Gold Is Flashing a Warning: Educate Yourself NOW | Clive Thompson
Summary
Macro Backdrop: Rising commodity and energy costs are feeding inflation, while the Federal Reserve faces a dilemma between curbing inflation and supporting employment.
Stagflation Setup: The guest expects creeping inflation and potential negative real rates, a backdrop historically favorable for gold based on 1970s analogs.
Precious Metals Thesis: Strong pitch to accumulate gold and silver, emphasizing sustained demand and queues for physical purchases, with potential multi-year upside.
Physical Bullion Preference: Preference for physical bullion (coins, thematic series) over paper products, with advice on storage logistics and buying before supply tightens.
Dollar & Digital Currencies: Mixed outlook for the US Dollar as safe-haven flows compete with de-dollarization; discussion of stablecoins and potential CBDCs as part of a monetary reset risk.
Policy Constraints: High government debt burdens limit Volcker-style hikes, reinforcing the case for precious metals if real rates cannot rise meaningfully.
Risks Highlighted: Sharp moves to strong positive real rates or broad market shocks could pressure gold and silver near term due to portfolio rebalancing and liquidity needs.
Equity Specifics: No specific tickers were pitched; the conversation focused on macro positioning via precious metals and physical allocation.
Transcript
The world is going through change obviously, but it's picked up tremendously over the recent months and I've invited a fantastic guest back onto the show to discuss what is happening in the economy. Last time he was on, we talked about the Fed. We talked about Jerome Powell potentially leaving early. Now, we got confirmation yesterday that he won't be ch Fed chair as of May 15th, but he'll stay on the board. We'll have to discuss, okay, what are the ramifications here? What does that mean? And we'll we'll talk about gold flows as well. what what is happening to the gold and silver price? Should we be paying attention more closely? Should we be buying, selling, holding? Uh we we'll we'll discuss all of that here very very shortly. By the way, the guest of the the name of my guest is Clive Thompson. He's a accomplished author, but also a very very accomplished wealth manager. He's worked in Switzerland for over or I wouldn't say for over 50 years in Switzerland, but he's worked as a wealth manager for over 50 years and he's got some excellent insights that I can't wait to share with you as well. But before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we really really appreciate it. Now Clive, it is a great pleasure to have you back on the program. Thank you so much for joining us. >> Hello Kai and thank you very much and hello dear friends to all my viewers. >> Cliff, really appreciate you coming on. Um before we start talking about you know the the exhausting maybe macroeconomic picture right now let's talk about the more fun stuff. You wrote a book recently little trot learn about money. Tell us about it. Well, Kai um you know I was a wealth manager for nearly 50 odd years and one of the things I discovered from my clients is even though these were adults most of them knew almost nothing about investing and finance and you know and I I came to realize that I was the same when I came out of school at the age of 18 I didn't know the kinds of words we need to know such as what is interest what what is a deposit what what what is uh uh inflation uh what's a lease, who's a what's a landlord, tenant, all these kinds of words that you really have to know when you leave school. Um so I decided that it would be a good idea to write some books and there's five of them that I've written for the benefit of young children. So these are exciting story books. They've got fantastic stories in them, lovely pictures. Uh they're not lecture books. They're not teaching anybody anything. Um they but it's a story where the child will absorb a lot of financial words which the sort of words that he ought to know at 18 but we're talking about now 8 to 12 year olds probably. So these words from Little Trot. It's a they're five books. The books are called um Little Trot Learns to save money. The second one Little Trot Discovers Inflation. The third one, Little Trot Invests in Stocks. It's a very exciting book. Uh he he obviously goes through the uh usual bad experiences with followed by the good one. Uh Little Trot and the Great Gold Rush. And the last one is called Little Trot and the Goblin Tenants. And in each book, we have the baddies, the goblins, and we have the good boys, uh, well, Little Trotters, the good boy, who, um, learns how to how not to do it before learning how to do it. Uh, but they're great adventures, and, uh, I'm getting, uh, I've had 25 feedbacks on Amazon now, uh, about Little Trot, and every single one of them is five star, so I'm really pleased. But what I could do with is more uh, reviews. If anyone would like the book, I'd love you to buy it on Amazon. But if you can't afford on Amazon, I'm giving it away. The first one anyway, I'm giving it away free on my website, clivetoson.com. Just go to clivetompson.com, click on little trot, go to book one, and you can download the entirety of book one absolutely free of charge. I hope if you do that, it'll tempt you to buy book two, three, four, and five. >> Amazing. No, fantastic. I was just going to raffle maybe the gold rush one off. So, um, to to our listeners, I I will buy it on Amazon, but we'll raffle it off. Um, to to anyone who puts in gold rush in the in the comments down below. Let's do that. And we'll we'll reach out to you on on YouTube if you do that. So, we'll do that. No, you don't have to be a subscriber. Just like the video. Just hit uh and and and comment gold rush down below and we'll wrap it off. U maybe a book idea for for the next one there is Clive is how to set off an offshore entity or u maybe you know that could be the next one. Little trot learns how to offset to upset to uh set up an offshore entity. That's uh >> it could indeed. Although I've got two more ideas. One is little trot starts a business and the other one is little trot falls in with a bad crowd. >> Oh yeah. >> Who's the back crowd though? Bankers, mortgage brokers. >> They're going to be the the goblins. But you can make the goblins whoever you want it to be in your mind when you discuss it with you. So these the the wonderful thing about these because these books are full of lovely lovely pictures. It's a great book for grandparents or parents to sit with their child and read together because there's going to be a lot of discussion points. >> Absolutely. >> Such as who are the goblins in in our world? Who do you know? Who wouldn't you lend money to? >> Too too many too many goblins there, Clive. And let's talk about some of the demons perhaps that are chasing us in the markets right now. Um because when you were on about a year ago, Clive, we talked about tariffs. We talked about PAL. We talked of course about a global re reevaluation, but we also talked US dollar. Um let's stay on the US economy first. That was sort of the tariff topic. Um what do you make of the economy right now in general? It's been a year. Let's start at zero. Um what is your perception of the economy right now, Clive? >> Well, the the key risk to the global economy is the is commodity prices. Um, the World Bank has forecast that commodity prices will rise 16% in 2026 and that energy prices will rise 24% in 2026. And there is no doubt that the rising prices of raw materials will feed through to consumer prices at the end of the day. Now we obviously have a um a wind u a counterwin blowing the other direction of artificial intelligence and and greater efficiencies through robotics reducing the cost of manufacturing. But you cannot get away from the raw material input cost which is rising and has risen and is and continuing to rise. So I think what we're going to see is um gradually rising inflation. We're currently at 3.3% in the USA, well above the 2% target. It's more than 50% above the target that they've got. And that's true um in all western almost all western countries that inflation is running well ahead of where it's supposed to be. So at first sight you might think that the central bank is uh under pressure to raise interest rates to rein in that inflation. But the other side of the problem um which is also on the global economy we're seeing that unemployment is rising and we're seeing that employment the people on people is falling. So one although one can't say definitely that that's a slowing economy. Uh we can say that as far as the man in the street is concerned his job is more at risk. The it's getting harder to get a job. um uh but you know maybe it's not necessarily affecting company profits who are benefiting from the uh increased efficiency of getting rid of their staff. Um so I think that's the the the big picture. Obviously with uh higher energy costs it's feeding through to diesel prices which have risen far faster than petrol prices. uh and now oil prices falling a bit. They're falling slower than petrol prices and diesel of course is the key component um to uh many things uh you know it's um obviously feeding through to the transport costs because a lot of lorries most lries use diesel um but we've also got it's used in jet fuel it's used in agriculture for fertilizer uh and of course mining companies are using it too. So, uh, you know, freight in general is going to cost more and that's going to feed through to the retail prices down the line. >> Oh, 100%. But, uh, inflation is not just defined by by headline CPI by by meaning like headline prices, meaning like the oil price perhaps as well. Um, a lot of monetary inflation happening. Uh on the other end as well, we had Michael Howell um I think one of your uh f fellow Britons there um talk about $600 billion dollars