Luke Gromen exposes how the CIA and U.S. elites manipulate gold reserves—Fort Knox’s unaudited stockpile (last verified in the 1930s) and $600B central bank gold buildup since 2014—to prop up the dollar, while declassified Kissinger-Volcker docs reveal 1970s efforts to suppress gold revaluation. He warns of a potential Treasury "gimmick": revaluing gold at market prices ($3K/oz vs. $42/oz book value) to erase debt without selling physical metal, tying it to Trump-era tariffs and Vance’s push for a gold-backed reserve system to counter China’s yuan rise. Gromen frames gold as the only hedge against parasitic finance, defense, and real estate sectors—now consuming 30% of U.S. GDP—while retail investors, blindly buying Treasuries, risk inflation collapse, with gold poised to surge 2–4x to recollateralize $35T in debt. [Automatically generated summary]
So it's amazing to me to watch countries spending, a bunch of countries, spending so much effort, money on gold at a moment where technology dominates the conversation and crypto and AI are the future.
And gold is the oldest and most primitive medium of exchange.
I mean, cultures have been using gold around the world, every culture around the world, for at least 6,000 years.
But it has always retained that store of value component of money and, critically, at the highest levels of finance.
The global central banks who are running our currency and monetary system, as much as we have moved away from gold and those other functions, as much as we've moved to fiat currency, as much as technology has developed, as much as our economies have developed, they have always continued to hold their gold.
10-11 years, I think one of the big origin stories of macroeconomics as they have developed over the past 10 years has been the fact that global central banks on net...
In 2014, stopped growing their holdings of treasury bonds.
So global central banks have not bought a treasury bond on net.
Yeah, I think it ultimately evolved to that because it isn't used for anything, right?
So there's something called stock-to-flow in commodities, if you analyze commodities.
And stock-to-flow is just what is the stock of inventory of that commodity and what is the flow?
How much of it do you use a year?
And the lower the stock-to-flow ratio, the more it is a commodity, and the higher stock-to-flow ratio, the more it is like money.
And so, for example, oil has a stock-to-flow ratio.
When oil inventories are globally, a really high stock-to-flow of oil might be 1.2.
When they're low, they might be 1.1.
If they get below 1.1, you're going to know because you're going to see prices skyrocketing at the pump.
Very low stock-to-flow.
Wheat, copper, similar types of low stock-to-flows.
Silver's is, I don't know, as of a few years ago, around 30 to 1, right?
Because silver is both a monetary metal and an industrial metal.
Gold is 60 to 1 or more.
And so I think ultimately, I don't know that these ancient cultures were thinking about gold in terms of stock to flow, but I think ultimately what they were looking at is stock to flow means it keeps well, right?
You can put gold in.
It's the most money-like.
That's why I think independently around the world, all these cultures arrived at gold as the savings store of value par excellence.
So I said, well, how weird that gold would be the most enduring store of value because you can't eat it or heat your house with it, and you're saying that's why.
I would say one more thing about gold that I find fascinating is that it is the most private of all currencies.
So the great lie of my lifetime is that crypto was going to be private and was going to free us from surveillance and control, and that is just not proven true, and no one's really tried hard to make it true, which tells you a lot about how much people lie and what the real agenda is, which is control.
But gold can actually be moved around privately and stored privately.
I mean, there's not a digital record of gold.
And that leads to my question, which is, Like, what the hell is going on with gold flows around the world?
Gold physically moving from one country to another.
Why isn't that transparent?
This is public money.
The reserves of different countries is owned by the public of those countries.
So you have an idea, but again, when I say it's transparent and not, those data, as long as it is what they classify as non-monetary gold, according to IMF shipping classifications, we'll call them, however they...
industrial classifications.
Non-monetary gold gets recorded.
Monetary gold, to your point, It doesn't have to be declared as it moves, is how I understand the rules.
And so when you see the monetary gold movements, there is still very much an element of secrecy and non-transparency.
And yes, some of that is the public's money and it's not being disclosed why it's moving and how much exactly.
It's almost like being in the movie Jaws, right?
Where early on, you know there's a shark out there, and you see the impact of the shark, and every now and then you'll get a glimpse of it, but you don't really fully see the shark very often.
Privacy being different from secrecy, but something that should be disclosed that's not is not disclosed for a reason.
And so when you have huge movements, you tell me if I'm overstating this, but there are now big movements of gold between countries right now, correct?
Has long been the competitor to the dollar system.
And once you start getting into competitors to government currencies, which are, as you noted, a very effective method of control.
This is why we use dollar sanctions, why we've been using dollar sanctions.
Quickly gets into the reason for, I think, at least some of the reason for the secrecy around gold as it relates to governments, which is, number one, or excuse me, as Greenspan said, that the only currency that's better than the dollar is gold.
And it's been that way for a long time, and he said that in 2013 or 2014. And so that...
Number one is there's a perception, right, where if you're trying to be a manager of the dollar, as the U.S. government is, that is a perception you are trying to manage.
And so I think there's some element of that.
I think there are other countries that have been, for example, the Chinese have been buying lots of gold.
They have long said you can find it in WikiLeaks documents from 2009. China's buying gold to kill two birds with one stone.
It's number one.
It will build up and help internationalize the renminbi over time.
And also, the Americans and the Europeans, they specifically said, have historically tried to prevent gold from rising too much in order to increase the prestige and the attractiveness of their own currencies.
And so we're buying gold for that reason.
