Solomon, who is a big player in the 98 long-term capital bank rescues.
Buffett. Buffett.
Yeah, and Buffett has lots of great investors out there. Warren Buffett is near the top of that list, of course.
And he's a legendary investor, of course. Of course.
However, massive propaganda around Warren Buffett. Of all the investors in the world, who's received more slavishly, sort of ass-kissingly positive press than Warren Buffett? Like, there's never been a bad word.
You're not a Latin. He's like the Oprah.
It's the offshocks. Yeah, it's the offshocks.
But no one has been promoted more aggressively by the American media than Warren Buffett. I think that's fair.
And it's, you know, it's interesting because it's. But he's a hard asset guy.
He's absolutely a hard asset guy. He literally bought Borsheim's jewelry store.
which sells gold. He bought railroads, right? Exactly.
Railroads. Omaha Steaks.
And this is a guy whose whole philosophy is about buying physical things. Yeah, absolutely.
With inherent value. And he's against gold.
Oh, yeah. He's not against gold.
You can see, and this goes back to that conflict of once you become big enough within the system,

it's not in your interest to highlight some of these things.

I mean, one of his Berkshire letters from late 60s, early 70s,

he highlights that basically Berkshire, it might have been the late 70s,

Berkshire stock priced in gold had gone nowhere for 10 or 15 years.

And I mean, that flat out shows you, right?

So all of these productive business and all these things he says about these productive businesses over time, 100% true. And there are instances in history where gold outperforms, where gold preserves purchasing power, currencies are being debased.
It's interesting. He frequently talks about, well, I started investing in, I think it was when I was 10 years old, I bought my first stock, which would have been 1941 or 42, which just happened to be basically the all-time generational low of U.S.
stocks because we won the battle of Midway. And at that point, it was sort of obvious we were going to win World War II and so on and so forth.
But I always say to clients and friends, yes, and look back 15 years. The prior 15 years from 1918 to 1939, 1915 to 1931, were catastrophic for financial assets of all types in the West.
Gold, like all you wanted to own was gold. And so it's interesting.
I think part of the point being part of, I think, your view of the world depends upon when you're born and what happens as you're growing up. It's sort of that cycle theory of, you know, the fourth turning.
I think it affects your views on investments, too. Why wouldn't it? Of course.
And it affects your views on the future in general. Sure.
And as you just said, the degree to which you're vested in the system currently in place affects your outlook and affects very much what you're willing to say in public. And the bigger you are within that, the more pressure can be applied to you, right? If you don't get deal flow on Sunday night, if you are pumping goals, if you're Warren Buffett, or you have, you know, you don't get the approval of whatever thing you need approved or from the congressman.
It's just, look, I'm not opining on it. It's just how the game is played.
Well, it was so obvious. I'm not a financial expert, that's for sure.
But I have been in the media my whole life and I know what a fluff job looks like. And I know, no, I do.
I know a lot about it. And I watched Warren Buffett.
I've never been against Warren Buffett. I'm not against him now.
But I mean, the amount of promotion that guy received from the system told you everything about his orientation and the incentives in place for him. And like they were promoting Warren Buffett and Warren Buffett's worldview, like very aggressively.
And so, you know, I didn't believe half of it and you shouldn't either. That's my view.
Yeah, I think you always want to think critically about this stuff. You think? Yeah, I think so.
Absolutely. So give us a sense of where gold is flowing in the world right now, to the extent we know.
To the extent what we can see, I would describe it simply as from the UK and the EU, to a lesser extent, into the U.S. It's still flowing into China.

It flows into China all the time.

But they're the big delta, the big change since the Trump election, essentially, has been a significant ramp up in the flows of gold out of the U.K. into the U.S.

So that would seem good for the U.S.

Yeah, historically, when you see where gold is flowing, that's your economic winner. That's who's winning.
And where the countries that are losing gold, those are the countries that are losing. That goes back several hundred years.
That's sort of how it works, which makes sense. I would say several thousand years.
Yeah, exactly. Yeah.
So do you, and I should have asked this earlier, do you anticipate any time in the future where gold is no longer regarded as a measure of economic strength and health? Does it ever get eclipsed by crypto? No, I don't think so. I don't, you know, at some point Bitcoin could compete with it, in my opinion, possibly, but I think that's far down the road and failing that um it would take something unforeseeable right we discover we discover an asteroid that has you know gazillions of dollars of gold on it and we develop the ability to go up there and bring it back cheaply in a way that competes what about okay so gold is almost hovering at about 3 000000, a little under 3,000 an ounce.
It's clearly going to make it to 3,000, I would guess. Is there a threshold at which, like, it becomes, because there's a lot of gold, actually, on the Earth's crust, a lot, and it's just too expensive to extract it, but is there a threshold at which, like, gold production just ramps up dramatically? It becomes worth it to, like, extract a lot more gold, and it affects the price because of supply and demand.

