Economists Uncut

David Lin (Uncut) Fed To Launch ‘Bazooka’ After Crash 01-27-2025

Fed To Launch ‘Bazooka’ After Crash: Why Risk-On Investor Turns Bearish | Matt Piepenburg

U.S. debt levels are still soaring. The Congressional Budget Office just released a new update. We’ll get their updated forecast for the next couple of years.

 

We’ll get the forecast of our guest, Matthew Piepenburg. He is the managing partner of Greyer’s AG. We’ll get Matthew’s take on what’s going on with the economy, which assets to look at as investors, risks and opportunities for 2025.

 

Matt, good to see you. Good to be back, David. Good to be back.

 

We were on the show a couple of months ago. People should check out our last interview. We talked about the debt issue in great detail.

 

We’ll revisit some of those themes today again. Exactly one year ago, I had you on this show right here in this spot at the Vancouver Resource Investment Conference. You were a little more constructive, let’s say, on the markets back then on risk assets.

 

That turned out to be a great call. People should check out that interview as well, link down below for Matt’s call back then. What’s changed for you this year? Yeah.

 

Last year, I was joking before we started, I was kind of plugging my nose and saying risk. That’s right. Look, I’m very cynical about a Fed, Pavlovian driven market.

 

If I looked at the normal things of Ben Graham and valuations and price to book, price to equity, price to earnings, excuse me, all the things that would normally make free price discovery make me cynical about the markets. Last year, this time, I was very risk on only because when we met in January, already by November, it was pretty clear that Powell was signaling a more dovish stance for 2024. He didn’t even cut rates until September, but just that carrot floating out in front of the markets when he was talking about rate cuts for that year, this year, 2024, I knew that the markets were at Pavlovian because, and again, I’m simplifying a great deal of complexity in the equity markets, but it basically boils down to this, when a central bank is dovish and openly dovish, and we knew we had to cut rates also because the cost of debt was getting too high and to hire for longer.

 

The Fed couldn’t, I mean, Uncle Sam couldn’t afford to hire for longer, but when a central bank is dovish, the markets are usually bullish, and when a central bank is hawkish to moderately hawkish, markets tend to retrace or be bearish. Last year, the signals were pretty loud and clear. Again, even though the actual cuts didn’t happen until September, that was enough for markets to have that candy in front of them, be more of a tailwind, more risk on, and proved out to be a great year for the S&P, and also, obviously, a fantastic year for gold, but this year, I’m a little different, not quite as bullish.

 

Non-farm payroll numbers from the previous month came in at $235,000, $100K more than the initial expectation. I remember that day, markets dropped like a rock on that report. It’s kind of ironic how a stronger economy is now bearish news for the equities markets, perhaps, and again, ironically, that a strong economy has propped up asset prices up until now, but yet has also caused inflation to be sticky, and now the Fed’s kind of putting a pause on cutting rates, which is ultimately why a lot of investors like yourself are a little more cautious right now.

 

Are you cautious because of a strong economy? That’s my ultimate question here. Not at all. That’s a great point.

 

I mean, bad news is good news, good news is bad news in a Fed Pavlovian market. We could talk about jobs and labor and that whole fiction, but setting that aside, agnostically just saying let’s assume it’s positive news, well, the markets say if it’s positive news, that means the Fed will be less dovish. And the markets are now, the rotten wing beneath, the rotten wind beneath this debt-driven stock market is support from a central bank, lower rates.

 

If there’s positive news in labor, that may slow down the dovish tendency, and so that’s why markets reacted poorly to otherwise good labor news. So, you know, again, that’s to this thesis of I wish we had free price discovery, I wish we had natural supply and demand, I wish we had Ben Graham. What we’re seeing more is Charlie McKay, the madness of crowds, and we’re seeing the market reacting to how accommodative a central banker will be, or a central bank will be in the U.S. in particular.

 

And I’m very much simplifying, but there are other reasons to be a little more cautious this year than last year. I mean, when you have a rise in the S&P, and again, let’s be very clear, I completely separate the economy, which I’ve said long ago was in a recession last year, from the markets. They’re two very different things.

 

But when you look at the markets now, and you look at the Fed being a little more moderately dovish than they were super dovish last year, they’re talking about maybe less rate cuts for 2025, even one less rate cut makes the markets nervous. Even Goldman Sachs projections on gold are a little bit lower because they see one less rate cut. But the point is, in addition to the Pavlovian nature of this entirely centralized stock market, S&P, Dow, Nasdaq, you can look at a Nasdaq with a P of 49, but I’m looking at really boring, obvious leading indicators.

 

The Buffett indicator, you know, that’s a classic. It’s at all-time highs. It’s over 200%.

 

It’s at 208 in certain days. And that’s just market cap of the S&P to the GDP. And when you look at that classic Buffett indicator, it always peaks before a pretty significant retracement.