You get into that gold is very much a geopolitical metal because when you think of it in those terms, if you're China and you're buying lots and lots of gold, as China has done at times over the last 15 years after the great financial crisis, let's be clear, That can be construed in certain circles in Washington and in Brussels and in London as a tax on those nations' currencies.
And so it is in the interest of nations that might want to diversify from the dollar, from the euro reserves, in which FX reserves are primarily – I want to check a number while you're talking.
It behooves those nations to have a level of secrecy around it as well.
So it's that element of trying to manage currency systems from two opposite sides of the coin.
So, I guess the only point I'm making again and again and again is at the heart of this incredibly important phenomenon, the movement of gold around the world, is a lie.
Like, there's lying.
Like, we don't actually know what the state of play is.
And, you know, members of Congress, almost all of them with the last name Paul, have been calling for an audit of Fort Knox for, I mean, just decades.
And if you really press...
It doesn't look like Fort Knox has been actually audited for close to 100 years since the 30s.
I think that's right.
I'm open to correction.
They said it was audited in the 70s, but it wasn't actually audited.
Some of it was audited.
Why is it so hard with a federal workforce, including contractors like 10 million people, to just go through the contents of the vaults and weigh them and make sure that they're not gold-plated titanium?
Make sure they're all there and then figure out who owns them.
I think it comes down to policy and that gold is a geopolitical metal.
And if you go back to, again, declassified documents of conversations and memos around a lot in the 70s, and you'll see some familiar names there, Volcker, Kissinger.
The U.S. in the 60s was losing a lot of gold, right?
The system was essentially dollar is pegged to gold, $35 an ounce.
Everything else is paid to the dollar.
And it started becoming clear as we got deeper and deeper in Vietnam and guns and butter with LBJ that we didn't have the gold to cover our debt offshore at $35 an ounce.
And we were sending, you know, if I recall correctly, we were sending an airplane a month to Riyadh with bullion, right, to settle gold deficits as we had agreed to.
Right, so, but, and I think the reason why the numbers are lies is when you, or why there's not great clarity, right?
Why they manage the optics in the way they're clearly managing the optics is, you can go back, once we closed the gold window in 71, Nixon said, hey, no more gold, you know, the dollar's now free-floating, and...
You can read from these declassified documents that the U.S. very much had an interest in getting gold out of the system.
We didn't want – because there was one of the declassified documents in question.
There is – there was a proposal that was afoot in 73-74 by the Europeans to revalue their gold to – They were looking to basically revalue gold and then settle deficits with OPEC in gold.
And the Americans in question, excuse me, Kissinger, Weintraub, Volcker.
So this isn't our interest.
This is not what we want.
We want the Saudis not getting gold.
We want them getting treasury bonds.
And so, right, the famous Bill Simon deal.
And so I think – I can't believe they took that deal.
I think it might have been a gold or the lead type of deal at that point in time.
We'll give you not only – you take the gold, you take the lead.
And the gold is we'll provide you protection.
We'll provide you weapons.
We'll let you access to our markets.
And if you don't do it – We're going to regime change you, and oh, by the way, we'll give you maybe a sweetener on your, you know, I think it's very possible they were getting higher than market interest rates on the treasury bonds for decades as part of that deal.
In fairness, I think, you know, it's always about power and control, right?
This is about control of the system.
This is the dollar system.
Clearly, 71 was a default in the gold, and so we were trying to sort of get around this.
And so I think sort of the original sin, or again, the origin story of the refusal of wanting to even talk about what is an audit, what is, is, as it relates to audits of Fort Knox, is once we close that gold window, I think that whole thing You know, generation of leadership, 70s, 80s, and didn't want to talk about gold.
And going in to audit it brings gold back up and brings it back up that, hey, we defaulted on our gold clauses.
Like twice in the past 80 years, by the way, FDR defaulted on gold clauses to the domestic Americans.
So I think the original origin story was about this reticence.
About is the gold there?
Has it been audited?
What is an audit?
Has it been fully audited?
Has it been fully assayed?
All of the things you would think are pretty easy to do.
I think go back to that policy of petrodollar.
We don't want gold back in the system.
The Europeans do.
We don't.
This is the deal.
We threw our weight around in the 70s and sending people into Fort Knox to show them we have the gold.
Doesn't help us remove gold from the system.
And ultimately, why do we want to remove gold from the system?
Control, and it's easier to run deficits without tears.
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What's so interesting, boy, you're teaching me a lot.
Thank you.
They don't want to talk about gold when they haven't since the default of 71, which is never described, by the way, as a default.
And even to this day, people who, and I know some of them, who are interested in gold and sort of follow its global movements and buy gold, physical gold, non-abstract gold, they're embarrassed of it.
I've been working in investment research for 30 years and at high levels at major institutions around the U.S., around the world, doing investment research for major money managers.
And it's fascinating what you say because there is always, not amongst all of them, but amongst a lot of investment professionals.
They watch gold.
They watch it more than you would think, more than the average American would think.
They own it.
But there is that stigma where it's sort of, you know, hey, you see gold?
But he clearly just didn't want to, it's even to someone, you know, open-minded, brilliant person, it's not something that people talk about in public.
It's almost like admitting you have some kind of weird fetish or something.
I think it goes back to that original point of why those movements are shrouded in secrecy, which is gold on some level is a hedge or an insurance policy against the existing system as it has been allowed to evolve over the last 50 years.
