Dr. Mark Thornton Warns 'Fiat Is In The ICU' And Central Banks Do Not Trust Each Other
Summary
Precious Metals: The guest makes a strong bull case for gold and silver amid fiat debasement, central bank distrust, and rising bond yields.
Silver Inelasticity: Silver’s supply is highly constrained due to its byproduct nature, slow recycling, and environmental policy limits, setting the stage for sharp price moves.
Gold Accumulation: Central bank buying, highlighted by Poland’s plan to reach 700 tons and gains by Russia, signals a global shift toward physical gold reserves.
Miners’ Leverage: Preference is shown for gold producers with significant silver credits and strong balance sheets, with earnings expected to drive later outperformance.
Bond Market Stress: Rising long-term rates in the U.S., Japan, and the U.K. and waning foreign demand for Treasuries underscore risks to financial assets and support hard assets.
Fertilizers: A rotation toward commodities is emphasized, with potential outperformance for agricultural fertilizers and chemicals relative to equities in 2026.
Policy Scenarios: Metals could pause only on credible fiscal reform, de-escalation, or a Volcker-like shock; otherwise, policy risks (taxation/confiscation-lite) may further fuel hard asset demand.
Cycle Signals: The Skyscraper Curse and heavy AI-era capex are cited as late-cycle indicators of malinvestment that typically precede downturns.
Transcript
Welcome back. I'm Jeremy Sapper. And if you're watching the markets right now, you're seeing a a sea of red, but we got to keep the context honest. Yes, the S&P 500 is down roughly 1 one and a half% this morning, which effectively wipes out the gains we've made so far in 2026. But remember, we're pulling back from record highs, and we aren't crashing. We're giving back those January rally numbers. The bid isn't dead. It's just being tested. And the real story though is looking at metal silver briefly traded up near $96 on the spot side just this morning before snapping back towards the mid90s. And whether it's green or red by the time that you watch this program, the signal is volatility. Now, these big two-way swings can point to thinner liquidity in a market trying to find the right pi price. All while gold holding firm above $4,700, proving resilience even as the broader markets sell off. And and right in the middle of this volatility, Poland's central bank has approved a plan to buy an additional 150 tons of gold, targeting 700 tons in total reserves. And to put that into context, Poland is NATO ally on Europe's eastern flank. Choosing physical gold over interestbearing bonds is a strategic decision. It's not a trade. Someone gets it. Just today at the World Economic Forum in Davos, Switzerland, billionaire Ray Dalio put it nicely, saying that the current monetary order is breaking down and fiat is no longer a central bank asset. Take a listen. >> If you look at the what is happening and why it's happening and who's buying it. So, let's let's just take a moment on that capital war issue. Okay, we know that both the holders of US dollar denominated debt and which is money and the those who need it, the United States are worried about each other, right? So if you have other countries who are holding it and they're worried about each other and we're producing a lot of it, that's a big issue, right? So you have to explain what is going on with fiat currencies generally speaking. And now if you take the conflicts you can't ignore the possibility the capital wars. In other words, maybe there's not the same inclination to buy US debt and so on. We at least need to talk about those possibilities and find out who is buying and selling what that is behind these market movements. >> All right, lots to get to today uh in including news in Davos that we'll continue to watch here. But my guest today has been tracking these signals for years. He's an Austrian school economist and senior fellow at the Misesus Institute. He's also the author of the skyscraper curse. It's a well-known framework linking record-breaking construction booms to economic turning points. Dr. Mark Thornton, welcome back to Kick Code News. Great to see you. >> Uh, thank you very much, Jeremy. It's great to be here. >> Uh, I want to start with that Dio quote. You know, the the order is breaking down. I mean, we we see stocks selling off a little bit today, but we're still hovering near all-time highs and investors have been incredibly resilient here. So is today just a you know a healthy correction uh with this Greenland and Japan news or is this divergence kind of stocks finally slipping while metals hold up strength? Is that the proof that the crackup boom has actually begun? >> It has begun and fiat money is not dead but it's in the intensive care unit and governments aren't doing anything about it. They're continuing to borrow. They're continuing to print. And I think it's a sign of our times that central banks no longer trust one another holding paper assets, holding in particular US government paper assets, uh government bonds and so forth. And you know the uh the the rates on US long bonds as well as uh long bonds in Japan and in Great Britain. All of these are headed higher and it's really spooking the market um because of the proflegate spending, the runaway deficit spending, um the interest on the national debts in all of these countries um are just clear signals uh to investors around the world that there's a a lot of trouble going on um in the macro economy and governments are causing chaos um and international conflict. So, it's quite natural, I think, that people are heading to old-fashioned money, which is gold and silver. >> Yeah. Yeah. Speaking of which, I want to drill into silver. I mean, we're we're witnessing history here with new all-time highs and the volatility, I mean, is wild today. I want to to kind of force this into into plain English because this is one of your strongest arguments and it often gets missed. A lot of silver doesn't come from primary silver mines. I mean, it comes as a byproduct from copper, lead, zinc, and gold mining as you know. So, explain the paradox. I mean, if the global economy slows down and base metal mines cut production, does silver supply actually fall at the exact moment monetary demand is rising? >> Well, it might not fall very much, but the supply of silver is very inelastic. In other words, the market can't respond in large quantities to large changes in prices because uh so little silver comes out of primary silver mines and so much comes out of the secondary byproduct mines of zinc and copper um lead etc. And if the economy is going downhill, if economic activity worldwide, especially industrial activity is declining, then there's less demand for lead, copper, zinc, and so forth. And it doesn't give those mines any incentive what to whatsoever to increase output. And therefore, the there's going to be less byproduct silver production coming into the market. And of course uh increasing the number of silver mines or the the amount of production from existing silver mines is very very difficult to do. So the supply side of silver in terms of new silver coming into the market is very very limited um in the short run and it takes years really for the market to adjust or for the market to come up with substitutes for silver um or to even to expand the recycling of silver. So on all three counts, all the things that the market would typically do in other marketplaces is highly constrained and that constraint is is even more manifest because of years of global environmental policy which has discouraged extractive industries such as mining from expanding. So we're hamstrung on all the typical market remedies to much higher prices in silver. >> Yeah. Yeah. Yeah. And I mean, you know, if if if demand surges, which we're seeing, and supply can't respond, I mean, what's the mechanism that clears the market? Is it is it price going vertical? Is it shortages? Is it rationing or or is this the futures market forcing a cash settlement type event? >> Well, of course, in the futures markets, they're in a lot of trouble there. When silver approached $50 an ounce, I said we're going to be going through a lot of growing pains. And my oh my have we seen a lot of growing pains in every aspect from retail distribution, wholesale, refining uh and and the futures markets of course which have experienced uh backwardation and they've also experienced margin calls and none of this has slowed down the increase in the price of silver. So the big response we're going to see uh going forward is a price response and of course that will eventually uh you know discourage certain uh consumers certain buyers of silver um and they'll try to economize but again very very difficult and like with electronics and medical devices and uh all of those kind of things computer technology ology. The price of silver, the cost of silver in an individual product or good or or technique is still relatively low. So the whole marketplace is really loaded up uh uh loaded to bear for higher much higher prices. And of course that's going to cause a lot of recycling, you know, where small silver stackers uh you know redeem their stacks or part of their stacks. Uh so that we see the product flowing ironically from the retail level back up to the wholesale level where there's been such a heightened demand uh because of the chaos in the futures markets. >> Yeah. Yeah. Interesting way. I mean I I want to bring it back to the miners for a second because you know our audience wants leverage plays and and for investors watching I mean if if primary silver supply is limited does that make the primary silver miners the most leverage trade in the entire metals complex or or do the best opportunities stay in gold producers you know with silver credits because they've already got cash flow and less risk. Yeah, I think that, you know, gold miners with heavy uh silver emphasis that hasn't been sold off or sold off to royalty companies, you know, they're going to benefit. They're obviously benefiting from a higher gold price and uh the major miners are accumulating, you know, very strong balance sheet. So, moving forward, uh we're going to see, you know, them uh going out and purchasing new reserves. Uh the same thing with the major silver producers, silver miners, they're accumulating stronger balance sheets. So far that the leverage in miners hasn't really paid off tremendously in the sense that uh the mining companies have not really uh I mean they're doing extremely well uh but not as much uh in terms of leverage play against the metals themselves. So, the metals themselves, uh, you know, which we expect in the first part of a big huge rally like this, they're going to do extremely well. But as the dollars and cents start showing up on the balance sheets of the miners where earnings reports come in and signify to investors what's really going on in those corporations, I I expect the the prices, the stock prices of these mining companies to do very well going forward. >> Yeah, well said. A lot of people waiting and watching, hoping that their portfolios continue to hit this trade. I got to ask you, I mean, you know, are the when we talk about this, we we got to talk about this this byproduct, too. I mean, nobody's really bringing up this one more layer, but platinum is outperforming today, too. I mean, industrial metals are moving. Is this primarily a currency story? People selling dollars or is it also that supply story? We simply don't have enough real commodities to meet demand. Yeah, I mean a lot of that goes back to all those global environmental policies that I talked about which has been discouraging mining and discouraging industry, discouraging extractive industries uh in general and these you know platinum, palladium, silver and gold uh especially silver platinum and