Dollar Decline Is the Plan: Gold & Bitcoin to Compete as Neutral Reserve Asset | Luke Gromen

This has been decided. This is we are reshoring. We are going to weaken the dollar and something else is going to serve as a neutral reserve asset for the global system. Whether it's Trump, whether it's Bessant, whether it's Myron, whether it's Vance, they're all saying the same thing which is we want to get rid of the dollar as global reserve asset as store of value and we want to maintain the dominance of the dollar within global payment systems. It's happening in plain sight for those with the eyes to see it.

Uh the US military for 15 years has been saying look our our industrial base is too hollowed out. We can't fight a war against a nearpeer or pure major power. We can't make the weapons to go to war. And when you hear so often many analysts say, "Well, ultimately the US military backs the dollar." Well, sure. And guess what backs the US military? Chinese rare earths, the Chinese factory, and that this system has outlasted its usefulness. that ultimately the dollar is going to be much lower sometime in the next 3 years. I ultimately think it means much higher asset markets, much lower dollar, much higher gold, much higher bitcoin. This administration I think they see as um in my opinion sort of standing up bitcoin as a neutral reserve asset for the US and that's why I say all roads lead to gold and bitcoin. I think you know bitcoin, gold and then everything else. I think Bitcoin and gold are going to go up versus virtually all other commodities, many other assets as we move away from a debt reserved system.

>> What is that asset that you would choose?

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>> God, you're you're going to make me piss off somebody, aren't you?

>> If I had to choose just one,

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this is the real story with Michelle McCrory.

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Hello, I'm Michelle Mccori. Thank you for joining us. This is the real story where we go beyond the headlines and behind the curtain to show you what is really happening with money, markets, and power. And for nearly 80 years, the US dollar has been the reserve currency, the anchor for global trade, finance, and power. Now, that's given America huge advantages. Cheaper imports, strong buying power overseas, and a deep global market for US debt. But it has also created a catch 22. To keep the world supplied with dollars, America has to run trade deficits year after year that keeps the global system running. But over time, those same deficits weaken our own economy, hollow out our industrial base, erode national security, and slowly eat away at the dollar's value and credibility and the demand for treasuries. Economists call this Triffin's dilemma. And now, for the first time in a long time, we're hearing this dilemma openly acknowledged at the very top of US government. And it's raising the question, is the Trump administration, preparing for a deliberate policy shift, even a monetary reset? Is President Trump willing to take short-term economic pain for what he believes is the greater long-term good of restoring America's productive strength and sovereignty?

Now, the president has openly talked about the benefits of a weak dollar as a strategic move to restore American manufacturing strength.

>> I'm a person that likes a strong dollar, but a weak dollar makes you a hell of a lot more money. Hate to tell you, we have a strong dollar. One thing happens. It sounds good, but you don't do any tourism. You can't sell tractors. You can't sell trucks. You can't sell anything. When you have a strong dollar, you can't sell anything. It's only good for inflation and it's good psychologically. It makes you feel good. But with that being said, I love strong dollars, but you make your money with a currency. And I had so many different fights with President Xi with I mean with between Japan and China. All they want to do is have a weak currency.

And Vice President JD Vance has gone further, describing the dollar's strength as a tax on American producers and questioning the benefits and sustainability.

>> The reserve currency status is a massive subsidy to American consumers, but a massive tax on American producers. And when I look at the American economy, we have a lot of financial engineers and a lot of diversity consultants. We don't have a lot of people making things. And I worry that the reserve currency status and the the lack of control we have over our currency is perhaps driving that.

Now these statements line up with what my next guest has been warning for years. Luke Groman says that the post 1971 dollar reserve system has basically turned into a resource curse. It's pushed the US to over financialize the economy and left the US strategically vulnerable. He's warned that America's reserve currency status, ballooning debt, weaponizing of the dollar with excessive sanctions, and de-industrialization are on a collision course. That Washington will have to weaken the dollar to pull in capital and rebuild domestically. And he sees a future where the dollar's dominance fades, gold returns to the monetary system as a neutral reserve asset, and Bitcoin potentially joins it as a parallel reserve. Luke is one of the most respected names in the global research sector. He is the founder and president of Forest for the Trees, FTT, a leading macroeconomic research firm serving institutional and high-netw worth clients. He's known for connecting the dots between global debt dynamics, currency systems, and geopolitical shifts. He's also the author of the Mr. X interviews, volumes one and two. All right, Luke, great to have you with us.

>> Great to be here. Thanks for having me on, Michelle. Yeah, and you know before we started I said I may refer to you as one of the greatest uh macroeconomic uh strategists of our time but you talked me out of that but we'll see because a lot of what you have said has come to fruition certainly since my conversations with you and we do have a lot of ground to cover as I mentioned a lot of what we've discussed in the past has materialized when we've spoken before you correctly called how US treasuries uh would be reduced for gold on the central bank level now the data has shown that has materialized indeed in your latest report to highlight that. I want to get into that. I want to get your thoughts on a potential gold revaluation, how you see Bitcoin and stable coins fitting in, your outlooks for gold and Bitcoin, but I want to start off with a big picture view and your big picture outlook. And I want to zoom out and get the forest for the trees as you put it to help us set the scene here. Now you have said that the dollar's dominant role in the global system is ending not through some dramatic apocalyptic collapse but via a managed decline designed to keep the US Treasury market functioning and avoid a systemic crisis. So let's start off with the heart of the problem. Something that you have talked about for years Triffin's dilemma. The idea that if the US dollar is the world's reserve currency, we have to run persistent deficits to supply the world with dollars. But then over time those same deficits hurt the economy, undermine confidence in the dollar. And you've said that we are now in the late stages of this dilemma. So break that down for us.

Yeah, I think the the easiest way of the the the simplest way to break it down is is after uh Nixon closed the gold window in 1971 where the US wasn't going to uh satisfy foreign creditor demands for gold anymore and make the dollar as good as gold at $42 an ounce. Uh then we moved to something else and ultimately this what the something else morphed into um required certain trade and capital flows and those to oversimplify were uh we offshore our factories and middle class and working-class jobs abroad. Uh those nations make stuff for us and send it here. We pay for them with dollars. Uh they take the dollars and recycle them into our capital markets funding uh Washington deficits. uh US mortgage markets and then equity markets, other US asset markets and uh it leads to a a a virtuous cycle for a time. Early on you get the consumer benefits. You get cheaper interest rates. You uh that can support more and more debtfueled consumption at Washington and by US consumers and that leads to more demand for these countries factories etc. And then at some point it starts to uh uh go too far as any good system does. It becomes a victim of its own success. And in recent years the symptoms of of the these uh victims of its own victimhood of its own success I suppose have be begin more and more obvious essentially.

