Why Dollar Crashed 10%: Start Of Currency Reset? | Peter C. Earle
Summary
Gold: Framed as a structural, not speculative, move driven by central bank buying, de-dollarization hedging, and geopolitical risk, implying a remonetization and portfolio role akin to bonds.
AI Sector: Characterized as long-duration with real earnings support versus the dot-com era, yet vulnerable to large drawdowns and technological shifts; Nvidia NVDA exemplifies strong demand but faces disruption risk.
US Dollar Weakness: Discussion of policy efforts to engineer a cheaper dollar, referencing Plaza Accord dynamics, with risks to inflation, reserve status, and potential competitive devaluations.
Trade Protectionism: Tariffs and policy vacillation increase uncertainty, suppress capex and hiring, and act as a recurring tool that caps growth and heightens market fragility.
Market Outlook: Equities appear fragile on the surface but fundamentals and earnings remain supportive; recent corrections are seen as sentiment-driven rather than a collapse in fundamentals.
Portfolio Positioning: Emphasis on risk management over timing, avoiding leverage in volatile assets, considering dollar-cost averaging, and maintaining exposure to precious metals for insurance.
Monetary Regime: Advocates the benefits of a gold standard for fiscal and monetary discipline versus fiat’s debt and devaluation cycle, suggesting a potential eventual return to commodity-backed money.
Transcript
You know what we're seeing in gold is not a speculative spike like we see at times. This is this is a a structural shift. Most fiat currencies including the dollar are terminally ill. It's just a question of how long they take to to expire become worthless. So eventually going back to some form of commodity standard will not be uh an issue of choice. It'll be a matter of absol of of of national survival of financial uh of of of of economic survival. >> Well, how can we survive the next financial crisis? I'm pleased to be joined by a new guest in the program, Peter C. Earl. He is the director of economics and economic freedom and senior research fellow at the American Institute for Economic Research. He's the author of a new book, Gold in Uncertain Times, and the author of several articles recently about gold, which we'll talk about in detail today about the shifting monetary policy and uh whether or not we need a gold standard today. So these are all topics that he's covered and we'll talk about the future of the economic landscape in the US and around the world. What's going to happen to our debt system? Are we entering a debt crisis? All themes of a discussion and much much more. Welcome to the show, Peter. Good to see you. >> Good to see you. Thanks for having me. >> Pete, let me start by asking you about some bigger picture ideas here. The number one or two factors driving economic growth that are important to you right now. In other words, barring these items, nothing else is nothing else is as important. The economy could go either boom or bust because of these things. What are they? >> Sure. The first is uncertainty. Uh the high degree of uncertainty with regard to tariff policy, with regard to other policies, I mean uh these ideas of uh putting sanctions on nations that are moving away from using the dollar, whatever. I think those are absolutely uh uh uh crippling to economic growth. And uh related to that uh you know sort of a subset of that is tariffs itself. Um barriers on trade uh restrictions from uh individuals or restrictions of individuals moving things from from nation uh an abregation of the law of comparative advantage. You know those are the two things I think uh are right now putting a cap on future growth and they should be dealt with uh as soon as possible. >> How do you rectify uncertainty? I mean isn't that a constant in investing in itself? >> Right. So I mean you can't fully get rid of it but you can get rid of the parts that are driven by vacasillating policies and uncertainty about uh you know where tariffs will be will there be tariffs you know what will growth look like um you know are you going to uh to stop putting out economic data that sort of thing so I mean there is always going to be some degree of latent uncertainty but to the extent it's driven by either um uh uh uh you know promises of policies or by policies that change uh you know daily or weekly, you know, that should be removed and that would at least u give some certainty uh for for entrepreneurs and and consumers and investors to deal with the uncertainty that that can't be removed. >> I showed this graphic to another guest earlier and um I want to get your take on this. So the S&P is down about 5% from its all-time high. Somebody collated big gains and moves, not gains, but moves um um from several stocks assets in the overall markets since all-time highs. The market correction has already happened for a lot of the big tech companies. And if you f go further down the risk spectrum, the uh the losses become even more pronounced. Bitcoin's down 33% from its highs. Uh Ethereum's down 45%. Um importantly, the tech uh the NASDAQ overall hasn't moved much year to date >> and um and uh Bitcoin is down on a year that the tech sector is flat if not slightly up. So why is this happening right now? There is a correction that has been ongoing. It's not a forecast anymore. It's already starting to happen. Why is it happening? >> Well, stocks have gone very far without taking a step back. But I would say that uh you know, I think that the stock market looks fragile on the surface, but that the underlying macro backdrop is still pretty broadly supportive. You know, we've had mixed breadth. Um there's some concerns about credit stress but but overall you know this environment despite all the comparisons is nothing like what we saw uh between 2000 and 2001 because back then you know we had these high-flying tech stocks um you know near the NASDAQ peak there was a whole bunch of uh revenue warnings guidance cuts we had outright failures uh in some of the the the dotcom stocks and uh you know the differences one of the differences that is that those companies you know they never had any earnings. They never had any revenue. Um most of them were unprofitable. They were burning cash all the time. But today we see that, you know, a lot of these companies like Nvidia and some of the others, the really high flyers and the mag 7 to the extent that they're outside AI, you know, they have real earnings. They have lots of customers. Um S&P 500 earnings just posted the strongest quarter since 2021. Um AI revenue uh surprised to the upside. And I mean, you know, Nvidia's latest in uh uh uh uh corporate earnings report showed real broad-based demand. So, you know, even if you look at leverage because a lot of these companies are are are putting on capex to an extent where they have to float debt, you know, most of the leverage indicators are are benign. And I think that um most of the stress we've seen has been sentiment driven, not a sign of deteriorating fundamentals. So, I you know, I'm not going to say I'm bullish or that you should run out and buy stocks. I don't think um that uh that that things are are are as bad as the surface level seems to indicate. >> I want to play for you this clip from uh CNBC. Uh Ross Sorcin interviewed Ray Dallio, Bridgewater founder. >> Shocking uh title here getting a lot of traction and uh just let me share my screen and sound and I'll play for you just one minute of this 9-minute clip and then we can react to the first part. >> Intelligence so much more. Bridgewater founder Ray Dallio is with us. Good morning to you, sir. Good morning. >> So, you've been uh providing lessons for us for a very long time about economic cycles and where we are and what's going on. The big question in the market right now because we're looking at Nvidia this morning and I think a lot of people are waking up thinking where's the market headed next has been this question of an AI bubble and curious where you ultimately come down. Are you with Jensen Wong who says he doesn't see it that way or do you see something else? >> Um there's uh definitely a bubble in uh the markets. Yeah. Um bubbles. What is a bubble? Right. What is a bubble? >> What what is a bubble? A bubble um is that there's a lot of creation of wealth from various ways such as you decide that you're going to have a uh sell $50 billion worth of stock and value it at uh trillion dollars or you have multiples like that and then you create the wealth that way. And then the question with all this wealth relative to money is who needs the money. So it's all it's a matter of who the buyers and sellers are. For example, um if we had a wealth tax or if you had a tightening of monetary policy, then they has to be the selling of those assets. So in order to pay those things. So there's a mechanics of who owns it, is it overowned, and so on. It's not the long-term duration of the earnings. So you think about it. Isn't it interesting that we have um such a short-term reaction, it's great that what the results are, but this is a it's valued as a long duration asset. So for 25 years, the next 25 years, it's very unknown. >> He goes on to later say that people should be holding because uh bubbles burst when investors need liquidity uh and people shouldn't be selling simply based on valuation concerns. We're not quite there yet, but