platium and copper even have been down uh for a very long time very long and so they haven't had the encourage encouragement uh to go out and uh explore for new uh resources and to develop new minds. And so uh we're going to be playing a lot of catchup where um you know the exploration side and the development side of minds is uh really going to start going at a breakneck speed um out there to catch up with things. And so you know the activity level in the mining sector I think is going to be uh just uh something to really marvel at going forward. >> Yeah. Yeah. That's an interesting fact. I mean let me challenge that though. A lot of the supply problem also comes from geology. The easy ounces seem to be gone. Grades seem to be lower and it takes longer to build mines as you mentioned. So how much of this you know is policy and and how much is this the reality that mining is just harder and more expensive than it used to be? >> Well that's definitely true. I mean, entrepreneurs are going to go out there and look for the easiest ounces to get, but I can guarantee you um you know, as silver and gold and platinum and palladium uh go upward in price that the the market is going to play its magic and people are going to be out there discovering all new sources. They're going to be discovering ways of substituting away from things like silver and platinum and palladium u into other areas. And so in the long run I expect the market to make a lot of different adjustments in terms of discovery in terms of um implementing. You know we have a lot of new mining technology a lot of new uh technology to discover um and uh and process uh you know or existing ores. and we're much better at at uh processing existing ores or even reprocessing old ores uh and tailings and that sort of thing. So the market is going to be one source of really solving these problems and high prices you know for investors we love it but um in general for the economy uh you know the people out in uh Silicon Valley and the technology industries and artificial intelligence and electricity they're sweating out um all of these uh shortages and high prices in so many of these areas. Uh but the market is going to definitely play its role. It just is really um behind times because of policy and because of the fact that this inflation and debasement has come on. Um and of course the media outside of KitKo uh is not broadcasting these problems uh far and wide the way they should be. But uh you know the world economy has wasted a tremendous amount of silver um in alternative energy sources. So we've been wasting silver in solar power and wind power and munitions and all sorts of different areas where you know we've you were using the silver and it's not being uh reh harvested. So I think the market's going to play a great role and it's going to be very surprising in terms of new discoveries um of supply and new ways of uh getting access to that supply and uh and bringing it to market. So it, you know, for me as an Austrian economist and looking at the market and the marvels that it's accomplished in the past, I expect these same sort of mar marvels to happen, especially as we go from $100 silver to $200 silver and above. >> Okay. So is that your call? I mean, obviously you're quite bullish on the silver trade. I mean, you know, history is writing itself. We're $5 away from a hundred US on the spot side. Did you ever see anything like this? You think 200 this year? Well, maybe not 200 this year, but I you know, and I'm not in the uh business of making forecasts like that, but um I would say that left um under the current circumstances of runaway uncontrolled uh government spending and printing that there's no stopping >> uh the debasement of currencies and there's no stopping uh the rise in metal prices. the the things that are going to stop or at least slow down uh the rise in metal prices are these market responses on the one hand but also government either uh involved in nefarious >> nefarious sorts of activities. >> Yeah. >> Um sorry about that. >> That's all right. um or or actual um you know getting their house in order. So you know government can go both ways and it probably will uh where they're they're going to they're going to try to crack down on metals. They're going to try to crack down somehow um on various aspects of the economy to try to hide and divert attention away to what's actually happening. Um, you know, Wall Street is is busy diverting our attention away from what's happening in the precious metals market. >> Um, you know, they're they're not uh you know, the only time they ever report on the precious metals is when there's a down day in the marketplace and where they can have somebody come on and badmouth the precious metals and say, "Well, the top is in. Everybody's going to lose money from here on out." So, I think that's the situation we face right now. But I think broadly speaking um I'm very optimistic and I think that the thing the the reason that we can be optimistic in all of our futures even though this these signals from precious metals are are very very negative is that more and more people don't trust the governments they don't trust the central banks and they don't trust fiat currencies. >> Yeah well said. uh even in that clip and we only paid a small clip this morning of Ray Dalia, but he did give CNBC a little bit of hell for not mentioning medals this morning as it was the top story. Um let's get back to Poland because I want to look at the geopolitics of this buy. I mean, you know, 150 tons is quite massive, but Poland isn't just any country. You know, they're the eastern flank of NATO. We know other nations like China and Russia have been very active in these buys with central banks across the board. I mean, they know the playbook better than anyone being where they are. Mark, when a key NATO ally aggressively swaps euro and dollar reserves for physical gold, what is the signal? Are they hedging against a failure of the Euro zone or are they insuring themselves against this breakdown of the alliance itself? >> I think both of those things. Uh Poland is smarter than most European countries. >> Uh we've hosted many of their scholars here. They're very uh much oriented towards the Austrian school and libertarian view of the world. And I think they're just um you know they've borne the brunt of world wars and inflations and holocausts and so forth. And I think they're just smarter um in general than most European countries. And I'm not surprised in the least uh that they're setting aside, you know, more um more gold as reserves and of course they have a lot of silver production. >> Um they're in Poland. So, um I think that they're they're on the forefront because of their experience and because of their orientation away from European socialism by and large and much more towards a balanced economy and that they do have scholars there that um are very much uh you know ingrained with the Austrian school of economics and free market economics in general. >> Yeah. Yeah. You know, speaking of the the East, according to estimates tracking uh reported holdings and price action, I mean, Russia has gained roughly 216 billion dollars in value on their gold since the war began. I mean, this appreciation effectively offsets what the West froze. So, here's a question for the global market. I mean, if you can sanction a Treasury bond, but you can't sanction a gold bar, does that force every central bank in the global south to increase their gold allocation just to survive? Well, I mean, if you look at the the way things are going, it just doesn't make sense uh to be adding to your reserves in in paper form right now. I mean, all forms of paper fiat denominated assets are in trouble. you know, from life insurance and um to government bonds to private sector bonds to the currencies themselves, there's all there's really a title wave of of negativity that they're facing right now, they're all heading down. Um and you know when those when it becomes apparent uh you know that there's another leg down in the US dollar or there's a you know a breakout in uh long-term interest rates in the United States. Um, you know, this is going to send shock waves uh through investors generally in in the economy uh whether they're central banks or individuals or corporations. >> And they're going to be going more towards hard assets and inventories of raw materials, uh, commodities, um, things of that nature. And they're going to shy away from, you know, storing their value in fiat denominated terms. There's just no question about it. uh there's you know it's to me it seems like it's pretty obvious um the direction of change uh that's happening in the world economy and I think that's what's showing up in markets uh for gold, silver, platinum, palladium, copper, etc. the monetary and close monetary metals out there, precious metals um you know they're all very well aware of what's going on. >> Yeah. Yeah. Well said. I want to bring this back to the bond market for a second because you know Europe holds roughly $8 trillion in US assets. President Trump is threatening tariffs over Greenland and and Europe especially now I mean I'm following the rhetoric but they're certainly discussing some retaliation even if they don't sell the uncertainty still changes the math. I mean you know if the if foreign demand for US debt slows down which it already has who funds the deficit? I mean who buys the bonds? Well, I mean, all of the uh foreign purchasers in the private sector and the public sector or central banks, uh they're all cutting back if they know what's good for them. And of course, you know, places like uh Holland and England and Japan, of course, uh they're facing the same uh issues at home as well. and uh and and so there's just a diminished players out there in the in the real world economy and this is going to force uh central banks to buy up their own paper and of course the Federal Reserve uh they've scaled back on their quantitative tightening program. They've stopped it and then then of course they restarted their quantitative easing program to address so-called liquidity issues. Um and you know that has not really uh turned things around in the US government bond market. So you know the interest rates have not fallen because of Fed purchasing $40 billion a month. And so that tells me that um I would be very leerary about those kind of those markets moving forward. If $40 billion a month really doesn't make a dent uh in that market, then u you know what's what's going to solve it if if uh the rates on long-term US government bonds increases moving forward. >> Um you know that spells a lot of trouble as well. >> Yeah. Yeah. And of course, you know, I want to be fair and play devil's advocate here as well. I mean, we've heard the dollars dying for for for decades, right? I mean, the US has stayed on top longer than most people even expected. So, you know, kind of give me like three things in order that would kind of break this metals rally. What would have to happen for gold to sell off hard from here? Is it a kind of vulker style rate shock? Is it is it a credible fiscal reform? Is it a geopolitical deescalation? >> Well, all three of those would certainly help. I mean a vulker style increase in interest rates right now is very untenable uh because of the size of the US national debt. I mean the idea that we would be uh rolling over our debt at three or four times the rate of interest um you know what would that tell us about the value of the US dollar? So um it you know it would it would certainly help it would certainly strengthen things. Uh it would certainly stop the inflation. >> Uh and so it would be uh one possible way of addressing the issue. The problem is that in contrast to Vulkar's time when the US national debt was only in the 30% range of GDP, uh today it's well over 