The US government has to sell $28 trillion of debt in the next 4 years (Uncut) 02-19-2025

The US government has to sell $28 trillion of debt in the next 4 years

So last time we were talking, we were talking about Bitcoin and gold, and how obviously a lot of people are piling into both of these assets. They are classic inflation hedges. So if people see inflation heating up or feel like things are getting more expensive, they want to go into something that feels safe.

And sure enough, later in the week, the inflation numbers did come out and they had accelerated. And it was 3% year over year, instead of the 2.9% in December. So I think some places tried to make it not seem like such a big deal.

But actually, James, you were talking about this, how it is a big deal because that’s not really the most important number that they came out with last week. Yeah. Yeah.

The real number, I mean, the 3% number for inflation, they say the annual rate of inflation basically from January 2024 to January 2025, that 12-month period, inflation increased 3%. That’s up from 2.9% from before. So we think, okay, big deal.

Yeah, inflation ticked up a little bit, but not the end of the world. Well, that’s a backwards looking number. That’s like, let’s look back over the past 12 months.

But if you want to look forward, you’ve got a month over month number. How much did prices increase from December 2024 to January 2025? In that single month, it increased 0.5%. So 3% over the previous 12 months, but half a percent just in the previous one month. And that’s a really big deal, right? Because if you look forward and say, well, man, if inflation, if prices are increasing by half a percent per month, that’s more than 6% for this year, basically for the next 12 months.

So if you look forward, the inflation picture is actually getting much, much worse. And that’s not a single month aberration. It’s not like the month over month number was basically zero for a long time.

And then all of a sudden it jumped up and people go, oh, maybe it was the holidays or maybe it was whatever. It’s the egg prices, right? Right. Oh, it’s egg prices.

Right. Yeah. The egg price excuse.

Oh, it’s just egg prices. Oh, no, that’s not the case at all. Because if you go back to last summer, the month over month number in June, July, et cetera, was zero.

Inflation was basically dead at that point. They were going, yeah, hallelujah. We said, no, no, no, no, no.

We’ll get to that. We’ll get to that. We said there’s a reason why this number is lower than it should be.

And we’ll explain that in a minute. But then what happened starting in October, November, the month over month number started to creep up. 0.2, 0.3, then 0.4, now it’s 0.5. So this is a pattern.

This is not a single aberration. This is a pattern of inflation. Acceleration.

Right. It’s a pattern of accelerating inflation. So even if you say, all right, well, let’s average.

Let’s not use the 0.5% number. Let’s average the last four months even. Let’s just do an arithmetic average of the last three or four months.

Man, you still get to four, four and a half percent. So they’re saying, oh, inflation was 3.0%. It’s like, okay, it’s like reading yesterday’s newspaper. It’s like, okay, big deal.

It’s like you pick up the Wall Street Journal from three months ago, whatever. It’s like, who cares what it says the S&P 500 index closed at three months ago. What consumers care about is like, where’s the trend? And the trend is really bad because it’s 0.2, 0.3, 0.4, now 0.5. This is not a good trend.

And we talked about this last summer when these numbers were coming out and they said, oh, the month over month number is zero. We said, no, no, no, no, it’s not. It’s not really.

So we’ve got a chart here, the way that the consumer price inflation works. You can see here, you’ve got these different categories and this is how it works. They have these different categories that say food, energy, shelter, transportation services, and they sort of average all this together.

And you get, these aren’t all the categories, but there’s just some of the big categories and they have this overall number. So you can see the overall number in blue. And this is what they were reporting back in the July, 2024 inflation numbers.

But you can basically see all these numbers, food, energy, shelter, transportation services, medical services, et cetera. These are all positive numbers, right? So they were all increasing. They were all that much higher from one year earlier.

That’s right. Exactly. You had transportation services that was almost like 9% or something like that.

Year over year increase, medical care services was up. All these things were up, but there was one thing that was dragging the entire average down. All of these different things were up, food up, energy up, shelter up, medical up, used cars and trucks were down and down by a lot.

11%. Right. Exactly.

Exactly. And a lot of people remember how nutty things got during the pandemic. And it was because of all the supply chain stuff and factories are shut down and had this global, very interconnected global economy, and you couldn’t get like little parts.

We had the great microchip shortage, all these things. And so the new cars just weren’t getting produced. And so as a result of that, people that needed vehicles had to go to the used market or depending on the quality of vehicle, you get previously owned or even previously driven.

So the used car market, there was all this demand went into used cars. And so used car prices went through the roof. I actually remember I bought a car.

I bought a Lincoln Navigator and I couldn’t find a new one. I had this growing family. I’m like, I’m going to get the biggest car I can find.

Were you driving Navigators before it was cool? Is that the Matthew McConaughey thing? No. No, I was definitely, I was driving it only because I started having kids. I’m like, I want to have all this space.

So I bought this tank and I paid more money than the guy. It was like, the only one I could find was like two years old, I think. And I paid more money than the guy had bought it new two years before.

And I’m like, man, I’m a sucker. But I was so like, I have to have this car. I have to have this car.

I got kids, I got all this stuff, I need to go. And everything that I had really before that was just way too small. I had a small little, small SUV.

There’s just basically good enough for me. I’m not a car guy. I’m not a guy who has to show fancy wealth or anything like that in a vehicle.

I’m a very functional dude. But this was just literally like, I wanted the biggest car I could find. And I paid more money.

I felt like such a sucker, but you know, you do what you have to do. You, you know, you feel like you do whatever you have to do for your kids. But that means that these prices falling aren’t even like the 11%.

It’s like, wow, used cars got so cheap. And it’s like, no, they were so expensive that- They’re just falling back in line. Right.

It’s back to normal, basically. Right. That’s all that was.

And we wrote about that at Shift Software. We were writing about that last summer. We said, there’s one thing that’s dragging this average down.

Cause look at the medical care is up. Transportation services up. Like auto insurance was like, went through the roof.

It was like 18% or something. Yeah. It was crazy.

Yeah. It was crazy. And so we were writing about this.

We said, there’s one thing that’s dragging the average down and that’s used cars and trucks. And the reality is that that’s a one-time thing because prices went up to the roof during the pandemic. And now they’re just coming down back to normal where used cars and trucks should be because the new car production is back to normal.

And so used car prices now are going to fall back to normal. And so this is this kind of disinflation, really deflation for used cars and trucks, but it’s a one-time thing. And we said, very specifically said, if you look forward over the next few months, you’re not going to see this red line going down, this used car price drop.

It’s going to go away. And suddenly used car prices are going to be zero, maybe even a little bit positive. And so this sort of benefit of used cars and trucks dragging down the rate of inflation, that’s going to go away.

And that alone is going to cause inflation to increase. Now, look at what happened. Joe, you did a comparison of July, 2024 and January, 2025.

If you look back again, you can see the comparison on the left column and the right column. So food, food went up, energy went down a tiny bit. Shelter went down a little bit.

Transportation service went down a little bit. Medical care went down a bit. When you said it went down a little bit, they were still up.

They were not up by as much as they had been up in July. Yeah. Exactly.

Exactly. So you had this very slight… So energy, the price of energy was still up, but the rate at which it was up was a little bit less. So still have inflation, but slightly less inflation.

But you can see this line, the pink line was the July, 2024 used cars and trucks, hugely negative. Now all of a sudden, January, 2025, look what happened. Oh, what a surprise.

Used cars and trucks actually went back to being now positive in terms of… So the price is actually going up again. So that huge drag on the average is now gone. And so because of that, because it’s not… Because used cars and trucks not only dragging down the average inflation, inflation is now up.

And that’s just on the year over year basis, which is looking backwards. If you look forward really on a month over month basis, it’s a lot worse. Like we talked about, if you annualize 0.5%, I mean, this is more than 6% year over year.

And you would say this is a more accurate representation of what inflation is now, because we don’t have this giant category that’s down by so much dragging down the entire average. That’s exactly right. Yeah.

You know what’s interesting too, though, is that the… When we’re talking about inflation going up by a certain percent now, that’s on top of all the other inflation that we’ve already got. So if inflation kind of continued at the same rate, wouldn’t the increase naturally fall? Because we’re piling that on top of these already high prices from a year ago. Well, I mean, just speaking of cars, I was looking at cars the other day.