can you just evaluate what we've heard so far? >> Sure. So I mean you know none of the things that I mentioned about the market about the economy eliminates some of the deeper questions about the scale the cost and the payoff horizon of AI you know I I hasten to remember that early in my career you know about 5 years into my career you know there's this company called Amazon.com and it's a company that that really sort of remade the world and its image and it was the only one of the dotcoms the only major one of the dotcoms to survive but it saw a 95 5% collapse in price at one point and took almost 10 years to recover even when it had earnings. So, so given given the data uh the policy posture and liquidity conditions, I would say that pullbacks are more likely to be contained than not, but these are very very long-term assets as Ry was saying. I think so, too. Uh, you know, I mean, it's very difficult to see the future. It's even more difficult to see the future when you have a vested interest in it like like many of these these firms do. But I mean, you know, I I I don't I I I really hasten to add that this is not the dotcom era. Even if we were to see 60, 70, 80, 90% draw downs in some of these stocks, which I don't see how we could see because of their earnings. Uh even if we were to see that, it still wouldn't be the same because many of those firms back then, furniture.com, Pets.com, all those, they really had nothing to start with. they were using the IPO process as venture capital and uh ultimately you know that sort of uh uh uh 9:1 you know failure to survive to to to success ratio was borne out but for the for the first time or at least for for once you know it was public investors who are holding those stocks not you know VC portfolios so I I I think that I think that Ray is basically right but I mean I don't I don't see um I don't see the kind of dynamics of a bubble that he does here definitely overvalued though for what it's worth >> gold is one of the best assets of this year. And you already know why people hold gold. Well, it's because it's real money. But what if your gold could do more than just sit in a vault? That's where today's sponsor, Monetary Metals, comes in. 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I mean, I don't think he's giving financial advice, but he's saying what he's generally saying is just because something is overvalued, it doesn't mean that people should start panicking and selling their portfolio right away, which is fair enough. Valuations have been poor indicators of price direction. So, what does one how does one approach this dilemma, Pete? >> You know, I I mean, I don't give investment advice, but but what I what I what I am interpreting Ray to be saying is just be ready for a very bumpy ride. Probably don't want to own these things. uh you know uh with a lot of margin or or or or that sort of thing. Um you know maybe for those who are equipped enough you know be ready for either to dollar cost average in you know over a very wide uh uh price range a very long time that sort of thing. I don't know if he's suggesting that people should you know buy puts or sell calls. I don't know. But I mean, I think I think the very basic takeaway is, you know, you may you may see these things at half of their current price, a quarter of their current price, you know, 25% lower, who knows, you know, over over time. These are very long-term assets. And and I agree with them. They should be thought of almost more like bonds than like equities because, you know, we're talking about a very long runway, you know, to the future. And of course, you know, I have to add as well, you know, we don't know that Nvidia has got it right. It may turn out that these massive data centers that a lot of these AI firms are building, you know, will be invalidated by a single innovation. Maybe some new chip, maybe some quantum computing, you know, uh uh development will make it such that right what right now takes massive physical infrastructure can be done in a room or two rooms or something like that. So, uh you know, that's part of the adventure, but it's also a reason why uh it's not for the faint of heart. >> Pete, let's talk about um the Marilago accord and um and basically the themes that investors should be paying attention to from bas from this administration's core agenda. So I'll just read for you a few sentences from this FT article dated earlier in the year. Will anybody buy a Mara Lago accord? Donald Trump's chaotic trade policy can only lead to economic chaos. This is an opinion piece clearly. So, might the Trump administration stumble upon something both more coherent and less damaging yet still meet the president's protectionist claims? Perhaps some members, including Scott Besson, Treasury Secretary, and Steven Myron, chair of the Council of Economic Advisors, believe so. Tell us about the core pillars of the Marilago Accord and fundamentally how will assets change in accordance to this um new doctrine. >> Sure. So the the the the moral Lego accord is based upon an article called something along the lines of how to restructure the global trading system and um the deep logic here is to re-engineer the structure of US economic power and it does so by trying to pull on four levers. The first is the one we've seen the most of and that's tariffs. Tariffs are essentially, you know, used as a way of uh generating income and sort of uh, you know, making the uh the the the massive, you know, 25 or 28 trillion US economy uh, you know, sort of weaponizing against other countries or at least using it for leverage. Uh, the second is restructuring the Treasury market. The idea being that if we can stretch out the uh the maturity of Treasury bonds and get lower yields uh that we can uh kind of put off the issues with debt for a while and uh and alleviate a lot of the uh strain from debt service and all that sort of thing. There are issues with each one of these, but I'll just go over what each of the pillars are. That's the second pillar, restructuring treasuries. Uh the third is to walk down the dollar. the idea being to reduce the value of the dollar in order to boost exports and make American goods more competitive. Um, you know, we saw that a little bit in the in the 80s 1985 with the Plaza Accord. That's one of the plans here. And then the fourth part is to re-evaluate uh long-standing treaties and agreements uh you know long-standing security agreements um where the US you know many of which took place after World War II. The idea is that in many cases some allies you know they should be paying in more. Maybe some of those agreements are costly in ways they don't need to be. So those four elements are meant to be used in a way that changes the US standing in the world. And I mean there's some issues with each of them. I mean I think we've seen with tariffs so far, you know, the uncertainty of of of putting on these tariffs and then taking them off and changing them and you know putting a 50% tariff on copper for two days and then taking it off. Those sorts of things do a lot more harm than good. Um do you want me to go on with tariffs? Do you want me to to to speak about each of those or where would you want to go next? >> Let's start with dollar the dollar first. I'm curious to get your long-term take on the dollar. And um >> now we know that Trump and his allies want the dollar lower and I want I want you to just tell us about how he may accomplish this if that's still their objective. >> Are we going to see and if so if this this does become something that they're doing successfully, are we going to see long-term structural weakness of the dollar versus other currencies? or do we see a race to the bottom worldwide? >> It's a really good question because you know a cheaper dollar makes imports more expensive but that includes things like energy, food, industrial inputs and that you know can have inflation-like effects at home and it also affects the US position as the issue of the world's reserve currency. Right? So the dollar keeps our borrowing costs low and it underpins global demand for US treasuries. And we saw it throughout history especially for example with the Plaza cord. You know, we did see short-term gains from the attempt to to weaken the dollar, but then over the long term, we saw more volatility and we eventually saw an explosive move upwards in the dollar. You know, the a couple of factors there is that first of all, right now, in order to get a weaker dollar, you would get have to get a lot of American competitors to buy into this. They would not only have to, you know, sell their own currencies, but they'd have to they'd have they'd have to basically sell the dollar and buy up their own currencies. And doing that is directly against their own interests. So even if they say that, I'm not sure they're going to want to do it. You know, plus I mentioned the inflation effects, but also, you know, if you if you if you do this sort of thing with the dollar, you know, many other countries are probably going to get involved in a in a competitive devaluation. And uh for company for countries that have smaller currencies or less liquid currencies, you know, it's a race to the bottom that America doesn't want to win. It's much easier for smaller comp countries to uh to devalue their currencies than the US. So I mean, that's a that's a big issue. And the