Gold QE Concept: The podcast discusses the potential for the Federal Reserve to engage in "Gold QE," which involves revaluing gold on the Fed's balance sheet to increase its monetary base without issuing more debt.
Fed's Balance Sheet: The discussion highlights how revaluing gold could significantly increase the Fed's balance sheet, allowing the Treasury to spend more without issuing additional treasuries, effectively creating money from thin air.
Market Impact: The revaluation of gold could lead to a substantial increase in the Treasury's coffers, potentially reducing the need to issue as many Treasury bonds and impacting the gold price and broader market dynamics.
Monetary System Mechanics: Emphasis is placed on understanding the role of the commercial banking system in money creation, suggesting that banks like JP Morgan can increase money supply similarly to the Fed through asset purchases.
Legal and Practical Considerations: Questions are raised about the legality and practicality of the Fed engaging in Gold QE, especially given past actions that have stretched legal boundaries during crises.
Strategic Timing: The podcast argues that the Treasury should reserve such measures for times of genuine financial crisis, rather than deploying them when the yield curve is inverted and demand for treasuries is high.
Commercial Banking System's Role: The discussion underscores the importance of focusing on the commercial banking system's activities, as their balance sheets are significantly larger and more impactful than the Fed's.
Investment Opportunity: The podcast concludes with a mention of Monetary Metals, a service that offers interest on gold holdings by leasing them to jewelers, providing a potential investment opportunity for gold holders.
Transcript
Hello fellow rebel capos. Hope you are doing well. Excuse me. We've got some big news from the Federal Reserve and Zero Hedge points this out that they might do gold QE. Gold QE. Now, I know many of you are probably asking yourself, what on earth is gold QE? But whatever it is, I don't think I like it and I would be right there with you. So, let's go over to Zero Hedge and check out what they're talking about and then think about how the Fed's balance sheet actually works. I think this is a great article to really get you thinking in terms of well, maybe they will do this. And what I'm talking about is a revaluation of gold on their balance sheet. They could revalue it a lot higher. We've done a few videos on that. I know Luke Croman talks about this all the time. We've done a few videos on this over the last few weeks. Well, actually last few months or so. But let's get right over to this Zero Hedge article where they talk about the Fed doing gold QE. Here we are. Whoops. How did I have no idea how that just Oh, here it is. Right there. Wrong one. Wrong tab. Okay. Gold revaluation imminent. US Treasury hoarde tops 1 trillion for the first time. So, I wanted to do this video for a couple different reasons. Number one, let's talk about gold QE, obviously, but then also I want to talk about the Fed's balance sheet. And that's what I love about this zero hedge article is they go into that quite extensively. So, on the back of 45% surge in gold price this year, the US Treasury hoarde. So the US Treasury or the US the government whatever on the asset side of their balance sheet they have a significant in fact I think the world's largest gold reserves. So what's really interesting is they value the gold reserves at a price based on like their cost basis or something like that. It's it's the gold on their val on their balance sheet is valued at like $35 an ounce. So, a lot of people are looking at this and saying, "Well, this is completely ridiculous. So, let's just go ahead and revalue the gold on the Treasury's balance sheet up to today's price." And this gives them over a trillion dollars. So, as far as at today's price and so then what they could do is they could go ahead and sell it's like gold certificates or something like that to the Federal Reserve. And I believe the Fed actually might already have some of these gold certificates on their balance sheet from the Treasury. And then what the Fed does is that's the asset. Then they go ahead and create bank reserves out of thin air. They put them in the TGA and voila, the TGA has more money that they could go ahead and spend into the real economy without having to issue the treasuries, without having to issue more debt. So let's go into this and then let's think about what are the probabilities that this actually happens and if it does what does it do to the gold price and then how does this really work mechanically because that gives us insights as to how not only the Fed's balance sheet works but uh probably more much more importantly the monetary system. Okay, market value of US gold reserves. So this is just the market value but I'm curious if they state What? It's listed right now on their balance sheet. Is that it? 11 billion. Wait a minute. The federal government's cash and other monetary assets in billions. Yeah. 11 billion, man. Yeah. So, I don't know why they do that. I don't know if that's an accounting deal. You would think, especially since the the Fed pulls out every single accounting gimmick they can muster up, they pull out all the stops. You would think the Treasury would do the exact same thing. Like, why wouldn't they just mark to market? I don't know. That's really weird. H, that's got me thinking. But anyway, let's uh keep moving on here. So right now bottom line is it's at 11 billion. So they could revalue this to a trillion