 

In addition to just the actual data points and percentages on the Buffett indicator, you’ve got Buffett himself going to record levels to cash. He’s a pretty smart guy, pretty decent in equities, pretty strong in valuations. He’s being defensive.

 

A lot of portfolio managers I talk to are very defensive now, more in cash than they were a year ago. And frankly, it’s not just my cynicism. You can talk to Druckenmueller, you can talk to Gundlach on the bond side, Jeremy Grantham, Ray Dalio, Paul Tudor Jones.

 

We’re all having the same views. So it’s not just trying to be negative. I also look at another board indicator, it’s just the S&P to currency and issue.

 

Pull up that chart when you get back to the office. It’s a fantastic chart. That too is showing a tremendous overvaluation.

 

You tack on those two obvious indicators with a very narrow, narrowly driven equity market. I remember in the 70s, I wasn’t trading, obviously, I was just a kid. But we all look back at the nifty 50, they thought that was narrow.

 

We had 50 names. Now we’ve got seven to five to three that are leading. That’s incredibly narrow.

 

And just the fact that NVIDIA, its market cap, which has risen so dramatically, so fast, its market cap is 12% of GDP if you looked at the valuation of it. So you’ve got a very narrow, overvalued market by every indicator. And I think eventually the laws of gravity will apply.

 

And then you go to Robert Graham, you know, or excuse me, Robert Farrell, very ignored thinker. Again, I think fundamentals eventually will matter. And what did Robert Farrell say is the most misunderstood, ignored and powerful force in the markets.

 

It’s the force of mean reversion. And the overvaluation here is quantifiable. The question is, will the Fed wait for a crash to then pull out the bazooka? Because they only have two tools.

 

You know, they have Fed balance sheet interest rates. So every problem looks like a nail when all you have are hammers. But will the Fed try to prevent a major, major retracement? Or will they wait for it and then pull out the bazooka? Will we have an EK89 that stays down for a long time? Or will we have another dip by the low and see QE sustain this market? Somebody asked me that the other day, and I’d like to get your perspective.

 

He said, what would need to happen for us to have a major market crash that lasts several years, not just a flash crash like COVID, then we had a V-shaped recovery, but something like a Nikkei or the Nasdaq popping in 2000, didn’t recover until 10 years later to its pre-1999 levels, right? What are the conditions necessary for that kind of event? Well, you have to have a fundamental, fundamental change at the Eccles Building and a fundamental change in the way we’ve been doing business for the last 40 years, because this credit, this debt bubble based on low rates has been building for decades. And typically, the political nature of the Fed has been to never let the markets have natural price discovery, natural mean reversion. As soon as there was any significant crisis, it was immediately pumped back in with synthetic liquidity.

 

You’d have to have like a Bill Martin or a Paul Volcker. You’d have to have someone who says, let the pain, keep the punch bowl out, let the pain be real. Let it last.

 

Certainly, a major mean reversion would be a deflationary event that could solve our quote unquote inflation problem with a massive market crash. Politically, it’s hard to imagine. In a lot of ways, the only really good narrative in the US right now is the markets.

 

It is the net international investment position for the rest of the world, this unbelievable bubble. And I think, is it too big to fail? You could technically have a market that never collapses as long as you buy that market at the expense of the currency by queuing into the moon. It would be very interesting to see.

 

I think we need austerity. We need, sadly, a recession. We should allow free markets to come in.

 

But frankly, we haven’t had free markets in decades. It’s certainly not since Greenspan. Whether it’s Greenspan, Bernanke, Yellen, Powell, the market almost feels like a national 401k.

 

You have to support it. But more importantly now, you have to support the bond market. The bond market is the thing.

 

If they don’t QE, once the reverse repo, which is now drying up, or the TGA dries up, or these other tricks for backdoor liquidity, if you don’t support an otherwise unloved US Treasury, then bond yields rise. That means the cost of debt rises. Because there’s no support for bonds, the prices fall.

 

If bond prices fall, yields rise. Yields are the real interest rate, not the Fed funds rate. And so if yields rise, that crushes just about everything but the US dollar.

 

Every asset class, from real estate, from mortgages, certainly from equities. And my gosh, that makes Uncle Sam’s debt repayment, interest payments far more expensive. So there’s almost a matter of national economic security to keep those debt markets monetized.

 

And because treasuries are now otherwise unloved, there’s certainly less love since 2022 when we weaponized the dollar. And in addition to being a weaponized, distrusted US Treasury, the rest of the world is catching on that the US is too massively in debt, that it’s a bad credit from a bad issuer. So the combination of the debt-soaked nature of the US Treasury and the fact that it’s been weaponized means there’s less and less buyers of those Treasury auctions for our IOUs.

 

And the key indicator of that would be Japan and China. Traditionally, our best buyers at the auction have been net sellers this year. The one thing that would prevent a long trough, a long dip if markets were reverted, would be the national interest of supporting the bond market.