only other thing I'd add is that, you know, the president has said, this administration has said that they want foreign companies uh to come to the US and invest in the US. Well, if you ask a giant Korean or Japanese or German company to put a huge manufacturing plant in the US, the first thing they do to do that is buy up dollars. And when they buy up dollars, they increase the strength. So that's that sort of thing uh is is directly at odds with this pillar of the Mara Lago. And it's uh it's a risky thing to do anyway. Well, you brought up the Plaza Core several times and I was just pulling out some stats as you were talking uh Pete. So, the after the Plaza Core was implemented, the uh the yen depreciated, sorry, the US feller, the US dollar fell against the yen and the mark uh by 50% in 1987. So, the Plaza Accord signed in Plaza Hotel, New York 1985. two years later, successful, the biggest FX intervention, coordinated FX intervention by five central banks ever in recorded history. [snorts] >> We're not seeing that to this level in scale yet. But I do want to point to you that the yen has been moving dramatically against the dollar >> over the course of the year. And I'm just going to pull this chart up for you and we can talk about it. Maybe this was a direct result of Trump's policies. Uh maybe not. But as you can see that the yen has been weakening structurally for quite a number of years against the dollar. But this has accelerated exponentially this year. >> Yep. >> So maybe it's work but but but then but then again you're thinking like the dollar should be weakening not the other way around. >> The dollar is down about relatively speaking against a basket of I believe 15 currencies. The dollar is about nine the dollar was down about 9.5% this year. Correct. Astronomical in dollar terms. I mean the thing about the Mar the thing about the Plaza accord is yeah we did see some some successes early on but if you look 10 years later the dollar you know was up an order of magnitude higher than it had been. So these are short-term you know uh moves these are sort of I would say they're superficial sort of cosmetic moves you know if you really want to strengthen your currency or weaken your currency you'd have to change the nature of trade the nature of your industrial base that sort of thing. And so, um, I mean, these may may deliver short-term benefits or short-term gains, but, um, to to to be really lasting, uh, economic change, you need you need structural change underneath. >> Here's my theory. So, do Donald Trump partly instituted or enacted the tariffs early in the year to purposely engineer a weaker dollar because maybe they didn't have an official accord or an official agreement between central banks to intervene in the FX markets. Or maybe they did behind closed doors. I don't know, but certainly it wasn't the same structure as a Plaza cord. Now that the dollar has weakened per his agenda, >> we're not going to see as much tariffs anymore, therefore more certainty in the markets. Does that theory make any sense or can you find some holes in what I just said? >> I mean, it it does make sense. Uh, frankly, I hope that you're right, but uh but uh but um but you know, the one thing I would say is that I I I mean I think that the administration has grown to rely on the threat of tariffs if not actual tariffs, which means that's a tool they probably won't get rid of. And that means again a higher average latent amount of of uncertainty in the markets, which is, you know, it's just not something we want. I mean, one of the things I noticed is that, you know, the recent trend in um in in in in both business uh sentiment and consumer sentiment was actually very very bad. I believe the current sentiment of the University of Michigan uh number was either the lowest ever or the second lowest ever this last month. I mean, we that's that's that's a really sort of lousy lousy state of affairs when we have prices rising again. You know, disinflation seems to have stopped. So again, you know, if we could if we could if we could knock out that portion of uncertainty which can be wiped out, we'd be all the better for it. >> What's the bigger risk right now? Unemployment, higher unemployment or higher inflation? >> Wow. Well, I'll tell you. Um I think right now that uh it's unemployment because uh we see some uh if you look at the state warn reports you know once we reach a certain point where state warn reports reach above a certain level you tend to see unemployment kind of picks up a momentum we're seeing a little bit of that. I mean the early stages in some of the early stages we see right now what we're seeing is is not necessarily a lot of firing but we're seeing some layoffs but a lot of non-hiring. a lot of firms, you know, that might have said they were going to hire five or 10 people this year, they're going to hire instead three. They're going to hire one or none. So, I mean, that's the first stage, but, you know, my concern is that uh is that the Fed may have waited too long to start lowering rates and uh they may be uh playing catch-up at this point. I hope that's not the case, but I mean, again, you know, this uncertainty has has led a lot of businesses to hold off on capex and expansion, and um it's uh it's it's it's a dicey situation. There seems to be and I'll talk about uh your work on analyzing the historical implications of the gold standard and applying it today. You've written several pieces about this. You've even got a book called gold in uncertain times which I want to discuss with you now. But before we do, is there a bigger gold rush happening? Like literally, I mean Tucker Carlson announced that he's starting a gold company. The Tether uh the stable coin company earlier in the in the fall announced that they were buying gold. They're adding to their gold reserves over 116 tons to be exact, valued between 8.7 billion to 12 billion depending on the market price. Uh meanwhile, Bitcoin miners have been reported to sell Bitcoin to pivot into AI. So, it looks like there's this narrative shift from Bitcoin to gold, at least on the surface. I don't know if that's actually what's going on, but that's what it looks like. What What is going on? >> Yeah, I think it's structural. So, you know, what we're seeing in gold is not a speculative spike like we see at times. This is this is a a structural shift. We have central banks that are buying at the fastest pace in decades. Uh bricks including in especially China, India and some of the emerging markets. You know, some firms are buying simply because they want to hedge away from the dollar because they saw what happened with uh Russia getting kicked out of Swift and all that sort of thing. And you know, on top of that, we've got dollar uncertainty both because of the uh Mara Lago accord, you know, the walking down of the dollar I mentioned before and tariffs. And that's paired with uh geopolitical uncertainty where every major reason region in in the world right now Middle East you know uh uh southern Europe et has some degree of instability. So, so I think the key tell is that gold is rising despite decent equity markets and still high nominal rates, which means, you know, this move is more more about a reassessment of gold, a remonetization of gold and insurance, not panic. And I and I would just add that the market structure out there supports that interpretation. We have ETF flows. There's physical demand. Um even large sales like the recent Russian gold liqued the price. We're still at, you know, $4,100 an ounce. So, you know, that that that suggests how deep the current demand for gold is. >> Do we need a gold standard? And I'll let you answer this however however you like. I know we've only got a few minutes left, and I know you've written literally books about this topic, [laughter] but uh how have gold standards functioned in the past? Have they achieved their purpose? Do we need that same purpose today? I mean the one thing they do is they arrest spending and they make it easier for individuals and businesses and governments themselves uh to plan long term. They they they they you know they provide a an anchor for uh for value such that uh you know people can vote with their feet uh if the if there's monetary expansion beyond the gold standard if it gets abregated. And uh you know what we see is that you know when we've had a gold standard we tend to get a very mild deflation over time which means a sort of a gentle falling of price partially driven by productivity partially driven by the kind of long-term planning that arises from uh from from from that sort of stable anchor of value. And uh I mean you know I've heard a lot of people say it would be impossible in this day and age you know they sort of link there seems to be a link between technological advancement or or or innovation and the gold standard. That's not true at all. Um what I would say is that you know it might take a while to make that sort of conversion. I think in the short term we could do some small fixes to sort of uh end or arrest you know the pernicious aspects of se of of of central banking but in the longer term some sort of commodity backed money whether it's gold or silver or something else would be a way of you know really really putting an end to some of the pernitious aspects of fiat currency and the effects it has on every aspect of the economy. You