Wall Street Is Wrong About Inflation And Gold Is Heading To $7000 | Steve Hanke
Summary
Inflation Mechanics: Guest argues markets are complacent and inflation risk is rising due to accelerating bank lending and money supply growth, not oil shocks.
Gold Bull Case: Bullish on gold with a secular uptrend and a potential peak in the $6,000–$7,000/oz range; options positioning (calls vs puts) supports an upside bias.
Silver and Metals: Silver shares the bullish setup with typical spike-and-consolidate behavior as weak hands are shaken out before renewed advances.
Commodities Supercycle: Expects a new supercycle as critical materials see sharp gains and periodic spikes, driven by precautionary inventory building and geopolitical risks.
Oil Outlook: Recommends being long oil for investors who can tolerate volatility, citing Strait of Hormuz tensions and low inventories in Asia prompting hoarding.
Rotation and Positioning: Advocates rotating away from long-duration bonds and into commodities/hard assets, warning that the long bond bull market has ended.
Policy and Regulation: Looser bank regulations and strong bank earnings increase lending capacity, a de facto monetary loosening the Fed overlooks by ignoring money supply.
Equities vs Miners: Prefers trading commodity futures over mining equities given cost pressures and idiosyncrasies; no specific stock tickers were pitched.
Transcript
Welcome back. I'm Jeremy Saffron. It's great to be back with you. Uh markets still looking relatively calm today. Even with a pullback from record highs, the AI trade is still driving sentiment. And a lot of investors seem to think that the inflation problem is manageable, that the Middle East supply shocks are temporary, and the next big story is rate cuts. But today's guest says that's kind of the wrong read here. He says Wall Street is looking at the wrong inflation story. The US debt path is getting worse. And the bigger risk is what happens when money, debt, and complacency all collide. So today, we're going to test that thesis. If the mainstream is misreading inflation, debt, and market risk, what does that mean for the dollar, for gold, for silver, and of course for mining stocks that many investors assume will automatically benefit here? Joining me now is Professor Steve Hanky. Welcome back to Kiko News. Steve, good to see you. >> Great to be with you, Jeremy. >> Uh, lot to get to in the market. You know, I mean, there's there's talk a little bit about Iran happening today and of course Hormuz, we see uh oil being back up, but I kind of want to start with that that contradiction even with stocks pulling back just a bit today. I mean, the broader message from the market still is screaming resilience as you know. I mean, investors keep buying the idea that companies can muddle through the noise. Uh what are they still not seeing here, Steve? >> Well, I I think they're not seeing a lot of things. Ba basically you mentioned the word complacent. I think the markets are very complacent right now uh all right across the board and you also mentioned in well there there just a number of things going on. One one reason that they're complacent I think is because earnings have been so strong and and particularly bank earnings have been strong and that that gets into another aspect that you uh flagged and that's inflation. And and let's just walk let me let me walk you through my view on on the earnings >> in banks and and what does that do? That increases the capital that banks have and and that gives them more reserves, more firepower. They can increase the loans that they're extending. And when they increase the loans that they're extending, that increases somebody's the size of somebody's checking account. And checking accounts are part of the money supply. So it increases the money supply and eventually that feeds through to what? Inflation. So So we're not going to get the inflation genie back in the bottle. Because already the loans being extended by banks are growing. They've been accelerating and they've been now growing at almost 7% peranom and the rate consistent with hitting my inflation or I should say not mine the Fed's inflation target of 2% is about 6%. So, so they're already ele elevated, accelerating and elevated. And and those loans are very important, Jeremy, because mo most people don't realize that the money supply is not really a Fed thing. It's a commercial bank thing. Commercial banks produce about 80% of the money broadly measured in the United States as well as Canada and virtually every other country around the world. around 80%, the big chunk is comes from commercial banks. >> So, so that's kind of my my take on inflation is that it's it's going to get worse. It did jump in the United States. The headline CPI jumped from 2.4% to 3.3% uh in in the from uh February to March. That didn't surprise me because I saw the acceleration coming for the last 18 months in the money supply and I looked at the threemonth annualized inflation rate in February in the United States. It was what it was exactly 3.3% which was a March readout. So none of this surprised me and and again the basis for my thinking is a quantity theory of money. It's all about what changes in the money supply. It's not changes in the oil prices by the way or or commodity prices or any particular price. Those are relative price changes. If the price of oil goes up, which it of course it has. Uh what what does that mean? The price of oil goes up relative to everything else. And and the the best example to kind of natural experiment to make this point is if you look at precisely 1979 in Japan. Japan of course doesn't produce any oil. We had an oil crisis in 79. And and what happened in 79? Well, the inflation rate actually went down from 4.1% to 3.7 4.1 and 7879 it was 3.7. The the the inflation rate actually went down. Well, why did it go down? Because starting in 1974, the Bank of Japan decided it was going to squeeze the money supply and reduce its rate of growth, which it did. So oil prices boomed in 1979, but inflation actually went down in Japan because prior to 1979, they'd been squeezing the the money supply, slowing it down, and that was feeding through with the traditional lags in into the into the CPI. Mhm. >> So, so that's the that's the nub of the argument and and the argu the argument is most people just are completely confused about the causation related to oil and inflation. >> Right? >> Every single article you read is going to say, "Oh, inflation went up in the United States. It jumped up to 3.3% from 2.4 because of the oil price increase." No. that they are that they're often correlated. But the reason they're correlated, for example, in the 1973 Yam Kipper war in that oil crisis, what happened to Japan? Japan the inflation went up when the oil prices went were going up. They were highly correlated, positively correlated. Why? Because prior to 73 in 1971 through 19 1972 the average rate of growth and broad money in Japan was 25%. A huge expansion. So of course you got a huge inflation. It just happened >> at the same time the relative price of one thing in the basket was was going up a lot which was oil. So that's that that's a that's a main thing and and and it's very hard to get it out of people's heads because it's in the press all the time, >> right? Yeah. I mean, you know, just to pin this down too, I want to get into the oil side, but I mean, it was an interesting point because you're saying obviously stronger earnings, increase bank capital, that gives banks more room to lend, and that lending literally creates new deposit money, which works its way through the system with the lag, but it shows up later in prices. I mean a lot of people would argue that the market would would you know say stronger earnings and more lending can also reflect a healthy economy not just inflation risk but how do you distinguish between productive credit growth and and you know kind of credit growth that that ends up debasing purchasing power. >> Well it it it number one banks are are are ma making extending credit for U bankable projects and and and and what's that mean? That means a project in which the bank thinks that the free cash flow coming from the uh uh creditor uh or the debtor, I should say, the debtor, the person who borrowed the money is going to have enough free cash flow to amortize the loan and pay the interest and pay the thing off >> and and and so they're they're all in principle productive. And if they're unproductive in a systematic way, the bank of course goes bankrupt. Now the second aspect of that is well what about the inflation part of the thing? And the inflation part of the thing is if the banks are lending at at a at a rate that's excessive let's say over in the United States just roughly rule of thumb more or less 6% peranom 6 7% peranom something like that then then you got a problem if the if all of a sudden the loans start growing at you know let's say 10% which I think they might by the way in the United States because because of two things. The banks had very strong earnings. So their capital is going up. That means their firepower is going up. They they have the that that means in short a loosening of monetary policy. When bank earnings go up and their capital goes up and their reserves go