Yes. Ultimately, supply will be a function of price.
And then there's a lot of it in the ocean, right? In theory, if you sort of dry out the oceans and filter it. Filter it, yeah.
And that's just a question of price. And the question of price is ultimately a question of energy efficiency, right? If you wanted to, you know, that's how much energy do you need to expend to dig and get that out of the crust where it is and refine it down so that it makes sense.
And right now, it's going to cost you way more in energy in order to get that. And so, you're not going to do that.
And so, if price goes up enough, then it makes sense for you to expend that amount of energy to do that. And I think that's a really important point that ties back to our stock to flow and why gold is valuable.
When you think of it in those terms of it is where you need to expend a lot of energy to get gold and the price of gold determines how much energy you're willing to expend to get it. It's just a compressed and portable storage of energy.
So that raises a deeper and more fundamental question, which is, do the great powers have a built-in incentive to keep energy prices higher than they would naturally be in a truly free market? Depends which great power, right? The Chinese, all else equal, want to build a consumer society. They would like to have energy prices cheaper.
America, we like cheap oil, but not as cheap as we used to like it because now we have shale. So we want, you know, we want Goldilocks oil.
So, you know, above $90 starts to be a problem for our consumer. Below $70 starts to be a problem for our shale industry.
And so if you look at the price of West Texas crude, WTI crude oil over the last two, three years now, oil has been 70 to 90. And I think that's so like, we need Goldilocks oil.
The Europeans, same kind of thing. They need a cheaper oil.
The Russians, they would probably like more expensive oil. The Saudis, you know, Saudi has $90 fiscal break even.
You know, anything below 90, they're borrowing money, and things get spicy over there if they don't maintain their promises to their people. So, but, okay, so you're talking about hydrocarbons.
Correct. But, you know, there's been, for all the talk of the Green New Deal, now we're getting far afield, but I think it's really fundamental to the world, where all the talk of the Green New Deal and all these new forms of energy and renewables and green technology has really been pretty shockingly lame.
Really? I mean, it's like windmills and solar panels, both of which are just like kind of absurd. There are like a lot of advanced technologies, particularly in biotech, that are moving like crazy fast.
AI, crazy, crazy fast. Energy generation technologies are not moving crazy fast at all.
Like no one's like, hey, actually, there's a brand new nuclear breakthrough. Like we're not building any nuclear.
Like you conceivably, if you got off hydrocarbons, could, I don't know, why isn't there a greater effort to figure out cheaper ways to produce energy I think a lot of it is on some level political right I think okay right so maybe if maybe the Green New Deal I mean obviously it's anti-civilization it's anti-human it's really dark and it's built on a lie but it's also built on geopolitical realities right I think I think so yeah i mean it's look there are things we could do that would ramp up energy production fast um and that is nuclear like we we should have we should be building nuclear plants a bunch every year as far as the eye can see but if you really got you know nuclear or any form of energy energy down in hydrocarbon equivalents to like $10 a barrel of oil, equivalent, you'd like blow up the world financial system kind of. I think it depends.
There's a lot of other puts and takes. And some of that gets into how you'd probably have to restructure some debt.
Some of that is how gold, right? Because the Saudis at $10 a barrel. But again, that then gets into gold, right? Where we go, okay, well, as partly some grand deal.
Now, this is far afield, but some sort of grand deal, we are going to revalue oil and gold reserves, right? Or we're going to revalue gold. So that Saudi – it's like Saudi doesn't care how they get paid.
If oil goes to $10,000 but their gold goes up to $10,000, they still have all the money. They get compensated for past surplus.
Well, right. But if energy – as you just said, if energy prices dropped far far below what we can currently imagine then the price of gold would also drop because the price of extraction of gold would drop so you have a maybe well yes yeah fair fair if you can apply that energy yeah yeah sure right but i mean you'd have two competing forces your your cost of energy to mine gold would go down but at the same time that if you drop energy there's two groups of you know nations in the world.
There's the US as a reserve currency, and there are US creditors that import energy and US creditors that export energy. And they all own a bunch of bonds.
Yes. And they own a bunch of financial assets.
And so if oil drops really low, all of your oil exporting creditors are going to sell their dollar assets because they're going to need to, because saudi owes money at 90 a barrel and if they don't pay that money for social programs etc place the place has political problems yes uh and so they're going to be selling treasury bonds they're going to be selling stocks and that creates and the u.s economy is so leveraged that that it's not going to take a lot of selling to create an economic crisis from it. So you'd have to – basically you would get into a situation where in some way, shape, or form the Fed would be printing money again as a result of oil prices getting too low, which is in theory a good thing, which then could actually be net good for gold, right? So there's puts and takes depending on – Basically, you're describing a world that's so complex and interconnected where global finance, the cost of energy, and then the geostrategic stuff, the military rivalries, it's all of a piece.
So it's pretty scary to mess with any single factor in that in a dramatic way. It's disruptive.
It's potentially disruptive. Super disruptive.
Yeah, it's potentially. And I think that's ultimately the power and the encouraging thing about gold.
Gold is always thought about as, oh, you're buying gold, you're a doomer, the world's going to end. No.
Part of the problem of what I just described, change in and of itself isn't a problem. But rapid change, when you have high levels of debt, it's the debt that creates the problem.
And so if you, when you look around and you see these central banks buying all this gold and having all these countries buying this gold, if you revalue gold enough to basically re-collateralize or buy down, effectively buy down your debt so that you have low debt levels, then you can make dramatic, more dramatic changes to the economic system and its connections without running the risk of blowing up the financial system, right? Because whether gold, you know, once you take, you introduce something deflationary into a debt-based system, the debt starts to go boom.

People don't generate the income to pay the interest.

Right.

In a more equity-based system or in a gold – I hate to say gold-based because it's – I'm not talking about a gold-backed currency. But if your debt to GDP is low because you've revalued your gold much higher and restructured your balance sheet,

a deflationary recession or a restructuring of the economy that is deflationary or a good energy introduction or AI productivity enhancement that is deflationary, that can be weathered and benefited from without blowing up the debt-based system. So gold is paradoxically a way to foam the runway for a major change, be it geopolitically or energy or AI, something deflationary.
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So you said a minute ago that big picture over time, countries that are acquiring gold are stronger and countries that are seeing their gold reserves depleted or weaker. Seems obvious.
Over time, yeah. You're running, right? You're saving more than you're spending, essentially.
And the United States is acquiring gold because why? That's the $64,000 question in markets right now. It is the official nominal reason being given in markets and in the media is that Trump's administration may or may not put tariffs across any number of countries, as we've discussed, including possibly gold hubs like the UK.
And if you put a 25% tariff on the UK across all items, just to pick a number, you run the risk. The mechanical impact of that would be to increase the price of gold 25%.
And the problem is, is that- Tariffs against American imports of British goods? Yes, exactly. But other than like shortbread, is there a British export? Not really, no.
Right. They're a twin destination, no.
They don't make anything, right? Not on net, no. No.
Not on net. And so this is what the story is.
There's been this massive flow of gold out of the UK to the US because tariffs might happen, which would impact the price of gold in a manner such that it would be very disruptive to what are called basically spread trades, that gold traders in New York or London, bullion banks that traffic in gold bullion, they may have a position on in gold futures in New York and a physical gold position in London.

And if a tariff were to change the price relationship between those two, it could create significant losses for them. And so the response is basically, bring the gold here to mitigate that risk.
That is the official story. There is absolutely a strong element of truth to that.
With that said, the longer this goes on and the gold flows continue, the less that story holds up as the sole reason. when we go back in time to 2020 and during COVID, we saw a very similar spike in gold futures relative to spot prices in London.