 

And if the bond market’s supported, yields come down. If yields come down, the cost of debt comes down. The cost of debt comes down, the equity markets can rebound faster.

 

Scott Besant, at his Treasury confirmation hearing on the 16th of January, said that the Treasury might be hard-pressed to help a nation in case, or the nation, in case of a national emergency based on current levels of spending. In other words, he’s insinuating the government can’t even afford to solve a national crisis when it comes to a natural disaster. Well, how concerned, do you agree with this? How concerned should we be about the rising U.S. debt levels, spending levels? Is this just alarmist talk from the incoming Secretary of the Treasury? Obviously, we should be concerned about debt levels for a number of reasons we can get into.

 

And one of the most recent examples that Besant was talking about is just look at the hurricanes that came in to hit North Carolina. And this was at a time where the reaction, I mean, you can look at the Palisades fire too in Los Angeles. But certainly, this hurricane in North Carolina, near and dear to my heart in the South, being from Virginia, or living in Virginia for many years, it was appalling.

 

There wasn’t enough money for transformers, for electricity, and yet we were sending billions off to the Ukraine. Again, not trying to get into political fairness or unfairness of that, but there was a lack of initiative and technically a lack of funding. Now, I don’t think the U.S. Treasury is ever going to not have the funds, because it will always go across the street to the Constitutional Lab and go to the Echols building, mousetick a zero to the balance sheet, and monetize its problems in some way at the expense of the currency.

 

But I think what Scott Besent is saying is, they’re going to need cooperation from the Treasury and they’re going to need cooperation from the Fed. I’m not sure right now they feel that Yellen and Powell are going to give it to them the way they want. It’s a long, long story, but for Trump to be successful, he has to bring down debt to GDP.

 

And he’s going to, one of the ways to bring down the debt is to monetize it or inflate it away. One of the ways. He can have regulations that are less regulatory, more productivity, but he’s going to need lower interest rates and eventually more QE.

 

If Powell doesn’t support that, if Yellen doesn’t support that, that’s going to be a real problem for his make America great again. So it’s not unusual to see Besent coming out with these statements. I think there’s going to be some tension between Powell and Yellen and the new administration.

 

That’s why a lot of the ideas that Trump has, great optics, a lot of promises, but DC is very embedded in its old ways. It’ll be very interesting to see how the new administration reacts with the embedded administration. I’d like to play for you a short 20 second clip of him talking about the dollar.

 

Be clear. This is one of the things that got me out from behind my desk and my quiet life in this campaign was the thought that this spending is out of control. We are spending about 24, 25% of GDP.

 

So as you said, 6.8 to 7% deficit. We have never seen this before when it is not a recession or not a war. And I am concerned because several times the treasury of the United States has been called upon to save the nation, whether it was the civil war, the great depression, world war two, or the recent COVID epidemic treasury along with full government and Congress has used its borrowing capacity to save the union, to save the world.

 

He also said, so that goes back to what we just talked about. He also said that the treasury needs a, or the U.S. needs a stronger dollar overall. You know, how would you respond to that clip I just played for you? Well, first of all, it’s refreshing to see someone at least talking about deficit GDP, talking about excessive spending, talking about overspending, talking about really deficit spending.

 

And I want to answer directly. That’s refreshing in itself. This is a Yale scholar, pretty smart guy, knows his history.

 

It’s just refreshing to see someone talking that openly about a real problem because that’s been not talked about at the political landscape as much as it should be. So that in and of itself, I’m happy to hear. In terms of Trump wanting a stronger dollar, actually when he was campaigning, whether it was Jake Sullivan yelling or Trump, or frankly even Harris at the time, I got the impression they wanted a weaker dollar.

 

I think they need a weaker dollar. And here’s why. First of all, absolutely true, we need to cut spending, but cutting spending is expensive.

 

If you take the DOG, the Department of Government Efficiency, as an example, Musk and Vivek, this idea of cutting the fat, the bureaucracy in DC, pink slipping 75% of the agency fat, that’s a way of cutting $2 trillion in spending over the next two years. That’s the goal for our 250th anniversary, to cut $2 trillion in spending. The problem with that is, it’s yes, yes, but, but, because for that to even be effective, first of all, as I’ve said to you before, if you pink slip a lot of people in DC to cut spending, you don’t do that unless you have a weaker dollar.

 

Because if you do that, 25% of our GDP comes from government. If you slash spending in government, that actually is going to have an impact, a negative impact on GDP. And if you do that during a strong dollar period, when those people come off the unemployment lines into a highly levered America, they’re going to be expensive too.

 

So it’s not as easy as just cutting the fat, as if it’s a zero-sum game. If you push here, there’s something that comes up over here. It’s not as easy as they think.

 

The fact that they want to cut spending is great, but frankly, they can save $25 billion in interest expense just by cutting interest rates by 25 bps. They need more support from the Fed if they really want to cut some of the expense of interest. But the idea of cutting spending is fantastic, but the real reality is this.

