Lyn Alden: Fed Rate Cuts Will Cause Stagflation Increases? QT Is Over But QE Restart May Be Delayed?

Summary

• Macro Regime: Discussion of fiscal dominance, sticky inflation, and tariffs creating a stagflation-like backdrop with the Fed nearing the end of QT and likely shifting to gradual balance sheet expansion.
• Gold: Long-term bullish due to central bank accumulation and potential policy revaluation benefits, though tactically overbought and at risk of a near-term pause.
• Bitcoin: Positive 12-month view supported by institutional adoption, spot ETFs, and improved accounting; still trades as risk-on with liquidity cycles but favored versus gold tactically.
• Stablecoins: Structural growth expected and seen as incremental Treasury demand, though only a partial offset to deficits; policy signals are supportive of a larger stablecoin footprint.
• Energy: Oil producers and services are out of favor but offer improving risk/reward as shale supply discipline meets weak PMIs; long-term hydrocarbons remain essential.
• Natural Gas & AI Data Centers: Ongoing data center buildout is clustering near gas generation, reinforcing durable natural gas demand and indirectly benefiting data center infrastructure.
• Companies Mentioned: MicroStrategy (MSTR) cited as a major corporate Bitcoin holder; Caterpillar (CAT) referenced in currency-competitiveness context alongside Komatsu; Tether/USDT and Circle discussed in stablecoin market structure.
• Risks: Trade wars and tariff uncertainty, French financial system stress, private credit/CRE vulnerabilities, and weak global PMIs could cap near-term oil demand.

Transcript

Hi everyone, this is Jason Ber of Wall Street from Main Street. Welcome back for another Wall Street from Main Street podcast interview. We're recording this interview on Monday, October 27th, 2025. The S&P 500's rallied a lot lately. It's over $6,700. Despite all the crazy stuff going on in the macro conditions with Trump tariffs, it's been a weak dollar for a lot of 2025, although the dollar index has rallied a little bit lately. The gold and silver price got smashed today on news of a potential China trade deal. Today's special guest is a returning guest. They wrote a book a couple years ago. It came out, I think, in August of 2023 called Broken Money: While Why Our Financial System is Failing Us and How We Can Make It Better. They also are one of the top macro experts with their newsletter. Lyn Alden, thank you for joining me again. >> Thanks for having me back. Happy to be here. >> So, Lynn, I I talked about some of the asset price inflation and we've had a I would argue we've had a lot of asset price inflation for years now. despite all this, why do you think um President Trump, Scott Pascent, why do you think they're so adamant that there needs to be interest rate cuts rapidly in the near future? >> Uh well, I would separate um people in the administration from the Fed. I think the people in the administration uh they generally want higher asset prices despite the fact that asset prices are already good. Uh and they probably want stimulatory effects on the economy. Uh they they you know, they pretty much said as much. Um now there's been some of that in for example in the prior administration although um Biden himself was pretty um tight on it uh like Elizabeth Warren for example grilled uh drone pal on uh high interest rate policy during that time. So it's generally the case that um those in power would prefer more dovish uh policy when possible. Uh some of them tend to uh have a little bit more respect for the independence of the Fed. at least optically they will be kind of um light on criticism or on specific uh statements like that whereas obviously Trump uh is generally disregarding of social norms um and so they have more of a policy both in his first term and here in the second term of being more direct about their kind of desires for more dovish monetary policy. uh some of the people in administration that then try to articulate kind of in more detail what Trump is saying will generally argue things like that they believe that their policies will be disinflationary um and that you know the Fed will have that the Fed is maybe behind the curve and that they should be more forward-looking that that'd be their words uh in many cases um now for the Fed themselves they are also somewhat dovish uh so they're not as adamantly dovish as the administration is um but they do have penciled in um gradual rate cuts uh over the next year or so. Um I think their arguments are primarily around um that the the slight weakening of the labor market in their few view seems to be taking precedence over the fact that uh inflation as they measure it is still pretty sticky and high above their target. >> Now do you think the Fed's inflation target has changed? Because for many years what they had a 2% inflation target. I remember Janet Yellen talking when she was Fed chairman, not Treasury Secretary, about how their two they couldn't get their uh uh 2% inflation target, even though I would argue the real inflation rate was higher than 2%, but the Fed said with their official CPI that it was below. So, do you think that the Fed now realizes that basically inflation is not fully going to go away and that they're going to they're going to allow maybe a 3% annualized inflation target? Do you think that's like the new normal that the Fed um people at the Fed have? >> So, I I mean, they haven't officially changed their target. I do think that they are more fine with with something like a 3% uh uh level the way they measure it. Um I think the the bigger issue uh perhaps is that they're realizing that their tools are not um that suitable for addressing this type of inflation which I've talked about before which is you know if you go back to the 70s uh most of the like the broad money supply creation that was happening at the time was from bank lending and so raising rates dramatically could slow down bank lending and therefore directly tackle the the key source of the at least the uh demand side of inflation. Obviously, there's also the oil component on the supply side. Um whereas here over the past, call it five, six years. Um uh it's primarily been fiscal spending that's been the driver of at least the demand side of inflation. And there really hasn't been that many supply side issues outside of, you know, kind of 2022 time frame. Um and and most of it's not bank lending. So bank lending is at a totally kind of um uh low to mid level is pretty subdued. uh they've had that kind of compressed for years now. Uh they've got weak PMIs, so both manufacturing and service PMIs are pretty weak. Um prices paid for both manufacturing and service PMI are up despite weak activity, which is rare, and that's largely because of tariffs. Um and so when the Fed looks at kind of things that they have some degree of control over or influencing, they basically say like our portion's been done. um and there's nothing they can do about fiscal the fiscal deficits and then ironically by keeping interest rates high they actually add to fiscal deficits through the industry channel. Um and so that's the problem with fiscal dominance is that uh when you have high public debts and public deficits and it's pretty entrenched due to like demographics and kind of multi-deade policy decisions. um the central bank find itself kind of trapped where you know they they could they could raise 100 basis points, they could cut 100 basis points and it's actually I think not going to massively affect inflation either way because it's mostly that fiscal side uh as well as other things you know tariffs and that that's also part of the fiscal side. Well, canes used to call that what cost push inflation, but uh stagflation, I mean the Keynesians of the 1970s, the labor economists, they thought that stagflation was not possible, right? Because they thought that the only way inflation could occur was with there was uh wage growth. But um that proved the 1970s stagflation proved that you could have uh st inflation increasing without without wage growth. >> Yeah. Yeah, I mean if you if you funnel deficits uh to uh other areas besides wage increases going up, you can you can basically um cause all this extra demand for things. I mean basically as money flows out toward uh social security, Medicare, defense uh and interest expense. Um all that expense is someone else's income uh often through multiple chains of of intermediaries. Uh so even like you know employees in the healthcare sector, employees in the defense sector, all the people on social security um uh all the people that are receiving uh more interest expense than like than they would interest in income for them than they would if interest rates material lower. So that is you know getting out into both the domestic and to some extent the global economy uh and and has kind of a a demand side inflationary component uh at a time when also on our supply side. I mean so a lot of our system is designed around structural deflation from the from the productive sense. So for example, you know, we had a 30-year stretch of pretty rapid globalization. Uh you know, the China opened up to the world. Uh the Soviet Union collapsed and so all of this eastern labor and resources connected with Western capital. Uh and so you you had this really kind of um uh long period of excess supply. uh uh disinflationary growth uh and the cost of all that uh was a few things. One is fragility. The more you globalize supply chains, you know, in many cases the more fragile you make them. Uh and two, obviously there are winners