that has been pumped into the economy which nobody's really talking about because it wasn't labeled anything. Um it came through bank regulation and many other things as well. Um how closely are you following that side of the inflation equation there Cliff? >> Well in the in the USA money supply has risen sharply in the last two years. Um and we've also seen a sharp rise in government debt. So monetary expansion, government debt, doesn't matter where you look, is increasing in the 6 to 8% range and that is likely to continue increasing. So my question to any saver is how are you managing how are you um judging your wealth? How are you measuring it and comparing it? Are you comparing it against the uh official inflation rate which they tell you is 3 point something%. Uh or are you comparing it with the monetary expansion of debt and government and money supply which is 6 to 8% range or uh should you be measuring it against a basket of real tangible assets? And if you're looking at real tangible assets, you're looking at um over the last year, uh gold is up more than 40%, silver's up more than 40%, the stock market, S&P 500 is up more than 40%. Uh Bitcoin, which I know that's not some people say that's not a tangible asset, but it's up more than 40%. Um so there's a whole bunch of assets that people want to own which are rising at the rates we saw. Uh certainly gold is rising at the rates we saw back in the 1970s when we're in a very similar situation of rising oil prices and uh at that time something slightly different from what we have today which is negative real interest rates. Um today we still got but only just positive interest rates. But if inflation rises anymore, we'll go into negative in real returns and that will drive people away from monetary savings into other assets like gold. >> Yeah, we're getting very close to that as well because the Fed might actually cut interest rates here very soon. We just had the Fed meeting and the FMC announcement just yesterday, Clive, um what are your main takeaways from that? Is it like is the trend intact? Are we heading that direction where we don't where we will see again negative real interest rates? Well, on the Fed funds rate, I I personally believe that the Fed is stuck. It's torn between the devil and the deep blue sea. Do we raise rates to re inflation which is rising or do we cut rates to try and encourage investment in the economy to bring back the the jobs growth which is because you know fact the fact is there's less people working than a year ago. um the unemployment rising so uh logically you'd lower rates. So obviously both of those are mandates that the Federal Reserve has got to keep full employment and to uh re inflation but they don't at at this time they don't go together. It's one or the other or sit on your hands and do neither. Now we've got um Kevin Walsh has been appointed to the uh as the Federal Reserve governor. He'll be um uh sitting in that seat very shortly. And I don't think he would have been appointed by Donald Trump unless Donald Trump really believed that despite all his words that he's not going to be um the puppet of Donald Trump. I don't think he would have been appointed unless Donald um Donald Trump really believes that he will be uh a dove lowering interest rates. Um but we shall see. So where where am I where am I sitting? I know the market believes that we'll have at least one cut, possibly two in 2026. Um, I think that on balance, I think that's more likely than not, but it's um, when I say more likely, it's only sort of a 55% chance in my view. I wouldn't put it as high as the market's putting it. >> Yeah. No, it's a it's an interesting discussion. As you said, they're caught between a rock and a hard place here because what do you focus on? Do you focus on inflation? Do you focus on the economy? The economy seems to be doing okay. The only problem is consumer sentiment, Clive. Um, at the lowest and since what is it, 42 years, 45 years, uh, absolute drastic levels here and, uh, we've been in a 40-year bull market for for bonds. So, maybe, uh, there's a big reversal happening now. And maybe you can help us understand it a little bit better. Um, is the consumer the deciding factor here of what the Fed might do? Well, I think consumer confidence is is one thing, but there's not the number they're looking at. You know, they're looking uh they're looking at the employment number, which obviously we know if we read the non-farm payrolls numbers which come out every month. Um we know that they're kind of fudged because a month later they'll revise them downwards to make the next month number look much better. Um but so they're looking they're not re not looking so much at consumer confidence. They're looking at the employment numbers and they're looking at the inflation level. Um, but why are the why why is consumer confidence falling? Well, I think the re reality here is people are seeing higher prices at the pump. They, you know, they're driving their car around and uh if you're on the motorway, the petrol price might they call it gasoline in America, don't they? The gasoline price might be over $5. Um, compared with $3 a year or so ago before all this uh trouble started. Um, diesel prices are through the roof as well. So people are saying, "I've got less money in my pocket." Uh or if they're on credit card survival, the the amount of their credit card debt is is going up. I don't know how um half the population survive, frankly. And but of course, we do have another side of the population who that that the other side have got jobs uh and they're making plenty of money and they're saving and they're saying those who have woken up, how do I protect my savings? >> No. Exactly. Because as you said, like there's no more interest to be paid. Inflation is eating it away. How how do you protect yourself? And maybe that's the perfect segue because I was going to ask you next like how a potential Fed cut will shape or will um make other asset classes behave like what what is gold going to do? What is the US dollar going to do if the Fed decides to cut? And that's what the the language in in the press release sort of suggested that they're leaning towards a cut um when it comes out. Even Powell was more on the cut side. Uh while the descendant said cut and that language might be a little too aggressive for us, but 8 to4 somewhat voted for a cut here and the only descent or maybe 8 to three if you take Mirin out because he he was for a very strong cut even this round. Um so what what do you make of that? Like what what is the impact? >> Well, let's say we do get the cut. Um which as I say I'm saying it's only 55% probability in my opinion. um that would make the real rate of return uh approximately zero. So because we'd get a cut down to let's call it 3 and a half% and with inflation at 3.3 and rising so inflation will be at 3 and a half by then. Uh that's the official number which we all know is understating the truth. Um so we'll have zero real interest rates and then we'll probably go negative as inflation rises a little bit. What does that mean? It means it puts us into a situation of stagflation. Stagflation is one where the economy is slowing and inflation is rising. So stagnating economy, inflating uh prices, stagflation. When we had stagflation back in the 1970s, it was extremely good for the gold price. um over an uh the period from August 1971 through to January 1980 when which was a period more or less of all the time of negative real rates gold literally soared. Now it didn't go in a straight line. It's up and down. But if we did draw it as a straight line, it was a compound annual rate of return of 47% you could have had if you bought gold at $35 and sold it at $850 in January 1980. 45 47% I think it was perom 46% about for for eight year eight eight and a bit years straight. Now, we have had a rise in the gold price of approximately the same amount over the last 12 months. Uh, which kind of implies that people are anticipating the same sort of scenario. Uh, so if we do go into negative rates, I think we've got um many years ahead of us until such time as something is done about it. uh and whether that would be uh adopting a Paul Vulkar type of attitude which he did in 1988 when he raised interest rates massively you know way beyond what what they're they could possibly do that today they can't do it today but in back then he raised the interest rate to 20% uh against an inflation rate of 14% we're talking about 1980 at the end of so that's when stagflation stopped being stagflation it we had the positive real rates. Um, so that that's what ended the the gold price rally and then gold collapsed over the next three years because we they had people could say, I'll take my money out of gold and put it into deposit because I can get a real rate of return even after inflation. Why do I need gold? But they can't do that this time. They they just don't have the flexibility. The difference now is that level of government debt as a percentage of GDP is far higher than it was back in 1980. So they can't do it. If they were to do it, it would it would basically create a debt spiral, which we're already to some extent in, but it would speed up that debt spiral because the interest payments on the debt uh as a percentage of the um uh tax take uh have risen dramatically in the last couple of years and are set to continue rising according to the Bureau of Labor Statistics. So you can imagine if they put the rates up to a very high level uh let's say north of 10 it wouldn't take very long just a few years before the total interest payments exceed the tax take of the US government it can't be done >> yeah and that will be catastrophic but right now I think where do we stand like the interest payments uh based on tax income I think it was only I don't want to make up a number I thought it was 25% but >> a couple a couple of