Transcription
Gold is close to all-time highs. Bitcoin is close to all-time highs. And everyone, even the Guardian, is talking about the debasement trade. The debasement trade. The debasement trade. The so-called debasement trade holds on Wall Street.
But even though everyone is talking about the debasement trade, everyone is doing it wrong. They're just saying, "Go out there and buy Bitcoin and gold." And this is incomplete. This is incorrect. So, what I'm going to do right now is reveal the secret strategies the pros use to play this debasement trade with more upside and more importantly less downside. I'm going to reveal this to you in three simple fast steps.
Step number one, let's go over the whole argument, the narrative here. It's all about money printing. So, we've got a chart from today's date going all the way back to 1960. For heaven's sakes, on the left, we go from 0 trillion up to 24 trillion. This is a representation of the amount of currency units in the United States chasing goods and services. That would be M2 money supply. And you can see this thing is going parabolic and exponential growth curve. I mean, look at this. From 2000 all the way to 2020 into 2021, it's going almost straight up. Now, we had a little bit of a reprieve there, let's say, in 2023, but now it's going back up. And this trend looks like it's not only going to continue higher and higher and higher, but go up at an even faster pace. So the money supply growth, if you just look at this chart, looks like it's increasing exponentially. This will lead to massive inflation. In other words, a depreciation or debasement of the United States dollar relative to goods and services in the United States. And although this is the key, it's all about the increase in money supply growth, we're not done yet. Let's remember that the debt and the deficits for the United States government, they're exploding higher. And even though Trump might be trying to reign it in, Doge, good idea, but it's not working. It's going the opposite direction. So, in the future, the debt and the deficits are going to continue to go higher and higher and higher. And oh, by the way, this is happening at a time when foreigners are dumping treasuries. They see what's going on. They see the fiscal irresponsibility. They see the US debt is totally unsustainable. By the way, this is the argument. This might not be my argument. I'm explaining the current narrative around this trade. So, the foreigners are dumping all these treasuries. The supply of treasuries is going skyhigh. And this means that interest rates inevitably are going to go up at the long end of the curve because we're just adding more and more and more treasuries through these deficits, but the buyers are decreasing because these foreign central banks are trading the treasuries for gold. So then what happens? The Fed has to step in and do QE. Just call it yield curve control. In other words, money printer go burr. They've got to buy all of these treasuries. Now this is okay for the government. They want to run it hot. Why? Because right now the debt to GDP is over 100%. So if they can keep inflation high for a sustained period of time, in other words, they can decrease the value of the dollar for a sustained period of time, this benefits the government because it likely would reduce the debt to GDP and get it down to a more sustainable level. Now, of course, this benefits the government, but this absolutely crushes the average Joe and Jane because the purchasing power of their savings decline as the debt to GDP for the United States government goes down. So because the rate of change or the money supply growth is going to continue to increase remember that is the key then we have to go into hard assets whether it's oil whether it's Bitcoin gold because this is the only way that we're not only going to protect our purchasing power but increase our purchasing power because sooner or later everyone is going to realize and see what we see. They're going to notice that the government is debasing the currency. They're going to pile into gold. They're going to pile into Bitcoin. And they are going to go parabolic. And we are going to get rich. And if you don't believe me, hey, just look at this chart. What do you see this blue line doing? But you see, if we stand back and think about it for a moment, we realize that this chart is totally wrong. And if this chart is totally wrong, then our key premise for the debasement trade is also totally wrong. I'm going to explain exactly what I'm referring to right now.