100% of GDP and growing very rapidly. So I don't really see that as um as a cure all the way it was in the 1980s. But uh certainly uh the the way to do it is uh to work towards balancing the US government budget uh reducing spending uh in the economy which of course they've completely ignored. Um, Doge was kind of, you know, just um, a passing thought in Washington DC and was quickly looked at as something in the past. Uh, but they have to cut the spending. They have to work towards balancing the budget. They have to um, you know, curtail their policies. And of course, at the macroeconomic level, they have to restore um, economic equilibrium in the world economy. Right now there's a lot of chaos going on because of uh international conflict between the United States, Europe, Japan um and certainly China. And so you could cut back a lot on the problem if you started back with uh cooperation. So, you know, if President Trump signed a deal with the Chinese that was a free trade deal where the Chinese uh guaranteed to buy started buying the US government debt again, well, you know, that might work. Uh that would certainly calm a lot of fears uh in the market. But that's the type of thing uh that you have to do to to address the problem in a real way rather than in a threatening way. And of course they could threaten their way uh you know with confiscation type policies and draconian type policies. But a return to free trade with an agreement uh on the Chinese to start buying US government bonds again even if it wasn't a a great deal of money involved it would solve uh it wouldn't solve the problem but it would calm a lot of fears. And right now the market is quite logically very afraid of what's going on in terms of international conflict because you know that trade wars can break out especially with trading blocks that are developing that Mises talked about and taught us about. It's not free trade. It's a it can lead to international conflict as it did in World War I. So we have to back off of those policies and that would greatly calm the fear fears of market and of course gold is the price of gold is in large uh respects a product of fear that we're fearing inflation we're fearing debasement we're fearing international conflict and so that would help solve the problem. >> Yeah that's an interesting point. Uh you said quite a few things there and our time always goes too fast but I want to bring up that point because in Vulkar Vulkar's era obviously debt to GDP was around 30 you said today it's around 100 for viewers obviously that means that the US is carrying a completely different debt load. So does that mean a true Vulkar style rate shock is basically impossible now because the interest expense would blow up the budget? >> Yes. I mean, I I think it is um the the only thing that they could pull off would be a very short-term um rate shock. But see, that's exactly the thing that did not work in the 1970s. uh they tried that in the 1970s where the Fed would raise the interest rate. They would wash down the CPI inflation in the economy and then they would return to easy money and then the inflation would return at even higher rates. And it was only with Vulker um who brought interest rates up to 15% at the Fed and of course 18 to 21% in the economy. And uh Jimmy Carter, President Jimmy Carter, who was a Democratic liberal, he embarked on some very severe free market reforms uh in many important structural industries in the US economy. And the combination of sound monetary policy, reduce government debt and free market reforms in telecommunications and you know uh uh pipelines and all sorts of industries uh set out a course of uh economic normaly and economic prosperity in the United States in the 1980s. And you know, you had Margaret Thatcher in England, you had President Reagan in the United States, and you had Ludic Van Misus's prime student, FA Hayek, who won the Nobel Prize in economics. He was the ideological backbone be for Margaret Thatcher and Ronald Reagan saying, "You have to fight inflation. It has to be tamed. It has to be beaten. It's job number one." And that's what they did and we saw the results that economic prosperity returned and that's the sort of thing that Austrian economists recommend for our future as well. >> Yeah. If they go the other way, you know, draconian as you mentioned, Mark, when you say confiscation type policies, I just want to define it carefully for the viewers. You're not necessarily saying people wake up and, you know, the government takes your gold. You're saying that governments can extract wealth indirectly through policy here. >> Yeah. And they can they can increase um taxation. >> Mhm. >> Um you know they've they've sort of pigeonholed uh people, you know, so that their accounts, their retirement accounts, all this stuff is just sitting there um locked away. And so they may not be going for bank safety deposits, uh you know, to to steal your coin collection, but they have a much larger fish to fry. uh in terms of people's tax deferred uh retirement accounts and and all sorts of uh assets in the economy and incomes in the economy that they can raise taxes um on. And if they raise taxes um and if they go after tax deferred retirement accounts or even just raising the taxes on you know retirement benefits, social security benefits, withdrawals from IRA and so forth. um you know that's going to have a uh you know it might partially fill the hole in the government budget, but it's going to have a very discouraging impact on the economy um and on the average voter out there who's already hurting in most countries around the world. Uh the the majority of uh the population, the working population, the labor, the small businesses, they're all hurting already. And if you start to increase extraction uh from the population um you know with increased taxes um you know that's going to really uh it's going to really hurt and it's probably not going to it's probably only going to exacerbate uh the desire to get away from um all that and getting into precious metals. >> That's interesting. We're obviously been hearing that main street Wall Street divide uh continue this year into 2026 too. I want to look at Japan because it matters directly to the US markets. I mean, overnight Japanese bond yields spiked to the highest level in decades. Traders compared it to the UK bond crisis back in 2022 when confidence cracked and the market forced a response. You've said one of the clear signals of a system shift is is when government bonds markets start to come unglued as you call it. I mean for viewers that means investors demand higher yields because they don't trust the government finances but is that what we're seeing in Japan? Is that your definition of that trigger? >> Absolutely. you know, they had the carry trade in Japan with ultra low interest rates um in Japan. Um and the really the world economy experienced 40 years of declining long-term interest rates and that was uh you know epitomized by the zero to negative interest rates in places like Japan and and that uh carry trade helped finance um a lot of uh government debt and um private sector debt as well as people took advantage of those low interest rates. uh in Japan. Now, of course, uh that's coming home to roost. Interest rates are rising all over the place. They're normalizing in Japan. Um they've increase back so that Japan does no longer looks like a an outsider in the world bond market. Um and uh and now their long-term interest rates have broken out uh to the highest level in many years. and uh you know that that's going to attract uh probably more funds into the Japanese uh bond market, but of course then the Japanese aren't going to be investing um in the private sector economy as much or in US government bonds. So this is this is a game that's been cut loose and uh you know and and all these central banks and all these governments are still seeking you know ever larger amounts of new money coming in to finance their spending and their debt to roll their debt over and it's just coming at a much higher cost >> and bringing it home to the US. I mean, obviously we know Japan is one of the largest foreign holders of US debt, but if Japanese banks take losses at home, does that mean they need to sell US assets to rate cash? I mean, I'm just wondering what this could finally trigger. Uh, are we looking at a risk of a global margin call? >> Well, yes. I think I think it's I think you're going to see that. Um, but it it's more I I think the Japanese are going to try to manage it so that they're just purchasing less uh in terms of US government bonds um and you know in order to finance themselves um uh in in Japan. So uh but of course they've got to be very leerary of of what's going on with the Japanese bond market. I think they're hoping uh that it stabilizes the value of the yen, but of course we've seen uh some regular and even recent depreciation um of the yen and and so you know there's a lot of these problems are ubiquitous out there in terms of fiat currencies and government bonds and it's just very difficult uh especially with this cross financing uh between countries um you know in terms of countries uh private sectors uh financing o the public sectors in other countries. So uh you know I think this is going to become much more chaotic and much more unreliable uh going forward. But we know the one thing that we do know is that the overall level of private sector funding of of the public sector is going to be declining as um the um the private sector savers and so forth um are going to be keeping the money closer to home and going to be converting currency into money, gold and silver. >> Yeah, that's interesting. I mean, I wonder if Japan is selling treasuries to fund itself, does that mean gold becomes that anti-bond trade as we've seen in other central banks? And does silver benefit too or does silver get hit first in a margin call because it's more volatile? >> Um well, I don't know that. Um but I think that you know the fact that the Japanese people are also buying you know this this uh the market in precious metals uh is a hot market not just in the United States as a matter of fact in terms of the small investor the the United States is probably behind uh places like China and Japan and India and other countries around the world. Um th those are the places where the the uh demand for precious metals has already been heightened for quite some time and uh and and so the United uh the the small investor in the United States is really uh in aggregate playing catch-up to what's going on in the rest of the world in in um and I expect um the demand on the part of small investors around the world to increase and for the United States, for Americans to catch up to that. I think, you know, from my personal information, it seems like people only in the last few weeks are really catching wind of what's really going on around the world. >> Yeah. Yeah. Speaking of which, and my last point on this blog, I mean, you've talked about the the Canton effect, the idea that money printing benefits those closest to the source first. I mean, right now the Federal Reserve is spending $2.5 billion renovating its headquarters while markets are under pressure. Is that the perfect example of what you mean? And and what's the clearest, you know, place viewers can see it? Is it housing? Is it stocks? The gold price itself? >> Well, I think that historically speaking, uh, you see the Canton effect in Wall Street and in the stock market. Uh, that's where the money is injected. Uh and so the money tends to go into the bond market, in the stock market uh and it it tends to show its influence in places like financial centers such as New York City, but also of course where the money is first spent in Washington DC. So you had this incredible runup in real estate values in the Washington