and even if the let's just assume the Federal Reserve has these gold certificates which are a claim on this 11 billion then you revalue it to a trillion. Federal Reserve puts 900 billion in the TGA and then they could go ahead and spend that 900 billion without having to tax or without having to issue more treasuries. That's kind of the punchline here. But then, you know, Luke would come in and rightfully so say, look, if they're going to do this, it's like kind of a one-time deal. Um, and so if they're going to revalue it to the trillion, fantastic. Why don't they go ahead and try to repric gold at 20,000 by putting out a bid for gold? So you're trading treasuries for gold in essence and then you drive the price up to 20,000 and then you go ahead and do the revaluation because now instead of adding 900 billion to the TGA, you could add, you know, doing the quick math here. What's let's just say it's at 4,000 right now. You add five. So five five trillion, four to five trillion, something like that. And then you can pay down the US debt, get the debt to GDP down to a level that's more sustainable. I think that's what the argument would be. Not my argument, but that's what the argument would be. So here we go. I guess Zero Hedge does a little bit more precise math than I just did right off the top of my head. That means that an update of the reserves value in line with today's prices would unleash unleash roughly 990 billion into the treasury's coffers, dramatically reducing the need to issue quite so many Treasury bonds this year. See, this is where I have a different view. So, if I'm the Treasury and I'm thinking, okay, I have only got one shot at this. Why would I do that right now when the curve when the vast majority of the curve is inverted? And and what that means is you've got the belly of the curve, let's say, that where interest rates are actually lower than Fed funds. And what that tells you is there's massive demand for treasuries. So you would want to reserve this. You'd want to keep your powder dry, so to speak, until a time in which you the curve is is extremely steep. That would imply, especially if it's way above nominal GDP, that would imply that o all of a sudden supply matters. Now, supply really hasn't impacted interest rates going back 75 years as far as I can tell. And I always pull up this chart. I can just do it right now because I've got it up. But if you pull up a chart of nominal GDP and then if we had a chart of the 10-year Treasury yield, it would basically be a smoothed out version of this. And so, and even right now, you nominal GDP running at 4.6 as of Q2 2025. And what's the 10-year trading right now? It is Whoops. at it's under it's it's like it's like 50 basis points under nominal GDP. So if we you know and I'm sure you guys have heard the argument at at nauseium over and over and over again. Whoops. Let's get back to zero hedge that it's all we're going to have to increase the deficits. The government's going to spend money, which is absolutely true. And there's nothing that stops this train like Lynn says, which is definitely true. And therefore, we're going to have so much debt and so much deficit spending. And foreigners are dumping our treasuries that interest rates are going to go way up and the Fed is going to lose control of interest rates. And therefore the Fed is going to have to step in and do QE or or they could revalue gold to go ahead and try to pay down a certain percentage of the debt to get that debt to GDP down to where it would appease let's say the bond vigilantes. Like this is kind of the argument here. And my point is I don't know that they really need to do this because right now they sure as heck don't need to because the curve is inverted the majority of the curve and the if supply is actually an issue if you did have bond vigilantes that were out there you would not have an inverted curve. Your curve would be massively steep. It would be like almost like an exponential curve. Like as an example, Fed funds would be at 4%. The 30-year Treasury would be at 10, right? It would be that's where you get into the zone where you're like, "Okay, now we need to be worried. Now supply does matter, right? Especially if nominal GDP is at 4.5%." If nominal GDP is at 4.5%. The 10-year Treasury is trading at eight or nine and Fed funds is at four. Okay, now it's a different conversation. Now the market is telling you supply finally does matter. Now I think the odds of us getting there are extremely low, but that's I would save the dry powder for that type of situation. Like why would you deploy your dry powder when the the curve is inverted, which would tell you that there's massive demand for treasury? Just ask the price. So, I think this conceptually makes sense and it's something that we should consider the Fed might or the Treasury might do in the future for sure. Um, just like UBI, like it's probably coming, but it it it might not be here tomorrow. I think that's probably what I'm trying to say here. So, the US world holds the world's biggest gold stash. Yeah. 8.1 is that 8.1,000 tons. That is a lot. That's a lot of gold. Let's see. US Treasury assets would rise. Okay. Yes, we've talked about this. Now, let's get into how this would be like QE. So, this is Zero Hedg's argument. In other words, the best of all words. I think that's a typo. It's got to be a typo. Best of all worlds. A QE like operation in which see a QE like operation. One which see the Fed. My goodness gracious. Zero head. Who's doing who's doing your editing here, guys? Holy cow. one which we would see maybe the Fed quietly funnel