Don Hansen: Gold, Trade and Tariffs — What Investors Need to Know
Summary
Gold Thesis: The guest builds a bullish case for gold, citing sustained M2 growth, rising central bank purchases, and declining confidence in the US dollar's store-of-value function.
Trade & Tariffs: He argues persistent US trade deficits have hollowed out manufacturing, justifying tariffs as tools for fair trade rather than pure free trade.
Currency Regimes: Historical context from the gold standard, Bretton Woods, the petrodollar, and the Plaza Accord highlights how currency dynamics influence trade balances and gold demand.
China Dependence: China's manufacturing dominance and control over critical materials and pharmaceuticals pose strategic and geopolitical risks for deficit countries.
Housing Affordability: A record-high home price-to-income ratio and cheaper rents versus mortgages suggest residential real estate weakness, potentially driving capital toward gold.
Japan vs. US: Japan's ability to sustain high debt due to persistent trade surpluses contrasts with US twin deficits, underscoring risks to USD demand.
Investment Takeaway: Overall perspective favors gold as a hedge and beneficiary of macro tailwinds from monetary expansion, trade realignments, and potential housing market softness.
Transcript
[music] I'm Charlotte Mloud with investingnews.com and here today with me is private investor Don Hansen. I think our audience knows you very well from your research on topics related to gold and silver and today you'll be sharing your recent work on trade settlement. So, we'll go over how this relates to tariffs eventually, how it relates back to gold, but we need a decent amount of history first. So, I hope we can start there and you can tell us what we need to know. >> Absolutely. Would love to do that. >> Okay. >> And I it's interesting. One of the reasons I got interested in this, there's a lot that I didn't know myself and the the the whole business of trade and tariffs is of course front page news these days. And so I wanted to educate myself and realize that there probably isn't very many people who knew much more about it than I did when I started this. >> Yeah, I learned a lot already. >> But um what I would like to start with is saying why does large and persistent goods trade deficits matter? Why is it a bad thing? Which I believe it very much is. Not everybody I talk to believes that and I think they primarily believe that because they're not aware of how all this works and how it has worked and all the details and so I want to try to get into that to explain that and and I'll go into that in just a moment but I first wanted to just explain why does it matter and um one of the things that happens a deficit country in goods is Of course, the the balance is always there because you send so many goods and then uh they send you money if you're the the deficit country in terms of trade. So it has comes out even but the issue happens then is that the deficit country is basically giving up assets to get whatever those goods are right well in initially it's in the case of the US for example it's US dollars the currency then the question is what do they do with it and this is the trick of terms it's the capital flows issue and What's happened over the last 25 years in particular is what has China done with those US dollars and the another negative aspect about it that is uh not a directly financial but it's the fact that when uh a deficit country is importing a whole lot of things those goods are then not produced in the home country, which means that those manufacturing jobs go to the surplus country. And of course, we've seen in the United States a just a devastation of manufacturing jobs. I mean, I've driven through the Midwest and where my wife was from, Ohio, Pennsylvania, and all that where towns you would go through and there's this boarded up buildings where those all that's all gone. and they they're those were good union jobs that paid for families to live reasonably well. Those are gone. >> So you're reducing the standard of living in order to buy cheaper goods from China. So and the other part of it is that then the manufacturing goes away which then actually creates a monopoly in manufacturing of a lot of things many of which are very important things uh in the case of China they've particularly focused on getting monopolies in critical things uh critical metals which we know all about pharmaceuticals not many people know this but our medicines are almost totally dependent on Chinese imports. >> Wow. >> And we learned about that in the COVID years. Okay. This is the the sort of another negative when you get into this consistent deficit situations. Um and um then the other thing is if they get manufacturing dominance that yields political power, geopolitical power, which then if you're a country like China and they're a potential enemy, they can and will and want to use that against you. >> Yeah. >> And and and that brings me to the other aspect of of talking about trade and and free trade. you know all about Adam Smith and you maybe heard of an economist named David Ricardo. >> Okay. And David Ricardo was well known for talking about how uh free trade was such a good thing because of what he called comparative advantage. That is you had one country whose uh country a and they could are more efficient. In other words, it took fewer hours to produce a product than country B did. Whereas a different product they had, this one took fewer hours and that. And so if you traded both, it was a win-win. Everybody benefited. But that was free trade. That's fair trade. You see, there was more efficient. >> Yeah. Yeah. and and that's when free trade is great. The difficulty is that what we got into is competitive advantage. Competitive advantage is where you got a price advantage, not necessarily an efficiency advantage. And that price advantage could be government subsidies by China. Um it could be the uh currency yuan is depressed in value so that it's cheaper for us us to buy it or it can be that labor is just cheaper. >> Well certainly you you know you want to think that people in the developing countries want to have a better life too right? >> Yeah. >> So that then you would say that would be a good thing to allow that. The problem is it happened too fast. >> Okay? >> And it would never have happened under the exchange system that we had between 1820 and 1930. >> Right? >> And that system was based on gold. Okay? Where everybody's money was backed by gold. You could go to the bank if you wanted to and they would give you gold coin for your gold certificate or silver certificate. And all the uh exchange internationally was done that way also. So that if you gave gold certificates and and the your the country that was uh producing your stuff and you were buying it with your gold certificates, if you started accumulating a whole lot of them, you could say, "Hm, I wonder if you've got enough gold to back this paper that I just got from you." And if you didn't think so, you could go to that country and say, "I think I'd like my gold." That was just the way the Brettonwood system worked, if you may remember, in 1944. So, it tended to equiliberate. And the other thing that happened during those years is the use of tariffs. And because see what you can do if you want to have not have the surplus country basically exploiting you by price competition and destroying your own market, you can put up a tariff or you could just change the currency exchange rate. Except that's very hard to do because the other country doesn't want to let you do that. Of course, >> because you know, if you're a surplus country and you want to keep the the your uh currency cheap, >> all you have to do is print a bunch of it and sell it into the market. So, the supply goes up, so the price goes down. I mean, that's how currency manipulation works. Okay? It's very simple and that's it's a standard kind of thing. But um so what we're looking at here is understanding that people are saying that well free trade is good. Well, it is only if it's fair trade. >> Okay, you see what I'm saying? Distinction. Yeah, >> it's only if it's fair trade. And it's only fair trade if there's basically a comparative advantage where you're more efficient in terms of labor hours. Okay? >> If you get the other advantage with the price, then what countries used to do was either use a tariff or or there would be gold moving or some way so that it always ended up equilibriating. So you didn't get this ongoing huge buildup of the movement of capital. But that's what's happened with us in in the last 25 years when we got let me uh let me cover something else here just to give the historical perspective. >> Yes, please. >> Because I have information about >> what the trade balance history was with the US since 1800. >> Okay. Okay, just just to tell you between 1800 and 1870 the US ran a deficit all but three years and as a percent of GDP the deficit was about minus 2.2%. Between 1870 and 1970 full hundred years it was a persistent surplus of about 1.1%. Then in 1970 and beyond it was consistent deficit. 