>> All right. And you know, I it's important to give the sort of macro framing because it's it's something that you've talked about and you've also said that the Trump administration seems to get this better than any other administration in light of the some of the remarks that I played in light of where we are in the macroeconomic and geopolitical stage. Explain why you say that.

Well, I think you when you see when you hear Trump's uh commentary both in his first term and now in his second term, uh he has been talking about reversing the capital flows uh that we were just talking about, which is, you know, he wants to put tariffs on. He want to make goods the goods coming elsewhere more expensive. He wants to make more of them here. Um that is a direct reversal of the the the trade flows, the capital flows we've been describing for 50 years. You saw Senator Vance at the time, Vice President Vance now, uh we didn't get to see there, but the person he was grilling at that point in time was uh Chairman Powell, Fed Chair Powell. He was he was talking about the the dollar's reserve status as having a resource curse as being good for consumers, good for Washington, um not not good for producing US assets. We've seen uh Secretary Besson, Treasury Secretary, talk about uh the knee that that Wall Street has done very well over the last 40 years, but now it's Main Street's turn. Um, and when you hear what they say, when you look at the steps they are taking, they all support a view of reversing these flows. Now, to what end? Why do we want why do we want Main Street to do better than Wall Street? You know, hasn't this been good? Don't we don't we like this? And the the answer to that is that uh it's become a sec a significant US national security threat. We have we have so hollowed out our manufacturing base. We can no longer make the weapons and armaments and manufactured goods that the United States military needs to support the very dollar system as it's structured. And and that's one of these victims of its victimhoods of its own success that I was referencing before. And so I think that's ultimately the driver to what's behind u you know the Trump uh administration sort of chapter and verse singing from this himnil.

>> And you know just to set the stage again Luke I think a lot of people have recency bias. They only know a time with the US as the global reserve currency. And I gave that little Triffin's dilemma macroeconomic wonky description to paint the picture that these resets happen that these shifts naturally occur through economic cycles that have spanned thousands of years. So set the scene for us where we are right now. uh bringing in the idea of debt, bringing in the idea of the US treasuries being potentially replaced as neutral reserve assets, bringing in the idea that as you mentioned keeping the global reserve currency status as is is a national security threat. Weave that all together into the context of how this is a pattern that we've seen in history before.

>> Sure. So ultimately it's it's kind of you know something whether you want to call it Thusidity's trap or or what what have you. There's always sort of an incumbent power and a and a rising power. You know in the 1910s it was the US and the UK and and Germany was interwoven in there and and we've seen this sort of play out throughout history. It's the US and China now and each are very powerful countries. um they are tied together in a way that perhaps has never been as economically tied in any of these situations uh before. In other words, the Chinese are by far our biggest supplier, by far our biggest trade creditor um and and one of our biggest foreign creditors and they own a lot of our assets and and so we're both mutually dependent on each other. The reason it's happening now is multifaceted. The Chinese you know to be clear the dollar has been replaced at the central bank level over the last 11 years. In 2014 global central banks stopped buying treasury bonds on net. Uh they have net sold about $2300 billion of treasury bonds since 2014. They have bought on net about 600700 billion of gold. So at the central bank level, we're now 11 years into this new regime where central banks are reserving gold. They are no longer reserving incremental uh treasury bonds. Why are they doing that? Uh the Chinese came out in late 2013 and said it's no longer in our interest to grow FX reserves. It's no longer in our interest to buy treasuries. That is, I think, a direct nod from the Chinese side that they're in a they're in a pinch. uh they have to import large amounts of oil and other commodities to fund their economy, their debt, their growth. Uh and they have to buy historically those commodities in dollars and they have a finite number of dollars. And so they are very much in a were finding themselves as they came out of the great financial crisis with the rest of the world that they were they were facing a Southeast Asia late 1990s type crisis where they're going to run out of dollars and when they do they're going to either have to curtail their economy, they're going to have to devalue their currency. They're have to do something. And that was not politically acceptable to them as a powerful nation. And so what they began doing is is working to fix it. They began cutting out the middleman. Rather than storing their wealth in treasury bonds and US dollar paper assets, they began going direct to the source and buying oil fields, buying copper mines, buying gold mines, buying ports in in Europe and around the world. Uh and then beginning to change the denomination of marginal supplies out of those mines, oil fields, etc. to Chinese yuan because they can print yuan. They'll never run out of yuan. Now, nobody including even Putin himself really trusted the yuan more than the dollar. And so, how were the Chinese able to to engineer this was through gold. They they made a very conscious effort beginning in 2009 to provide for a system that allows for the uh recycling of offshore yuan imbalances into physical gold. Uh, and everybody trusts gold more than the dollar. Uh, even Alan Greenspan said it in 2014. the the the number one the best currency in the world is still gold. It's even better than the dollar. So u the Chinese have come at this Triffins dilemma from that angle which is acute national security threat to their oil import bill. They need to be able to buy oil in their own currency. They've used gold to facilitate that. The US on the other side has been in more recent years uh the US military for 15 years has been saying look our our industrial base is too hollowed out. can't fight a war against a nearpeer or pure major power. Uh Washington, as usual, didn't listen. U they like the old system. They're not resistant to change. They need a crisis. Trump started to change this in with in in the first term with some of the uh trade uh restrictions, sanctions, tariffs, etc. But what really started to change minds in Washington was first COVID. when COVID hit and all of these Washington politicians suddenly said, "Oh, I need a mask. We'll call China. We don't make them. I need this. My kid is sick. They need this. Get in line. We don't make them. China makes them all." That was the first time it really brought it home, I think, to the civilian sector uh after the military been warning about it for over a decade. That was the first instance. And then the second instance has come post uh 2022 the Russia Ukraine war where the United States military uh earlier this year Secretary General Rudy of of NATO uh openly declared that Russia had outproduced all of NATO by 4 to one. Why? Now keep in mind the same Russia that John McCain once called you know a country with a gas station attached to it or a gas station masquerading as a country. the same the same country that people said well it's it's got a smaller GDP than Italy we're going to you know the ruble is going to be rubble three years ago well it outproduced us 4 to1 and and importantly how did that happen they and China were focused on industrial production and we have simply hollowed out too much of it and so this was kind of the second big triffin dilemma problem highlighted from the US side that was you know I jokingly say with all respect to to to Congress people, you know, it was so easy even a Congress person could understand it, which is we can't make the weapons to go to war. And when you hear so often, you know, many analysts say, "Well, ultimately the US military backs the dollar." Well, sure. And guess what backs the US military? Chinese rare earths, the Chinese factory base. And that's been, you know, kind of the warning the US military has been warning about for 15 years. But it took COVID and the supply chain disruptions from that. And then it took, you know, to be blunt, NATO losing due to supply chain shortfalls in a proxy war against Russia, uh to really understand that this system has outlasted its usefulness. The United States, you know, forget about what we want. It's very difficult to maintain the the reserve status of the currency, even if you want to, if you don't have the military to do it. And we no longer really have the military supply chains ironically because of that very dollar system. And that's really those two dynamics. The Chinese have wanted change for 15 years because it's a matter of national security uh to them to not have a currency crisis around their oil import bill. And it's increasingly in the last five years become an acute matter of US national security as well to no longer have the dollar as as structured as it has been since 71 as a reserve currency because we can't make weapons. We can't make PPE. We we we were shown in COVID. So it's those dynamics coming in. Both parties want to move the system to a neutral reserve asset. No longer reserving dollars but reserving a neutral reserve asset. and central banks have been at it, as I noted at the beginning, from for for 11 years. They're already have an 11-year head start. Um, so there is pretty, you know, it's it's interesting. There's pretty wide agreement whether you look at US, China, different multilateral bodies, the former uh chief economists of the IMF, former president of the World Bank have all talked about this for at various times for the last 10 to 15 years. uh and we're moving in that way with the global central banks stopping buying treasuries on net and buying gold for the last 11 years. But in the United States, this is still a bit of a a wild kind of thought. I don't think it's nearly as wild a thought as it should be. It's happening in plain sight for those with the eyes to see it.