years ago uh it was running at 8% of the uh tax take that was the interest payment when I last looked it was 18% of the tax take and I think the based on the Bureau of Labor Statistics numbers if you take their go to their website look at their forecast of looking out and this is from 6 months ago when I last looked it was heading towards 22% in a few years the reason for that is there's a lot of debt maturing at close to zero interest rates this is debt they took out in the uh years after the great financial crisis through to about 3 years ago when uh the official Fed funds rate was a quarter percent and that means the bonds that were issued were at very very low interest rates. So, a lot of that debt's maturing and has to be replaced by debt at today's interest rate. And we know that the interest rate on bonds now uh you can't really get less than uh 3 and a half%. So, many multiples of that. Uh but, you know, it depends on your maturity. You might be almost at 5% if you're looking for a 30-year bond. So, they're going to have to be rolling this debt, but at much higher interest rates if yields on bonds stay where they are at the moment. And that's why the interest burden is rising. But you can imagine it would rise much further if they put up short-term rates significantly. And the question is like and maybe ties in with the next topic is is really the confidence in the US and the US dollar in general like higher interest rates are actually quite attractive. Um if you believe that uh the the US will be able to pay them moving forward. That's why perhaps even the shortdated the bills of more interest to investors right now as well. I think it's 3.9% on the 2-year right now here, Clive. Um cuz because what I'm trying to connect here is the topic of dollar confidence that we've had on that we discussed last time as well about a year ago because we were talking about capital leaving the US, right? And now I want to bring it back to capital coming coming back to the US as maybe um the US has shown that it is in a very strong position um and that interest rate discussion might be that that's that that that perfect segue for it like is is there a connection Clive? >> Well the US dollar is uh down about 10% over the last 12 15 15 18 months. Um it's come down from a uh if I look at the DXY which is a uh like a basket of currencies against which the dollar's measured it's come down from a level of over 110 to below 100. Um so it's dropped let's call it for simplicity around 10%. But it's had its um ups and downs in in the last month or so. It's not been it's never been a straight line. Um, so will the dollar continue dropping or will it rise because people are rushing into it if there's higher interest rates, which we I'm saying is a 45% chance. Um, will they uh will they go into it because they do what they always do and and I don't think this has changed particularly, but in times of uncertainty and war, people tend to flock to the dollar and dollar liquidity. Um, so it could well be that uh we we've got some more months of money flowing into the dollar as people seek the comfort and safety of the world's largest, most international, most tradable currency on the planet. Um, we we saw that after the Russian invasion of Ukraine. uh money rushed into the dollar and in fact at the time the gold price went down from uh kind of 1,800 to600 um let's call it something like a 15 16% decline um and it stayed down you know the gold price after the peak of 1800 was down for something like uh 7 months before it started recovering. Uh so if we look at that uh we're into the uh the war started in uh end of February so we got March April um we're in the second of a seven-month decline of gold but obviously we don't know at what point it starts to recover. Uh but for those who like gold I think this is a great time to be trying to accumulate it. In fact um yesterday I was trying to buy gold. This is the third attempt this year. I've had three attempts to buy gold this year. Um I'm talking about physical gold and I was this time I was down at um it's the fourth attempt pick uh one was not really anybody's fault but the fourth I went to Deusa which is a Swiss shop where you can buy physical gold and once again I was told sorry sir there's such a queue you'll have to wait 40 45 minutes before you can get get to the counter and I said I haven't got 40 minutes I've got a train to catch and so I couldn't um the the the pre this is the third time I've been in there trying to get gold and had the same experience. There's too many people in the door which I never experienced ever ever before in the previous year. >> Are they buying or selling though? >> Well, on the I this time I didn't ask, but on the previous two occasions that I tried to get in, I was I asked the question and was told they're buying. Um and there was a there was a a fourth occasion when I tried to buy gold from a different dealer, but it wasn't anything to do with buying and selling. Uh this was when I was in Kron Montana at the start of the year and there hadd been this uh the fire and I I I made the appointment with the thing to come back the next day and then of course you couldn't get in the street because they blocked off the street because of the Kron Montana fire. But that's nothing to do with the guy uh the seller there. But uh yes it the three time two of these three times at Dusa you just couldn't get in the door because there were too many buyers. yesterday. I'm guessing it's the same thing, but I don't know that without asking the question. >> Yeah. No, fair enough. Um, we'll talk about gold or we'll come back to gold in a second and the role of gold here and how that perhaps changed and what the opportunity is, but just staying on the dollar real quick. I'm I'm curious. The US dollar of course is the world reserve currency, but it was weakening and we've discussed that at length last time as well. But h has the US and maybe over the last 12 months since we spoke been able to maybe restrengthen that position of the US dollar in the global marketplace. >> Well, there's obviously something going on with the what they call stable coins. Um that creates a demand for dollars which never existed before. uh because people all around the world will be are attracted to the convenience of being able to trade in stable coins because it might be very difficult if you're in I don't know Nigeria for example to trade in large bundles of physical dollars but if you can do it in stable coins there's a lot of reasons why you why you'd want to do that so I think that is um a factor which is uh creating a demand for dollars which didn't exist before but pushing against that we have um countless uh countries around the world who are feeling nervous about uh dollar holdings and sanctions in particular. Uh there's a worry that the dollar might be weaponized against them and they'd perhaps rather hold uh some other form of currency. So, you know, you got the twin drifts of people drifting away from the dollar because they don't trust it and people saying, "I don't care whether I trust or not. I, you know, I've I've now got a new way of using the dollar. And, you know, actually, if I'm using stable coins, it's going to be a little bit harder to um sanction that. That's not actually true because we've seen we've seen Tether have been freezing um billions of dollars when they are suspected of um illicit use. But the belief people have got this belief that it's it's like Bitcoin which is un untouchable which not quite true but they they're going to believe this and they're going to say I don't care about the risks. I'll take the uh stable coins and I'll use them for my trade. So you the jury's out. We'll have to see. Um but I do think people are reducing the dollar waiting uh in the traditional sense. >> Yeah. No, they absolutely are. And I think there's a directive in China as well. reduce here to government bond US government bond holdings as well. Uh we're focused on the renimi and and setting it up as the second world reserve currency here. Um is that maybe you know again perfect segue to gold here. Is that what's been pushing gold higher as well? It's it's it seems like we're on the verge of a monetary reset Clive. Um where do you see things headed and try to map it out timing wise a little bit as well Clive? I know it's a tough one to answer but uh maybe give some perspective there. Not only the USA but the whole world is in a an excessive debt situation as far as governments are concerned. Um central bank governors, economists, people in the know have said over and over again that the present path is unsustainable. But the present path isn't going to change because there's no will from governments to re in spending. Uh, of course they'll use the right words and they continue to use the right words. Um, as we saw uh when Donald Trump came in, you know, there was a lot of talk about the uh Department of Government Efficiency going to cut spending. But when it comes down to the reality of trying to do that, it's very very hard for governments to cut spending because everybody and their dog has got something to say about it. Yeah, touch someone else's project, but don't touch mine. Um, so it's going to be hard to rein in the spending and we're in a situation right now where debt is increasing at a faster pace than the economy is increasing. That means it's increasing as debt to GDP ratio is increasing. You will get to and we will definitely get to uh a point in time where something happens and the world wakes up all at the same time perhaps in the middle of a crisis. So, uh, you you get a crisis, uh, a black swan event, and black swan events, even though they're supposed to never happen, they're the kind of things which happen all the time. You just don't know when the next one's coming, you know, whether it be a COVID pandemic or a a war or a a natural disaster. We