1970, guess what happened that that we know about? >> Yeah. >> Was the end of the Brettonwood system where there there was it was settled. >> Yeah. >> Through the gold movement. Okay. >> And um so and that up until 2018, the average deficit was about 2 and a half% of GDP. I couldn't find anything after that in the data that I was looking at. It's probably available. I just need to dig further. But we know it got bigger, right? Because currently our merchandise trade deficit according to the numbers I've seen is about a trillion dollars a year >> and our budget deficit is about $2 trillion a year. Which brings me to another aspect of this that is interesting to talk about in that it's well known in economics that countries cannot run both a trade deficit and a budget deficit simultaneously for very long. And the reason is quite simple. If you do, you're basically paying people with your money. And if they decide because your deficit is so large that maybe your money isn't worth so much anymore that then they they basically want to get more of your money for the goods because they don't think it's worth that anymore. I mean, of course, what that does is drive your currency down. And so most normal countries can't get away with that very long. The US got away with it because they had the world's reserve currency. >> Yeah. That helps with a lot of things. and that and and so it was used in trade and so people would were were accumulating it and uh that we were, you know, continuing to get away with that. But now it's getting to the point where people don't want our dollars so much anymore. And as you know, there's there's three characteristics of money. There's a store of value. It's a medium of exchange. and it's a unit of account. Okay. Well, the dollar was used for that solely, all three after 1971 when they ended the Brettonwood system. But by 2014 or thereabouts, people were starting to lose faith in it because we had this so-called great financial crisis and a whole bunch of other problems. And gold went from $300 an ounce to $1,800 an ounce in 2012. And everybody said, "Gee, we're we're holding US treasuries." And we didn't get all that. We didn't get six times. Okay? So maybe maybe gold's a better store of value now. And so that's when the central banks all started to buy gold instead of sell it, which they did all the way through the previous bull market in gold from 2000 to 2012. They were selling gold all the way along, but we still got a bull market in gold because the US stock market was down and we continued to have the increase in the US money supply at 7% a year every year since 19 I don't know how many go way back which is why ultimately the gold price has got to go up because you the supply of money goes up 7% a year but the supply of gold goes up less than 1%. So you don't look at those two and say, "Yeah, the price when you look at the [laughter] at this the relative supply, it it's just a constant tailwind for the price of gold." So anyway, that's what we get to. But I thought it would be interesting to look at what um the uh tariffs did. >> Yes. because in fact the US used tariffs in multiple ways over their history and it was just interesting to share that um the tariff rate u from um 1792 to 1812 was 12 a.5%. Okay, from 1812 to 1820 it was 25%. That was you had the end of the so-called war of 1812. 1814 you had the end of the no paleic war. So that was a tumultuous period. So from 1820 to 1860 it was fairly stable at 40%. Okay. Between 1860 and 1914 the beginning of World War I it was 60%. And and why was that? The reason is that the United States was industrializing. So in the early years and that's where there was a trade situation where the British money was coming to the US to invest in re in real estate and in companies and whatever and the and the United States needed that investment in order to industrialize. As the companies began manufacturing more and more things, they wanted to protect themselves from the companies in Europe. >> Sure. Yeah. >> And that's why you got the um 60% tariff rate. >> Significant. Yeah. >> Okay. Because the the gold was was changing, but that wasn't enough. And so then the US government basically wanted to protect our industry. And so they use 60% tariff. So this people now talk about gee where we're doing 25%. That's great. It was it went for a long time here 54 years at 60%. As an average rate. >> Yeah. >> So this is not this is not new. This has been going on for very very logical reasons. Now of course 1914 we had World War I and after that the world economy was chaos and then in 1944 of course we had the Brettonwood system created where we had system that was basically based on gold but the US dollar was backed by gold at three $35 an ounce because they wanted to go back to that that had worked so well in that 110 in 10 years 1820 to 1930 but there was no way that they were going to go back to where the currency domestically would be based on that and I think the primary reason was nobody could come up with the idea of what was what should we do what was the rate >> okay >> of exchange okay and there was a huge mistake made along the way that scared everybody away from doing that in the early 1920s the British who were the numerous in the 19th century. Okay, the British pound was it and the sun never set on the British Empire blah blah blah blah blah you know. Okay, very proud people. So in the early 20s they wanted Britain to go back to the gold standard but they backed the pound at the same exchange rate they had before the war, >> right? which was crazy because they printed all this pounds to pay for the war bills. And so of course that was a disaster and ended up in part being bailed out by the US Federal Reserve because the Fed at the time Benjamin Strong was good buddies with Monteku Norman who was the head of the British the central bank in England. interesting people and there's a great book about these people and what what they did and all this sort of stuff in that interim period between the wars >> and uh that created inflation in the US because he created a lot but he was trying to help out the English who had made this huge mistake and so have that having happened nobody wanted to well how are we going to do this okay we'll just use it for international and everything will be fine as long as the Americans are are good and nice. Do do the right thing and don't print too many dollars. Well, of course, [laughter] we know how that turned out. It was and and it actually wasn't an illogical thing after the war. You couldn't have had a gold standard because the Germans and the Japanese didn't have any gold. They didn't have anything. I mean, they got totally destroyed. Most of Europe was a a wreckage. So the US then did facilitate under the Marshall Plan and so on and that was all very good except that that should have been just a distinct period where once you got past that then you had to begin to take a look at okay where are we going to go from here because then by the 1960s the Europeans are building up now and they are taking a look at how this is working and saying wait a minute this arrangement with the system based on the dollar which is now being inflated all the time isn't going to h we don't like that. So they basically exchanged for half of the US dollar stash they we started with 16,000 tons of gold in 1970 it was eight and that's where President Nixon who had to really just default on and say okay we can't do this anymore. >> Yeah. Yeah. So what happened after that and and the reason that it survived in any sane way is because Henry Kissinger who was a brilliant guy and everybody knows who he was was the secretary of state under Nixon. He and Nixon went to the Saudis who were the primary supplier of oil to the world at that time in 1970, right? And they said, "Okay, you uh sell all your oil in dollars, US dollars, and we will promise to defend you." Because this is a fairly small country with no military that had this enormous wealth of oil, right? So, they were afraid they were gonna somebody was going to try to steal it from them. So this they took this as a good idea. Why not? I'll just do that. And then because oil was such a huge part of international trade, everybody said, "Oh, okay. We'll just use dollars and accumulate dollars in order to do exchange." And that system lasted for a long time. that it endured, but not so long that in 1985 the US dollar's um value got too high. It appreciated something like 48% from 