And it was driving a massive flow of gold out of London here because of COVID, because supply chains broke down with the shutdowns of flights and what have you. A lot of gold is shipped on transatlantic commercial airliners in the cargo holds.
And so those flows stopped. It drove a mismatch.
And what the COMEX, the gold futures exchange in the US did, ultimately, one of the things to sort of settle those markets down was to, what I'll say, change the rules for the Lehman. They introduced a gold futures contract that made the good delivery denomination, I think 400 ounces in London, 100 ounces in New York, either or, right? So that, okay, well, the gold that's here is fine, so we don't need to move it.
So they took a step to change the rules to settle the market down. Another famous example we were talking about before we got on air was the Hunt Brothers run on silver.
They tried to corner the silver market in the 80s. This was COMEX, and they changed the rules on the Hunt Brothers.
Once it became apparent that the Hunt Brothers were successfully cornering physical silver, they changed the rules. They set the market to sell only.
You couldn't buy gold or silver futures, and you could only sell, and the market promptly tanked um At any point in time, Trump, Besant, Rubio, other American officials could come out and say and clarify, we're not going to put tariffs on gold. There will never be tariffs on gold.
There are a lot of countries in the world where there's no VAT. They'd have VAT that there's no VAT on gold.
So this is the long – my point being that the longer this goes on without a rule change or a political pronouncement about tariffs, political clarification about tariffs, the more likely it becomes, in my opinion, speculatively, that the tariffs are on some level as reason for the gold flows cover.

That the gold is being brought here for some other reason.

So what could, I mean, and that always is the likely explanation that there's something else that accounts for at least part of a phenomenon that you're watching. So what could that other reason be? I think there's two things.
There's a tactical reason. There's a strategic reason.
The tactical reason is if you Google gold revaluation, you'll find a number of stories in any mainstream financial media over the last two, three, four weeks. There has been increasing speculation in the aftermath of Trump's election, and in particular in the aftermath of Scott Besant being approved as Treasury Secretary, that there is a gimmicky but completely legal and mandated in the rules way by which the United States could revalue its gold, which it currently holds on its books at $42 per ounce up to the current market price, And in so doing, or even higher, and in so doing, it creates a bank deposit, basically, at the Treasury's bank account at the Fed that the Trump administration could then use to buy down debt, to not have to borrow as much.
It's effectively money printing through gold. It's creating money supply using gold through basically an accounting gimmick that is already on the books.
But that gold would never be sold to anyone? Never be sold to anyone. It's just literally an exchange of paper.
So the United States would not lose its gold reserve? There's no chance of that? Not under that transaction, no. Okay.

As it's been explained to me. You'd hate to get to a point where the nation has so much debt backed by nothing other than its Navy, which may become irrelevant thanks to drones.
So you could see this all moving very fast. It's like all of a sudden we owe the world trillions of dollars, but where's the collateral, where policymakers are forced to sell off physical assets that belong to the country? Oil, water, because we have the world's largest fresh water reserves in the Great Lakes, and gold.
I don't think, is that a crazy way to think? I don't think, well, I think ultimately there'll be no need to do that because you've got the assets and you've got a printing press, right? So ultimately it's really a function of the currency. Of course, as long as you're the world's reserve currency.
And even if we're, I mean, I think we will be, but they'll always have the ability to print dollars. It's just a question of what happened.
But what if nobody wants them? It would just depreciate faster. Right.
But I mean, like at some point, like if I, you know, take a loan against my house mortgage on my house. And also, if I don't pay it, you know, the holder of that mortgage gets my house.
There's collateral. So like, where's the collateral in the United States other than like, I don't know, people like us? I don't know.
What is the collateral? The collateral is it's a complicated question. I what – On some level, it's the threat of violence.

I think some of what we're seeing in terms of these discussions around will we leave NATO or will we not.

This is a discussion that goes back to the 70s.

There was something called the blessing letter.

Carl Blessing was a governor of the Bundesbank, the German Bundesbank.

And the French were asking for their gold back.

Others around the world were asking for their gold back in the 60s and 70s. I guess the blessing letter might have been late 60s.
The Germans started hinting about asking about their gold back. And the Americans sent a letter that essentially said, you know, if you ask for your gold back, we will have to reconsider stationing U.S.
troops in West Germany to protect you from the USSR. So you're going to keep taking dollars or else we're going to bring our boys home and you can deal with the Soviets yourself.
And the Germans never asked for their gold back. And so what collateralizes is a complicated multi-body, right? It is goodwill, protection, access to markets, the threat of violence, military protection.
Gold is way, way down there. I don't think the gold is thought of as collateral, but it could be as a reserve asset if we wanted to change the system.
We would need to have it if we wanted to change from the system we've been in for the last 50 years. And that kind of gets to the strategic side of it.
What if we have no choice? Because we're not the only decision makers in this process. We're not.
True. I think you would see some sort of grand deal be discussed ahead of that.
And I think that's some of what we're seeing in real time when we talk about us and the Russians and the Saudis and the Chinese all getting together in Saudi and talking about, you know, probably not how the Yankees are going to do this year. And probably not just the end of the war in Ukraine.
No, absolutely. I don't think it's only about the war in Ukraine.
Of course not. You know, those are, think about what you've got there.
Because the war in Ukraine is not about Ukraine and never has been. You know, you've got the four biggest, you know, Saudi, U.S., Russia, that's 40% of global oil production.
And U.S., China is, what, probably 60% of global oil imports, global oil. So you can, oil's going to have a role there.
Now, the strategic side of what I think we're seeing the gold movement is ultimately what, if you take a step back and try to see the forest for the trees of what the Trump administration is trying to do. The Ukraine war showed us we got outproduced by the Russians badly.
We couldn't produce shells. We couldn't produce stinger missiles.
We couldn't. We were reliant on essentially China to supply our industrial base, to supply our defense base.
We've been borrowing money from China to build weapons to face down China using Chinese components. It's not a good strategy when your biggest geopolitical adversary is China.

And so starting with COVID.

Could it be that we were using Chinese components to arm the Ukrainians in a war against Russia,

which has lied with China?

I think that absolutely could be the case.