 

If they really want to make an impact on debt to GDP, and they really want to cut spending, they’re going to have very little wiggle room. Because as we talked about before, when you take away interest expense on debt, military and healthcare entitlements, you only have 25% to work with. The only way to really cut spending is to do something severe in the military budget or the entitlements.

 

That’s politically very difficult. Now, Colonel Douglas McGregor was here this morning. He’s a soldier.

 

He’s a colonel. He says we should just be, absolutely. Like Ike Eisenhower said, cutting military spending.

 

These are two military guys who warned back in the 60s. Ike said, cut the military industrial congress, military industrial complex. Cut that.

 

We should only be spending money to defend our borders, not be spent all over the world like other empires have done to destroy themselves. If the Trump administration really wants to make a dent in the debt to GDP, and really make a dent in spending, it starts with the military. That’s a very politically polarizing topic.

 

By the way, for world reserve currency to retain its status, it has to retain its military hegemony. There’s a lot of contradictory ideas and powers here. It’s not as easy as we think.

 

It’s not as easy to cut spending. When you make promises on the campaign, you have the optics of the doge, but the real spending cuts are going to have to come from politically difficult areas like the military, like entitlements. They’re massive.

 

Look, it’s just not as easy in reality as it is on a campaign. I’m not trying to take the wind out of the new administration’s sails. I’m sure they know this.

 

Tariffs are also going to be expensive, traditionally. There’s a lot of great optics, a lot of great ideas. Actually, over the long term, I think they’ll be great.

 

It’s going to take more than one administration, but the Trump campaign or the Trump administration is coming in. They know they’ve got midterms in two years. They want to work fast and furious.

 

Trump isn’t worried about re-election. He’s got a House. He’s got a Senate.

 

He’s got a Treasury Secretary. They want to move hard and fast. It’s going to be very disruptive.

 

It’s going to be whatever you say about Trump, love him or hate him, he does what he says. The question will be, is what he does going to be effective? Really, each of these silos could take an hour on each side to really dig into the weeds. It’s just not as easy as it sounds.

 

I think most Americans know that, even those who support Trump. You’ve been bearish on the dollar for quite some time, and I think you still are. Here’s one potentially bullish case for the dollar that I’ve read recently.

 

The House Financial Committee is looking to regulate the use of stablecoins, which is just fiat on a blockchain for the audience. A lot of stablecoins being in use right now, dominant form of payment in the blockchain. It’s been speculated that stablecoins will be the number one use or purchaser of US Treasuries going forward.

 

Because if you were to use a collateralized stablecoins versus an algo stablecoin, you would need a huge amount of US dollars in reserve. What’s your take on whether or not stablecoins could change your outlook? I think you’re spot on to a very important topic. First of all, I’m bearish on the dollar long term just because of the debt.

 

The debt describes it. But look, the Dixie is at 109 today. I think it’s like going like I think that trading range is 100 to 109.

 

I don’t think it’s going to go to 150 or 170. I don’t think it’s going to go back to 60. The dollar is still the best horse in the glue factory on a relative basis.

 

On absolute terms, it still purchases less. So regardless of what the Dixie does, what you buy with a $100 bill is going to be a lot less each successive year, even if we’re still the best horse in the glue factory, the best patient in the ICU. Again, if I’m in Venezuela, Argentina, Istanbul, I much prefer the dollar over a peso or lira.

 

So I want to be clear about that distinction. As to the stablecoin point, you’re spot on, David. Sadly, you’re spot on.

 

And I’ve been talking about this and it’s very wonky and complex. I won’t get into it now. But look, stablecoin, brilliant idea, but it’s just a wolf in sheep’s clothing.

 

Stablecoin is effectively CBDC by another name. This is telegraphed four years ago by the IMF. We’re in desperate times.

 

We need desperate solutions. CBDC, stablecoins, we can’t get into the ISO protocol, you know, compatibility or XRP and what they’re doing with Ripple. It’s basically we’re going to a tokenized, digital, digitized economy.

 

That’s unavoidable now. Tether, which is created, frankly, as a stablecoin. And it’s a protocol that works off the XRP system, which is XRP is the highway basically for any digitized or tokenized asset like stablecoin to enter.

 

So you need a certain protocol. What Tether is to me is a stablecoin, obviously, it is a central bank digital currency because it’s basically a one-to-one ratio with U.S. Treasury. So if you create a buzz in the crypto space, you legitimize the crypto space.

 

Three years ago, Trump hated Bitcoin. Now he loves it. Now he’s talking about a Bitcoin strategic reserve.

 

There’s nothing strategic about Bitcoin that will upset the Bitcoin audience, but it’s going to go higher. Because what Trump is doing is like he calls it the new oil. We did this in the 70s.

 

We inflated oil because it was backed by the dollar to support more interest in the dollar to get some of our post-Vietnam debt out of the way. There was a very, very deliberate policy to expand the oil price, to create demand for the dollar, to help us get out of debt. We’re doing the same thing.