I read this article, I think it was in the journal actually. And they were talking about the average price of a new car now is almost $50,000. I mean, yeah, it’s like, man, what the hell, man? That’s insane.

That’s insane. I mean, it doesn’t feel like that long ago that the average car you could easily pick up for like 20 grand. And so you’re right.

It’s like you get this inflation and then more inflation, more inflation, more inflation. So it just takes these prices, it takes them higher and higher and higher and higher. And that’s the monster of it, because it just never stops.

I mean, the best you can hope for is that the rate at which it increases, slows down, or maybe even stops entirely. But even that, it’s just such a bizarre thing because politicians, they’ll say they don’t like inflation, but realistically, they need inflation because the freaking debt is so high. Central bankers are terrified of falling prices.

I mean, it’s like Walmart’s whole, this is like one of the most successful retailers in the history of the world. And to a degree, Amazon as well, doesn’t necessarily put this on its mission statement. But I mean, both of these, they’re basically in the business of trying to create lower prices.

I mean, they do actually a pretty good job of kind of keeping inflation in check by pushing for, they push their suppliers, they push all these guys to, anybody that sells product in their store to do it in the most efficient way possible to pass that savings on. And they compete with each other. Right, exactly.

And because consumers like, not only do we like not having inflation, we like no inflation, we like deflation. We like when things get cheaper. That’s what consumers like.

But central bankers go, no, we can’t have deflation because they think it’s going to throw the economy in a freaking tailspin. So these people are so completely out of touch. Well, so deflation would make debt more expensive.

Right, exactly. If you have inflation, you go back to the Weimar Republic after World War I, and Germany got stuck with the bill for World War I after the Treaty of Versailles in 1919, they had to sign this up. And this is one of the big reasons why, frankly, Hitler and the Nazis came to power because they were railing against saying, man, this is bullshit, this war reparation debt.

Why are we paying France? Why are we paying, you know, Bill, why are we paying the UK? Why are massive debt burden? So they started printing, you know, this is kind of classic hyperinflation episode, they started printing all this money. Well, when you have inflation, and your debt level is fixed, like it was in Germany, in the Weimar Republic, then your debt level is fixed, and suddenly you have this massive amount of inflation, that’s actually pretty good for you. It’s actually pretty good for you.

Now a lot of that, you know, some of that debt is, you know, foreign currency, some of it’s domestic, it really depends every country in modern times, in particular, has a mix. In the case of the United States, basically all the debt is in US dollars. So you have a fixed US dollar rate.

And if you have, you know, I mean, let’s just be crazy and say you would have, you know, we have hyperinflation in the US. And all of a sudden, $36 trillion doesn’t seem like that much money anymore. You pay it back in a day, because there was a time, right? I mean, there’s a time that like, you know, the US, the national debt, you know, a billion dollar national debt was like, it’s like, Oh, my God, this debt level so high, you know, and now it’s like, billion dollars, like, what a joke, what a joke.

And so this is what happens over time is just like the the money that we’re talking about becomes sort of less and less significant, less less important. And that’s a factor that’s because of inflation. Well, so the higher inflation goes, the easier it is to pay back the debt.

But also, the the printing of the money, the central bank printing that money is what’s causing that inflation. So they have, it almost sounds like they have no incentive to not just print more money and keep pumping that giving it to the US government, right? Yeah, I mean, how do they, realistically, how do they get the money? I mean, when they go into debt, that there’s, there’s basically a handful of different categories of lenders. And you know, we’ve talked about this before, when the when the government goes into debt, they can borrow from foreign governments and central banks, and the US has that privilege, because the dollars the reserve currency.

And so the easiest way for foreign governments and central banks to own US dollars is to own US government bonds, because it’s the most liquid asset there is in the world. I mean, there’s this, it’s liquid, and it’s really big, there’s $36 trillion worth of US government debt. So there’s no amount of money that you have that you can’t, you can’t find, you can’t park in US government bonds, right? So, so foreign governments, central banks buy it.

You know, banks, domestic banks, particular by foreign banks do as well, but US domestic banks, I mean, this was the big deal. Silicon Valley Bank bought like $117 billion worth of US government bonds, which turned out to be a toxic asset for them lost value, and these guys went under, you know, you have some wealthy investors, I mean, somebody like, you know, Bill Gates, whatever, you know, I mean, people have billions, 10s of billions, you know, a couple hundred billion dollars, even they don’t just have that money sitting in the bank, they don’t park it in the bank, they go and they, they have it and invest it. And a lot of those investments are going to be in government bonds.

So so that’s another sort of category as well. But you know, one of the biggest categories by far is the the central bank in the United States, the Federal Reserve, and the Federal Reserve, they can also buy the US debt. Yeah, exactly.

They buy you. So that’s the primary, the primary thing that the US government that the Federal Reserve buys are US government bonds, and federal housing agency bonds. And so the housing agencies are like, you know, the Fannie Mae and Freddie Mac, these such things, they, they go out when your bank, you go to the bank and say, I need a mortgage to buy this house, what the banks end up doing, they never hold your mortgage.

It’s not, it’s not like, you know, the old in the movie, like, it’s a wonderful life and all that. It’s not like that. So but they, they, they pool your mortgage and his mortgage and Bill’s mortgage and all these mortgages together into a bond.

And then they flip that bond out into the market. And sometimes they they they send it to one of these federal housing agencies, they send it to Fannie Mae and Freddie Mac, those bonds have to conform to certain specifications, the loans have to be a certain size, and all these different things, there’s different certifications to qualify as Fannie Mae and Freddie Mac mortgage, and they get rolled together into a bond. And then the Fed will buy those as well.

The Fed will actually buy these these housing agency bonds. It was it was one of the weird things like during the pandemic, they were buying, oh, man, they’re buying so many of these bonds, and housing prices are going through the roof. And, you know, you can think about it like if the Fed is is is creating money to buy these bonds, they’re essentially creating money to support the housing market, you go, why supporting the housing market, home prices are all time highs, home prices are becoming unaffordable.

Why the hell are you printing money that’s going to go into the housing market, ipso facto make houses more expensive. I mean, it was it was just the dumbest policy, no more supply. There’s no new houses, you know, obviously, there’s some but there’s there’s not the the amount of money that they’re pumping into the system is not reflecting the amount of new houses.

It’s just chasing the same amount of houses that would have been there anyway. That’s right. So it was making houses a lot more expensive.

Because I mean, you look at again, especially in the early days of the pandemic, there was no construction going on. Everybody was told everybody’s told to go home and cower in fear in your basement. Nobody was allowed to go out and build houses in April of 2020.

You know, we were told if we went outside that we would spontaneously combust, you know, and just just disintegrate, like Thanos, clenching his fist, and you know, half the world just just disappears, right? I mean, that that’s, that’s what we were told. So nobody was allowed to go out and build houses. There was no new housing supply.

Right? So they were they were they were shoveling all this money, hundreds of billions of dollars into the housing market, housing buyers are going through the frickin roof, and they kept shoveling money into the housing market. And so they go, we cannot we don’t understand why houses are unaffordable, right? It’s like, oh my god. So the Federal Reserve isn’t just printing money to give to the government.

They’re also printing money to buy assets in the private sector. They print money, they always buy bonds, but not not always. But for the most part, they buy bonds, they do swap lines and all sorts of things, you know, that we we can do another deep dive into like central banking one on one because it’s ridiculous.

It is ridiculous. I mean, we should do a whole thing just about central banking. Iman, shut that one down.

We should definitely do that. Because like, I mean, it would like people just come out of that just frickin enraged if they’re people really understood. Nobody understands it.

Nobody really understands central banking. I mean, I’m convinced most people on the Federal Open Market Committee don’t actually understand central banking. And so I mean, there’s, there’s, there’s so much to understand.

I learn more every day, honestly about it. But the other thing that they say by a lot of housing bonds, but the biggest thing that they that they get into our US government bonds, and it’s the same thing they, they basically, if you or I go out if we go to Treasury Direct, which is the basic consumer facing website that the Treasury Department has, that you can go out and buy government bonds, in my opinion, it’s actually better to own a very short term t bill. 28 day t bill, it’s a better deal than didn’t have money sitting in a bank account.