1980 to 85. And so the US was unhappy about this because then the US's export industries were having a hard time selling and the Japanese were importing all these Toyotas and Volkswagens and so forth and so on. So the US government said, "Okay, you guys, we got to get together and have a pow-wow here about how to how to fix this, right?" And US still being the US, they had the end power to say, "Okay, we're all going to come, aren't we?" And so they had a meeting in New York City at a the Plaza Hotel, very famous, and and and the U US and Japan and Germany, France and the UK were all there at this meeting. And they worked out a way to try to make the exchange rates between the dollar and everybody else's currency what the US considered more fair for them. Okay? And so they get the Japanese and the Germans to do monetary and fiscal stimulus to get more money into their economy so their people would import more from the US and the US was supposed to reduce its budget deficit and do various other things. I don't remember all the details I'd have to look that was in that agreement but that did did happen. Okay. Well, and the U situation as far as the currency did improve and the Germans were able to adjust to it relatively well. The Japanese couldn't and their economy was devastated. And so what their government did was engage in monumental monetary and fiscal stimulus. It was so extreme and there was so much inflation in assets that in n 19 by 1989 their stock market was I mean off the charts. Real estate was so expensive that I'm sure you've heard this and nobody believes it that the emperor's property in the middle of Tokyo Yeah. was worth more than all the land in California. Now I don't know that's what you were told. Okay. It was crazy. >> Yeah. >> And and what happened? It collapsed. the economy collapsed and for two decades, 1990s and the 2000s, the Japanese economy was stuck and they ran huge deficits and budget deficits in order to try to make it work and it never really did. Very, very low interest rates and all that stuff. And so nobody beyond that, if we had any currency, wanted to go to any more plaza accords because they say, "Look what happened to the Japanese." Well, that's why today you'll never see the Chinese go to some sort of a pow-wow to agree to make the Americans happy because they think that that ain't going to happen. >> Okay? >> That that ain't going to happen. The other thing just to explain about the Japanese that most people don't realize the country having a a trade deficit and a budget deficit at the same time as I said earlier is particularly if it's not a world reserve currency country it doesn't sustain itself very long but Japan Japan was unique and got away with building up an enormous debt of something like 250% of GDP and the reason is that Japan was consist consistently a surplus country. >> Okay. >> Uniquely, always a surplus country. And so the government's deficit was covered by Japanese people buying it. Japanese people were really good savers. They saved more per capita or I mean percent of their income than just about anybody. So the Japanese government didn't have to worry about their currency being damaged because of this whole business because they were getting money that came in from their investments as well as their really good trade because they were good at a lot of things. So that when people say, "Well, gee, you shouldn't have to worry about getting the debt to hard." Yeah, but you're not Japan. Okay, most people don't realize that. That's so that's a bad example to say somehow well you know why should you worry about having high debt to GDP >> because Japan could got away with it. Well yeah they did but they were unique >> that's what's so interesting about all this is that there's so many different interdependent issues that say well you know you there's nothing you can say for sure unless you know all the pieces as to how they fit together. But um okay, let's see where we are here. Oh, and just another thing I thought was interesting to know the uh percent of revenue as a percent of total revenue, which is people might be curious about certainly to get the revenue was not the only reason they were doing tariffs by any means, but they did were able to get away with that. So they did it and and in the US between 1800 and 1865 95% of the government's revenue was from tariffs. 95%. >> Wow. >> Then 1965 to 19 1865, excuse me, after the Civil War 20 1914 was the World War I. It was 50% tariffs and 40% an ES excise tax. >> Okay. >> What's an excise tax? I didn't actually know that. they should have. A sales tax is when the consumer pays the tax. An excise tax is when the producer pays the tax. >> Okay. >> So, they're really both sales taxes. Yeah. But the ex anyway. Okay. >> And then >> when you got after World War II when everything, you know, between 1914 and 1945, there wasn't anything quite consistent. But after that, all the way up to today, the percent of revenue for the US government in tariffs is pretty much zero. They just didn't go there anymore. Yeah. And and probably should have at some point when the whole system changed, you know, and in in the 60s and began to say, "Oh, okay. We don't have the same circumstances where what we're doing made sense in 1945 but 15 years later then and the whole thing had changed and didn't. So anyway, that's where we we get to that. Let's see the um store of value issue I think referred to as changed in the 2014. So that that's certainly a significant impact and then the central banks began to buy gold and sold US dollars in 2012 and by 2014 they were buying 500 tons a year and then in 2022 they went up to a thousand tons a year and that's when the current bull market really really took off. Okay. And we know but the interesting thing and I've talked about this in the previous interviews of the issues that affect the gold price. >> Yeah. >> And one of them of course is the M2 grows 7% a year every year. Um another one is what's the central banks doing? And in the last bull market in gold they were central banks were selling. >> Yeah. >> The US stock market was in a bare phase and that helped. And another piece that I discovered and really wasn't thinking about and should have been I want to talk about is what was residential real estate doing. >> Right. This is a new one. >> This is a new one. Okay. And I and I got a really aha moment out of this particularly from an interview that was done by a a woman named Miller D. Wright which I think you familiar and I I forward it to you. But what's happened in the 2000s, you you had a major decline in residential real estate in the starting in about 2006. And that's when the whole thing went down. So there was a lot of money coming out of both the stock market and the residential real estate market. And and what I have trouble getting my head around is how much money is involved in residential real estate? probably more than the stock market. We can we can certainly wonder about that and I don't know that exactly. But where we are now is that we're at a peak in the stock market because you've got the valuations are very high. We know that haven't really slid over yet. So it isn't quite become a tailwind for the gold price. But with the real estate, residential real estate that is starting to roll over. But the thing that I found interesting in Melody Wright's talk was that the key to residential real estate being affordable or not affordable is the relationship between the median home price and the median income. >> Right? and between uh 19 let's see what I get the dates here about that yeah [clears throat] between 1965 and 2000 that ratio was 4.0 zero plus or minus.5 or in other words between 3.5 and 4.5 quite stable for a long time until the government got involved and in the in the first the second Bush administration they were going to be good guys and make it easier for people to own their own home so practically anybody with a pulse could get a mortgage right and then the banks sold those mortgages and securitized them and you know the whole nightmare okay but what happened is by 2006 six that ratio had gone all the way up to 6.8. >> Oh my goodness. >> Then the whole thing unraveled and then you so you saw all this money coming out of the real real estate and going potentially into the stock market after 2006. And of course that's when gold went. So yeah, I'm sure it had a factor because by 2012 the ratio was down to 4.7. So it didn't take very long. >> Okay. But the thing to know is today that ratio is 7.1. It's higher than it's ever been. That's why young people today in the US cannot afford to buy a house because it's too expensive. And the expense to own one has gone up, especially insurance, >> but maintenance and energy and all this stuff. So, you know, people can't