Steve Hanke Warns: $7,000 Gold, Oil Shock, Inflation Surge
Summary
Commodity Supercycle: The guest argues a new commodity supercycle is underway, citing broad price spikes and chronic underinvestment on the supply side.
Crude Oil: He expects repeated price spikes due to Strait of Hormuz disruptions, inventory drawdowns in Asia, and the physical market leading futures; prefers being long Brent.
Oil Services: Field damage, shut-in wells, and the need to redrill and repair infrastructure support a bullish view on oilfield services and related refinery engineering activity.
Fertilizers: A third of global trade transits Hormuz and Russia’s export ban tightens supply, reinforcing a constructive view on fertilizers and ag commodities.
Precious Metals: Bullish on gold (targeting $6k–$7k/oz) and silver, supported by central bank buying, sanction risk, and industrial demand from electrification.
Electrification: The energy crisis may accelerate EV adoption, boosting demand for metals like silver and other critical materials.
Portfolio Move: His one trade is to rotate $50k from bonds into gold, positioning for inflation, geopolitical risk, and commodity upside.
Macro View: Inflation is rising with accelerating money supply growth; central bank responses risk misdiagnosing supply shocks, adding to volatility.
Transcript
This video is sponsored by Terra Hutton who made the invisible investable. My name is Mark and you're watching Resource Talks weekly news roundup for the week ending April the 12th, 2026. This week we're trying to figure out whether this ceasefire with Iran actually holds, what it means for shipping through the Strait of Hormuz, energy and fertilizer prices, and how central banks are likely to respond if this drags on. And luckily for you, it's Professor Steve Hanke who's going to be helping us figure all of this out. And then at the end of the conversation, I'm even going to be asking him how he would invest $100,000 in this environment. So, Professor Hanke is a professor of applied economics at Johns Hopkins University, a former economic advisor to President Ronald Reagan, and one of the world's best-known monetarists. So, without further ado, Professor Hanke, thank you so much for being here today. Well, Mark, thank you for having me. Professor, if we start with energy, so Trump's ceasefire with Iran seems to be held together so far with elastic bands and a bit of glue. Uh and there's a lot of confusion of the terms. And of course, the headlines at the end of this week are all about J.D. Vance heading to Pakistan for a negotiation with Iran um on a longer-lasting peace deal. So, given that backdrop, what does all this mean for the risk premium in energy markets? And and how long could that premium persist now that Iran has shown that it has a very strong hand? The risk premium will persist. And the risk premium will persist. Let's get go on to the so-called agreement. Like all of Trump's tariff agreements, nothing has been written down. Uh so, if there's no document, nothing exists. That's point number one. Point number two is that we you mentioned Vance as well as other uh personalities will be in Islamabad over the weekend, and nothing nothing will happen. There'll be there'll be no again, there'll be nothing in writing and and in fact, nothing will happen. Uh and and whatever verbally is agreed to, Israel, who started the war, by the way, it's it's clear on February 11th, you know, and I who met with Trump in the White House and the US team and over uh Zoom, actually, we we had the head of the Mossad, David Barnea, made a presentation. And the presentation was that the game plan would be to eliminate the supreme leader in Iran as well as the top echelon, and within two or three days, the whole thing would collapse. Uh now, after the meeting, the head of the CIA, John Ratcliffe, said in quote and I'm quoting from the New York Times has this. I'm quoting, he said, "This is fanciful." And then the Secretary of State piped in and said, "In short, you mean it's in quote bullshit?" And and that did not deter President Trump, who who of course is controlled by the Israelis. The Israelis gave the order, and Trump followed the order. And the and the war started. So, it's it's a it's an Israeli war. Uh and it couldn't have existed, of course, without massive firepower and financial support and so forth by the United States. But now we're we're going into this so-called meeting over the weekend, back to that. And whatever is agreed to, Israel's going to do what it wants to do anyway. They're they're they practice enemy. It's it's a lawless country. Wh- Whatever the sea They broke the ceasefire in Gaza. They've broken the ceasefire in Lebanon. And they'll break They'll They'll just do whatever they want to do. So, so where does that leave us with regard to the markets? It leaves, of course, Iran as the one with the strong hand because they control the strait. Uh and they will continue to control it. And end of end of story. So, so the only issue is it's is is it going from a freeway to a toll road, or or is it going from a freeway to no road? Let's talk about this concept of a toll road. So, Iran is now effectively charging up to around $2 million per tanker to pass through Hormuz, which is around a dollar a barrel. Um and in some cases, they're charging that in crypto. So, when you see that, where does that cost actually show up in markets? Do you think it'll just be absorbed [clears throat] by producers or or passed through into prices? Or or does it distort trade flows in a even more insidious way? Well, it it kind of does all three of those things, Mark, but uh the the starting point that most people miss is that uh that that's for the the tolls and the passages that that that go through. And by the way, Iran, the speaker of the parliament, indicated that they're they're actually going to start charging in real. Uh Iranian real. And most people, this is almost totally unreported and unnoticed because people don't know how