DC area, you know, with the greatest number of percentage of millionaires and million-doll houses. Uh that's where the money the canon effect where the money is injected. Those are the people who benefit the most. And that's really the story behind the Kshaped economy that the upper income people, the people with wealth, the people with access to bank credit and those low interest rates that get the money first and are able to invest it in stock markets and so forth. uh their incomes and their wealth and their spending of course has continued upward um at a very fast pace. Whereas the rest of the population that does not have direct access to this new money, that does not have great bank credit or and um uh you know that don't get the money that doesn't show up in Auburn, Alabama for quite some time. Um those are the people who are being left behind. Those are the people whose wages and whose incomes um are not keeping up with inflation. And so they're already uh in recession in the the uh you know in the large scale areas of the United States, the rural areas and the non-financial center areas. Those are the areas that are already hurt. And so this exactly explains the big story which is the K-shaped economy in the United States. The big economic divide. What you know divides Americans basically is the people who are benefiting from the system. The wealthy who have access to the money and versus the working class who don't have access to this money and who don't get the money first. they only get the higher prices later on in the economy and so their real wages, their inflation adjusted wages are are suffering and those are the also the people who are unfortunately redeeming their silver stacks in order to meet you know medical bills and um uh tax payments and all sorts of things or the higher insurance uh of government healthc care insurance. uh you know th those are the people who are suffering and that those are the people who are unfortunately being forced to you know go to the local coin dealer and uh redeem their stacks of silver uh for the paper currency in order to meet the uh contingencies um that have befallen them in this economy. >> That's an interesting one and it kind of brings me back to that you know your core thesis on on what you call the skyscraper curse. I mean, you have a whole book on it. I mean, for viewers, uh, this is a historical pattern where record- setting towers show up during easy money booms and then economic reality seems to hit. Uh, we've seen reports that Jedha Tower in Saudi Arabia is restarted construction to become the world's tallest while bond markets are stressed in Japan. I mean, is the pattern repeating? Is that what peak looks like? >> Absolutely. You know, the Jedha Tower was supposed to set a record in 2020 and Austrian economists around the world were anticipating uh at least a global recession if not an economic crisis in late 2019 2020. We actually put a book out on the subject. But then of course COVID, the COVID emergency uh came into play and snuffed out the official recession with $5 trillion of new money and $20 trillion of new spending in the United States alone. Uh but then they restarted the Jedha Tower last year. It's on its way to setting a record at the end of this year. And once it reaches that record height, now of course just the building of the skyscraper does not cause an economic crisis, but it's symptomatic of financial conditions in the world economy that see both the building of world record setting skyscrapers and the onset of global economic crisis. So, it's something to watch out because they're building they're building uh I think it's one new story over there in western Saudi Arabia adding on one new floor every four days. So, the the construction got restarted last year and it seems to be going a pace. Uh the information about the project is not very forthcoming. Um and and so I can't provide an accurate update, but it all signs point to a new record uh height skyscraper uh them reaching that record height in 2026, >> right? I mean, so the argument is K-shaped inequality is really the the the social symptom and the skyscraper is the physical system of the same cheap money cycle. >> That's correct. the um the skyscraper is a construction project. It's a real estate project of enormous proportions and there's all sorts of new technology that we don't necessarily see in the construction of those uh record setting skyscrapers in terms of things like elevators and air conditioning. But just pumping the concrete requires a whole new level of technology, advanced technology. Um and then of course in in the current world situation uh the world economy is busy throughout building the AI new level of advanced technology with artificial intelligence which is impacting industries across the board forcing new technology to be implemented and of course but this is advanced technology which is not necessarily the best, most efficient, most productive technology at a point in time. So that skyscrapers technology is just symptomatic of what's going on technologically speaking throughout the world economy. And uh this is a very unfortunate uh signal, but it's something where we can all learn more about what's really going on in a business cycle. Um because otherwise we don't really know. Everybody likes the uh you know the upswing in the business cycle. Everybody likes the new technology. Everybody likes the profits and the investments and then everybody is completely caught flatfooted when things turn down. But with the Austrian theory and the skyscraper curse index, we learn why artificial interest rates, why artificial printing of money and credit uh cause these distortions cause these male investments would which ultimately have a tremendous negative impact on the overall economy. Let's bring up the endgame here and kind of the big question because you've said a return to some kind of a goldback system is a real possibility here. I mean for viewers, we're not really talking about coins in your pocket. We're talking about governments using gold to settle trade or to restore confidence in currencies when the bond market stops working. So I mean what hap what has to happen first here for that to become politically unavoidable? And and is that a 2026 story or is that a 10-year story? I think it's happening right now. I think people, you know, are considering, you know, not only investing in these metals, but also uh they're considering using them in barter type situations. Uh Van just came out and and discussed, you know, what what it would take for the US to go back on the gold standard. So everybody has a a pretty strong hint that we are facing a really severe situation and it's going to take a really monumental effort and obviously Dallio and Van these are really smart people and they both see that the endgame is a return to gold. Now governments are not going to like that. they're going to resist that at all turns. But what we're going to see, if we're not already seeing it already, is people turning to holding real money and eventually using real money wherever it's possible uh in barter type situations. Uh but of course we're also getting greater access to um cryptocryptized forms of gold and silver that potentially can be used um in the economy uh either through for investment purposes or for spending purposes. So, I think you're going to see that's one of the uh market revolutions that you're going to see is that people are going to want to not only to hold these things, but eventually to be able to use these things. Um, and not just for investment purposes, but to make transactions. Um, and maybe because of high rates of inflation. uh maybe because it's hard to make uh economic calculations uh in this chaos uh but it's definitely going to come. It's because as I said at the very beginning uh the we're already in the works of this problem and the national debts are already huge and the deficits are huge and the governments aren't doing anything about them. So the trends in precious market and the trends in precious metals is going to continue until uh something is done about it. And uh if it if it's allowed to just run its course, then people are going to force be forced especially in um less advanced countries uh where maybe hyperinflation starts uh to begin in those in those economies that uh they're going to be forced to start using uh money at in terms of their day-to-day exchanges. >> Yeah. All right. So, we're setting up a a a interesting 2026 for obviously the hard asset side. I I got to end with this. I mean, your contest uh stocks versus manure. You bet that fertilizer prices, utility would outperform the S&P 500, financial assets in 2026. With stocks down this morning in, you know, silver holding a historic run, silver and gold have both outperformed the S&P last year. Is the manure winning? And seriously, I mean, what what's the takeaway here? or should investors focus on utility instead of paper promises? >> Well, th this uh this year's prediction contest of stocks versus manure, uh that was um something I got off of Michael Oliver who said that he thought maybe uh manure would outperform the S&P 500 this year. So he's really the source the inspiration uh for this prediction but basically it is uh the idea that commodities in general will do better than uh financial assets in general. So, we set it up as a a contest between the S&P 500 and uh the ETF MO uh which is a ETF of agricultural related uh stocks including a heavy emphasis on agricultural fertilizers and chemicals. So it should be an interesting year. Um comparing the the competition of investment classifications of uh financial assets on the one hand and commodity uh particularly agricultural commodities because agricultural commodities I think are the worst or one of the worst performing uh subgroups within the commodity category. Obviously the precious metals and the industrial metals have done very well. Uh and we're starting to see some action in the energy markets u the specialty metal these uh the rare earth and so forth lithium and uranium but it hasn't really uh worked its way down into the agricultural the soft commodities and so forth. So an interesting contest. Uh we'll see what happens. Um I'm looking forward to 2026. >> Yeah. Amen. And I'm not sure when I'm going to talk to you again. So, final question. I mean, maybe even just a sentence. One piece of advice for navigating 2026. I mean, what is it? Well, I think the best thing that's happening to Americans and and people around the world is they no longer trust their politicians. They no longer trust uh the government officials, the politicians, and the bureaucrats that are running their economies and running their lives. And I think that's the one shining star, the north star that if we keep our eye on that one principle that we'll do better personally um in terms of our own decision making in the economy by not trusting those people uh not really even paying attention to them and and also uh their performance in in terms of running the governments uh and their impact on the economy. So, I think that that's the one uh northstar general indicator that if people keep their eye on that one principle that we'll all do better uh in 2026 heading into 2027. >> All right, Dr. Mark Thornton. Sharp, timely, and uh a lot for investors to think about, especially with silver's inelastic supply, bond markets tress, and central banks leaning back into gold. Uh, thank you very much for joining us in the audience today, >> Jeremy. It's my pleasure. >> Appreciate your time. All right, and we want to thank you for watching Kitco News. I'm Jeremy Saffron. If you found this interview valuable, be sure to hit subscribe, drop a comment below, and tell us what you're watching next. Gold, silver, miners, even the bond market. We'll see you next time. Heat. Heat.
