Transcription
Uh, I think the first thing that we will see is we will see the yields out along the long end of the yield curve rising significantly above that 5% level. Um, I wouldn't be surprised to see yields over 10% and in the fullness of time over 20% or whatever. I mean, uh, because there is no doubt that the US Treasury is in a debt trap. Um, I mean, the debt trap is being sprung.
Welcome back to Metals and Miners. I'm your host, Gary Bow. Today, we have a fantastic and timely discussion lined up with Alistair McLeod, a recognized authority and advocate for sound money and formerly a banker, stockbroker, and financial researcher and historian. Alistair is the founder of McLeod Finance, and he publishes his analysis and his perspective on everything that's going on around us at McLeodFinance.com or AlistairMcLeod.substack.com. Alistair, it's an honor to have you back on Metals and Miners. Welcome to the show.
>> Well, thank you very much for having me back.
>> Absolutely. My pleasure. Alistair, you've analyzed and you've directed investments in the precious metals markets for many decades. You've been through many cycles, and this one is really not the run-of-the-mill type of cycle. The current cycle, it's been absolutely manic on a historic level. It's whipsawing investors around and it's causing many to exit and even others to be at a complete loss as to what's happening. Now, there's a lot happening that we're going to get into, but before we do, I just want to ask you, what do you hope for those tuning into this conversation today that they're going to walk away with after listening to it?
>> Well, I hope a better understanding of the relationship between money and credit and why it is that credit is losing value rather than money in the form of gold actually gaining it. Once you understand that, once you understand it's your currency going down, you will understand it ahead of the herd. And that's the important thing because when the ordinary person in the street suddenly understands it's not prices rising but is currency going down, the currency is doomed and it is already too late.
>> Yeah. So that's still before us. Okay. All right. Earlier today, the highest levels of the Chinese government instructed their banks to begin divesting themselves of US Treasuries due to volatility risk and other reasons. With the issues that the Japanese bond market is facing and Europe's economy being so fragile and their priorities being focused on military modernization and energy acquisition, what are the impacts of this directive by China?
>> I thought this one would come up. It's um, it is fascinating, um, you know, telling the institutions about the volatility in the US Treasury market when actually volatility has died to virtually zero. You know, it makes you ask yourself, what are they up to? Um, you know, that I mean, it's interesting because the Chinese, uh, when it comes to sidelining the dollar, if I put it that way, um, basically until now have taken really almost no action. I mean, it changed actually when Trump came in and he had his April 2nd liberation day. Do you remember with all the tariffs on the BS and all that?
>> That was really, I think, what changed, um, China's approach to the dollar because until then,
>> you know, it was the "sun Tzu" approach of, you know, when the enemy is making mistakes, don't interrupt him. And that was the overall approach, I think. But, um, I mean, Trump with his tariffs was really very, very aggressive, and that meant that China had to take a number of steps. Um, the first one was to secure other markets for their exports. And, um, very, very quickly, um, China's share of China's exports to America has dropped to, I think, a little bit below 10% of the total. So, yeah, that was pretty good. Um, she's secured other markets for herself. And of course, in line with that, she's secured a completely separate payment system from the dollar and SWIFT for international trade. And she has put in place the ability to protect the yuan by tying it to gold. This is why, uh, vaults, the SDE, the Shanghai Gold Exchange, have opened vaults in Saudi Arabia and also Hong Kong. And Hong Kong, quite clearly from subsequent action, is going to become the international center for China's activities. I think that was always her plan anyway, but this is definitely now coming to the fore. Um, and I mean, if you sort of think back to her gold accumulation plans, which go all the way back to 1983, I mean, they were secret, but, you know, I've got a copy of the original legislation translated into English, so it is actually there. Also, their, um, secret, uh, acquisition of silver, which is something that they've been doing for the last three decades to my knowledge. And, um, they've controlled the price. They've stopped controlling the price. They've turned around and said, okay, and, you know, the gloves are off when it comes to things like rare earths. Okay. Um, you know, you've got to come and ask us if you're going to get any of our rare earths. We're not just going to export it. The same with silver, same with tungsten, same with, you know, various other critical minerals. Um, and interestingly, silver was put on the critical mineral list by the Americans. Have they got any? No. So, um, this, I think, was a definite plan. Now, given that there is a definite plan, if you like, for the ending of the dollar, I think what's happening is that China is no longer holding back on just standing aside and letting the enemy make the mistakes. I think they're now moving into protectionist mode, protecting their own currency. Now, part of this has to be, if you like, a very soft attack on the dollar. And I think that, um, this instruction to, um, uh, institutions who I understand hold roughly half the 680 odd billion dollars of, uh, US Treasury debt. The instruction to them to reduce their holdings, I think is a very, very important point. I think it, I, I think it's something we should take very, very seriously. It does mean that it won't be just China. I think there will be other nations that will be divesting themselves of US Treasury debt.