up that that in effect is saying looseness is in the cards. The other thing that can affect bank lending is are the regulations that are imposed on banks. Because if bank regulations are tight and squeezing the uh the reserves that they have, what what's that mean? That means tightness is squeezing. This is what happened after the great financial crisis started in 2008. We we had DoddFrank. We had Basel 3 coming in. All these things squeezed the res capital and the reserves that were available to extend loans the basis for loan extension and and now the bank regulations are being loosened up in the United States. So that's a second factor that will loosen. So there's a policy explicit policy to loosen in the sense that bank regulations have been loosened up and some of them had been gone away with which is in my view some of it good actually. >> Uh but also you have this spontaneous thing going on with bank earnings. It has it has nothing to do with policy per se but but it is a real effect that will influence the course of the growth in the money supply. >> Yeah. So I mean you know on the policy because you you're warning is that if if grow loan growth moves towards that 10% that it is effectively a new loosening cycle right. ics because banks are earning more, their their capital improves, they lend more, deposits expand, and that feeds into money supply. Uh if if banks are getting stronger earnings and more capacity to lend, why hasn't the Fed already leaned harder against that? I mean, are policy makers just missing the signal? Are they are are they just accepting more inflation risk than they admit? Well, they they they they n number one, all of this is laid out in in a new book that Matt Sukurki and I wrote called Making Money Work. uh which by the way yesterday we had a a piece an op-ed in the Wall Street Journal that that gets gets into some of this um and and and the point is in the book that the the our point our critique of the Fed is that the Fed doesn't look at changes in the money supply. They they don't think changes in the money supply have any material and and consistent effect on changes in economic activity and inflation. That's the view of the Fed and and it's the official view by the way. Chairman Paul has testified over and over on this and and most of the other central bankers whether it's in Canada or or the e European Union ECB or almost everybody ha has this modern view this bizarre view that the quantity theory of money that re says there's a relationship between changes in the money supply and changes of economic activity and inflation uh that That view has been discarded by the central bankers. So they don't realize that the biggest and and the things and I emphasize on making money work. We've got a whole several chapters on this is that bank regulations are a means to introd introduce monetary policy. People focus on the Fed funds rate. The Fed funds rate that that's that's a minor that's a second or third order condition. The first order condition is what are changes in bank regulations? What what are those and how do they affect bank capital? Because the bank capital and reserves at the banks have that will determine really the that's the elephant in the room >> that that's who's producing 80% of the broad money are the commercial banks. So those regulations are very important to keep your eye on and and focus on. And as I said, the the bankers uh the central bankers didn't realize this when the great financial crisis occurred in 2008. We had DoddFrank regulations coming in the United States and we also had Bosel 3 regulations coming out of Basel. All those tightened up. They increased the the required capital asset ratios at banks and and as a result the the loans being made by the banks right after the great financial crisis hit actually they went negative. they they were actually sucking down and and and pulling away from the money supply and and that's why we had Q quantitative easing one quantitative easing quantit two and three because the contribution of the commercial banks had gone negone south had gone negative so if the if the Fed hadn't engaged in quantitative easing they had contradictory policies the bank regulations very tight and as a result of that excessive tightness, the Fed had to come in with quantitative easing 1, two, and three to increase the contribution to the money supply that 20% that was being contributed by the central bank. So on the on the one hand they they were squeezing the money supply and on the other hand they they reacted by quantitative easing and and as a result the money supply by the way as you'll recall Jeremy it grew very slowly coming out of the great financial crisis and and a lot of people particularly people in the metals market by the way got this completely wrong. They they they were looking at the growth in the Fed's balance sheet. It was ex it was exploding and and me a lot of metals people said, "Oh, we're going to have hyperinflation." They were looking at the Fed's balance sheet. They said, "Oh, we're going to have hyperinflation." They didn't realize the elephant in the room was actually contracting its contribution. >> Yeah. So, so what happened after the great financial crisis? By the way, the balancing out negative commercial bank contribution, positive contribution by the Fed, the central bank, and and and if you aggregated the two, we had very slow growth on the aggregate broad money measures, M2 in the United States, and we had a very slow recovery, by the way, and and we didn't have much inflation. Forget the hyperinflation, we didn't have much inflation. So, everyone everyone has that story just completely wrong. >> You know, there's there's lots to get here too, but I want to go back to that point because if if that basil era kind of restraint fades and bank credit starts to expand faster, does that become just another argument for owning gold before inflation data shows up more clearly in the official data? You know, >> it it it's definitely another reason. There are many, but there it's another reason to be holding gold and and silver for that matter. But sticking with gold, I I think the secular bull market is intact. We got a some consolidation around a little little below 5,000 going on now for a while, which which doesn't bother me because it just it means that the contracts are in stronger hands and and that's that's fine with me. Uh but it I think the market will peak out the bull will peak out around $6 to $7,000 an ounce. And if you look at the current situation, the the calls outnumber the puts for the May uh gold contract by about four almost four and a half to one. So that that's that's a bullish signal, >> right? >> The options market thinks it's going up. >> You said 6,000 7,000 uh If if you're kind of right that Wall Street is is blaming, you know, the the wrong inflation culprit, what do you think that means for gold right now? I mean, is gold already seeing this monetary reality or is the metal still underreacting or to to your point there, Steve? I mean, did it shake out some loose hands? I think it just I I think there was a lot of speculate, loose hands, weak hands, shaking, you know, that that that that always happens, especially if you if you have a market that was going up as fast as gold and as fast as silver. Silver is the same thing. Uh both of those markets were, you know, I couldn't believe how fast they were going up. You had, you had a lot of, you know, characters in there that with weak hands. th those have been shaken out and it's settling down and it it'll start making another run and it it will I think end up peeking out around6 to $7,000 an ounce. So it has quite a ways to go. It's every everything is in order as they say and uh that's that's that's my view. You want to be long gold. Yeah. In fact, speaking of commodities, you want to be long all commodities now, Jeremy, because I think we are entering a super cycle again with the commodities. >> So, it's it's not only the precious metals, but if you look at things that that I watch that are, shall we say, the critical materials. Well, we we you can throw oil in there. You want to be long oil if if you're willing to take have a volatile ride, you want to be long oil. But look at look at what's happened to ferro venadium since uh December of last year. Ferravenadium, it's up 90%. Malibdum up 25%. >> Lithium carbonate up 39%. Lithium hydroxide up 49%. Lithium spotamine up 52%. Tanalum huge spike 133% since December. Neobbium 28% up. Aluminum 22% up. Tin 21%. Steel 16%. So, so you got have all of these things happening and and what you'll see you'll see more spikes occurring and that that's typical of a a super cycle. >> Yeah. A lot of people taking profit too. >> Yeah. Yeah. You that's why you get the spike and they you know backs off. Same same thing we had with gold and silver. uh spikes, goes up extremely rapidly and and then backs off a little bit and and consolidates and then makes another run for it. As assuming your secular bull market is intact or you're in a super cycle, that's that's typical of what happens. So I think we we will see more spikes and uh and and continued upward trend. So you you you want to be you know they they call it pi pivoting away from the tech stocks into into halo >> heavy assets low obsolescence you want to be halo because people are hoarding commodities now and this this comes into the Gulf what's happening in the into the Persian Gulf and the straight of Hermuz now with all the upset that's occurring people are going Oh, we we really should have more inventory of of these things coming out of the Gulf to to hedge. They they can't you can't do a perfect hedge, but you can what do you do? More oil storage. In Asia, the average storage inventories was only 30 days. So they they were in a pickle when when the when the war broke out. So maybe maybe they'll want to be ho hoarding inventorying more helium, sulfur, oil, fertilizer, all all these things. If if if you think there's a risk that you haven't attended to, you you you want to have a precautionary inventory. and and and so that's that's another factor behind the statement that I made. I I think we're set up for another super cycle because there will be an augmented demand just for precautionary inventories across the board on all all these things. Why do you want to hoard rare earths? Because you're worried that China might cut you off. >> Yeah. Why do you want to How about Taiwan where where they're using a tremendous amount of helium to produce chips? Well, may maybe you'll have more inventory of helium. >> Now, if so, if you like critical materials, does that make resource equities more more attractive than gold miners here? I mean, or do gold miners still kind of win on a riskadjusted basis? Well, gold miners are okay, but I you know I I I think lithium will make a another big run. And I another one I think is venadium. I I realize those are kind of exotic for a lot of people, but they're things that I follow. So >> we Hey, we've been talking about them. We've been talking about that. And you know, actually, this is interesting because in that theory, you were talking a little bit about, you know, wanting to sell AI stocks, this kind of stuff. I I want to get into that because the reason matters is, you know, the investors are hearing a very different story from some influential voices. Trump's pick uh for the Fed, Kevin Walsh, and others are making the case, I think Elon Musk is talking about it, that AIdriven productivity can be structurally uh just inflationary. I want to play you a quick clip from CNBC. >> What we call AI in a couple years we'll just call business. And AI is going to make almost everything cost less. and the US can be a big winner. And uh and it's a hugely exciting moment. If I were to step back for a minute, if I were the president, what I'd be worried about is a central bank that doesn't see any of that. A central bank that is stuck with models from 1978, governance from a prior period and don't recognize we could be at the front end of a productivity boom. And if I were the president, I'd be worried that they might not see it and they might think economic growth is somehow going to be inflationary. I think we were probably in the early innings of a structural decline in prices. Ken sees it on the front lines of real businesses and I think if you look over uh the period of the next year or two, it's a pretty special moment. >> So I mean is Kevin Worsh right that AI changes the inflation story or is this just the next fashionable narrative that that lets the consensus ignore what actually drives prices? Well, this this is a narrative that's coming out of Silly Valley, otherwise known as Silicon Valley. This this is a this is the hype, the AI hype kind of thing. And and number one, it hasn't happened yet because productivity actually went down in the United States in 2025. Not only GDP went down a little bit, but productivity also went down. So if AI is is, you know, the greatest thing since sliced bread, it it it just hasn't happened yet. Now, let let let's assume that it does. We've had other booms in productivity. From about 1865 until the first world war, there was a there was a you know, a a lot of technical change, railroads, telegraphs, electricity, you know, all all kinds of things were happening. and and and there was a big boom not only in productivity but economic activity. Now for the first 10 years of that boom actually we had deflation and and not not not not inflation we actually had a sec the longest stretch of deflation we had in the US was in in that first 10 years of that huge boom period. So, so that's consistent with the with this narrative that they're giving. But then then the the the the money supply got gooseed and started increasing at a more rapid rate than much more rapid rate than economic activity and we had inflation. So you you it's it's conceivable there's there's something to their argument. They're they're at least thinking in terms of the quantity theory of money that that the rate of growth and productivity in the economy on one on one side has to be related to the money supply and if and what they're arguing is basically they're assuming the money supply growth remains constant and the productivity and real rate of growth in the economy boom. And in that case, we we we wouldn't see an an inflationary surge from AI. We might even see a modest decrease in in prices or mild deflation. That that's that's an assumption, but but the assumption historically doesn't hold water because it usually doesn't work that way. He you get a boom in productivity and >> a boom in real economic activity and and and the central banks goose the money supply and it grows faster than the productivity and real economic activity. You get inflation, >> right? Right. >> So it depends on what's going on with the with the monetary policy. And and and I don't I don't buy, by the way, the the Silly Valley productivity argument because they claim that it's going to be orders of magnitude. The potential growth rate in the United States would jump from, let's say, two or two and a half% where it's at now to to like five or six%. There's just no way. It's not going to happen, >> right? So, so, so to cut the legs out from under them right away, their their productivity narrative boom is not going to happen anywhere near the magnitudes that they're talking about. There'll be a lot of shifting around and changes in in the job picture and so forth like we had in agriculture. Remember at at the turn of the 20th century, but at the start of the 20th century, most people, you know, over a third of the people in the United States were were working on the farm. Now you have less than, I think, 1% working on the farm. >> Why? Because you've had over a long period of time huge increases in productivity and huge increases in output from agriculture. But but that we've lost workers and then so what? >> Yeah. So I mean >> it's it's been great by the way for the United States because it's freed up a lot of labor to go into other things that are more more attractive and productive. >> So I mean we could say you know because if AI lowers the cost of goods and services that's it could not be trivial. But are you saying productivity can matter maybe at the micro level but still lose to debt and money at the macro level? >> Uh that's one way to put it that but it's that's that's an accurate characterization >> and and they're what they're trying to do basically is the following here. Here here's the Elon Musk has been all of this is repeated by these Silicon Valley guys by the way. That's where the idea comes from. And they're saying don't worry about AI. It's not going to create inflation. So don't worry about that. And then they and then the next thing they do is what Elon Musk and most of them have been proposing by the way, which is very bad idea. And that is a permanent income. They say don't worry about AI. If you lose your job, the government's going to give you a permanent income. It's going to put you on the dole permanently. A terrible idea. But Musk is pedalling this as well as all the all these billionaires from Silicon Valley are pedling this idea. And and the reason they're doing this is to get the public off their back, >> right? to keep to keep the AI investment hype going and the AI investment boom going and and you know they're raising capital and all kinds of new startups and all that stuff. >> So that that's what's going on. But the most of it is just utter nonsense by the way really if you really look at it if you really look at it carefully and slice and dice this thing it's it's a narrative that doesn't hold water. Well, yeah, because I mean, so, so when you mentioned, you know, Silicon Valley, people like Elon Musk talking about some form of permanent income or universal high income, are you saying that that whole worldview assumes abundance first and and simply ignores the monetary consequences if the state is financing the checks? >> Yeah. And and and by the way, it's very interesting that all these big capitalists in Silicon Valley, they're these these people are fundamentally socialist. Mhm. >> So, so e Elon can put that in his pipe and smoke it. That that's a pure socialist policy that he's he's portraying. Which by by the way, somebody asked me the other day, they said, "Well, has this ever been tried before on a large scale?" And I says, "Yeah, all you have to do is look at Europe." I mean de facto in some place like France where they have over 57% of the