Dr. Mark Thornton Warns 'Fiat Is In The ICU' And Central Banks Do Not Trust Each Other
Summary
Transcript
Welcome back. I'm Jeremy Sapper. And if you're watching the markets right now, you're seeing a a sea of red, but we got to keep the context honest. Yes, the S&P 500 is down roughly 1 one and a half% this morning, which effectively wipes out the gains we've made so far in 2026. But remember, we're pulling back from record highs, and we aren't crashing. We're giving back those January rally numbers. The bid isn't dead. It's just being tested. And the real story though is looking at metal silver briefly traded up near $96 on the spot side just this morning before snapping back towards the mid90s. And whether it's green or red by the time that you watch this program, the signal is volatility. Now, these big two-way swings can point to thinner liquidity in a market trying to find the right pi price. All while gold holding firm above $4,700, proving resilience even as the broader markets sell off. And and right in the middle of this volatility, Poland's central bank has approved a plan to buy an additional 150 tons of gold, targeting 700 tons in total reserves. And to put that into context, Poland is NATO ally on Europe's eastern flank. Choosing physical gold over interestbearing bonds is a strategic decision. It's not a trade. Someone gets it. Just today at the World Economic Forum in Davos, Switzerland, billionaire Ray Dalio put it nicely, saying that the current monetary order is breaking down and fiat is no longer a central bank asset. Take a listen. >> If you look at the what is happening and why it's happening and who's buying it. So, let's let's just take a moment on that capital war issue. Okay, we know that both the holders of US dollar denominated debt and which is money and the those who need it, the United States are worried about each other, right? So if you have other countries who are holding it and they're worried about each other and we're producing a lot of it, that's a big issue, right? So you have to explain what is going on with fiat currencies generally speaking. And now if you take the conflicts you can't ignore the possibility the capital wars. In other words, maybe there's not the same inclination to buy US debt and so on. We at least need to talk about those possibilities and find out who is buying and selling what that is behind these market movements. >> All right, lots to get to today uh in including news in Davos that we'll continue to watch here. But my guest today has been tracking these signals for years. He's an Austrian school economist and senior fellow at the Misesus Institute. He's also the author of the skyscraper curse. It's a well-known framework linking record-breaking construction booms to economic turning points. Dr. Mark Thornton, welcome back to Kick Code News. Great to see you. >> Uh, thank you very much, Jeremy. It's great to be here. >> Uh, I want to start with that Dio quote. You know, the the order is breaking down. I mean, we we see stocks selling off a little bit today, but we're still hovering near all-time highs and investors have been incredibly resilient here. So is today just a you know a healthy correction uh with this Greenland and Japan news or is this divergence kind of stocks finally slipping while metals hold up strength? Is that the proof that the crackup boom has actually begun? >> It has begun and fiat money is not dead but it's in the intensive care unit and governments aren't doing anything about it. They're continuing to borrow. They're continuing to print. And I think it's a sign of our times that central banks no longer trust one another holding paper assets, holding in particular US government paper assets, uh government bonds and so forth. And you know the uh the the rates on US long bonds as well as uh long bonds in Japan and in Great Britain. All of these are headed higher and it's really spooking the market um because of the proflegate spending, the runaway deficit spending, um the interest on the national debts in all of these countries um are just clear signals uh to investors around the world that there's a a lot of trouble going on um in the macro economy and governments are causing chaos um and international conflict. So, it's quite natural, I think, that people are heading to old-fashioned money, which is gold and silver. >> Yeah. Yeah. Speaking of which, I want to drill into silver. I mean, we're we're witnessing history here with new all-time highs and the volatility, I mean, is wild today. I want to to kind of force this into into plain English because this is one of your strongest arguments and it often gets missed. A lot of silver doesn't come from primary silver mines. I mean, it comes as a byproduct from copper, lead, zinc, and gold mining as you know. So, explain the paradox. I mean, if the global economy slows down and base metal mines cut production, does silver supply actually fall at the exact moment monetary demand is rising? >> Well, it might not fall very much, but the supply of silver is very inelastic. In other words, the market can't respond in large quantities to large changes in prices because uh so little silver comes out of primary silver mines and so much comes out of the secondary byproduct mines of zinc and copper um lead etc. And if the economy is going downhill, if economic activity worldwide, especially industrial activity is declining, then there's less demand for lead, copper, zinc, and so forth. And it doesn't give those mines any incentive what to whatsoever to increase output. And therefore, the there's going to be less byproduct silver production coming into the market. And of course uh increasing the number of silver mines or the the amount of production from existing silver mines is very very difficult to do. So the supply side of silver in terms of new silver coming into the market is very very limited um in the short run and it takes years really for the market to adjust or for the market to come up with substitutes for silver um or to even to expand the recycling of silver. So on all three counts, all the things that the market would typically do in other marketplaces is highly constrained and that constraint is is even more manifest because of years of global environmental policy which has discouraged extractive industries such as mining from expanding. So we're hamstrung on all the typical market remedies to much higher prices in silver. >> Yeah. Yeah. Yeah. And I mean, you know, if if if demand surges, which we're seeing, and supply can't respond, I mean, what's the mechanism that clears the market? Is it is it price going vertical? Is it shortages? Is it rationing or or is this the futures market forcing a cash settlement type event? >> Well, of course, in the futures markets, they're in a lot of trouble there. When silver approached $50 an ounce, I said we're going to be going through a lot of growing pains. And my oh my have we seen a lot of growing pains in every aspect from retail distribution, wholesale, refining uh and and the futures markets of course which have experienced uh backwardation and they've also experienced margin calls and none of this has slowed down the increase in the price of silver. So the big response we're going to see uh going forward is a price response and of course that will eventually uh you know discourage certain uh consumers certain buyers of silver um and they'll try to economize but again very very difficult and like with electronics and medical devices and uh all of those kind of things computer technology ology. The price of silver, the cost of silver in an individual product or good or or technique is still relatively low. So the whole marketplace is really loaded up uh uh loaded to bear for higher much higher prices. And of course that's going to cause a lot of recycling, you know, where small silver stackers uh you know redeem their stacks or part of their stacks. Uh so that we see the product flowing ironically from the retail level back up to the wholesale level where there's been such a heightened demand uh because of the chaos in the futures markets. >> Yeah. Yeah. Interesting way. I mean I I want to bring it back to the miners for a second because you know our audience wants leverage plays and and for investors watching I mean if if primary silver supply is limited does that make the primary silver miners the most leverage trade in the entire metals complex or or do the best opportunities stay in gold producers you know with silver credits because they've already got cash flow and less risk. Yeah, I think that, you know, gold miners with heavy uh silver emphasis that hasn't been sold off or sold off to royalty companies, you know, they're going to benefit. They're obviously benefiting from a higher gold price and uh the major miners are accumulating, you know, very strong balance sheet. So, moving forward, uh we're going to see, you know, them uh going out and purchasing new reserves. Uh the same thing with the major silver producers, silver miners, they're accumulating stronger balance sheets. So far that the leverage in miners hasn't really paid off tremendously in the sense that uh the mining companies have not really uh I mean they're doing extremely well uh but not as much uh in terms of leverage play against the metals themselves. So, the metals themselves, uh, you know, which we expect in the first part of a big huge rally like this, they're going to do extremely well. But as the dollars and cents start showing up on the balance sheets of the miners where earnings reports come in and signify to investors what's really going on in those corporations, I I expect the the prices, the stock prices of these mining companies to do very well going forward. >> Yeah, well said. A lot of people waiting and watching, hoping that their portfolios continue to hit this trade. I got to ask you, I mean, you know, are the when we talk about this, we we got to talk about this this byproduct, too. I mean, nobody's really bringing up this one more layer, but platinum is outperforming today, too. I mean, industrial metals are moving. Is this primarily a currency story? People selling dollars or is it also that supply story? We simply don't have enough real commodities to meet demand. Yeah, I mean a lot of that goes back to all those global environmental policies that I talked about which has been discouraging mining and discouraging industry, discouraging extractive industries uh in general and these you know platinum, palladium, silver and gold uh especially silver platinum and platium and copper even have been down uh for a very long time very long and so they haven't had the encourage encouragement uh to go out and uh explore for new uh resources and to develop new minds. And so uh we're going to be playing a lot of catchup where um you know the exploration side and the development side of minds is uh really going to start going at a breakneck speed um out there to catch up with things. And so you know the activity level in the mining sector I think is going to be uh just uh something to really marvel at going forward. >> Yeah. Yeah. That's an interesting fact. I mean let me challenge that though. A lot of the supply problem also comes from geology. The easy ounces seem to be gone. Grades seem to be lower and it takes longer to build mines as you mentioned. So how much of this you know is policy and and how much is this the reality that mining is just harder and more expensive than it used to be? >> Well that's definitely true. I mean, entrepreneurs are