>> All right. And that's what we do here. We go behind the curtain on the real story, Luke. And it seems as though the Trump administration is starting to look at this keeping in mind that what you said the only way to cut the Gordian knot of Turfin's dilemma is through neutral reserve assets and that seems you know that means to separate essentially the three functions of a global reserve currency store of value medium of exchange unit of account and hence you mention a neutral reserve asset like gold and maybe bitcoin as a store of value and that may actually be in the US's long-term uh favor because the US dollar can then correct me if I'm wrong still serve as the medium of exchange and the unit of account if we get gold emerge as that neutral reserve asset and that is already happening. There's also the Bitcoin conversation, but before we go there, talk us walk us through this. How the US can still maintain some kind of medium of exchange and unit of account status whilst weakening itself, but also drawing off a neutral reserve asset like gold.

>> Yeah, I you you framed it perfectly, right, with the the there's three components of a currency, a store of value, unit of account, medium of exchange, and the dollar has served all three. And it's that store of value uh of component of the dollar's reserve status that has only been in existence since 71 really right remember prior to 71 the dollar was reserve currency and gold was technically the store of value um and it was Nixon essentially saying eh we're going to replace uh the dollar tied in a way to oil uh with Saudis help through the petro dollar system we're going to replace that and and so ultimately the reason why that you need to replace that is that the effects that that drives. If you use your currency as the store of value, you get the flows that we've gotten and the outcomes that we've gotten, which is to say our factories go offshore. Our financial markets uh and we become highly financialized, right? That those flows we described happen and it strengthens your currency. your currency gets too strong to be able to compete in sort of anything uh that is made as Trump highlighted and as specifically cited just two three weeks ago in that those comments uh that you showed excerpted earlier uh and so the way you fix that is you move back to a neutral reserve asset now you don't peg you know we I think we're going to work with gold because I think that's central banks have it on the balance sheet it's the biggest market right now relative to neutral reserve assets Um, it has a very long history. Of course, the you don't make the mistake that the Americans made by pegging it to the dollar. That's dumb. You don't do that. The Chinese, everyone knows you're not going to do that. What you're going to do is you're going to let it float in currency terms and you're going to settle trade on a net basis in physical gold and you're going to let price go where it goes with each respective currency. Now, the Americans by virtue of the existing system run by far the biggest deficits in the world. It's not even close. The UK is second, but it's it's not even close. But again, that's not because we're inherently bad or proflegate, per se. It's because we have the reserve currency in a system where the reserve currency is the store of value. So we have to run these deficits and hollow out our industrial manufacturing base uh industrial defense base to do this by moving gold into a neutral reserve asset where the world is on a net basis reserving gold that floats in every currency. Essentially everyone's going to bid any uh the biggest portion of um of deficits uh in local currency terms. They're going to bid for gold. Now, who's got the biggest deficits? How, you know, there's going to be a few yuan bidding for gold. There's going to be a few euro bidding for gold because they run a flat, they each run, you know, the Chinese run a capital uh account uh excuse me, current account surplus. The ch the Europeans roughly flat capital account. The Americans a huge deficit. So, there's going to be a lot of dollars bidding for gold in that situation. And so the price of gold will rise a lot in dollars a lot more than it does in yuan, yen, euro. And as that happens through the gold pivot, through the gold reference point as a World Bank president Robert Zelich called it 15 years ago, uh you are going to end up with a weaker dollar relative to yuan, yen, euro, which is exactly what the Trump administration has been trying to do for one plus terms already. U it's what the US has been trying to get more competitive even under the Biden administration. We want to get more competitive with Chinese goods. when you want the Chinese to strengthen their currency against the dollar. This does all those things through the gold pivot. Dollar gold goes up a lot. Yuan gold goes up less and we end up with a weaker dollar versus the Chinese yuan while maintaining sort of the dominance of the dollar systems, the unit of account, >> the medium of exchange that that we like and quite frankly the world likes. and and and it it allows us to uh play to our strengths around rule of law uh and those types of things. There's obviously a multi-entury tradition of Anglo-American case law and etc around commerce, letters of exchange, global trade, etc. that I think a lot of the world wants to keep. It's just that this store of value part of it is just not in our it's not in our interest anymore. It's not in anybody's interest anymore. And that's why I think the world is, you know, by agreement from each's enlightened self-interest arriving, you know, at least for now at reserving a lot more gold and not reserving treasuries on net anymore.