>> What kind of ramifications are you expecting on the US side of the ledger?
>> Well, the US have got a problem. I mean, I remember, um, a journalist asking Greenspan the question over China, who I think at that time was the largest holder by far. Um, they asked Greenspan, well, what happens if the Chinese turn sellers? And he turned around and said, well, it's quite simple. You know, we control the register. In other words, they won't be able to sell it. I thought that was a very, very risky remark at the time. I think the Chinese are probably getting ahead of that possibility. But I mean, quite frankly, if the American, uh, Treasury is stupid enough to prevent foreigners from selling US Treasuries, then they're not going to do any funding whatsoever abroad, and it's going to collapse the dollar in my view. Because of all the dollars that are owned by foreigners, um, they may not be able to sell the underlying stock, but I mean, they'll find some way of hedging their dollar risk, um, getting out of dollars elsewhere. Bear in mind that according to the US Treasury TIC figures, roughly 22, uh, trillion dollars of equities in the stock market are held by foreigners. 22 trillion. So while, you know, they may sort of freeze the accounts on the Treasury side, the damage, I tell you, will certainly happen elsewhere and in huge, huge consequences.
>> So that's about a third of the stock market, if I'm not mistaken. And, um, that's a healthy amount. We're already starting to see some money, some currencies, some investments going home to their respective countries where they, you know, flows are turning.
>> Um, if I'm not mistaken, there's about $9 trillion that need that is maturing this year in Treasuries that needs to be rolled over. There's two to three trillion, um, in deficit spending. Uh, they're wanting to increase that, you know, for military, for, uh, housing, etc., etc. Uh, and then you have 10,000 baby boomers a day who are retiring, and all those unfunded liabilities that they're tied to are basically transferring to the deficit. So, um,
>> Absolutely.
>> Yeah. So, I mean, with these problems that are happening in the Japanese bond market, with China signaling that they want to sell, with Europe being strapped, I mean, isn't the Fed going to have to come in here and really print?
>> Well, that's the inevitable outcome. Uh, I think the first thing that we will see is we will see the yields out along the long end of the yield curve rising significantly above that 5% level. Um, I wouldn't be surprised to see yields over 10% and in the fullness of time over 20% or whatever. I mean, uh, because there is no doubt that the US Treasury is in a debt trap. Um, I mean, the debt trap is being sprung partly by, um, the reluctance, I think, of foreigners to continue to subsidize, uh, Treasury deficits. And at the same time, I think the other thing, um, about it is that the economy is actually, I don't think, behaving half as well as the statistics suggest. If you take the government deficit out of GDP, you actually have a contracting, uh, economy in terms of nominal GDP. So that, I mean, because you're looking at what, 6, 12, 7% deficit, um, and what's the economy meant to be growing in nominal terms? I mean, I think they're talking about 5% or something. So, you know, it is actually already contracting now. Um, using GDP to measure economic activity, I think, is actually a very, very bad thing anyway, because it doesn't, you know, you don't take into account how that credit is being used. It's a measure of the total credit in the economy, if you like. So, um, that, I think, um, is something of a problem, um, because when it comes to financing a deficit, and, you know, the debt, the debt, the mountain of debt, you need to have the income from taxes, the increased income from taxes to, um, cover the financing cost of the debt. Now, I know governments never pay, apart from in T-bills, they'll pay the financing costs out along the yield curve, they just let it accumulate. But, you know, nonetheless, the characteristics of a debt trap are that you don't have the income to sustain it. That, I think, is the problem that is already a problem and it's going to be blown wide open by developments which are happening, I think, not just in China now, but elsewhere. I mean, I think the Japanese situation, um, I think is likely to lead to, uh, the institutions there, the pension funds and the insurance companies, certainly not increasing their exposure to US debt and for that matter, EU debt, um, as the bond yields in the JGB market begin to rise to reflect the inflationary policies of, um, this new prime minister.