going to go out there and look for the easiest ounces to get, but I can guarantee you um you know, as silver and gold and platinum and palladium uh go upward in price that the the market is going to play its magic and people are going to be out there discovering all new sources. They're going to be discovering ways of substituting away from things like silver and platinum and palladium u into other areas. And so in the long run I expect the market to make a lot of different adjustments in terms of discovery in terms of um implementing. You know we have a lot of new mining technology a lot of new uh technology to discover um and uh and process uh you know or existing ores. and we're much better at at uh processing existing ores or even reprocessing old ores uh and tailings and that sort of thing. So the market is going to be one source of really solving these problems and high prices you know for investors we love it but um in general for the economy uh you know the people out in uh Silicon Valley and the technology industries and artificial intelligence and electricity they're sweating out um all of these uh shortages and high prices in so many of these areas. Uh but the market is going to definitely play its role. It just is really um behind times because of policy and because of the fact that this inflation and debasement has come on. Um and of course the media outside of KitKo uh is not broadcasting these problems uh far and wide the way they should be. But uh you know the world economy has wasted a tremendous amount of silver um in alternative energy sources. So we've been wasting silver in solar power and wind power and munitions and all sorts of different areas where you know we've you were using the silver and it's not being uh reh harvested. So I think the market's going to play a great role and it's going to be very surprising in terms of new discoveries um of supply and new ways of uh getting access to that supply and uh and bringing it to market. So it, you know, for me as an Austrian economist and looking at the market and the marvels that it's accomplished in the past, I expect these same sort of mar marvels to happen, especially as we go from $100 silver to $200 silver and above. >> Okay. So is that your call? I mean, obviously you're quite bullish on the silver trade. I mean, you know, history is writing itself. We're $5 away from a hundred US on the spot side. Did you ever see anything like this? You think 200 this year? Well, maybe not 200 this year, but I you know, and I'm not in the uh business of making forecasts like that, but um I would say that left um under the current circumstances of runaway uncontrolled uh government spending and printing that there's no stopping >> uh the debasement of currencies and there's no stopping uh the rise in metal prices. the the things that are going to stop or at least slow down uh the rise in metal prices are these market responses on the one hand but also government either uh involved in nefarious >> nefarious sorts of activities. >> Yeah. >> Um sorry about that. >> That's all right. um or or actual um you know getting their house in order. So you know government can go both ways and it probably will uh where they're they're going to they're going to try to crack down on metals. They're going to try to crack down somehow um on various aspects of the economy to try to hide and divert attention away to what's actually happening. Um, you know, Wall Street is is busy diverting our attention away from what's happening in the precious metals market. >> Um, you know, they're they're not uh you know, the only time they ever report on the precious metals is when there's a down day in the marketplace and where they can have somebody come on and badmouth the precious metals and say, "Well, the top is in. Everybody's going to lose money from here on out." So, I think that's the situation we face right now. But I think broadly speaking um I'm very optimistic and I think that the thing the the reason that we can be optimistic in all of our futures even though this these signals from precious metals are are very very negative is that more and more people don't trust the governments they don't trust the central banks and they don't trust fiat currencies. >> Yeah well said. uh even in that clip and we only paid a small clip this morning of Ray Dalia, but he did give CNBC a little bit of hell for not mentioning medals this morning as it was the top story. Um let's get back to Poland because I want to look at the geopolitics of this buy. I mean, you know, 150 tons is quite massive, but Poland isn't just any country. You know, they're the eastern flank of NATO. We know other nations like China and Russia have been very active in these buys with central banks across the board. I mean, they know the playbook better than anyone being where they are. Mark, when a key NATO ally aggressively swaps euro and dollar reserves for physical gold, what is the signal? Are they hedging against a failure of the Euro zone or are they insuring themselves against this breakdown of the alliance itself? >> I think both of those things. Uh Poland is smarter than most European countries. >> Uh we've hosted many of their scholars here. They're very uh much oriented towards the Austrian school and libertarian view of the world. And I think they're just um you know they've borne the brunt of world wars and inflations and holocausts and so forth. And I think they're just smarter um in general than most European countries. And I'm not surprised in the least uh that they're setting aside, you know, more um more gold as reserves and of course they have a lot of silver production. >> Um they're in Poland. So, um I think that they're they're on the forefront because of their experience and because of their orientation away from European socialism by and large and much more towards a balanced economy and that they do have scholars there that um are very much uh you know ingrained with the Austrian school of economics and free market economics in general. >> Yeah. Yeah. You know, speaking of the the East, according to estimates tracking uh reported holdings and price action, I mean, Russia has gained roughly 216 billion dollars in value on their gold since the war began. I mean, this appreciation effectively offsets what the West froze. So, here's a question for the global market. I mean, if you can sanction a Treasury bond, but you can't sanction a gold bar, does that force every central bank in the global south to increase their gold allocation just to survive? Well, I mean, if you look at the the way things are going, it just doesn't make sense uh to be adding to your reserves in in paper form right now. I mean, all forms of paper fiat denominated assets are in trouble. you know, from life insurance and um to government bonds to private sector bonds to the currencies themselves, there's all there's really a title wave of of negativity that they're facing right now, they're all heading down. Um and you know when those when it becomes apparent uh you know that there's another leg down in the US dollar or there's a you know a breakout in uh long-term interest rates in the United States. Um, you know, this is going to send shock waves uh through investors generally in in the economy uh whether they're central banks or individuals or corporations. >> And they're going to be going more towards hard assets and inventories of raw materials, uh, commodities, um, things of that nature. And they're going to shy away from, you know, storing their value in fiat denominated terms. There's just no question about it. uh there's you know it's to me it seems like it's pretty obvious um the direction of change uh that's happening in the world economy and I think that's what's showing up in markets uh for gold, silver, platinum, palladium, copper, etc. the monetary and close monetary metals out there, precious metals um you know they're all very well aware of what's going on. >> Yeah. Yeah. Well said. I want to bring this back to the bond market for a second because you know Europe holds roughly $8 trillion in US assets. President Trump is threatening tariffs over Greenland and and Europe especially now I mean I'm following the rhetoric but they're certainly discussing some retaliation even if they don't sell the uncertainty still changes the math. I mean you know if the if foreign demand for US debt slows down which it already has who funds the deficit? I mean who buys the bonds? Well, I mean, all of the uh foreign purchasers in the private sector and the public sector or central banks, uh they're all cutting back if they know what's good for them. And of course, you know, places like uh Holland and England and Japan, of course, uh they're facing the same uh issues at home as well. and uh and and so there's just a diminished players out there in the in the real world economy and this is going to force uh central banks to buy up their own paper and of course the Federal Reserve uh they've scaled back on their quantitative tightening program. They've stopped it and then then of course they restarted their quantitative easing program to address so-called liquidity issues. Um and you know that has not really uh turned things around in the US government bond market. So you know the interest rates have not fallen because of Fed purchasing $40 billion a month. And so that tells me that um I would be very leerary about those kind of those markets moving forward. If $40 billion a month really doesn't make a dent uh in that market, then u you know what's what's going to solve it if if uh the rates on long-term US government bonds increases moving forward. >> Um you know that spells a lot of trouble as well. >> Yeah. Yeah. And of course, you know, I want to be fair and play devil's advocate here as well. I mean, we've heard the dollars dying for for for decades, right? I mean, the US has stayed on top longer than most people even expected. So, you know, kind of give me like three things in order that would kind of break this metals rally. What would have to happen for gold to sell off hard from here? Is it a kind of vulker style rate shock? Is it is it a credible fiscal reform? Is it a geopolitical deescalation? >> Well, all three of those would certainly help. I mean a vulker style increase in interest rates right now is very untenable uh because of the size of the US national debt. I mean the idea that we would be uh rolling over our debt at three or four times the rate of interest um you know what would that tell us about the value of the US dollar? So um it you know it would it would certainly help it would certainly strengthen things. Uh it would certainly stop the inflation. >> Uh and so it would be uh one possible way of addressing the issue. The problem is that in contrast to Vulkar's time when the US national debt was only in the 30% range of GDP, uh today it's well over 100% of GDP and growing very rapidly. So I don't really see that as um as a cure all the way it was in the 1980s. But uh certainly uh the the way to do it is uh to work towards balancing the US government budget uh reducing spending uh in the economy which of course they've completely ignored. Um, Doge was kind of, you know, just um, a passing thought in Washington DC and was quickly looked at as something in the past. Uh, but they have to cut the spending. They have to work towards balancing the budget. They have to um, you know, curtail their policies. And of course, at the macroeconomic level, they have to restore um, economic equilibrium in the world