 

The new oil is digital assets. It’s the blockchain ledger. But Tether is just another way to mop up U.S. Treasuries that no one else is buying in the auctions, that no one’s buying in the foreign markets, that no one’s buying at the BRICS.

 

But now Tether on the wings of a Bitcoin bubble, on the wings of a digital bubble, on the wings of a new, let’s be honest, I mean, this is the new distributive ledger reality we’re in. It is wonderful for the Treasury and that will actually support the dollar. You’re absolutely correct.

 

But be careful what you ask for. IMF was telegraphing CBDC and telegraphing digitization and tokenization four years ago during the COVID crisis. But what Tether really is, Stablecoin, what it really is, is a form of digitalization.

 

But with digitalization comes digital ID. And this is a slow drip. This is classic slow drip, frog boil centralization.

 

Centralization always follows desperation. We’ve talked about this before. You have a debt crisis, the financial crisis, inflation crisis, social crisis, more centralization for the left or the right.

 

And what it is really, again, it’s a wolf in sheep’s clothing. It will absorb Treasuries because Tether or Stablecoin like that is one to one U.S. Treasury, basically. And so it will absorb and create demand for a Treasury that otherwise is not loved.

 

And so it’s actually quite brilliant. And I can’t say I don’t support it in terms of the trade, but be careful what you ask for, because you’ll get that trade at the expense of your individual freedoms. That may not matter.

 

Plug your nose, take the trade. But this idea of individual freedoms, this idea of fear for CBDC, this idea of all the things. Remember, when Bitcoin was originally touted, it was about being decentralized outside of the banking system, a maverick, totally decentralized asset.

 

It is now part of a narrative, ironically, but not surprisingly, everything that happens in the dark state. It’s now part of a narrative that’s completely flipped upside down. You got to wonder why Trump was negative on Bitcoin, why Larry Fink was negative on Bitcoin.

 

And now suddenly they’re supporting a Bitcoin strategic reserve because it’s part of the Tether narrative. You got to even wonder, come on, even Voorhees, a big Bitcoin proponent, just six months ago said, why am I in Bitcoin? Because it’s far from the swamp of government. It’s far from banks.

 

But Bitcoin is being used. The narrative of crypto is being used to draw demand into stablecoin. And that is not decentralized, not big government.

 

Bitcoin couldn’t be more politicized. Digitization, tokenization could be more politicized now. And everything’s going to be tokenized, whether that’s cross-border payments, whether that’s meme currency stocks, whether that’s interbank payments, whether it’s smart contracts, everything is going to be digitized.

 

That will be more efficient. That will pull in demand. But you’re going to lose some privacy rights, some civil liberties, and it’s a slow frog boil towards a more centralized economy.

 

And look, I warned about this four years ago, and I wrote about it then. CBDC will be slow-gripped in, and Tether is just a part of that narrative. I think for the investors watching, they want to understand where to park their cash, either in U.S. dollar-nominated assets or foreign assets, what you think of the currency pairs, USD versus something else is important.

 

So take a look at this chart, for example. You’ve got the 10-year versus the DXY, you know, perfect correlation here, makes sense. So let’s talk about your outlook for the bond market and whether or not that this correlation is going to hold, the 10-year versus the dollar, the DXY.

 

What does this chart show? What’s the narrative here? Look, again, the bond market is the thing. Yields are the most important thing. That is the real mandate of the Central Bank and the Federal Reserve.

 

They can talk about employment and inflation, but their real mandate is making sure that there’s not a failed Treasury auction, that there’s not a failed bond market. Because we are an economy, we are a system that lives off the issuances of IOUs. They have to keep those yields under control.

 

Right now, with yields spiking relatively, the dollar is getting stronger. But again, they have to keep those yields under control. And so your question, what will they do? Where do people park their cash? Again, on a relative basis, if you’re anywhere else in the world, the US dollar is superior to just about every other currency.

 

But on an absolute basis, if you’re an American citizen living in America, if I’m an American living in Buenos Aires, I love seeing the DXY going up. I love seeing yields go up, makes the dollar stronger. But if I’m an American, yeah, my dollar is stronger relatively, but if I’m in my own country, I want to see a dollar that holds its purchasing power over time.

 

So where would I park my assets in a safe zone? Well, up until recently, it was the short end of the yield curve. You got at least more yield in the 10-year, you got it in the two-year. Now it’s about a four basis point difference, a 40-bit difference.

 

What is it? I think it’s 4.2 versus 4.6, that yield curve. By the way, when that yield curve went from inverted to now re-uninverted, that’s usually a recessionary indicator. That’s right.

 

Since World War II, it always has been. But notwithstanding that, where do I park my money? In the risk-free return of the 10-year treasury. I think the 10-year treasury is a return-free risk based on actual inflation, not misreported inflation.