Once you get to a certain level of wealth, power, influence within that system, You clearly understand the Achilles heels and the risks and how that system will at some point, mathematically, certainly, it could be next week, it could be 50 years from now, will at some point need to be reset in some fashion.
You understand that.
And it is not in your interest, socially, financially, etc.
To advocate or advertise that you are hedging or insuring against the collapse of that system.
Because it's not just yet another Intel community-inspired conspiracy, though it is that, obviously.
But it's also...
It is, in some sense, almost unpatriotic.
To say, you know, I'm all about gold and land or whatever, about physical assets, because what you're saying is I don't believe in the system of the U.S. government.
Which is horribly ironic, because if you go back to 1948, Warren Buffett, famous investor, poo-poo's gold every chance he has, and his father, Congressman Howard Buffett, from the state of Nebraska, wrote a missive, you can still find it online, saying gold convertibility...
Is essential to human freedom.
In which on the first page, he says, look, the first thing, autocrats and evil empires that we just got done fighting, right?
This is 1948. First thing they did when they got to power was remove the convertibility of their currency to gold.
So it's ironic.
It's always ironic to me.
People say, well, you own gold.
You're anti-American.
I said, there's nothing more American than gold.
People say, well, what does gold do?
It's useless.
I said, no, no, gold.
The very use of gold.
Is that as long as you can convert your currency into gold, you are still a free person.
When you can no longer do that, your vote really doesn't matter because they control the currency, right?
I would say Warren Buffett, you know, so much to admire there and be impressed by, and I am and all that, but he's a political player, among many other things.
You can see, and this goes back to that conflict of once you become big enough within the system, it's not in your interest to I mean, one of his Berkshire letters from late 60s, early 70s, he highlights that basically Berkshire, it might have been the late 70s, Berkshire stock priced in gold had gone nowhere for 10 or 15 years.
And I mean, that flat out shows you, right?
So all of these productive business and all these things he says about these productive businesses over time, 100% true.
And there are instances in history where Where gold outperforms, where gold preserves purchasing power, where currencies are being debased.
It's interesting.
He frequently talks about, well, I started investing in, I think it was when I was 10 years old, I bought my first stock, which would have been 1941 or 42, which just happened to be basically the all-time generational low of U.S. stocks because we won the battle of Midway and at that point it was sort of obvious we were going to win World War II and so on and so forth.
But I always say to clients and friends, yes, and look back 15 years.
The prior 15 years, from 1918 to 1939, 1915 to 1931, were catastrophic for financial assets of all types in the West.
Gold, like, all you wanted to own was gold.
And so it's interesting, I think part of, you know, the point being, part of, I think, your view of the world depends upon when you're born and what happens as you're growing up.
It's sort of that cycle theory of, you know, the fourth turning.
I think it affects your views on investments, too.
And it affects your views on the future in general.
Sure.
And as you just said, the degree to which you're vested in the system currently in place affects your outlook and affects very much what you're willing to say in public.
I would describe it simply as from the UK and the EU, to a lesser extent, into the US. It's still flowing into China.
It flows into China all the time.
But the big delta, the big change since the Trump election, essentially, has been a significant ramp up in the flows of gold out of the UK into the US. So that would seem good for the US. Yeah, historically, when you see where gold is flowing, that's your economic winner.
That's who's winning.
And where the countries that are losing gold, those are the countries that are losing.
That goes back several hundred years.
That's sort of how it works, which makes sense, right?
So do you, and I should have asked this earlier, do you anticipate any time in the future where gold is no longer regarded as a measure of economic strength and health?
What about, okay, so gold is almost hovering at about 3,000, a little under 3,000 an ounce.
It's clearly going to make it to 3,000, I would guess.
Is there a threshold at which, like, it becomes, because there's a lot of gold, actually, on the Earth's crust, a lot, and it's just too expensive to extract it, but is there a threshold at which, like, gold production just ramps up dramatically?
It becomes worth it to, like, extract a lot more gold, and it affects the price because of supply and demand.
Yes, is ultimately its supply will be a function of price.
And then there's a lot of it in the ocean, right?
In theory, if you sort of dry out the oceans and filter it.
Filter it, yeah.
And that's just a question of price.
And the question of price is ultimately a question of energy efficiency, right?
If you wanted to, you know, that's how much energy do you need to expend to...
To dig and get that out of the crust where it is and refine it down so that it makes sense.
And right now, it's going to cost you way more in energy in order to get that, and so you're not going to do that.
And so if price goes up enough, then it makes sense for you to expend that amount of energy to do that.
And I think that's a really important point that ties back to our stock-to-flow and why gold is valuable.
When you think of it in those terms, you need to expend a lot of energy to get gold, and the price of gold determines how much energy you're willing to expend to get it.
It's just a compressed and portable storage of energy.
So that raises a deeper and more fundamental question, which is, do the great powers have a built-in incentive to keep energy prices higher than they would naturally be in a truly free market?
You know, there's been, for all the talk of the Green New Deal, now we're getting far afield, but I think it's really fundamental to the world, where all the talk of the Green New Deal and all these new forms of energy and, you know, renewables and green technology, it's really been pretty shockingly lame, really.
I mean, it's like windmills and solar panels, both of which are just like kind of absurd.
There are like a lot of advanced technologies, particularly in biotech, that are moving like crazy fast, AI crazy, crazy fast.
Energy generation technologies are not moving crazy fast at all.
Like, no one's like, hey, actually, there's a brand new nuclear breakthrough.
Like, we're not building any nuclear.