All right, so let's switch over to, uh, silver, Alistair. Physical silver shortages are seemingly pretty severe. There's virtually no meaningful physical silver available for large buyers. Refineries, they're backed up. They're prioritizing gold, and dealers can't source it at spot prices. So, you're left with massive premiums being applied. As a result, what are you expecting to see in the silver market moving forward?
>> Well, it's a bit of a car crash, isn't it? Um, I think, well, let's just look at the background a little bit. I mean, in the case of silver, there's been a, um, a supply deficit compared with demand. Supply from the mines and also scrap compared with demand for the last six years or so. Um, and something eventually had to give, and that's now what's happening. I mean, again, we come back to China. China is the second largest miner. Um, it even imports silver dory from Mexico to refine. And where does the silver go? It doesn't go back to Mexico. Uh, so there's that. And also they import, um, other ores, silver-bearing ores, you know, copper ore, lead, zinc, whatever. Um, and, um, something like 60% of, um, silver mine silver actually comes as a byproduct of, uh, other metals. So, you know, and they're, they're importing this ore and refining it and keeping it. They are the largest processor and miner of silver in the world. I mean, talk about a critical mineral. And at the same time, you've got EV production, you know, electronic vehicle production going off the charts. You've also got in China, I mean, it's just killing people like Tesla, I understand. Uh, you've also got the photovoltaic cell business and all the rest of it. And India is getting in on that act as well with the, you know, with the big multinationals like Reliance Industries building huge, huge growth solar production facilities and solar generation farms. Um, so silver was going to explode. And what is China doing? I mean, it's interesting watching what's going on in the, um, in the Shanghai markets, both the gold exchange and the futures exchange. Are the authorities supplying silver into the vaults? No, they're not. They're just standing back. They're letting the market sort it out. Which is fascinating because in the past, they have suppressed the price of silver. They have kept control over the price of silver until it finally sort of went through the window, um, in the second half of last year. So this is, I think, a very, very important development. Now, where does silver go? I mean, there is no doubt that, um, in both COMEX and also in the London forward market, there are paper claims considerably in excess of the availability of silver, and those claims are being called in now. So that's a problem. We've, we had an instance, I think it was on something like the 7th of October last year in the London market whereby the lease rate suddenly spiked up to well over 30% because, um, silver was being called in, uh, and out of maturing, maturing, uh, forward contracts, and there just wasn't the silver there. So I think everybody, um, you know, who's got these liabilities, uh, in the paper market, um, basically are trying to beg, borrow, and steal silver from wherever they can. So, um, I'm not making any accusations, but watch out if you hold SLV. I think that, um, this is interesting, and the price of silver, the spot price, and also the, the, uh, futures price on COMEX has been consistently below the price in Shanghai. Now, you can see that there's a lot of speculation going on in Shanghai. Yeah, sure. I mean, the Chinese are wild punters. They love it. Anything leveraged, they play. Um, so much so, but the interesting thing is that you had this guy, was it Bain, B, Sheiling,
>> the billionaire,
>> yeah, with, with over 30,000 contracts short. He accumulated this short position, as I understand it, through January, probably starting slightly earlier, um, and he's now been stopped from dealing effectively. I mean, he can close the shorts, but he can't buy anymore. So there's a huge, huge great bear squeeze in the offing there. And I see also that the Shanghai Futures Exchange issued a notice today, having identified, I think, something like 150 malpractices, spoofing, and acting in concert, and all, you know, all the sort of various ways in which you can rig a market, and they're acting on it. And I sort of think to myself, well, this is actually interesting because we know that the pricing of silver is now really moving to, um, uh, Shanghai, hence the premium there, um, over a mark, over the paper markets, which are desperately trying to keep the prices down. But they're also being a lot more responsible than say, COMEX or the LBMA. Uh, the LBMA is basically, you know, doesn't give out information. When it comes to COMEX, you know, you sometimes wonder whether they're doing things properly with, um, position limits, for example, um, you know, suspending, um, um, um, you know, sort of contracts when the price move goes beyond whatever the regulated level is, and you sort of wonder whether they actually care about malpractices and so on. I mean, you know, this is something which is interesting. There's a long history of this. I mean, when you get senior directors on the bullion desk of JP Morgan being arrested and sent to jail for spoofing and various other practices, unfair practices in the market. I mean, this is something that COMEX has been turning a blind eye to for an awful long time.