GDP being accounted for by government expenditures what do they have de facto they have a permanent income >> they it's the welfare state it's it's just a it's the welfare state morphing into a this permanent income thing. So here you have all these, you know, preachers in Silicon Valley because that basically they're preachers by the way, >> right? >> And and and a lot of this was just charlatanism. >> So I mean Silicon Valley that story is is abundance first, but your critique is obviously the monetary math still comes first. >> Absolutely. >> Yeah. Yeah. I there there's a big difference between the Silicon Valley rhetoric and reality. >> Is somebody selling stock, you know? Somebody's selling stock. Okay, let us >> somebody's pedalling stock. And they do a pretty good job of that, by the way. >> Yeah. Yeah. In history, too, professor. Uh let's get into the bond market just because it's not technical, but it kind of matters. I mean, Treasury just carried out a $15 billion buyback operations. Officials say that this is, you know, transparent routine debt management, not hidden QE. Fair enough. But, but does the need for larger regular buybacks tell us something about how much maintenance the Treasury market now requires in a high debt world? >> Well, I my knee-jerk reaction originally when I saw this was, well, maybe that's true. And then I did look into it and and it is fairly routine actually. Mhm. Mhm. >> It's nothing to get really excited about one way or another. The bond market, the the key to the bond market, though, if you look at the 10-year, it's now, you know, 4.2, 4.3. I I think those yields will go up as as inflation goes up. And uh you don't want to be long bonds. You don't want to be long the 10-year. I I'd be I'd be out of there. Uh and uh so that's that's my message on bonds. You you you want to be under hard assets. >> Yeah. >> The the the we we had by the way it it's interesting the long one of the longest bull markets in history has been the bond market from starting in 1980 until just a couple years ago. But it broke down and uh and and and and it no longer exists. I mean we we are not in the in this huge secular bull market and bonds anymore. And I think right now for at least the shortterm or intermediate term, you don't want to be long bonds. >> Interesting. Uh you know, you talked about hard assets there. Let's bring it back for the Kicko audience. Uh, a little bit to the mining side because this is, you know, where some of our viewers live and and tech reported a sharp jump in earnings, but management is already kind of warning that the energy shock is pushing up diesel freight an explosive cost on that side. Even if gold benefits from from policy failure, miners still obviously face that cost pressure. Is is this one of those moments where the the physical metal works better than the equities? Well, I I m maybe I I don't Jeremy I I don't know because I'm not I'm not following the miners in in any detail at all. And the and the reason for that >> is that that I trade the physicals. >> I mean in in the in the futures market in the paper markets I trade them. I I'm not trading the physicals, but I and and and this is my rule of thumb is what what when you look at natural resources and and you think commodity prices are going to go one way or the other, you trade the commodity. You you you I I I I just stay away from the refiners, the miners. I I trade oil or I trade copper or I trade in the case of lithium. Of course, in that case, you've got to go with somebody who actually some of these critical materials you like venadium and lithium, you you have to buy into a company that's producing them because there really aren't there's no paper market. >> Yeah. >> And even even the physical market is not very transparent in those things. So even if you were trading physicals, you'd have to be a highly specialized uh operation, >> you know, I mean to talk to our investors that are precious metals investors, maybe not on the miners, but bullion, you know, they're looking at that silver drive up that kind of scared them a bit. We saw this small correction that's shaking out of hands. Uh your thesis, I mean, 6,000 7,000 still very lucrative year for this uh for this for this kind of market. Um, what should a serious precious metals investor maybe do differently this quarter in your opinion? >> Well, as I say, I'm just in the paper market. I'm not going to change anything. >> Yeah. Yeah. >> Yeah. And and and think about it this way. If if you have a market going up, let let's say let's say gold's at 5,000 now and it goes to 7,000. Is is it really worth worrying about the detail of and getting out in the weeds? Are you going to are you going to use strategy A or B or it's just going up by so much that any strategy you have is going to do very well? So why why waste a lot of time worrying about it? And now there are people and certainly KitKo viewers that that they're into mining and they're into mining stocks. Well, fine. But I'm not into mining and I'm not into mining stocks. So So I I I really have no advice to give them that is intelligent because I haven't done any due diligence. I I have no opinion about the miners because I'm not trading the miners. >> Yeah. Yeah. Makes sense. Makes sense. We get questions. That was a couple of them on Twitter saying, "Oh, what does Steve think about the miners?" But I mean, you still like the physicals. You're not watching Bitcoin at all. I in my research this morning, I saw a couple Bitcoin headlines and you know, not not a fan of that. >> No, I No, that it's Bitcoin is just a highly speculative asset with zero fundamental value. So that that's that's my view. If you want to speculate in it, it's fine. I I don't I don't care. But it it is something with no no fundamental value. Now it one one argument some of my friends make that that like the miners by the way they they always say well Hanky why why are you just trading physicals even even trading I mean futures not let's just why why are you just trading futures okay you can you know you can you can get some leverage in there and do that but why not m miners because they're you get a lot more leverage because because they're setting on huge deposits and you know leverage they make that argument but it it never swayed me very much. >> Interesting. Our time always kind of runs out too fast. I I saying we need to have you on the program more so we're definitely going to do that. Let me end with this one. I mean for people at home who who feel like the mainstream story doesn't always match the way they're living through. I mean we get talk about it. Wall Street says everything's okay, but they feel the pinch at the gas pump specifically. Now, what are they getting right? And and what is Wall Street still getting wrong? Well, I I don't number one that Wall Street isn't on the pivot that I I I think's fundamental, and that's go going go from the high-tech pivoting into the commodity super cycle. That there are few people that are talking about this and and the importance of it. But but generally that's not the case. >> That that's that's one big thing. I mean, that that's a big strategic thing with me. It would be, you know, go going again into halo, heavy assets, low obsolescence. >> Yeah. I mean, you know, not everyone's into monetary policy as much as you and I, professor. I mean, a lot of people at home, they feel that squeeze and, you know, they hear experts on MSNBC, for instance, saying things are basically fine. What is the mainstream kind of still missing about the real economy? You want viewers to know? Well, uh I I think there there are a lot of things, but the one thing How about inflation? >> Yeah. >> Now, now now the general public is starting to inflation expectations have gone up for the wrong reason. They they've gone up because they think oil price increases cause inflation. No, the fundamental thing is that the money supply is accelerating and I think will continue to accelerate and that means inflation is baked in the cake more more inflation and if that's the case you can do your analysis and figure out where where you want to be >> because of that and and and one thing and where you don't want to be and I think you don't want to be in bonds long term term bonds. I mean, insure short duration is another thing, but >> yeah, >> if you're if you're in cash, you're in short-term bonds, but or bills. >> Yeah. Yeah. Yeah. What an interesting time. Uh I guess we'll continue to watch some of these private credit risks that are starting to show up as well. Uh as I said, professor, please come back to us uh in a couple of months. I appreciate your time today. Thanks for cutting through the noise. >> Thank you, Jeremy. Look forward to seeing you again soon. >> You betcha, sir. We will. Thanks so much. All right. And to our viewers, there's where we kind of look past the mainstream sentiment and focus on the math that actually improves and impacts your portfolio. If you appreciate this kind of unvarnished look at gold, silver, the global markets, make sure to subscribe to the channel. We're closing in on 1 million subscribers, and we're glad to have you along with the ride. I'm Jeremy Saffford. It's great to be back, and we'll see you next time. Heat. Heat. Heat. Heat. N.