economy. Right now there's a lot of chaos going on because of uh international conflict between the United States, Europe, Japan um and certainly China. And so you could cut back a lot on the problem if you started back with uh cooperation. So, you know, if President Trump signed a deal with the Chinese that was a free trade deal where the Chinese uh guaranteed to buy started buying the US government debt again, well, you know, that might work. Uh that would certainly calm a lot of fears uh in the market. But that's the type of thing uh that you have to do to to address the problem in a real way rather than in a threatening way. And of course they could threaten their way uh you know with confiscation type policies and draconian type policies. But a return to free trade with an agreement uh on the Chinese to start buying US government bonds again even if it wasn't a a great deal of money involved it would solve uh it wouldn't solve the problem but it would calm a lot of fears. And right now the market is quite logically very afraid of what's going on in terms of international conflict because you know that trade wars can break out especially with trading blocks that are developing that Mises talked about and taught us about. It's not free trade. It's a it can lead to international conflict as it did in World War I. So we have to back off of those policies and that would greatly calm the fear fears of market and of course gold is the price of gold is in large uh respects a product of fear that we're fearing inflation we're fearing debasement we're fearing international conflict and so that would help solve the problem. >> Yeah that's an interesting point. Uh you said quite a few things there and our time always goes too fast but I want to bring up that point because in Vulkar Vulkar's era obviously debt to GDP was around 30 you said today it's around 100 for viewers obviously that means that the US is carrying a completely different debt load. So does that mean a true Vulkar style rate shock is basically impossible now because the interest expense would blow up the budget? >> Yes. I mean, I I think it is um the the only thing that they could pull off would be a very short-term um rate shock. But see, that's exactly the thing that did not work in the 1970s. uh they tried that in the 1970s where the Fed would raise the interest rate. They would wash down the CPI inflation in the economy and then they would return to easy money and then the inflation would return at even higher rates. And it was only with Vulker um who brought interest rates up to 15% at the Fed and of course 18 to 21% in the economy. And uh Jimmy Carter, President Jimmy Carter, who was a Democratic liberal, he embarked on some very severe free market reforms uh in many important structural industries in the US economy. And the combination of sound monetary policy, reduce government debt and free market reforms in telecommunications and you know uh uh pipelines and all sorts of industries uh set out a course of uh economic normaly and economic prosperity in the United States in the 1980s. And you know, you had Margaret Thatcher in England, you had President Reagan in the United States, and you had Ludic Van Misus's prime student, FA Hayek, who won the Nobel Prize in economics. He was the ideological backbone be for Margaret Thatcher and Ronald Reagan saying, "You have to fight inflation. It has to be tamed. It has to be beaten. It's job number one." And that's what they did and we saw the results that economic prosperity returned and that's the sort of thing that Austrian economists recommend for our future as well. >> Yeah. If they go the other way, you know, draconian as you mentioned, Mark, when you say confiscation type policies, I just want to define it carefully for the viewers. You're not necessarily saying people wake up and, you know, the government takes your gold. You're saying that governments can extract wealth indirectly through policy here. >> Yeah. And they can they can increase um taxation. >> Mhm. >> Um you know they've they've sort of pigeonholed uh people, you know, so that their accounts, their retirement accounts, all this stuff is just sitting there um locked away. And so they may not be going for bank safety deposits, uh you know, to to steal your coin collection, but they have a much larger fish to fry. uh in terms of people's tax deferred uh retirement accounts and and all sorts of uh assets in the economy and incomes in the economy that they can raise taxes um on. And if they raise taxes um and if they go after tax deferred retirement accounts or even just raising the taxes on you know retirement benefits, social security benefits, withdrawals from IRA and so forth. um you know that's going to have a uh you know it might partially fill the hole in the government budget, but it's going to have a very discouraging impact on the economy um and on the average voter out there who's already hurting in most countries around the world. Uh the the majority of uh the population, the working population, the labor, the small businesses, they're all hurting already. And if you start to increase extraction uh from the population um you know with increased taxes um you know that's going to really uh it's going to really hurt and it's probably not going to it's probably only going to exacerbate uh the desire to get away from um all that and getting into precious metals. >> That's interesting. We're obviously been hearing that main street Wall Street divide uh continue this year into 2026 too. I want to look at Japan because it matters directly to the US markets. I mean, overnight Japanese bond yields spiked to the highest level in decades. Traders compared it to the UK bond crisis back in 2022 when confidence cracked and the market forced a response. You've said one of the clear signals of a system shift is is when government bonds markets start to come unglued as you call it. I mean for viewers that means investors demand higher yields because they don't trust the government finances but is that what we're seeing in Japan? Is that your definition of that trigger? >> Absolutely. you know, they had the carry trade in Japan with ultra low interest rates um in Japan. Um and the really the world economy experienced 40 years of declining long-term interest rates and that was uh you know epitomized by the zero to negative interest rates in places like Japan and and that uh carry trade helped finance um a lot of uh government debt and um private sector debt as well as people took advantage of those low interest rates. uh in Japan. Now, of course, uh that's coming home to roost. Interest rates are rising all over the place. They're normalizing in Japan. Um they've increase back so that Japan does no longer looks like a an outsider in the world bond market. Um and uh and now their long-term interest rates have broken out uh to the highest level in many years. and uh you know that that's going to attract uh probably more funds into the Japanese uh bond market, but of course then the Japanese aren't going to be investing um in the private sector economy as much or in US government bonds. So this is this is a game that's been cut loose and uh you know and and all these central banks and all these governments are still seeking you know ever larger amounts of new money coming in to finance their spending and their debt to roll their debt over and it's just coming at a much higher cost >> and bringing it home to the US. I mean, obviously we know Japan is one of the largest foreign holders of US debt, but if Japanese banks take losses at home, does that mean they need to sell US assets to rate cash? I mean, I'm just wondering what this could finally trigger. Uh, are we looking at a risk of a global margin call? >> Well, yes. I think I think it's I think you're going to see that. Um, but it it's more I I think the Japanese are going to try to manage it so that they're just purchasing less uh in terms of US government bonds um and you know in order to finance themselves um uh in in Japan. So uh but of course they've got to be very leerary of of what's going on with the Japanese bond market. I think they're hoping uh that it stabilizes the value of the yen, but of course we've seen uh some regular and even recent depreciation um of the yen and and so you know there's a lot of these problems are ubiquitous out there in terms of fiat currencies and government bonds and it's just very difficult uh especially with this cross financing uh between countries um you know in terms of countries uh private sectors uh financing o the public sectors in other countries. So uh you know I think this is going to become much more chaotic and much more unreliable uh going forward. But we know the one thing that we do know is that the overall level of private sector funding of of the public sector is going to be declining as um the um the private sector savers and so forth um are going to be keeping the money closer to home and going to be converting currency into money, gold and silver. >> Yeah, that's interesting. I mean, I wonder if Japan is selling treasuries to fund itself, does that mean gold becomes that anti-bond trade as we've seen in other central banks? And does silver benefit too or does silver get hit first in a margin call because it's more volatile? >> Um well, I don't know that. Um but I think that you know the fact that the Japanese people are also buying you know this this uh the market in precious metals uh is a hot market not just in the United States as a matter of fact in terms of the small investor the the United States is probably behind uh places like China and Japan and India and other countries around the world. Um th those are the places where the the uh demand for precious metals has already been heightened for quite some time and uh and and so the United uh the the small investor in the United States is really uh in aggregate playing catch-up to what's going on in the rest of the world in in um and I expect um the demand on the part of small investors around the world to increase and for the United States, for Americans to catch up to that. I think, you know, from my personal information, it seems like people only in the last few weeks are really catching wind of what's really going on around the world. >> Yeah. Yeah. Speaking of which, and my last point on this blog, I mean, you've talked about the the Canton effect, the idea that money printing benefits those closest to the source first. I mean, right now the Federal Reserve is spending $2.5 billion renovating its headquarters while markets are under pressure. Is that the perfect example of what you mean? And and what's the clearest, you know, place viewers can see it? Is it housing? Is it stocks? The gold price itself? >> Well, I think that historically speaking, uh, you see the Canton effect in Wall Street and in the stock market. Uh, that's where the money is injected. Uh and so the money tends to go into the bond market, in the stock market uh and it it tends to show its influence in places like financial centers such as New York City, but also of course where the money is first spent in Washington DC. So you had this incredible runup in real estate values in the Washington DC area, you know, with the greatest number of percentage of millionaires and million-doll houses. Uh that's where the money the canon effect where the money is injected. Those are the people who benefit the most. And that's really the story behind the Kshaped economy that the upper income people, the people with wealth, the people