And I think that we know the Chinese were supplying Russians with dual-use goods as well. So China's on both sides.
China's on both sides. And critically, think about the implications of this, right? So we, America, when we wore the dominant power, we were the ones supplying the weapons to these types of conflicts.
Now we didn't really have the ability to credibly say, Ukraine, Taiwan, and Israel, we can supply all of you at once. Empirically, we demonstrated over the last three years, it was impossible.
We were moving patriot systems out of Israel to Ukraine and then having to backtrack in certain areas in different conflicts as a result of that. When paired with what happened in COVID, which was, hey, we need more PPE and supplies and what have you, and China said, just as soon as we get ours, we were dependent on China and COVID.
And it was made crystal clear to Washington that the defense industrial base has been too hollowed out by this currency system whereby we export dollars and we export our factories and our workers and China sends us stuff and we send them dollars and they send us goods and, sorry, they send us goods, we send them dollars, and then they reinvest those dollars in our financial markets.

And that's fine.

That has been how the world has worked for 50 years. And it's been great for Wall Street.
It's been great for Washington. It's been great for China.
It's not been great for the American middle and working class whose factories got offshore to China. And Washington was fine with that until all of a sudden they realized this process has gone so far.

We cannot credibly fight a war without Chinese factories. And the Defense Department is saying, and they began saying it 10 years ago, no mas, we're done here.
This is, we need to start reshoring as a matter of national security. And the origin problem is the structure of this dollar system.
And so we need to get out of the business of supplying China the dollars to buy up the world. And that means we need to change the currency system that's been in place for 50 years.
Well, when you say these types of things, the instant response, the correct response is, well, okay, if the U.S. isn't going to run deficits, run up debt to supply the dollars to the world, who will? No one else will.
The Chinese won't and no one else can. And that is correct.
And the answer is, is then you're going to have to settle deficits in something else that is nobody else's debt, nobody else's liability. And that is gold.
And I think that's where this is going, which is, and I think it's part of the reason why the U.S. is actually buying gold is to try to turbocharge this change to the system.
When you hear President Trump say, we want to go back to tariffs and cut income taxes, when you hear Marco Rubio in his confirmation hearing say, within 10 years, we are going to be dependent on China for everything if we do not take aggressive actions to change and start to reshore, change this currency system and reshore. When you have Senator Vance, say what he said in 2023 to Powell about the dollar increasingly being a resource curse, about which Vance is very familiar, having grown up in West Virginia and Southern Ohio and seeing the deindustrialization.
The chapter and verse, this administration understands this problem. What the current Vice President J.D.
Vance said to the Fed Chairman. So in 2023, he said that the dollar shows the hallmarks of a resource curse, which is, it's often called Dutch disease I might refer to as which is a fact

for The dollar shows the hallmarks of a resource curse, which is, it's often called Dutch disease. I might refer to it as error, which is effectively, if you're Saudi Arabia and you discover that you are the biggest, lowest cost producer of oil, you produce a lot of oil and the rest of your economy shrivels up and does nothing.
You know, it withers away. And it ultimately becomes a strategic handicap or a strategic risk.
And you get corruption every time. Exactly.
And Vance's point was that the dollar's reserve status, we are the Saudi Arabia of money. That's how the system has worked for 50 years.
We produce the world's reserve currency. We're the Saudi Arabia of money.
And what has followed is the hollowing out of industries other than those most closely tied to the money printer, to the dollar, Washington, Wall Street. And his point is that it is becoming this resource curse of being the Saudi Arabia of money is increasingly not good for the American middle class, the American working class, the U.S.
defense establishment. He specifically cited our inability to produce shells for Ukraine in his question to Powell in 2023.

And you can find this online.

You can Google it.

I think it was April or March of 2023.

and so it showed a fundamental understanding of this connection between the structure of the dollar system over the last 50 years and the situation in which we find ourselves where our

defense industrial base is so hollowed out and our debt level so high, we cannot credibly fight a war against our major adversaries without them supplying us. And our debt is so high that they can weaponize our debt against us.
And so ultimately, I think the strategic reason why we're starting to see gold re-enter the conversation, why central banks have been buying gold for 10 to 12 years, why the U.S. is gold is, we're likely moving to a system advocated for by the policies of the United States, if not outright saying, hey, we want gold to be the neutral reserve asset.
But we can see the policies and they are functionally indistinguishable from saying we want gold to be the neutral reserve asset. I think what we're going to do is move toward a system where the foreign capital flows, Basically, we bring factories, but we put tariffs on.

We lower income taxes.

U.S. consumer spending rises.

The dollar, we start to see foreigners send goods here,

also pay us tariffs, start to reinvest in our factories

instead of just buying our treasury bonds

and our financial assets.

Employment goes up. Building goes up, growth goes up.
Ultimately though, if they're not recycling their dollars into, you know, they can only put so much in factories. They're not putting them in treasury bonds anymore.
They haven't for some time. What are they going to put it in if they have a surplus left over from dealing with us, where they can put their surplus dollars, et cetera? I think the answer is gold.
And I think that's, I think the flows of gold, the longer we go where the tariff story, you know, it's just tariffs and it just keeps coming and it just keeps coming, which I'm hearing is still to this point, continuing to keep coming, gold flowing in, the more likely, in my opinion, when married with the pronouncements from Trump, Rubio, Vance, Stephen Mirren, the Council of Economic Advisors, Besant, the more likely it is that these flows of gold into the U.S. are effectively front-running what will likely be a higher price of gold driven there by the recycling of global trade more into gold and less into U.S.
financial assets than has been the case over the last 50 years. It's just an incredible story.
If what you're saying is right, it's incredible because really it's a move toward the fundamentals, toward the past.

It's actually moving backward.

What you're saying is the future is like building more factories and buying more gold?

Really?

I thought we were moving to a far more abstract.

I mean, I'm thrilled by it, let me just say.

But it's the opposite of what I think many of us anticipate, which is a world that is increasingly abstract.