and losers from that. So um uh we've de-industrialized the United States. We've kind of pushed our industry elsewhere. That's kind of the cost of it's kind of whole Triffin's dilemma being the global reserve currency. uh it's been, you know, we we get to exert our will in the world, but we gradually hollow ourselves out industrially. Uh and after many decades of that, um we're not really anymore globalizing. Uh now, you know, arguably we're going backwards in globalization now. But even if we're just going flat, even if we're just we're no longer in a period of rapid globalization, we've taken out that um supply side while the the large deficits are still um uh pushing on the demand side. So it's natural that um many you know prices in many categories are are above their their target. >> Well to add to your points there also I think another reason that inflation is stubbornly high why the Fed um is wondering why inflation won't come down is because of the weakness in the dollar for 2025. Yes we've had a a rally in the dollar lately what the last 6 to 8 weeks but over overall for 2025 I mean the dollar has been very very weak what for the first nine months of the year that was one of the worst starts in 30 or 40 years. Uh yeah, in rate of change terms, it's been very weak. It's been stabilizing somewhat more recently. Uh it's still pretty overvalued on a on a trade basis. Uh it's still um in its higher band like on its and it's kind of a multi-deade trend. It had, you know, kind of three really big bull cycles and two really big bare cycles. We're still, you know, in that elevated state that we've been in ever since 201, you know, 15 uh or so, late late 2014. we're still in that kind of that that higher band even though we're obviously way off the the highs. Um and but that that weaker dollar so far has you know around the margins been inflationary now with with oil as cheap as it is. Um you know I I don't think the dollar is necessarily like the main component here. um uh you know obviously if the dollar was stronger we we would have probably many parts of the global economy and parts of the domestic economy would be slower and that could have a disinflationary effect. Uh but generally speaking, when you get a weaker dollar, one of the ways that can come out is these, you know, much higher oil prices, which which hasn't really been materializing because, you know, there's demand weaknesses. There's, at least at the moment, a fairly abundant supply. Um, and so I I'd say more of it has to do uh with the the size of the deficits uh as well as there's still uh some degree of postcoid stimulus working its way through the system. prices take, you know, years to adjust over time as that as that kind of money just kind of trickles out into the system. So, there's still prices kind of catching up to the growth of money supply. Uh, and even though that that is now much diminished. Now, I know you've studied financial history. You've talked a lot in the past interviews with me and in your books about the 1940s, the 1970s stagflation. you you tend to side that a lot of the stuff happening now is more similar to the 1940s after um the 1929 crash and the Great Depression era um and I think after World War II ended. But uh historically speaking, are are these budget deficits when countries run these budget deficits, are these normally in the long run very um inflationary like stagflation, currency debasement type types of events? Because I I see that a lot of the deflation people just talk about uh you know like oh mountain bike prices are collapsing. You know those expensive mountain bikes the consumer has can't afford the credit for the big ticket items. We're seeing subprime auto loan defaults. So, where do you side with like all the distortions here and then like the some of these consumer discretionaries, people either can't get credit, can't get loans that they're defaulting versus like budget deficits being inflationary. >> Uh, yeah, they're all they're always multiple components. Um, so in I would I would characterize ourselves as as similar to the 1940s with the key difference being that we're more like the UK in the 1940s than the US in the 1940s. uh because at the time the you know the US was a rising power uh with a with a trade surplus. The UK was the incumbent power uh with the global reserve currency but a trade deficit. Um and uh so the United States is kind of in that sort of position. Um, and it's not the numbers as a percentage of GDP aren't as extreme as the 1940s, but the main comparison there is that unlike the '7s, when people think of inflation, they often think of the 70s, but again, that was very that was bank lending driven inflation primarily, plus the whole geopolitical oil issue. Uh, whereas the 1940s was a very fiscal driven inflation. So the main thing that this whole era the 2020s uh pretty much wherever you look in the developed world has in common with the 40s uh is that fiscal driven uh inflation component. That's the biggest factor. Now when it comes to what extent are monetized fiscal deficits going to drive up actual prices of things that depends on then money many other variables from there. So that when whenever you have a large increase in the money supply, you're very likely to get pretty pretty broad aggregate price increases as well. Um the offsetting factor of that is I mean if you get a huge ramp up in supply for something uh then um the you know the money supply growth won't necessarily translate into much higher prices for for specifically those abundant things. Uh it generally will still drive up prices for the scarce things. So if you double the money supply but then you double the uh supply of most commodities, it's still the case that for example waterfront property is probably going to go up quite a bit in price because that certainly hasn't uh you know uh increase in supply dramatically as the money supply has. So you'll get that very kind of heterogeneous effect on what things are going going up in price and what things are not. And then right now the US has and and this is also actually quite different from the 40s. uh most of the stimulus in the 40s, at least a lot of it, uh kind of was injected into the working and middle class. Um you know, the the Rosie the Riveter type of folk, the the the returning vets, they got all the mortgage um backup and stuff like that. Whereas uh here the the fiscal deficits are kind of more topheavy. they're more injected into um you know the the older >> bailouts corporate bailouts older Americans uh interest expense flowing to generally wealthy individuals and institutions um healthcare and defense spending which goes to corporations and then generally goes to their uh upper middle class employees uh on average. Um so it is it's spilling more into that kind of higher the higher brackets. Um uh and uh and then of course it depends on what sector you're in. If you're in commercial real estate, if you're um you know if you uh work if your income is tied to the volume of residential uh real estate, even the prices are holding up in many cases reasonably well. It's the volume's obviously uh very poor. Uh uh private equity, private credit, I mean these areas are pretty stressed. Uh the lower income consumer is pretty stressed. Uh and so uh certain products or or services uh that are bought by distressed um types of uh sectors uh people in in certain you know areas uh especially if they also don't have any supply constraints can certainly go down uh even though you have fiscal driven inflation. So if you take a niche thing like an expensive mountain bike and I'm not an expert on the mountain biking uh industry so I don't know what any what any sort of >> cyclical or seasonal trends there but yeah you have these pockets of weakness. I I've been somewhat tracking it uh because I I I'm working on a book right now. Uh book sales this year are not great and there's a lot of energy people asking why and it could be because around the margins lower income people uh are trying to um you know save save their income where they can and and just cutting down on books is is one of the possible categories. >> Well, I mean those mountain bikes are big ticket items. So that's like going and buying what an 8K flat screen TV. top of the line or top-of-the-line video gaming computer, you know, or a brand new car. I mean, those are big ticket items and in this environment where interest rates are not coming down yet, I mean, the consumer has a much higher cost of capital than someone who's more affluent. >> Yeah, that's true. Now, mountain bikes, I assume, well, depends on how high end of a mountain bike we're talking about. So, if it's if it's a mountain bike bought by uh on average a a middle income or lower income group, I would not be surprised if those are down. uh if the mountain bikes are purchased uh by in this you know in the higher income brackets um and if they're still down that'd be interesting. Uh it depends on you know what industry or or so forth but the point is manufactured goods on average have a lot of supply flexibility. Um it that's why when it comes to looking at price inflation compared to the growth of money supply one really has to look at aggregates. Uh where where is scarcity? So you know there's scarcity in providing health care services. There's scarcity in gold. There's scarcity in you know highquality waterfront real estate. There's scarcity um in uh you know many things like that. There's on average less scarcity in things like textiles, electronics um you know manufactured goods unless of course we talk