afford to do that. >> Yeah. Very interesting. And the other thing that's interesting is that rents are actually down. If you were to compare, and she just talked about this, a home that you either owned it or you rented it, you would pay $1,000 a month less in rent than you would pay for the mortgage for the same house. So, you're seeing that shift into the rental market. But anyway, there's going to be a lot of money coming out of residential real estate, particularly because an awful lot of the rental homes are owned by people who made a lot of money in the stock market. And they, you know, that the 10% the the the rich folks who benefited from low interest rates and who took out 3% mortgages to buy a second, third, fourth home that they then rented, right? Okay. And they're older now. And so when you start to see the markets soften or they retired, died or whatever, all that's going to come on the market and that's going to be a major decline in residential real estate and and it needs to because the affordability issue, but the mortgage rate is not the problem anymore. She's pointed out that, you know, it used to be well all these people had 3% mortgages, so they don't want to sell. But in the last four years now, the people with a 6% mortgage rate have there's more people in that than there is in the 3% level. So that isn't the excuse anymore, >> right? And it isn't mortgage rates. It's the cost to buy it and the cost to keep it because of insurance and maintenance, all this other stuff. So that's a big deal, but it's another tailwind potentially to the gold price that hasn't happened yet. >> Yeah. So it all comes back around to gold. comes back around to gold and and it also comes back around to just the fact that you've got to ask yourself, yeah, well, Don, where's the head? Where is this all headed? What's going to happen? Right? And when we look at the history of what worked in the past where you had a combination of gold back currencies and the use of tariffs in particularly critical areas where the exchange rates weren't changing to allow for an appropriate balance in these things and that worked for 110 years and that was an incredible period of time for international trade. I mean the world economy bmed in the 19th century for we had technologies of course of electric motors and on and on so many different things but the system really worked well and there were also mechanisms of trade when people say well there isn't enough gold around yeah but there was something called bills of trade you ever know what that was that was a mechanism to do trade that actually when the goods were delivered then it went away. So there were devices that the bankers were using >> so that you didn't have to have a monumentally large money supply to do trade. There were other very convenient things that would allow for the money to be more stable that we don't even talk about. I only know about that because I've been into the Austrian school of economics and Bury Rothbart and people like that talked about that all the time. and says, "Hey, the gold standard is perfectly re realistic if we do what we did for 110 years and we allowed the banks to do the things that that did." So, I'm not an expert in all this, but I'm I'm just enough to be dangerous in terms of looking at it and saying, you know, maybe we ought to know more about what has worked in the past >> instead of figuring that we are so smart today that this is the only way that we can do things. And and [clears throat] I I see that culturally in terms of people not even wanting to be interested in the the great scholars of yestery year, whether it's the the Greek Aristotle and and and Plato and all these other or so many other brilliant people over the centuries that have said things that were profound and and we tend to I think be somewhat resistant to that. It's like somehow we our experts heaven forget no have got it all figured out and and it's unfortunate that I think we've been misled by our experts so that we know the Fed has 400 economists on staff and from what I'm told by people who have worked in the Fed is that basically what they do is write papers for each other and their forecasts are almost always wrong. If you've ever noticed what they're going to predict and it never comes out right, but they keep doing the same models. So, we need to take a look at what really makes sense and what we need to do to create a system where we have win-win in trade. We need to have win-win. We can't go win lose that because that leads to all kinds of bad things. Win-win is always good in any kind of exchange. You want you don't want to have a situation where somebody loses because too many somebody's losing has really scary consequences. They they don't they get very unhappy. They starve. I mean all sorts of bad stuff >> comes out of that. So we we need to think more about how we can function in a way where we have win-win where everybody comes out in a positive way and to some extent. They're never going to be perfect, but we don't we need to try harder with that. >> Well, this this is very compelling. I really like the idea of looking to the past for solutions to today's problems. You don't always have to just reinvent the wheel. >> Exactly. Exactly. But it's it's it's it's too bad that we don't at least educate ourselves to what did people do and how did it work. >> Yeah. and then look at that and say, "Well, you know, does that apply now or, you know, can we learn from that?" But I I just know too many people who think, well, the way we're doing it now is just fine and trade deficits are okay and but it isn't okay and and we're seeing an awful lot of people in US and Europe and Canada whose standard of living is not good. Their wages and incomes has not kept up with inflation. they aren't buying a home to raise a family. So, the population is declining. And that's the other problem that we have right today. That's unique. And that is the demographic shift. >> Yes. >> Because, you know, we got all these debts. >> You can get out of that is we did after World War II because we had growing population. >> So, we had more hours worked and they were more productive. That's how the US grew out of the debt they had after World War II. the economy grew and and the budgets were balanced in the 50s and 60s. Okay? So that you ended up reducing the debt as a percent of GDP from 150 or more in 1945 to where by 1970. It was um maybe 40. I mean it was enormous improvement. But we can't do that this time. The demographics won't allow it. >> Yeah. Very different. So, we've got a very unique dilemma here to try to how are we going to get through this deal? >> And I don't know that it means we need to take a serious look. What are we doing? What are our conditions? And how are we going to make this better so that everybody wins? >> Yeah. >> And and the other thing I should emphasize because everybody's going to ask, well, why did we let this go on for 25 years and we had this these the deficits in trade and budget that went on and on and on. and the the middle class and the working class standard of living declined and nobody did anything about it. And the reason is I think >> that the financial and corporate elites made out like bandits on the deal. >> They were winning. They like globalization because it allowed them to have products produced in low-wage countries and then they would bring them to the US, mark them up and make more money. So then the share price of their companies went up and they they didn't think of themselves as Canadians or Americans or Germans or French. They thought of themselves as international businesses. Okay? >> And so they they wanted one world government and nationalism was a bad thing. And so open borders and all this sort of stuff is their mentality. But you know what? There's a lot of middle class and below people who vote and that's it. It's not going to continue. And the the scary part is that there may be not very good folks who end up taking control in a highly chaotic situation. So, we're in a fourth turning. You know, all about fourth turning. Yes. And we're in there and uh it's a fascinating time to be alive. >> It really is. And thank you so much for sharing. Let's hope that this reaches the right ears. Yes. >> [laughter] >> Well, this was really great as always. Thank you so much. I'll send you back out onto the PDAC 4, but it was so nice to see you. >> Oh, it's great to see you. I've had so much fun doing this. It's It really uh >> uh is a big important part of my life. It gives me a reason to get up in the morning because I know I get excited about Boy, I know I might be able to do another interview and this is number 13. So, it's been wonderful for me and uh I just hope that I can help people. >> Yeah. And that's all that's why I do it. I just want to to share and I'm I've been retired 24 years now. >> So I have the time and I have the experience being in business and my education and everything and as an investor in the golden mining sector and so I hope that I can help other people be successful too. >> I think you have you always get the most positive comments on our channel. I think there's a lot of people out there who are watching and appreciating. So, thank you so much. Oh, >> we'll wrap it up and and once again, I'm Charlotte Mloud with investingnews.com and this is Don Hansen. >> Oh, do a wave. [laughter]