Like, you conceivably, if you got off hydrocarbons, could, I don't know, why isn't there a greater effort to figure out cheaper ways to produce energy?
Well, right, but if energy, as you just said, if energy prices dropped far below what we can currently imagine, then the price of gold would also drop because the price of extraction of gold would drop.
Your cost of energy to mine gold would go down, but at the same time that...
If you drop energy, there's two groups of nations in the world.
There's the U.S., there's a reserve currency, and there are U.S. creditors that import energy and U.S. creditors that export energy.
And they all own a bunch of bonds.
And they own a bunch of financial assets.
And so if oil drops really low, all of your oil exporting creditors are going to sell their dollar assets because they're going to need to, because Saudi owes money at $90 a barrel.
And if they don't pay that money for social programs, et cetera, the place has political problems.
And so they're going to be selling treasury bonds.
They're going to be selling stocks.
And that creates – and the U.S. economy is so leveraged that it's not going to take a lot of selling to create an economic crisis from it.
So you have to – basically you would get into a situation where in some way, shape, or form the Fed would be printing money again as a result of oil prices getting too low, which is in theory a good thing.
Which then could actually be net good for gold, right?
So there's puts and takes depending on – Basically, you're describing a world that's so complex and interconnected where global finance, the cost of energy, and then the geostrategic stuff, the military rivalries, it's all of a piece.
So it's pretty scary to mess with any single factor in that in a dramatic way.
I think that's ultimately the power and the encouraging thing about gold.
Gold is always thought about as a, oh, you're buying gold, you're a doomer, the world's going to end.
No.
Part of the problem of what I just described, change in and of itself isn't a problem, but rapid change when you have high levels of debt, it's the debt that creates the problem.
And so if you, when you look around and you see these central banks buying all this gold and having all these countries buying this gold, If you revalue gold enough to basically re-collateralize or effectively buy down your debt so that you have low debt levels, then you can make more dramatic changes to the economic system and its connections without running the risk of blowing up the financial system, right?
You introduce something deflationary into a debt-based system, the debt starts to go boom.
People don't generate the income to pay the interest.
In a more equity-based system, or in a gold-based, because I'm not talking about a gold-backed currency, but if your debt-to-GDP is low because you've revalued your gold much higher and restructured your balance sheet,
A deflationary recession or a restructuring of the economy that is deflationary or a good energy introduction or AI productivity enhancement that is deflationary, that can be weathered and benefited from without blowing up the debt-based system.
So gold is paradoxically a way to foam the runway for a major change, be it geopolitically or energy or AI, something deflationary.
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So you said a minute ago that big picture, over time, countries that are acquiring gold are stronger and countries that are seeing their gold reserves depleted or weaker.
It is the official nominal reason being given in markets and in the media is that Trump's administration may or may not put tariffs across any number of countries, as we've discussed, including possibly gold hubs like the UK. And if you put a 25% tariff on the UK across all items, just to pick a number, You run the risk.
The mechanical impact of that would be to increase the price of gold 25%.
There's been this massive flow of gold out of the UK to the US because tariffs might happen which would impact the price of gold in a manner such that it would be very disruptive to what are called basically spread trades, that gold traders in New York or London, bullion banks that traffic in gold bullion.
They may have a position on in gold futures in New York and a physical gold position in London.
And if a tariff were to change the price relationship between those two, it could create significant losses for them.
And so the response is basically, bring the gold here to mitigate that risk.
That is the official story.
There is absolutely a strong element of truth to that.
With that said...
The longer this goes on and the gold flows continue, the less that story holds up as the sole reason.
When we go back in time to 2020 and during COVID, we saw a very similar spike in gold futures relative to spot prices in London, and it was driving a massive flow of gold out of London here because of COVID. Supply chains broke down with the shutdowns of flights and what have you.
A lot of gold is shipped on transatlantic commercial airliners in the cargo holds.
And so those flows stopped.
It drove a mismatch.
And what the COMEX, the gold futures exchange in the U.S., did ultimately, one of the things to sort of settle those markets down was to, what I'll say, change the rules for the Lehman.
They made the good delivery denomination, I think 400 ounces in London, 100 ounces in New York, either or, right?
So that, okay, well the gold that's here is fine, so we don't need to move it.
So they took a step to change the rules to settle the market down.
Another famous example we were talking about before we got on air was the Hunt Brothers run on silver.
They tried to corner the silver market in the 80s.
This was COMEX, and they changed the rules on the Hunt Brothers.
Once it became apparent that the Hunt Brothers were successfully cornering physical silver, they changed the rules.
They set the market to sell only.
You couldn't buy gold or silver futures, and you could only sell, and the market promptly tanked.
At any point in time, Trump, Besant, Rubio, other American officials could come out and say and clarify, we're not going to put tariffs on gold.
There will never be tariffs on gold.
There's a lot of countries in the world where there's no VAT, that have VAT, that there's no VAT on gold.
So this is the long, my point being that the longer this goes on without a rule change or a political pronouncement about tariffs, political clarification about tariffs.
The more likely it becomes, in my opinion, speculatively, that the tariffs are on some level as reason for the gold flows cover.
That the gold's being brought here for some other reason.
So what could, I mean, and that always is the likely explanation that there's something else that accounts for at least part of a phenomenon that you're watching.
The tactical reason is if you Google gold revaluation, you'll find a number of stories in any mainstream financial media over the last two, three, four weeks.