to keep an eye on things, but I measure the inflation rate and watch things every every day in Iran. And in fact, I'm the only one who measure who knows how to measure the inflation rate. And what's happened since the war started 5 weeks ago is that the Iranian real is is appreciated between about 9 and 11%. It's a little bit volatile, but it it's at a significant appreciation against the dollar. And the the as a result of that, of course, the inflation's come down. The inflation was running in the mid-80s percent per year, and it's down uh below 60% per year as as we speak today. Now, how did all this happen? Well, it happened because one opening in the toll road or freeway, I guess something that remains a freeway is a free passage for Iranian vessels to go out, and they've increased their sales of oil sales are a lot higher prices, by the way, and and a lot lower discounts, and the sanctions have been removed by the on them. So, so the Iranian oil is not sanctioned. It's It's being let out. And and it looks like most of the Russian oil is not sanctioned, too. So, this This is the only positive benefit from the Israeli-US war on Iran. And that is that I I think I hope the international sanctions regime will be will disintegrate on everybody. I'm I'm against sanctions of any kind on anyone. And I'm against protectionist measures like tariffs, quotas, non- tariff barriers. So, as as a classical liberal and a free market free trade economist, that's my view in principle. And in practice, these sanctions never work anyway. They always backfire. There's a There's a big scholarly literature on that. And they always backfire. And they're also, by the way, there's a big scholarly literature on regime change. And and the the Mossad director before the current Mossad director, a guy named Cohen, Cohen and Mossad's position was that decapitation and regime change would never work in Iran because they'd been reading the scholarly literature. They knew what was going on. The new The new guy, Barnea, is is the one that changed the tune in the Mossad. And that runs counter, by the way, to all the other intelligence agencies. All the other intelligence agencies were like the old Mossad. They They said it would never work. And and what what is the scholarly literature? A good summary of that is is a book by Lindsey O'Rourke published by Cornell University Press a few years ago. It's called a a curve a covert regime change. And she has about 70 of these have been tried by the United States since World War II, and and they all failed. So, we have we have a long history of knowing that these things don't work. So, at any rate, that that's in in in short, that's kind of a summary of the situation. So, you you can you can bet your bottom dollar that the strait will be controlled by Iran. I do want to know more about that. But people listening should also know more about Terra Hutton who made the invisible investable. Terra Hutton is built for the people who are tired of going through boring PowerPoint decks and geological jargon when they're analyzing mining companies. It's a digital platform where the data, the story, and the context sit together so mining investors can understand the why without needing a geology degree or a week off work. And if you're on the company side, it's a way to present your project like a serious operator with everything investors keep asking for in one place. Professor, there's been a lot of focus on the passage or non-passage of oil through the Strait. But of course, we also know that a third of global fertilizer trade runs through Hormuz. Um and prices already moving with warnings of rising food insecurity if this goes on. So, given that dynamic, do you think that agricultural commodities could be relevant for investors as a hedge against this whole situation? Oh, you want to be long commodities right across the board. You want to be long anyway, even before the war. I I I've fingered this as a super cycle is starting. A commodity super cycle is is starting again. And and if you go through Uh you you mentioned fertilizer. Okay, that that's gone through the moon. Helium's gone through the moon. Aluminum's gone through the moon uh and spiked. And oil has spiked because of the Strait because all all of traffic goes through the Strait. And fertilizer has been aggravated in a way because one place you can get fertilizer is Russia. But uh once the war started Putin put a ban on exportation of fertilizer from Russia until the end of April, until the end of this month cuz it's planting season in northern hemisphere and uh they want to keep the fertilizer in Russia and he wants to use that of course as a bargaining chip to to get sanctions removed. So, so so all the commodities are going up and just take take a look listen to the to the ones I follow to give you some idea of what's going on. Uh let let's get out in the critical materials zone which I specialize in and ferrovanadium the last year we've gone up 90%. Molybdenum up 23%. Lithium carbonate up 34%. Lithium hydroxide up 44%. Spodumene up 49%. Tantalum up 173%. Niobium up 29%. Aluminum up 20%. Tin up 13%. Steel up 16%. Crude oil up 91%. So, so that gives you some you've got to make a big rotation out of the techs and the into the commodities. That's that's the that's the bottom line and and the reason for that the war is involved, but but we we I I had anticipated that before the war a commodity super cycle was starting and and you find these price spikes by the way. Price spikes go with a super cycle. You get a higher frequency of spikes and and we clearly have had a spike in ferrovanadium. That's up 90%. Uh we've had lithium way up off the bottom. And and of course the the big spike is tantalum. So, that sounds like you're sort of reading out all the success stories from your own portfolio, your own commodities portfolio. Probably makes a lot of happy reading for you. But what about the people who who aren't already invested in these things? Is it like trying