 

But even if you take the BLS’s word on inflation, I think it’s going to go much higher for a number of reasons. And frankly, the 10-year over the last five years on an annualized inflation-adjusted basis is underwater. It means it’s getting negative yield for the last five years.

 

I can send you the graph on that. It just is what it is. So you’re actually not finding the safe haven in the bond market you did 30 or 40 years ago in my dad’s market.

 

So where do I park my cash? Of course, I’m talking in my book. I wouldn’t park it in an IOU from a discredited, indebted, unloved US government until there’s massive changes. And so what is the rest of the world doing? And again, it’s not to get into a brick side show or talk about de-dollarization, but look at Eastern central banks, not like the moronic Gordon Brown who sold all his gold after the wall came down, or Canada that got rid of all its gold.

 

What is the smart, quote unquote, I would say realistic central banks doing? What is the BIS telling you? The next tier one asset is gold. Obviously I’m talking my bias. Obviously I’m talking my book.

 

But these central banks aren’t stupid. They’ve been seeing this ball in motion since 2014, more so since 2022, when we weaponized the dollar. There was an average of 118 tons a year by central banks being bought.

 

Now it’s well over 260. Why? Because they want, like the BIS, to recognize that the best way to save as a store of value, your cash, is in a precious metal hard asset like gold. That is not me talking my book.

 

Look at the data. It’s happening. It’s continuing to happen.

 

So you save in hard assets and you spend in fiat. You used to save in treasuries. You used to save in bonds and then reallocate.

 

Is there another fiat you like more than the dollar or is it just the concept of a fiat, a government-denominated asset? Swiss franc, Japanese yen, the Bank of Japan’s raising rates, probably the only major central bank right now to do that. But fiat by its nature, well fiat really means whatever the government tells you it is, is the currency. Sure, yeah.

 

But any currency that’s not backed by a hard asset eventually reverts to, like Voltaire says, its intrinsic value, which is zero. That’s an extreme statement. But if you look since 1971, since Nixon took us off the gold standard to get himself reelected, to have unfettered ability to print money, every major currency, including the Swiss franc, has lost well over 95% to 98% of its purchasing power when measured against a milligram of gold.

 

I can send you that graph as well. That’s not sensational. That’s just a fact.

 

It’s not discussed at the RA office. It’s not discussed at your private wealth manager at Goldman Sachs for a number of reasons. But it’s a simple, non-gold bug objective reality that gold is a far superior store of value than a treasury, or an IOU, from any currency, from any issuer, anywhere in the world.

 

I still say, when you’re talking about who’s the healthiest patient in the ICU, it is the US dollar, because it still has the power of that world reserve currency. It still has a massive percentage of FX reserves. It still has a massive amount of power, notwithstanding the dollarization.

 

It’s not going to disappear anytime soon. I think it’s going to be repriced. It can be strong on a relative basis.

 

But if I were an American living in America, great. We’re stronger than everybody else. I still have a real hard time paying for that flight, paying for that tuition bill, paying for that car payment.

 

And by the way, for most Americans, I have a real hard time paying 22% interest on my credit card. So yeah, great. We’re relatively stronger.

 

But personally, when you cross the GW bridge, when you buy clothes, groceries, cars, houses, everything still costs more. Your dollar buys less. That’s the hardest thing for people to understand.

 

We’re conditioned through cognitive dissonance to trust the IOU of Uncle Sam. But we’re not the same country we were decades ago. You said to me offline, you mentioned this earlier, we’re in a recession where we have been.

 

Are we at the tail end of a recession? What do you mean by that? Are we some sort of contraction? Well, look, again, the classic indicators are the Psalms, the Conference Board indicators, 13-year peak in business bankruptcy, small business bankruptcies. I mean, you can go on and on. There’s the U6 unemployment, the revised labor from the Department of Labor, total fiction.

 

Nick Eberstadt, just like John Williams and even Larry Summers, is more honest about employment. Just as Larry Summers and John Williams were about inflation. It’s simply not tinfoil-headed.

 

That data points just aren’t true. Yield curve since World War II, what the yield curve is telling me is we’re already in a recession. So, and again, it’s the layoffs, it’s the unemployment, it’s the Main Street reality.

 

You look at manufacturing, you look at retail, you look at year-over-year car sales. All of those are negative to flat year-over-year. So I think for the average guy on Main Street in Toledo, Ohio, Shaker Heights, Ohio, Michigan, Virginia, California, for the average American, they don’t need to wait for the NBER to tell them they’re in a recession.

 

They’re in one. So yes, we’re in a recession. I want to get back to you.

 

What was your question? So we’re in a recession. So what does that mean for? What does that mean for investors? But more specifically, are we in the tail end of a recession currently? Because you said we’ve been in a recession. Is this recession that you’ve described, is it almost over or do you think it’ll persist throughout 2025? I think it will persist because we have to first admit we’re in a recession before we can tackle a recession.