wrote this interesting article called Forgetting Gold. >> Yeah. >> Um and here, let me just sum this up. Your gold became a museum piece in the public mind not because it failed as a monetary technology, but because it obstructed a coalition of interests, fiscal, bureaucratic, and financial that profit from discretion. >> What do you what do you mean by this? Well, what I mean is that whenever you have a system where uh political officials or bureaucrats or technocrats are are charged with making decisions, you know, they they they over time there's creep, right? So, I mean, the Federal Reserve, you know, might have been c might have been started to arrest bank runs and to, you know, sort of even out, you know, create an elastic currency to even out seasonal flows. And then over time, you have the addition of the of the maximizing unemployment mandate. You have medium-term interest rates. you have, you know, uh, a stable price level, you have bank regulation and the many many other things that the Federal Reserve has been charged with doing. And so, you know, when you have this sort of anonymous or or or or or it's not really good description or, you know, nominally automatic system like the gold standard where there's a certain value that the money is pegged to, it doesn't require a lot of intervention. You know, when you get intervention, when you get discretion, you get errors, you get interpretations, you get individuals who can be influenced by political powers. So, there's just a whole host of things that are avoided when you have a system that's sort of self-guided or self-driving like the gold standard is. It's not a great description, but it's a a modern description of how it works. Can we summarize this as gold was obsolete as a financial instrument and is no longer? >> Can I >> Can you summarize the perception of gold as gold being obsolete as a financial instrument at one point in modern history and now is no longer obsolete because of structural changes. >> Sure. So when we went off the gold standard, the last vestigages of the gold standard in August of 1971, the view was that, you know, we could have a fiatbacked economy, a fiat currency economy, and that we had, you know, these great um officials who are highly trained and have, you know, batteries of PhD economists with lots of data, and that they could essentially engineer better outcomes with money than could be had um using a a commodity back standard. But I, you know, looking at the destruction of purchasing power of the dollar, looking at uh the massive title wave of $ 38 trillion of debt that we're now underneath and all the other effects of uh 50some years of fiat currency, you know, gold has always been there and it's uh you know, I I've always viewed the period of time in which the US went off the gold standard to as an interregnum that eventually we'd have to go back to gold or silver, some of the metal, not because we we realized uh that it was better, but because we would have to that will be the only way of arresting the slide that we've seen in in most areas of the economy uh under a under a central banking dollar a central bank managed dollar. >> What happens to investment thesis or basically how does the fact that gold no longer looks forgotten based on just the price action, the volume and interest alone in the media. What does that mean structurally for investors going forward? Well, I think one thing that's going to happen is, and now, first of all, I should I should hasten to mention that none of this means that gold goes from here to 10,000. Gold may go back down to 2,000 or 2500. It may go up to 6,000. Who can say? But I mean, one thing we know for sure, and that is that there's always demand for gold and that the march upward has coincided with a growing realization uh that the uh that that most fiat currencies, including the dollar, are terminally ill. It's just a question of how long they take to to expire, become worthless. So what it means for investors is that my my my first guess is that is that gold will achieve a place in portfolio similar to one that say bonds have or something like that. Up until now people would say well you should have some stocks you should have equities you should have some bonds and then maybe some commodities or some other stuff maybe some maybe some gold. I think it's going to become more imperative in the in the medium term, maybe in the short term, [clears throat] where investors have some exposure to precious metals, whether that's gold and silver, I'm not sure about platinum, palladium, those sorts of things. But that's the first thing. Um and the second thing is I wonder if over time as fiat currencies get sicker if we won't have a popularization of the various metrics which measure for example things like stock prices, things like bond yields, uh you know, conventional financial metrics being measured, you know, not in dollars or index points, but in gold. You know, there's a there's a there's a there's a gold to copper ratio. There's a, you know, a gold valued um uh uh you know, S&P 500, that sort of thing. or or there's a conversion of the dollar values. I wonder if those will become more popular over time because it's just it's it will just be a reflection of the fact that that gold is is is less malleable in terms of its uh value than uh than fiat currencies are. >> In your article called uh the gold standard explained uh which summarizes how it worked in the past and the functions of a gold standard. I want to just highlight this particular paragraph here. Fiscal and monetary discipline linking money creation to gold restraining governments from overspending. who just mentioned that were financing deficits by printing money. Monetary policy was effectively automatic. A nation could not expand its money supply unless it acquired more gold. For this reason, advocates view the gold standard as a guarant as a guard rail rather against political manipulation of money and a deterrent to reckless borrowing. So far as we know, the administration is not seriously proposing or considering a gold standard, at least not in the inner circle of the Trump administration. And so what happens theoretically if this lack of discipline, this lack of fiscal monetary discipline goes unchecked? >> Well, I mean we've seen a lot of that over the last 50 years, but I mean uh to a certain extent, you know, you have a a increasing uh devaluation of the of the unit currency, in this case the dollar, you have rising levels of debt. You know, with those rising levels of debt, as that debt pile rises, uh there's more and more risk that eventually somebody's not going to receive their uh their money back. They're not going to get their uh principal back. So you would have rising yields and with rising yields come more comes more strain from the debt burden and one has to imagine that you know any level of spending that's dependent upon bonds means we have to continue to issue bonds which means eventually if there's no market for those bonds the Federal Reserve will have to basically buy those bonds directly. So there's a sort of a um like a conveyor belt or a treadmill that just moves faster and faster and eventually winds up with either you know direct printing of money or uh or or or very high confiscatory levels of taxes or all of the above financial oppression that sort of thing. So I mean uh you know eventually as I've said and as I believe eventually going back to some form of commodity standard will not be uh an issue of choice. It'll be a matter of absolute of of of national survival of financial uh of of of of economic survival. >> Well, how can we survive the next financial crisis, however it may happen, whenever it may happen, in whatever form it happens, let us know. We'll end here. >> I mean, it's good to be hedged, you know, it's good to uh to to to do things, you know, outside the realm of investment. Uh, you know, uh to try not to have too much debt. um to uh to to try to uh acquire skills that are that are that are um uh still marketable in a recession or something like that. Um you know, stay aware, keep keep one's eye on uh keep your eye on uh shows like this and other financial media. Um and uh just uh I guess don't get sucked into the uh to the uh to the to the propaganda, you know. I mean uh uh fundamental value uh was always found in commodities and and hard goods like land uh gold, silver that sort of thing and um eventually you know for all the good that financialization has done eventually a lot of those things are built on very sort of flimsy uh foundations and uh those will eventually be uh be be be discovered or be be demonstrated you know if there's a real you know if there's a real economic collard hopefully we don't wind up seeing that but I mean It's not like most governments to uh to turn around while there's still time. >> Okay. Excellent. Thank you very much, Pete. Appreciate talking to you. Where can we find more information about you or learn about you and read your work? >> So, uh most of my writing is at air.org. Uh I'm Peter Searl and uh I have a Twitter account uh which I use sporadically and um yeah, that's it. I I'm around I guess you'd say. >> All right. Well, we'll find Peter around in the links down below. Thanks very much, Pete. speak next. >> Thanks for having me. Yep. You too. >> Thank you for watching. Don't forget to like and subscribe.