we're bound to at some point get some sort of trigger event which make people rethink to what extent they want to hold currency, which is the liability of a government. And then everybody rushes at the same time for something different. So what do they rush for? Well, they're going to rush for tangible assets, whether it be gold, property, uh stocks. I mean, it depends on the on the the person's individual's um view, but they're not at that point. That's when the governments try to bring in an alternative currency to manage the economy. Now, whether that's done by means of exchange controls, i.e. or capital controls means you can only spend and use part of your money. You can't use the rest. Whether it's done uh through um what we could call a bailin. The bailin is where effectively where the government says part of your money has to be invested in government bonds. There is no choice. We're taking it and helping ourselves. Or whether it's the uh use of an alternative currency uh which is the only one you're allowed to use. So let's let's call it central bank digital currency for example could be a stable coin but let's say they say all transactions have to be through the CBDC the central bank digital currency so that we are controlling you for anti-moneyaundering for taxation for terrorism we can see what's going on uh and if money goes into your uh wallet it'll be swept out of your bank account if it goes out of your wallet go be swept into your bank account but all transactions must be through your wallet and then one day you wake up and you find that you can't move money out of your bank account at least not at one one into your wallet. Now suddenly you've got a new currency, the CBDC trading alongside the old currency, the the old euro, the old yen, the old Swiss Frank, the old pound and so forth, the old dollar. And one you can deploy, that's what's in your wallet. And the other one you can't because you can't put it in your wallet or there's restrictions. So effective we then have two currencies and you know what will happen to the old currency on day one it'll it'll be worth 30 70% of the old one it'll be trading at a 30% discount and 3 months later it'll be trading at an 80% discount and a year later it'll be worth nothing because you can't deploy it. >> Yeah. Or it'll be too expensive to keep printing money. That'll be the excuse. It's like oh the paper the the commodity input prices have risen. Like it's not worth printing it anymore. Let's just keep it digital. >> Right. It just makes more economic sense, right? >> Whatever whatever the scenario is, it won't it won't work out well for those who have large cash balances or government bonds. >> No, exactly. Um let's talk about the price action in gold and silver though because I'm curious what prompted you to stop in at DOSA yesterday um to to buy more physical because obviously it's uh is it price driven or why why'd you do it? Um, so it's not price driven. Um, of you know, I I personally think we probably could uh see some months from here of um the gold price not not really shooting up. I mean, a lot of people are saying it's got to shoot up to the 5,500, the level it was at its absolute peak. Now I I think we will get there and I think it will go higher a lot higher. But to to say that it's about to happen next week or next month or two months. My look my my brain which is like everybody else looking for patterns isn't saying that's imminent. But you you when it starts to happen you don't want to be running to the gold store like everybody else. You want to be filling your boots at a time when you can still lay your hands on it. My my plan um is to continue buying the physical. It doesn't mean to say that you shouldn't buy uh exchange traded funds and so forth, but I've got my fill of those sort of things. I've got my gold miners, I got my exchange traded funds. I feel that now is the time when I'd like to have more physical um and of course I'll keep it in a very safe place uh where I can go to get it. Specifically, a bank safety deposit box. You got to rely on the bank doors being open when you need it. one assumes that uh uh that that you will be able to get in the door. So I I think now is the time to be while while there's still an opportunity to get it before you find just can't get it at all. And we did actually see that um across the world in the run-up to the January peak. Uh people were reporting everywhere that they couldn't get in the door just as was my experience a couple of times uh to buy gold and and yesterday as well though that I think that uh the one of the suggestions was the guy the guy said to me you can come if you come as we open there's less people at that time. Um, so yeah, I think it's just a a time to be acquiring now. Price driven. Uh, yeah, it's a good price. It's uh, you know, we're $1,000 below its peak nearly. Um, I like to buy things when they're not at the peak. >> Makes sense. And and I follow that logic very clo like it make I I can easily follow that logic is what I was trying to say. Um, Clive, last question perhaps. Does does the same concept apply to silver as well? I'm assuming. Yes. >> Yes. I mean, I'm um in fact, my my plan yesterday was to buy gold and silver. What I tend to do when I go into these shops, I I look at what they've got in stock. Um I'm not so much a buyer of the bullion coins, but more a buyer of the thematic coins, uh such as the um the Queen's Beasts coins or the Australian Luna collection coins or the Chinese panda collection. Um, so the the thematic coins where they bring out a new design every year, therefore that you can say they're part of a collection, are the ones I like to buy. Um, I'm, you know, I I' I've had my fill in years gone by of krugarans and uh, eagles and things like that. And I guess they don't thrill me as much to look at as the lovely fresh design you get each year when they when the various mints bring out their um thematic coins. >> Oh no, it's it's always fun to hold it physically as well. It just it just feels better, right? And paper contracts, I don't think we need to go there. Our audience knows how we feel about paper contracts, at least me personally. So, um not not too excited about those. Um, and may maybe very last question, Clive, because we're all super optimistic about gold and silver. Is there anything that could break that gold and silver theory um that could derail what we've been talking about? >> Well, of of course much higher interest rates aren't going to do gold any good. Uh, if we go to um strong positive real rates of return, um the the incentive to go into precious metals will reduce. Um, so we're sort of sitting at the uh sitting on the fence at the moment, we're halfway between one and the other, but uh in in my opinion with inflation likely to creep upwards, uh we'll go onto the side of the fence, which will make it very attractive to have more gold and silver at the expense of other assets. Um the the other thing of course we must remember is there is always a danger of a an event which causes asset prices generally to fall. Uh I'll give you a few examples. Let's say there was a a major data country I just take a random example Argentina Brazil um it doesn't really matter what what country you take was to was to default that would cause all asset prices to fall including gold and silver. Let's say there was a stock market crash for whatever reason. You imagine that one of the largest companies on the planet suddenly uh discovers that actually it had been exaggerating its sales and profits and uh the the share price halves as as the investigation starts that that'll bring down the stock market. Gold and silver will fall with it. So when there is a uh an event which causes an asset to disappear or to to crash in price, everything is affected because people rebalance their portfolios when that happens. And it it generally involves the selling a bit of a bit of everything and that would bring down gold and silver too. >> No, fair enough. And I think we've seen that liquidity impass. I don't know, let's let's call it that. It's uh that liquidity pressure I guess in in recent weeks when uh for example the Turkish central bank had to flush out some of its holdings right around 120 tons not a small amount and to try to stabilize it its currency with while doing so. No fantastic Clive what a wonderful conversation we we touched on a lot of topics. Um congratulations again on your book series. Um >> yep exactly little trot fantastic learn to save money and uh no we we'll raffle one of the the books off. just put in gold rush in the comments down below. We'll we'll pick a winner. We'll randomize it and uh we'll reach out through YouTube as well. Clive, um in the meantime, where where else can our audience find more of your work? >> Um I'd love people to go to my website, which is clivetompson.com, my name, exactly as you see it on the screen, clivetoson.com. And if you I'd love you to buy the book on Amazon, but if you can't afford it, you can get the free book one from my website. Uh you'll find lots of other interesting things on clivetoon.com including some links to some of my videos. >> Lovely. Thank you so much, Clive. It was great to catch up again. Let's let uh let a year pass before we do this again. So, >> thank you. >> Can't wait to do this again soon. And uh >> thumbs up to all your listeners. >> Appreciate Appreciate it, Clive. And everybody else, thanks so much for tuning in. Really appreciate you watching Sore Financial. If you enjoyed this conversation with Clive Thompson, hit that like and subscribe button. It helps us out tremendously. And as I said before, hit the uh put in gold rush down below. We'll raffle off one of Clive's books. We'll send it to you via Amazon. So, make sure to uh to comment down below. And in the meantime, stay safe out there and don't let emotions run your investments for you. Take care.