to get on the bus when it's already gone? Or are there any of those metals that you named still The super super cycle is just starting. So, it's it's a it's you you've you've got to get on the gravy train. That's that's and and you have to pick and choose. Obviously, maybe you'd have second thoughts about getting in at the if something spikes and you want to watch it back off and then and then it'll it'll spike again by the way. But let's let's talk about oil for example because that that's not quite as exotic as some of the things that I mentioned and people won't even realize what they are. Uh so, it takes about 4 to 6 weeks for a tanker to to move out of the Strait to its final destination on a on average. That means that by the end of this month of the month of April that all those tankers that left the Strait before the war will arrive at their destinations and unload. So, so we'll have a huge gap between that point and the start of what right now is it's basically functionally shut. I mean, a little is going through the Strait and and and almost most of that is Iranian oil by the way. But very little other goods and materials including oil are going through there. So, you'll have this kind of gap that this physical shortage shall we say relative to where we were. And what happens if you run into physical shortage? You have to go into inventory. So, they'll start drawing down inventory which that's even happening in the United States by the way. Inventories are going down. But it's it's it's already starting and it will be big time in in Asia. For example, in Indonesia, Sri Lanka, Philippines, Taiwan. The average the average inventory for crude is about 30 days in those countries. And and when the inventory is all drawn down, then the price spike will occur again. So, later this month no matter what happens in Islamabad over the weekend and all the rhetoric and wind coming out of Washington, forget it. There's going to be a physical shortage. And and it will spike again. And it's very interesting when I talk about physical because most of your listeners, they they probably look at the paper market, the futures market. But the physical market is what counts and the physical market prices are way above the paper market as we speak today. And what happens with these recurring spikes and and elevated prices is that the paper market will get mugged by reality and and start moving up and converging to the physical. So, that's that's that's what's going on. So, you you want to be long oil. To make it to make a long story short, you want to be long Brent or Brent is probably my preferred long rather than WTO because WTO is US-based and Brent is a more international grade. I can see the logic for oil prices continuing to go up as you said with inventories being depleted and the situation in the Strait remaining uncertain. But what is the justification in your mind for this idea that a commodity super cycle could be starting? Couldn't one argue that if input prices in terms of energy are going through the roof and that brings about global recession or even depression, um that's going to be very bad for industrial metal prices cuz it'll you know, take out global demand. Well, you're talking about the that's the demand side. What about the supply side? It's the supply side. The the and and there's been underinvestment in the commodities for some time and the and the supply is uh sh- shall we say not not shown much signs of life. And and the supply on all these commodities, it it it takes a long time to to to crank things up. You you just don't go in and turn on a switch. I mean, it takes a long long time uh to either find or develop or expand even even an existing ore body and an existing mine to expand. You don't you just don't do that overnight. And and speaking of supply by the way, we've had this hit on oil going back to oil. We we we we've had a lot of damage in the fields. A lot of the wells have been shut down and the the the as a result of that, the the wells and infrastructure are damaged. So, you've got to go back and redrill. So, so that this is just not going to happen right away which which does get into another good thing. You you want to be long the oil service companies. They're they're they're going to they're going to be see their demand increase big time. And and those companies that are in the business of building and and or repairing refineries. All of that kind of thing. What about monetary metals, gold and silver? How are you looking at them? They're going up. I think gold gold's going to peak out. This secular bull market will peak out peak out at 6 to 7,000 dollars an ounce. And and silver will follow. And silver of course the the industrial side of silver is very strong demand because you have to look at the commodity thing also from the demand side. What's what's going to happen? There's going to be Remember, we had global warming and all of that talk and policy and so forth and shifting a transition shifting to electric shifting to electric. And once you shift to electric, you have a tremendous demand for all kinds of commodities. And then then it kind of died away, you know, with we with with Trumpism and all of that stuff. And now, with what's going on with the crisis resulting from the US Israeli attack on Iran, you're you're going to get the transition coming back because everybody's now scratching their head and they said, "Gee, maybe maybe we should really get an electric car." Or and and you get the same thing going on. Why why do you why do you think China has been in the process of transitioning to electric for a long time. A lot of people are going to want to go electric. And and what what does that do to silver? Demand up. So so so that's the commodity side of it. What what about the the precious metals currency side of things? And that's going up too because of the fact that as particularly the United States and in the West is pretty unpredictable on what they'll do about sanctions. Are are