>> All right, let me ask you this. So, um, you know, you talk about how the paper market is desperately trying to keep the price of silver down, and it doesn't appear that China is trying to keep the price of silver down. They're allowing the market to sort it out.
>> Being the manufacturing engine of the world, on one hand, you would think that they would want to keep silver down since it's so used and so required in so much of what they're manufacturing. Um, that being said, they have a history of subsidizing their, um, their manufacturers or their economy in many ways, but the western markets don't. And so by allowing the, by allowing the, um, the price of silver to continue to go much higher, can you see a scenario where it could really damage western manufacturing? But at the same time, they'll just subsidize.
>> No, I don't think it's quite as simple as that. Um, talking about fair practices. Uh, just look at the European Union and how they, you know, sort of behave when it comes to products manufactured outside the European Union. Look at President Trump. You know, we're going to tariff these bastards so that they don't can't export into the United States, you know. So the pot's calling the kettle black here, I think, Gary. I think that's, but seriously, about your point, by far the most efficient manufacturers of these industries which are mandated by western governments, like we've got to have, um, you know, sort of, uh, you know, non-carbon, um, electricity generation, so it's photovoltaics, it's, you know, these damned awful windmills and all the rest of it. We are, you know, we are passing laws that this is the future. Okay. Now, from that point of view, it's a fairly, um, inflexible market, in terms of, um, demand. I mean, the, you know, if you get a recession, the demand is not going to drop. That's the point I would like to make. China is by far the most efficient manufacturer of all these products. The people who are going to get killed by it are not the Chinese. They suffer no disadvantage from a rising price of silver, and I think they've worked that out. That is the point which we've got to understand.
>> Okay. All right. So, a lot of investors are taking the perspective that until the gold to silver ratio gets down below 30 to 1, maybe even more preferably 20 to 1, that they won't even begin to consider selling their silver. Are you viewing the ratio as a sell signal at some point? And what range are you looking for?
>> No, I'm not. I mean, well, one thing at a time. I'm looking at the markets and I see, um, I see the sort of short squeeze which is turning, um, silver into a Giffen good. What that means is that instead of the normal relationship where the price rises to the point where supply is, uh, is generated to meet the demand or demand drops off to the supply and there's a price balance. Instead of that, what happens with a Giffen good is that supply just disappears because nobody wants to sell because they can't buy it back. And this is the whole point. This is what's going on. Um, now, I don't know how far this could drive it. I mean, we saw a spike in, in, um, in, in the nickel price a couple of years back. I think it was now. This again was a Chinese, a big, big Chinese, um, uh, uh, nickel magnate. Um, he had the stock, but it wasn't in deliverable form, and the LME went out and canceled a lot of the contracts, which created a lot, a lot of kerfuffle. I think that we could have the same sort of volatility in silver. I mean, silver could shoot up quite easily. And Mike Oliver, who's a technical analyst, I certainly respect, um, you know, thinks that it could go to $300 by the middle of this year. I don't think I'm misquoting him.
>> No, you're not. I, I actually had him on a couple of weeks ago.
>> Yeah. Um, and, you know, it is a, I mean, you know, I don't fully understand his method, but I, you know, from what I've seen of his forecasts, I wouldn't go against what he said. I think he gets it more right than wrong. That's for sure. He's a very good technical analyst.
>> Yeah.
>> Um, so, uh, at the moment, I'm just watching this, this shortage situation and trying to follow the geopolitics behind it. And I have to say that, um, these two factors look like driving the price of silver, measured in our fiat currencies, a long way higher. There is another thing which I think very few people really understand, Gary, and that is that, um, you've got to think in terms of, uh, pricing things in gold. I mean, the point about gold is that its purchasing power over long periods of time is relatively stable. So when you see a basket of, let's say, base metals, um, go down priced in gold, you know that it should return to that, some sort of norm. Now, there are two ways in which that can happen. One way is that gold goes down, measured in, you know, relative to the base metals, or base metals rise relative to gold. With the way, um, fiat currencies are destroying value, their own value, it is clear that this will be reflected in far higher gold prices on any medium-term outlook. Let's just put it that way.