almost 700 billion in cash to the treasury that was 990 uh but without actually doing a thing on net a gold so just to make sure we're all understanding the balance sheet here so the gold would go or a claim on the gold would go on the Fed's balance sheet that would be the offsetting asset and then they would dump the 900 billion in the TGA and those bank reserves if you want to look at it that way would be the offsetting liability. So why is that similar to QE? Because the Fed goes out instead of buying gold, they buy treasuries and that's the asset on the balance sheet. Then the offsetting liability or the bank reserves that they create to buy those treasuries in the first place. So here you're just swapping out treasuries with with gold. Now, I don't know. See, another question would be, not that it really matters, but can they legally do this? Because technically the Fed is supposed to just lend. So, if you're buying the gold, I don't know how that would work. Like, like how is that? I don't know. But there again, I mean, just look at what they did to the surveys sickness and they completely ignored pretty much every single binding law that was in the book when you look at the Federal Reserve Act. So why would they just all of a sudden pay attention to it now? They probably wouldn't. Although technically I think this would be this would be illegal or it would it would be gray area. Okay. Onnet gold remarking would increase the size of the treasury in the Fed's balance sheet. Yep, that's exactly what we just said. Allow for TGA to be used for Treasury priorities. Uh pay down the debt, fund deficit. We talked about that. Meanwhile, the Fed and the Treasury magically conjure up some 990 billion out of thin air to be spent on whatever. All because Treasury agrees that the fair value of gold is the fair value of gold. Okay. So, another thing that I'd like to point out here getting into how the monetary system really works is people put so much emphasis on the Federal Reserve. What's the Fed doing? The Fed doing? The Fed doing? The Fed doing? Oh my gosh. What's the Fed doing in their balance sheet? In fact, let's see if we've got the Fed's uh balance sheet here. Do we have it? Boom. So, here's the Fed's balance sheet. They get hyperfocused on the Fed's balance sheet and oh my gosh, are they printing money? Are they printing money? Are they printing money? But when I bring up the commercial banking system, people just tune it out. Like, oh yeah, yeah, yeah, those commercial banks, whatever. Anyway, what's the Fed doing? And the reason I laugh at this is if you really understand the mechanics here. So, let's go back to the Zero Hedge article. How they say they just print up or conjure up 990 billion out of thin air that can be spent on whatever. Okay. How is that any different than the banks? Like, so the argument here as far as this being inflationary and increasing the money supply is the the Fed is, let's just say, buying the gold and they're putting money that didn't exist before and the TGA and then the Treasury is spending that money back out into the economy. So all else being equal, M2 money supply when they spend the money back into the economy, M2 money supply increases by $990 billion because they're spending that out. Let's say they're just spending it in STEMI checks or social security checks. Then that's increasing the overall deposits, the commercial bank deposit liabilities by $990 billion. So then people look at that, they're saying, "Oh my gosh, the Fed is money printing. They're doing all this QE. It's inflationary. But the reason I find this rather comical is because let's just assume for a moment the Fed, we're not talking about the Fed. Let's just let's replace the Fed. Uh let's replace the Fed with JP Morgan. So, let's say JP Morgan comes in and buys, I don't know, $990 billion worth of gold or $990 billion worth of stocks or $990 billion worth of gold or silver or platinum or Bitcoin. What happens? Well, that asset goes under their balance sheet. And then what happens to the commercial bank deposit accounts of the entities that sold them the $990 billion worth of stuff. Their accounts increase by $990 billion. It's the exact same. It's the exact same. The the JP Morgan just increased M2 money supply by $990 billion. without the Fed, without the Treasury, without anything. Why? Because they're a bank and they're buying stuff from a non-bank entity. So, it doesn't matter whether the bank is the Fed or JP Morgan or Wells Fargo or Goldman Sachs or Bank of America. If you got a bank that buys anything from a non-bank, they are increasing all us being equal, they're increasing the amount of currency units that are out there chasing goods and services. So why is it that we just hyperfocus on every single transaction from the Federal Reserve? Right? We we go back to the balance sheet here and this goes down. Oh my gosh, they're doing QT. Oh, QT, what's going to happen to liquidity? Or it's going up. Like, oh my gosh, they're printing money. That's we're we're sloshing around with all this liquidity. What's going that's going to increase the stock market. It's going to do this. It's going to do that. It's going to do that. But yet, have you ever, other than me, have you ever heard anybody talk about the commercial banking system? And that actually they're just as important, and I would argue more important than the Federal Reserve. But for some reason, people think that when the Fed does this, it increases the money supply. But when JP Morgan does this, like nothing happens. It's crazy. But let's get back to the zero hedge