Because you know, the t bills will actually pay you a pretty healthy rate of interest. And, you know, the banks, most banks still pay zero, I mean, they pay like nothing or like point 2%, or something like that. The other thing is that banks are such a pain in the butt, that every time you want to go and do something, you want to send money somewhere they got, you know, you got to play 20 questions, why are you withdrawing this money? Treasury Department never asked any questions.

Ooh, that’s interesting. Actually, I never thought about that before the $10,000 thing, or even less. No, they never asked any question.

You could you could send a billion dollars into the Treasury Department say I want to buy bonds. Great. They won’t ask any questions about where did this money come from? They won’t ask any questions at all.

Right. So it’s I mean, it’s actually it’s a weird thing to say, especially a guy like me. But you know, it’s I think, I think for kind of uninvested cash, it’s just sort of sitting on the sidelines.

I mean, I think Treasure Direct right now, short term 28 day t bills is a pretty good deal. And you can hold on to that you can because they do those auctions every week. So you could take 25% of the money in week 125.

And week two, week three, week four. And by the time week one matures, you have the option, you can just roll that over and just have this every week have 20% 25% of your money rolling over that you can choose to take it out or, you know, roll it over and into into a new, into a new, new bond, new Treasury bill. Well, it’s kind of interesting this phenomenon with you obviously trusting that the government’s going to give your money back after 28 days, but two years, I wouldn’t buy a 30 year bond.

Yeah, right. I wouldn’t do it for 30 years, man. I wouldn’t do a 10 year note.

I wouldn’t do a five year note, but 28 days. Yeah, no problem. I’ll loan these guys money for 28 days.

But this plays out on a larger scale too, doesn’t it? Exactly. Other institutions are saying, am I going to loan the US government money for 30 years? What is China thinking? I mean, if I’m thinking that, if I’m thinking, I’m not going to give these guys money for 30 years, what is China thinking? Right? What’s, what’s, what’s Russia thinking? What are all these, what’s Germany thinking right now? I mean, these guys are so, these guys are so pissed off. They’re, they’re, you know, you know, JD Vance goes over there and tells the truth, by the way.

I mean, if you didn’t see that, that, that video, I mean, the guy said things that were just straight up real. You know, he said, you got, you guys are canceling elections, threatening to cancel elections, stamping out free speech. There’s a 60 minutes interview where they went and interviewed a couple of, you know, senior German officials.

And this lady’s like, so let me get this straight. It’s a crime to insult somebody in public. Oh yeah, yeah, yeah.

It’s a crime, you know? And, and, and they’re like, and what about online? They’re going, oh yeah, yeah, yeah. It’s even more of a crime and trying to make this explanation justify why, you know, if you insult somebody online, why it’s even more severe of a crime, they’re going to come to your house. And, you know, this guy was almost kind of cackling about how, when they take people’s computers and laptops and cell phones or whatever, and they take this stuff away because now it’s evidence of a crime and all this kind of stuff.

I mean, it’s like, you know, and they go and they call Elon a Nazi, you know, because he, because he’s for free speech and, you know, wants to make sure that people have a choice. I mean, it’s, it’s, it is the most classic case of- I always found that pretty ironic that they like made it illegal to say anything like pro Nazi. So like their, their solution to, to Nazis was just going full Nazi on anybody that would- Yeah, we’re going to go Nazi on the Nazis.

I mean, look, like, I think, I think any rational human being obviously acknowledges that that kind of belief system is atrocious. And I can’t imagine that anybody actually would realistically believe in that stuff anymore, but there’s a handful of people who actually, you know, think that that stuff is, is legit. And, you know, I think this is like Elon’s approach is to say the, I mean, even, even, you know, Zuckerberg realized this is that, you know, the best way, rather than going around censoring speech, you know, his whole kind of turning the other cheek has now been, let’s put this stuff out in the light of day.

And if somebody’s going to say something stupid, let the whole world know that he’s a complete idiot. Let the whole world know that he’s a scumbag and let him hang himself by just opening his mouth and letting all this, you know, all this stuff come out and everybody will know, like, I don’t have anything to do with this guy. That’s what I always thought too.

It’s like, let people express what they really believe because then they, they’re not, they’re not lurking around you. You have no idea who around you believes what, or, you know, if they, if they are judging everything you’re saying, show your, show your true colors, you know? Right. Exactly.

Yeah. I mean, you know, free, free speech is always better. And they, you know, and they, I mean, that’s a whole other rabbit hole, but yeah, I mean, it’s, it’s, the point is that those guys now, you know, the, the, the Europeans are, are, are pretty ticked off.

Right. And so we’re talking about debt, we’re talking about bonds. And, and so you have all these, these countries now that are angry with the United States, they’re not very happy.

And so are they, you know, they also see the government spending, they see, you know, the, the hundreds of billions of dollars that, you know, that, that are wasted. I mean, the GAO put out this report and said, you know, we, we think there might be up to like $500 billion a year of fraud in US government spending. They see that stuff.

They see the trade wars, they see the tariffs, they see all these things. They go, do we really want to loan money to the US government for 30 years? I, I don’t think so. I don’t think so.

And that’s, that’s, that’s a problem, right? Because we talk about, you know, your other big, you know, your other big sort of lender who, you know, when, when, if you or I go to Treasurer Direct and we decide we want to buy government bonds, we’re using it with our money, the money that we have, we’re going, here’s the money in my account, I’m going to send it to the government. That’s with money that exists in the system. Well, that’s not the case with the Federal Reserve.

The Federal Reserve doesn’t really have very much of its like own money. So what do they want to go and when they want to buy bonds, they create it. They just conjured out of thin air.

We say, you know, that they, they print money, but it’s, you know, it’s air quotes because they don’t, there’s, they’re not sitting there, you know, with a, with a printer, there’s no physical money. It’s, it’s when they do it, it’s all digital. They go to a computer, they type some stuff in and hocus pocus, poof, there’s another trillion dollars that they’ve conjured in thin air.

And they basically transfer that money electronically to the Treasury Department. It actually, again, it goes through intermediaries, you know, with the, in the JP Morgan and these, these sorts of companies. But at the end of the day, it’s new money that’s conjured out of thin air from the Federal Reserve through these financial intermediaries to the Treasury Department.

It’s money that didn’t exist and all of a sudden it exists. And so that’s new money. And that new money is inflationary.

When they print trillions of dollars, they create trillions of dollars, that’s inflationary. And so the reason why trying to cut the government deficit is going to be anti-inflationary. Disinflationary.

Disinflationary is because we’re not going to have to print as much of that money. The Federal Reserve isn’t going to have to print as much of that money. Yeah, that’s the whole point.

I mean, we saw it during the pandemic, right? You have, if you think about an economy as a whole, right? Think about, everybody knows about the law of supply and demand, right? So you think about the economy as a whole. I mean, if there’s, if I have like one pen and this is the only pen that exists on the planet, and there’s a thousand people want to buy this pen, obviously this is going to go for a pretty hefty amount of coin, right? Fortunately, this is not the only pen that exists and there’s plenty of pens. If you think about that for the entire economy, you have a supply of goods and services.

There’s supply of everything, right? There’s a supply of goods and services and there’s demand for goods and services. So what happened during the pandemic? Again, they told everybody stay home, cower in fear, don’t go outside or everybody, otherwise everybody’s going to die. If everybody said, you know, anybody sets foot outside, so cower in fear in your basement.

And so therefore people are clearly, there’s going to be less supply of goods and services because people aren’t going to their jobs. They’re not going to factories. They’re not building houses.

They’re not doing these things. And so the supply of goods and services was reduced. At the same time, the government was handing out stimulus checks to everybody.

They were giving PPP loans to everybody. So there was this surge of cash into the system, which obviously people sit at home with nothing to do. What are you going to do? You’re going to shop.

You’re going to go online. You’re going to buy stuff. So you have demand goes through the roof, supply falls.

Oh, what a surprise. Less supply, more demand, prices went up. And the central bankers, the federal reserve, these are PhDs, economists, successful guys that go, we, oh, we don’t understand it.

We don’t know. Oh, it’s transitory. Oh, inflation doesn’t exist.

It’s like, man. Do you think they really don’t though? Or do you think they’re playing a different game? I, man, I don’t know. I can’t really speak to anybody’s intentions or what they really knew or didn’t know.

I mean, to me, I just, I think we have to make our assessments based on what they actually said. I think in the case of the Fed, they screwed it up enough times. I mean, when the Fed chairman went in front of Congress, two days before Silicon Valley bank went bust and said, no, we don’t see any problems here.