Wall Street Is Wrong About Inflation And Gold Is Heading To $7000 | Steve Hanke
Summary
Transcript
Welcome back. I'm Jeremy Saffron. It's great to be back with you. Uh markets still looking relatively calm today. Even with a pullback from record highs, the AI trade is still driving sentiment. And a lot of investors seem to think that the inflation problem is manageable, that the Middle East supply shocks are temporary, and the next big story is rate cuts. But today's guest says that's kind of the wrong read here. He says Wall Street is looking at the wrong inflation story. The US debt path is getting worse. And the bigger risk is what happens when money, debt, and complacency all collide. So today, we're going to test that thesis. If the mainstream is misreading inflation, debt, and market risk, what does that mean for the dollar, for gold, for silver, and of course for mining stocks that many investors assume will automatically benefit here? Joining me now is Professor Steve Hanky. Welcome back to Kiko News. Steve, good to see you. >> Great to be with you, Jeremy. >> Uh, lot to get to in the market. You know, I mean, there's there's talk a little bit about Iran happening today and of course Hormuz, we see uh oil being back up, but I kind of want to start with that that contradiction even with stocks pulling back just a bit today. I mean, the broader message from the market still is screaming resilience as you know. I mean, investors keep buying the idea that companies can muddle through the noise. Uh what are they still not seeing here, Steve? >> Well, I I think they're not seeing a lot of things. Ba basically you mentioned the word complacent. I think the markets are very complacent right now uh all right across the board and you also mentioned in well there there just a number of things going on. One one reason that they're complacent I think is because earnings have been so strong and and particularly bank earnings have been strong and that that gets into another aspect that you uh flagged and that's inflation. And and let's just walk let me let me walk you through my view on on the earnings >> in banks and and what does that do? That increases the capital that banks have and and that gives them more reserves, more firepower. They can increase the loans that they're extending. And when they increase the loans that they're extending, that increases somebody's the size of somebody's checking account. And checking accounts are part of the money supply. So it increases the money supply and eventually that feeds through to what? Inflation. So So we're not going to get the inflation genie back in the bottle. Because already the loans being extended by banks are growing. They've been accelerating and they've been now growing at almost 7% peranom and the rate consistent with hitting my inflation or I should say not mine the Fed's inflation target of 2% is about 6%. So, so they're already ele elevated, accelerating and elevated. And and those loans are very important, Jeremy, because mo most people don't realize that the money supply is not really a Fed thing. It's a commercial bank thing. Commercial banks produce about 80% of the money broadly measured in the United States as well as Canada and virtually every other country around the world. around 80%, the big chunk is comes from commercial banks. >> So, so that's kind of my my take on inflation is that it's it's going to get worse. It did jump in the United States. The headline CPI jumped from 2.4% to 3.3% uh in in the from uh February to March. That didn't surprise me because I saw the acceleration coming for the last 18 months in the money supply and I looked at the threemonth annualized inflation rate in February in the United States. It was what it was exactly 3.3% which was a March readout. So none of this surprised me and and again the basis for my thinking is a quantity theory of money. It's all about what changes in the money supply. It's not changes in the oil prices by the way or or commodity prices or any particular price. Those are relative price changes. If the price of oil goes up, which it of course it has. Uh what what does that mean? The price of oil goes up relative to everything else. And and the the best example to kind of natural experiment to make this point is if you look at precisely 1979 in Japan. Japan of course doesn't produce any oil. We had an oil crisis in 79. And and what happened in 79? Well, the inflation rate actually went down from 4.1% to 3.7 4.1 and 7879 it was 3.7. The the the inflation rate actually went down. Well, why did it go down? Because starting in 1974, the Bank of Japan decided it was going to squeeze the money supply and reduce its rate of growth, which it did. So oil prices boomed in 1979, but inflation actually went down in Japan because prior to 1979, they'd been squeezing the the money supply, slowing it down, and that was feeding through with the traditional lags in into the into the CPI. Mhm. >> So, so that's the that's the nub of the argument and and the argu the argument is most people just are completely confused about the causation related to oil and inflation. >> Right? >> Every single article you read is going to say, "Oh, inflation went up in the United States. It jumped up to 3.3% from 2.4 because of the oil price increase." No. that they are that they're often correlated. But the reason they're correlated, for example, in the 1973 Yam Kipper war in that oil crisis, what happened to Japan? Japan the inflation went up when the oil prices went were going up. They were highly correlated, positively correlated. Why? Because prior to 73 in 1971 through 19 1972 the average rate of growth and broad money in Japan was 25%. A huge expansion. So of course you got a huge inflation. It just happened >> at the same time the relative price of one thing in the basket was was going up a lot which was oil. So that's that that's a that's a main thing and and and it's very hard to get it out of people's heads because it's in the press all the time, >> right? Yeah. I mean, you know, just to pin this down too, I want to get into the oil side, but I mean, it was an interesting point because you're saying obviously stronger earnings, increase bank capital, that gives banks more room to lend, and that lending literally creates new deposit money, which works its way through the system with the lag, but it shows up later in prices. I mean a lot of people would argue that the market would would you know say stronger earnings and more lending can also reflect a healthy economy not just inflation risk but how do you distinguish between productive credit growth and and you know kind of credit growth that that ends up debasing purchasing power. >> Well it it it number one banks are are are ma making extending credit for U bankable projects and and and and what's that mean? That means a project in which the bank thinks that the free cash flow coming from the uh uh creditor uh or the debtor, I should say, the debtor, the person who borrowed the money is going to have enough free cash flow to amortize the loan and pay the interest and pay the thing off >> and and and so they're they're all in principle productive. And if they're unproductive in a systematic way, the bank of course goes bankrupt. Now the second aspect of that is well what about the inflation part of the thing? And the inflation part of the thing is if the banks are lending at at a at a rate that's excessive let's say over in the United States just roughly rule of thumb more or less 6% peranom 6 7% peranom something like that then then you got a problem if the if all of a sudden the loans start growing at you know let's say 10% which I think they might by the way in the United States because because of two things. The banks had very strong earnings. So their capital is going up. That means their firepower is going up. They they have the that that means in short a loosening of monetary policy. When bank earnings go up and their capital goes up and their reserves go up that that in effect is saying looseness is in the cards. The other thing that can affect bank lending is are the regulations that are imposed on banks. Because if bank regulations are tight and squeezing the uh the reserves that they have, what what's that mean? That means tightness is squeezing. This is what happened after the great financial crisis started in 2008. We we had DoddFrank. We had Basel 3 coming in. All these things squeezed the res capital and the reserves that were available to extend loans the basis for loan extension and and now the bank regulations are being loosened up in the United States. So that's a second factor that will loosen. So there's a policy explicit policy to loosen in the sense that bank regulations have been loosened up and some of them had been gone away with which is in my view some of it good actually. >> Uh but also you have this spontaneous thing going on with bank earnings. It has it has nothing to do with policy per