>> Right. So I I guess the big question then is do you think the Trump administration is trying to get ahead of this? Are they leaning into gold as a neutral reserve asset?

Yes, I think they are. I think they absolutely understand this um at a very fundamental level. uh whether you talk you whether you look at the past pronouncements um of Secretary Besson before he was under consideration since he was under consideration since he's been Secretary of the Treasury uh Trump many different times the things he's said uh Vice President Vance uh his commentary uh prior to um you know prior to uh becoming vice president uh that the clips that you showed before some of the things he said since where he's not necessarily specific specifically mentioning this, but when he talks about pulling back from US commitments around the world, you know, that is again is a is a reversal of the flows that very much defined this, you know, post71 reserve status. The world's going to have to provide for more for its own defense. Um, and we're going to need to produce more of our own production and and most produce more of our own consumption and the world's going to need to consume more of its own production,

>> right? So look, um, President Trump, you know, has made some comments. He, who has the gold makes the rules. Uh, Treasury Secretary Scott Bassant, he said that he sees a Breton's type of realignment happening. He says that they're going to move to monetize the asset side of the US balance sheet. He has, you know, said that he is a self-confessed uh, gold bug. Um and and we now have a a curious sort of dynamic where we have the the Mara Lago accords, right? And we have Steven Myron who is the um chair of the Council for Economic Advisers, incoming Federal Reserve Gina Governor if he gets if he gets the nod. And he's pushing for a deliberately weaker dollar to revive US manufacturing and rebalance trade. But he thinks that you can still preserve the role of the dollar as we just said as some kind of dominant world reserve currency if not a neutral reserve asset. So can can it be done? Can you thread that needle? And is that what the Trump administration is going for right now?

>> I think it is what they're going for. You know, it's a little bit of um how can I put it? Uh the language is is there's there's some semantics to it. Um, you know, technically for the dollars to be a reserve currency, you got to be reserving it. And I just said central banks stopped reserving it 11 years ago, right? They're reserving gold.

>> Um that's that

>> I guess rephrasing it somewhere else. Reserving the dollar's sort of prominence on the global stage. I I get the reserve currency with a neutral reserve asset, but sort of maintaining dollar dominance in in one way or another because that's not something I would think the Trump administration willingly wants to give up, but it is

>> seeing the writing on the wall and and and taking action. So, is there kind of some kind of balance that can be had there, particularly if they lean in to the idea of gold?

>> Yeah, I think ultimately there is. Uh it's a fundamental trade-off though, right? like they if they want to make a lot more and run smaller deficits by doing so, then the world's going to reserve a lot more gold and the price of gold's going to go up a lot and the dollar is going to weaken as a result of that. Um, and I think that's what they're after is finding some sort of happy medium around, you know, a much weaker dollar, but still a very dominant, you know, dollar in payments and in unit of account. unit of accounts pretty easy. I think that's, you know, that's going to be there for a long time. But the payment side in particular, I think, is the one they're worried about losing. I think they're willing to let store of value go. In fact, the things they're doing are encouraging the world to move away from dollars as a store of value. uh you know even if you listen to what Bessant said last weekend or you know these Trump trade deals of hey we want these countries investing in our country basically bringing a sovereign wealth fund here investing in factories that we direct the deal the deal was they get to put their money wherever they want they buy our bonds u that is a reversal of flows sort of changing the store of value nature of of things here but I think they're okay with at and they need to be because if they don't change the store of value then nothing's going to change and the US is simply going to continue to be hollowed out and the national security threat posed by you know the the hollowed out uh industrial base is only going to get worse and it's already pretty bad um in terms of our ability uh to to to you know project conventional power against a nearpeer or peer uh military around the world. So I think ultimately that's what we're watching is a lot of in in real time is you chapter and verse whether it's Trump whether it's Bessant whether it's myin whether it's Vance uh whether it's you know trade representative uh Jameson trade gre uh this this week or last week in the New York Times they're all saying the same thing which is we want to get rid of the dollar as global reserve asset as store of value and we want to maintain the dominance of the dollar within global payment systems. Um, and in so doing, bring the dollar down to a more attractive level for American production to be attractive, reshore our industrial base, and get back on our feet from a standpoint of being able to con uh project conventional military power with our own industrial base without help from the Chinese that we currently can't do. So that's the, you know, that's sort of the, you know, the the baby they're trying to split. That's the Gordian knot they're trying to cut. Um, there's a lot of executional risk to it. Make no mistake. And that's, you know, I think we have, you know, we're still hearing the echoes of the starting gun going off. Like this has been decided. We are moving in that direction. You can see this in, you know, the defense department's investment in MP materials on the rare earth side about a month ago. Uh, so this is very very early innings. This is you know you know first couple of pitches of the first inning a lot of a lot of executional risk from here a lot of political risk a lot of geopolitical intrigue and you know importantly like as in combat the other side gets a say right so let's see what China does let's see how the Japanese the Koreans the uh the Europeans the Russians react

>> just to encapsulate it when you say this has been decided what would that this be

>> this is we are reassuring we are going to weaken the And we are going to stand you know something else is going to serve as a neutral reserve asset for the global system.