about niche things which are which are increas becoming less niche like rare earth bottlenecks and things like that. But basically that general trend like let's say over the past 25 years the things that are more labor or resource intensive have tended gone up in price faster whereas things that we've gotten exponentially better at making grains textiles electronics uh plastic toys and stuff like that that generally is either not keeping up with the money supply or in some cases outright deflating in price um because the productivity growth has exceeded the money supply growth. Well, I I think the Keynesians, a lot of them, the hardcore ones, like the labor economists and a lot of these deflationist does, that's there's some of them out there, Lyn. I don't know if you've seen it, but some of them said there's no evidence of any inflation for for many, many years. It's just kind of shocking. You know, look at the asset price inflation. Uh, a lot of my bills, the everyday necessities are up a lot, enormously over the years. But I think you talked about aggregates. I think aggregates I think one of the main mistakes that a lot of these Keynesians make is they say well the um the money supply is up this but all the prices aren't up a uniformly amount like 6% or something therefore there's uh evidence that there is no inflation or they cite like something like oh the mountain bike prices are falling therefore there's evidence of no inflation but um you know when you have um all these distortions and central planning like this and the government's giving out bailouts or subsidies or unbidded contracts I mean it just creates enormous distortions throughout the economy where um certain prices can go up. Look what happened with some of these shares of certain companies or prices for certain items. The government decides it wants to hoard certain key strategic metals. You could have stuff like that. So like um consumer staple items, stuff you have to just to survive. Those items seem to be going up in price enormously over time. And now it seems like lately with the Fed raising interest rates the last couple years, credit problems, the economy slowing down, people are losing their jobs with um artificial intelligence. um software or outsourcing that the discretionary items now that people easily could have afforded maybe in the past, they're um either stopping buying them or they're potentially defaulting on them. What we're seeing now with subprime auto. >> Yeah, I would say if some if someone argues that there's no price inflation, um I invite them to hold bonds, [laughter] you know, if that's if that's what they want to do. >> They they probably have held bonds Lyn for the last four or five years and they might be out of a job. So, >> and that's rough. Yeah. So, I mean, I I I've been having this debate with some uh uh uh friends that are on more the the the deflationist camp. Uh and many of them were arguing for bonds and against other types of assets and and you know, um things the chips fell where they did. Um now, it doesn't mean that bonds can't be a decent trade from time to time, but basically um you know, bonds will buy you a lot less of most things. Now in the deflationist credit I mean certain things like you know it's it's oil like oil for example as I already mentioned is pretty cheap. That's a pretty fundamental component uh to to high inflation most of the time. Um so obviously there are pockets of weakness. Um but that's why there's a in in a K-shaped recovery people can often cherrypick uh the thing they want to focus on. Um but at the end of the day it depends on their job description. I mean are they making returns? Are they not making returns? Are their calls working? Are their calls not working? Um, uh, are they kind of growing in in share of things or are they kind of stagnating and shrinking? >> Well, also, Lynn, free market capitalism, you know, over the long term, if there's competition, if governments aren't putting trade barriers up and extra taxes and tariffs and subsidizing this industry or blocking that industry, you know, picking out winners and losers. Capitalism produces through competition, innovation, it produces beneficial deflation for the consumer. Look at how much cheaper quality TVs are, how much cheaper what nice computers. Um, those things are are cheaper. That's from beneficial deflation and competition. But, uh, it just seems to me the last, especially with with Trump coming in, I mean, he started this trade war. He's putting up trade barriers now. He's trying to what force prices from not falling in certain industries. >> Uh, yeah. I mean, I I've been on the record of um, you know, not being uh, very bullish on the effectiveness of tariffs. I mean there, you know, there are certain certain contexts where if you replace part of an income tax with a tariff in some sort of sensible way. Uh, you know, that could be a tool in the in the tool chest. Um, but the the way that this been done is it's primarily been attacks on to some extent on corporations um uh and to a lesser extent on consumers. Now if if the tariffs stay in place, I do expect those companies to increasingly pass on a greater share of those uh increases to consumers. Uh it also is add a lot of business uncertainty. Uh it's very hard to plan uh when you have kind of very mercurial um policy changes happening around you. uh a lot of headline risk all the time when you're trying to make kind of these these long like you know 5 10 15 year capital allocation decisions that you need a kind of a long forward expected uh return on investment uh when making that decision um you know the manufacturing PMIs are still weak um and so you know people can talk about reshoring things and you know there's always individual things being you know individual manufacturing facilities being built individual happening. When we look at the aggregates, um it's pretty weak. Um but I think we're in the we're in kind of when you have fiscal dominance, it it often gets the case where everything that could be tried gets tried. Um so if they find themselves spending too much um unable to raise taxes, it's very unpopular to do so for obvious reasons. Uh it's I think it's not surprising that they say, "Well, let's try to tax the foreign sector. let's try to do tax increases that are hard for people to kind of realize are potentially hitting them. Uh and seeuh to what extent that works. Um and so it generally takes months and years to sort this out. I mean earlier this year one of the big headlines was Doge uh that you know that we're going to slash uh massive amounts of government spending was kind of the headline stuff. Um Sam Callahan and I released a report on my site back in January kind of outlining pretty much step by step why that was not going to happen. Uh and you know overall spending this year ended up being higher than last year. Um there's very you know minimal cuts. They kept you know kind of pointing to all these like optical things. They were kind of doing interesting accounting um to try to say how much they were cutting. At the end of the day, uh while they, you know, they gutted a few kind of um smaller little tiny slices of the pie chart, uh they didn't actually make a dent in the overall u spending pie. And so >> under 200 billion, right? So I think like I think the actual estimates are under 200 billion what they were aiming for, two trillion or something like that. >> Yeah. And when you so when you look back and you say, "Okay, well I mean as the dust settles, uh it was what it was." And I think, you know, we still need longer to play out with tariffs. Um but then it's kind of like well it was what it was. Uh and so right now consumer sentiment is near record lows. Um stock market is at you know all-time highs. Uh a stock market is doing poorly in gold terms. Uh which is generally a sign of stagflation. Uh it's not it's not generally considered a booming stock market when you're underperforming gold. Uh even though um there's much worse things to be in than the stock market right now. um and you have uh just gradually weakening labor market. Um and it's it's just it's a challenging kind of like um place to be operating in. It's not it's not just the the current mix of policies, but it's it's kind of a lot of policies that led to this point as well. >> And a lot of the policies the mix of a it's a weird mix of stuff. It reminds me of reading about like Herbert Hoover and then FDR doubled down on it. Congress was doing similar stuff. is a weird mix of subsidies, bailouts, and tariffs. The issue now, Lynn, with the size of the budget deficits, how quickly the the national debt is growing. I think we're adding a trillion dollars now every 80 days. Last year it was 100 days. The issue now is, you know, Trump with the trade wars and before he negotiate gets all these trade deals finalized, you know, he he goes for um ridiculous, you know, talking about 50 100% tariffs first and then he wants to negotiate it down. I see. But then if you're a BRICS country, nonG7, what incentive do you have to hold US Treasury bonds or buy more new US Treasury bonds? >> Well, for the most part, you don't. And so there's not been uh a lot of uh especially uh foreign official uh accumulation of treasuries. Um there's still still been some private sector interest. Um as far as the amount of deficits um you know one thing we have to be careful of is you like you know things that happen in 80 days it's it's not a um smooth treasury growth throughout the year. So uh the past couple months has seen that the treasury refilling its