Why Dollar Crashed 10%: Start Of Currency Reset? | Peter C. Earle
Summary
Transcript
You know what we're seeing in gold is not a speculative spike like we see at times. This is this is a a structural shift. Most fiat currencies including the dollar are terminally ill. It's just a question of how long they take to to expire become worthless. So eventually going back to some form of commodity standard will not be uh an issue of choice. It'll be a matter of absol of of of national survival of financial uh of of of of economic survival. >> Well, how can we survive the next financial crisis? I'm pleased to be joined by a new guest in the program, Peter C. Earl. He is the director of economics and economic freedom and senior research fellow at the American Institute for Economic Research. He's the author of a new book, Gold in Uncertain Times, and the author of several articles recently about gold, which we'll talk about in detail today about the shifting monetary policy and uh whether or not we need a gold standard today. So these are all topics that he's covered and we'll talk about the future of the economic landscape in the US and around the world. What's going to happen to our debt system? Are we entering a debt crisis? All themes of a discussion and much much more. Welcome to the show, Peter. Good to see you. >> Good to see you. Thanks for having me. >> Pete, let me start by asking you about some bigger picture ideas here. The number one or two factors driving economic growth that are important to you right now. In other words, barring these items, nothing else is nothing else is as important. The economy could go either boom or bust because of these things. What are they? >> Sure. The first is uncertainty. Uh the high degree of uncertainty with regard to tariff policy, with regard to other policies, I mean uh these ideas of uh putting sanctions on nations that are moving away from using the dollar, whatever. I think those are absolutely uh uh uh crippling to economic growth. And uh related to that uh you know sort of a subset of that is tariffs itself. Um barriers on trade uh restrictions from uh individuals or restrictions of individuals moving things from from nation uh an abregation of the law of comparative advantage. You know those are the two things I think uh are right now putting a cap on future growth and they should be dealt with uh as soon as possible. >> How do you rectify uncertainty? I mean isn't that a constant in investing in itself? >> Right. So I mean you can't fully get rid of it but you can get rid of the parts that are driven by vacasillating policies and uncertainty about uh you know where tariffs will be will there be tariffs you know what will growth look like um you know are you going to uh to stop putting out economic data that sort of thing so I mean there is always going to be some degree of latent uncertainty but to the extent it's driven by either um uh uh uh you know promises of policies or by policies that change uh you know daily or weekly, you know, that should be removed and that would at least u give some certainty uh for for entrepreneurs and and consumers and investors to deal with the uncertainty that that can't be removed. >> I showed this graphic to another guest earlier and um I want to get your take on this. So the S&P is down about 5% from its all-time high. Somebody collated big gains and moves, not gains, but moves um um from several stocks assets in the overall markets since all-time highs. The market correction has already happened for a lot of the big tech companies. And if you f go further down the risk spectrum, the uh the losses become even more pronounced. Bitcoin's down 33% from its highs. Uh Ethereum's down 45%. Um importantly, the tech uh the NASDAQ overall hasn't moved much year to date >> and um and uh Bitcoin is down on a year that the tech sector is flat if not slightly up. So why is this happening right now? There is a correction that has been ongoing. It's not a forecast anymore. It's already starting to happen. Why is it happening? >> Well, stocks have gone very far without taking a step back. But I would say that uh you know, I think that the stock market looks fragile on the surface, but that the underlying macro backdrop is still pretty broadly supportive. You know, we've had mixed breadth. Um there's some concerns about credit stress but but overall you know this environment despite all the comparisons is nothing like what we saw uh between 2000 and 2001 because back then you know we had these high-flying tech stocks um you know near the NASDAQ peak there was a whole bunch of uh revenue warnings guidance cuts we had outright failures uh in some of the the the dotcom stocks and uh you know the differences one of the differences that is that those companies you know they never had any earnings. They never had any revenue. Um most of them were unprofitable. They were burning cash all the time. But today we see that, you know, a lot of these companies like Nvidia and some of the others, the really high flyers and the mag 7 to the extent that they're outside AI, you know, they have real earnings. They have lots of customers. Um S&P 500 earnings just posted the strongest quarter since 2021. Um AI revenue uh surprised to the upside. And I mean, you know, Nvidia's latest in uh uh uh uh corporate earnings report showed real broad-based demand. So, you know, even if you look at leverage because a lot of these companies are are are putting on capex to an extent where they have to float debt, you know, most of the leverage indicators are are benign. And I think that um most of the stress we've seen has been sentiment driven, not a sign of deteriorating fundamentals. So, I you know, I'm not going to say I'm bullish or that you should run out and buy stocks. I don't think um that uh that that things are are are as bad as the surface level seems to indicate. >> I want to play for you this clip from uh CNBC. Uh Ross Sorcin interviewed Ray Dallio, Bridgewater founder. >> Shocking uh title here getting a lot of traction and uh just let me share my screen and sound and I'll play for you just one minute of this 9-minute clip and then we can react to the first part. >> Intelligence so much more. Bridgewater founder Ray Dallio is with us. Good morning to you, sir. Good morning. >> So, you've been uh providing lessons for us for a very long time about economic cycles and where we are and what's going on. The big question in the market right now because we're looking at Nvidia this morning and I think a lot of people are waking up thinking where's the market headed next has been this question of an AI bubble and curious where you ultimately come down. Are you with Jensen Wong who says he doesn't see it that way or do you see something else? >> Um there's uh definitely a bubble in uh the markets. Yeah. Um bubbles. What is a bubble? Right. What is a bubble? >> What what is a bubble? A bubble um is that there's a lot of creation of wealth from various ways such as you decide that you're going to have a uh sell $50 billion worth of stock and value it at uh trillion dollars or you have multiples like that and then you create the wealth that way. And then the question with all this wealth relative to money is who needs the money. So it's all it's a matter of who the buyers and sellers are. For example, um if we had a wealth tax or if you had a tightening of monetary policy, then they has to be the selling of those assets. So in order to pay those things. So there's a mechanics of who owns it, is it overowned, and so on. It's not the long-term duration of the earnings. So you think about it. Isn't it interesting that we have um such a short-term reaction, it's great that what the results are, but this is a it's valued as a long duration asset. So for 25 years, the next 25 years, it's very unknown. >> He goes on to later say that people should be holding because uh bubbles burst when investors need liquidity uh and people shouldn't be selling simply based on valuation concerns. We're not quite there yet, but can you just evaluate what we've heard so far? >> Sure. So I mean you know none of the things that I mentioned about the market about the economy eliminates some of the deeper questions about the scale the cost and the payoff horizon of AI you know I I hasten to remember that early in my career you know about 5 years into my career you know there's this company called Amazon.com and it's a company that that really sort of remade the world and its image and it was the only one of the dotcoms the only major one of the dotcoms to survive but it saw a 95 5% collapse in price at one point and took almost 10 years to recover even when it had earnings. So, so given given the data uh the policy posture and liquidity conditions, I would say that pullbacks are more likely to be contained than not, but these are very very long-term assets as Ry was saying. I think so, too. Uh, you know, I mean, it's very difficult to see the future. It's even more difficult to see the future when you have a vested interest in it like like many of these these firms do. But I mean, you know, I I I don't I I I really hasten to add that this is not the dotcom era. Even if we were to see 60, 70, 80, 90% draw downs in some of these stocks, which I don't see how we could see because of their earnings. Uh even if we were to see that, it still wouldn't be the same because many of those firms back then, furniture.com, Pets.com, all those, they really had nothing to start with. they were using the IPO process as venture capital and uh ultimately you know that sort of uh uh uh 9:1 you know failure to survive to to to success ratio was borne out but for the for the first time or at least for for once you know it was public investors who are holding those stocks not you know VC portfolios so I I I think that I think that Ray is basically right but I mean I don't I don't see um I don't see the kind of dynamics of a bubble that he does here definitely overvalued though for what it's worth >> gold is one of the best assets of this year. And you already know why people hold gold. Well, it's because it's real money. But what if your gold could do more than just sit in a vault? That's where today's sponsor, Monetary Metals, comes in. 