se but but it is a real effect that will influence the course of the growth in the money supply. >> Yeah. So I mean you know on the policy because you you're warning is that if if grow loan growth moves towards that 10% that it is effectively a new loosening cycle right. ics because banks are earning more, their their capital improves, they lend more, deposits expand, and that feeds into money supply. Uh if if banks are getting stronger earnings and more capacity to lend, why hasn't the Fed already leaned harder against that? I mean, are policy makers just missing the signal? Are they are are they just accepting more inflation risk than they admit? Well, they they they they n number one, all of this is laid out in in a new book that Matt Sukurki and I wrote called Making Money Work. uh which by the way yesterday we had a a piece an op-ed in the Wall Street Journal that that gets gets into some of this um and and and the point is in the book that the the our point our critique of the Fed is that the Fed doesn't look at changes in the money supply. They they don't think changes in the money supply have any material and and consistent effect on changes in economic activity and inflation. That's the view of the Fed and and it's the official view by the way. Chairman Paul has testified over and over on this and and most of the other central bankers whether it's in Canada or or the e European Union ECB or almost everybody ha has this modern view this bizarre view that the quantity theory of money that re says there's a relationship between changes in the money supply and changes of economic activity and inflation uh that That view has been discarded by the central bankers. So they don't realize that the biggest and and the things and I emphasize on making money work. We've got a whole several chapters on this is that bank regulations are a means to introd introduce monetary policy. People focus on the Fed funds rate. The Fed funds rate that that's that's a minor that's a second or third order condition. The first order condition is what are changes in bank regulations? What what are those and how do they affect bank capital? Because the bank capital and reserves at the banks have that will determine really the that's the elephant in the room >> that that's who's producing 80% of the broad money are the commercial banks. So those regulations are very important to keep your eye on and and focus on. And as I said, the the bankers uh the central bankers didn't realize this when the great financial crisis occurred in 2008. We had DoddFrank regulations coming in the United States and we also had Bosel 3 regulations coming out of Basel. All those tightened up. They increased the the required capital asset ratios at banks and and as a result the the loans being made by the banks right after the great financial crisis hit actually they went negative. they they were actually sucking down and and and pulling away from the money supply and and that's why we had Q quantitative easing one quantitative easing quantit two and three because the contribution of the commercial banks had gone negone south had gone negative so if the if the Fed hadn't engaged in quantitative easing they had contradictory policies the bank regulations very tight and as a result of that excessive tightness, the Fed had to come in with quantitative easing 1, two, and three to increase the contribution to the money supply that 20% that was being contributed by the central bank. So on the on the one hand they they were squeezing the money supply and on the other hand they they reacted by quantitative easing and and as a result the money supply by the way as you'll recall Jeremy it grew very slowly coming out of the great financial crisis and and a lot of people particularly people in the metals market by the way got this completely wrong. They they they were looking at the growth in the Fed's balance sheet. It was ex it was exploding and and me a lot of metals people said, "Oh, we're going to have hyperinflation." They were looking at the Fed's balance sheet. They said, "Oh, we're going to have hyperinflation." They didn't realize the elephant in the room was actually contracting its contribution. >> Yeah. So, so what happened after the great financial crisis? By the way, the balancing out negative commercial bank contribution, positive contribution by the Fed, the central bank, and and and if you aggregated the two, we had very slow growth on the aggregate broad money measures, M2 in the United States, and we had a very slow recovery, by the way, and and we didn't have much inflation. Forget the hyperinflation, we didn't have much inflation. So, everyone everyone has that story just completely wrong. >> You know, there's there's lots to get here too, but I want to go back to that point because if if that basil era kind of restraint fades and bank credit starts to expand faster, does that become just another argument for owning gold before inflation data shows up more clearly in the official data? You know, >> it it it's definitely another reason. There are many, but there it's another reason to be holding gold and and silver for that matter. But sticking with gold, I I think the secular bull market is intact. We got a some consolidation around a little little below 5,000 going on now for a while, which which doesn't bother me because it just it means that the contracts are in stronger hands and and that's that's fine with me. Uh but it I think the market will peak out the bull will peak out around $6 to $7,000 an ounce. And if you look at the current situation, the the calls outnumber the puts for the May uh gold contract by about four almost four and a half to one. So that that's that's a bullish signal, >> right? >> The options market thinks it's going up. >> You said 6,000 7,000 uh If if you're kind of right that Wall Street is is blaming, you know, the the wrong inflation culprit, what do you think that means for gold right now? I mean, is gold already seeing this monetary reality or is the metal still underreacting or to to your point there, Steve? I mean, did it shake out some loose hands? I think it just I I think there was a lot of speculate, loose hands, weak hands, shaking, you know, that that that that always happens, especially if you if you have a market that was going up as fast as gold and as fast as silver. Silver is the same thing. Uh both of those markets were, you know, I couldn't believe how fast they were going up. You had, you had a lot of, you know, characters in there that with weak hands. th those have been shaken out and it's settling down and it it'll start making another run and it it will I think end up peeking out around6 to $7,000 an ounce. So it has quite a ways to go. It's every everything is in order as they say and uh that's that's that's my view. You want to be long gold. Yeah. In fact, speaking of commodities, you want to be long all commodities now, Jeremy, because I think we are entering a super cycle again with the commodities. >> So, it's it's not only the precious metals, but if you look at things that that I watch that are, shall we say, the critical materials. Well, we we you can throw oil in there. You want to be long oil if if you're willing to take have a volatile ride, you want to be long oil. But look at look at what's happened to ferro venadium since uh December of last year. Ferravenadium, it's up 90%. Malibdum up 25%. >> Lithium carbonate up 39%. Lithium hydroxide up 49%. Lithium spotamine up 52%. Tanalum huge spike 133% since December. Neobbium 28% up. Aluminum 22% up. Tin 21%. Steel 16%. So, so you got have all of these things happening and and what you'll see you'll see more spikes occurring and that that's typical of a a super cycle. >> Yeah. A lot of people taking profit too. >> Yeah. Yeah. You that's why you get the spike and they you know backs off. Same same thing we had with gold and silver. uh spikes, goes up extremely rapidly and and then backs off a little bit and and consolidates and then makes another run for it. As assuming your secular bull market is intact or you're in a super cycle, that's that's typical of what happens. So I think we we will see more spikes and uh and and continued upward trend. So you you you want to be you know they they call it pi pivoting away from the tech stocks into into halo >> heavy assets low obsolescence you want to be halo because people are hoarding commodities now and this this comes into the Gulf what's happening in the into the Persian Gulf and the straight of Hermuz now with all the upset that's occurring people are going Oh, we we really should have more inventory of of these things coming out of the Gulf to to hedge. They they can't you can't do a perfect hedge, but you can what do you do? More oil storage. In Asia, the average storage inventories was only 30 days. So they they were in a pickle when when the when the war broke out. So maybe maybe they'll want to be ho hoarding inventorying more