>> Okay. And that something else is looking like a gold. We'll we'll get into Bitcoin and your theories there. But as we said uh gold has been bought by central banks at at record levels uh continuing to bolster their their gold. uh you we have some charts from your latest report which illustrates that how uh you know US uh treasuries have declined very dramatically uh compared to gold how gold is now the number uh two asset how it's uh replaced um you know the the euro uh I'm just trying to find out statistics on that but uh they are in in in your report and they're certainly uh you know illustrating that point it it brings up the conversation though of do we see this potential of the US somehow linking the treasury market to gold something that you know Judy Shelton has suggested that there is a way to sort of keep the treasury market intact by linking it somehow to gold what do you think about that

>> I think it's possible I I think it's that's one thing one way to do it I think there's kind of two ways that gold could be brought you know to bear, I guess, if you will, on the Treasury market. One is the way that that Judy Shelton has laid out, and I think she's brilliant and and has done a good job of highlighting that, which is essentially, I think, a, you know, the tourist way to think about that is the United States has too much debt and that is beginning to increase term premiums on long-term debt. In other words, the market is beginning to demand more interest from the United States because of the levels of debt. The market is not worried about the US defaulting, but the world world is doing the math and going the Americans cannot pay this ba ma back mathematically unless they inflate it away unless they keep growth well above rates in which case I'm going to lose real purchasing power by holding a long-term American Treasury bond. And so you're beginning to see those concerns reflected in yields at the long end of the Treasury curve. One way gold can fix that is you think about it, a treasury bond, every bond has two components of risk, right? So you've got default risk and you've got or credit risk and you've got inflation risk. Well, there's no default risk to an American Treasury bond. They have they owe it in dollars. They have a printing press. They can always print you back the dollars. The dollars might be worthless, but you're always going to get your dollars back. So, by introducing a gold kicker, right, some of the gold bonds that that Judy Shelton has talked about in the past, you eliminate or significantly reduce at least the inflation risk of a long-term Treasury bond. So, and by doing that, you can reduce interest rates, the borrowing rate of long-term, right? So, I might not be interested as a foreigner at buying a 10-year US Treasury yielding 4.25% 25% today because I look at the math and I look at the fiscal numbers and I say, you know what, the Americans are going to have to inflate this away. This is not a good deal for me. And a lot of foreign entities have been doing that exact math and arriving at that exact decision. They've been buying gold instead. Now, the Americans say, "Look, we're going to offer on every thousand face value Treasury bond $100 of gold valued at $4,000 per ounce." and then you know it's convertible here at these intervals however you want to structure that then all of a sudden the gold side of it completely takes away the inflation risk and now I might say oh you know what 4.25% two 5% I'll buy that bond. In fact, I'll buy it all the way down to 3%. Or two and a half%. I'll be happy to buy a 2 and a half% US Treasury bond if 10% of it is convertible into gold at say, you know, 3500 or $4,000 an ounce, whatever. Uh practically speaking, it would have to be a higher price given the level of debt to kind of cover to make the that to make it work. Uh but that's one way gold can be brought to bear to lower the borrowing costs of the United States. The other way is a bit more uh all at once and blunt force. But if you look at the financial accounting manual for Federal Reserve banks, it's a publicly available document, section 2.10. It provides for the US Treasury Secretary to instruct the Fed to revalue the gold from $42 per ounce where it is held statutory rate on the US balance sheet uh on the Fed's balance sheet up to the market price. Well, today it trades at $3,400 an ounce roughly. That's at today's price is about $876 billion of gain that would mathematically just get deposited into the Treasury general account. Uh you wouldn't have to sell the gold. There would be no transaction. It is simply an accounting entry. It's basically Treasury creating money using the gold without having an offsetting increase in debt as is usually the case with money creation. and then Bessant would be able to take that and say, "Look, I got $876 billion more in the Treasury General account. I'm going to curtail issuance at the long end for the next two years." And so, despite some of the inflationary policies we've been talking about and and reshoring is definitely going to be inflationary over time in a very real way, you could actually uh anesthetize, as I've called it, the long end of the Treasury curve. you could keep 10 and 10 and and 20 and and 30-year Treasury yields from rising too much simply because you wouldn't need to issue barely any if you've if you have this Treasury general account to fund your operations for that part of the curve instead. And obviously, you know, the US has 261 million ounces of gold. Roughly every $4,000 per ounce in the price of gold is about a trillion dollars that would get deposited into the Treasury General account every time you do this trick. And so that's a more blunt force way that you could bring gold to bear to reduce the borrowing cost of the US. But either way, uh, regardless of what I think, the US fiscal situation is getting very, very acute. I think they're going to have to do something along these lines over the next, you know, 9 to 12 to 18 months. It's just there's no other options.

>> You know, if the Fed won't play,

>> you think they're going to have to uh revalue the gold. Um and and you say the Fed won't play ball, but um you know there was a curious note from the Federal Reserve uh I believe about a week ago, August 1st, where the Federal Reserve released a research note titled official reserve revaluations, the international experience, and it outlined how five countries used gains on their official gold holdings to raise funds. Now, it didn't recommend that the US did it, but it did show, hey, how it's been done in in the past. And you know, again, this isn't French theory from the Goldbook crowd anymore. when you have a Fed note on this where you have former Fed adviser as we discussed Judy Shelton supporting it, Senator Cynthia Lamus has introduced legislation to revalue the gold in order to get a Bitcoin strategic reserve. That's a whole other conversation. Uh Treasury Secretary Scott Bent has many times uh said that they were going to monetize the asset side of the balance sheet. He did subsequently walk that back. Although he was very careful with he said I believe today and I think for those paying attention I believe you're the one who caught that where he said we're not going to do it today. Um so not you know potentially still saying we may still do it but for for somebody that was paying attention there was a bit of a giveaway there. And you know, we've even got Donald Trump Jr. are saying that his father's administration is exploring a powerful economic tool under the Gold Reserve Act to repric America's gold. Donald Trump Jr. does say this in his capacity as a spokesperson for a gold company. But nonetheless, it's very telling. We have all of these theories uh coming together, conspiracy theories coming into the so-called conspiracy theories coming into the mainstream. So given the fact that you said we're seeing gold being set up as a neutral reserve asset, give me your timeline on revaluing the gold and how you see that playing out. Do and when do you see that playing out?