Gold Is Flashing a Warning: Educate Yourself NOW | Clive Thompson
Summary
Transcript
The world is going through change obviously, but it's picked up tremendously over the recent months and I've invited a fantastic guest back onto the show to discuss what is happening in the economy. Last time he was on, we talked about the Fed. We talked about Jerome Powell potentially leaving early. Now, we got confirmation yesterday that he won't be ch Fed chair as of May 15th, but he'll stay on the board. We'll have to discuss, okay, what are the ramifications here? What does that mean? And we'll we'll talk about gold flows as well. what what is happening to the gold and silver price? Should we be paying attention more closely? Should we be buying, selling, holding? Uh we we'll we'll discuss all of that here very very shortly. By the way, the guest of the the name of my guest is Clive Thompson. He's a accomplished author, but also a very very accomplished wealth manager. He's worked in Switzerland for over or I wouldn't say for over 50 years in Switzerland, but he's worked as a wealth manager for over 50 years and he's got some excellent insights that I can't wait to share with you as well. But before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we really really appreciate it. Now Clive, it is a great pleasure to have you back on the program. Thank you so much for joining us. >> Hello Kai and thank you very much and hello dear friends to all my viewers. >> Cliff, really appreciate you coming on. Um before we start talking about you know the the exhausting maybe macroeconomic picture right now let's talk about the more fun stuff. You wrote a book recently little trot learn about money. Tell us about it. Well, Kai um you know I was a wealth manager for nearly 50 odd years and one of the things I discovered from my clients is even though these were adults most of them knew almost nothing about investing and finance and you know and I I came to realize that I was the same when I came out of school at the age of 18 I didn't know the kinds of words we need to know such as what is interest what what is a deposit what what what is uh uh inflation uh what's a lease, who's a what's a landlord, tenant, all these kinds of words that you really have to know when you leave school. Um so I decided that it would be a good idea to write some books and there's five of them that I've written for the benefit of young children. So these are exciting story books. They've got fantastic stories in them, lovely pictures. Uh they're not lecture books. They're not teaching anybody anything. Um they but it's a story where the child will absorb a lot of financial words which the sort of words that he ought to know at 18 but we're talking about now 8 to 12 year olds probably. So these words from Little Trot. It's a they're five books. The books are called um Little Trot Learns to save money. The second one Little Trot Discovers Inflation. The third one, Little Trot Invests in Stocks. It's a very exciting book. Uh he he obviously goes through the uh usual bad experiences with followed by the good one. Uh Little Trot and the Great Gold Rush. And the last one is called Little Trot and the Goblin Tenants. And in each book, we have the baddies, the goblins, and we have the good boys, uh, well, Little Trotters, the good boy, who, um, learns how to how not to do it before learning how to do it. Uh, but they're great adventures, and, uh, I'm getting, uh, I've had 25 feedbacks on Amazon now, uh, about Little Trot, and every single one of them is five star, so I'm really pleased. But what I could do with is more uh, reviews. If anyone would like the book, I'd love you to buy it on Amazon. But if you can't afford on Amazon, I'm giving it away. The first one anyway, I'm giving it away free on my website, clivetoson.com. Just go to clivetompson.com, click on little trot, go to book one, and you can download the entirety of book one absolutely free of charge. I hope if you do that, it'll tempt you to buy book two, three, four, and five. >> Amazing. No, fantastic. I was just going to raffle maybe the gold rush one off. So, um, to to our listeners, I I will buy it on Amazon, but we'll raffle it off. Um, to to anyone who puts in gold rush in the in the comments down below. Let's do that. And we'll we'll reach out to you on on YouTube if you do that. So, we'll do that. No, you don't have to be a subscriber. Just like the video. Just hit uh and and and comment gold rush down below and we'll wrap it off. U maybe a book idea for for the next one there is Clive is how to set off an offshore entity or u maybe you know that could be the next one. Little trot learns how to offset to upset to uh set up an offshore entity. That's uh >> it could indeed. Although I've got two more ideas. One is little trot starts a business and the other one is little trot falls in with a bad crowd. >> Oh yeah. >> Who's the back crowd though? Bankers, mortgage brokers. >> They're going to be the the goblins. But you can make the goblins whoever you want it to be in your mind when you discuss it with you. So these the the wonderful thing about these because these books are full of lovely lovely pictures. It's a great book for grandparents or parents to sit with their child and read together because there's going to be a lot of discussion points. >> Absolutely. >> Such as who are the goblins in in our world? Who do you know? Who wouldn't you lend money to? >> Too too many too many goblins there, Clive. And let's talk about some of the demons perhaps that are chasing us in the markets right now. Um because when you were on about a year ago, Clive, we talked about tariffs. We talked about PAL. We talked of course about a global re reevaluation, but we also talked US dollar. Um let's stay on the US economy first. That was sort of the tariff topic. Um what do you make of the economy right now in general? It's been a year. Let's start at zero. Um what is your perception of the economy right now, Clive? >> Well, the the key risk to the global economy is the is commodity prices. Um, the World Bank has forecast that commodity prices will rise 16% in 2026 and that energy prices will rise 24% in 2026. And there is no doubt that the rising prices of raw materials will feed through to consumer prices at the end of the day. Now we obviously have a um a wind u a counterwin blowing the other direction of artificial intelligence and and greater efficiencies through robotics reducing the cost of manufacturing. But you cannot get away from the raw material input cost which is rising and has risen and is and continuing to rise. So I think what we're going to see is um gradually rising inflation. We're currently at 3.3% in the USA, well above the 2% target. It's more than 50% above the target that they've got. And that's true um in all western almost all western countries that inflation is running well ahead of where it's supposed to be. So at first sight you might think that the central bank is uh under pressure to raise interest rates to rein in that inflation. But the other side of the problem um which is also on the global economy we're seeing that unemployment is rising and we're seeing that employment the people on people is falling. So one although one can't say definitely that that's a slowing economy. Uh we can say that as far as the man in the street is concerned his job is more at risk. The it's getting harder to get a job. um uh but you know maybe it's not necessarily affecting company profits who are benefiting from the uh increased efficiency of getting rid of their staff. Um so I think that's the the the big picture. Obviously with uh higher energy costs it's feeding through to diesel prices which have risen far faster than petrol prices. uh and now oil prices falling a bit. They're falling slower than petrol prices and diesel of course is the key component um to uh many things uh you know it's um obviously feeding through to the transport costs because a lot of lorries most lries use diesel um but we've also got it's used in jet fuel it's used in agriculture for fertilizer uh and of course mining companies are using it too. So, uh, you know, freight in general is going to cost more and that's going to feed through to the retail prices down the line. >> Oh, 100%. But, uh, inflation is not just defined by by headline CPI by by meaning like headline prices, meaning like the oil price perhaps as well. Um, a lot of monetary inflation happening. Uh on the other end as well, we had Michael Howell um I think one of your uh f fellow Britons there um talk about $600 billion dollars that has been pumped into the economy which nobody's really talking about because it wasn't labeled anything. Um it came through bank regulation and many other things as well. Um how closely are you following that side of the inflation equation there Cliff? >> Well in the in the USA money supply has risen sharply in the last two years. Um and we've also seen a sharp rise in government debt. So monetary expansion, government debt, doesn't matter where you look, is increasing in the 6 to 8% range and that is likely to continue increasing. So my question to any saver is how are you managing how are you um judging your wealth? How are you measuring it and comparing it? Are you comparing it against the uh official inflation rate which they tell you is 3 point something%. Uh or are you comparing it with the monetary expansion of debt and government and money supply which is 6 to 8% range or uh should you be measuring it against a basket of real tangible assets? And if you're looking at real