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I mean, I don't think he's giving financial advice, but he's saying what he's generally saying is just because something is overvalued, it doesn't mean that people should start panicking and selling their portfolio right away, which is fair enough. Valuations have been poor indicators of price direction. So, what does one how does one approach this dilemma, Pete? >> You know, I I mean, I don't give investment advice, but but what I what I what I am interpreting Ray to be saying is just be ready for a very bumpy ride. Probably don't want to own these things. uh you know uh with a lot of margin or or or or that sort of thing. Um you know maybe for those who are equipped enough you know be ready for either to dollar cost average in you know over a very wide uh uh price range a very long time that sort of thing. I don't know if he's suggesting that people should you know buy puts or sell calls. I don't know. But I mean, I think I think the very basic takeaway is, you know, you may you may see these things at half of their current price, a quarter of their current price, you know, 25% lower, who knows, you know, over over time. These are very long-term assets. And and I agree with them. They should be thought of almost more like bonds than like equities because, you know, we're talking about a very long runway, you know, to the future. And of course, you know, I have to add as well, you know, we don't know that Nvidia has got it right. It may turn out that these massive data centers that a lot of these AI firms are building, you know, will be invalidated by a single innovation. Maybe some new chip, maybe some quantum computing, you know, uh uh development will make it such that right what right now takes massive physical infrastructure can be done in a room or two rooms or something like that. So, uh you know, that's part of the adventure, but it's also a reason why uh it's not for the faint of heart. >> Pete, let's talk about um the Marilago accord and um and basically the themes that investors should be paying attention to from bas from this administration's core agenda. So I'll just read for you a few sentences from this FT article dated earlier in the year. Will anybody buy a Mara Lago accord? Donald Trump's chaotic trade policy can only lead to economic chaos. This is an opinion piece clearly. So, might the Trump administration stumble upon something both more coherent and less damaging yet still meet the president's protectionist claims? Perhaps some members, including Scott Besson, Treasury Secretary, and Steven Myron, chair of the Council of Economic Advisors, believe so. Tell us about the core pillars of the Marilago Accord and fundamentally how will assets change in accordance to this um new doctrine. >> Sure. So the the the the moral Lego accord is based upon an article called something along the lines of how to restructure the global trading system and um the deep logic here is to re-engineer the structure of US economic power and it does so by trying to pull on four levers. The first is the one we've seen the most of and that's tariffs. Tariffs are essentially, you know, used as a way of uh generating income and sort of uh, you know, making the uh the the the massive, you know, 25 or 28 trillion US economy uh, you know, sort of weaponizing against other countries or at least using it for leverage. Uh, the second is restructuring the Treasury market. The idea being that if we can stretch out the uh the maturity of Treasury bonds and get lower yields uh that we can uh kind of put off the issues with debt for a while and uh and alleviate a lot of the uh strain from debt service and all that sort of thing. There are issues with each one of these, but I'll just go over what each of the pillars are. That's the second pillar, restructuring treasuries. Uh the third is to walk down the dollar. the idea being to reduce the value of the dollar in order to boost exports and make American goods more competitive. Um, you know, we saw that a little bit in the in the 80s 1985 with the Plaza Accord. That's one of the plans here. And then the fourth part is to re-evaluate uh long-standing treaties and agreements uh you know long-standing security agreements um where the US you know many of which took place after World War II. The idea is that in many cases some allies you know they should be paying in more. Maybe some of those agreements are costly in ways they don't need to be. So those four elements are meant to be used in a way that changes the US standing in the world. And I mean there's some issues with each of them. I mean I think we've seen with tariffs so far, you know, the uncertainty of of of putting on these tariffs and then taking them off and changing them and you know putting a 50% tariff on copper for two days and then taking it off. Those sorts of things do a lot more harm than good. Um do you want me to go on with tariffs? Do you want me to to to speak about each of those or where would you want to go next? >> Let's start with dollar the dollar first. I'm curious to get your long-term take on the dollar. And um >> now we know that Trump and his allies want the dollar lower and I want I want you to just tell us about how he may accomplish this if that's still their objective. >> Are we going to see and if so if this this does become something that they're doing successfully, are we going to see long-term structural weakness of the dollar versus other currencies? or do we see a race to the bottom worldwide? >> It's a really good question because you know a cheaper dollar makes imports more expensive but that includes things like energy, food, industrial inputs and that you know can have inflation-like effects at home and it also affects the US position as the issue of the world's reserve currency. Right? So the dollar keeps our borrowing costs low and it underpins global demand for US treasuries. And we saw it throughout history especially for example with the Plaza cord. You know, we did see short-term gains from the attempt to to weaken the dollar, but then over the long term, we saw more volatility and we eventually saw an explosive move upwards in the dollar. You know, the a couple of factors there is that first of all, right now, in order to get a weaker dollar, you would get have to get a lot of American competitors to buy into this. They would not only have to, you know, sell their own currencies, but they'd have to they'd have they'd have to basically sell the dollar and buy up their own currencies. And doing that is directly against their own interests. So even if they say that, I'm not sure they're going to want to do it. You know, plus I mentioned the inflation effects, but also, you know, if you if you if you do this sort of thing with the dollar, you know, many other countries are probably going to get involved in a in a competitive devaluation. And uh for company for countries that have smaller currencies or less liquid currencies, you know, it's a race to the bottom that America doesn't want to win. It's much easier for smaller comp countries to uh to devalue their currencies than the US. So I mean, that's a that's a big issue. And the only other thing I'd add is that, you know, the president has said, this administration has said that they want foreign companies uh to come to the US and invest in the US. Well, if you ask a giant Korean or Japanese or German company to put a huge manufacturing plant in the US, the first thing they do to do that is buy up dollars. And when they buy up dollars, they increase the strength. So that's that sort of thing uh is is directly at odds with this pillar of the Mara Lago. And it's uh it's a risky thing to do anyway. Well, you brought up the Plaza Core several times and I was just pulling out some stats as you were talking uh Pete. So, the after the Plaza Core was implemented, the