cash account uh from very low kind of debt ceiling levels all the way up to their um kind of target level. Um uh and so I would extrapolate that all year. Similarly, for example, when when tax season comes around, that tends to be a low quarter of deficits. So, there tends to be higher deficits in the back half of the year, which we're in now. So, we're still running something in the ballpark of $2 trillion deficits, which are large, but they're not really accelerating at the moment. That combination of some tariff revenue uh combined with uh interest expenses that, you know, at least um the the Fed is no longer raising rates. Uh so some of that is starting to settle out and we're kind of in this choppy um not really accelerating but still high deficit uh environment. So um in public I hear Trump like it's back and forth whether he wants a strong dollar or weak dollar because I've heard Bent talk about that they wanted a weaker dollar I think months ago that that was part of their policy. Do you think that the administration they want a weaker dollar and do you think that they also want higher gold and bitcoin prices for different reasons? Uh so if you look at um Steen Mirren published a report back in November uh 2024 right after Trump's election and it was how to restructure global trade. Uh and of course he became uh you know Trump's chief economist now is on the Fed. Uh and so that that's kind of like the the the steelman uh argument for what they're trying to do. Uh that's kind of the you know the more like um uh academic treatment of of this administration's kind of tariff and and dollar policy and and what um uh Miring kind of point out in that paper is that that their expectation was uh that as they play hard ball in the beginning so as they kind of threaten tariffs and start from what they view as a strong negotiating position that it would probably result in a rising dollar uh and then as they make trade deals um they could include something like a Mara Lago accord to then you know purposely weaken the dollar after having locked in deals that are favorable to the US. That was it was kind of the highle game plan. Um and it didn't really work out like that. So as they played hard ball with tariffs uh they they got a weaker dollar. Um and and you know uh Bent did argue earlier that a strong dollar uh would push down inflation despite the the tariffs but then we got a weaker dollar. So they they have in some cases tried to have it both ways. Um Trump has at times he's he's done some of these interviews like it was a couple years ago with Bloomberg. I think it was actually less than a year ago. Um where he pretty articulately described uh how other certain other currencies were undervalued relative to the dollar and that for example like um Kamasu's like heavy uh equipment was at like an advantage compared to Caterpillar. like he was actually making something that sounded like a macro um researcher was saying that. Uh but at other times he's argued for a strong dollar in part because you know Trump's optics are around strength. Uh so generally they don't want to say out loud we want a weaker dollar per se. They'll usually use phrases like we want you know other currencies to to you know trade at their fair value. we want um other countries to stop doing currency manipulation which generally means uh that they want those currencies to rise in strength relative to the dollar. So I think it I think the problem is that they they they have conflicting goals. So they they want low inflation, they want a strong economy, but then they also want to reduce the trade deficit. Uh and they want to keep the dollar as the global reserve currency. The problem is that the way the world gets dollars to use the dollar as a global reserve currency is primarily through our structural trade deficits with the rest of the world. Uh so that's the cost we pay for for that and because of the fact they want to have their cake and eat it too. um they have conflicting goals and therefore they have these conflicting statements about the dollar because there's no like they can't just lay out like a three uh step policy thing that makes sense for all those goals. So in any given topic when you ask them something you're going to get one answer versus another answer. Uh and you know someone like uh Scott Bent of course is very intelligent. He'll be able to put together something that that at least sounds somewhat cohesive. Um but when you kind of you can still pick it apart is the problem. And it it's just because they in engineering like let's say you have um fast, cheap or good. The the kind of the joke is you can pick two. You can't pick all three. Um and that's kind of the policy mix right now is like out of all those things I listed, you can pick maybe twothirds of them. You can't pick all of them. Um and they've not been able to let go of the the one-third that they that they you know that they want to let go. So >> well they also can't expect uh China, Russia and the other BRICS countries to go along with everything they say easily. So I what I'm seeing now I don't know if you read the book Currency Wars by Jim Rickers where in the first chapter of the book and I highly recommend our listeners go and reread the book or read the book for the first time. It's cheap now because it came out I think in 2010 or 2011. there's a financial war game scenario and in the financial war game scenario I think the US is like threatening all these trade tariffs and trade wars and all this other stuff and the other countries are like you know what we don't want to buy treasuries anymore we're just going to start buying gold so a lot of the stuff that has happened the last three three and a half years with the Russia sanctions the 300 billion of Russian reserve assets that were confiscated the interest payments from Russia on their treasury bonds that were taken um as well by the US a lot of it seems to be playing out very similar to the financial war game scenario in that first chapter of the currency wars where Russia, China, and the other BRICS countries just decide they're tired of dealing with all these crazy, you know, Looney Tunes, yuseimity, Sam type policies out of DC. >> Uh, yeah. No, I I I think that's that's right. I think the the part where I would defend the current administration is that I do think that for years now, American politicians have underappreciated the importance of the structural trade deficit. It's just not been something that comes up uh almost ever. uh and it has been uh a structural issue because it's tied to our global reserve currency. And so I I do think that it was correct to elevate that as an issue. Um I I just think that the the the policy mix hasn't been particularly coherent. And an issue is that I think that the the US has not as strong of a hand as many people assumed. Um and and so that's the issue is is basically I think somewhat correct diagnosis but then uh not not the correct execution uh is how I would describe it. >> Yeah. I to add to your points Sarah from what I've heard in some of these trade deal negotiations they've actually tried to get some of these uh trading partners in trade deals to agree to buy Treasury bonds and these other countries have refused. So [laughter] take it I I I like I haven't seen an announcement saying that that's 100% the case that that's exactly but that's what I've heard like off the record from sources here. >> I think I mean the the key issue here right is is that that connection between the dollar as the global reserve currency and the trade deficits um and for you know let's say during the cold war um you know maybe it was the case that having the global reserve currency was very important. uh it allowed basically you know the Soviet Union had to get oil the the hard way whereas the United States could just print money and buy it more or less uh and that was a really big strategic advantage. The problem is when you run that playbook for decades, so after and Luke Romans made this point a number of times is after this the cold war ended. Um the the monetary system could have been restructured to be more balanced but it wasn't. Um and uh so the whole world uses the dollar ledger which means the whole world needs dollars which means we send dollars out into the world they overvalue our dollar. Uh it boosts our import power. It hurts our export competitiveness for lower margin things which primarily manufacturing. Uh and so we hollow ourselves out. We flood the whole world with dollars so they can use it as the global reserve currency. Um and uh I I think the the the correct approach here would be to pull back gracefully when an empire gets overextended and it's no longer benefiting from being an empire. It's you know its borders are too big to defend properly. uh there's trouble at home uh and all that. The the correct move is to basically um tact like retreat from a position of strength and focus on the core. Uh and in that case it would be um saying you know we're fine with you know Asian countries using China's currency more. We're fine with a more multipolar currency world. We're fine with gold re-entering the system uh as kind of a a global money. We're we're fine with Bitcoin uh being this this uh store of value and and open-source settlement network. Um basically that you know we don't necessarily need 800 foreign military bases. um and you kind of retreat tactfully from that position of strength uh and then say we're going to focus on the robustness of our domestic economy uh and having really good trade relations with our neighbors uh and