helium, sulfur, oil, fertilizer, all all these things. If if if you think there's a risk that you haven't attended to, you you you want to have a precautionary inventory. and and and so that's that's another factor behind the statement that I made. I I think we're set up for another super cycle because there will be an augmented demand just for precautionary inventories across the board on all all these things. Why do you want to hoard rare earths? Because you're worried that China might cut you off. >> Yeah. Why do you want to How about Taiwan where where they're using a tremendous amount of helium to produce chips? Well, may maybe you'll have more inventory of helium. >> Now, if so, if you like critical materials, does that make resource equities more more attractive than gold miners here? I mean, or do gold miners still kind of win on a riskadjusted basis? Well, gold miners are okay, but I you know I I I think lithium will make a another big run. And I another one I think is venadium. I I realize those are kind of exotic for a lot of people, but they're things that I follow. So >> we Hey, we've been talking about them. We've been talking about that. And you know, actually, this is interesting because in that theory, you were talking a little bit about, you know, wanting to sell AI stocks, this kind of stuff. I I want to get into that because the reason matters is, you know, the investors are hearing a very different story from some influential voices. Trump's pick uh for the Fed, Kevin Walsh, and others are making the case, I think Elon Musk is talking about it, that AIdriven productivity can be structurally uh just inflationary. I want to play you a quick clip from CNBC. >> What we call AI in a couple years we'll just call business. And AI is going to make almost everything cost less. and the US can be a big winner. And uh and it's a hugely exciting moment. If I were to step back for a minute, if I were the president, what I'd be worried about is a central bank that doesn't see any of that. A central bank that is stuck with models from 1978, governance from a prior period and don't recognize we could be at the front end of a productivity boom. And if I were the president, I'd be worried that they might not see it and they might think economic growth is somehow going to be inflationary. I think we were probably in the early innings of a structural decline in prices. Ken sees it on the front lines of real businesses and I think if you look over uh the period of the next year or two, it's a pretty special moment. >> So I mean is Kevin Worsh right that AI changes the inflation story or is this just the next fashionable narrative that that lets the consensus ignore what actually drives prices? Well, this this is a narrative that's coming out of Silly Valley, otherwise known as Silicon Valley. This this is a this is the hype, the AI hype kind of thing. And and number one, it hasn't happened yet because productivity actually went down in the United States in 2025. Not only GDP went down a little bit, but productivity also went down. So if AI is is, you know, the greatest thing since sliced bread, it it it just hasn't happened yet. Now, let let let's assume that it does. We've had other booms in productivity. From about 1865 until the first world war, there was a there was a you know, a a lot of technical change, railroads, telegraphs, electricity, you know, all all kinds of things were happening. and and and there was a big boom not only in productivity but economic activity. Now for the first 10 years of that boom actually we had deflation and and not not not not inflation we actually had a sec the longest stretch of deflation we had in the US was in in that first 10 years of that huge boom period. So, so that's consistent with the with this narrative that they're giving. But then then the the the the money supply got gooseed and started increasing at a more rapid rate than much more rapid rate than economic activity and we had inflation. So you you it's it's conceivable there's there's something to their argument. They're they're at least thinking in terms of the quantity theory of money that that the rate of growth and productivity in the economy on one on one side has to be related to the money supply and if and what they're arguing is basically they're assuming the money supply growth remains constant and the productivity and real rate of growth in the economy boom. And in that case, we we we wouldn't see an an inflationary surge from AI. We might even see a modest decrease in in prices or mild deflation. That that's that's an assumption, but but the assumption historically doesn't hold water because it usually doesn't work that way. He you get a boom in productivity and >> a boom in real economic activity and and and the central banks goose the money supply and it grows faster than the productivity and real economic activity. You get inflation, >> right? Right. >> So it depends on what's going on with the with the monetary policy. And and and I don't I don't buy, by the way, the the Silly Valley productivity argument because they claim that it's going to be orders of magnitude. The potential growth rate in the United States would jump from, let's say, two or two and a half% where it's at now to to like five or six%. There's just no way. It's not going to happen, >> right? So, so, so to cut the legs out from under them right away, their their productivity narrative boom is not going to happen anywhere near the magnitudes that they're talking about. There'll be a lot of shifting around and changes in in the job picture and so forth like we had in agriculture. Remember at at the turn of the 20th century, but at the start of the 20th century, most people, you know, over a third of the people in the United States were were working on the farm. Now you have less than, I think, 1% working on the farm. >> Why? Because you've had over a long period of time huge increases in productivity and huge increases in output from agriculture. But but that we've lost workers and then so what? >> Yeah. So I mean >> it's it's been great by the way for the United States because it's freed up a lot of labor to go into other things that are more more attractive and productive. >> So I mean we could say you know because if AI lowers the cost of goods and services that's it could not be trivial. But are you saying productivity can matter maybe at the micro level but still lose to debt and money at the macro level? >> Uh that's one way to put it that but it's that's that's an accurate characterization >> and and they're what they're trying to do basically is the following here. Here here's the Elon Musk has been all of this is repeated by these Silicon Valley guys by the way. That's where the idea comes from. And they're saying don't worry about AI. It's not going to create inflation. So don't worry about that. And then they and then the next thing they do is what Elon Musk and most of them have been proposing by the way, which is very bad idea. And that is a permanent income. They say don't worry about AI. If you lose your job, the government's going to give you a permanent income. It's going to put you on the dole permanently. A terrible idea. But Musk is pedalling this as well as all the all these billionaires from Silicon Valley are pedling this idea. And and the reason they're doing this is to get the public off their back, >> right? to keep to keep the AI investment hype going and the AI investment boom going and and you know they're raising capital and all kinds of new startups and all that stuff. >> So that that's what's going on. But the most of it is just utter nonsense by the way really if you really look at it if you really look at it carefully and slice and dice this thing it's it's a narrative that doesn't hold water. Well, yeah, because I mean, so, so when you mentioned, you know, Silicon Valley, people like Elon Musk talking about some form of permanent income or universal high income, are you saying that that whole worldview assumes abundance first and and simply ignores the monetary consequences if the state is financing the checks? >> Yeah. And and and by the way, it's very interesting that all these big capitalists in Silicon Valley, they're these these people are fundamentally socialist. Mhm. >> So, so e Elon can put that in his pipe and smoke it. That that's a pure socialist policy that he's he's portraying. Which by by the way, somebody asked me the other day, they said, "Well, has this ever been tried before on a large scale?" And I says, "Yeah, all you have to do is look at Europe." I mean de facto in some place like France where they have over 57% of the GDP being accounted for by government expenditures what do they have de facto they have a permanent income >> they it's the welfare state it's it's just a it's the welfare state morphing into a this permanent income thing. So here you have all these, you know, preachers in Silicon Valley because that basically they're