>> The reason why, yeah, the reason why I was asking you it in that context, Alistair, is because there are some, uh, chart technicians and some analysts who are looking at this as a traditional, um, cycle, asset cycle, and they're viewing it as, you know, maybe there's one to two years left, and then it'll peter out, and at that point, at that point, it'll be time to sell, uh, you know, your silver and gold. It'll be time to move into another asset class that is now rising. And really, what you want to do, according to them, is go from, you know, from asset class to asset class and catch these rises. And, you know, in the grand scheme of things, um, what we're watching here is nothing more than a traditional bull cycle, and it'll, and it will peter out. Then you have this other group of people who believe that we're looking at the, you know, the decay and eventual death of the fiat monetary system that we are currently living it under, going all the way back. And the only thing that's going to halt what we're watching is going to be a brand new monetary system implementation for the globe, for the powers that be. Um, you know, having talked with you before, um, I know you fall into the latter camp, not the first camp. Um, I guess my question would be, how could you be so sure that the people, and these are some legitimate analysts and technicians, and, you know, they're good quality people who have good quality reasoning, but, you know, I'm just curious for those who are watching, how could you be so sure that this is not just another asset bubble, so to speak, or asset cycle, as they're calling it, but rather this truly is the decaying and eventual death of the fiat monetary system?
>> Yeah. Well, um, when there's a big difference between a bubble and a cycle, as it were. I mean, obviously, at the top of a cycle, you get a bubble. But, um, the problem is that the, the value of these fiat currencies is going down. They are coming to the end of life because they have now reached the point of debt saturation. I mean, the whole point about a fiat currency is it allows the government to spend, um, without having to tax. Um, it taxes as much as it can, obviously, but there comes a point where taxpayers will rebel, or else they will refuse to, um, continue to pay taxes and rearrange their lives so that they don't have to pay so much tax. And this is always a constraint on government, and this is why governments hate, um, a gold standard. I mean, really, from, um, uh, the Great Depression, from then, they have actually managed to basically devalue, if you like, the gold standard by devaluing the dollar. And at the same time, um, they have tried to edge their way from having to tie the value of fiat currencies to real money in everyone's common law, and that is final settlement with no counterparty involved in terms of obligations, and that's physical metal. Everything else is credit. And this is why John Pierpont Morgan, back in, uh, 1912, in evidence to Congress, said, "Gold is money, and all else is credit." And he was stating a legal fact, and it is still the situation today. I mean, it's not for nothing that British pound notes, or 10 pound notes, we don't have pound notes anymore, uh, 10 pound notes have written on them, um, a pledge saying, "I promise to pay the bearer of this 10 note £10," signed by the chief cashier. What's £10? It's 10 sovereigns. Now, when I tell you that a sovereign today, I mean, I was in the market buying a few today, you pay over £900 each. In theory, I should be able to take my 10 pound note and get £9,000 for it in today's collapsed currency. The same situation, actually, is the case with the dollar. I mean, you had, you know, so, I mean, basically, we know from history that every fiat currency eventually fails, and it fails for the same reason that they're failing today. And also, Gary, if you, um, look at probably the best, um, recorded currency collapse in history, which was the German Reichsmark in the wake of the First World War, you can see the interplay between the politics and the economics and all the rest of it, and you can see exactly the same thing happening today. I mean, the idea that the Germans were stupid to do what they did, and, you know, look, it was politics. What's happened today, you've got to spend through, uh, President, President Trump, who's got all sorts of wonderful plans, but when it comes to actually cutting spending, no, not really, that's not quite so important. And you don't have any economists really who understand the difference between money and credit. I mean, I've even had Austrian economists saying, no, money, the dollar's money. Hold on a minute. You've got to go back to school.
>> Well, it's really interesting. You know, I hope that the folks who are tuning in are really grasping what you're saying here between the difference between the two, because how you look at what's happening will impact, you know, how you're investing and how you're going to come out on the other side of this. Um, I just, as a sidebar, I was telling a friend of mine that, you know, years ago, you can take your $10 bill and go into the bank and walk out with $10 worth of metal.
>> Yep.
>> And he looked at me like I had three heads. He had no idea that that you could do that. And so, you know, the truth is is that the majority of the population is so uneducated when it comes to, you know, money versus credit, that they're able to be taken advantage of by, you know, the whims of the government.
>> But let me, let me move on here, Alistair. In the last year or so, the Trump administration has sent many signals of trying to initiate a new mining boom to kick off. They've made some very strong speeches around the globe regarding critical minerals and mining them. They've purchased direct equity stakes in some mining companies. I'm not supporting that, I'm just listing here.
>> Sure.