article. So, needless to say, uh, concerns. Okay. Needless to say, gold remarking, just revaluing the gold uh, is seen by unorthodox. You know, I don't even know why this would be seen as unorthodox because it's just marktomarket accounting. You're just doing literally the exact same thing as every corporation. I mean, I understand what they're saying that it's a little weird just because the Treasury is doing it and they've had it marked at 11 billion for decades, but it's I mean, I could see the argument for doing it. It's like, hey, we're just following GAP accounting like every other corporation on the planet Earth. US gold has not been remarked for decades, likely to guard against volatility of the Treasury in Fed's balance sheet. Uh, Okay. Does that Does that really matter? Concerns over fiscal and monetary authority independence. Yeah. And maybe a little bit better argument there. But let's remember, excuse me, the Fed was the one that came in during the surveys sickness and basically bought corporate debt through a special purpose vehicle. You know, going back to really just ignoring the Federal Reserve Act. So, I mean, people I remember back then people weren't up in arms. In fact, I was one of the few people that were saying, "Whoa, whoa, whoa, whoa, whoa, time out. Time out. Time out." They can't do that. They can't do that. I mean, you didn't even hear a peep on CNBC or Bloomberg. It's like, "Hey, that Federal Reserve Act right here were supposed to be rule of law. Remember that? I guess that's out the window." No one was even talking about it. So, the fact that they didn't even care back then when they were blatantly ignoring uh the Federal Reserve Act and the law that is supposed to bind them. Uh if nobody cared about it back then, I don't know why they would really care about the gold revaluation now. According to none of the BFA's heaviest of Fed plumbing hitters, okay, Mark uh Cabana, gold remarking could cause TGA to be paid down in ways that would stoke macro activity, risk inflation. I mean, it all depends on how they spend the money, right? If they take the 9990 billion just sty checks helicopter money then yeah if they take the 990 billion and give it to Zalinsky probably not uh the BFA strategist guy conclusion is gold remarking is possible it's absolutely possible uh but the legal questions may not be wellreceived I wouldn't have any concern over that, especially if you're in a crisis type situation. Like, not that I'm in favor of of, you know, financial engineering or not like I'm in favor of the Fed just giving the Treasury 990 billion dollars that they could further distort the economy with. But, uh, as as far as, you know, what my base case would be as to the market's reaction, especially in a crisis, I don't think they would bat an eye. It's very similar like the government shutdown like me whatever. So I think the big question here for gold owners is you know can they do this? Absolutely they can. And would they do this in a potential crisis? Absolutely they would. if they do they but we're not at that crisis right now because you got an inverted curve or points of the curve are inverted. So there's it's almost like pulling the fire alarm when there's not only no fire but it's pouring rain outside and it's pouring rain in your house and you're and you're pulling the fire alarm. So So they're not going to do it right now. Uh that's for sure because there's no need. But if the crisis came about then yeah sure absolutely they could do it. Would the market really bat an eye? I don't think so. I think gold might get a bid just because of the narrative and people are kind of freaking out. They don't really understand what's going on. But if you are the treasury and you're going to do that if you're going to revalue up to a trillion to or to the market price I get it. But why not, like Luke Luke Groman says, why not just put in a bid at 20,000 and revalue gold up to that level and then go ahead and have the Federal Reserve dump four or five trillion into the TGA to try to bring down the debt or do whatever the central planners think needs to be done. I that's really how I would think about this. And then I think the biggest takeaway here in terms of the monetary system is for people to realize that look, if you really want to understand how this works at the end of the day, you have to realize that the Fed really isn't at the center of the monetary solar system and you have to realize that it's the commercial banking system. So if you are someone that is really concerned about QE or QT or liquidity or how that impacts M2 money supply, inflation, disinflation, deflation, you should be far more focused on what the banks are doing than the Federal Reserve. Because at the end of the day, what is the Fed? It's a bank. It's a bank. That's it. And if the Fed is buying treasuries, it's going to do the exact same thing to all those items and all those metrics you're concerned about as JP Morgan. So, if you're going to be focusing on the Fed, you should also focus more of your attention on the banking system in aggregate total because the Fed's balance sheet right now is what roughly 7 trillion, let's say. Okay. What's the aggregate balance sheet of the global banking system? 