And you're describing a world that is increasingly concrete. Or an economy.
An economy, yeah. And I think there will still be growth in services and the abstractions and these things.
This doesn't mean technology stops progressing. And when I say factories, I would use the broadest possible definition of factory, right? So if you're making things, robotic factories, they're making things.
Exactly. And that I think is where this is going.
And again, critically, I think the reason it's going there. And I think the reason these policymakers, again, Trump, Besson, Rubio, Vance, chapter and verse is it has become clear that the status quo dollar system has become an acute national security threat to the United States on two fronts.
We can't make weapons, which we keep hearing. We can't make them fast enough to credibly defend our allies and project power.
and our debt has gotten so high that that too has become a national security threat. And this sort of checks both boxes in terms of this systemic change.
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El smartphone de intercambio debe ser de Apple, Google o fly in the ointment. There's an entire class of people, some of the richest people in our society, some of whom I know, you know, too, who've gotten, you know, rich beyond the dreams of Croesus by really doing nothing and adding nothing just as parasites on the financial system.
You probably would be more generous than I am in describing what they do, but they're useless people who've looted the country, but they're really powerful. They're the biggest donors.
And so they're going to stand by and just let their world collapse? Well, I don't i mean i don't you know it's one of these things where i think you know what's charlie munger say you show me an incentive i'll show you an outcome right it was one of charlie munger's famous quotes and so i don't i don't see them as i don't see them as uh as parasites or whatever i think i see them as rational people responding to it they are they are i don't I don't think you can stand back and say like, you know, I don't know. I don't want to be too mean.
I don't want to be too mean. But like, it's harder for the layman me to understand sort of the added value.
Is that the term that they use? Of some of these, quote, industries. It all seems fake.
It all seems sort of the product of short-term thinking. It seems very mercenary.
It seems disconnected from the national interest. It seems greedy, among other things, and basically disgusting.
And it hasn't made the country stronger. It's made it, in fact, weaker.
It's made the country you just described. Sure.
It's like totally overwhelmed by debt and can't even produce artillery shells. Well, think about it, right? So, system we set up when you're the saudi arabia of money as we've been since 71 you're going to have dollar dutch disease this is the resource curse vance talked about 23 and so you're going to have two sectors grow to the detriment of all other sectors federal government Yep, yep.
And finance, insurance, real estate.

Right.

The fire industry, finance.

Now, both of those industries are absolutely,

and I'm not calling them parasites,

but they are parasitic industries.

They make money by taking a small cut

of everything that comes in.

Yeah.

And if you just think about this intuitively,

biologically, in the natural world,

if you have a small parasite on you, you have a small, whatever, gut parasite, it takes a little bit of every meal you eat. Maybe you don't feel 100%, but you're fine.
The parasite is great and you're fine. At some point, the parasite gets so big.
If it's allowed to get so big that it's taking too many of your calories, you start to wither you die ultimately and that is where we're at unfortunately that's the symptoms of this are a hundred thousand people a year dying of drug overdoses uh the inability to make shells uh the hollowing out of the defense industrial base uh and these are the things that this fixes i mean it's it's you know i i look at myself. I was a fairly smart kid.
I was going to go into architecture. I didn't like architecture.
I could have done engineering. But I absolutely, 35 years ago, looked at it and said, okay, well, I can study really hard and never go out to the bars and graduate in five years in engineering.
or I could get really good grades, a lot less effort,

go out to the bars and graduate in five years in engineering, or I could get really good grades, a lot less effort, go out to the bars three, four nights a week, and graduate in four years in business and in finance. And I, you know, I made a self, you know, I made a, it's a tragedy of the commons problem, right? I did what was best for me.
I've, I've, and my family. Most of my friends made the same choice.
I'm not, you know, people respond to incentives. Of course.
But this fundamentally changes the incentives. And when you do this neutral reserve asset.
So to answer your question. There are a lot of people vested in the current system.
A lot of people vested, yes. Powerful people.
How are they? I think what we have been watching over the last five years, and I think this is part of the, you know the trump versus you know the the no question the the the animosity to him manifests in party politics oh yeah i think absolutely and i think there has been a sort of the uh a progression of the u.s you know what was you know it's 1960 to 1980 what's good for g GM is good for America. And then from 1980 to 2020, what's good for Goldman Sachs is good for America.
And I think starting, Trump introduced some of these concepts, 16 to 20, but I think COVID and then the war in Ukraine reinforced it. I think we're shifting to a what's good for the U.S.
defense industrial base and middle and working class is good for America. And so there's, you know, this, to your point, this old what's good for Goldman Sachs is good for America wing of the world, the Robert Rubens and the, you know, the Larry Summers and a lot of these guys you're seeing lament against all the tariffs and all this stuff.'re absolutely fighting i don't know that it is terrible for their interests if because what you're talking about the two most pronounced dynamics are going to be the real value of long-term treasury bonds long-term dollar bonds will fall relative to industrial assets production exactly, etc.
So these guys may have less political power, but the reality is that's just a marking to market. Their worldview has been proven wrong.
We can't make shells. There are 100,000 people dying of drug overdoses every year.
You do have a hollowed out defense industrial base. We do have too much debt.
Those things are no longer debatable. They're all empirically true.
They're all empirically shown to be hurting the U.S. So they can't argue on the merits, so they've got to attack the people trying to implement it.
But in the end, I don't think they can win this argument anymore because events have proven them wrong. The system is going to change because the U.S.
military is not going to sit here and go, you know what, guys, you're right. Let's keep that system.
And we'll just have China make everything for us in five years. And then, you know, when you want us to face down the Russians over in, you know, Georgia or in, you know, Lithuania, you know, we'll ask the Chinese to make weapons for it.
Like, that's not going to happen. So if that's not going to happen, and if we're not going to default on our debt, then the only outcome is they're going to have to restructure the system in this way, which will be good for these people's equity bases, right? There'll be a lot more bank loans.
So it's just more – it's not catastrophic. It's just catastrophic to a worldview.
But the worldview, like to any objective observer, is already dead. I mean just to ask a kind of Google question because I can't control myself but you know you'd hate

to But the worldview, like to any objective observer, is already dead. I mean, just to ask a kind of goo-goo question because I can't control myself, but you'd hate to see manufacturing come back and then discover the only manufacturing is like machines that kill other people.

Could you also – because that's totally disgusting.

You can't be proud of a country whose only export is bombs. I mean, that's – you can't be proud of that.
That's totally disgusting. You can't be proud of a country whose only export is bombs.

I mean, that's, you know, you can't be proud of that.

That's totally immoral.