>> Uh, they've established many prominent metals as critical or strategic, as you mentioned earlier. They've announced that they're setting up funding for more than a hundred billion dollars to make direct investments. They've spoken about setting up a new system to protect miners and their profits against China by setting up, uh, price floors. Uh, they've also established a project known as Project Vault to stockpile and store these critical, uh, strategic metals. China's been dominating the supply chains, as you've been, uh, talking about, and the refining capabilities for years. Can the US catch up to the point of becoming self-sufficient in the next few years? And while they're trying, are you expecting prices to substantially rise and for tensions between the countries to substantially rise?
>> Okay, two questions there. The first one, um, you know, will they succeed in this, in effect? And the answer is no. Not in a short term. I mean, on a 50-year view, I, you know, I don't think that's what we're talking about. But the idea that they can actually, uh, resolve the rare earths problem, if I can call it that, in a couple of years, forget it. No way. Because apart from anything else, um, you know, you've got to build the facilities to do it. You've got to get the mines going. You've got to get the, um, you know, the planning permissions and this and that and all the rest of it. And you've got to get, build the refineries and so on. This is not something you can do in a blink. It's something which takes time. And not only that, but, um, you know, you've got to prove up the resources. I don't think that's the case. I mean, you know, you've got politicians turning around and saying that they're rare earth, they're everywhere. I mean, do you remember not so long ago they were saying Trump was going to do a big deal with Ukraine so they get all the rare earths in the Donbass region? What? It's never ever ever been surveyed. So what's this about rare earth? I mean, you know, so in other words, it's a whole lot of BS, this stuff about, you know, how they can, can, um, you know, build their own independence from China and all the rest of it. No, the fact is that China has got, you know, has got a grip on the whole thing. And, you know, okay, if America decides, right, we're going to take stakes in, um, these major mining operations, which means that as a government, we'll be able to force them to do this, that, and the other thing, well, we'll see about that. But if they manage to do that, I mean, the consequence in Beijing, I think, in the, um, Communist Party will be for the leaders to say, oh, well, in which case, if Mexico, say, is not going to export dory to us to refine, then we better hold on to what we've got. You know, in other words, I think that the initial effect actually could be to make the situation even worse in terms of, uh, price of these, not only precious metals, but I think the whole of the commodity complex as well.
>> So, is that what you're expecting? You're expecting, regardless of the success of the United States in their effort here, that prices are going to be substantially rising across the commodity complex, and are you expecting the tensions between the two to also be rising?
>> Well, uh, the tensions will continue. I think, um, would be a brave man who who steps in front of the statement and says that, you know, they're going to continue to rise. I don't think that's the point. I think it misses the point. The point is that, uh, um, commodity prices across the whole spectrum have been very badly depressed by the paper currency system. This is what, if you measure these things in the price of gold, bearing in mind gold as money has been for the last two millennia, two and a half millennia, actually legally, then then, uh, you can see that, you know, either gold has got to fall, which, um, in the current, you know, with the ending of the fiat currency system, is not the case, definitely not the case, or commodity prices measured in gold are going to rise. Now, if gold is rising against, uh, declining fiat currencies, then you've got a massive apparent bull market in the whole of the commodity complex. And I think this is actually terribly important, uh, Gary, because I can't find anyone really who's seriously pushing the idea that inflation is going to be a problem in 2026. The second half of this year, you will see inflation going through the roof, driven by commodity prices, driven by the producer price index, if you like, filtering through into consumer prices. This is a disaster for the dollar. The dollar is going to zero. And what that basically means is that prices, not just gold, prices of everything with a zero value in the dollar goes to infinity. That's the course we're on. What we need is a political class who's got the guts to face up to it and go against, um, the wishes of the electorate to actually deal with it, like cutting spending, no more welfare, no more this, you know, complete reset.
>> Well, we saw, yeah, but I mean, Doge.
>> No, I mean, if, if Elon Musk can't do it, nobody could do it in today's environment.
>> Yeah. I mean, Elon Musk, I mean, it was absolutely certain that he was going to be forced out of Doge.
>> But I mean, this is a guy, this is a guy who can, who can reuse rockets. This is a guy, this is a guy who could accomplish literally anything.
>> He's brilliant. And so, I think, I think what we saw here was an was the execution of the idea that look, we're going to put Elon Musk up there. It's impossible, and we're going to show that this is an impossible task by proving that even Elon Musk can't do this. And I think, I think we saw that now. I think the whole world knows there's no way that you can go the austerity route.