There has been increasing speculation in the aftermath of Trump's election, and in particular in the aftermath of Scott Besant being approved as Treasury Secretary, that There is a gimmicky but completely legal and mandated in the rules way by which the United States could revalue its gold,
which it currently holds on its books at $42 per ounce up to the current market price, and in so doing, or even higher, and in so doing, it creates a bank deposit, basically, at the Treasury's bank account at the Fed.
That the Trump administration could then use to buy down debt, to not have to borrow as much.
It's effectively money printing through gold.
It's creating money supply using gold through basically an accounting gimmick that is already on the books.
Because you'd hate to get to a point where the nation has so much debt backed by nothing other than its navy, which may become irrelevant thanks to drones.
So you could see this all moving very fast.
It's like all of a sudden we owe the world trillions of dollars, but where's the collateral?
Where policymakers are forced to sell off physical assets that belong to the country.
Oil, water, because we have the world's largest...
Like, if I, you know, take a loan against my house, if I have a mortgage on my house, and also if I don't pay it, you know, the holder of that mortgage gets my house.
There's collateral.
So, like, where's the collateral in the United States other than, like, I don't know, people like us?
I think some of what we're seeing in terms of these, you know, discussions around will we leave NATO or will we not?
This is a...
This is a discussion that goes back to the 70s.
There was something called the Blessing Letter.
Carl Blessing was a governor of the Bundesbank, the German Bundesbank.
And the French were asking for their gold back.
Others around the world were asking for their gold back in the 60s and 70s.
I guess the Blessing Letter might have been late 60s.
The Germans started hinting about asking about their gold back.
And the Americans sent a letter that essentially said, you know, if you ask for your gold back, we will have to reconsider.
Stationing U.S. troops in West Germany to protect you from the USSR. So you're going to keep taking dollars or else we're going to bring our boys home and you can deal with the Soviets yourself.
And the Germans never asked for their gold back.
And so what collateralizes is a complicated multibody, right?
It is...
Goodwill, protection, access to markets, the threat of violence, military protection.
Gold is way, way down there.
I don't think the gold is thought of as collateral, but it could be as a reserve asset if we wanted to change the system.
We would need to have it.
If we wanted to change from the system, we've...
We've been in for the last 50 years, and that kind of gets to the strategic side of it.
I think you would see some sort of grand deal be discussed ahead of that, and I think that's some of what we're seeing in real time when we talk about us and the Russians and the Saudis and the Chinese all getting together in Saudi and talking about probably not how the Yankees are going to do this year.
You know, you've got the four biggest, you know, Saudi, U.S., Russia, that's 40% of global oil production, and U.S., China is, what, probably 60% of global oil imports?
Global oil, so you can, oil's going to have a role there.
Now, The strategic side of what I think we're seeing in the gold movement is ultimately, if you take a step back and try to see the forest for the trees of what the Trump administration is trying to do, the Ukraine war showed us we got outproduced by the Russians badly.
We couldn't produce shells.
We couldn't produce stinger missiles.
We were reliant.
On essentially China to supply our industrial base, to supply our defense base.
We've been borrowing money from China to build weapons to face down China using Chinese components.
It's not a good strategy when your biggest geopolitical adversary is China.
And so, starting with COVID... Could it be that we were using Chinese components to arm the Ukrainians in a war against Russia, which has lied with China?
And critically, think about the implications of this, right?
So we, America, when we wore the dominant power, we were the ones supplying the weapons to these types of conflicts.
Now we didn't really have the ability to credibly say, Ukraine, Taiwan, and Israel, we can supply all of you at once.
Empirically, we demonstrated over the last three years, it was impossible.
We were moving patriot systems out of Israel to Ukraine and then having to backtrack in certain areas in different conflicts as a result of that.
When paired with what happened in COVID, which was, hey, we need more PPE and supplies and what have you, and China said, just as soon as we get...
Ours.
We were dependent on China in COVID. And it was made crystal clear to Washington that the defense industrial base has been too hollowed out by this currency system whereby we export dollars and we export our factories and our workers and China sends us stuff and we send them dollars and they send us goods.
Sorry, they send us goods, we send them dollars, and then they reinvest those dollars in our financial markets.
And that's fine.
That has been how the world has worked for 50 years.
And it's been great for Wall Street, it's been great for Washington, it's been great for China.
It's not been great for the American middle and working class whose factories got offshore to China.
And Washington was fine with that until all of a sudden they realized this process has gone so far, we cannot credibly fight a war without Chinese factories.
And the Defense Department is saying...
And they began saying it 10 years ago.
No mas.
We're done here.
We need to start reshoring as a matter of national security.
And the origin problem is the structure of this dollar system.
And so we need to get out of the business of supplying China the dollars to buy up the world.
And that means we need to change the currency system that's been in place for 50 years.
When you say these types of things, the instant response, the correct response is, well, okay, if the U.S. isn't going to run deficits, run up debt to supply the dollars to the world, who will?
No one else will.
The Chinese won't and no one else can, and that is correct.
And the answer is, is then you're going to have to settle deficits in something else that is nobody else's debt, nobody else's liability, and that is gold.
And I think that's where this is going, which is – and I think it's part of the reason why the U.S. is actually buying gold is to try to turbocharge this change to the system.
When you hear President Trump say we want to go back to tariffs and cut income taxes, when you hear Marco Rubio in his confirmation hearing say within 10 years we are going to be dependent on China for everything if we do not take aggressive actions to change and start to reshore, change this currency system and reshore.