>> I I I think it's going to have to happen, you know, sooner rather than later, unfortunately. And the reason I say that is the latest July deficit statement just came out right yesterday. Um if something we track very closely is what we call true interest expense as a percentage of US total receipts uh treasury receipts and what we count in that is interest gross interest entitlement payments and veterans affairs. These are the interest of this country and the interest-like obligations of the offbalance sheet liabilities of this country relative to the amount of receipts and you know they're running uh year-to- date through the third quarter at about 101% of receipts with receipts at all-time highs with job growth good with uh stocks at near all-time highs and in July that percentage was 132%. So, when you think about interest and the interest like obligations at 100 to 130% of your receipts and your receipts are at all-time highs, you're in an emergency. You have a choice. You either start looking to cut one of those expenditures, right? Now, we can we cut entitlements? No. Can we cut Veterans Affairs? No. Can we cut interest? Well, they're sure beating the heck out of Powell to cut interest. Secretary Besson came out yesterday said they need to cut 50 basis points immediately. Well, I bet he's saying that. I would be saying the same thing, too, because the easiest thing to cut is the trillion and a half they're spending annually on interest, which is, you know, almost 30% of of receipts proforma. So, uh that is they need something they are in a position where they they are up against the wall and heaven forbid if stocks fall that total interest expense goes up rapidly. If the economy if if job growth slows or even falls, heaven forbid, same thing. So they, this to me is sort of the most acute uh dynamic when you say when are they going to have to do it? I think eventually they're going to have to do it. But the fiscal situation of the United States, particularly when you're talking about some of the strategic things they're looking to do in terms of reshoring, etc., which are inflationary, which would all else equal put upward pressure on interest rates, all else equal put upward pressure on true interest expense as a percent of receipts. uh they they are, you know, I don't think they want to do it yet.

>> Um and so I think that's why we're seeing some of the other things first, right? Let's, you know, let's pound on Powell. Let's try to pressure the Fed to cut rates. Bessent two weeks ago coming out and and saying we're going to upsize Treasury buybacks and we're going to significantly increase the buybacks done at the long end. That's basically Treasury QE twist, right? like that's we're going to try to shift stuff on the margin out of the long end into the short end which are much more liquid markets etc you know but that you can see them taking steps that suggest they are under pressure from a fiscal standpoint which is exactly what the math suggests so I think they're ultimately you know I think they would rather do some other things first

>> uh but I think they're ultimately going to have to do that and I think it's a good thing for the US I think it gives them a tremendous amount of of fiscal flexib ibility, you know, particularly if they revalue the gold up and then that, you know, that money goes into the TGA. Now, all of a sudden, Besson has a lot of flexibility with respect to terming out debt and and and the financial markets, etc.

>> And and just to explain to our viewers who are not familiar by what we mean by revalue the gold, the official price of gold is still $42.22 uh per ounce. It hasn't been changed on the books since 1973. the market price is over 3,400. So if the US suddenly revalued gold to match the market price, um that would uh bring in about $880 billion. It's not very significant in the grand scheme of things of over $37 trillion in debt. If you keep it at that level,

Though, it doesn't even cover a year's a payment interest on the on the payment. But you know, that brings the conversation of whether they'll revalue it even higher. And if that is the plan, I want to hear your thoughts on what they could revalue it to. And wouldn't then the US be buying more gold with the dollars that it can print if this is eventually where we're going?

Yeah, in theory, yes. Um, perhaps with other things, you know, right? Uh, buying, you know, because ultimately the world may not want those dollars. They would they would say, "No, we want the gold. We we don't want your dollars for gold." Uh, but but the very, well, while you still can, you know, secretly buying it now while you still can while the demand is still there.

Right? No, that's right. And and I I would say, you know, uh, you know, that we saw very large imports of gold into this country in the first quarter of the year, starting shortly after Trump won. Um, there was so much gold imported into this country in the first quarter that it actually mathematically turned GDP negative for for a uh, a couple of for a couple of months. Pretty significantly negative. So somebody somebody was importing a significant amount of gold uh into this country in the first quarter. Who could that be? I don't know. They to me I think it's it's possible that at least some of that was uh the US government or some sort of Treasury proxy.

But setting aside the speculation, if if the US wanted to revalue gold, yeah, in theory, you could print dollars and buy gold, and I think the gold price would go up a lot if they did that. Um, and that would it would set it would amount to the US devaluing its debt against gold. Um, which is what needs to happen. Like the whole world knows this is going to happen. That's the reason central banks have been buying gold in that treasuries for 11 years. So sort of like the last thing keeping us from this is we don't want to give up that sort of you know, make that statement of well, you know, gold is now the primary reserve asset, not treasuries anymore. But the fact is, by their actions, central banks began making that declaration 11 years ago and so we're kind of the last ones to give it up and critically the Trump administration gets it, the military gets it. In our interest. So I think something like that is possible. Uh, you know, and it could be done in a more surreptitious way.

So when I look last week when Trump all of a sudden came out and said I'm going to put tariffs on gold at 39%. That I was on vacation. I said, "Whoa, that's essentially if you wanted to do that, the disruption that would create to global gold markets would quite possibly, if not quite likely, trigger a massive short squeeze in unallocated and uh gold markets around the world, much higher. Would we do it that way?" So that, you know, I mean, if if he subsequently he subsequently walked that back with just a very clear post on X, "Will not put tariff on the gold." So, what was that about?

Yep. I don't know. Um, did he make a mistake? Was he told you can't do this? Was that simply a test of the, you know, the emergency broadcasting system as as we used to watch, you know, on Saturday morning cartoons of of of like, hey, we're going to do this at some point. You know, don't get too far over your skis. Short in gold, get on sides. I I don't know. I can make the case either way, but you that's one way they could conceivably revalue gold higher to capture that upside because look at 39% tariff on gold. If it went through, gold went to $4,500 from $3,400 at, you know, at the 39% tariff rate. Now you're talking a trillion, too, up from $880 billion, you know.

Well, you'd want to get a lot more gold in first before you did that, wouldn't you? And you know, and andy Shakman has a a striking thesis. He does believe that the US is quietly preparing for some kind of monetary reset that brings gold back into the system uh to potentially reanchor confidence in the Treasury market, even if that means sacrificing the dollar's current structure. And he points to the trade data that shows just in 2025, I believe the US has imported over 800 metric tons uh this year alone. The US has become a net importer of gold. So, you know, he argues that uh this isn't retail demand or ETF. That it's a strategic, possibly government directed, possibly offthebooks shadow program that the president uh has directed the Treasury Secretary to do under the Gold Reserve Act uh under the Exchange Stabilization Fund where you can trade gold or foreign currency with the Treasury uh secretary's approval and the president's signoff. You do have to report that to Congress at some point, but he reckons that they're delaying the reporting part and doing this covertly, you know, so-called for for the greater good. And that's potentially what's happening here.

Now, you say that you think, you know, Trump, and I get that you're speculating that Trump got a phone call saying, "Hey, walk back those tariffs." Um, who or or or clear up that era, clear up that misconception. Who would that phone call have come from or who would have given that directive?