What could possibly go wrong? They had no idea. And these guys, by the way, they’re also- Which wouldn’t have been a calculated move because they wouldn’t have just wanted to look that bad. Right.

Who wants to look that stupid? Who wants to look so incompetent? I just don’t, I mean, maybe, maybe it’s all a plan. Maybe they’re like, maybe secretly, yeah, maybe secretly the guys in the federal reserve don’t like the federal reserve. They want to abolish the Fed.

So they go, look as stupid as we possibly can to build up some public support. Yeah. I mean, like, who knows, man, who knows, but they certainly, they certainly look like they don’t have it locked down.

So that’s, that’s basically what inflation is. And so when the, when the Fed creates new money, I mean, the Fed created trillions of dollars during the pandemic, we got 9% inflation, right? So that’s, that’s a huge driver of inflation. When the Fed conjures money out of thin air, it makes its way to the government.

The government spends all that money, right? So now you have that, that new money creates more demand, but there’s no increase in the supply of goods and services, more demand for goods and services. There’s no real increase in supply of goods and services. So what happens? You have higher prices.

And so that’s, that’s what happens, especially when the, when the government spends money that it doesn’t have, when you have a lot of deficit spending and, and it’s sort of a, an addition to that, when the Fed creates new money to make it happen, when the Fed creates money to facilitate deficit spending, those two things together, that’s very inflationary. So that’s what we saw during the pandemic. And, you know, if, if they don’t put a stop to this, that’s what we’re going to see over the next few years.

And that’s what Doge is trying to do with, I mean, what was the latest they found a billion dollars of department of education money going towards these like DEI woke. So like, they always have these people coming into schools, right. To give talks.

And it’s going to be that critical race theory is that guy that wrote anti-racist baby. And, you know, like white babies are racist by the time they’re six months old. And like, these people are literally being paid with tax dollars from the department of education to go into schools and train these teachers and spread this propaganda.

And so it’s basically just a slush fund for leftist causes to take tax dollars and give it to their friends. And it’s a big, you know, those friends donate to the party. And, and this is how much, how much of the United States budget is going to this sort of thing when just in one fell swoop billion dollars was doing this in the department of education that got eliminated just last week.

They were, they were proud of it. They posted on their website. I mean, this is like, this isn’t even like you don’t have to troll the depths of Twitter to see this stuff.

This is like on the department of education website. They said, yeah, we found $675 million, you know, on this one, we have found $300 million over here that was going to all these, you know, silly woke cause. So we canceled the contracts.

We canceled the contracts, you know, I mean, we wrote, we wrote something, excuse me, we wrote something the other day about the department of education in general. And, you know, it started, the whole history goes back to 1867, Andrew Johnson, the guy that came in after Lincoln, Andrew Johnson was vice president for like 10 days at his own. And just to talk about this guy, this guy was drunk as a skunk at his own inauguration.

He was mad. True story. This guy was massively hung over.

He gives his, this is like before they’re like in the, I guess like in the rotunda in Congress. And so he goes and gives this stammering, slobbering speech falling all over himself. It supposedly reported he’d been drunk for an entire week.

And Lincoln was like looking on going, oh my God, what the hell did I just do? Probably the same way Obama felt after like watching Joe Biden give his first speech as vice president. Like, oh my God, you know, that memes, like I need a vice president who’s dumber than I am. Oh yeah.

Joe Biden felt when Kamala Harris gave her first word salad speech. Oh my God, what did I do? And so that was Andrew Johnson. But there’s enough people at the end of the civil war who felt the way forward to keep the US unified is to have the federal government step in and oversee education, make sure that everybody, every kid has, you know, whether you’re, whether you’re, you know, in the North, in the South, descended from slaves, doesn’t matter.

Everybody should have equal right to an education, you know, nice idea. And so they created the department of education, uh, about that just to sort of oversee and basically make sure that, you know, every kid had that, that opportunity the next year, literally, I think the following year or within the next two years, it might’ve been the following year, Congress goes, you know what? Not constitutional. The constitution doesn’t say anything about education.

There’s nothing in the constitution says it’s up to Congress to regulate education. That’s a state responsibility, not a federal responsibility. So they, they folded it.

And what was the department education for a year, basically got folded into some little irrelevant statistical gathering agency within the department of interior. And it sort of languished for a long time. And then Jimmy Carter brought it back in 79.

And if you look at there, I mean, they, they put out test scores. And if you look at the test scores and they say, here’s the testing that we did, you know, from 1979, 1980, and look to 2023, 2024. I mean, in this period of time, you talk about 45 plus years, test scores have declined in the United States, despite the education department spending trillions of taxpayer dollars, trillions.

What did you get for your money? Well, the kids are, the kids are underachieving. The kids aren’t performing as well. Um, university education now, right? Right.

I mean, university education went through the roof, right? The cost of the cost of tuition at an average university in the United States became insanely expensive because the education department also helps oversee all the loan programs to try and make university more affordable. You’ve done the opposite. You’ve made it completely unaffordable, right? Same thing with the teachers unions.

We talked about this lady. Who’s the head of the, of the American federation of teachers, Randy Weingarten. And this lady has been a union boss for like what, 35 years, something like that.

I mean, it’s been almost 30 years, almost 30 years. Yeah. Yeah.

Yeah. Exactly. It’s 1997.

It’s almost three decades. She’s been a union boss. Test scores have fallen.

Teachers have fallen farther behind financially. You know, I mean, everything’s a total disaster and get these people saying from my cold dead hands, are you going to shut down Maxine Waters? Let her head, let her fricking gang to the department of education building. Is that where we want to go in here? And you know, whatever the poor security guards outside going, look, I can’t let you in unless you have official business here or whatever.

And they like, basically they were trying to have like a, almost like a little bit of a coup. And it was, I mean, the whole thing, because you’re right. Like this is their, well, this has never been against storming federal buildings though, has she? I don’t know about that.

But I mean, these guys have used just like USAID, the department of education is basically a slush fund for leftist causes. Now they got found out. Now, you know, people want to go and shut it down.

And again, and even like, forget about the leftist causes. Just look at the cost and benefit. You go, you spent trillions of dollars and test scores have declined.

Why should that, why should that organization continue to exist? Right. Why should taxpayers continue something based on their mission and say, you failed, you failed, you failed, you’re done. Give the money back.

You’re done. Right. But they don’t want to do that.

So they go and they want to storm the education building and they want to say, but the children, the children, it’s like, if you actually gave a damn about the children, then you would want to fold this department. You would want to get rid of it because this department is doing nothing for the kids. They’re actually getting dumber as a result.

And then you go and compare it to other countries and say, look at, look at, look at other countries. You look at this. I mean, look at, man, I mean, like Singapore pops to mind, look at Singapore and its education system from over the same period from 1979 to 2024.

And what’s happened with their kids and what’s happened with their test scores and what’s happened with their, you know, cost of all these, I mean, it’s like, it’s, it’s, it’s just a night and day difference. That’s also the interesting thing, because this isn’t just like a government in general problem. It’s like some governments have actually done decently with this.

You know what I mean? Like you mentioned Singapore, like Singapore is not exactly like a libertarian society. It’s kind of an authoritarian society and yet they, they have certain successes when it comes to government spending and government priorities. Like Singapore is like a kind of a free market authoritarian society.

I mean, they’re very capitalist, but yeah, I mean, it’s, that’s, there’s a lot, I mean, you know, God help you if you, you know, whatever spit on the street or something like that. I mean, that’s, it’s, it’s very, it’s very authoritarian in that way. But yeah, I mean, from, and with, you’re right.

I mean, there’s some places that, I mean, in general, like there’s places that just do government better. I mean, Singapore is not like the example or the only example. I mean, there’s plenty of places that do government a lot better.

They have smaller governments, they have more efficient governments, they have more effective governments. They hold themselves accountable for results to their voters, to their constituents. And it’s something that the U S doesn’t, and it’s not like a Joe Biden or Obama, whatever.

I mean, this has been both parties for decades. I mean, really decades. So it’s, it’s a, it’s a, it’s a failure.

I’m not a guy who’s gonna yes on the right and no on the left. Like this is, I mean, this is a multi party, multi, I mean, this has been a failure across the board for a really, really long time. And honestly, it’s about time.