uh the yen depreciated, sorry, the US feller, the US dollar fell against the yen and the mark uh by 50% in 1987. So, the Plaza Accord signed in Plaza Hotel, New York 1985. two years later, successful, the biggest FX intervention, coordinated FX intervention by five central banks ever in recorded history. [snorts] >> We're not seeing that to this level in scale yet. But I do want to point to you that the yen has been moving dramatically against the dollar >> over the course of the year. And I'm just going to pull this chart up for you and we can talk about it. Maybe this was a direct result of Trump's policies. Uh maybe not. But as you can see that the yen has been weakening structurally for quite a number of years against the dollar. But this has accelerated exponentially this year. >> Yep. >> So maybe it's work but but but then but then again you're thinking like the dollar should be weakening not the other way around. >> The dollar is down about relatively speaking against a basket of I believe 15 currencies. The dollar is about nine the dollar was down about 9.5% this year. Correct. Astronomical in dollar terms. I mean the thing about the Mar the thing about the Plaza accord is yeah we did see some some successes early on but if you look 10 years later the dollar you know was up an order of magnitude higher than it had been. So these are short-term you know uh moves these are sort of I would say they're superficial sort of cosmetic moves you know if you really want to strengthen your currency or weaken your currency you'd have to change the nature of trade the nature of your industrial base that sort of thing. And so, um, I mean, these may may deliver short-term benefits or short-term gains, but, um, to to to be really lasting, uh, economic change, you need you need structural change underneath. >> Here's my theory. So, do Donald Trump partly instituted or enacted the tariffs early in the year to purposely engineer a weaker dollar because maybe they didn't have an official accord or an official agreement between central banks to intervene in the FX markets. Or maybe they did behind closed doors. I don't know, but certainly it wasn't the same structure as a Plaza cord. Now that the dollar has weakened per his agenda, >> we're not going to see as much tariffs anymore, therefore more certainty in the markets. Does that theory make any sense or can you find some holes in what I just said? >> I mean, it it does make sense. Uh, frankly, I hope that you're right, but uh but uh but um but you know, the one thing I would say is that I I I mean I think that the administration has grown to rely on the threat of tariffs if not actual tariffs, which means that's a tool they probably won't get rid of. And that means again a higher average latent amount of of uncertainty in the markets, which is, you know, it's just not something we want. I mean, one of the things I noticed is that, you know, the recent trend in um in in in in both business uh sentiment and consumer sentiment was actually very very bad. I believe the current sentiment of the University of Michigan uh number was either the lowest ever or the second lowest ever this last month. I mean, we that's that's that's a really sort of lousy lousy state of affairs when we have prices rising again. You know, disinflation seems to have stopped. So again, you know, if we could if we could if we could knock out that portion of uncertainty which can be wiped out, we'd be all the better for it. >> What's the bigger risk right now? Unemployment, higher unemployment or higher inflation? >> Wow. Well, I'll tell you. Um I think right now that uh it's unemployment because uh we see some uh if you look at the state warn reports you know once we reach a certain point where state warn reports reach above a certain level you tend to see unemployment kind of picks up a momentum we're seeing a little bit of that. I mean the early stages in some of the early stages we see right now what we're seeing is is not necessarily a lot of firing but we're seeing some layoffs but a lot of non-hiring. a lot of firms, you know, that might have said they were going to hire five or 10 people this year, they're going to hire instead three. They're going to hire one or none. So, I mean, that's the first stage, but, you know, my concern is that uh is that the Fed may have waited too long to start lowering rates and uh they may be uh playing catch-up at this point. I hope that's not the case, but I mean, again, you know, this uncertainty has has led a lot of businesses to hold off on capex and expansion, and um it's uh it's it's it's a dicey situation. There seems to be and I'll talk about uh your work on analyzing the historical implications of the gold standard and applying it today. You've written several pieces about this. You've even got a book called gold in uncertain times which I want to discuss with you now. But before we do, is there a bigger gold rush happening? Like literally, I mean Tucker Carlson announced that he's starting a gold company. The Tether uh the stable coin company earlier in the in the fall announced that they were buying gold. They're adding to their gold reserves over 116 tons to be exact, valued between 8.7 billion to 12 billion depending on the market price. Uh meanwhile, Bitcoin miners have been reported to sell Bitcoin to pivot into AI. So, it looks like there's this narrative shift from Bitcoin to gold, at least on the surface. I don't know if that's actually what's going on, but that's what it looks like. What What is going on? >> Yeah, I think it's structural. So, you know, what we're seeing in gold is not a speculative spike like we see at times. This is this is a a structural shift. We have central banks that are buying at the fastest pace in decades. Uh bricks including in especially China, India and some of the emerging markets. You know, some firms are buying simply because they want to hedge away from the dollar because they saw what happened with uh Russia getting kicked out of Swift and all that sort of thing. And you know, on top of that, we've got dollar uncertainty both because of the uh Mara Lago accord, you know, the walking down of the dollar I mentioned before and tariffs. And that's paired with uh geopolitical uncertainty where every major reason region in in the world right now Middle East you know uh uh southern Europe et has some degree of instability. So, so I think the key tell is that gold is rising despite decent equity markets and still high nominal rates, which means, you know, this move is more more about a reassessment of gold, a remonetization of gold and insurance, not panic. And I and I would just add that the market structure out there supports that interpretation. We have ETF flows. There's physical demand. Um even large sales like the recent Russian gold liqued the price. We're still at, you know, $4,100 an ounce. So, you know, that that that suggests how deep the current demand for gold is. >> Do we need a gold standard? And I'll let you answer this however however you like. I know we've only got a few minutes left, and I know you've written literally books about this topic, [laughter] but uh how have gold standards functioned in the past? Have they achieved their purpose? Do we need that same purpose today? I mean the one thing they do is they arrest spending and they make it easier for individuals and businesses and governments themselves uh to plan long term. They they they they you know they provide a an anchor for uh for value such that uh you know people can vote with their feet uh if the if there's monetary expansion beyond the gold standard if it gets abregated. And uh you know what we see is that you know when we've had a gold standard we tend to get a very mild deflation over time which means a sort of a gentle falling of price partially driven by productivity partially driven by the kind of long-term planning that arises from uh from from from that sort of stable anchor of value. And uh I mean you know I've heard a lot of people say it would be impossible in this day and age you know they sort of link there seems to be a link between technological advancement or or or innovation and the gold standard. That's not true at all. Um what I would say is that you know it might take a while to make that sort of conversion. I think in the short term we could do some small fixes to sort of uh end or arrest you know the pernicious aspects of se of of of central banking but in the longer term some sort of commodity backed money whether it's gold or silver or something else would be a way of you know really really putting an end to some of the pernitious aspects of fiat currency and the effects it has on every aspect of the economy. You wrote this interesting article called Forgetting Gold. >> Yeah. >> Um and here, let me just sum this up. Your gold became a museum piece in the public mind not because it failed as a monetary technology, but because it obstructed a coalition of interests, fiscal, bureaucratic, and financial that profit from discretion. >> What do you what