with access to bank credit and those low interest rates that get the money first and are able to invest it in stock markets and so forth. uh their incomes and their wealth and their spending of course has continued upward um at a very fast pace. Whereas the rest of the population that does not have direct access to this new money, that does not have great bank credit or and um uh you know that don't get the money that doesn't show up in Auburn, Alabama for quite some time. Um those are the people who are being left behind. Those are the people whose wages and whose incomes um are not keeping up with inflation. And so they're already uh in recession in the the uh you know in the large scale areas of the United States, the rural areas and the non-financial center areas. Those are the areas that are already hurt. And so this exactly explains the big story which is the K-shaped economy in the United States. The big economic divide. What you know divides Americans basically is the people who are benefiting from the system. The wealthy who have access to the money and versus the working class who don't have access to this money and who don't get the money first. they only get the higher prices later on in the economy and so their real wages, their inflation adjusted wages are are suffering and those are the also the people who are unfortunately redeeming their silver stacks in order to meet you know medical bills and um uh tax payments and all sorts of things or the higher insurance uh of government healthc care insurance. uh you know th those are the people who are suffering and that those are the people who are unfortunately being forced to you know go to the local coin dealer and uh redeem their stacks of silver uh for the paper currency in order to meet the uh contingencies um that have befallen them in this economy. >> That's an interesting one and it kind of brings me back to that you know your core thesis on on what you call the skyscraper curse. I mean, you have a whole book on it. I mean, for viewers, uh, this is a historical pattern where record- setting towers show up during easy money booms and then economic reality seems to hit. Uh, we've seen reports that Jedha Tower in Saudi Arabia is restarted construction to become the world's tallest while bond markets are stressed in Japan. I mean, is the pattern repeating? Is that what peak looks like? >> Absolutely. You know, the Jedha Tower was supposed to set a record in 2020 and Austrian economists around the world were anticipating uh at least a global recession if not an economic crisis in late 2019 2020. We actually put a book out on the subject. But then of course COVID, the COVID emergency uh came into play and snuffed out the official recession with $5 trillion of new money and $20 trillion of new spending in the United States alone. Uh but then they restarted the Jedha Tower last year. It's on its way to setting a record at the end of this year. And once it reaches that record height, now of course just the building of the skyscraper does not cause an economic crisis, but it's symptomatic of financial conditions in the world economy that see both the building of world record setting skyscrapers and the onset of global economic crisis. So, it's something to watch out because they're building they're building uh I think it's one new story over there in western Saudi Arabia adding on one new floor every four days. So, the the construction got restarted last year and it seems to be going a pace. Uh the information about the project is not very forthcoming. Um and and so I can't provide an accurate update, but it all signs point to a new record uh height skyscraper uh them reaching that record height in 2026, >> right? I mean, so the argument is K-shaped inequality is really the the the social symptom and the skyscraper is the physical system of the same cheap money cycle. >> That's correct. the um the skyscraper is a construction project. It's a real estate project of enormous proportions and there's all sorts of new technology that we don't necessarily see in the construction of those uh record setting skyscrapers in terms of things like elevators and air conditioning. But just pumping the concrete requires a whole new level of technology, advanced technology. Um and then of course in in the current world situation uh the world economy is busy throughout building the AI new level of advanced technology with artificial intelligence which is impacting industries across the board forcing new technology to be implemented and of course but this is advanced technology which is not necessarily the best, most efficient, most productive technology at a point in time. So that skyscrapers technology is just symptomatic of what's going on technologically speaking throughout the world economy. And uh this is a very unfortunate uh signal, but it's something where we can all learn more about what's really going on in a business cycle. Um because otherwise we don't really know. Everybody likes the uh you know the upswing in the business cycle. Everybody likes the new technology. Everybody likes the profits and the investments and then everybody is completely caught flatfooted when things turn down. But with the Austrian theory and the skyscraper curse index, we learn why artificial interest rates, why artificial printing of money and credit uh cause these distortions cause these male investments would which ultimately have a tremendous negative impact on the overall economy. Let's bring up the endgame here and kind of the big question because you've said a return to some kind of a goldback system is a real possibility here. I mean for viewers, we're not really talking about coins in your pocket. We're talking about governments using gold to settle trade or to restore confidence in currencies when the bond market stops working. So I mean what hap what has to happen first here for that to become politically unavoidable? And and is that a 2026 story or is that a 10-year story? I think it's happening right now. I think people, you know, are considering, you know, not only investing in these metals, but also uh they're considering using them in barter type situations. Uh Van just came out and and discussed, you know, what what it would take for the US to go back on the gold standard. So everybody has a a pretty strong hint that we are facing a really severe situation and it's going to take a really monumental effort and obviously Dallio and Van these are really smart people and they both see that the endgame is a return to gold. Now governments are not going to like that. they're going to resist that at all turns. But what we're going to see, if we're not already seeing it already, is people turning to holding real money and eventually using real money wherever it's possible uh in barter type situations. Uh but of course we're also getting greater access to um cryptocryptized forms of gold and silver that potentially can be used um in the economy uh either through for investment purposes or for spending purposes. So, I think you're going to see that's one of the uh market revolutions that you're going to see is that people are going to want to not only to hold these things, but eventually to be able to use these things. Um, and not just for investment purposes, but to make transactions. Um, and maybe because of high rates of inflation. uh maybe because it's hard to make uh economic calculations uh in this chaos uh but it's definitely going to come. It's because as I said at the very beginning uh the we're already in the works of this problem and the national debts are already huge and the deficits are huge and the governments aren't doing anything about them. So the trends in precious market and the trends in precious metals is going to continue until uh something is done about it. And uh if it if it's allowed to just run its course, then people are going to force be forced especially in um less advanced countries uh where maybe hyperinflation starts uh to begin in those in those economies that uh they're going to be forced to start using uh money at in terms of their day-to-day exchanges. >> Yeah. All right. So, we're setting up a a a interesting 2026 for obviously the hard asset side. I I got to end with this. I mean, your contest uh stocks versus manure. You bet that fertilizer prices, utility would outperform the S&P 500, financial assets in 2026. With stocks down this morning in, you know, silver holding a historic run, silver and gold have both outperformed the S&P last year. Is the manure winning? And seriously, I mean, what what's the takeaway here? or should investors focus on utility instead of paper promises? >> Well, th this uh this year's prediction contest of stocks versus manure, uh that was um something I got off of Michael Oliver who said that he thought maybe uh manure would outperform the S&P 500 this year. So he's really the source the inspiration uh for this prediction but basically it is uh the idea that commodities in general will do better than uh financial assets in general. So, we set it up as a a contest between the S&P 500 and uh the ETF MO uh which is a ETF of agricultural related uh stocks including a heavy emphasis on agricultural fertilizers and chemicals. So it should be an interesting year. Um comparing the the competition of investment classifications of uh financial assets on the one hand and commodity uh particularly agricultural commodities because agricultural commodities I think are the worst or one of the worst performing uh subgroups within the commodity category. Obviously the precious metals and the industrial metals have done very well. Uh and we're starting to see some action in the energy markets u the specialty metal these uh the rare earth and so forth lithium and uranium but it hasn't really uh worked its way down into the agricultural the soft commodities and so forth. So an interesting contest. Uh we'll see what happens. Um I'm looking forward to 2026. >> Yeah. Amen. And I'm not sure when I'm going to talk to you again. So, final question. I mean, maybe even just a sentence. One piece of advice for navigating 2026. I mean, what is it? Well, I think the best thing that's happening to Americans and and people around the world is they no longer trust their politicians. They no longer trust uh the government officials, the politicians, and the bureaucrats that are running their economies and running their lives. And I think that's the one shining star, the north star that if we keep our eye on that one principle that we'll do better personally um in terms of our own decision making in the economy by not trusting those people uh not really even paying attention to them and and also uh their performance in in terms of running the governments uh and their impact on the economy. So, I think that that's the one uh northstar general indicator that if people keep their eye on that one principle that we'll all do better uh in 2026 heading into 2027. >> All right, Dr. Mark Thornton. Sharp, timely, and uh a lot for investors to think about, especially with silver's inelastic supply, bond markets tress, and central banks leaning back into gold. Uh, thank you very much for joining us in the audience today, >> Jeremy. It's my pleasure. >> Appreciate your time. All right, and we want to thank you for watching Kitco News. I'm Jeremy Saffron. If you found this interview valuable, be sure to hit subscribe, drop a comment below, and tell us what you're watching next. Gold, silver, miners, even the bond market. We'll see you next time. Heat. Heat.