preachers by the way, >> right? >> And and and a lot of this was just charlatanism. >> So I mean Silicon Valley that story is is abundance first, but your critique is obviously the monetary math still comes first. >> Absolutely. >> Yeah. Yeah. I there there's a big difference between the Silicon Valley rhetoric and reality. >> Is somebody selling stock, you know? Somebody's selling stock. Okay, let us >> somebody's pedalling stock. And they do a pretty good job of that, by the way. >> Yeah. Yeah. In history, too, professor. Uh let's get into the bond market just because it's not technical, but it kind of matters. I mean, Treasury just carried out a $15 billion buyback operations. Officials say that this is, you know, transparent routine debt management, not hidden QE. Fair enough. But, but does the need for larger regular buybacks tell us something about how much maintenance the Treasury market now requires in a high debt world? >> Well, I my knee-jerk reaction originally when I saw this was, well, maybe that's true. And then I did look into it and and it is fairly routine actually. Mhm. Mhm. >> It's nothing to get really excited about one way or another. The bond market, the the key to the bond market, though, if you look at the 10-year, it's now, you know, 4.2, 4.3. I I think those yields will go up as as inflation goes up. And uh you don't want to be long bonds. You don't want to be long the 10-year. I I'd be I'd be out of there. Uh and uh so that's that's my message on bonds. You you you want to be under hard assets. >> Yeah. >> The the the we we had by the way it it's interesting the long one of the longest bull markets in history has been the bond market from starting in 1980 until just a couple years ago. But it broke down and uh and and and and it no longer exists. I mean we we are not in the in this huge secular bull market and bonds anymore. And I think right now for at least the shortterm or intermediate term, you don't want to be long bonds. >> Interesting. Uh you know, you talked about hard assets there. Let's bring it back for the Kicko audience. Uh, a little bit to the mining side because this is, you know, where some of our viewers live and and tech reported a sharp jump in earnings, but management is already kind of warning that the energy shock is pushing up diesel freight an explosive cost on that side. Even if gold benefits from from policy failure, miners still obviously face that cost pressure. Is is this one of those moments where the the physical metal works better than the equities? Well, I I m maybe I I don't Jeremy I I don't know because I'm not I'm not following the miners in in any detail at all. And the and the reason for that >> is that that I trade the physicals. >> I mean in in the in the futures market in the paper markets I trade them. I I'm not trading the physicals, but I and and and this is my rule of thumb is what what when you look at natural resources and and you think commodity prices are going to go one way or the other, you trade the commodity. You you you I I I I just stay away from the refiners, the miners. I I trade oil or I trade copper or I trade in the case of lithium. Of course, in that case, you've got to go with somebody who actually some of these critical materials you like venadium and lithium, you you have to buy into a company that's producing them because there really aren't there's no paper market. >> Yeah. >> And even even the physical market is not very transparent in those things. So even if you were trading physicals, you'd have to be a highly specialized uh operation, >> you know, I mean to talk to our investors that are precious metals investors, maybe not on the miners, but bullion, you know, they're looking at that silver drive up that kind of scared them a bit. We saw this small correction that's shaking out of hands. Uh your thesis, I mean, 6,000 7,000 still very lucrative year for this uh for this for this kind of market. Um, what should a serious precious metals investor maybe do differently this quarter in your opinion? >> Well, as I say, I'm just in the paper market. I'm not going to change anything. >> Yeah. Yeah. >> Yeah. And and and think about it this way. If if you have a market going up, let let's say let's say gold's at 5,000 now and it goes to 7,000. Is is it really worth worrying about the detail of and getting out in the weeds? Are you going to are you going to use strategy A or B or it's just going up by so much that any strategy you have is going to do very well? So why why waste a lot of time worrying about it? And now there are people and certainly KitKo viewers that that they're into mining and they're into mining stocks. Well, fine. But I'm not into mining and I'm not into mining stocks. So So I I I really have no advice to give them that is intelligent because I haven't done any due diligence. I I have no opinion about the miners because I'm not trading the miners. >> Yeah. Yeah. Makes sense. Makes sense. We get questions. That was a couple of them on Twitter saying, "Oh, what does Steve think about the miners?" But I mean, you still like the physicals. You're not watching Bitcoin at all. I in my research this morning, I saw a couple Bitcoin headlines and you know, not not a fan of that. >> No, I No, that it's Bitcoin is just a highly speculative asset with zero fundamental value. So that that's that's my view. If you want to speculate in it, it's fine. I I don't I don't care. But it it is something with no no fundamental value. Now it one one argument some of my friends make that that like the miners by the way they they always say well Hanky why why are you just trading physicals even even trading I mean futures not let's just why why are you just trading futures okay you can you know you can you can get some leverage in there and do that but why not m miners because they're you get a lot more leverage because because they're setting on huge deposits and you know leverage they make that argument but it it never swayed me very much. >> Interesting. Our time always kind of runs out too fast. I I saying we need to have you on the program more so we're definitely going to do that. Let me end with this one. I mean for people at home who who feel like the mainstream story doesn't always match the way they're living through. I mean we get talk about it. Wall Street says everything's okay, but they feel the pinch at the gas pump specifically. Now, what are they getting right? And and what is Wall Street still getting wrong? Well, I I don't number one that Wall Street isn't on the pivot that I I I think's fundamental, and that's go going go from the high-tech pivoting into the commodity super cycle. That there are few people that are talking about this and and the importance of it. But but generally that's not the case. >> That that's that's one big thing. I mean, that that's a big strategic thing with me. It would be, you know, go going again into halo, heavy assets, low obsolescence. >> Yeah. I mean, you know, not everyone's into monetary policy as much as you and I, professor. I mean, a lot of people at home, they feel that squeeze and, you know, they hear experts on MSNBC, for instance, saying things are basically fine. What is the mainstream kind of still missing about the real economy? You want viewers to know? Well, uh I I think there there are a lot of things, but the one thing How about inflation? >> Yeah. >> Now, now now the general public is starting to inflation expectations have gone up for the wrong reason. They they've gone up because they think oil price increases cause inflation. No, the fundamental thing is that the money supply is accelerating and I think will continue to accelerate and that means inflation is baked in the cake more more inflation and if that's the case you can do your analysis and figure out where where you want to be >> because of that and and and one thing and where you don't want to be and I think you don't want to be in bonds long term term bonds. I mean, insure short duration is another thing, but >> yeah, >> if you're if you're in cash, you're in short-term bonds, but or bills. >> Yeah. Yeah. Yeah. What an interesting time. Uh I guess we'll continue to watch some of these private credit risks that are starting to show up as well. Uh as I said, professor, please come back to us uh in a couple of months. I appreciate your time today. Thanks for cutting through the noise. >> Thank you, Jeremy. Look forward to seeing you again soon. >> You betcha, sir. We will. Thanks so much. All right. And to our viewers, there's where we kind of look past the mainstream sentiment and focus on the math that actually improves and impacts your portfolio. If you appreciate this kind of unvarnished look at gold, silver, the global markets, make sure to subscribe to the channel. We're closing in on 1 million subscribers, and we're glad to have you along with the ride. I'm Jeremy Saffford. It's great to be back, and we'll see you next time. Heat. Heat. Heat. Heat. N.