do you mean by this? Well, what I mean is that whenever you have a system where uh political officials or bureaucrats or technocrats are are charged with making decisions, you know, they they they over time there's creep, right? So, I mean, the Federal Reserve, you know, might have been c might have been started to arrest bank runs and to, you know, sort of even out, you know, create an elastic currency to even out seasonal flows. And then over time, you have the addition of the of the maximizing unemployment mandate. You have medium-term interest rates. you have, you know, uh, a stable price level, you have bank regulation and the many many other things that the Federal Reserve has been charged with doing. And so, you know, when you have this sort of anonymous or or or or or it's not really good description or, you know, nominally automatic system like the gold standard where there's a certain value that the money is pegged to, it doesn't require a lot of intervention. You know, when you get intervention, when you get discretion, you get errors, you get interpretations, you get individuals who can be influenced by political powers. So, there's just a whole host of things that are avoided when you have a system that's sort of self-guided or self-driving like the gold standard is. It's not a great description, but it's a a modern description of how it works. Can we summarize this as gold was obsolete as a financial instrument and is no longer? >> Can I >> Can you summarize the perception of gold as gold being obsolete as a financial instrument at one point in modern history and now is no longer obsolete because of structural changes. >> Sure. So when we went off the gold standard, the last vestigages of the gold standard in August of 1971, the view was that, you know, we could have a fiatbacked economy, a fiat currency economy, and that we had, you know, these great um officials who are highly trained and have, you know, batteries of PhD economists with lots of data, and that they could essentially engineer better outcomes with money than could be had um using a a commodity back standard. But I, you know, looking at the destruction of purchasing power of the dollar, looking at uh the massive title wave of $ 38 trillion of debt that we're now underneath and all the other effects of uh 50some years of fiat currency, you know, gold has always been there and it's uh you know, I I've always viewed the period of time in which the US went off the gold standard to as an interregnum that eventually we'd have to go back to gold or silver, some of the metal, not because we we realized uh that it was better, but because we would have to that will be the only way of arresting the slide that we've seen in in most areas of the economy uh under a under a central banking dollar a central bank managed dollar. >> What happens to investment thesis or basically how does the fact that gold no longer looks forgotten based on just the price action, the volume and interest alone in the media. What does that mean structurally for investors going forward? Well, I think one thing that's going to happen is, and now, first of all, I should I should hasten to mention that none of this means that gold goes from here to 10,000. Gold may go back down to 2,000 or 2500. It may go up to 6,000. Who can say? But I mean, one thing we know for sure, and that is that there's always demand for gold and that the march upward has coincided with a growing realization uh that the uh that that most fiat currencies, including the dollar, are terminally ill. It's just a question of how long they take to to expire, become worthless. So what it means for investors is that my my my first guess is that is that gold will achieve a place in portfolio similar to one that say bonds have or something like that. Up until now people would say well you should have some stocks you should have equities you should have some bonds and then maybe some commodities or some other stuff maybe some maybe some gold. I think it's going to become more imperative in the in the medium term, maybe in the short term, [clears throat] where investors have some exposure to precious metals, whether that's gold and silver, I'm not sure about platinum, palladium, those sorts of things. But that's the first thing. Um and the second thing is I wonder if over time as fiat currencies get sicker if we won't have a popularization of the various metrics which measure for example things like stock prices, things like bond yields, uh you know, conventional financial metrics being measured, you know, not in dollars or index points, but in gold. You know, there's a there's a there's a there's a gold to copper ratio. There's a, you know, a gold valued um uh uh you know, S&P 500, that sort of thing. or or there's a conversion of the dollar values. I wonder if those will become more popular over time because it's just it's it will just be a reflection of the fact that that gold is is is less malleable in terms of its uh value than uh than fiat currencies are. >> In your article called uh the gold standard explained uh which summarizes how it worked in the past and the functions of a gold standard. I want to just highlight this particular paragraph here. Fiscal and monetary discipline linking money creation to gold restraining governments from overspending. who just mentioned that were financing deficits by printing money. Monetary policy was effectively automatic. A nation could not expand its money supply unless it acquired more gold. For this reason, advocates view the gold standard as a guarant as a guard rail rather against political manipulation of money and a deterrent to reckless borrowing. So far as we know, the administration is not seriously proposing or considering a gold standard, at least not in the inner circle of the Trump administration. And so what happens theoretically if this lack of discipline, this lack of fiscal monetary discipline goes unchecked? >> Well, I mean we've seen a lot of that over the last 50 years, but I mean uh to a certain extent, you know, you have a a increasing uh devaluation of the of the unit currency, in this case the dollar, you have rising levels of debt. You know, with those rising levels of debt, as that debt pile rises, uh there's more and more risk that eventually somebody's not going to receive their uh their money back. They're not going to get their uh principal back. So you would have rising yields and with rising yields come more comes more strain from the debt burden and one has to imagine that you know any level of spending that's dependent upon bonds means we have to continue to issue bonds which means eventually if there's no market for those bonds the Federal Reserve will have to basically buy those bonds directly. So there's a sort of a um like a conveyor belt or a treadmill that just moves faster and faster and eventually winds up with either you know direct printing of money or uh or or or very high confiscatory levels of taxes or all of the above financial oppression that sort of thing. So I mean uh you know eventually as I've said and as I believe eventually going back to some form of commodity standard will not be uh an issue of choice. It'll be a matter of absolute of of of national survival of financial uh of of of of economic survival. >> Well, how can we survive the next financial crisis, however it may happen, whenever it may happen, in whatever form it happens, let us know. We'll end here. >> I mean, it's good to be hedged, you know, it's good to uh to to to do things, you know, outside the realm of investment. Uh, you know, uh to try not to have too much debt. um to uh to to try to uh acquire skills that are that are that are um uh still marketable in a recession or something like that. Um you know, stay aware, keep keep one's eye on uh keep your eye on uh shows like this and other financial media. Um and uh just uh I guess don't get sucked into the uh to the uh to the to the propaganda, you know. I mean uh uh fundamental value uh was always found in commodities and and hard goods like land uh gold, silver that sort of thing and um eventually you know for all the good that financialization has done eventually a lot of those things are built on very sort of flimsy uh foundations and uh those will eventually be uh be be be discovered or be be demonstrated you know if there's a real you know if there's a real economic collard hopefully we don't wind up seeing that but I mean It's not like most governments to uh to turn around while there's still time. >> Okay. Excellent. Thank you very much, Pete. Appreciate talking to you. Where can we find more information about you or learn about you and read your work? >> So, uh most of my writing is at air.org. Uh I'm Peter Searl and uh I have a Twitter account uh which I use sporadically and um yeah, that's it. I I'm around I guess you'd say. >> All right. Well, we'll find Peter around in the links down below. Thanks very much, Pete. speak next. >> Thanks for having me. Yep. You too. >> Thank you for watching. Don't forget to like and subscribe.