Don Hansen: Gold, Trade and Tariffs — What Investors Need to Know
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[music] I'm Charlotte Mloud with investingnews.com and here today with me is private investor Don Hansen. I think our audience knows you very well from your research on topics related to gold and silver and today you'll be sharing your recent work on trade settlement. So, we'll go over how this relates to tariffs eventually, how it relates back to gold, but we need a decent amount of history first. So, I hope we can start there and you can tell us what we need to know. >> Absolutely. Would love to do that. >> Okay. >> And I it's interesting. One of the reasons I got interested in this, there's a lot that I didn't know myself and the the the whole business of trade and tariffs is of course front page news these days. And so I wanted to educate myself and realize that there probably isn't very many people who knew much more about it than I did when I started this. >> Yeah, I learned a lot already. >> But um what I would like to start with is saying why does large and persistent goods trade deficits matter? Why is it a bad thing? Which I believe it very much is. Not everybody I talk to believes that and I think they primarily believe that because they're not aware of how all this works and how it has worked and all the details and so I want to try to get into that to explain that and and I'll go into that in just a moment but I first wanted to just explain why does it matter and um one of the things that happens a deficit country in goods is Of course, the the balance is always there because you send so many goods and then uh they send you money if you're the the deficit country in terms of trade. So it has comes out even but the issue happens then is that the deficit country is basically giving up assets to get whatever those goods are right well in initially it's in the case of the US for example it's US dollars the currency then the question is what do they do with it and this is the trick of terms it's the capital flows issue and What's happened over the last 25 years in particular is what has China done with those US dollars and the another negative aspect about it that is uh not a directly financial but it's the fact that when uh a deficit country is importing a whole lot of things those goods are then not produced in the home country, which means that those manufacturing jobs go to the surplus country. And of course, we've seen in the United States a just a devastation of manufacturing jobs. I mean, I've driven through the Midwest and where my wife was from, Ohio, Pennsylvania, and all that where towns you would go through and there's this boarded up buildings where those all that's all gone. and they they're those were good union jobs that paid for families to live reasonably well. Those are gone. >> So you're reducing the standard of living in order to buy cheaper goods from China. So and the other part of it is that then the manufacturing goes away which then actually creates a monopoly in manufacturing of a lot of things many of which are very important things uh in the case of China they've particularly focused on getting monopolies in critical things uh critical metals which we know all about pharmaceuticals not many people know this but our medicines are almost totally dependent on Chinese imports. >> Wow. >> And we learned about that in the COVID years. Okay. This is the the sort of another negative when you get into this consistent deficit situations. Um and um then the other thing is if they get manufacturing dominance that yields political power, geopolitical power, which then if you're a country like China and they're a potential enemy, they can and will and want to use that against you. >> Yeah. >> And and and that brings me to the other aspect of of talking about trade and and free trade. you know all about Adam Smith and you maybe heard of an economist named David Ricardo. >> Okay. And David Ricardo was well known for talking about how uh free trade was such a good thing because of what he called comparative advantage. That is you had one country whose uh country a and they could are more efficient. In other words, it took fewer hours to produce a product than country B did. Whereas a different product they had, this one took fewer hours and that. And so if you traded both, it was a win-win. Everybody benefited. But that was free trade. That's fair trade. You see, there was more efficient. >> Yeah. Yeah. and and that's when free trade is great. The difficulty is that what we got into is competitive advantage. Competitive advantage is where you got a price advantage, not necessarily an efficiency advantage. And that price advantage could be government subsidies by China. Um it could be the uh currency yuan is depressed in value so that it's cheaper for us us to buy it or it can be that labor is just cheaper. >> Well certainly you you know you want to think that people in the developing countries want to have a better life too right? >> Yeah. >> So that then you would say that would be a good thing to allow that. The problem is it happened too fast. >> Okay? >> And it would never have happened under the exchange system that we had between 1820 and 1930. >> Right? >> And that system was based on gold. Okay? Where everybody's money was backed by gold. You could go to the bank if you wanted to and they would give you gold coin for your gold certificate or silver certificate. And all the uh exchange internationally was done that way also. So that if you gave gold certificates and and the your the country that was uh producing your stuff and you were buying it with your gold certificates, if you started accumulating a whole lot of them, you could say, "Hm, I wonder if you've got enough gold to back this paper that I just got from you." And if you didn't think so, you could go to that country and say, "I think I'd like my gold." That was just the way the Brettonwood system worked, if you may remember, in 1944. So, it tended to equiliberate. And the other thing that happened during those years is the use of tariffs. And because see what you can do if you want to have not have the surplus country basically exploiting you by price competition and destroying your own market, you can put up a tariff or you could just change the currency exchange rate. Except that's very hard to do because the other country doesn't want to let you do that. Of course, >> because you know, if you're a surplus country and you want to keep the the your uh currency cheap, >> all you have to do is print a bunch of it and sell it into the market. So, the supply goes up, so the price goes down. I mean, that's how currency manipulation works. Okay? It's very simple and that's it's a standard kind of thing. But um so what we're looking at here is understanding that people are saying that well free trade is good. Well, it is only if it's fair trade. >> Okay, you see what I'm saying? Distinction. Yeah, >> it's only if it's fair trade. And it's only fair trade if there's basically a comparative advantage where you're more efficient in terms of labor hours. Okay? >> If you get the other advantage with the price, then what countries used to do was either use a tariff or or there would be gold moving or some way so that it always ended up equilibriating. So you didn't get this ongoing huge buildup of the movement of capital. But that's what's happened with us in in the last 25 years when we got let me uh let me cover something else here just to give the historical perspective. >> Yes, please. >> Because I have information about >> what the trade balance history was with the US since 1800. >> Okay. Okay, just just to tell you between 1800 and 1870 the US ran a deficit all but three years and as a percent of GDP the deficit was about minus 2.2%. Between 1870 and 1970 full hundred years it was a persistent surplus of about 1.1%. Then in 1970 and beyond it was consistent deficit. 