are they going to freeze the assets of the central bank like Russia's because they don't like what the central what the government is doing? Is is that a risk? Well, the French think it's a risk because they've just repatriated they sold off liquidated all their gold. They did the final liquidation this week in the United States and and rebought it in in France. So so what do you do? You you hoard. You don't buy dollars. You you at the margin Again, this is all these things are happening at the margin, Mark. You you hoard gold. So what's what's going on now? Well, you've had some uh central banks have sold because of liquidity. They need liquidity and and also some private holders have had margin calls and they sold gold. So it's backed off a little bit. But who's back in there buying again? China. Let's take the conversation briefly to monetary policy in the face of what the International Energy Agency has called the worst energy supply shock in history. Um but given your views a monetarist that inflation comes from money supply and not from input prices like oil. Um do you think that central banks risk making things worse if they respond to this as if it were true inflation right now? Uh no, there there there there is true inflation in the United States. The consumer price index just jumped up to 3.3% today from 2.4% in the prior month of February. Now, that now that is as a monetarist, that didn't surprise me because I'm looking at the what's going on at the margin. And and guess what the three-month annualized inflation rate was in February. The month before the March 3.3% number that we got year over year today, it was 3.3%. It had already moved up. Things are accelerating. And why are they accelerating? They're accelerating because for the last 18 months the money supply has been accelerating in the United States. And and the biggest contributor to the money supply are the commercial banks which produce about 80% of broad money. And and now the annual year-over-year rate of increase is is running for for commercial bank lending is is is running about 6.6% per year. So and and that's that's above Hanke's golden growth rate of 6%, a rate consistent with hitting a 2% inflation target. So before the war, everything was already coming up. Why was it coming up? Because inflation is always and everywhere a monetary phenomenon. Now, people say, "Oh, yeah, but you know, this doesn't make any sense. Like every every time we have an oil crisis and oil spikes, inflation goes up." Well, that's that's because prior to the spikes, we've had elevated monetary easy money easy money and and and it would have gone up anyway. What happens with the oil price spike, we get a relative price change. Oil and oil-related commodities go up relative to everything else. Now, the the easiest way to look at this, look at 1979. The that that oil crisis occurred right after the Iranian Revolution in 19 79 and and following in 1980, of course, you had the Iranian-Iraq War started. So there so there was an oil crisis. Pri- The prices went up. In Japan, Japan had decided after a disastrous experience in the Yom Kippur War 1973 oil crisis and and tremendous inflation surge in Japan, but that was caused be- because what was going on with the money supply year before the 1973 crisis money supply in Japan was going up at 25% per annum. And that's why in 1980 what was the price level? It went up 23.2% in Japan in 1980. And everybody said, "Oh, that's because of oil. That's because of oil." No, it was because the money supply had been going up in in 1977 and 78 on an average of 24 peaked out at 25% 25.2% to be precise. Now, let's go to 1979. In 1974, the Japanese said, "We're going to we're going to tighten the money supply. We're we're not going to go through this inflation thing again." So when the oil crisis in 1979 hit, the oil price shot up, but but the inflation rate actually dropped from 4.1% in 19 78 to 3.7% in 1979 in Japan. Why? Because they tightened the money supply. They'd actually cut the rate of growth in the money supply by by half in half. And and so they didn't see the fallout of inflation associated with the relative price increase of oil relative to everything else in Japan in in 1970 8. And so I mean that's 1979. So that that's a perfect what they call a natural experiment. You don't have to go through any fancy econometrics or anything else. It was a natural experiment. Price of oil boomed. Prior to that, the money supply had been coming down. Inflation was coming down. And inflation actually came down from 4.1% in 78 to 3.7% in 79 in Japan. Well, Professor, I don't want to keep you because I know you've got a hard deadline coming up. It's actually quite late for us recording right now on a Friday. Most people would be out gallivanting, but you very kindly agreed to stay here and uh talk with our viewers about the events in the news. Um before you do run off, though, I'd like to very quickly get your input for a new segment on our show which is called the Resource Talks Million Dollar Portfolio. And we start off with a conventional allocation. So we've got 60% in global equities. We've got 30% in US bonds. We've got 5% in gold. And we've got 5% in cash. So given everything that we've discussed, if you had to reallocate $100,000 within that portfolio, what one move would you make? And you only get one move, so not a shopping list. Okay, we had some unfortunate technical difficulties there at the end and we lost Professor Hanke just as he was at the point of telling us what his one trade would be with our Resource Talks Model Portfolio. But fortunately, he let me know by email afterwards that his one move would be to sell $50,000 worth of bonds and add $50,000 worth of gold, giving us a distribution of 5% still in cash, 10% now in gold, 25% in bonds, and 60% still in global equities. And we're going to continue tracking this portfolio in our weekly news roundups and we'll see how it performs. So thanks for watching and see you next week.