Somebody said, no, we’re going to, we’re going to hold people accountable for results. And the results are horrific. And this sort of private organization, it would have gone under a long time ago.

And only because this is government that it’s just, it not only did not fail, it got bigger and bigger and bigger. And that’s a problem. People are actually complaining about rooting out literal fraud.

And these, I don’t know if you saw that chart from a, that Elon shared about the social security recipients. There’s like. Oh yeah.

Yeah. Over 120 years old. I mean, no, there’s like millions of people like over the age of, over the age of 90, over the age of 90, there’s like millions of people.

Then you got, you got people that are 300 years old, whatever. And they’re all getting, they’re all getting social security checks. And it’s like.

Benjamin Franklin still collecting. Right. Exactly.

Yeah. Yeah. Exactly.

Yeah. George Washington didn’t die. Actually, he’s getting a social security check.

I mean, it’s, it’s. And it’s like, why can’t they just go like, accept the fact that somebody is finally going in there and at least trying to clean up a little bit of this, save a little bit of money because they should be justifying every single dollar, $2 trillion a year being added to the debt. You should have to justify every single dollar going out the door.

And at least that seems like what the goal is right now with. You’re right. You’re right.

And you’re right. It’s amazing how many people, but I think, you know, the people on look, there’s plenty of, there’s plenty of boondoggles on the right as well. I mean, I imagine that they get into the department of energy.

There’s going to be a lots of, you know, this is going to be lots of funny stuff going on. And I hope they find all of it. I hope they find all of it.

I mean, you know, they’re going to find it. Department of defense. They could cut that in half.

Oh my God. I know. I think, I mean, the DOD, you could, you could take a hundred billion dollars and, and I don’t, I just, I don’t think there’s any, not even the slightest decline in mission readiness.

I mean, because in many respects, it’s actually good because then you force these agencies, you force them to actually like, no, you actually have to be smart about it. You have to think in a way that you have limited resources because that’s what war is. You have limited resources.

There’s no infinite resources when it comes to war. Defense is a tricky business and people figure this out. Sun Tzu, Hannibal, these guys figured this out a long time ago.

I mean, in the battle of Cannae, you know, Hannibal vanquished a much larger Roman force because he was smarter and he had to figure out how do I do this with limited resources? And he did it with just better strategy, better tactics. And if you, if you, if you come into a conflict situation, bloated and drunk off of your own fiscal discord, you’re actually at a disadvantage over a much more disciplined enemy that has to be disciplined about the allocation of their resources because they’re going to be disciplined across the board, including in their, you know, in their manpower and everything else. And so you actually do yourself a disservice, but yeah, it is incredible.

Like every one of those, every one of those frauds has a constituency. And right now we’ve seen just, we just happen to see a lot of them on the left, but there’s plenty on the right. I mean, the, the, the ones on the left, USAID, that’s definitely on the left.

There’s a department of education is definitely on the left. I think the social security ones, my wife showed me this the other day. She said, look at this chart.

And it’s the one you talk about with Elon. And it’s like, yeah, like 20, 25 million people, whatever, getting this over the age of, of, of 90. And I go, well, now we know all those people that voted for Joe Biden in 2020.

They have the social security checks to prove it. Right. Exactly.

Cause I mean, do we honestly think that there’s literally tens of millions of fake social security recipients that are dead, that those people aren’t voting? I mean, come on, like, like don’t, don’t be naive. Don’t be naive. I’m not trying to be conspiratorial here, but there’s, if there’s actually rank evidence of this now existing and I would love to see, I mean, it was a nice chart, but I’d love to see if there’s even more evidence we could actually kind of dive into some of the details.

It’d be great if they could show that. I don’t know if legally they’re allowed to, or they could show that that’d be great. But I mean, if that’s, if that’s really legit, I mean, come on, like, don’t be naive.

It’s obviously impacting votes as well. It clearly is. And you know, but so even if this stuff like did get cleared up though, it’s not the only issue, right? Because we have this $36 trillion of debt that already exists.

So even if you stop adding to that, that they’re already spending, I think $1.1 trillion on interest every year. So that accounts for about half of what was added to the debt last year. So you get into this spiral where you’re borrowing money in order to pay the debt on the money that you’ve already borrowed.

Pay the interest on the debt, yeah. Right. Sorry.

And then you talked about this last month, $28 trillion worth of government bonds are maturing over the next four years. So just during Trump’s presidency. And when you say they’re maturing, you’re saying the government has to pay that back, but they obviously don’t have the money where they go, oh, well, let me pay with my stash of $28 trillion.

I mean, the best thing that anybody can hope for is that Elon sends out a tweet and says, you know what, we just found out that there was a bunch of phony accounting going on. And the national debt is actually only like $6 trillion. We’re like, oh my God, hallelujah.

But we know that’s not the case. Or it goes the other way and it’s actually $7 trillion. Oh my God, that would be, well, if you look at the overall financial obligations, you look at the unfunded liabilities of social security and all this stuff, you add all those things in, which under GAAP accounting standards, generally accepted accounting principles, that every Apple and Facebook, every major company in the United States has to follow these rules.

They would have to add in all that stuff as well. The real amount you get to, I think the number is like around a hundred trillion dollars. It’s definitely north of 70, and I think it’s close to a hundred trillion dollars.

But this is a real thing that the treasury department actually reports. You can look this up yourself and look at the financial report of the U.S. government. And they put it out every year around this time, usually in February, some years a little bit later.

But usually in February, they put out the financial report of the U.S. government. And you can see the total level of debt, the unfunded pension liabilities, all these things together. I mean, the number is gruesome.

The number is gruesome. But yeah, I mean, like what happens is people buy, investors around the world, whether it’s foreign governments and central banks or individuals like us, whatever we got, we buy these bonds. And again, the bonds mature after a certain period of time.

So if they’re very short-term bonds, which are technically called T-bills, like I was talking about earlier, 28-day T-bills, every 28 days, those things mature, right? 30-year bonds, on the other hand, it’s three decades and those things mature. And so most of those, most of U.S. government debt is fixed interest. And so they’ll pay a certain amount of interest year after year, after year, after year, for 30 years or a 10-year note or something like that.

But the end of that period, they mature. So somebody bought a 10-year note in February of 2015. Now it’s 10 years later, right? So that note is about to mature.

And so when a note matures or a bond, some government bond matures, the bondholder, the investor has to think, well, okay, geez, what do I want to do? Do I want to reinvest? Do I want to take the principal and interest and reinvest that into a new bond? Maybe I take the interest off the table and I reinvest the principal. Maybe I take part of the principal or you know what? I’d say, you know what? I’m just take all my money back. I’m just gonna take all my money back.

And this is the, again, we were talking about this earlier, like me, I buy these 28-day T-bills. I just let them roll over. And every, basically every week I get to say, hmm, do I want to continue loaning my money to the government? And I have that opportunity every single week to do that.

If you buy these longer term ones, you have that opportunity basically every 10 years when it matures. And I think right now there’s going to be a lot of governments, foreign governments and central banks, which is basically of all the sort of marketable fixed rate debt in the US, they’re about half of it. You know, they’re about half of his foreign governments and central banks.

So it’s a lot of money. And those guys are sitting there looking at this right now thinking, do I want to continue loaning money to the federal government? We have actually another chart here. Iman, let’s pull this one up.

And this actually shows, this is a chart from the Federal Reserve. And this chart actually shows the maturity period by year of all these different flavors and variety of bonds. You’ve got 30-year bonds, you’ve got 10-year bonds, 10-year notes, five-year notes, three-year notes, et cetera.

And you can see on the chart, thanks. So we have 2025, you can see this is straight from the Federal Reserve. We have $9 trillion in 2025.

This is from three-year, five-year, seven-year, 10-year, et cetera, notes that are going to mature, 30-year bonds that are going to mature just this year alone, $9 trillion. Now, not all of that’s foreign governments, central banks, but you could say 40, 50% of it probably is. $7 trillion in 2026, $7 trillion in 2027, $5 trillion in 2028.

And so if you add all that up, that’s $28 trillion between now and the end of 2028, $28 trillion. And it just keeps going from there. So this is just the current debt.