120 trillion. Uh, and and if you look at all the offbalance sheet stuff, if you look at all the derivatives, I mean, we're talking about quadrillions. So, you've got quadrillions over here that no one's paying attention to. And then you've got 7 trillion right here that everyone pays. Not only do they pay attention to it, but they analyze every single word and every single transaction with a with through through the lens of a microscope uh or a magnifying glass and it should be the complete opposite. All right, guys. Now, that brings me to today's sponsor. If you're a gold bug, which I'm sure you are, if not, you should be. The problem with prices going up is that your storage fees go up. So, good friends of mine over at Monetary Metals, they have solved this problem. And they came to me a few months ago and said, "George, we'd love to sponsor the show." I said, "Yeah, I haven't really had any sponsors. I'm not that interested." But they walked me through their business model and what they do, and I'm like, you know, actually, I'd like to set up my own account. And not for all my gold, but for a portion of it. So, I set up an account with Monetary Metals. 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You Won't Believe This…The Fed Might Do GOLD QE
Summary
Transcript
Hello fellow rebel capos. Hope you are doing well. Excuse me. We've got some big news from the Federal Reserve and Zero Hedge points this out that they might do gold QE. Gold QE. Now, I know many of you are probably asking yourself, what on earth is gold QE? But whatever it is, I don't think I like it and I would be right there with you. So, let's go over to Zero Hedge and check out what they're talking about and then think about how the Fed's balance sheet actually works. I think this is a great article to really get you thinking in terms of well, maybe they will do this. And what I'm talking about is a revaluation of gold on their balance sheet. They could revalue it a lot higher. We've done a few videos on that. I know Luke Croman talks about this all the time. We've done a few videos on this over the last few weeks. Well, actually last few months or so. But let's get right over to this Zero Hedge article where they talk about the Fed doing gold QE. Here we are. Whoops. How did I have no idea how that just Oh, here it is. Right there. Wrong one. Wrong tab. Okay. Gold revaluation imminent. US Treasury hoarde tops 1 trillion for the first time. So, I wanted to do this video for a couple different reasons. Number one, let's talk about gold QE, obviously, but then also I want to talk about the Fed's balance sheet. And that's what I love about this zero hedge article is they go into that quite extensively. So, on the back of 45% surge in gold price this year, the US Treasury hoarde. So the US Treasury or the US the government whatever on the asset side of their balance sheet they have a significant in fact I think the world's largest gold reserves. So what's really interesting is they value the gold reserves at a price based on like their cost basis or something like that. It's it's the gold on their val on their balance sheet is valued at like $35 an ounce. So, a lot of people are looking at this and saying, "Well, this is completely ridiculous. So, let's just go ahead and revalue the gold on the Treasury's balance sheet up to today's price." And this gives them over a trillion dollars. So, as far as at today's price and so then what they could do is they could go ahead and sell it's like gold certificates or something like that to the Federal Reserve. And I believe the Fed actually might already have some of these gold certificates on their balance sheet from the Treasury. And then what the Fed does is that's the asset. Then they go ahead and create bank reserves out of thin air. They put them in the TGA and voila, the TGA has more money that they could go ahead and spend into the real economy without having to issue the treasuries, without having to issue more debt. So let's go into this and then let's think about what are the probabilities that this actually happens and if it does what does it do to the gold price and then how does this really work mechanically because that gives us insights as to how not only the Fed's balance sheet works but uh probably more much more importantly the monetary system. Okay, market value of US gold reserves. So this is just the market value but I'm curious if they state What? It's listed right now on their balance sheet. Is that it? 11 billion. Wait a minute. The federal government's cash and other monetary assets in billions. Yeah. 11 billion, man. Yeah. So, I don't know why they do that. I don't know if that's an accounting deal. You would think, especially since the the Fed pulls out every single accounting gimmick they can muster up, they pull out all the stops. You would think the Treasury would do the exact same thing. Like, why wouldn't they just mark to market? I don't know. That's really weird. H, that's got me thinking. But anyway, let's uh keep moving on here. So right now bottom line is it's at 11 billion. So they could revalue this to a trillion and even if the let's just assume the Federal Reserve has these gold certificates which are a claim on this 11 billion then you revalue it to a trillion. Federal Reserve puts 900 billion in the TGA and then they could go ahead and spend that 900 billion without having to tax or without having to issue more treasuries. That's kind of the punchline here. But then, you know, Luke would come in and rightfully so say, look, if they're going to do this, it's like kind of a one-time deal. Um, and so if they're going to revalue it to the trillion, fantastic. Why don't they go ahead and try to repric gold at 20,000 by putting out a bid for gold? So you're trading treasuries for gold in essence and then you drive the price up to 20,000 and then you go ahead and do the revaluation because now instead of adding 900 billion to the TGA, you could add, you