1970, guess what happened that that we know about? >> Yeah. >> Was the end of the Brettonwood system where there there was it was settled. >> Yeah. >> Through the gold movement. Okay. >> And um so and that up until 2018, the average deficit was about 2 and a half% of GDP. I couldn't find anything after that in the data that I was looking at. It's probably available. I just need to dig further. But we know it got bigger, right? Because currently our merchandise trade deficit according to the numbers I've seen is about a trillion dollars a year >> and our budget deficit is about $2 trillion a year. Which brings me to another aspect of this that is interesting to talk about in that it's well known in economics that countries cannot run both a trade deficit and a budget deficit simultaneously for very long. And the reason is quite simple. If you do, you're basically paying people with your money. And if they decide because your deficit is so large that maybe your money isn't worth so much anymore that then they they basically want to get more of your money for the goods because they don't think it's worth that anymore. I mean, of course, what that does is drive your currency down. And so most normal countries can't get away with that very long. The US got away with it because they had the world's reserve currency. >> Yeah. That helps with a lot of things. and that and and so it was used in trade and so people would were were accumulating it and uh that we were, you know, continuing to get away with that. But now it's getting to the point where people don't want our dollars so much anymore. And as you know, there's there's three characteristics of money. There's a store of value. It's a medium of exchange. and it's a unit of account. Okay. Well, the dollar was used for that solely, all three after 1971 when they ended the Brettonwood system. But by 2014 or thereabouts, people were starting to lose faith in it because we had this so-called great financial crisis and a whole bunch of other problems. And gold went from $300 an ounce to $1,800 an ounce in 2012. And everybody said, "Gee, we're we're holding US treasuries." And we didn't get all that. We didn't get six times. Okay? So maybe maybe gold's a better store of value now. And so that's when the central banks all started to buy gold instead of sell it, which they did all the way through the previous bull market in gold from 2000 to 2012. They were selling gold all the way along, but we still got a bull market in gold because the US stock market was down and we continued to have the increase in the US money supply at 7% a year every year since 19 I don't know how many go way back which is why ultimately the gold price has got to go up because you the supply of money goes up 7% a year but the supply of gold goes up less than 1%. So you don't look at those two and say, "Yeah, the price when you look at the [laughter] at this the relative supply, it it's just a constant tailwind for the price of gold." So anyway, that's what we get to. But I thought it would be interesting to look at what um the uh tariffs did. >> Yes. because in fact the US used tariffs in multiple ways over their history and it was just interesting to share that um the tariff rate u from um 1792 to 1812 was 12 a.5%. Okay, from 1812 to 1820 it was 25%. That was you had the end of the so-called war of 1812. 1814 you had the end of the no paleic war. So that was a tumultuous period. So from 1820 to 1860 it was fairly stable at 40%. Okay. Between 1860 and 1914 the beginning of World War I it was 60%. And and why was that? The reason is that the United States was industrializing. So in the early years and that's where there was a trade situation where the British money was coming to the US to invest in re in real estate and in companies and whatever and the and the United States needed that investment in order to industrialize. As the companies began manufacturing more and more things, they wanted to protect themselves from the companies in Europe. >> Sure. Yeah. >> And that's why you got the um 60% tariff rate. >> Significant. Yeah. >> Okay. Because the the gold was was changing, but that wasn't enough. And so then the US government basically wanted to protect our industry. And so they use 60% tariff. So this people now talk about gee where we're doing 25%. That's great. It was it went for a long time here 54 years at 60%. As an average rate. >> Yeah. >> So this is not this is not new. This has been going on for very very logical reasons. Now of course 1914 we had World War I and after that the world economy was chaos and then in 1944 of course we had the Brettonwood system created where we had system that was basically based on gold but the US dollar was backed by gold at three $35 an ounce because they wanted to go back to that that had worked so well in that 110 in 10 years 1820 to 1930 but there was no way that they were going to go back to where the currency domestically would be based on that and I think the primary reason was nobody could come up with the idea of what was what should we do what was the rate >> okay >> of exchange okay and there was a huge mistake made along the way that scared everybody away from doing that in the early 1920s the British who were the numerous in the 19th century. Okay, the British pound was it and the sun never set on the British Empire blah blah blah blah blah you know. Okay, very proud people. So in the early 20s they wanted Britain to go back to the gold standard but they backed the pound at the same exchange rate they had before the war, >> right? which was crazy because they printed all this pounds to pay for the war bills. And so of course that was a disaster and ended up in part being bailed out by the US Federal Reserve because the Fed at the time Benjamin Strong was good buddies with Monteku Norman who was the head of the British the central bank in England. interesting people and there's a great book about these people and what what they did and all this sort of stuff in that interim period between the wars >> and uh that created inflation in the US because he created a lot but he was trying to help out the English who had made this huge mistake and so have that having happened nobody wanted to well how are we going to do this okay we'll just use it for international and everything will be fine as long as the Americans are are good and nice. Do do the right thing and don't print too many dollars. Well, of course, [laughter] we know how that turned out. It was and and it actually wasn't an illogical thing after the war. You couldn't have had a gold standard because the Germans and the Japanese didn't have any gold. They didn't have anything. I mean, they got totally destroyed. Most of Europe was a a wreckage. So the US then did facilitate under the Marshall Plan and so on and that was all very good except that that should have been just a distinct period where once you got past that then you had to begin to take a look at okay where are we going to go from here because then by the 1960s the Europeans are building up now and they are taking a look at how this is working and saying wait a minute this arrangement with the system based on the dollar which is now being inflated all the time isn't going to h we don't like that. So they basically exchanged for half of the US dollar stash they we started with 16,000 tons of gold in 1970 it was eight and that's where President Nixon who had to really just default on and say okay we can't do this anymore. >> Yeah. Yeah. So what happened after that and and the reason that it survived in any sane way is because Henry Kissinger who was a brilliant guy and everybody knows who he was was the secretary of state under Nixon. He and Nixon went to the Saudis who were the primary supplier of oil to the world at that time in 1970, right? And they said, "Okay, you uh sell all your oil in dollars, US dollars, and we will promise to defend you." Because this is a fairly small country with no military that had this enormous wealth of oil, right? So, they were afraid they were gonna somebody was going to try to steal it from them. So this they took this as a good idea. Why not? I'll just do that. And then because oil was such a huge part of international trade, everybody said, "Oh, okay. We'll just use dollars and accumulate dollars in order to do exchange." And that system lasted for a long time. that it endured, but not so long that in 1985 the US dollar's um value got too high. It appreciated something like 48% from 1980 to 85. And so the US was unhappy about this because then the US's export industries were having a hard time selling and the Japanese were importing all these Toyotas and Volkswagens and so forth and so on. So the US government said, "Okay, you guys, we got to get together and have a pow-wow here about how to how to fix this, right?" And US still being the US, they had the end power to say, "Okay, we're all going to come, aren't we?" And so they had a meeting in New York City at a the Plaza Hotel, very famous, and and and the U US and Japan and Germany, France and the UK were