Steve Hanke Warns: $7,000 Gold, Oil Shock, Inflation Surge
Summary
Transcript
This video is sponsored by Terra Hutton who made the invisible investable. My name is Mark and you're watching Resource Talks weekly news roundup for the week ending April the 12th, 2026. This week we're trying to figure out whether this ceasefire with Iran actually holds, what it means for shipping through the Strait of Hormuz, energy and fertilizer prices, and how central banks are likely to respond if this drags on. And luckily for you, it's Professor Steve Hanke who's going to be helping us figure all of this out. And then at the end of the conversation, I'm even going to be asking him how he would invest $100,000 in this environment. So, Professor Hanke is a professor of applied economics at Johns Hopkins University, a former economic advisor to President Ronald Reagan, and one of the world's best-known monetarists. So, without further ado, Professor Hanke, thank you so much for being here today. Well, Mark, thank you for having me. Professor, if we start with energy, so Trump's ceasefire with Iran seems to be held together so far with elastic bands and a bit of glue. Uh and there's a lot of confusion of the terms. And of course, the headlines at the end of this week are all about J.D. Vance heading to Pakistan for a negotiation with Iran um on a longer-lasting peace deal. So, given that backdrop, what does all this mean for the risk premium in energy markets? And and how long could that premium persist now that Iran has shown that it has a very strong hand? The risk premium will persist. And the risk premium will persist. Let's get go on to the so-called agreement. Like all of Trump's tariff agreements, nothing has been written down. Uh so, if there's no document, nothing exists. That's point number one. Point number two is that we you mentioned Vance as well as other uh personalities will be in Islamabad over the weekend, and nothing nothing will happen. There'll be there'll be no again, there'll be nothing in writing and and in fact, nothing will happen. Uh and and whatever verbally is agreed to, Israel, who started the war, by the way, it's it's clear on February 11th, you know, and I who met with Trump in the White House and the US team and over uh Zoom, actually, we we had the head of the Mossad, David Barnea, made a presentation. And the presentation was that the game plan would be to eliminate the supreme leader in Iran as well as the top echelon, and within two or three days, the whole thing would collapse. Uh now, after the meeting, the head of the CIA, John Ratcliffe, said in quote and I'm quoting from the New York Times has this. I'm quoting, he said, "This is fanciful." And then the Secretary of State piped in and said, "In short, you mean it's in quote bullshit?" And and that did not deter President Trump, who who of course is controlled by the Israelis. The Israelis gave the order, and Trump followed the order. And the and the war started. So, it's it's a it's an Israeli war. Uh and it couldn't have existed, of course, without massive firepower and financial support and so forth by the United States. But now we're we're going into this so-called meeting over the weekend, back to that. And whatever is agreed to, Israel's going to do what it wants to do anyway. They're they're they practice enemy. It's it's a lawless country. Wh- Whatever the sea They broke the ceasefire in Gaza. They've broken the ceasefire in Lebanon. And they'll break They'll They'll just do whatever they want to do. So, so where does that leave us with regard to the markets? It leaves, of course, Iran as the one with the strong hand because they control the strait. Uh and they will continue to control it. And end of end of story. So, so the only issue is it's is is it going from a freeway to a toll road, or or is it going from a freeway to no road? Let's talk about this concept of a toll road. So, Iran is now effectively charging up to around $2 million per tanker to pass through Hormuz, which is around a dollar a barrel. Um and in some cases, they're charging that in crypto. So, when you see that, where does that cost actually show up in markets? Do you think it'll just be absorbed [clears throat] by producers or or passed through into prices? Or or does it distort trade flows in a even more insidious way? Well, it it kind of does all three of those things, Mark, but uh the the starting point that most people miss is that uh that that's for the the tolls and the passages that that that go through. And by the way, Iran, the speaker of the parliament, indicated that they're they're actually going to start charging in real. Uh Iranian real. And most people, this is almost totally unreported and unnoticed because people don't know how to keep an eye on things, but I measure the inflation rate and watch things every every day in Iran. And in fact, I'm the only one who measure who knows how to measure the inflation rate. And what's happened since the war started 5 weeks ago is that the Iranian real is is appreciated between about 9 and 11%. It's a little bit volatile, but it it's at a significant appreciation against the dollar. And the the as a result of that, of course, the inflation's come down. The inflation was running in the mid-80s percent per year, and it's down uh below 60% per year as as we speak today. Now, how did all this happen? Well, it happened because one opening in the toll road or freeway, I guess something that remains a freeway is a free passage for Iranian vessels to go out, and they've increased their sales of oil sales are a lot higher prices, by the way, and and a lot lower discounts, and the sanctions have been removed by the on