tangible assets, you're looking at um over the last year, uh gold is up more than 40%, silver's up more than 40%, the stock market, S&P 500 is up more than 40%. Uh Bitcoin, which I know that's not some people say that's not a tangible asset, but it's up more than 40%. Um so there's a whole bunch of assets that people want to own which are rising at the rates we saw. Uh certainly gold is rising at the rates we saw back in the 1970s when we're in a very similar situation of rising oil prices and uh at that time something slightly different from what we have today which is negative real interest rates. Um today we still got but only just positive interest rates. But if inflation rises anymore, we'll go into negative in real returns and that will drive people away from monetary savings into other assets like gold. >> Yeah, we're getting very close to that as well because the Fed might actually cut interest rates here very soon. We just had the Fed meeting and the FMC announcement just yesterday, Clive, um what are your main takeaways from that? Is it like is the trend intact? Are we heading that direction where we don't where we will see again negative real interest rates? Well, on the Fed funds rate, I I personally believe that the Fed is stuck. It's torn between the devil and the deep blue sea. Do we raise rates to re inflation which is rising or do we cut rates to try and encourage investment in the economy to bring back the the jobs growth which is because you know fact the fact is there's less people working than a year ago. um the unemployment rising so uh logically you'd lower rates. So obviously both of those are mandates that the Federal Reserve has got to keep full employment and to uh re inflation but they don't at at this time they don't go together. It's one or the other or sit on your hands and do neither. Now we've got um Kevin Walsh has been appointed to the uh as the Federal Reserve governor. He'll be um uh sitting in that seat very shortly. And I don't think he would have been appointed by Donald Trump unless Donald Trump really believed that despite all his words that he's not going to be um the puppet of Donald Trump. I don't think he would have been appointed unless Donald um Donald Trump really believes that he will be uh a dove lowering interest rates. Um but we shall see. So where where am I where am I sitting? I know the market believes that we'll have at least one cut, possibly two in 2026. Um, I think that on balance, I think that's more likely than not, but it's um, when I say more likely, it's only sort of a 55% chance in my view. I wouldn't put it as high as the market's putting it. >> Yeah. No, it's a it's an interesting discussion. As you said, they're caught between a rock and a hard place here because what do you focus on? Do you focus on inflation? Do you focus on the economy? The economy seems to be doing okay. The only problem is consumer sentiment, Clive. Um, at the lowest and since what is it, 42 years, 45 years, uh, absolute drastic levels here and, uh, we've been in a 40-year bull market for for bonds. So, maybe, uh, there's a big reversal happening now. And maybe you can help us understand it a little bit better. Um, is the consumer the deciding factor here of what the Fed might do? Well, I think consumer confidence is is one thing, but there's not the number they're looking at. You know, they're looking uh they're looking at the employment number, which obviously we know if we read the non-farm payrolls numbers which come out every month. Um we know that they're kind of fudged because a month later they'll revise them downwards to make the next month number look much better. Um but so they're looking they're not re not looking so much at consumer confidence. They're looking at the employment numbers and they're looking at the inflation level. Um, but why are the why why is consumer confidence falling? Well, I think the re reality here is people are seeing higher prices at the pump. They, you know, they're driving their car around and uh if you're on the motorway, the petrol price might they call it gasoline in America, don't they? The gasoline price might be over $5. Um, compared with $3 a year or so ago before all this uh trouble started. Um, diesel prices are through the roof as well. So people are saying, "I've got less money in my pocket." Uh or if they're on credit card survival, the the amount of their credit card debt is is going up. I don't know how um half the population survive, frankly. And but of course, we do have another side of the population who that that the other side have got jobs uh and they're making plenty of money and they're saving and they're saying those who have woken up, how do I protect my savings? >> No. Exactly. Because as you said, like there's no more interest to be paid. Inflation is eating it away. How how do you protect yourself? And maybe that's the perfect segue because I was going to ask you next like how a potential Fed cut will shape or will um make other asset classes behave like what what is gold going to do? What is the US dollar going to do if the Fed decides to cut? And that's what the the language in in the press release sort of suggested that they're leaning towards a cut um when it comes out. Even Powell was more on the cut side. Uh while the descendant said cut and that language might be a little too aggressive for us, but 8 to4 somewhat voted for a cut here and the only descent or maybe 8 to three if you take Mirin out because he he was for a very strong cut even this round. Um so what what do you make of that? Like what what is the impact? >> Well, let's say we do get the cut. Um which as I say I'm saying it's only 55% probability in my opinion. um that would make the real rate of return uh approximately zero. So because we'd get a cut down to let's call it 3 and a half% and with inflation at 3.3 and rising so inflation will be at 3 and a half by then. Uh that's the official number which we all know is understating the truth. Um so we'll have zero real interest rates and then we'll probably go negative as inflation rises a little bit. What does that mean? It means it puts us into a situation of stagflation. Stagflation is one where the economy is slowing and inflation is rising. So stagnating economy, inflating uh prices, stagflation. When we had stagflation back in the 1970s, it was extremely good for the gold price. um over an uh the period from August 1971 through to January 1980 when which was a period more or less of all the time of negative real rates gold literally soared. Now it didn't go in a straight line. It's up and down. But if we did draw it as a straight line, it was a compound annual rate of return of 47% you could have had if you bought gold at $35 and sold it at $850 in January 1980. 45 47% I think it was perom 46% about for for eight year eight eight and a bit years straight. Now, we have had a rise in the gold price of approximately the same amount over the last 12 months. Uh, which kind of implies that people are anticipating the same sort of scenario. Uh, so if we do go into negative rates, I think we've got um many years ahead of us until such time as something is done about it. uh and whether that would be uh adopting a Paul Vulkar type of attitude which he did in 1988 when he raised interest rates massively you know way beyond what what they're they could possibly do that today they can't do it today but in back then he raised the interest rate to 20% uh against an inflation rate of 14% we're talking about 1980 at the end of so that's when stagflation stopped being stagflation it we had the positive real rates. Um, so that that's what ended the the gold price rally and then gold collapsed over the next three years because we they had people could say, I'll take my money out of gold and put it into deposit because I can get a real rate of return even after inflation. Why do I need gold? But they can't do that this time. They they just don't have the flexibility. The difference now is that level of government debt as a percentage of GDP is far higher than it was back in 1980. So they can't do it. If they were to do it, it would it would basically create a debt spiral, which we're already to some extent in, but it would speed up that debt spiral because the interest payments on the debt uh as a percentage of the um uh tax take uh have risen dramatically in the last couple of years and are set to continue rising according to the Bureau of Labor Statistics. So you can imagine if they put the rates up to a very high level uh let's say north of 10 it wouldn't take very long just a few years before the total interest payments exceed the tax take of the US government it can't be done >> yeah and that will be catastrophic but right now I think where do we stand like the interest payments uh based on tax income I think it was only I don't want to make up a number I thought it was 25% but >> a couple a couple of years ago uh it was running at 8% of the uh tax take that was the interest payment when I last looked it was 18% of the tax take and I think the based on the Bureau of Labor Statistics numbers if you take their go to their website look at their forecast of looking out and this is from 6 months ago when I last looked it was heading towards 22% in a few years the reason for that is there's a lot of debt maturing at close to zero interest rates this is debt they took out in the uh years after the great financial crisis through to about 3 years ago when uh the official Fed funds rate was a quarter percent and that means the bonds that were issued were at very very