 

You’ve got to grow your way out of a recession. We need growth policies. I think Trump’s administration wants to cut regulation.

 

That will certainly help productivity, but I don’t think it’s going to be enough. The reason I don’t is because this goes back to 1752 David Hume. It goes back to 20th century von Mises.

 

It goes back to recently Reinhart and Rogoff. When your debt to GDP crosses the Rubicon of 100% and now we’re at 125, mathematically growth slows by one third. So we have this massive set of cannonballs on each ankle as we’re trying to grow.

 

So we have to cut the debt to get the growth. Until we get the growth, we can’t get out of a recession. The only way to get out of a recession is kind of like the bazooka COVID policy of more fiscal spending, which puts us into more debt.

 

So round and round we go into solving a debt crisis with more debt, buying growth through deficit spending, buying growth through the fantasy that debt can solve a debt crisis. If we really want to do a long-term save America, it’s going to take more than one term, it’s going to take more than one policy, and we’re going to have to do some serious cuts in entitlements and defense. So how do you think the world order is going to change during Trump 2.0, specifically BRICS versus the US? Trump has threatened 100% tariffs on any country.

 

He was targeting BRICS more so, on any country that moves away from the USD in trade. It doesn’t look like the BRICS are really worried about this threat so far, at least in the news or whatever we’re reading. But how do you think they’ll respond to some statement like that? I think they’re going to respond, as Russia said, this is going to put further pressure on the dollar down.

 

Look at Trudeau, your Trudeau. He was pretty scared when Trump said that. He ran right down to Mar-a-Lago, didn’t go too well for him.

 

It’s pretty embarrassing. Unfortunately, the BRICS ain’t Canada. No offense.

 

They have a little bit more power. Again, we’re going into a multi-polar economy, a multi-polar, that’s undeniable. That does not mean, by the way, that Russia, China, Brazil, they don’t have major problems of their own.

 

They have severe problems. But that genie is out of the bottle now. We’re going to a multi-polar economy, frankly, a lot of ways a multi-dysfunctional economy.

 

But the BRICS are not going to bend like Trudeau, and I’m not saying it’s going to be clean. I think the tariff policy, first of all, tariffs are supposed to protect manufacturing. We don’t really have manufacturing.

 

It’s been offshored to China and Central America. It’s really a form of weaponization, let’s be honest. Weaponization didn’t do so well for us since 2022, and this is just an extension of that.

 

It’s falling right into, I think, the plans of Russia and China to continue to move the hockey puck away from the dollar. But regardless of that speculating, we can look at a case history, and you blow the dust off the history books. Yes.

 

We had the Smoot-Hawley Act in 1930 under President Hoover. Right. And what did that… Well, first of all, it destroyed the political career of Hoover.

 

It lost Smoot and Hawley their seats in the Senate. All those countries that we put those tariffs in for reacted. There’s a tit-for-tat reaction.

 

So exports to the countries that we put tariffs on went down by 30%. We went into a recession. Gold standard got so bad.

 

So Smoot-Hawley, as an example, was very destructive to GDP. It created more trade wars and more new trade arrangements outside of the US, which is exactly what the Bricks are going to do. I’m not saying it’s a failed policy.

 

There’s a lot of reasons why Trump wants to put the tariffs. He wants to tell companies that are in China, look, you want to sell yourself to America. You’re an American company, but you’re going to have to import American products from China.

 

You better get your butts back in the US and make it here. I see why he’s doing it. Hell, I live in France.

 

You don’t see American wine in France because France puts a 25% tariff on American wine. So he wants to reorganize fairer trade. The simple reality is it’s not as easy as he thinks.

 

History, math, inflation, GDP, and debt suggest to me those tariffs politically, optically, even fundamentally sound ideas, but it’s going to be a little bit more painful than he realizes. And we’re going to see that real quickly. People have been telling me how tariffs are somewhat inflationary.

 

The unintended consequence could be that as you brought up Smoot-Hawley back in the 1930s, that could happen. We can get a depression. Worst case, right, if it gets out of hand, right, I’m not saying we will, but let’s say worst case it gets out of hand, well, that’s a disinflationary, not a deflationary event.

 

Yes, absolutely. Look, I’m ultimately like Paul Tudor Jones, the end game is inflation. Yes.

 

But that doesn’t mean we can’t have massive deflation first, like a mean reversion in the market or a major recession slash depression. That’s the best way to get rid of inflation is have a depression. What’s your ultimate inflation hedge portfolio, Wendell, here? I know gold is a major part of it, but if one were to construct some sort of portfolio that is aimed at protecting your wealth, you know, besides gold, what else would I do with my cash? Look, you could argue hard assets that will have this commodity super cycle in the S&P tanks.

 

If you look at the 12, 15, 13-year cycles, you see the charts. Ronnie Stifler’s got some great ones, he calls it the chart of the decade. When stocks tank and we have a recession and markets and the economy correlate and go down, usually you see a rise in hard assets.