You know, who knows? It could be, you know, some sort of global bank. It could be, you know, some sort of uh representative in City of London, Bank of International Settlements in Basel. You know, there are sort of, you know, there there are in theory rules that that govern, you know, they the thing we can say with high degree of confidence is there haven't been a lot of people that have told Trump, hey, you can't do that. And he backs off. We saw it after Liberation Day, right? The bond market bullied him. He he wouldn't admit to it. He said, "Oh, it wasn't the bond market. The bond market was getting a little queasy." It was the bond market. Bond market bullied him. And for him to reverse course on this so quickly, either he was testing things he didn't know or somebody said, "Look, you can't do that. Reverse that now." And I don't know who that would be, but those are the to me the only three the most plausible options.

Yeah, it was a very straightforward post on X. There will be no tariff on gold. Uh, but to your point, that could be a way to effectively revalue the gold uh while sort of keeping it into the you know, global macroeconomic system that sort of makes sense how to justify a massive gold devaluation. But you know, either way, um, the US on record holds the most amount of gold. I mean, there are a lot of conspiracy theories whether it may even hold more. Some people argue that it could have the gold reserves of the likes of Muammar Gaddafi and Saddam Hussein hidden in Fort Knox. Some people say that Fort Knox may have less, you know, uh that the gold there isn't even there, that it's rehypothecated. But at least officially on record, the US is the top holder of gold.

But we do know that China has been buying gold at a rapid level. Um, so wouldn't this kind of move ultimately be to China and even Russia's advantage?

Uh, yeah, it wouldn't hurt him. Uh, and you know, importantly, you look at the, you know, Ken Rogoff, the former chief economist of the IMF, wrote a piece in 2015 in Project Syndicate, "Emerging Markets Should Go for the Gold," in which he advocated that it was no longer in their interest and it was no longer in developed nations' interest that they just keep stockpiling bonds and that they should buy gold instead because, quote his words, not mine, "Gold has no upside on its price." Uh, and so, uh, I, yeah, I absolutely think gold revaluing would would would benefit China, would benefit Russia. And, you know, critically, in trade deals, you need to have a quid pro quo. There needs to be quid pro quo, right? There's there's there's give and take, particularly among great powers. And so we can see what the ask is from the US side of China. You need to consume more of your own production. Uh, this would satisfy a big portion of that ask. The Chinese government uh has been advocating to its people to buy gold since like 2002. So, uh, you've had 20 plus years of Chinese gold buying. It's very strong in China culturally, anyway. And so if you revalue gold higher uh as a way of rebalancing the system, sort of cutting the Gordian knot and all of the things we've discussed to date, s you know, strengthening the US fiscal and debt position, the other side of it is you're going to weaken the dollar, yes, but you're also going to improve the balance sheets of the Chinese consumer massively and give them the wherewithal to consume more of their own production. So there is sort of an other side of the same coin. Um, you know, to use a to use a bad pun or pun intended, uh, that you kind of need something like this. You can't have it all just be take, take, because the other side, you know, the Chinese don't necessarily need to agree. They can just walk away. They have proven that they have staying power, and that we kind of both need each other. And so when you look at it through that way, gold seems like a very elegant way to rebalance not just the dollar-centric system and some of these debt and and US defense industrial issues, but also the other side of the same coin, which is the Chinese have too many factories and not enough consumers. And so, you know, if you take gold high enough, you end up with a situation where it incenses through market uh impulses the US to produce more of its own consumption, and the Chinese to consume more of their own production. So I I think it has the possibility of of a gold revaluation being a very elegant solution that, you know, to the US debt problem and the Chinese consumption problem that both sides can probably agree to. Um, so let's see if if it plays out that way. But to me, it's very clear that there's a win-win to be had.

Okay. So a system of global cooperation, how novel, Luke. Uh, where where where everybody benefits to some degree. But look, you you have mentioned in your previous uh, in your most recent report rather, that gold has overtaken long-term US Treasuries as the preferred reserve asset for much of the non-Western world, driven uh largely by China's strategy of pairing gold with its digital yuan to de-dollarize commodity trade. China doesn't want to use the dollar, uh, part of the larger de-dollarization trend that we've discussed at length in the past. Uh, using the digital yuan to buy oil, but because there's a trust issue, China has to position some kind of gold-linked settlement uh layer there. Um, now you've said that the US has recognized this shift and is now pivoting towards Bitcoin and stablecoins to preserve dollar payment hegemony, and that this potentially sets up some kind of neutral reserve asset rivalry with gold for the BRICS or China system, and potentially Bitcoin for the US-led system. Am am I paraphrasing you correctly there?

Yeah, in essence, yeah. I mean, de facto, we can see, you know, we what we wrote, we said gold defeated long-term treasuries as a reserve asset, and that's, you know, call up GLD over TLT on a chart. Any trader in the world, and call it up, and it is up and to the right exponentially uh over the last 10 years. Gold won. That's that's can easily be seen. Uh, the US has some choices. It can go with gold. To your point before, there are probably interests in the United States that see gold as uh giving too much to the Chinese and the Russians. Um, and I think maybe the other issue that is within that is that gold is completely outside the dollar system, you know, and ultimately revaluing gold a lot will move the currencies, but it's a bit of a blunt instrument. I do think the stablecoin rollout by this administration, I think they see as, um, in my opinion, sort of standing up Bitcoin as a neutral reserve asset for the US. There there's people that see attractiveness to that, and I can see it too because ultimately the higher Bitcoin prices go, you can see a very clear relationship over time between Bitcoin and stablecoin market cap. And so, you know, there's a question around chicken or the egg of of, you know, is it does Bitcoin go and then stablecoins or vice versa? But in the end, if stablecoin market cap goes up a lot, Bitcoin's probably going to go up a lot. And if Bitcoin goes up a lot, stablecoin market cap's probably going to go up a lot. And now we don't have to speculate. We have attached stablecoins to T-bills via the Genius Act. There's no mystery about that. And so I look at it as I, if I was sitting in this administration, I'd say, look, Bitcoin goes up a lot, stablecoins are going to go up a lot, uh, T-bill demand's going to go up a lot, and that gives me more fiscal flexibility than if gold goes up a lot as a neutral reserve asset. And that's really the angle I come at it from.