So you need military, you need weapons, but you also want to build things that are beautiful and uplifting and life enhancing also.

Could you get that too?

I think absolutely.

I mean, ultimately, you think about everything we've shifted to, you know, this system has required us offshoring infrastructure, manufacturing, et cetera. That stuff needs to be rebuilt, right? We're sort of, when you look at the flows of the last 50 years, our infrastructure looks like we lost a war.
It's been hollowed out. It's been dilapidated.
And so there's decades of open field running of, I mean, I'm an investor in a private equity investment in U.S. electrical infrastructure.
It's a boring business. They just make metal bending stuff that goes into transformers.
No, it's not boring at all. It's the future.
It's absolutely the future. And they've got so much demand.
They can't hire enough people. They can't, you know, and so there's, once you get the right incentives in place in terms of the monetary system and those flows, the markets will start to work and they'll start to feed on themselves.
And then we can get into things. Okay, wow, we have enough, you know, we've got enough demand.
Now we need to build the power plants. Once we build the power plants, then build more high-speed rail we build more high-speed rail we need more train stations we need we need more electricians we need more totally and it can feed on itself it's not easy there's a high degree of executional risk not least of which is because we have dawdled so long because this other wing of washington has been so successful in fighting off what has long been obvious to the military and others, we got to run fast.
We got to run not quite on a Manhattan Project type of timeframe, but we don't have, we need to be aggressive in doing this. And I think it's part of the reason why we've seen the Trump administration be so aggressive with some of their moves so early on.
I mean, it has been fascinating how quickly they've been doing things and moving fast and breaking stuff. And some of the stuff is like, oops, we didn't need to do that.
But I think that speed reflects, in my opinion, my read of that speed of action by the Trump administration is a nod towards understanding that this needs to get going fast. It's so big picture.
It's just so impressive, you know, just from a management perspective, like that they're thinking in these terms. And I think we know that they're thinking in these terms.
Oh, yeah, they absolutely are. You can see it in their public pronouncements.
J.D. Vance specifically, maybe tell me if you think I'm giving him too much credit, but he seems to have thought about this like holistically, like in a big way.

You described that exchange with Jerome Powell.

I mean, are you getting indications that Vance has has a big picture in mind?

I think Vance understands it at a level.

As good as any politician that I've seen in this country in my, in, in, in decades. And I think some of that is, you know, if, if, if viewers haven't watched Hillbilly Elegy or read the book, Hillbilly Elegy, he understands that it's such an intuitive level because he lived it.
He was in Middletown, Ohio. He saw what happened in Middletown, Ohio.
He saw what what happened to his family he saw he saw the hollowing out I mean so much so that Larry Summers one of the people that trying to fight this was publicly praising Vance and Hillbilly Elegy in 2017 you can find it on X saying oh my gosh I had no idea this was happening it's that so I think Vance he's such a foolish man Larry Summers yeah That's a whole different topic. No, but just like for, it's- As smart as he is, it's, yeah, he's- As smart as he is.
I mean, air quotes, because, I mean, we're constantly bombarding this propaganda about how smart all these different people are. Oh, they're so smart.
Really, are they so smart? How do they order their own lives, for one thing? The smart and common sense, right? Like, how's your marriage doing? Like your kids respect you? Like how smart are you actually?

What's the, you know, what's the, your output?

What have you created that's worth having?

Like smart people almost by definition would have sort of successes, right?

What's his success?

I don't really get it.

Gathering, you know, merit badges, whatever.

I'm sorry.

Anyway, so yeah.

The whole leadership class is like that.

There's a, there it is.

Oh, you're so smart.

Really?

Show me how.

Then it's, you know, so Vance, I think really gets at a, he lived it. He saw like more than anyone in that seat that we've seen in our lifetimes, I would argue, saw and has spoken about, has spoken about the resource curse.
And so Vance, you know, the dollar Dutch disease, what happened to manufacturing? What happened to families? What happened to the social fabric of the middle and working class across America? And he wrote about it. The movie is about him.
And in 2023, he specifically linked reserve currency status of the dollar, specifically said it might not be a good thing for the U.S., specifically said we are getting wildly outproduced by the Russians in Ukraine and we can't credibly maintain our defense obligations because we don't have the industrial base to do so because of the dollar system and the resource curse. And kind of left it open for Powell to kind of say, hey, you know, you got two minutes to answer.
You know, what do you think? And I think he gets it so fundamentally from, we talked earlier about, you know, where you grow up leads and influences your views on investing in the world, et cetera. The timeframe in which you grow up and where you grow up.
Think about the timeframe in which he grew up and where he grew up. And he's brilliant and his ability to just synthesize data and understand not just the direct linkages, but the second and third derivative implications and the policies that could be taken, the levers that could be pulled to move those second and third derivatives in a way that is beneficial to fix to really fix the issue and not just you know print money and try to paper totally right it's he's he's very encouraging in my opinion kind of shocking i think a lot of i mean you don't want to curse him he's the vice president not the president so but on the other hand i think some people in the last month have looked at some of the things jd vance has said and written and been sort of stunned by how deep and well expressed they are think about like used to that no and and you know last weekend's a perfect example and and again i it goes to that whole the existing system that's empirically been proven to not be what's right for us all you heard about last weekend was how he had insulted free speech in the UK and in the EU.
Is that what they were saying? I don't follow that stuff. Oh my goodness.
Every wilting flower about liberal free speech and blah. And I think they buried the lead.
They're idiots. I mean mean they're just liars he said germany you are the only country that did not follow and i quote the stupid washington consensus of the 70s 80s and 90s that de-industrialized correct all of us and now you're choosing to de-industrialize like that passage alone tells you the biden administration blew up their effing natural gas pipeline i mean it de-industrialized the country for them and they're such self-hating cucks that they said not a word about it they've been trained for 80 years to hate themselves and the net result is the total destruction of the heart of europe which is germany sorry it is it's it's been it's it was shocking to me how is this good for the world it's not how is this good for the united states to destroy europe it it makes no sense it's vandalism on a scale that most people don't understand and i anyway god bless jd vance for saying that he's absolutely right and he's and yeah and that ties back into this whole point of these policy makers are tell when was the last time you had the vice president of the united states call the 70s, 80s, 90s, holy grail, this is the dollar system, stupid.
The stupid Washington consensus. I don't ever remember hearing that.
And if it was a one-off, okay, whatever. But we've heard it, the interactions with Powell.
Trump saying, I want to make us great like we were 1870, 1913, which is tariffs, low-income tax, no-income tax. Rubio saying, listen, guys, we can't make stuff.
In 10 years, we're going to be dependent on China for everything we need. Besant saying in his confirmation hearing, Wall Street's had a great run.
Main Street has really suffered. It's Main Street's time.
We need to pursue policies that bolster Main Street. Wall Street will still be okay.
They'll still do fine, maybe not as well, but it's Main Street's time. We need a Main Street.
These policymakers are telling us. It all, in my opinion, goes back to the structure of the system, which is as long as we store global surpluses in our financial markets and in particular treasuries, that system is going to continue.
You move to a neutral reserve asset like gold because now when they store money in gold, price of gold goes up, currencies can move around. It's a natural rebalancing mechanism.
The dollar will weaken against the yuan, right? What have we been saying? We want the Chinese to weaken the yuan, weaken the yuan, or excuse me, strengthen the yuan, strengthen the yuan, the yuan, strength in the yuan. If gold goes up in dollars and doesn't go up as much in yuan by virtual flows into, you know, dollar flows into gold and fewer yuan flows into gold, the dollar's going to go down versus the yuan, which is the very thing we've been trying to get the Chinese to do to stop dumping so much cheap product here.
Gold will take care of it. It just does what it's...
Are you advising the new administration? No. I hope you will.
The only criticism I would have of your critique, which I think is kind of brilliant and very well explained, is that I think you may be undervaluing or underrating the ferocity of the response. I just, I don't disagree.
I'm from DC, and I just think the stakeholders, as we call them, the people who are benefiting from the system in place, can be really ferocious in protecting that. I agree.
And one of the things I've, I don't have as much familiarity with that, and so I would admit naivete towards the degree of that to a certain extent. One thing I would say to me.
It killed like a million people in Ukraine for like no reason. So clearly they don't care about the human cost.
And it's the, from a layman's perspective, I thought a lot of the Trump appointments were interesting in and of themselves. But as you know, there's appointments and then there's confirmations.
And so I was withholding judgment to see.