When you have Senator Vance, say what he said in 2023 to Powell about the dollar increasingly being a resource curse, about which Vance is very familiar, having grown up in West Virginia and Southern Ohio and seeing the deindustrialization.
The chapter in verse, this administration understands this problem.
That the dollar shows the hallmarks of a resource curse, which is, it's often called Dutch disease.
I might refer to it as air, which is effectively, if you're Saudi Arabia and you discover that you are the biggest, lowest cost producer of oil, you produce a lot of oil and the rest of your economy shrivels up and does nothing.
You know, it withers away.
And it ultimately becomes a strategic handicap or a strategic risk.
So Vance's point was that the dollar's reserve status, we are the Saudi Arabia of money.
That's how the system has worked for 50 years.
We produce the world's reserve currency.
We're the Saudi Arabia of money.
And what has followed is the hollowing out of industries other than those most closely tied to the money printer, to the dollar, Washington, Wall Street.
His point is it is becoming this resource curse of being the Saudi Arabia of money is increasingly not good for the American middle class, the American working class, the U.S. defense establishment.
He specifically cited our inability to produce shells for Ukraine in his question to Powell in 2023. And you can find this online.
You can Google it.
I think it was April or March of 2023. And so it showed a fundamental understanding of this connection.
Between the structure of the dollar system over the last 50 years and the situation in which we find ourselves where our defense industrial base is so hollowed out and our debt level so high, we cannot credibly fight a war against our major adversaries without them supplying us.
And our debt is so high that they can weaponize our debt against us.
And so ultimately, I think...
The strategic reason why we're starting to see gold re-enter the conversation, why central banks have been buying gold for 10 to 12 years, why the U.S. is – gold is – we're likely moving to a system advocated for by the policies of the United States, if not outright saying, hey, we want gold to be – we want gold to be a neutral reserve asset.
But we can see the policies, and they are functionally indistinguishable from saying we want gold to be the neutral reserve asset.
I think what we're going to do is move toward a system where the foreign capital flows.
Basically, we bring factories, but we put tariffs on.
We lower income taxes.
U.S. consumer spending rises.
We start to see foreigners send goods here, also pay us tariffs.
Start to reinvest in our factories instead of just buying our treasury bonds and our financial assets.
Employment goes up.
Building goes up.
Growth goes up.
Ultimately, though, if they're not recycling their dollars into, you know, they can only put so much in factories.
They're not putting them in treasury bonds anymore.
They haven't for some time.
What are they going to put it in if they have a surplus left over from dealing with us, where they can put their surplus dollars, etc.?
I think the answer is gold, and I think the flows of gold, the longer we go where the tariff story, you know, it's just tariffs, and it just keeps coming, and it just keeps coming, which I'm hearing is still, to this point, continuing to keep coming, gold flowing in.
The more likely, in my opinion, when married with the pronouncements from Trump, Rubio, Vance, Stephen Mirren, the Council of Economic Advisors, Bessent.
The more likely it is that these flows of gold into the U.S. are effectively front-running what will likely be a higher price of gold driven there by the recycling of global trade more into gold and less into U.S. financial assets than has been the case over the last 50 years.
And again, critically, I think the reason it's going there...
And I think the reason these policymakers, again, Trump, Besson, Rubio, Vance, chapter and verse, is it has become clear that the status quo dollar system has become an acute national security threat to the United States on two fronts.
We can't make weapons, which we keep hearing.
We can't make them fast enough to credibly defend our allies and project power.
And our debt has gotten so high that that, too, has become a national security threat.
And this sort of checks both boxes in terms of this systemic change.
Both of those industries are absolutely, and I'm not calling them parasites, but they are parasitic industries.
They make money by taking a small cut of everything that comes in.
And if you just think about this intuitively, biologically, in the natural world, if you have a small parasite on you, you have a small, whatever, gut parasite, it takes a little bit of every meal you eat.
Maybe you don't feel 100%, but you're fine.
The parasite is great, and you're fine.
At some point, the parasite gets so big, if it's allowed to get so big, that it's taking too many of your calories, you start to wither and you die, ultimately.
And that is where we're at.
Unfortunately, the symptoms of this are 100,000 people a year dying of drug overdoses, the inability to make shells, the hollowing out of the defense industrial base.
And these are the things that this fixes.
You know, I look at myself.
I was a fairly smart kid.
I was going to go into architecture.
I didn't like architecture.
I could have done engineering.
But I absolutely, 35 years ago, looked at it and said, okay, well, I could study really hard and never go out to the bars and graduate in five years in engineering.
Or I could get really good grades, a lot less effort, go out to the bars three, four nights a week, and graduate in four years in business and in finance.
And I... You know, I made a self, you know, I made a, it's a tragedy of the commons problem, right?
And I think there has been a progression of the U.S. 1960 to 1980, what's good for GM is good for America.
And then from 1980 to 2020, what's good for Goldman Sachs is good for America.
And I think starting...
Trump introduced some of these concepts, 16 to 20, but I think COVID, and then the war in Ukraine reinforced it.
I think we're shifting to what's good for the U.S. defense industrial base and middle and working class is good for America.
And so there's, you know, this...
To your point, this old, what's good for Goldman Sachs is good for America wing of the world, the Robert Rubens and the Larry Summers and a lot of these guys you're seeing lament against all the tariffs and all this stuff.
They're absolutely fighting.
I don't know that it is terrible for their interests if, because what you're talking about, the two most pronounced dynamics are going to be the real value of long-term...
Treasury bonds, long-term dollar bonds will fall relative to industrial assets, production, equities, etc.