kind of focusing on making sure our energy policy is great and then trying to reshore some stuff in exchange for giving up some of that kind of unilateral ability to sanction anyone in the world. But the problem with almost all empires is they never do pull back from a position of strength. They instead fight for every every little border they have. They fight with all their blood and treasure until they lose it. Not from a position of strength, but from a position of weakness. I I asked you a second part of question a couple minutes ago. You talked about the weaker dollar in their stance and it's like one thing in public, one thing in private back and forth. The markets aren't um they produce a weaker dollar. The other part of this is do you think that the Trump administration do you think that they want higher gold prices that maybe they were in there buying some gold earlier this year maybe to get the dollar down and they they would have denied this? And do you think that long-term that they have a strategy where they're going to adapt? They think that the US economy can flourish that DC can be all right financially with with its finances at higher gold prices at higher bitcoin prices. >> Uh so I'm not sure if they directly participated in gold going higher. Uh Scott Bent did uh give comments recently that were pretty favorable on gold and obviously the administration's taken a more favorable view on Bitcoin than the prior administration did. Uh so I think at least at the bare minimum I think they are fine with higher prices. Um uh you know you can ask uh geopolitical strategists uh or those that are kind of closely tied in with the administration what individuals may think about it. Uh but I think in general that they're fine with those higher prices. Um I I think that they you know to some extent if you just see gold run away uh I think you know there are people in the administration and within the Fed that would be concerned about that uh because it would you know generally show a lack of confidence uh if you have gold just trouncing Treasury bonds uh year after year after year um that can start to become a problem if you if you still want the dollar as the global reserve currency which this administration uh ostensibly does. Um, but I think that that, you know, for how gold how cheap gold was, I don't think a doubling of it, which is basically what happened from from to call it 2,000 to 4,000 an ounce, I don't think that poses a problem at all for the United States. They do have uh supposedly significant gold reserves. um they do have that um mechanism uh that's right in the Fed handbook uh where they can revalue uh their gold holdings up to uh you know basically whatever price they want. They can the easy obviously the easiest one is just to jump to current market value but they technically uh can also do open market operations and and jump gold even higher and that's one of the few ways that they can spend without issuing debt. So if they did want to do some sort of intentional debt devaluation, then higher gold prices are uh beneficial. So um you know I I kind of view the administration as neutral to positive uh on gold and bitcoin at least up to certain levels. Yeah, I agree. Uh Judy Shelton what is an adviser and she has a book out about this about gold back treasury bonds and having a higher gold price. Also, uh, Jim Rickards, I think about six or seven years ago, he put out a smaller book called The New Case for Gold, and it was talking about why the US government would would try everything else, basically, a lot of the stuff over the last 15 or 20 years, and then eventually decide that they wanted a weaker dollar, and that they would start buying gold and move the gold price to a certain level now, not, you know, runaway prices like you said, but move it to, I don't know, four or five, $6,000, get the dollar weaker, and then manage the gold price that way. And then that would um allow the US's what asset side of the balance sheet with the gold holdings to be worth way over a trillion dollars. >> Yeah, I think that'd be the smart mechanism. I think doing doing open market operations earlier to get more official gold on the balance sheet would have been useful. Um uh my guess is that this just kind of happened without them. Uh you know they might not have fought it or you know they wouldn't really have a good reason to fight it. And I think you know if I go back to my point around empire is basically one of the ways of that that playing that long game of kind of retreating from a position of strength is to let gold and and you know to some extent Bitcoin go higher to have these neutral reserve assets because basically the way to rebalance the global monetary system is to not have any one country's ledger be the primary uh liquid savings of all the other countries because that overvalues their currency and affects their trade balance because they have to flood the rest of the world with that with units of that currency. Uh and instead for the primary uh liquid savings asset to be some neutral money. Uh and so historically the I mean the biggest one is gold with something like a 27 trillion market cap. Uh Bitcoin is like the you know 17year-old upandcomer. Uh that's like a two trillion market cap. um uh but assets like that or a kind of a mix of multiple countries um uh currencies and bonds uh is a more balanced way uh to do things. Now because of network effects this is not always intentional uh and so uh you know when a when a money becomes larger and more liquid uh that begets more liquidity uh the it's self-reinforcing and so the dollar has had that kind of benefit and that curse for a long time uh until basically the cost started to catch up with it. Um and so but yeah, I think I think that a smart move and I don't know to what extent they are doing it, but I think a smart move uh is to uh you know support uh gold and bitcoin and going up in price uh or at least like not get in the way and say sure we we want a more uh polar uh multipolar and decentralized global store value and payment system. Well, it see it seems according to estimates that the Trump family has made billions of dollars extra in the last three to five years, mostly off of crypto. What Eric Trump just launched, what a new competing to tether, a new stable coin. I think it's publicly traded on the NASDAQ. Do you think the goal from the Trump administration, the Treasury, the US Treasury Department, is to for a higher Bitcoin prices, so then there's more demand for stable coin and then stablecoin will buy what? More US treasuries? >> Well, there's a couple questions there. one is I I obviously I do think that they want their bags higher. Um that that is I think true. Uh and then as far as the stable coin policy um yeah I do think that they are viewing stable coins um as a potential uh demand source for treasuries. They pretty much said it outright. I mean uh uh you know secretary um uh Bent has said it outright. Um some of them have cited the uh city report. So, City released a report earlier this year and they outlined a bare base and bull case for stable coin demand uh I believe through 2030 uh and um uh Bent cited the uh bull case which I think was 3.7 trillion uh of of stable coin demand by that time. The the base case was much lower at like 1 something trillion uh and the bare case was lower than that. Uh so basically what city did was they they looked at all the different types of uses for the for you know demand sources for dollars. So it could be money markets. It could be domestic bank accounts. It could be foreign dollar denominated bank accounts. It could be domestic holding of currency. It could be foreign holding of currency. They kind of looked at all these categories uh and they said what you know to what extent is it reasonable to expect stable coin to take market share. And then for their bare base and bull cases, they assumed, you know, higher rates of stable coin taking market share from those different categories. And they got up to those figures. Now, it's important to point out that um just because you, let's say you add a trillion dollars in new stable coins, which would be quite a bit cuz right now there's only, you know, a few hundred billion in stable coin market cap. Let's say you add a trillion over the next 5 years. Um that's not entirely new dollar and treasury demand. Uh because that is partially coming from uh existing sources of of dollar and treasury demand. That's coming from money markets. Uh that's coming from uh uh demand for bank accounts. That's coming for uh foreign dollar bank accounts. And so partially what you're doing is you're converting a fraction reserve uh to what is ostensibly a full reserve. Um so a stable coin is is is ostensibly backed primarily by treasuries. Uh for a while there was also reverse repos. Um uh these kind of lower risk types of collateral. Uh whereas banks are you know a bank deposit is backed partially by treasuries but then also by a bunch of other loans and things like that. Uh and so what that does is that does uh on net increase treasuries. Uh but it's only a percentage of that headline amount. And then you have to look at magnitude. So let's say let's say we do add a trillion in stable coin market cap and let's say half of that represents entirely new demand for treasuries. Let's say you know half a trillion. Um you know if we're running $2 trillion deficits a year that's 10 trillion in deficits over that 5year period of which stable coins might have absorbed half a trillion. Um and so uh >> could you talk about um how stable coin