know, doing the quick math here. What's let's just say it's at 4,000 right now. You add five. So five five trillion, four to five trillion, something like that. And then you can pay down the US debt, get the debt to GDP down to a level that's more sustainable. I think that's what the argument would be. Not my argument, but that's what the argument would be. So here we go. I guess Zero Hedge does a little bit more precise math than I just did right off the top of my head. That means that an update of the reserves value in line with today's prices would unleash unleash roughly 990 billion into the treasury's coffers, dramatically reducing the need to issue quite so many Treasury bonds this year. See, this is where I have a different view. So, if I'm the Treasury and I'm thinking, okay, I have only got one shot at this. Why would I do that right now when the curve when the vast majority of the curve is inverted? And and what that means is you've got the belly of the curve, let's say, that where interest rates are actually lower than Fed funds. And what that tells you is there's massive demand for treasuries. So you would want to reserve this. You'd want to keep your powder dry, so to speak, until a time in which you the curve is is extremely steep. That would imply, especially if it's way above nominal GDP, that would imply that o all of a sudden supply matters. Now, supply really hasn't impacted interest rates going back 75 years as far as I can tell. And I always pull up this chart. I can just do it right now because I've got it up. But if you pull up a chart of nominal GDP and then if we had a chart of the 10-year Treasury yield, it would basically be a smoothed out version of this. And so, and even right now, you nominal GDP running at 4.6 as of Q2 2025. And what's the 10-year trading right now? It is Whoops. at it's under it's it's like it's like 50 basis points under nominal GDP. So if we you know and I'm sure you guys have heard the argument at at nauseium over and over and over again. Whoops. Let's get back to zero hedge that it's all we're going to have to increase the deficits. The government's going to spend money, which is absolutely true. And there's nothing that stops this train like Lynn says, which is definitely true. And therefore, we're going to have so much debt and so much deficit spending. And foreigners are dumping our treasuries that interest rates are going to go way up and the Fed is going to lose control of interest rates. And therefore the Fed is going to have to step in and do QE or or they could revalue gold to go ahead and try to pay down a certain percentage of the debt to get that debt to GDP down to where it would appease let's say the bond vigilantes. Like this is kind of the argument here. And my point is I don't know that they really need to do this because right now they sure as heck don't need to because the curve is inverted the majority of the curve and the if supply is actually an issue if you did have bond vigilantes that were out there you would not have an inverted curve. Your curve would be massively steep. It would be like almost like an exponential curve. Like as an example, Fed funds would be at 4%. The 30-year Treasury would be at 10, right? It would be that's where you get into the zone where you're like, "Okay, now we need to be worried. Now supply does matter, right? Especially if nominal GDP is at 4.5%." If nominal GDP is at 4.5%. The 10-year Treasury is trading at eight or nine and Fed funds is at four. Okay, now it's a different conversation. Now the market is telling you supply finally does matter. Now I think the odds of us getting there are extremely low, but that's I would save the dry powder for that type of situation. Like why would you deploy your dry powder when the the curve is inverted, which would tell you that there's massive demand for treasury? Just ask the price. So, I think this conceptually makes sense and it's something that we should consider the Fed might or the Treasury might do in the future for sure. Um, just like UBI, like it's probably coming, but it it it might not be here tomorrow. I think that's probably what I'm trying to say here. So, the US world holds the world's biggest gold stash. Yeah. 8.1 is that 8.1,000 tons. That is a lot. That's a lot of gold. Let's see. US Treasury assets would rise. Okay. Yes, we've talked about this. Now, let's get into how this would be like QE. So, this is Zero Hedg's argument. In other words, the best of all words. I think that's a typo. It's got to be a typo. Best of all worlds. A QE like operation in which see a QE like operation. One which see the Fed. My goodness gracious. Zero head. Who's doing who's doing your editing here, guys? Holy cow. one which we would see maybe the Fed quietly funnel almost 700 billion in cash to the treasury that was 990 uh but without actually doing a thing on net a gold so just to make sure we're all understanding the balance sheet here so the gold would go or a claim on the gold would go on the Fed's balance sheet that would be the offsetting asset and then they would dump the 900 billion in the TGA and those bank reserves if you want to look at it that way would be the offsetting liability. So why is that similar to QE? Because the Fed goes out instead of buying gold, they buy treasuries and that's the asset on the balance sheet. Then the offsetting liability or the bank reserves that they create to buy those treasuries in the first place. So here you're just swapping out treasuries with with gold. Now, I don't know. See, another question would be, not that it really matters, but can they legally do