And I think there is some, to me, again, as a Washington layman,

encouraging that he picked Vance, number one, after what Vance said.

That to me was check one.

Most important thing, I agree.

So, okay, Vance gets it on that policy.

But then when you see Tulsi, very unpopular in the Beltway. Okay.
Not only does she get picked, she gets confirmed. RFK Jr.
I know. Not only gets picked, but gets confirmed.
Like Cash yesterday. Okay.
So point being that you are, Hegseth, unpopular, confirmed.

So there's this slate of people that are non sort of deep state, if we will, get picked and get confirmed.

And so to me, you know, I would defer to your joint, but as a layman to Washington, the fact they got picked and then that they got confirmed is at least encouraging that fight that I think presents executional risk to this optimistic view of where we could be in two, three, five, ten years. In my opinion, it's those appointments and what have you have on some level mitigated or at least their victories.
They're huge victories. And we're now 31 days in.
I don't know when this is going to air, but we're a month and a day into the administration. And they've won almost everything except Matt Gaetz.
And I think it's incredible. I've never seen anything like this.
Nothing like this has happened in my lifetime in Washington. On the other hand, it was really a victory over the Republican Senate, which is a collection of some of the worst people I've ever met, but also some of the dumbest and weakest.
And so it's a great victory, and I love to see them humiliated. And every day that some of these people weep is a happy day for me.
On the other hand, like they're not, you hand, some of the stakeholders in the current financial system are smart and serious, and they are not people to play with at all. I think they're completely ruthless.
I think they are willing to resort to things it's hard even to imagine. And I don't know.
I just think there's a fight ahead. I would defer to your judgment on it, but it intuitively makes perfect sense to me.
Yeah. One last question.
Where does this leave the average person, the retail investor, whatever we're calling that person now on the question of gold? Like, you know, I mean, if governments love gold, if gold plays a really essential part of the global financial system, which you've described, I think in great great detail. Is it wise for the average person to take delivery on gold and just bury it in his yard? Yes.
I think the average investor should have probably 5% to 10% of their net worth in gold bullion coins. It's fascinating.
I've been in the investment research business for 30 years. And it's offensive on some level, but it's an old saw because it's true, is once you start to see retail investing, retail investors plowing into something en masse.
Right. Runaway.
And a lot of times the banks too, by the way, the commercial banks run away. And we saw that with dot-com stuff in the late 90s.
E-Toys, pets.com, web man. You remember them well.
I remember them well, right them well right and then it was you know sand state real estate subprime mortgages and those kind of things and in the last three to four years the biggest marginal buyer of long-term u.s treasury bonds has been that the u.s retail. They've been investment funds, right? So the biggest buyers of 2, 3, 5, 7, 10, 20, and 30-year U.S.
Treasury bonds, they've been buying anywhere from 60 to 70 percent of new issuance for the last three to four or five years. And I'm not saying there's any risk to Treasury bonds on a nominal basis.
There isn't. However – No, it sounds totally safe.
You're going to get every dime you're promised. But we can't guarantee you what those dollars will buy you in the real world.
What those dimes will be worth, right. That's why when you've got this dichotomy where for 40 years, from 1974 to 2014, global central banks were buying treasury bonds and they were selling gold.
Why would you ever buy a bond from the same person who can print the currency? I just don't understand that. I mean, if you believe the inflation numbers and like, look, there are, I mean, it's kind of like a rigged system, right? Like the government is issuing the debt, which is held in a specific currency but that same government prints that currency yeah and that's why they're they're so hyper-focused on the fed managing inflation oh i know it's it doesn't make any sense it's like a rigged game it is my ignorance protects me from bad investments because like if it doesn't make sense i'm not not that i invest but like you know what i mean no and intuition is is to be trusted well that just doesn't make sense.
It doesn't make sense. That was ultimately why I first got an interest in gold.
Because the key question is not, do you get paid back what they owe you? The key question is what you just said, which is what is the value of what they pay you back? You may get every dime back, but maybe those dimes aren't worth anything. And they determine what the dimes are worth.
So it's a rigged deal. And that's why I first got involved in gold.
I never owned gold before 2000, late 2008 or early 2009. When the U.S., you know, depths of the great financial crisis came out and they said, okay, now we're going to print a trillion dollars and we're going to buy treasury bonds, QE.
And I remember thinking to myself going, how can an oil producer like Russia or our factory base like China look at that and say, so I'm going to expend all this energy to pump this oil and produce it and refine it and ship it and send it and pay you for dollars and then put those dollars into treasury bonds? And you're just going to click a couple of keys on a computer and buy a trillion dollars of the treasury? Why would I sell my oil and store my surpluses in treasuries? That was what first. And sure enough, guess what happened later in 2008 and into 2009, 2010? Russia started buying gold in their reserves.
Of course. The Chinese, same thing.
How could you sell all this stuff to the United States? Like actual stuff. Store them in treasury.
Yeah, and store it in treasury bonds and have the Americans print it. And sure enough, Chinese gold purchase started rampant.
So for me, when you go back to what does it mean for U.S. retail, it's the same type of dynamic.
The United States government owes its baby boomers. Right now, the United States takes $5 trillion a year in tax receipts.
And right now, we're paying baby boomers in entit, $3.3 trillion of that. So about 70, almost 70% of receipts are going to boomers.
Has there ever been a generation that deserves it less? I'm serious. Has there ever been a generation? Has there ever been a more destructive generation, a more self-involved generation, a more annoying generation? If I could just, I take, you know, as Gen Xer, I take it again.