So out of the $36 trillion in debt that the United States has right now, $28 trillion of that is going to mature in the next couple of years. So every single one of those bondholders, whether it’s a foreign government or central bank, or it’s Apple, or it’s an individual investor like me, has to think, anybody that owns those bonds, 10-year notes, 30-year bonds, et cetera, has to go, gee, do I really want to continue loaning money to the federal government, to the US government? And again, you look around, if you’re Germany and you’re pissed off at the United States right now, if you’re China, if you’re Russia, if you’re whatever, any of these countries that own lots of US debt, even Japan that has its own issues to deal with, does Japan really want to own north of a trillion dollars worth of US government bonds when they’ve got their own issues to deal with? They’ve got their own pension liabilities. They’ve got their own social security issues.

They’ve got all these problems in Japan, fiscal challenges that they have to deal with. Do they really want to own all these US government bonds? And so I think what you’re going to find, especially in an era of trade wars, and tariffs, and just conflict, and lack of cooperation in general, I think you’re going to find a lot of these countries say, God, I’m just, you know, on top of everything else, the debt, and the inflation, and all this stuff, I’m out. I’m out.

Maybe I don’t take all of my money out, but I’m not going to keep 28 trillion dollars in. You know, maybe I take out 14. Maybe I do half, you know, maybe, or even just a quarter.

I take some of it out. I take, you know, seven, eight trillion dollars out, and I reinvest the other 20. But that’s, that’s, they have to, they have to find some buyer.

They have to find some investor that’s going to stump up whatever the foreign investors don’t buy. They’re going to have to find somebody else to stump up that cash. And then bear in mind, on top of this 28 trillion dollars over the next four years, there’s also the new debt, right? This is just existing debt.

On top of that, there’s also the new debt, which could easily be another seven to ten trillion dollars. And I’m straight from the Congressional Budget Office. That’s their own projections on the amount of debt.

So, you know, hey, maybe Doge is able to make a difference, and that number falls, but man, we’re talking 30 trillion dollars, 35 trillion dollars, maybe close to 40 trillion dollars in debt, in U.S. government debt, that they have to find a buyer for that debt over the next four years. And sure, foreigners are going to buy a lot of it, but they’re not going to buy all of it. That’s the whole point.

And even when they buy it, you can see, so on the chart is five years, seven years, that is maturing from interest rates that were in 2020, five years ago, they were practically zero. Right, exactly. So you’re talking about at a cost of, whereas before, right, five-year notes, seven-year notes that matured, even 10-year notes that would have matured, that they would have entered into in 2015.

Interest rates were really low in 2015. They were really low in 2020 and 2022. They were really, really low.

And so now all of a sudden, you’re talking about refinancing $28 trillion worth of bonds, where the average rate on those bonds, maybe it’s like 1%, right? You talk about 1% yields on these bonds, and now all of a sudden, you got to pay 5%. So you’re talking maybe $30 trillion that you got to pay an extra 4% on. I mean, that’s an extra $1.2 trillion a year.

You’re doubling the interest bill that you pay every year. The U.S. government already pays $1.1 trillion per year in interest. Now you’re talking about adding another trillion dollars a year, just over the next four years, just to pay interest.

That’s a really big deal, right? And that creates, so now it’s even more money that you have to spend. Now your deficit spending increases even more because your interest bill has gone up. Your social security has gone up.

Your interest has gone up. I mean, you have already have no money left over for the military. You have no money.

All of your tax revenue already right now, all U.S. government tax revenue goes to basically social security, Medicare, the mandatory entitlement programs, and interest on the debt. That’s it. So they’re already, basically, they already spent all tax revenue before they put a single dollar in the U.S. military.

And that’s going to get worse because the interest bill now, we’re walking this through, the interest bill is going to skyrocket. It’s going to skyrocket. So the hope here is that, number one, DOJ can go in and identify, I mean, they’re going to have to identify lots and lots of budget cuts.

And they can do it. They can do it. But there’s going to be a lot of resistance.

And I think that’s clear now. We see this with USAID, pretty small agency. The people on the left had a freaking fit over it.

And then they said, no, now we’re coming for the Department of Education. And they went and basically tried to engage in freaking insurrection. They went and stormed the government building over the Department of Education.

So I mean, we can only imagine what’s going to happen when they go after defense, when they go after energy, when they go after a lot of these other departments. So it’s not going to be easy. I still think they can do it.

I still think they can pull it off. But it’s going to be tough. It’s far from a foregone conclusion.

Just to close the loop on what you were saying before, the other buyer, if foreign countries don’t want to buy it, the debt is the Federal Reserve printing that money. So if you’ve got $28 trillion that you’ve got to refinance, and on top of that, a few trillion more in additional deficit spending. So let’s call it $35 trillion.

And again, roughly half of that would usually go to foreign investors and central bank. Let’s say $15 trillion of that, just to be conservative. We’ll go to foreign governments and central banks.

$15 trillion of that. And they say, gee, we don’t want all that $15 trillion. Let’s be kind and say, we’ll give you $10 trillion, but we want $5 trillion back.

Well, the Treasury Department doesn’t have $5 trillion. They don’t have a stash where they got $5 trillion. They go, oh, sure, no problem.

Here’s your $5 trillion back. They don’t have it. They’ve got to go and find $5 trillion of bonds they can sell to other investors.

Well, who’s that fallback investor? It’s the Federal Reserve. But remember, the Federal Reserve doesn’t buy bonds. They don’t buy new bonds with money they’ve got.

They buy bonds with money they conjure out of thin air. So the Fed would have to go in and basically create $5 trillion out of nothing, right? $5 trillion new dollars that didn’t exist and go and buy those bonds. Well, what happened the last time the Fed created $9 trillion? Or $5 trillion? I’m sorry.

I just gave it away. The last time the Fed created $5 trillion, we got 9% inflation, right? And now we’re talking about tens of trillions. $28 trillion that has to be refinanced in the next four years alone, plus another $7 to $10 trillion of new debt from the deficit spending.

So if you can get the deficit spending under control and go, okay, hey, maybe over the next four years, we only have $4 trillion in additional debt instead of $7 to $10. Well, that’s still a move in the right direction. But what are you going to do with all these foreigners that own a ton of debt and they don’t want it anymore? Then the Fed’s got to go and buy that.

The Fed’s got to print that money to do that. That’s inflationary. Or what else? Now the government’s got to go and say, hey, is there any investor that wants this? Does anybody want this $5 trillion worth of debt? So yeah, okay, fine.

Maybe you find some banks, maybe find some companies, you find some individual investors that want to do that. But now you’re talking about existing money, right? Which means they got to take their money out of the stock market and put it in the bond market, right? So that the only way that happens is basically it means less money for the stock market, stock prices fall. And now they go and they put it in the bond market.

But in order to make that bond more attractive, the government’s going to have to let the interest rate increase. So now you’re talking about US government bonds paying 7%, 8%, 9%. And that’s honestly not that unusual.

Even if you go back to the 1990s, when you had no, I mean, basically deficit spending, I mean, they balanced the budget and all these things, these great things that happened, the economy was booming. And man, US government bonds are still paying 7%, 8%. And this was when everything was great.

But we also talked about the other day, how the government is horrible at investing. So when you put money into the stock market, you’re actually fueling new businesses, new jobs, new research. When you put money into the government debt, we did the math the other day, you’re not actually getting a return on investment, you’re not getting a negative return on investment.

So that’s worse for the overall economy. It compounds the problem because the exact thing that we need right now is economic growth in order to outpace the growth in the debt. That’s right.

I mean, that’s the way forward is you’ve got to cut government spending, and you’ve got to basically deregulate, you’ve got to cut bureaucracy, you’ve got to make it easy for people to do business again. You do those two things, and you got a pretty good chance of pulling this off. If they don’t do that, there’s going to be a problem.

And the problem is going to come in the form of inflation, the problem is going to come in the form of the US dollar losing its reserve status, because foreign governments and central banks have lost confidence. And nobody’s making this up, we’re already seeing very clear and obvious signs that this is happening. It’s not just the loudmouths, it’s not just Russia and China, whatever.

I mean, even European governments that are looking around going, why are we doing all this commerce and dollars again, this doesn’t really make sense anymore in this world. And so it’s a problem for the United States, it’s a problem for the US economy, it’s a problem for anybody who basically denominates their savings and so forth in US dollars, it’s a problem. And we already see what the solution is, is that the foreign central banks are moving towards gold.