>> Yeah. I don't think, I don't think it was a deliberate policy to show that, you know, it just can't be done. I think, um, I mean, it's, it's really quite simple. I mean, there's a whole divide between business and government. Musk is a businessman. He's an entrepreneur like someone we haven't ever seen before, or not in our generation anyway. Politics is different. That's not politics. And this is why America was so successful, um, before the First World War, because the presidents understood that it was not the business of government to interfere in the economy. So they let the economy go. I mean, apart from the, you know, the big, big inflation, but I mean, from, I think it was 1856, you had a de facto, uh, gold standard at $20.67 to the dollar, which was, if you like, confirmed in the Gold Act of 1900. Um, and under those circumstances, America flourished. And it flourished basically because they didn't mess around with with the money, as it were. And not only that, government didn't interfere with business. Business got on with business. The two worlds are completely separate. And if you try and join them together, it's disastrous. And, you know, and Musk, I think, God bless him, the hard way. But I mean, very sensibly backed out. He said, "This is just ridiculous."
>> And he backed out.
>> Lesson learned.
>> Yeah. So it's, so it's, it's impossible.
>> About a good, if I may just say, another thing about a good entrepreneur, he understands when a business project isn't going to fly, he cuts it. And that's exactly what Elon Musk did.
>> Yeah, it's true. It's true. So, I mean, lesson learned. We all saw it. There's no way that we're going to be, uh, you know, having an austerity policy here, let alone across the board in all countries. So, we'll have to see how that plays out.
>> All right. So, Alistair, I'm sure that you've been keeping an eye on the broader stock market and the tech slide in particular. I know that, uh, using the analogy of before of measuring things in gold, um, I believe the market, or the tech, the NASDAQ used to be about 43 ounces to buy the market back in 1999 at the height. Today, it's under 10 or right around 10. So you can see that it's actually been in a bear market except for the decaying currency. How do you view the markets? What's happening in tech? Are you concerned about a market crash, which is on the minds of many investors, or are you looking at it more of a rotation, in terms of, you know, maybe nominally things will appear to be going higher, however, it really is a rotation out of some of these financialized growth stocks and into, uh, you know, hard value?
>> Yeah. Um, what's been driving this market, uh, is credit. I mean, if you look at the expansion of, um, of, uh, um, if you like, the leverage, uh, on, you know, FINRA reports, um, uh, uh, you know, sort of, if you like, margin debt, and that's now over 1.2 trillion. Um, at the time of the Great Financial Crisis, it was around about 200 billion. So, you can see that this is a, this is a credit bubble. Credit is the other side of debt. For every debt, there is a credit. Uh, and this has been increasingly applied to the stock market. Now, um, we talked about China and US Treasuries and, uh, the possible response of, uh, other foreigners and all the rest of it. I mean, it is absolutely clear to me that the dynamics of the situation are leading to higher bond yields. Already, the relationship between bond yields at the long end and the, uh, uh, and the S&P 500 is more stretched, um, if you like, to the, to the disadvantage of the S&P than it has been in recorded history. I, I mean, we don't have the statistics, but I would say that this market is even more credit-driven than, uh, the market, the market in, in, uh, the late 1920s, when you had the Roaring Twenties. You had that burst of, uh, credit applied to the stock market in between really about 1926 and 28, 29, and then, of course, you had the Wall Street crash. So we have a setup which looks even worse than that. Now, the point is that when these bond yields start rising above the 5% level at the long end, I think the S&P, the Dow, NASDAQ will be toast, so will ephemera like, um, cryptocurrencies.
>> Do you think they're going to institute yield curve control in some, some form or fashion, and that would nominally spare the market?
>> No. Uh, I mean, they can't do it is the short answer. I mean, yield curve control works under a gold standard because what you can do, uh, under those, and also, I mean, the point about a gold standard is that government, uh, um, deficits are never as great as they are today. They can't be, you know, so there is a discipline, and that's the whole point of it. There is a discipline on governments. While that discipline is in place, you can say, let us, uh, or let us say, you can sell the short end and buy the long end, and the Fed would do something like that to try and depress, uh, the yields at the longer end, knowing that it can fund the short end without driving up the rate so much. So you can control the, you know, the yield curve that way. Can't do it now. You really can't. And the problem is that the only real funding that the Fed can do is really out of the T-bill market. That's relatively easy because you've got money funds, you've got, uh, you know, bank liquidity and all the rest of it. Um, but when it comes to actually selling the real stuff, you know, sort of 10 years and plus, oh, that's difficult. And I mean, even some of the shorter maturities, I think from time to time, the auctions have been disappointing. So, um, that, I'm afraid, is going to happen. I think that we're going to see far higher yields. And bear in mind also, uh, the inflation argument that we were just touching on. The fall in the purchasing power of the dollar is going to lead to far higher prices over the course of 2026. Under those circumstances, what's the yield on the long end of the of the curve going to be? It is going to reflect a far higher level of inflation than the current situation.