this? Because technically the Fed is supposed to just lend. So, if you're buying the gold, I don't know how that would work. Like, like how is that? I don't know. But there again, I mean, just look at what they did to the surveys sickness and they completely ignored pretty much every single binding law that was in the book when you look at the Federal Reserve Act. So why would they just all of a sudden pay attention to it now? They probably wouldn't. Although technically I think this would be this would be illegal or it would it would be gray area. Okay. Onnet gold remarking would increase the size of the treasury in the Fed's balance sheet. Yep, that's exactly what we just said. Allow for TGA to be used for Treasury priorities. Uh pay down the debt, fund deficit. We talked about that. Meanwhile, the Fed and the Treasury magically conjure up some 990 billion out of thin air to be spent on whatever. All because Treasury agrees that the fair value of gold is the fair value of gold. Okay. So, another thing that I'd like to point out here getting into how the monetary system really works is people put so much emphasis on the Federal Reserve. What's the Fed doing? The Fed doing? The Fed doing? The Fed doing? Oh my gosh. What's the Fed doing in their balance sheet? In fact, let's see if we've got the Fed's uh balance sheet here. Do we have it? Boom. So, here's the Fed's balance sheet. They get hyperfocused on the Fed's balance sheet and oh my gosh, are they printing money? Are they printing money? Are they printing money? But when I bring up the commercial banking system, people just tune it out. Like, oh yeah, yeah, yeah, those commercial banks, whatever. Anyway, what's the Fed doing? And the reason I laugh at this is if you really understand the mechanics here. So, let's go back to the Zero Hedge article. How they say they just print up or conjure up 990 billion out of thin air that can be spent on whatever. Okay. How is that any different than the banks? Like, so the argument here as far as this being inflationary and increasing the money supply is the the Fed is, let's just say, buying the gold and they're putting money that didn't exist before and the TGA and then the Treasury is spending that money back out into the economy. So all else being equal, M2 money supply when they spend the money back into the economy, M2 money supply increases by $990 billion because they're spending that out. Let's say they're just spending it in STEMI checks or social security checks. Then that's increasing the overall deposits, the commercial bank deposit liabilities by $990 billion. So then people look at that, they're saying, "Oh my gosh, the Fed is money printing. They're doing all this QE. It's inflationary. But the reason I find this rather comical is because let's just assume for a moment the Fed, we're not talking about the Fed. Let's just let's replace the Fed. Uh let's replace the Fed with JP Morgan. So, let's say JP Morgan comes in and buys, I don't know, $990 billion worth of gold or $990 billion worth of stocks or $990 billion worth of gold or silver or platinum or Bitcoin. What happens? Well, that asset goes under their balance sheet. And then what happens to the commercial bank deposit accounts of the entities that sold them the $990 billion worth of stuff. Their accounts increase by $990 billion. It's the exact same. It's the exact same. The the JP Morgan just increased M2 money supply by $990 billion. without the Fed, without the Treasury, without anything. Why? Because they're a bank and they're buying stuff from a non-bank entity. So, it doesn't matter whether the bank is the Fed or JP Morgan or Wells Fargo or Goldman Sachs or Bank of America. If you got a bank that buys anything from a non-bank, they are increasing all us being equal, they're increasing the amount of currency units that are out there chasing goods and services. So why is it that we just hyperfocus on every single transaction from the Federal Reserve? Right? We we go back to the balance sheet here and this goes down. Oh my gosh, they're doing QT. Oh, QT, what's going to happen to liquidity? Or it's going up. Like, oh my gosh, they're printing money. That's we're we're sloshing around with all this liquidity. What's going that's going to increase the stock market. It's going to do this. It's going to do that. It's going to do that. But yet, have you ever, other than me, have you ever heard anybody talk about the commercial banking system? And that actually they're just as important, and I would argue more important than the Federal Reserve. But for some reason, people think that when the Fed does this, it increases the money supply. But when JP Morgan does this, like nothing happens. It's crazy. But let's get back to the zero hedge article. So, needless to say, uh, concerns. Okay. Needless to say, gold remarking, just revaluing the gold uh, is seen by unorthodox. You know, I don't even know why this would be seen as unorthodox because it's just marktomarket accounting. You're just doing literally the exact same thing as every corporation. I mean, I understand what they're saying that it's a little weird just because the Treasury is doing it and they've had it marked at 11 billion for decades, but it's I mean, I could see the argument for doing it. It's like, hey, we're just following GAP accounting like every other corporation on the planet Earth. US gold has not been remarked for decades, likely to guard against volatility of the Treasury in Fed's balance sheet. Uh, Okay. Does that Does that really matter? Concerns over fiscal and monetary authority independence. Yeah. And maybe