That’s why gold is at all time highs right now. Yeah, nobody really knows what the financial system is going to, the post dollar financial system is going to look like. I don’t think it’s going to be the Renminbi.

I don’t mean, some people have talked about that. I don’t think anybody trusts China. I don’t think anybody trusts the CCP, nor should they.

But is it some consortium, is some new made up currency? Who knows? But someday the dollar is not going to be the global reserve currency. And I think there are enough people in foreign governments and central banks who get that, who also, we talked about this, like the idea that the US government, they have all this sort of national savings, their reserves in US dollars, and the US government’s constantly threatening them. I mean, are they really going to keep holding all their foreign reserves in US dollars? It doesn’t really make any sense.

And so gold is a thing that they know, this thing has universal value. Now, there’s a lot of things that have universal value. Oil has universal value as well.

They could say, they could take a bunch of their foreign reserves and say, we’re going to hold it all in barrels of oil. But if you think about it, in terms of having physical assets to denominate your reserve, gold is just, it’s just a lot more dense, right? Think about the size of a barrel of oil, right? Everybody can imagine like a barrel, like that’s $75, $80 basically. All that volume is $75, $80.

Now imagine you took a barrel and stacked it full of gold bars, right? I mean, we should do the math on that and see, but I mean, that’s got to be millions and millions and millions of dollars. So the same volume of a barrel of oil, $75 if you keep it as, they call it liquid gold, but is it really liquid gold? I mean, it’s $75, $80 on one hand, for the same volume as like millions, excuse me, maybe even tens of millions of dollars. So it’s obviously, gold is a nice thing, is an easy thing for them to be able to own and hold.

Yes, it’s expensive to transport, so is oil. A lot of things are expensive to transport. That doesn’t mean you don’t do it.

And I think they’ve already wrapped their heads around that. And so this is, again, a reason why gold has been going to all time highs. Now you’ve got some investors that have caught on, you’ve got funds that are going and buying it and stuff like that, trying to capitalize on this.

But I think if you look forward over the next couple of years, there’s a pretty, and we’ve done the math on this. We did it in the last episode. We said, look, I mean, it didn’t take that much money, we’re talking less than a hundred billion dollars worth of central bank gold purchases to drive gold to an all time high.

So they’ve got trillions of US dollar reserves. So I mean, what’s going to happen to the gold price? It could go a lot higher from here. But that’s just the demand side catalyst, right? So this is another interesting thing I have to call back to a 2018 article that we wrote.

And even back then, we were just looking at the numbers. Again, it’s not like we’re Nostradamus or anything, but we were saying that there was a supply crunch in gold, that people, that they were not finding as many major discoveries of gold as they had been over the previous decades. So that was, they were, what was it? They’re finding 30 to 50 million.

I should probably pull it up here. The quote was from Pierre Lassonde, right? So Pierre Lassonde was like just a god in the gold business. I mean, he founded Franco Nevada, used to run Newmont Mining.

And he said, this is a quote, he said, if you look back to the 1970s, the 80s and the 90s, in every one of those decades, the industry found, the gold mining industry found at least one 50 million plus ounce gold deposit, at least 10, 30 million ounce plus deposits, and countless five to 10 million ounce deposits. But if you look back at the last 15 years, we found zero 50 million ounce deposits, zero 30 million plus ounce deposits, and only very few, you know, 15 million ounce deposits. So that’s, that’s a big deal.

A lot of people refer to this as peak gold. And there are a bunch of other people as well. A lot of CEOs, Barrett Gold, Goldfields.

I mean, these guys are all, guy who’s head of Goldfield said, we were all talking about how production is going to increase every year. I think those days are gone. Barrett Gold, falling grades and production levels, lack of new discoveries.

They’re all bullish for the medium and long term gold price outlook. These are, Goldcorp said, quote, we’re at peak gold. We’re right at peak gold here.

He’s saying, you know, gold produced from mines has gone up pretty steadily for 40 years. This year, it starts to go down either this year or next year, it starts to go down. And you can look at gold production numbers.

And that basically happened. I mean, starting in 2018, gold production, which had been going up, up, up, up, up. It started to pretty much flatten out, even declined a little bit, starting in 2018.

So, this is, again, people refer to this as peak gold. To say peak anything, I think is a little bit dramatic. One of the problems really is that there just hasn’t been any interest in going out exploring for gold.

It just hasn’t really been the interest. Well, and at this time in 2018, gold prices were like, I don’t know, $1,200. And they had been as high as $1,800 back in 2011.

So, it was the idea, like, why bother going out exploring for gold if it’s not even worth it? The thing to remember about gold miners is that it’s not just the gold price. We can look at the gold price and go, ooh, it’s so pricey. $1,200, $1,500, it’s not really relevant.

Remember what you’re buying when you buy a gold miner is you’re buying gross profit margin. So, maybe the gold price is $1,200. What’s their price to mine that gold, though? What’s their all-in cost to mine that gold? And so, excuse me, if their all-in mining cost is $900 and they’re able to sell it for $1,200, then you got a $300 profit margin there versus today, you’ve got companies that have all-in costs at maybe $1,200, $1,500, but the frigging gold price is almost $3,000.

So, you go from making $200, $300 an ounce gross profit to making $1,500 an ounce, over $1,000 an ounce gross profit. So, the gross profit margins for these companies, the gross profits have gotten so much higher, the actual gross profit for these companies. And so, that’s what’s happened when the gross profit back in 2018, gross profit for mining companies is pretty low.

And so, because of that, it’s hard. If you go to an investor and say, hey, listen, here we go. We got to spend millions of dollars, tens of millions of dollars on exploring for gold.

And there’s a 99.9% chance we’re going to fail. And all that capital you put in is going to go to money heaven. And then, even if we’re able to find that gold, there’s only about a 10% chance that we’re actually going to be able to recover the gold.

We’re going to recover like maybe 10% of that gold that’s in the ground. And then we’re going to have to spend hundreds of millions of dollars more to build out the mine. And then it’s going to take us like 10 years to do it.

And then by the time we do all that, we’re going to make maybe $300 an ounce. Sign me up. Right.

Sign me up. Where do I sign? Where do I send the wires details? So, nobody was doing that in 2015, 2016, 2017. Nobody was doing that.

And so, as a result, you had what Lassonde was. And really, for honestly, most of this century, that’s why Lassonde was saying, we’re not seeing the discoveries. And that’s not an accident.

We’re not seeing the discoveries partly because, okay, sure, there’s been a lot of gold that’s mined. I mean, gold is a finite resource. And at least based on current technology, you can make an argument that nanotechnology makes it practically infinite.

But based on current technology, gold is a finite resource. And so when you mined a lot of it, it’s done. You depleted those reserves, and now you got to go find more gold.

And so the gold becomes harder to find. There’s less of it that’s remaining. So it’s harder to find.

But at the same time, you don’t just have those geological challenges. You have the financial challenges of attracting enough investment into the sector to say, hey, we got investors that are willing to take these huge risks and go out and find this gold. And people go, why the hell would I do that? I can just go and buy this AI company or whatever, and that’s what I’m going to do.

And so there aren’t these new discoveries anymore. We talked about it last time too, that this was the same attitude in the 2000s, that this has been a very long time that people have been saying that gold is dead. The brown bottom in the UK sold all the UK’s gold.

And there was a couple of years, 2011 and 2012, where it was elevated a little bit. Was that enough to get people exploring again? A little bit, to a degree. These things always go in cycles.

They always go in cycles. And you’ll see some years where it’s just packed with investors and some years where it’s just, you can hear crickets chirping and all these mining companies are desperate for capital. And some years they’re just flush with cash.

So it’s very, very cyclical. But the reality is that, again, we’re in a position now where the industry is, I think, able to attract a lot more capital because the gold price is where it is. Those margins are so high.

And the mining companies themselves are so flush with cash. They’re making so much freaking money right now. And they could actually take that money and say, hey, we’re going to invest.

If they were actually very responsible, they would take a lot of those profits they’re making right now and say, we’re going to park this in exploration to try and find new gold discoveries so that five years from now, 10 years from now, we’ll have more reserves. We can then go and mine five or 10 years from now. But they’re not doing that.

Barrick, they said, oh, look at our profits. We’re making so much money. And they say, oh, great.