all there at this meeting. And they worked out a way to try to make the exchange rates between the dollar and everybody else's currency what the US considered more fair for them. Okay? And so they get the Japanese and the Germans to do monetary and fiscal stimulus to get more money into their economy so their people would import more from the US and the US was supposed to reduce its budget deficit and do various other things. I don't remember all the details I'd have to look that was in that agreement but that did did happen. Okay. Well, and the U situation as far as the currency did improve and the Germans were able to adjust to it relatively well. The Japanese couldn't and their economy was devastated. And so what their government did was engage in monumental monetary and fiscal stimulus. It was so extreme and there was so much inflation in assets that in n 19 by 1989 their stock market was I mean off the charts. Real estate was so expensive that I'm sure you've heard this and nobody believes it that the emperor's property in the middle of Tokyo Yeah. was worth more than all the land in California. Now I don't know that's what you were told. Okay. It was crazy. >> Yeah. >> And and what happened? It collapsed. the economy collapsed and for two decades, 1990s and the 2000s, the Japanese economy was stuck and they ran huge deficits and budget deficits in order to try to make it work and it never really did. Very, very low interest rates and all that stuff. And so nobody beyond that, if we had any currency, wanted to go to any more plaza accords because they say, "Look what happened to the Japanese." Well, that's why today you'll never see the Chinese go to some sort of a pow-wow to agree to make the Americans happy because they think that that ain't going to happen. >> Okay? >> That that ain't going to happen. The other thing just to explain about the Japanese that most people don't realize the country having a a trade deficit and a budget deficit at the same time as I said earlier is particularly if it's not a world reserve currency country it doesn't sustain itself very long but Japan Japan was unique and got away with building up an enormous debt of something like 250% of GDP and the reason is that Japan was consist consistently a surplus country. >> Okay. >> Uniquely, always a surplus country. And so the government's deficit was covered by Japanese people buying it. Japanese people were really good savers. They saved more per capita or I mean percent of their income than just about anybody. So the Japanese government didn't have to worry about their currency being damaged because of this whole business because they were getting money that came in from their investments as well as their really good trade because they were good at a lot of things. So that when people say, "Well, gee, you shouldn't have to worry about getting the debt to hard." Yeah, but you're not Japan. Okay, most people don't realize that. That's so that's a bad example to say somehow well you know why should you worry about having high debt to GDP >> because Japan could got away with it. Well yeah they did but they were unique >> that's what's so interesting about all this is that there's so many different interdependent issues that say well you know you there's nothing you can say for sure unless you know all the pieces as to how they fit together. But um okay, let's see where we are here. Oh, and just another thing I thought was interesting to know the uh percent of revenue as a percent of total revenue, which is people might be curious about certainly to get the revenue was not the only reason they were doing tariffs by any means, but they did were able to get away with that. So they did it and and in the US between 1800 and 1865 95% of the government's revenue was from tariffs. 95%. >> Wow. >> Then 1965 to 19 1865, excuse me, after the Civil War 20 1914 was the World War I. It was 50% tariffs and 40% an ES excise tax. >> Okay. >> What's an excise tax? I didn't actually know that. they should have. A sales tax is when the consumer pays the tax. An excise tax is when the producer pays the tax. >> Okay. >> So, they're really both sales taxes. Yeah. But the ex anyway. Okay. >> And then >> when you got after World War II when everything, you know, between 1914 and 1945, there wasn't anything quite consistent. But after that, all the way up to today, the percent of revenue for the US government in tariffs is pretty much zero. They just didn't go there anymore. Yeah. And and probably should have at some point when the whole system changed, you know, and in in the 60s and began to say, "Oh, okay. We don't have the same circumstances where what we're doing made sense in 1945 but 15 years later then and the whole thing had changed and didn't. So anyway, that's where we we get to that. Let's see the um store of value issue I think referred to as changed in the 2014. So that that's certainly a significant impact and then the central banks began to buy gold and sold US dollars in 2012 and by 2014 they were buying 500 tons a year and then in 2022 they went up to a thousand tons a year and that's when the current bull market really really took off. Okay. And we know but the interesting thing and I've talked about this in the previous interviews of the issues that affect the gold price. >> Yeah. >> And one of them of course is the M2 grows 7% a year every year. Um another one is what's the central banks doing? And in the last bull market in gold they were central banks were selling. >> Yeah. >> The US stock market was in a bare phase and that helped. And another piece that I discovered and really wasn't thinking about and should have been I want to talk about is what was residential real estate doing. >> Right. This is a new one. >> This is a new one. Okay. And I and I got a really aha moment out of this particularly from an interview that was done by a a woman named Miller D. Wright which I think you familiar and I I forward it to you. But what's happened in the 2000s, you you had a major decline in residential real estate in the starting in about 2006. And that's when the whole thing went down. So there was a lot of money coming out of both the stock market and the residential real estate market. And and what I have trouble getting my head around is how much money is involved in residential real estate? probably more than the stock market. We can we can certainly wonder about that and I don't know that exactly. But where we are now is that we're at a peak in the stock market because you've got the valuations are very high. We know that haven't really slid over yet. So it isn't quite become a tailwind for the gold price. But with the real estate, residential real estate that is starting to roll over. But the thing that I found interesting in Melody Wright's talk was that the key to residential real estate being affordable or not affordable is the relationship between the median home price and the median income. >> Right? and between uh 19 let's see what I get the dates here about that yeah [clears throat] between 1965 and 2000 that ratio was 4.0 zero plus or minus.5 or in other words between 3.5 and 4.5 quite stable for a long time until the government got involved and in the in the first the second Bush administration they were going to be good guys and make it easier for people to own their own home so practically anybody with a pulse could get a mortgage right and then the banks sold those mortgages and securitized them and you know the whole nightmare okay but what happened is by 2006 six that ratio had gone all the way up to 6.8. >> Oh my goodness. >> Then the whole thing unraveled and then you so you saw all this money coming out of the real real estate and going potentially into the stock market after 2006. And of course that's when gold went. So yeah, I'm sure it had a factor because by 2012 the ratio was down to 4.7. So it didn't take very long. >> Okay. But the thing to know is today that ratio is 7.1. It's higher than it's ever been. That's why young people today in the US cannot afford to buy a house because it's too expensive. And the expense to own one has gone up, especially insurance, >> but maintenance and energy and all this stuff. So, you know, people can't afford to do that. >> Yeah. Very interesting. And the other thing that's interesting is that rents are actually down. If you were to compare, and she just talked about this, a home that you either owned it or you rented it, you would pay $1,000 a month less in rent than you would pay for the mortgage for the same house. So, you're seeing that shift into the rental market. But anyway, there's going to be a lot of money coming out of residential real estate, particularly because an awful lot of the rental homes are owned by people who made a lot of money in the stock market. And