So in this situation that you're painting with the higher, the higher yields, the higher inflation, the lower dollar, the lower stock market, um, the, are the, the move you are, are you saying that the move is going to be more reflective, um, similar to what happened after the 1929 crash, where everything went down except in that case, the mining complex, because you couldn't own really gold at the time, right? So the miners, the miners went, but so now basically the, you're, you're seeing a massive deflationary impact, and then the capital is going to flee into precious metals.
>> Yeah. I mean, um, where else do you go? Uh, not just precious metals, but also, um, I mean, you could make the argument for the entire commodity complex because they will tend to retain their value at the time when the paper's going down. I mean, the key to this is to understand the purchasing power of the dollar is going down. It's not so much the question of, of, uh, other things rising in price. Um, and, uh, inevitably, when you sort of run towards the end of life of the of a fiat currency, you know, people don't wake up to this. You know, and you mentioned earlier on, uh, you know, you've got very, um, sophisticated investment managers who are looking at this as a cycle and all the rest of it. They just don't see that the variable in this is the dollar. If they understood that, they would definitely have a different view.
>> Yeah. Well, this has been an incredible discussion with Alistair McLeod. Before we wrap up, I want to direct everyone who's interested in the metals and mining sector to dive into our Substack at metalsandminers.substack.com. When you join the quickly growing community, you're going to receive a free report. It's titled, "If you don't own gold, you know neither history nor economics." That's a famous quote by investing legend Ray Dalio, and that's the name of the report you'll receive. Now, I'm positive that you've been enjoying the conversation that I've been having with Alistair. Please let them know. Hit the like and subscribe button and leave a comment below the video. Alistair, would you please share a key takeaway as we wrap up here that you want the viewers to keep in mind, and then let everyone know where they could learn more about your work and how they can connect with you and follow what you're what you're talking about.
>> Well, I, I think you've just given me a cue, Gary, because you mentioned Ray Dalio, and from what I see, what he writes, his view actually isn't too different from mine. So if you don't believe a minnow like me, believe a whale like Ray. He's, there's no doubt about it. He is a very, very shrewd cookie, that one. But anyway, um, I'm saying that perhaps because he agrees with me. No, but I mean, the point is that what I do is properly researched in the context of history. It's understanding human behavior. This is the key thing. And it's also understanding the difference between money and credit. And that's what I do with my Substack. I mean, my subscribers, um, I, I'm very pleased to say that a lot of them really enjoy, um, uh, my writing, which I try and do in a way which people can understand. I, you know, I don't sort of wrap the thing up in complicated equations and, you know, sort of arcane statistics and internal machinations of the credit markets or whatever. I try and keep it as simple and as direct as possible. And, um, it's all about, I mean, for goodness sake, you know, $100 a year, um, it could save you.
>> You know, there's masses of people out there that, um, are just not tuning in to what's happening.
>> They're just going about their everyday lives. They're, you know, consumed with their families and their work and their politics and and and and just their their off time. They're exhausted from life. And, um, you know, I'm just hopeful that, um, you know, what we're talking about here today, what you're writing about, what I'm writing about, the other people I'm bringing on here, I'm just hoping that these messages get out there, um, and can help some of these people before,
>> uh, the big implosion comes that you're talking about. But Alistair, I really appreciate you coming back on to Metals and Miners and for being so generous with your time, analysis, and your ideas. It's always so fantastic to spend time with you, to catch up with you, to have these conversations, and this time's no different. And I look forward to having you back on sometime soon. And, uh, everybody else, thank you for watching. I want to direct everyone who's interested in the metals and mining sector to dive into our Substack at metalsandminers. When you join the quickly growing community, you're going to receive a free report. It's titled, "If you don't own gold, you know neither history nor economics." That's a famous quote by investing legend Ray Dalio, and that's the name of the report you'll receive. Hey, hey, hey.