Are you investing in new explorations? No, we’re going to have a stock buyback. We’re going to have a stock buyback. So that’s what they’re doing, right? No, they’re doing that because they think this is a good price to buy their own stock back at.

Are they looking at the market and saying nobody’s responded to this massive gold hike yet and our price is still- I think that’s actually a very good point, Joe. That’s a very astute point to make. Stock buybacks are not inherently dumb.

Sometimes they are. There’s cases where Coca-Cola is a great example. Coca-Cola was going into debt, running up its debt.

You got to pay this money back at some point, right? But Coca-Cola was running up its debt just to buy back its stocks. They would borrow money, then use that money to buy back to artificially increase the stock price, even though the actual core business wasn’t doing very well, right? There’s a lot of younger people that are just not into Coke products and all those things. So the core business was kind of sagging.

Revenue was down, all this stuff, and yet their stock price is going through the roof because the executives are indebting the company. They’re driving up the long-term debt to boost the stock price. And at the end of the year, they go, oh, look at how successful our company is.

The stock price is through the roof. Now shower me with tens of millions of dollars of bonuses and stock options, whatever. It’s a joke.

That’s a stupid way to do it. Those stock buybacks are stupid. But I think when you actually have a business- I was a chairman of a- I’ve been chairman of a publicly traded company a couple of times, and there was one- I was a chairman of this company that was traded on the Australian stock exchange some years ago.

And our stock was- I mean, it was so cheap. That’s why we got into it. We basically took a controlling stake in this business, or at least a big enough stake that we could kind of get onto the board and all that because the stock was so cheap.

The market cap of the stock was significantly less than the net asset value, the overall value of the assets of the business. And it was so cheap. We got in and basically we did a stock buyback because it was just- if you have something that’s worth a dollar and the stock is 50 cents, you should do a stock buyback.

And you make a good point. Because otherwise you’re going to be selling that asset to somebody else at half price. Right.

Exactly. That’s a way to reward your shareholders because it boosts the stock price. It takes shares out of circulation.

These guys are better off. On the other hand, I think in the case of Barrick, maybe similarly, actually. I mean, I think they’re probably maybe feeling the same way.

That’s probably a fairly sharp statement because we’ve been talking about this for a while, is that gold’s at an all time high, but gold companies are not, including some of the majors like Barrick. And so they say, hey, we’re going to take this cash and we’re going to buy back our stock until we feel like the value of the stock, the market cap of the company reflects our actual enterprise value of the business. Because they actually have gold.

They actually have gold. They’re pulling it out of the ground. They have gold, they have profits, they have good assets, all these things.

And so maybe that’s how they felt. But it comes at an expense because if they’re spending a billion dollars on stock buybacks, that’s a billion dollars they’re not spending in exploration and new discoveries. So it does come at a little bit of a long-term consequence.

And so that if you look at gold and say, let’s look at the supply and demand fundamentals, well, supply is not that great. My overall mining production has been very flat. New discoveries have been kind of few and far between.

Supposedly the Chinese went and discovered some massive gold deposit, but even that, it’s one of these kind of 30 million ounce. It’s not the big 50 million ounce, it’s like a 30 million ounce. And it’s like so deep in the earth that the cost of production, it’s going to be out of control.

Like their profit margins are going to be a lot less. They’re probably not going to be able to get all that. Are we going to believe the Chinese? Are we going to actually believe all this stuff? Or is this the CCP trying to say, oh yeah, there’s all this gold and trying to make the gold price go down so they can buy more? I mean, it’s hard to trust these guys.

And that’s one 30 million plus discovery in the last decade. Like that’s it. And there’s like another 15 million deposits.

Yeah, there’s not a whole lot of these. It’s like very small. So if you think about this, supposedly, so you got this one mine, this one, it’s not even a mine.

I mean, it’s going to take them years and years to develop this and try to extract it. But even if this is real, which I’m skeptical, and even if they can pull, they can actually operationalize this, which is going to be very expensive and take a lot of time. And even if they’re able to pull every ounce out of the ground, every one of those 30 plus million ounces, that’s literally that amount is the same amount as what central banks bought last year.

So that’s this whole like, oh, we have a new big discovery gone one year, one year of just central bank demand, and it’s gone. So this, so this is how you have to think about gold in terms of supply and demand. You’ve got, you’ve got serious prospects for rising demand.

And you’ve got, at least at the moment, what looked to be a lot of supply constraints on the horizon. Now that could change, right? You could see a lot of investors like, no, let’s go and explore, let’s spend that money. But if everybody gets in this big gold exploration bonanza right now, and everybody starts funneling money, throwing money at junior mining exploration companies, it’s still going to be years and years and years before that actual production comes online.

So what happens in the, it depends on the jurisdiction, right? I mean, God help you. I mean, if somebody goes and discovers a big, big gold deposit in the state of California, I mean, we’ll all be dead and they’ll still be trying to go through the permitting process, right? Gavin Newsom’s going to, you know, going to, going to, going to upload his consciousness to the internet and find ways to, you know, find ways to cancel the mining permit, whatever. I mean, it’s just, it’s, so it just depends on the jurisdiction.

Every place is different. But I think in the end, what you’re really talking about is, you know, you’ve got a, you’ve got a strong case to make for increased demand and a strong case to make for supply constraints on the horizon. So, I mean, what does that tell you about gold prices? We talk about this a lot and you’ve got this in the meantime, the market’s starting to wake up to gold miners and, you know, Barrick stock price up.

A lot of these guys have seen their stock price go up, but it starts at the big, big, big majors because they’re the biggest companies. They’re followed by the investment banks. They’re the ones that the, that the, you know, the big hedge funds are going to get into and all those sorts of things.

And, and so that trend, we’re already starting to see those stock prices, those companies become a lot more valuable. Eventually that trend is going to carry over to medium sized miners and smaller miners and smaller gold related companies, et cetera. It hasn’t happened yet, but it’s coming.

It’s coming. And so, you know, we’ve been talking about this and just to kind of close this out, we’ve been talking about this for a long time. And really this is where our research focuses on is these, you know, lesser known, sometimes smaller businesses that are, you know, have fantastic balance sheets, often even pay dividends, have fantastic properties, incredibly well managed yet are ridiculously undervalued.

However, they’re still profitable, you know, they make money and yet they’re super, super undervalued. And now we’re seeing the market wake up to, you know, the Barrett golds of the world, you know, whatever the big mining companies are out there. And eventually that’s going to matriculate down to this.

People are going to look at these small mining companies and go, holy shit, I can buy this thing for less than two times expected earnings this year. That’s insane. And I think those stock prices are going to go through the roof.

And so that’s, that’s really where we focus our research. And we’ve been talking about this for a while. And the reason we’ve been talking about this, I mean, man, this entire month, we’ve been talking about this.

We’ve been writing about it saying, listen, this isn’t, this is, this is real. This is out there. This is happening.

These things are, these stock prices are depressed. They’re undervalued and it’s not going to last. And now all of a sudden we saw this, you know, Barrick reported its earnings and all of a sudden, it just, it was like this slap in the face of the market and people go, oh my God, I need to get into gold companies.

So is this, you know, kind of, this could be the final call. This could be it. Yeah.

This might be the final call. I mean, you never know until, until it’s over, but this might, this might be it. So, you know, it’s just, it’s an opportunity that exists right now that there’s very few times where you can kind of look and say, here’s what the long-term trends are.

Here’s what the short-term trends are. You know, you can make this very bullish case. The, the, the, the data really stack up and all this.

And yet at the same time, these companies are ridiculously undervalued yet. They’re also profitable and have pristine balance sheets. Well, you just don’t see this kind of opportunities, which is why we’ve been talking about this so much because you just don’t see this.

You just don’t see this. I mean, I’ve been investing for like almost 30 years. Like you just don’t see this.

It’s a very, very rare thing. And so we want to make sure that people know about this, that they see it. And this is why we’ve been talking about this.

And there’s going to, there is going to come a time here, um, maybe the not too distant future where we’re not talking about this anymore because we’re going to say, and it’s gone. We’re going to talk about it one last time. And we’re going to say, we told you.

Yeah. So, um, we won’t laugh about it, but yeah, I mean, it’s, it’s, it’s, uh, it’s something that’s, it’s something that’s out there and it’s not going to last. So we just want to make sure people are aware of it and people know about it.

All right. So thanks James. Hey, thanks everybody.

Appreciate it.