they, you know, that the 10% the the the rich folks who benefited from low interest rates and who took out 3% mortgages to buy a second, third, fourth home that they then rented, right? Okay. And they're older now. And so when you start to see the markets soften or they retired, died or whatever, all that's going to come on the market and that's going to be a major decline in residential real estate and and it needs to because the affordability issue, but the mortgage rate is not the problem anymore. She's pointed out that, you know, it used to be well all these people had 3% mortgages, so they don't want to sell. But in the last four years now, the people with a 6% mortgage rate have there's more people in that than there is in the 3% level. So that isn't the excuse anymore, >> right? And it isn't mortgage rates. It's the cost to buy it and the cost to keep it because of insurance and maintenance, all this other stuff. So that's a big deal, but it's another tailwind potentially to the gold price that hasn't happened yet. >> Yeah. So it all comes back around to gold. comes back around to gold and and it also comes back around to just the fact that you've got to ask yourself, yeah, well, Don, where's the head? Where is this all headed? What's going to happen? Right? And when we look at the history of what worked in the past where you had a combination of gold back currencies and the use of tariffs in particularly critical areas where the exchange rates weren't changing to allow for an appropriate balance in these things and that worked for 110 years and that was an incredible period of time for international trade. I mean the world economy bmed in the 19th century for we had technologies of course of electric motors and on and on so many different things but the system really worked well and there were also mechanisms of trade when people say well there isn't enough gold around yeah but there was something called bills of trade you ever know what that was that was a mechanism to do trade that actually when the goods were delivered then it went away. So there were devices that the bankers were using >> so that you didn't have to have a monumentally large money supply to do trade. There were other very convenient things that would allow for the money to be more stable that we don't even talk about. I only know about that because I've been into the Austrian school of economics and Bury Rothbart and people like that talked about that all the time. and says, "Hey, the gold standard is perfectly re realistic if we do what we did for 110 years and we allowed the banks to do the things that that did." So, I'm not an expert in all this, but I'm I'm just enough to be dangerous in terms of looking at it and saying, you know, maybe we ought to know more about what has worked in the past >> instead of figuring that we are so smart today that this is the only way that we can do things. And and [clears throat] I I see that culturally in terms of people not even wanting to be interested in the the great scholars of yestery year, whether it's the the Greek Aristotle and and and Plato and all these other or so many other brilliant people over the centuries that have said things that were profound and and we tend to I think be somewhat resistant to that. It's like somehow we our experts heaven forget no have got it all figured out and and it's unfortunate that I think we've been misled by our experts so that we know the Fed has 400 economists on staff and from what I'm told by people who have worked in the Fed is that basically what they do is write papers for each other and their forecasts are almost always wrong. If you've ever noticed what they're going to predict and it never comes out right, but they keep doing the same models. So, we need to take a look at what really makes sense and what we need to do to create a system where we have win-win in trade. We need to have win-win. We can't go win lose that because that leads to all kinds of bad things. Win-win is always good in any kind of exchange. You want you don't want to have a situation where somebody loses because too many somebody's losing has really scary consequences. They they don't they get very unhappy. They starve. I mean all sorts of bad stuff >> comes out of that. So we we need to think more about how we can function in a way where we have win-win where everybody comes out in a positive way and to some extent. They're never going to be perfect, but we don't we need to try harder with that. >> Well, this this is very compelling. I really like the idea of looking to the past for solutions to today's problems. You don't always have to just reinvent the wheel. >> Exactly. Exactly. But it's it's it's it's too bad that we don't at least educate ourselves to what did people do and how did it work. >> Yeah. and then look at that and say, "Well, you know, does that apply now or, you know, can we learn from that?" But I I just know too many people who think, well, the way we're doing it now is just fine and trade deficits are okay and but it isn't okay and and we're seeing an awful lot of people in US and Europe and Canada whose standard of living is not good. Their wages and incomes has not kept up with inflation. they aren't buying a home to raise a family. So, the population is declining. And that's the other problem that we have right today. That's unique. And that is the demographic shift. >> Yes. >> Because, you know, we got all these debts. >> You can get out of that is we did after World War II because we had growing population. >> So, we had more hours worked and they were more productive. That's how the US grew out of the debt they had after World War II. the economy grew and and the budgets were balanced in the 50s and 60s. Okay? So that you ended up reducing the debt as a percent of GDP from 150 or more in 1945 to where by 1970. It was um maybe 40. I mean it was enormous improvement. But we can't do that this time. The demographics won't allow it. >> Yeah. Very different. So, we've got a very unique dilemma here to try to how are we going to get through this deal? >> And I don't know that it means we need to take a serious look. What are we doing? What are our conditions? And how are we going to make this better so that everybody wins? >> Yeah. >> And and the other thing I should emphasize because everybody's going to ask, well, why did we let this go on for 25 years and we had this these the deficits in trade and budget that went on and on and on. and the the middle class and the working class standard of living declined and nobody did anything about it. And the reason is I think >> that the financial and corporate elites made out like bandits on the deal. >> They were winning. They like globalization because it allowed them to have products produced in low-wage countries and then they would bring them to the US, mark them up and make more money. So then the share price of their companies went up and they they didn't think of themselves as Canadians or Americans or Germans or French. They thought of themselves as international businesses. Okay? >> And so they they wanted one world government and nationalism was a bad thing. And so open borders and all this sort of stuff is their mentality. But you know what? There's a lot of middle class and below people who vote and that's it. It's not going to continue. And the the scary part is that there may be not very good folks who end up taking control in a highly chaotic situation. So, we're in a fourth turning. You know, all about fourth turning. Yes. And we're in there and uh it's a fascinating time to be alive. >> It really is. And thank you so much for sharing. Let's hope that this reaches the right ears. Yes. >> [laughter] >> Well, this was really great as always. Thank you so much. I'll send you back out onto the PDAC 4, but it was so nice to see you. >> Oh, it's great to see you. I've had so much fun doing this. It's It really uh >> uh is a big important part of my life. It gives me a reason to get up in the morning because I know I get excited about Boy, I know I might be able to do another interview and this is number 13. So, it's been wonderful for me and uh I just hope that I can help people. >> Yeah. And that's all that's why I do it. I just want to to share and I'm I've been retired 24 years now. >> So I have the time and I have the experience being in business and my education and everything and as an investor in the golden mining sector and so I hope that I can help other people be successful too. >> I think you have you always get the most positive comments on our channel. I think there's a lot of people out there who are watching and appreciating. So, thank you so much. Oh, >> we'll wrap it up and and once again, I'm Charlotte Mloud with investingnews.com and this is Don Hansen. >> Oh, do a wave. [laughter]