the demand and what they buy how it increases when say let's say Bitcoin goes to 200,000 250 300,000 how much more assets under management would stable coin have so would they would they be buying hundreds of billions more than would they have a lot more access to uh capital and liquidity assets under management if Bitcoin goes let's say to 300,000 or 500 some somewhere a lot higher then >> well it depends so one of the first use cases of stable coins was as a trading unit of account in offshore exchanges. So as Bitcoin got bigger, stable coin balances got bigger too because people were flipping back and forth between Bitcoin and stable coins. Um now it's the case that um you know institutions and other other kind of like um you know not like on onore type of things are kind of the principal sources of demand for bitcoin. It's less correlated with stable coins. Um the large holders of bitcoins uh like Micro Strategy for example have you know almost nothing nothing to do with stable coins. Uh now some of the biggest like the biggest stable coin issuer Tether they do take some of their profits and put them into Bitcoin. Um and so to the extent that they, you know, the Bitcoin goes up, uh it strengthens their balance sheet. Um to the extent that the stable coin market grows, uh and if they continue their investment plan, they can they can invest more of their profits, uh into Bitcoin, uh at accelerating rate. Um but for the most part, they're they're somewhat separate markets. Um you know, other than of course that you know, trading volumes go up, you generally get some degree of uh intercorrelation. Um, but I would say they're at this point they're pretty different uh demand sources. And part of the reason why Tether has grown faster than Circle is because like a lot of the Circle stable coins were used in things like DeFi, whereas Tether is actually often used in the emerging world and now Tether what is buying physical gold. They're buying gold mining stocks or buying royalty shares. I'm just kind of scratching my head at some of the press releases that are coming out. They're mining like 10% equity stakes in some of these gold mining companies and precious metal royalty and streaming companies. >> Yeah, I mean Tether has a very large balance sheet. I haven't um closely followed their latest investment decisions. Um I used to follow it more closely. Um but yeah, when they when they have all this interest income from their holdings, um they are investing in a lot of different companies. They're also, you know, yeah, they're active in a in in venture to varying degrees. They're active in all sorts of things. So you're saying that there's not a 100% like a almost a pure 100% correlation one to one. Then say if uh the Trump administration thinks that uh Bitcoin price is going up to 300,000 then that creates the 3 trillion bullcase for treasury demand that Scott Bassan is talking about that he cited the research report that that that pro won't necessarily happen even if Bitcoin does go to a lot higher price. >> Yeah, I think they're mostly separate markets at this point. I think that basically stable coin increases are primarily demand for dollars and treasuries. Now I happen to be the of the view that over the next several years I think both of those things are going to go up and to the right. So I think I think Bitcoin price is going to go up and therefore the market cap is going to increase and I also think that the um amount of stable coins is going to go up by at least several hundred billion uh you know perhaps some of these higher numbers. So be I happen to be bullish on the market caps of both assets but I view the reasons as as somewhat different. Now I guess the the part that they share in common is that as more and more people understand those two assets uh you know if you're in Egypt and you're holding Egyptian pounds and the Egyptian money supply is growing faster than uh the growth rate of dollars and it's growing faster than the growth rate of gold or bitcoin. Um, you know, historically Egyptians do invest in in gold and sometimes they'll buy dollars on the, you know, like the black markets of of Cairo. Um, but if they can do it from their smartphone and they can buy Bitcoin or they can buy stable coins or in some cases they might able to buy interestbearing stable coins, you basically passing on some of the treasury interest to the holders. Um, you know, as more and more people around the world, billions of people learn to do that, uh, and as the tools get easier to use, that is one of the things that they that they perhaps do have in common, Bitcoin and stable coins, is that they both represent alternative liquid things that people around the world can put their money in. And of course, the key difference is that Bitcoin is is decentralized. Bitcoin is scarce. Um, but Bitcoin is volatile. uh and so it's it's generally more suitable for longerterm holding. Uh whereas stable coins uh they they get debased, they can be frozen. Um you know they they ultimately are the dollar often without interest. Um but they're useful for working capital especially if you're uh if your alternative is a another weaker currency. Um so that's what they have in common. >> Well, Bitcoin prices are also heavily correlated what with the NASDAQ 100. So they're more of a risk on speculative asset. Uh yeah, so Bitcoin generally correlates with liquidity. Uh multiple assets do um now prior to COVID um there was less correlation between Bitcoin and the NASDAQ because liquidity on average was less of a factor back then. There were these fiscal and monetary forces were just not quite as big in the second half of the 2010s as they were so far in the in the first half of the 2020s. Um and so a lot of things move with liquidity. Um uh and Bitcoin is is generally no exception. Um, gold being a more um defensive asset uh has a more mixed uh correlation with liquidity um because it is more of that riskoff asset and I I think Bitcoin is going to remain uh is often going to be traded as a risk-on asset until it's much larger than it is now. >> Well, also I mean there's a lot more institutional ownership. What for many many years over a decade it was very tough for any institution to get any ownership of Bitcoin. I mean there was a lot of uh pension fund boards. They couldn't get any approval to even buy a single bitcoin. I know hedge fund managers that couldn't buy any bitcoins with any client funds. So personally they were buying bitcoin. They're trying it out. They're buying it. But with their own shareholder with their own investor money that they were managing professionally they couldn't buy any. >> Yeah. And and that's I mean the the this cycle has been primarily defined uh by corporations and other types of pools of capital buying now that it's easier to do. So they this obviously the spot ETFs added to that. Um the fazby accounting changes uh made it less detrimental tax in terms of um accounting treatment. I mean uh it's a whole bitcoin on your on your balance sheet. Um uh just that the the asset became large and liquid enough for institutions to have it on their radar. I mean when it was a $50 billion asset, nobody cared at that scale. You know once it's over a trillion and stays there uh they care. um some even sovereigns get involved. Um and so it's it's it's natural that that this cycle is driven more by them. Uh so far most indicators show that that retail uh investors are not particularly participating uh in this cycle. Uh either in Bitcoin or in broader crypto. Uh I think the the broader crypto space which which many people know I'm I'm less favorable on than I am on compared to what my views on Bitcoin and stable coins. I think the broader crypto space has burned a lot of retail uh investors and speculators. Uh and then also I do think that some of the twospeed economy aspects that we talked about um you know there's lots of retail investors that just don't have the capital to to buy a ton of Bitcoin. And so those that that do are often the wealthier the the corporate the the the bigger balance sheets that are out there at the current time. >> A couple more questions before I let you go. So, it seems that uh quantitative tightening is ending. They haven't restarted QE officially. Do you think we're going to have to see maybe like Jeff Bank, some other type of credit event or pro additional problems in the repo market where maybe like a large hedge fund or or a sizable bank that has borrowed in repo to put on leverage trades or other um loan books or other derivatives bets or other stuff, they have a counterparty fail and then the Fed steps in similar to 2019. Do you think that in the not too distant future over the next uh 6 to 12 months we're going to see something like that and that's going to what uh do a 180 on the Fed's official balance sheet? Well, we could have counterparty fails for any number of reasons. I think that I think the path with the Fed's balance sheet is going to be that they're very close to stopping quantitative tightening. Um so uh basically they compared to the repo spike of 2019 uh this time they have a standing repo facility in place uh and uh sometimes at quarter end uh due to window dressing uh that's been used uh so bas for uh to take out the jargon basically uh say banks and other financial institutions they want to uh make the last day of their quarter their balance sheet look good because that's the snapshot that's going to be on their quarterly report. So they'll they'll generally do um you know various kind of liquidity actions to do that. So there's kind of a a a