them. So, so the Iranian oil is not sanctioned. It's It's being let out. And and it looks like most of the Russian oil is not sanctioned, too. So, this This is the only positive benefit from the Israeli-US war on Iran. And that is that I I think I hope the international sanctions regime will be will disintegrate on everybody. I'm I'm against sanctions of any kind on anyone. And I'm against protectionist measures like tariffs, quotas, non- tariff barriers. So, as as a classical liberal and a free market free trade economist, that's my view in principle. And in practice, these sanctions never work anyway. They always backfire. There's a There's a big scholarly literature on that. And they always backfire. And they're also, by the way, there's a big scholarly literature on regime change. And and the the Mossad director before the current Mossad director, a guy named Cohen, Cohen and Mossad's position was that decapitation and regime change would never work in Iran because they'd been reading the scholarly literature. They knew what was going on. The new The new guy, Barnea, is is the one that changed the tune in the Mossad. And that runs counter, by the way, to all the other intelligence agencies. All the other intelligence agencies were like the old Mossad. They They said it would never work. And and what what is the scholarly literature? A good summary of that is is a book by Lindsey O'Rourke published by Cornell University Press a few years ago. It's called a a curve a covert regime change. And she has about 70 of these have been tried by the United States since World War II, and and they all failed. So, we have we have a long history of knowing that these things don't work. So, at any rate, that that's in in in short, that's kind of a summary of the situation. So, you you can you can bet your bottom dollar that the strait will be controlled by Iran. I do want to know more about that. But people listening should also know more about Terra Hutton who made the invisible investable. Terra Hutton is built for the people who are tired of going through boring PowerPoint decks and geological jargon when they're analyzing mining companies. It's a digital platform where the data, the story, and the context sit together so mining investors can understand the why without needing a geology degree or a week off work. And if you're on the company side, it's a way to present your project like a serious operator with everything investors keep asking for in one place. Professor, there's been a lot of focus on the passage or non-passage of oil through the Strait. But of course, we also know that a third of global fertilizer trade runs through Hormuz. Um and prices already moving with warnings of rising food insecurity if this goes on. So, given that dynamic, do you think that agricultural commodities could be relevant for investors as a hedge against this whole situation? Oh, you want to be long commodities right across the board. You want to be long anyway, even before the war. I I I've fingered this as a super cycle is starting. A commodity super cycle is is starting again. And and if you go through Uh you you mentioned fertilizer. Okay, that that's gone through the moon. Helium's gone through the moon. Aluminum's gone through the moon uh and spiked. And oil has spiked because of the Strait because all all of traffic goes through the Strait. And fertilizer has been aggravated in a way because one place you can get fertilizer is Russia. But uh once the war started Putin put a ban on exportation of fertilizer from Russia until the end of April, until the end of this month cuz it's planting season in northern hemisphere and uh they want to keep the fertilizer in Russia and he wants to use that of course as a bargaining chip to to get sanctions removed. So, so so all the commodities are going up and just take take a look listen to the to the ones I follow to give you some idea of what's going on. Uh let let's get out in the critical materials zone which I specialize in and ferrovanadium the last year we've gone up 90%. Molybdenum up 23%. Lithium carbonate up 34%. Lithium hydroxide up 44%. Spodumene up 49%. Tantalum up 173%. Niobium up 29%. Aluminum up 20%. Tin up 13%. Steel up 16%. Crude oil up 91%. So, so that gives you some you've got to make a big rotation out of the techs and the into the commodities. That's that's the that's the bottom line and and the reason for that the war is involved, but but we we I I had anticipated that before the war a commodity super cycle was starting and and you find these price spikes by the way. Price spikes go with a super cycle. You get a higher frequency of spikes and and we clearly have had a spike in ferrovanadium. That's up 90%. Uh we've had lithium way up off the bottom. And and of course the the big spike is tantalum. So, that sounds like you're sort of reading out all the success stories from your own portfolio, your own commodities portfolio. Probably makes a lot of happy reading for you. But what about the people who who aren't already invested in these things? Is it like trying to get on the bus when it's already gone? Or are there any of those metals that you named still The super super cycle is just starting. So, it's it's a it's you you've you've got to get on the gravy train. That's that's and and you have to pick and choose. Obviously, maybe you'd have second thoughts about getting in at the if something spikes and you want to watch it back off and then and then it'll it'll spike again by the way. But let's let's talk about oil for example because that that's not quite as exotic as some of the things that I mentioned and people won't even realize what they are. Uh so, it takes about 4 