low interest rates. So, a lot of that debt's maturing and has to be replaced by debt at today's interest rate. And we know that the interest rate on bonds now uh you can't really get less than uh 3 and a half%. So, many multiples of that. Uh but, you know, it depends on your maturity. You might be almost at 5% if you're looking for a 30-year bond. So, they're going to have to be rolling this debt, but at much higher interest rates if yields on bonds stay where they are at the moment. And that's why the interest burden is rising. But you can imagine it would rise much further if they put up short-term rates significantly. And the question is like and maybe ties in with the next topic is is really the confidence in the US and the US dollar in general like higher interest rates are actually quite attractive. Um if you believe that uh the the US will be able to pay them moving forward. That's why perhaps even the shortdated the bills of more interest to investors right now as well. I think it's 3.9% on the 2-year right now here, Clive. Um cuz because what I'm trying to connect here is the topic of dollar confidence that we've had on that we discussed last time as well about a year ago because we were talking about capital leaving the US, right? And now I want to bring it back to capital coming coming back to the US as maybe um the US has shown that it is in a very strong position um and that interest rate discussion might be that that's that that that perfect segue for it like is is there a connection Clive? >> Well the US dollar is uh down about 10% over the last 12 15 15 18 months. Um it's come down from a uh if I look at the DXY which is a uh like a basket of currencies against which the dollar's measured it's come down from a level of over 110 to below 100. Um so it's dropped let's call it for simplicity around 10%. But it's had its um ups and downs in in the last month or so. It's not been it's never been a straight line. Um, so will the dollar continue dropping or will it rise because people are rushing into it if there's higher interest rates, which we I'm saying is a 45% chance. Um, will they uh will they go into it because they do what they always do and and I don't think this has changed particularly, but in times of uncertainty and war, people tend to flock to the dollar and dollar liquidity. Um, so it could well be that uh we we've got some more months of money flowing into the dollar as people seek the comfort and safety of the world's largest, most international, most tradable currency on the planet. Um, we we saw that after the Russian invasion of Ukraine. uh money rushed into the dollar and in fact at the time the gold price went down from uh kind of 1,800 to600 um let's call it something like a 15 16% decline um and it stayed down you know the gold price after the peak of 1800 was down for something like uh 7 months before it started recovering. Uh so if we look at that uh we're into the uh the war started in uh end of February so we got March April um we're in the second of a seven-month decline of gold but obviously we don't know at what point it starts to recover. Uh but for those who like gold I think this is a great time to be trying to accumulate it. In fact um yesterday I was trying to buy gold. This is the third attempt this year. I've had three attempts to buy gold this year. Um I'm talking about physical gold and I was this time I was down at um it's the fourth attempt pick uh one was not really anybody's fault but the fourth I went to Deusa which is a Swiss shop where you can buy physical gold and once again I was told sorry sir there's such a queue you'll have to wait 40 45 minutes before you can get get to the counter and I said I haven't got 40 minutes I've got a train to catch and so I couldn't um the the the pre this is the third time I've been in there trying to get gold and had the same experience. There's too many people in the door which I never experienced ever ever before in the previous year. >> Are they buying or selling though? >> Well, on the I this time I didn't ask, but on the previous two occasions that I tried to get in, I was I asked the question and was told they're buying. Um and there was a there was a a fourth occasion when I tried to buy gold from a different dealer, but it wasn't anything to do with buying and selling. Uh this was when I was in Kron Montana at the start of the year and there hadd been this uh the fire and I I I made the appointment with the thing to come back the next day and then of course you couldn't get in the street because they blocked off the street because of the Kron Montana fire. But that's nothing to do with the guy uh the seller there. But uh yes it the three time two of these three times at Dusa you just couldn't get in the door because there were too many buyers. yesterday. I'm guessing it's the same thing, but I don't know that without asking the question. >> Yeah. No, fair enough. Um, we'll talk about gold or we'll come back to gold in a second and the role of gold here and how that perhaps changed and what the opportunity is, but just staying on the dollar real quick. I'm I'm curious. The US dollar of course is the world reserve currency, but it was weakening and we've discussed that at length last time as well. But h has the US and maybe over the last 12 months since we spoke been able to maybe restrengthen that position of the US dollar in the global marketplace. >> Well, there's obviously something going on with the what they call stable coins. Um that creates a demand for dollars which never existed before. uh because people all around the world will be are attracted to the convenience of being able to trade in stable coins because it might be very difficult if you're in I don't know Nigeria for example to trade in large bundles of physical dollars but if you can do it in stable coins there's a lot of reasons why you why you'd want to do that so I think that is um a factor which is uh creating a demand for dollars which didn't exist before but pushing against that we have um countless uh countries around the world who are feeling nervous about uh dollar holdings and sanctions in particular. Uh there's a worry that the dollar might be weaponized against them and they'd perhaps rather hold uh some other form of currency. So, you know, you got the twin drifts of people drifting away from the dollar because they don't trust it and people saying, "I don't care whether I trust or not. I, you know, I've I've now got a new way of using the dollar. And, you know, actually, if I'm using stable coins, it's going to be a little bit harder to um sanction that. That's not actually true because we've seen we've seen Tether have been freezing um billions of dollars when they are suspected of um illicit use. But the belief people have got this belief that it's it's like Bitcoin which is un untouchable which not quite true but they they're going to believe this and they're going to say I don't care about the risks. I'll take the uh stable coins and I'll use them for my trade. So you the jury's out. We'll have to see. Um but I do think people are reducing the dollar waiting uh in the traditional sense. >> Yeah. No, they absolutely are. And I think there's a directive in China as well. reduce here to government bond US government bond holdings as well. Uh we're focused on the renimi and and setting it up as the second world reserve currency here. Um is that maybe you know again perfect segue to gold here. Is that what's been pushing gold higher as well? It's it's it seems like we're on the verge of a monetary reset Clive. Um where do you see things headed and try to map it out timing wise a little bit as well Clive? I know it's a tough one to answer but uh maybe give some perspective there. Not only the USA but the whole world is in a an excessive debt situation as far as governments are concerned. Um central bank governors, economists, people in the know have said over and over again that the present path is unsustainable. But the present path isn't going to change because there's no will from governments to re in spending. Uh, of course they'll use the right words and they continue to use the right words. Um, as we saw uh when Donald Trump came in, you know, there was a lot of talk about the uh Department of Government Efficiency going to cut spending. But when it comes down to the reality of trying to do that, it's very very hard for governments to cut spending because everybody and their dog has got something to say about it. Yeah, touch someone else's project, but don't touch mine. Um, so it's going to be hard to rein in the spending and we're in a situation right now where debt is increasing at a faster pace than the economy is increasing. That means it's increasing as debt to GDP ratio is increasing. You will get to and we will definitely get to uh a point in time where something happens and the world wakes up all at the same time perhaps in the middle of a crisis. So, uh, you you get a crisis, uh, a black swan event, and black swan events, even though they're supposed to never happen, they're the kind of things which happen all the time. You just don't know when the next one's coming, you know, whether it be a COVID pandemic or a a war or a a natural disaster. We we're bound to at some point get some sort of trigger event which make people rethink to what extent they want to hold currency, which is the liability of a government. And then everybody rushes at the same time for something different. So what do they rush for? Well, they're going to rush for tangible assets, whether it be