Step number two. Now, before I go into this plot twist and tell you why that chart we were just looking at is completely incorrect and will lead you to incorrect conclusions, let's make sure we're all on the same page. We're going to go straight to the Google AI overview and we're going to find out, well, what is currency debasement? I mean, it's one of these words that's just thrown around all the time, but we have to get our definitions correct. So, let's get into it. Here's how it works, what it is. Modern monetary debasement in a fiat system where currency is not tied to a physical commodity like gold, debasement occurs through monetary policy decisions primarily by creating more money out of thin air. So the way you debase a currency is create more of it. And if you want to debase the currency faster, then you need to create more of it at a faster rate. Okay. So why do governments do this? We talked about it a bit in step number one. Right here says fiscal tool. Governments may debase a currency to fund their operations. Basically how this works is if they issue a lot of debt, the debt to GDP goes up to 120%. Then they say, "Okay, well, we've got to debase the currency. We've got to create all of this inflation so we can pay that debt back with cheaper dollars." So what ends up happening is the government, they create more dollars, it increases GDP, they get more tax revenue, and then it's easier to go ahead and pay their debt. the debt burden overall is reduced and we can see this reflected by the debt to GDP ratio and that's why as an example in the 1970s a decade of high rates of inflation we saw the debt to GDP go down substantially but here's where things get really interesting instead of looking at just a normal chart of M2 money supply let's look at a log chart so now we can determine what the rate of change in the money supply growth actually is. And at the end of the day, as most of you know, it's all about the rate of change. If you want an example of this, would you prefer to buy a stock that's trading at $100, but is going up at 20% per month, or would you rather buy a stock that's trading at $1,000 that's going up 1% per year? It's obvious you want to buy the $100 stock because the rate of change is what really matters. And it's the exact same thing with the money supply growth. So instead of just looking at it in absolute terms, what we have to do is we have to look at it in terms of the percentage change. And that's why the chart we looked at in step number one is so misleading. Here we see the exact same chart, M2 money supply, but instead it's a log chart. So now this tells a much different story. In fact, it tells the opposite story of the chart that we looked at before. So let's check this out. From 1960 to let's say the early 1980s, the increase in money supply was staggering. Look at the trajectory of this trend line. But then notice what happens in 1990. We start to level off. And then once we get into a sustained uptrend again, the trend is actually a lot lower than it was from 1960 to the early 1980s. And now of course we had the surveys sickness. Everyone knows what happened then. The rate of change really increased. But what happened starting in let's say 2022 or 2023. Let's zoom in on this chart. And I think you guys are going to find this fascinating. So we're going to go to a chart just going back to the year 2000. And when we look at this chart, we know that this rate of increase was a lot lower than it was from 1960, let's say the early 1980s. And then we have this big jump up, let's say 2020. into 2022. But since that time, it's leveled off. Now, even if you want to look at the increase from let's say 2023 when it bottomed out and it has started to go up again, look at the rate of change. This trend line is based on me eyeballing it even lower than it was from 2000 to let's just say 2019 which is lower much lower than it was from 1960 to the early 1980s. Another fascinating way to look at this is simply pulling up a chart of the aggregate total or the cumulative total of money supply growth from let's just say 2020 the beginning of 2020 so preervesa sickness to today. And when we pull up that chart, and it's represented by this black line, we can see that we've had an increase of over 40%. 42% just in the last 5 years. I mean, this sounds like an astronomical number that really would have you scratching your head and asking, "Well, how on earth have we avoided hyperinflation with an increase of 42% in just five years?" Once again, what we have to do is we have to step back and ask the question, okay, well, how does this compare to other 5-year time frames or let's just say beginnings of other decades throughout US history? So, now let's go back to 1980 to 1985. Why? Because most of you know this was a time when we experienced significant disinflation. So we had prices going up but they are going up at a much lower degree or to a much lower degree in 1985 than they were in 1980. But look at how much the money supply grew during that time frame over 60%. 