little bit of a rush for liquidity at the at the last day of a quarter. Um so there has been some usage of the facility during those quarter end periods. What makes the last month interesting is that in midepptember uh and then again here in October uh there's been usage of the standing repo facility even outside of a quarter end even outside of you know the end of September which was the quarter end. uh and so that that shows that there's more stress in the system. There's more kind of liquidity shortages. Now, the Fed actually predicted this. Uh they they released New York Fed released a paper saying that the they think that the transition um uh of around 12 to 13% bank cash as a percentage of bank assets uh aggregate is the transition point between abundant reserves and ample reserves. And that's where they're at now. So, as they've kind of reached that level, they started to get these little liquidity strains. In addition, the New York Fed's been releasing these annual reports uh saying that they expect the Fed balance sheet will decrease until late 2025 or 2026 uh and then it'll gradually start increasing in line with nominal GDP. Um and that's what I expect to happen. I think that basically they're going to do they're going to stop QT uh and then after some months uh if if repo facilities continuing um they will probably go back to a period of of gradual balance sheet increases. So, not some sort of very rapid, you know, giga stimulus, but just more mild one, unless there's a a separate event apart from what I'm talking about now. But just looking at this these liquidity constraints, I think we'll see a gradually rising balance sheet uh which was actually similar to the repo spike, although except the fact that I think it'll be more smooth than that. So kind of the not the type of stimulus we saw during CO. Um and the challenging thing there of course is that um in some ways that seeds the the size of the balance sheet over to the fiscal side um because very large fiscal deficits can cause liquidity issues. Uh and the Fed will basically be putting out liquidity issues uh by expanding their balance sheet. Um and so I think we'll we'll be in a kind of a a new era. I mean the the past 3 years have been quantitative tightening and I think that's coming to an end and we'll see a gradual increase. Now I I also think I mean and the Fed's basically forecasted this is that they will continue to let mortgage back securities mature off of their balance sheet uh even as they go toward um reaccumulation of of T bills. >> Okay. Well, that's the plan as of now. We'll see what happens if things get worse with Jeffrey's Bank because what Jeffrey's Bank there's I I think they've been borrowing from the Fed's discount window. There's at least um quite a few banks that have been borrowing from the Fed's discount window. Well, that's emergency. So, normally um banks or other financial institutions do not borrow from the Fed's discount window because that that information becomes public, right? And then the short sellers know and then they start attacking the shares of that company. >> Yeah. So, we'll see what happens. I mean, there's always individual banks that have issues. Um I'm what I'm saying there is I'm looking at kind of aggregate liquidity across the system. Uh kind of like how back in uh March 2023 uh there were specific banks uh that had these these very unique characteristics uh that got in major trouble um and and some of them went under. Then what they had in common the ones that went under generally had a high ratio of uninsured deposits. So that's either business deposits or high- netw worth individual deposits that were way above the FDIC limit. Um so those types of depositors are more flighty because they you know they don't have reason to believe that their deposits are insured. Um and uh they also had generally had rapid um deposit growth in the in the preceding years and then they invested it heavily into like long duration treasuries and and mortgage back securities. And so that combination of when when rates went up really quickly and treasuries went down catastrophically uh that our our deflationary friends were holding. Um and so some of those banks were underwater and then they got rugpulled by the depositors. Um now most banks back then were fine. Um but the handful of banks that were uniquely exposed were indeed in trouble. So the Fed, you know, there there were banks that went under but then the Fed was able to continue what they were doing. Um, so I think that again here there might be some specific banks that are in trouble. They're there generally always are, especially at any sort of pivot or turning point. Um, but I think that the overall balance sheet will generally be slowing down its shrinkage pretty soon. Uh, and then in the months that follow pretty gradually increasing. Uh, it would take, I think, a pretty big shock uh, to have something that deviates from that and maybe cause it to go up more quickly. Uh for the listeners out there who didn't pay attention to this over the last couple years, Lynn's describing what happened with the Silicon Valley Bank and that was actually the first case we've ever seen of a digital bank run because people could literally pull out millions of dollars from their bank account with their phones. And so like the FDIC, Silicon Valley Bank, the depositors moving massive amounts of funds, many many billions of dollars because there were people worth millions of dollars, Hollywood celebrity, Silicon Valley people pulling millions of dollars out very very quickly that amounted to billions of dollars in aggregate. It just destroyed their ability to uh manage the bank. >> Yep. >> Yeah. So, we saw like a bank run. It occurred what in the span of a couple days, just a insanely quick bank run and it was all digital. There wasn't, you know, the old bank run from uh the 20s or 30s or 40s where people were standing out in line to get their money back. It was nothing like that. >> Yeah, that's one of the cases for higher reserves. U so before the global financial crisis, US banks on average had only 3% of their assets in cash uh including reserves which is a very tiny sliver of even that um and whereas now um you know banks have something like 13% of their assets in cash uh which gives them a little bit more of a buffer uh for when they get these types of of runs. And of course uh if there's another problem with the bank then a 13% buffer won't be sufficient. Uh but in general um banks are more liquid than they were um because they were extremely levered going into the global financial crisis. Um yeah >> well there's a problem with fractional reserve banking in general. What in 2008 it some of the banks got levered to I think Lehman Brothers was what 60 to1 or and Bear Sterns was 80 to1. I think City Bank at one point in 2008 or 2009 was leveraged 100 to1. So they just like uh it was absolutely insane the leverage ratio some of these banks got to and they were basically insolvent and they changed the accounting rules. So I don't know if things are are as bad now. I I think in Europe it's bad from what I'm hearing with the French government debt. But I mean there is obviously private credit problems. What 300 billion at least and then there's the derivatives tied to that. So the private credit markets the subprime auto loans that seems like and commercial real estate seem like huge huge problems here in the US. But then there's problems in Europe too with French government debt and whatever's tied to that. Yeah, I have concern around France. I I think I think the what I would describe is that in the US, so private credit and private equity, I think that's mostly going to be bad for the investors in those funds. Um I I expect that the spillover uh of the damage that happens there will be pretty low into the US banking sector. Um that's not to say that there won't be maybe individual banks caught out. I mean, there's thousands of banks. There's always a bank and a headline failing. Um but I I think that will be fairly contained for US banks. Uh I do however have more concerns around the French financial system. I I think that's you know if I were to list one of the problem areas uh globally I think France uh financially is is one of those key problem areas. >> Oh yeah. I agree. And whoever is holding that French government debt because there's going to be huge problems with that. I don't know if it's going to get restructured. The derivatives that are tied to it. I think even in Germany Lynn they're trying to dump now the German banks and some of the private equity firms. They're trying to dump some of those bad investments, that toxic sausage onto retail investors, and I think I just saw that recently. So, that's like total desperation. >> Yeah, I haven't followed that closely, but I wouldn't be surprised. >> So, last question here. I I I'm literally getting like messages from trolls that like oil demand is dead, fossil fuels are over, uh why don't you start interviewing wind and solar and battery experts? What are what is your position? Because from a sentiment standpoint, I mean, for oil and natural gas, I mean, for natural gas, I see a clear demand picture. For oil, I mean, we're close to the marginal cost of production here. The sentiment is really, really bearish. Do you think riskreward is starting to look good for for oil companies? I I think it looks decent. Um, you know, the the sector has been more bearish than my expectations. So you know while like I say the gold part of my portfolio has done better than I expected uh the the oil producer