gold, property, uh stocks. I mean, it depends on the on the the person's individual's um view, but they're not at that point. That's when the governments try to bring in an alternative currency to manage the economy. Now, whether that's done by means of exchange controls, i.e. or capital controls means you can only spend and use part of your money. You can't use the rest. Whether it's done uh through um what we could call a bailin. The bailin is where effectively where the government says part of your money has to be invested in government bonds. There is no choice. We're taking it and helping ourselves. Or whether it's the uh use of an alternative currency uh which is the only one you're allowed to use. So let's let's call it central bank digital currency for example could be a stable coin but let's say they say all transactions have to be through the CBDC the central bank digital currency so that we are controlling you for anti-moneyaundering for taxation for terrorism we can see what's going on uh and if money goes into your uh wallet it'll be swept out of your bank account if it goes out of your wallet go be swept into your bank account but all transactions must be through your wallet and then one day you wake up and you find that you can't move money out of your bank account at least not at one one into your wallet. Now suddenly you've got a new currency, the CBDC trading alongside the old currency, the the old euro, the old yen, the old Swiss Frank, the old pound and so forth, the old dollar. And one you can deploy, that's what's in your wallet. And the other one you can't because you can't put it in your wallet or there's restrictions. So effective we then have two currencies and you know what will happen to the old currency on day one it'll it'll be worth 30 70% of the old one it'll be trading at a 30% discount and 3 months later it'll be trading at an 80% discount and a year later it'll be worth nothing because you can't deploy it. >> Yeah. Or it'll be too expensive to keep printing money. That'll be the excuse. It's like oh the paper the the commodity input prices have risen. Like it's not worth printing it anymore. Let's just keep it digital. >> Right. It just makes more economic sense, right? >> Whatever whatever the scenario is, it won't it won't work out well for those who have large cash balances or government bonds. >> No, exactly. Um let's talk about the price action in gold and silver though because I'm curious what prompted you to stop in at DOSA yesterday um to to buy more physical because obviously it's uh is it price driven or why why'd you do it? Um, so it's not price driven. Um, of you know, I I personally think we probably could uh see some months from here of um the gold price not not really shooting up. I mean, a lot of people are saying it's got to shoot up to the 5,500, the level it was at its absolute peak. Now I I think we will get there and I think it will go higher a lot higher. But to to say that it's about to happen next week or next month or two months. My look my my brain which is like everybody else looking for patterns isn't saying that's imminent. But you you when it starts to happen you don't want to be running to the gold store like everybody else. You want to be filling your boots at a time when you can still lay your hands on it. My my plan um is to continue buying the physical. It doesn't mean to say that you shouldn't buy uh exchange traded funds and so forth, but I've got my fill of those sort of things. I've got my gold miners, I got my exchange traded funds. I feel that now is the time when I'd like to have more physical um and of course I'll keep it in a very safe place uh where I can go to get it. Specifically, a bank safety deposit box. You got to rely on the bank doors being open when you need it. one assumes that uh uh that that you will be able to get in the door. So I I think now is the time to be while while there's still an opportunity to get it before you find just can't get it at all. And we did actually see that um across the world in the run-up to the January peak. Uh people were reporting everywhere that they couldn't get in the door just as was my experience a couple of times uh to buy gold and and yesterday as well though that I think that uh the one of the suggestions was the guy the guy said to me you can come if you come as we open there's less people at that time. Um, so yeah, I think it's just a a time to be acquiring now. Price driven. Uh, yeah, it's a good price. It's uh, you know, we're $1,000 below its peak nearly. Um, I like to buy things when they're not at the peak. >> Makes sense. And and I follow that logic very clo like it make I I can easily follow that logic is what I was trying to say. Um, Clive, last question perhaps. Does does the same concept apply to silver as well? I'm assuming. Yes. >> Yes. I mean, I'm um in fact, my my plan yesterday was to buy gold and silver. What I tend to do when I go into these shops, I I look at what they've got in stock. Um I'm not so much a buyer of the bullion coins, but more a buyer of the thematic coins, uh such as the um the Queen's Beasts coins or the Australian Luna collection coins or the Chinese panda collection. Um, so the the thematic coins where they bring out a new design every year, therefore that you can say they're part of a collection, are the ones I like to buy. Um, I'm, you know, I I' I've had my fill in years gone by of krugarans and uh, eagles and things like that. And I guess they don't thrill me as much to look at as the lovely fresh design you get each year when they when the various mints bring out their um thematic coins. >> Oh no, it's it's always fun to hold it physically as well. It just it just feels better, right? And paper contracts, I don't think we need to go there. Our audience knows how we feel about paper contracts, at least me personally. So, um not not too excited about those. Um, and may maybe very last question, Clive, because we're all super optimistic about gold and silver. Is there anything that could break that gold and silver theory um that could derail what we've been talking about? >> Well, of of course much higher interest rates aren't going to do gold any good. Uh, if we go to um strong positive real rates of return, um the the incentive to go into precious metals will reduce. Um, so we're sort of sitting at the uh sitting on the fence at the moment, we're halfway between one and the other, but uh in in my opinion with inflation likely to creep upwards, uh we'll go onto the side of the fence, which will make it very attractive to have more gold and silver at the expense of other assets. Um the the other thing of course we must remember is there is always a danger of a an event which causes asset prices generally to fall. Uh I'll give you a few examples. Let's say there was a a major data country I just take a random example Argentina Brazil um it doesn't really matter what what country you take was to was to default that would cause all asset prices to fall including gold and silver. Let's say there was a stock market crash for whatever reason. You imagine that one of the largest companies on the planet suddenly uh discovers that actually it had been exaggerating its sales and profits and uh the the share price halves as as the investigation starts that that'll bring down the stock market. Gold and silver will fall with it. So when there is a uh an event which causes an asset to disappear or to to crash in price, everything is affected because people rebalance their portfolios when that happens. And it it generally involves the selling a bit of a bit of everything and that would bring down gold and silver too. >> No, fair enough. And I think we've seen that liquidity impass. I don't know, let's let's call it that. It's uh that liquidity pressure I guess in in recent weeks when uh for example the Turkish central bank had to flush out some of its holdings right around 120 tons not a small amount and to try to stabilize it its currency with while doing so. No fantastic Clive what a wonderful conversation we we touched on a lot of topics. Um congratulations again on your book series. Um >> yep exactly little trot fantastic learn to save money and uh no we we'll raffle one of the the books off. just put in gold rush in the comments down below. We'll we'll pick a winner. We'll randomize it and uh we'll reach out through YouTube as well. Clive, um in the meantime, where where else can our audience find more of your work? >> Um I'd love people to go to my website, which is clivetompson.com, my name, exactly as you see it on the screen, clivetoson.com. And if you I'd love you to buy the book on Amazon, but if you can't afford it, you can get the free book one from my website. Uh you'll find lots of other interesting things on clivetoon.com including some links to some of my videos. >> Lovely. Thank you so much, Clive. It was great to catch up again. Let's let uh let a year pass before we do this again. So, >> thank you. >> Can't wait to do this again soon. And uh >> thumbs up to all your listeners. >> Appreciate Appreciate it, Clive. And everybody else, thanks so much for tuning in. Really appreciate you watching Sore Financial. If you enjoyed this conversation with Clive Thompson, hit that like and subscribe button. It helps us out tremendously. And as I said before, hit the uh put in gold rush down below. We'll raffle off one of Clive's books. We'll send it to you via Amazon. So, make sure to uh to comment down below. And in the meantime, stay safe out there and don't let emotions run your investments for you. Take care.