to 6 weeks for a tanker to to move out of the Strait to its final destination on a on average. That means that by the end of this month of the month of April that all those tankers that left the Strait before the war will arrive at their destinations and unload. So, so we'll have a huge gap between that point and the start of what right now is it's basically functionally shut. I mean, a little is going through the Strait and and and almost most of that is Iranian oil by the way. But very little other goods and materials including oil are going through there. So, you'll have this kind of gap that this physical shortage shall we say relative to where we were. And what happens if you run into physical shortage? You have to go into inventory. So, they'll start drawing down inventory which that's even happening in the United States by the way. Inventories are going down. But it's it's it's already starting and it will be big time in in Asia. For example, in Indonesia, Sri Lanka, Philippines, Taiwan. The average the average inventory for crude is about 30 days in those countries. And and when the inventory is all drawn down, then the price spike will occur again. So, later this month no matter what happens in Islamabad over the weekend and all the rhetoric and wind coming out of Washington, forget it. There's going to be a physical shortage. And and it will spike again. And it's very interesting when I talk about physical because most of your listeners, they they probably look at the paper market, the futures market. But the physical market is what counts and the physical market prices are way above the paper market as we speak today. And what happens with these recurring spikes and and elevated prices is that the paper market will get mugged by reality and and start moving up and converging to the physical. So, that's that's that's what's going on. So, you you want to be long oil. To make it to make a long story short, you want to be long Brent or Brent is probably my preferred long rather than WTO because WTO is US-based and Brent is a more international grade. I can see the logic for oil prices continuing to go up as you said with inventories being depleted and the situation in the Strait remaining uncertain. But what is the justification in your mind for this idea that a commodity super cycle could be starting? Couldn't one argue that if input prices in terms of energy are going through the roof and that brings about global recession or even depression, um that's going to be very bad for industrial metal prices cuz it'll you know, take out global demand. Well, you're talking about the that's the demand side. What about the supply side? It's the supply side. The the and and there's been underinvestment in the commodities for some time and the and the supply is uh sh- shall we say not not shown much signs of life. And and the supply on all these commodities, it it it takes a long time to to to crank things up. You you just don't go in and turn on a switch. I mean, it takes a long long time uh to either find or develop or expand even even an existing ore body and an existing mine to expand. You don't you just don't do that overnight. And and speaking of supply by the way, we've had this hit on oil going back to oil. We we we we've had a lot of damage in the fields. A lot of the wells have been shut down and the the the as a result of that, the the wells and infrastructure are damaged. So, you've got to go back and redrill. So, so that this is just not going to happen right away which which does get into another good thing. You you want to be long the oil service companies. They're they're they're going to they're going to be see their demand increase big time. And and those companies that are in the business of building and and or repairing refineries. All of that kind of thing. What about monetary metals, gold and silver? How are you looking at them? They're going up. I think gold gold's going to peak out. This secular bull market will peak out peak out at 6 to 7,000 dollars an ounce. And and silver will follow. And silver of course the the industrial side of silver is very strong demand because you have to look at the commodity thing also from the demand side. What's what's going to happen? There's going to be Remember, we had global warming and all of that talk and policy and so forth and shifting a transition shifting to electric shifting to electric. And once you shift to electric, you have a tremendous demand for all kinds of commodities. And then then it kind of died away, you know, with we with with Trumpism and all of that stuff. And now, with what's going on with the crisis resulting from the US Israeli attack on Iran, you're you're going to get the transition coming back because everybody's now scratching their head and they said, "Gee, maybe maybe we should really get an electric car." Or and and you get the same thing going on. Why why do you why do you think China has been in the process of transitioning to electric for a long time. A lot of people are going to want to go electric. And and what what does that do to silver? Demand up. So so so that's the commodity side of it. What what about the the precious metals currency side of things? And that's going up too because of the fact that as particularly the United States and in the West is pretty unpredictable on what they'll do about sanctions. Are are are they going to freeze the assets of the central bank like Russia's because they don't like what the central what the government is doing? Is is that a risk? Well, the French think it's a risk because they've just repatriated they sold off liquidated all their gold. They did the final liquidation this week