6. So from 2020 to 2025 we're at 40%. From 1980 to 1985, we're at 60%. But we saw prices coming down. Why? Because it was really about the rate of change. But the whole point here with these charts is to show you that the money supply growth that we've seen in aggregate total when you look at it in terms of history, and I hate to say this, but it's actually pretty benign. Now, let me be very clear. I am not saying I am a proponent of always increasing the money supply. That's not what I'm saying. I'm just saying that the narrative, and we were talking about this in step number one, is that the rate of growth in the money supply is completely and totally unprecedented. And what I'm showing you with these charts is number one, the rate of change is actually lower when you especially when you look at the trend over the last few years than it was 1960, 1980, even lower than it was in the 2000s. But when you look at the aggregate total, it's nowhere near unprecedented as far as the amount of growth. But now, I know a lot of you right about now are saying, "Okay, George, well, you're probably cherrypicking here. 1980s, for whatever reason, that was some sort of anomaly. So, let's look at other five-year periods and see, okay, is this an outlier, meaning what we've seen from 2020 to 2025, or is this the norm, which is kind of the claim you're making? Okay, fantastic. Let's go back to 2000 to 2005, and we can see here that we're right around 40%. Okay, exactly in line with what we've seen recently. Let's go to 2010 to 2015. Ah, look at that. Well, 40%. H interesting. Now, let's go back to 1960 to 1965 because remember back then we were on a gold standard. So obviously the money supply wasn't growing because that constrains the government's ability to print money. And when we look at 1960 to 1965, you see that the money supply grew at almost 50%. And that's under a gold standard. Now I know again a lot of you are probably say, "Oh, George, that that's just fake news. You're just making this up." Now, that really wasn't a gold standard. To get a real gold standard that would constrain the government spending and all this money printing, you would have to go back to the late 1800s. Fantastic. Let's go ahead and do that. Let's look at 1880 to 1885. And here, whoa, would you look at that? The money supply grew at roughly 70%. That's right. 70. So if you look at the 1960s, if you look at the 1980s, if you look at the 2000s, even if you look at 2020 to 2025, the money supply grew actually to a greater degree from 1880 to 1885 when we were on the strictest gold standard that we have been. and let's just say the last 200 years. So what's the point? The point is when you actually look at the data accurately, do research and scratch beneath the surface, you see that the money supply growth that we have had from 2020 to 2025 is nowhere near unprecedented. In fact, it's actually below average. So this debasement theme, this debasement narrative, although we absolutely are seeing the dollar lose value relative to what we've seen throughout history, it's actually a lot lower. It's not going exponentially higher.
So then the next question becomes, okay, George, fine. Well, then how would you explain this increase in gold? I mean, just the other day it went above 4,000. Or how would you explain Bitcoin being near all-time highs? Or maybe silver being at all-time highs? That's actually a pretty easy explanation because number one, with gold, you've got central banks dumping it. Not because they're worried about debasement, but they're worried about counterparty risk for heaven's sakes, because of what we did to Russia and freezing all of their dollar assets back when they invaded Ukraine. And then obviously outside of the central banks, we've got a lot of global uncertainty. And when you have increasing levels of uncertainty, you're going to want something without counterparty risk. And that would be gold. And that would be Bitcoin. And then the narrative tries to explain why the prices have gone up by inserting this debasement idea, which is completely incorrect. But the key here is when you are investing, it's not about what you think. It's not about what the data says. It's not about these charts that I'm showing you in step number two. It's all about what the market thinks. And if the market thinks that the dollar is being debased by an everinccreasing rate, then prices for commodities, gold, silver, Bitcoin are also going to reflect that. And this is why a lot of the pros I know are using completely different strategies than the retail investor because they know that in a debt-based monetary system, if you have the rate of change in money supply growth decreasing, that could lead to disinflation or even deflation just as easily as it could lead to inflation.