So these guys may have less political power.
But the reality is that's just a marking to market.
Their worldview has been proven wrong.
We can't make shells.
There are 100,000 people dying of drug overdoses every year.
You do have a hollowed-out defense industrial base.
We do have too much debt.
Those things are no longer debatable.
They're all empirically true.
They're all empirically shown to be hurting the U.S. So they can't argue on the merits, so they've got to attack the people trying to implement it.
But in the end...
I don't think they can win this argument anymore because events have proven them wrong.
The system is going to change because the U.S. military is not going to sit here and go, you know what, guys, you're right.
Let's keep that system and we'll just have China make everything for us in five years.
And then, you know, when you want us to face down the Russians over in, you know, Georgia or in, you know, Lithuania.
You know, we'll ask the Chinese to make weapons for it.
Like, that's not going to happen.
So if that's not going to happen, and if we're not going to default on our debt, then the only outcome is they're going to have to restructure this system in this way, which will be good for these people's equity bases, right?
There'll be a lot more bank loans.
So it's just more...
It's not catastrophic.
It's just catastrophic to a worldview.
But the worldview, like, to any objective observer, is already dead.
I mean, just to ask a kind of goo-goo question, because I can't control myself, but, you know, you'd hate to see manufacturing come back and then discover the only manufacturing is, like, machines that kill other people.
Could you also, because that's totally disgusting.
You can't be proud of a country whose only export is bombs.
I mean, that's, you know, you can't be proud of that.
That's totally immoral.
So, you need military, you need weapons, but you also want to build things that are beautiful and uplifting and life-enhancing also.
Once you get the right incentives in place in terms of the monetary system and those flows, the markets will start to work and they'll start to feed on themselves.
And then we can get into things, okay, wow, we have enough electricity.
We've got enough demand.
Now we need to build the power plants.
Once we build the power plants, then we can build more high-speed rail.
There's a high degree of executional risk, not least of which is because we have dawdled so long, because this other wing of Washington has been so successful in fighting off what has long been obvious to the military and others.
We got to run fast.
We got to run not quite on a Manhattan Project type of timeframe, but we need to be aggressive in doing this.
And I think it's part of the reason why we've seen the Trump administration be so aggressive with some of their moves so early on.
I mean, it has been fascinating how quickly they've been doing things and moving fast and breaking stuff.
And some of the stuff is like, oops, we didn't need to do that.
I think that speed reflects, in my opinion, my read of that speed of action by the Trump administration is a nod towards understanding that this needs to get going fast.
And J.D. Vance specifically, tell me if you think I'm giving him too much credit, but he seems to have thought about this holistically, like in a big way.
You described that exchange with Jerome Powell.
I mean, are you getting indications that Vance has a big picture in mind?
As good as any politician that I've seen in this country in decades.
And I think some of that is, you know, if viewers haven't watched Hillbilly Elegy or read the book, Hillbilly Elegy, he understands it at such an intuitive level because he lived it.
He was in Middletown, Ohio.
He saw what happened in Middletown, Ohio.
He saw what happened to his family.
He saw the hollowing out.
I mean, so much so that Larry Summers, one of the people trying to fight this, He's such a foolish man, Larry Summers.
And in 2023, he specifically linked reserve currency status of the dollar, specifically said it might not be a good thing for the U.S. Specifically said we are getting wildly outproduced by the Russians in Ukraine and we can't credibly maintain our defense obligations because we don't have the industrial base to do so because of the dollar system and the resource curse.
And kind of left it open for Powell to kind of say, hey, you know, you got two minutes to answer.
We talked earlier about where you grow up leads and influences your views on investing in the world, etc.
The time frame in which you grow up and where you grow up.
Think about the time frame in which he grew up and where he grew up.
And he's brilliant.
And his ability to just synthesize data and understand not just the direct linkages, but the second and third derivative.
The implications and the policies that could be taken, the levers that could be pulled, to move those second and third derivatives in a way that is beneficial to really fix the issue and not just print money and try to paper over it.
That did not follow, and I quote, the stupid Washington consensus of the 70s, 80s, and 90s that de-industrialized all of us, and now you're choosing to de-industrialize?
And that ties back into this whole point of these policymakers are telling...
When was the last time you had the Vice President of the United States call the 70s, 80s, 90s, holy grail, this is the dollar system?
Stupid.
The stupid Washington consensus.
I don't ever remember hearing that.
And if it was a one-off, okay, whatever.
But we've heard it, the interactions with Powell.
Trump saying, I want to make us great like we were 1870, 1913, which is tariffs, low-income tax, no-income tax.
Rubio saying, listen, guys, we can't make stuff.
In 10 years, we're going to be...
We're dependent on China for everything we need.
Besant saying in his confirmation hearing, Wall Street's had a great run.
Main Street has really suffered.
It's Main Street's time.
We need to pursue policies that bolster Main Street.
Wall Street will still be okay.
They'll still do fine.
Maybe not as well, but it's Main Street's time.
We need a Main Street.
These policymakers are telling us, and it all, in my opinion, goes back to the structure of the system.
Which is, as long as we store global surpluses in our financial markets and in particular treasuries, that system is going to continue.
You move to a neutral reserve asset like gold, because now when they store money in gold, the price of gold goes up, currencies can move around, it's a natural rebalancing mechanism.
The dollar will weaken against the yuan, right?
What have we been saying?