in the United States and and rebought it in in France. So so what do you do? You you hoard. You don't buy dollars. You you at the margin Again, this is all these things are happening at the margin, Mark. You you hoard gold. So what's what's going on now? Well, you've had some uh central banks have sold because of liquidity. They need liquidity and and also some private holders have had margin calls and they sold gold. So it's backed off a little bit. But who's back in there buying again? China. Let's take the conversation briefly to monetary policy in the face of what the International Energy Agency has called the worst energy supply shock in history. Um but given your views a monetarist that inflation comes from money supply and not from input prices like oil. Um do you think that central banks risk making things worse if they respond to this as if it were true inflation right now? Uh no, there there there there is true inflation in the United States. The consumer price index just jumped up to 3.3% today from 2.4% in the prior month of February. Now, that now that is as a monetarist, that didn't surprise me because I'm looking at the what's going on at the margin. And and guess what the three-month annualized inflation rate was in February. The month before the March 3.3% number that we got year over year today, it was 3.3%. It had already moved up. Things are accelerating. And why are they accelerating? They're accelerating because for the last 18 months the money supply has been accelerating in the United States. And and the biggest contributor to the money supply are the commercial banks which produce about 80% of broad money. And and now the annual year-over-year rate of increase is is running for for commercial bank lending is is is running about 6.6% per year. So and and that's that's above Hanke's golden growth rate of 6%, a rate consistent with hitting a 2% inflation target. So before the war, everything was already coming up. Why was it coming up? Because inflation is always and everywhere a monetary phenomenon. Now, people say, "Oh, yeah, but you know, this doesn't make any sense. Like every every time we have an oil crisis and oil spikes, inflation goes up." Well, that's that's because prior to the spikes, we've had elevated monetary easy money easy money and and and it would have gone up anyway. What happens with the oil price spike, we get a relative price change. Oil and oil-related commodities go up relative to everything else. Now, the the easiest way to look at this, look at 1979. The that that oil crisis occurred right after the Iranian Revolution in 19 79 and and following in 1980, of course, you had the Iranian-Iraq War started. So there so there was an oil crisis. Pri- The prices went up. In Japan, Japan had decided after a disastrous experience in the Yom Kippur War 1973 oil crisis and and tremendous inflation surge in Japan, but that was caused be- because what was going on with the money supply year before the 1973 crisis money supply in Japan was going up at 25% per annum. And that's why in 1980 what was the price level? It went up 23.2% in Japan in 1980. And everybody said, "Oh, that's because of oil. That's because of oil." No, it was because the money supply had been going up in in 1977 and 78 on an average of 24 peaked out at 25% 25.2% to be precise. Now, let's go to 1979. In 1974, the Japanese said, "We're going to we're going to tighten the money supply. We're we're not going to go through this inflation thing again." So when the oil crisis in 1979 hit, the oil price shot up, but but the inflation rate actually dropped from 4.1% in 19 78 to 3.7% in 1979 in Japan. Why? Because they tightened the money supply. They'd actually cut the rate of growth in the money supply by by half in half. And and so they didn't see the fallout of inflation associated with the relative price increase of oil relative to everything else in Japan in in 1970 8. And so I mean that's 1979. So that that's a perfect what they call a natural experiment. You don't have to go through any fancy econometrics or anything else. It was a natural experiment. Price of oil boomed. Prior to that, the money supply had been coming down. Inflation was coming down. And inflation actually came down from 4.1% in 78 to 3.7% in 79 in Japan. Well, Professor, I don't want to keep you because I know you've got a hard deadline coming up. It's actually quite late for us recording right now on a Friday. Most people would be out gallivanting, but you very kindly agreed to stay here and uh talk with our viewers about the events in the news. Um before you do run off, though, I'd like to very quickly get your input for a new segment on our show which is called the Resource Talks Million Dollar Portfolio. And we start off with a conventional allocation. So we've got 60% in global equities. We've got 30% in US bonds. We've got 5% in gold. And we've got 5% in cash. So given everything that we've discussed, if you had to reallocate $100,000 within that portfolio, what one move would you make? And you only get one move, so not a shopping list. Okay, we had some unfortunate technical difficulties there at the end and we lost Professor Hanke just as he was at the point of telling us what his one trade would be with our Resource Talks Model Portfolio. But fortunately, he let me know by email afterwards that his one move would be to sell $50,000 worth of bonds and add $50,000 worth of gold, giving us a distribution of 5% still in cash, 10% now in gold, 25% in bonds, and 60% still in global equities. And we're going to continue tracking this portfolio in our weekly news roundups and we'll see how it performs. So thanks for watching and see you next week.