 

The problem is a flip side of that is if you have a recession, there’s less demand for commodities and hard assets. And so even though commodities, by the way, are up big across the board this year, and that adds to the inflation tailwind, I can’t help myself but be biased. Again, not trying to sell my book.

 

Hard assets, commodities are a broad statement. Metals and precious metals are different. Base metals are different.

 

Precious metals are monetary metals. So I’m really trying to hedge against inflation. By the way, gold, many people say, isn’t a hedge against inflation.

 

I totally disagree. But in general, before I just pump my book about I want a monetary metal over the long term to hedge against inflation, in general, you want to be in hard assets, but you want to buy those at the right valuation. I’d want to be in real estate.

 

I want to be in farmland. I’d want to be in things that are valuable over time and hold their value longer and have an actual use. The problem is, it’s very hard for the average American to get into farmland, unless it’s through an ETF, or to get into certain hard assets that can withstand a recession and still have demand.

 

That’s a classic case for the silver discussion. Is silver a base metal or a monetary metal? Will it act like a base metal? Will it act like a monetary metal? And so it’s a difficult question. My go-to reaction to anything where I see major economic pain and major threat to the currency is gold.

 

If we have deflation, and by the way, if we have a market crash, everything that’s not nailed down is going to go down in price, including gold. And I’m not against the fact, the reality that gold can suffer short term, but it will never have the kind of moves we saw with Bitcoin, the S&P or the other asset classes in a recession or in a market inversion. It usually dips for a very short period of time and then climbs to all time highs.

 

On a speculative basis, that’s how I look at gold. But on a long term wealth preservation, I’ve become so boring, so unsexy, because I really answer all my questions, not just about price optionality and hopefully rise in prices, but I just look at gold as a better store of value and a better long term way to sleep at night because it will sustain high and low cycles, deflation, inflation. And right now, technically, gold should not be doing well.

 

The DXY is strong, inflation is contained, we’re getting higher yields on our bonds. But gold is broken away from all of those traditional correlations because we’re in a world of too much debt, too much change, too much unfixable broken systems are going to take far more than two years or four years to fix. And unfortunately, whether we like it or not, gold in a recession, gold in a ripping market is still going to be a better asset than Bitcoin moved 100 percent in 60 days.

 

Not trying to criticize Bitcoin, I’m saying that’s not a store of value. That kind of volatility doesn’t even come close. Even if you say it’s consolidating, that doesn’t mean I wouldn’t go long XRP, Bitcoin or Tether or Ripple right now in this new administration.

 

That is a massive tailwind to politicize Bitcoin, to politicize crypto. It is a massive tailwind, undeniable. But that’s speculation, that’s not wealth preservation.

 

Well, you brought up your book, Gold Matters, Real Solutions to Surreal Risks. So maybe let’s end off here. We discussed several risks to the economy, the debt crisis being one of them.

 

What’s something else that’s surreal that we need to protect ourself against? That’s covered in your book. Yeah, I mean, this may sound polyamorous. What’s surreal is the dishonesty out of D.C. And that’s not partisan.

 

What’s surreal is platitudes replacing math. And I like to see Besson talking about deficit to GDP. That’s refreshing.

 

What’s surreal is the fact that we want to clean the swamp, but the swamp is K Street, the wolves of K Street. It’s legalized bribery. It’s the worst thing that happened to our autonomy.

 

Our democracy is lobbyists. We should have our Congress and our Senate voting for their people, not based on who bribes them the most behind the scenes on K Street. So what’s surreal to me in this economy, what’s surreal to me in this democracy is that we don’t have honesty about employment.

 

BLS is absolute fiction. We don’t have honesty about inflation. Again, I think for us to come to the truth, we’re not even honest about our debt and we’re not even honest about long term realistic solutions.

 

I think this crypto craze makes perfect sense. It’s a desperate solution in desperate times. It is the new oil.

 

It’s an artificially inflated asset class to create love for otherwise unloved U.S. Treasury. I’d like to just see more candor and more honesty. I think we’re getting a little bit further there than we were four years ago.

 

But to me, less BS about the BLS, about inflation, less BS about actual labor statistics. It was fascinating to me that the Department of Labor revised down all their optimism, which gave Trump, I mean, Powell all the confidence to do his policies. When they wait until after the election to suddenly say, oh wait, it’s not as rosy as we thought.

 

That was classic D.C. two-stepping, putting lipstick on a pig for political reasons and not being transparent about our debt, not being transparent about our labor and not being transparent about the invisible tax of inflation, which is multiples higher than we reported today. Well, let’s see if they revise down the last jobs numbers. We’ll see.

 

Matt, thank you so much for coming on the show. My pleasure. Where can we follow you? VonGreier.gold or GoldSwitzerland.com. We’ll put the link down below.

 

Make sure to follow Matt there. Appreciate your time as always. We’ll speak again soon.

 

Take care. Sounds good, buddy.

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