I try to put

myself in their shoes.

Look, if I was born when they were born and their

parents came home from World War II and basically had

16 kids and

let them go be free-range chickens

and they just sort of... I love all that.

They were general. They were

a product of the environment

and at the time they lived. But they never stopped talking about themselves.
I love huge families. I love prosperity.
I like peace and freedom. I like all that stuff.
What I don't like is self-involvement. And those people never stopped telling their own story.
The stupid Vietnam War, every cliche about Woodstock and the dumb civil rights movement, which actually didn't really help anybody. And everything about it was just like, it was just, they were drowning in Lake Me.
And I was raised around people like that. And they were my teachers.
And every single one of my teachers went to Woodstock. Every single one of my teachers was at some sit-in and some lunch counter in Greensboro or something.
It's like, they all were participating in these same mass market cliches, which they thought were like a sign of, you know, unique individualism or something, but they were all like a herd. They were like dumb and narcissistic and mediocre.
Did you not notice that? I would agree with the narcissism as a generation. Yeah, I would agree with that.
Talking about Selma all the time. And I would be like, how is Selma? Have you been to Selma? Like it's an actual place with actual people like are they thriving? You know all these people are like you know just lecturing you about how great they were because they were at Selma and I was wanted to go and then I wound up in Selma.
You ever been to Selma? I've never been to Selma. Yeah you should go to Selma and then you can tell them to like shut up actually because like the sum total of sum total of your efforts was, you know, like poverty, despair, and chaos.
Like you didn't actually achieve anything. So be quiet.
Sorry. You can feel my resentment.
No, no, no. I hate those people.
So think about that, right? So if you're getting $3.3 trillion in receipts. You're so rational and nice.
And I'm like such a lunatic. Excuse me.
Excuse me. But how do you get them to pay more for their own care? Well, simple.
You get them into treasury bonds and then you tell them inflation's four. You give them a 4.4% on the treasury bond and you actually let inflation run six, eight.
Right. Exactly.
And that's why you need to also, as an investor, whether you're a boomer, whether you're not a boomer or younger, you need to own some gold because over time, you'll lose on your bonds, but your gold will more than compensate you for that inflation. You maintain your purchasing power.
And I think your stocks will in certain, if broadly diversified, but that gold is ultimately the release valve that that is happening. And it needs to happen.
But basically, we're not going to be able to have an election where and say, hey, boomers, we need you to pay more for your care. Then no politician will be in office after trying to do that if they raise taxes on boomers to do that.
So what do they do? Because they can't do that. They take sort of the politically uncourageous way out, which is you inflate.
to inflate and that's what they're doing what they have been doing what they're going to continue to keep doing in my opinion and that's why i think you want to own i think retail investors need to own five ten percent of their of their assets in gold bullion so it's it what i didn't check the spot price this morning but um 2950 ish ish uh where do you think it goes in the next? I know you hate questions like this, but I can't resist. Final question.
Where could gold go? So this is something in our business. I say if you give a price, never give a time.
Right, no, of course. I'm sorry, I know.
It's okay, it's okay. No, I do it to be self-aware and parody myself on some level.
But in all seriousness, over time, one of the metrics I have looked at when we're talking about a restructuring of a system, we talk about the debt levels being a problem, all these things. I have a metric that looks at the market value of US official gold, right? So let's pretend it's all there.
We had that discussion already. Let's pretend it's all there or it's being brought back here maybe as we speak, but it's all there.
There's a metric that I follow that is the U.S. official gold as a percentage of the foreign held portion of the U.S.
federal debt. Right.
So it's what percentage at market price, what percentage is the United States official gold collateralizing our foreign held debt?

Because in the end, we can cram down our own people, but we have to maintain foreign creditors. So long-term, the average going back to I think 1960 or 1950, that number was 40%.
U.S. official gold at market price collateralized our debt by, on average, 40%.
As recently as 1989, that number was 20%. In the dollar crisis of 79-80, that number was 135%.
That was a true gold bubble. In other words, if our foreign creditors would have been so inclined we did it, they could have demanded gold for treasuries, and we still would have had a third of our gold left over.
Okay. Where is that number today? That number today with gold having risen 40% in the last year is at 9%.
Yeah, that's bad. So gold, in my opinion, minimum over time probably has to rise at least 2x and probably more like 4x just to get back to historical levels, assuming no further growth in the debt and assuming no ever again and assuming no dollar crisis that leads it to go over 40%.
And so it's still paradoxically one of the cheapest assets on the board when you look at it relative to the debt outstanding and the way this probably needs to be resolved from a debt perspective and

an economic restructuring perspective. China clearly thinks so.
Yep. If people found what

you said compelling and smart and really insightful, my views, where do they read more

of your insights? We have institutional and mass market products at fftt-llc.com.

I appreciate it. Thank you.
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