We want the Chinese to weaken the yuan, weaken the yuan, or excuse me, strengthen the yuan, strengthen the yuan, strengthen the yuan, strengthen the yuan.
If gold goes up in dollars and doesn't go up as much in yuan, by virtual flows into, you know, dollar flows into gold and fewer yuan flows into gold, the dollar's going to go down versus the yuan, which is the very thing we've been trying to get the Chinese to do to stop dumping so much cheap product here.
The only criticism I would have of your critique, which I think is kind of brilliant and very well explained, is that I think you may be undervaluing or underrating the ferocity of the response.
I'm from D.C. and I just think the stakeholders, as we call them, the people who are benefiting from the system in place, can be really ferocious in protecting that.
I don't know when this is going to air, but we're a month and a day into the administration, and they've won almost everything except Matt Gaetz.
And, you know, I think it's incredible.
I've never seen anything like this.
Nothing like this has happened in my lifetime in Washington.
On the other hand, it was really a victory over the Republican Senate, which is a collection of some of the worst people I've ever met, but also some of the dumbest and weakest.
And so it's a great victory and I love to see them humiliated and, you know, every day that some of these people weep is a happy day for me.
On the other hand, like, they're not, you know, some of the stakeholders in the current financial system are smart and serious and they, you know, they are not people to play with at all.
I think they're completely ruthless.
I think they are, you know, willing to resort to things it's hard even to imagine and I don't know.
Where does this leave the average person, the retail investor, whatever we're calling that person now, on the question of gold?
Like, you know, I mean, if governments love gold, if gold plays a really essential part of the global financial system, which you've described, I think, in great detail.
Is it wise for the average person to take delivery on gold and just bury it in his yard?
I never owned gold before late 2008 or early 2009. When the U.S. depths of the great financial crisis came out and they said, okay, now we're going to print a trillion dollars and we're going to buy treasury bonds, QE. And I remember thinking to myself going, how can an oil producer like Russia or our factory base like China look at that and say,
So I'm going to expend all this energy to pump this oil and produce it and refine it and ship it and send it and pay you for dollars and then put those dollars into treasury bonds?
And you're just going to click a couple of keys on a computer and buy a trillion dollars of treasury?
Why would I sell my oil and store my surpluses in treasuries?
Look, if I was born when they were born and their parents came home from World War II and basically had 16 kids and let them go be free-range chickens.
And those people never stop telling their own story.
The stupid Vietnam War, every cliche about Woodstock and the dumb civil rights movement, which actually didn't really help anybody.
And everything about it was just like, it was just they were drowning in Lake Me.
And I was raised around people like that.
And they were my teachers.
And every single one of my teachers went to Woodstock.
Every single one of my teachers was at some sit-in and some lunch counter in Greensboro or something.
It's like...
They all were participating in these same mass market cliches, which they thought were like a sign of, you know, unique individualism or something, but they were all like a herd.
They were like dumb and narcissistic and mediocre.
But how do you get them to pay more for their own care?
Well, simple.
You get them into treasury bonds, and then you tell them inflation's four, you give them a 4.4% on the treasury bond, and you actually let inflation run six, eight.
And that's why you need to also, as an investor, whether you're a boomer, whether you're not a boomer or younger, You need to own some gold because over time, you'll lose on your bonds, but your gold will more than compensate you for that inflation.
You maintain your purchasing power, and I think your stocks will if broadly diversified, but that gold is ultimately the release valve that that is happening.
And it needs to happen, but basically...
We're not going to be able to have an election and say, hey, boomers, we need you to pay more for your care.
No politician will be in office after trying to do that if they raise taxes on boomers to do that.
So what do they do?
Because they can't do that, they take sort of the politically uncourageous way out, which is you inflate.
You have to inflate, and that's what they're doing, what they have been doing, what they're going to continue to keep doing, in my opinion.
And that's why I think...
I think retail investors need to own 5-10% of their assets in gold billions.
No, I do it to be self-aware and parody myself on some level.
But in all seriousness, over time, one of the metrics I have looked at when we're talking about a restructuring of a system, we talk about the debt levels being a problem, all these things.
I have a metric that looks at the market value of U.S. official gold, right?
So let's pretend it's all there.
We had that discussion already.
Let's pretend it's all there or it's being brought back here maybe as we speak, but it's all there.
There's a metric that I follow that is the U.S. official gold as a percentage of the foreign-held portion of the U.S. federal debt, right?
So it's what percentage, market price, what percentage is the United States official gold collateralizing?
Our foreign-held debt, because in the end, we can cram down our own people, but we have to maintain foreign creditors.
So, long-term, the average, going back to, I think, 1960 or 1950, that number was 40%.
U.S. official gold, at market price, collateralized our debt by, on average, 40%.
As recently as 1989, that number was 20%.
In the dollar crisis of 79.80, that number was 135%.
That was a true gold bubble.
In other words, if our foreign creditors would have been so inclined and we did it, they could have demanded gold for treasuries, and we still would have had a third of our gold left over.
Okay, where is that number today?
That number today, with gold having risen 40% in the last year, is at 9%.
So gold, in my opinion, at a minimum over time, Probably has to rise at least 2x and probably more like 4x just to get back to historical levels, assuming no further growth in the debt and assuming no ever again and assuming no dollar crisis that leads it to go over 40%.
And so it's still paradoxically one of the cheapest assets on the board when you look at it relative to the debt outstanding and the way this probably needs to be resolved from a debt perspective and an economic restructuring perspective.
So it turns out that YouTube is suppressing this show.
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