a little bit better argument there. But let's remember, excuse me, the Fed was the one that came in during the surveys sickness and basically bought corporate debt through a special purpose vehicle. You know, going back to really just ignoring the Federal Reserve Act. So, I mean, people I remember back then people weren't up in arms. In fact, I was one of the few people that were saying, "Whoa, whoa, whoa, whoa, whoa, time out. Time out. Time out." They can't do that. They can't do that. I mean, you didn't even hear a peep on CNBC or Bloomberg. It's like, "Hey, that Federal Reserve Act right here were supposed to be rule of law. Remember that? I guess that's out the window." No one was even talking about it. So, the fact that they didn't even care back then when they were blatantly ignoring uh the Federal Reserve Act and the law that is supposed to bind them. Uh if nobody cared about it back then, I don't know why they would really care about the gold revaluation now. According to none of the BFA's heaviest of Fed plumbing hitters, okay, Mark uh Cabana, gold remarking could cause TGA to be paid down in ways that would stoke macro activity, risk inflation. I mean, it all depends on how they spend the money, right? If they take the 9990 billion just sty checks helicopter money then yeah if they take the 990 billion and give it to Zalinsky probably not uh the BFA strategist guy conclusion is gold remarking is possible it's absolutely possible uh but the legal questions may not be wellreceived I wouldn't have any concern over that, especially if you're in a crisis type situation. Like, not that I'm in favor of of, you know, financial engineering or not like I'm in favor of the Fed just giving the Treasury 990 billion dollars that they could further distort the economy with. But, uh, as as far as, you know, what my base case would be as to the market's reaction, especially in a crisis, I don't think they would bat an eye. It's very similar like the government shutdown like me whatever. So I think the big question here for gold owners is you know can they do this? Absolutely they can. And would they do this in a potential crisis? Absolutely they would. if they do they but we're not at that crisis right now because you got an inverted curve or points of the curve are inverted. So there's it's almost like pulling the fire alarm when there's not only no fire but it's pouring rain outside and it's pouring rain in your house and you're and you're pulling the fire alarm. So So they're not going to do it right now. Uh that's for sure because there's no need. But if the crisis came about then yeah sure absolutely they could do it. Would the market really bat an eye? I don't think so. I think gold might get a bid just because of the narrative and people are kind of freaking out. They don't really understand what's going on. But if you are the treasury and you're going to do that if you're going to revalue up to a trillion to or to the market price I get it. But why not, like Luke Luke Groman says, why not just put in a bid at 20,000 and revalue gold up to that level and then go ahead and have the Federal Reserve dump four or five trillion into the TGA to try to bring down the debt or do whatever the central planners think needs to be done. I that's really how I would think about this. And then I think the biggest takeaway here in terms of the monetary system is for people to realize that look, if you really want to understand how this works at the end of the day, you have to realize that the Fed really isn't at the center of the monetary solar system and you have to realize that it's the commercial banking system. So if you are someone that is really concerned about QE or QT or liquidity or how that impacts M2 money supply, inflation, disinflation, deflation, you should be far more focused on what the banks are doing than the Federal Reserve. Because at the end of the day, what is the Fed? It's a bank. It's a bank. That's it. And if the Fed is buying treasuries, it's going to do the exact same thing to all those items and all those metrics you're concerned about as JP Morgan. So, if you're going to be focusing on the Fed, you should also focus more of your attention on the banking system in aggregate total because the Fed's balance sheet right now is what roughly 7 trillion, let's say. Okay. What's the aggregate balance sheet of the global banking system? 120 trillion. Uh, and and if you look at all the offbalance sheet stuff, if you look at all the derivatives, I mean, we're talking about quadrillions. So, you've got quadrillions over here that no one's paying attention to. And then you've got 7 trillion right here that everyone pays. Not only do they pay attention to it, but they analyze every single word and every single transaction with a with through through the lens of a microscope uh or a magnifying glass and it should be the complete opposite. All right, guys. Now, that brings me to today's sponsor. If you're a gold bug, which I'm sure you are, if not, you should be. The problem with prices going up is that your storage fees go up. So, good friends of mine over at Monetary Metals, they have solved this problem. And they came to me a few months ago and said, "George, we'd love to sponsor the show." I said, "Yeah, I haven't really had any sponsors. I'm not that interested." But they walked me through their business model and what they do, and I'm like, you know, actually, I'd like to set up my own account. And not for all my gold, but for a portion of it. So, I set up an account with Monetary Metals. 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