Step number three. Now, let's go over one of these secret strategies the pros use to play this debasement narrative. Let's say that they believe is even better than just strictly holding gold or Bitcoin. We can throw silver in there as well. Let's start by looking at a chart from today's date going all the way back to 1986. We go from 0% right here down to negative 1% and all the way up to 3%. What on earth is this? This is the spread between the 2-year Treasury and the 10-year Treasury. Editor, go ahead and throw up the full chart, and you'll see that my chart is missing a few blue squiggly lines. It's incomplete. Why did I do this? Because I only wanted to focus on the times where the curve actually inverted. Now, what am I talking about inverted? That's when the two-year Treasury yield is actually higher than the 10-year Treasury yield. The opposite of what you would think. Very counterintuitive. So, check this out. Let's go all the way back to the inversion that preceded the 1990s recession. And what happened here? Goes up, down, kind of squiggles around zero, and then boom, the spread really increases dramatically. And then it goes up to here. And it even goes higher and higher and higher to where we go from a negative spread, in other words, inverted, to the spread steepening to the point where it's at 2.5, almost 3%. This is a massive move in the difference between the 2-year Treasury yield and the 10-year Treasury yield. But notice, let's fast forward to the.com bust. Exact same thing. Let's fast forward to the GFC, exact same thing. Let's fast forward to even before the surveis sickness where we got that small inversion in August of 2019, and you see the exact same thing, just to a slightly lesser degree. So, why on earth does this matter? Let's dive into that. Let's go back to this chart of the spread completely blowing out. Now, I want you to notice I've got a black line and a green line here. Why on earth did I do that? Because usually the spread starts to increase as a result of the Fed dropping rates. Now, what happens is that brings the 2-year down faster than the 10-year, and that's what creates the increase of the spread. But once we get to, let's just say, this point, we have a completely different dynamic playout. In fact, it's the exact opposite in the sense that let's just say the Fed's got interest rates at zero and the 10-year Treasury yield is here. The 10-year Treasury yield starts to go higher and higher and higher. Why? Because we get increased growth and inflation expectations. So here the spread increases because the Fed's dropping rates due to let's just say an economic slowdown or a recession which is disinflationary potentially even deflationary. And then we get the next leg up as a result of inflation expectations increasing and going from disinflation deflation and flipping all the way back to the other side where the concern is more so on an acceleration of consumer prices. So now let's go down to the bottom of this chart and you can see or or try to see my green little mark here. My green pen is running out of ink unfortunately. But I've got this green arrow is a bull steepener. Oh, excuse me, a bear steepener. And this black line is the bull steepener. And that's just a fancy way of saying this green line is going up or this part of the spread increasing as a result of inflation expectations going up. Notice the arrow. And this part is the exact same net result, but it's a completely different dynamic in terms of market expectations where they're expecting inflation to actually go down. So, you see how this trade works and why the pros like to use this even more so than they might like to just sit in gold or Bitcoin because it's a heads I win, tails, you lose. And what I mean by that, let's go right back to step number two, is if the rate of money supply growth continues to decline, we all know what happens in a monetary system that's debtbased that leads to disinflationary if not outright deflationary pressures, especially in the financial system, i.e. asset prices. But if we have another scenario like this, then it's game on and we're right back to the massive amount of debasement where most likely the dollar will lose purchasing power more significantly and we will see an increase in the rate of inflation, especially especially if the banks are playing ball. But regardless of whether we get this, we get this, or we get a recession that's disinflationary or deflationary, think the GFC, the net result with the spread is the exact same. And that's that it goes up. And here's where we are right here today. We were massively inverted. And today, that spread is only about 50 or 55 basis points. And you can see where it usually goes a lot higher than 50 or 55 basis points. Now, I want to be crystal clear. This is not personal investing advice. And full disclosure, I own gold. I own Bitcoin. And I have put this trade on in the past. I had it on from about 45 basis points to roughly where we are today around 55. But I do not have this trade on right now. But that said, by the time you're watching this video, I could have this trade back on. Who knows? But the main point here is this isn't investing advice. I'm simply sharing with you. One of these secret strategies that the pros use that sometimes they like even better than simply just owning gold or bitcoin because of the asymmetry where it has this type of component where regardless of the outcome whether it's inflationary or disinflationary deflationary the probability is high that they still win Again, black arrow, heads, they win. Green arrow, tails, you lose.
If you want more insights just like the ones we talked about in today's video, I got good news for you. I'm doing a free webinar training October 29th where I'm going to be going over three totally contrarian kind of secret strategies that the pros are using to beat the S&P 500. And if you're doing the whole buy and hold thing or buy the dip or just investing in a passive S&P index fund, although that may have worked in the past, it likely will not work moving forward. And the best thing about this free webinar is I've got a huge bonus for those who attend the webinar. You're going to get a $500 coupon for Rebel Capitalist Live tickets. This is the annual investment conference I do in Orlando. Past speakers have included Ron Paul, Robert Kiasaki, Peter Schiff, Lynn Alden, just to name a few. So, if you want to check out this webinar, if you want to register, we'll put a link in the description below.