and services companies have done worse than I expected. Um now the fact that you know PMIs so manufacturing PMIs for example uh have been in this slump for like an unprecedented amount of time uh because we have this kind of awkward fiscally dominant environment uh where the Fed is is trying to be tight trying to slow down the private sector while these fiscal deficits pour in. um you know, US industrial production's pretty flat. Uh Europe is de-industrializing uh um uh and so there's there's not a like a huge uptick in global demand uh for um oil uh and supply while you know there are constraints in sight. I mean as like shale is not particularly profitable to aggressively drill at the moment. Um you know supply is kind of very gradually looking to roll over. Um there are kind of these longerterm constraints that are forming. Uh which I do think will eventually result in bullishness. Uh it's just the case that at at this time given all the uncertainty around the trade war uh given China's kind of ongoing um excess capacity and disinflation uh given weak uh manufacturing activity in the US and elsewhere uh the overall kind of demand from energyintensive industries uh in most countries or at least the a lot of the big countries is not particularly high at the moment. Uh so when you have kind of you know lackluster demand uh and then okay enough supply um we have this kind of really middling weak price range uh and so I think the deciding factor is that shale is not really sustainable for the long term at current prices and so I think that that will kind of reset until um it starts to constrain supply and push the cost up. uh I do think that the the world will be using uh all forms of hydrocarbon uh including oil uh in in large amounts for for many many decades to come. >> Yeah, I think the supply demand picture for natural gas, liqufied natural gas, uh nuclear power, uranium is very very different because it's tied to the data centers. Um you know, if Bitcoin goes to a higher price, you're going to need more electricity for Bitcoin mining. But especially these data centers, I mean, I'm just seeing tons of articles. I know there's a lot of people that think like AI is a full bubble. It's not useful at all. The companies are spending the money here in the United States, Canada, Europe. They're building the data centers out. I mean, there's only a couple large data centers that are actually online. Most of the stuff still under construction or waiting in the queue. You only have a couple large data centers from Colossus XAI. um the well the XEI Colossus data center one in uh Tennessee and Mississippi and then the one in Texas Stargate one from OpenAI and Oracle and the other large companies. So there's only a couple large ones online right now uh as that those data centers get built they're all next to natural gas facilities. >> Yeah. And markets seek arbitragees. So, uh, it's long been the case, uh, that with cheap, u North American natural gas, and that's because natural gas is is not very funible, uh, even compared to oil. And so, um, it's been the case that natural gas has been less expensive in North America than elsewhere. And if you look at the energy component of natural gas compared to oil, uh, it's much cheaper on an energy basis. And so, um, you know, there's various incentives to try and try to find ways to use that natural gas more so than the oil. Um and so as as data centers and other uh sources demand have risen um they primarily been going after natural gas which makes a lot of sense. Um and that buildout will continue until it kind of reach like it its kind of temporary capacity. Um probably some washed out and then you know we'll maybe have the another leg higher. >> Yeah. So this is this is the issue like the people that are saying AI is a full bubble. I mean like people said the internet was a bubble and yes there was a lot of unprofitable companies. Yes. a lot of these like Pets.com and some of these other ones, the shares went up. It was solely on what um speculators, there was no actual business there. But then after the internet bubble collapsed, look at all the other companies that came to fruition with uh Amazon and and Google and so many of the other ones. So the money was invested. Yes, it wasn't invested efficiently, [laughter] but um eventually, [clears throat] you know, um there was a ton of innovation and stuff like that. I think we're going to see similar stuff over the long term for artificial intelligence, data centers, and robotics. >> I agree. >> Well, thank you so much for your time today. Uh I won't ask you where you think the gold price is going to go. I mean, cuz it's gone up a lot faster than I thought it would. It was at or near an all-time high in every other currency but the dollar way ahead of time. So, I was expecting a move up in the dollar gold price, but it's gone up. It was overdue for a correction, though. >> Yeah, I agree. I think um the way I've been phrasing it uh is that I think that gold itself is still not overvalued. Um you know when you look at say it's percentage of the of the you know kind of global liquid savings market uh it's it's still pretty reasonable. Um but it it is tactically very overbought. It's like the highest monthly RSI uh in modern history. Um uh it's very enthused in that sense. Um uh and so I I do think it's probably due for a breather. Um now I don't try to make like 3 month predictions about anything. I mean I don't I don't try to stand in the way of a huge momentum. Um now that might have been broken uh recently that momentum. Um but yeah I don't I don't have any view on the next three months other than I do I do view this as a period of heightened risk for gold. Um, and I, you know, I also, I track sentiment on social media. Like there, there are cases where Bitcoin is soaring and gold is flat and Bitcoiners are dunking on on on gold enthusiasts. Uh, and this has been the inverse where gold soaring, Bitcoin is kind of stuck in its, you know, little, you know, chopping over 100K, which is nothing to sneeze at. Um, but, you know, gold gold uses are having their victory laps. I own both. Um, but I see the sentiment pretty clearly uh across social media and I mean if I had to pick one for the next 12 months, I would say Bitcoin. Uh, obviously nothing is assured. Um, but I'm long both. >> Well, I mean the central banks and non G7 the bricks and non G7 central banks will keep dollar cost averaging gold. Now I don't know if that's going to cause a huge spike, but it's going to be a steady source of demand. So that's what's been occurring the last three and a half years for the people. There's a lot of people in the mainstream financial industry and they've been calling top for gold at 2,000, 2500, 3,000, you know, all the way up. There's some people that have been calling a top in gold what every couple weeks. So, they've been wrong all the time. I'm sure they're deleting all their social media posts and now they're going to say, "Finally, I called the top in gold. Pat themselves on the back. Look how I nailed this call so perfectly. The topping in gold is in. It'll never get as high as uh what 4,100 ever again." So, there's going to be those those types of people. But I I mean long-term just go and look at a money supply growth chart what on the St. Louis Fed's website Lynn from what M2 over the last like 20 30 years. I mean it's parabolic at a little dip over the last 3 years and then it just keeps rocketing up. So as long as like these governments and central banks are going to monetize debt, the central banks are going to expand their balance sheet. the uh monetary inflation, the money supply is going to keep growing. There's going to be um other people not looking to want to hold US treasuries long term and dollars because they're going to they're going to wonder what the the governments and the central banks are going to be doing with all the newly created currency. >> Yep. Absolutely. >> So, uh until that changes, until there's a discipline and I don't see any discipline in the current system, um I I think the trend is going to continue. Now, we will have corrections, we will have volatility. I don't see this trend going away. I mean I I think what DC did fundamentally with the you know the policies and then Trump added on to that with the tariff wars giving uh these nonG7 countries less incentive to buy treasuries with all the threats you know of the tariffs and the trade wars and the other stuff but uh you know three and a half years ago with the Russia sanctions if you're a brrics country and you had what a good amount of tens of billions of dollars in treasuries or more and you saw what they did to Russia I mean I would I would want to be hedging my treasury position and that's the comments you've seen from and the central bankers, the Polish central banker and others. That's exactly what they've said publicly is look um we can't fully trust either political party out of DC cuz um you know willy-nilly they could just change their mind and go right after our our holdings. >> Yeah, I agree. >> So Lynn, please tell my listeners more about your book broken money and about your newsletter. >> Uh so Broken Money uh is my 2023 book on uh the history of money and monetary technology. Um, you know, we brought up the issues of fra fraction reserve banking, uh, for example, and the book discusses that. Uh, so people can check that out if they kind of want my holistic view of this whole thing. Uh and then lynald.com provides various um uh free uh and lowcost paid research uh for investors and macro enthusiasts.