Okay. So I mean, I I get the point that if you create uh stablecoins which are backed by US Treasuries, um, you're creating more demand for US debt. That's one thing. And uh, stablecoins are ultimately what's used in, you know, as fiat on and off ramps to to get Bitcoin. Um, but explain how that positions Bitcoin then as a potential neutral reserve asset.

I think ultimately it is when you it really comes down to that relationship between, you know, the the stablecoin market historically and the Bitcoin market historically. Uh, and you can see this, you know, it's one of these things where coming a year ago, even this time, maybe 14 months ago, I wouldn't have even thought of it. Uh, June or July of last year, former Congressman Paul Ryan talked about how stablecoins could be used to help finance deficits uh in T-bill markets. And then I participated in a discussion at the Bitcoin conference last year where somebody who knows President Trump personally, their son told a member of that panel the night before that, you know, dad, President Trump says that Bitcoin is the new oil. And at first I just thought that was a nod to uh the energy proof of work of uh of of Bitcoin. But then later that fall, we saw the Treasury Borrowing Advisory Committee, the group of banks that advised Treasury, and this is in the Biden administration, this is not the Trump administration, discussing a uh quarterly report how digital assets can help support the Treasury market. And they specifically cite how stablecoins and market cap and Bitcoin and crypto market cap have gone up, and that ultimately that could, if paired with T-bills, create demand for T-bills. And so that's where I come out at is ultimately to me, you know, it's Bitcoin. It's it's not crypto, it's Bitcoin. Bitcoin market cap goes up. There has been a pretty good relationship over the last 10 years between Bitcoin market cap and stablecoin market cap. And in the ensuing six to eight months, we have now, you know, passed the Genius Act. We have Secretary Bessant talking about how the Genius Act, um, you know, could free up, you know, $3.5 trillion dollars worth of of uh, what what was the phrase? It was three half trillion dollars worth of of of, you know, stablecoins, um, from around the world. So it starts to look a lot like the petrodollar system of where, you know, you got to have you got to have dollars to have oil. You know, you got to have dollars to have stablecoins in some way. Um, and, you know, a lot of those dollars are going to end up in Bitcoin. Those stablecoins will end up in Bitcoin market cap is what history has shown. And so that's why I say to me, it looks like they are quietly standing Bitcoin up to compete with gold, which has very clearly competed with and defeated treasuries as a reserve asset.

Okay. Okay. I mean, I definitely, you know, get the idea that the US uh, you know, rolls out dollar-backed um, you know, supports dollar-backed stablecoins and because it creates demand for US treasuries. Uh, and, you know, that those stablecoins are collateralized with short-term government debt. I get that. Um, and again, as we said, US denominated stablecoins are what's used most often to uh, buy Bitcoin and other cryptocurrencies as the fiat on and off ramp. But then why would the US actually want Bitcoin as an alternative reserve asset if the US is not effectively leading in terms of Bitcoin holdings? Like I get the the gold angle because at least on the books, the the US is the world's top holder of gold, and as I said, some say yes, some say more, but at least officially on the books, it's the top holder of gold. But when it comes to Bitcoin, I mean, as it stands, um, you know, the US is effectively starting from behind. The top holder of Bitcoin is, uh, Satoshi Nakamoto, whoever he, she, they, them may be. That's also a big mystery. Uh, where it's he's estimated to hold, we'll go with he, hold between 750,000 and 1.1 million Bitcoin. But then MicroStrategy controls uh, nearly 630,000 Bitcoin, more than any government on Earth. Right. Uh, by contrast, the US government's strategic reserve is around 198,000 Bitcoin. Um, you know, China has around 190,000 Bitcoin. Again, much of it seized, not purchased. In fact, you can't trade Bitcoin in China. But the reality is is that the US would be positioning an asset where it's already at a disadvantage to, you know, private companies, to BlackRock, which is custodian, the top custodian of Bitcoin, and even anonymous individuals. So how does that starting position shape the strategy? I mean, is it viable to make Bitcoin a pillar of dollar dominance when the majority of supply is is elsewhere already?

In my opinion, yeah, because I think if you looked at it from a total country standpoint, so public and private holdings, uh, I think the United States is probably the strongest holder of it in the world. I don't know those numbers off the top of my head. I probably should, but I I'm pretty sure that's the case. And in that case, then what you're really talking about doing is recapitalizing the United States, uh, and in particular recapitalizing them through Bitcoin holders. Now, who are Bitcoin holders? They tend to be business people who understand money, who are, um, they understand energy. They understand the importance of having a functioning, you know, currency system rather than what we've had. They tend to understand Triffin's dilemma. They tend to understand all these things. And my view is these are the exact people you want to be making very wealthy through Bitcoin by revaluing and standing it up as a reserve asset because guess what these people are going to do? They're going to do what I am already doing, which is investing in a private equity company that is building equipment for the United States infrastructure. I, it's one of my bigger positions. I own a private equity investment in an electrical equipment manufacturer to make things for the US. Um, infrastructure, which is desperately sorely needed. And so I think writ large over this country, you're going to be talking about the net producer, right? By definition, if you've got Bitcoin, you are a net producer in the society and you have stockpiled some of your Bitcoin there, you are going to find a windfall. And what are you going to do? You're going to turn around and invest that in a productive manner. Most of these people aren't going to stick it into T-bills making 4% like like baby boomers have. They're going to be looking to build business. They're going to be hiring people. They're going to be, you know, buying companies and and and and changing the world. So, I I think from a strictly sovereign standpoint, I think the numbers you lay out make sense. But I think when taken from a bigger picture perspective, I think I think it makes perfect sense for the US to stand it up from that matter. And the other thing too is that the US, um, you know, ultimately, you know, there's a fixed supply of Bitcoin. You know, we'll take our chances. You know, there's your fixed supply. It is a perfect, it is a perfect, um, you know, hard asset over time, and that allows you to compete on the things you can compete on. Your currency is going to reflect that. But then it comes down to what's, you know, what's the resilience of your people? What's the resiliency and of your of your of your laws and of these things that, you know, we compete pretty favorably on.

All right. Yes. Only 21 million Bitcoin can ever be uh created. Um, so look, you're saying that you do potentially then see a system where you have two neutral reserve assets, gold and Bitcoin?

Well, ultimately you'll only have one, right? But I, you know, to have two, you're going to have to have, you know, a new Iron Curtain between the two. And I think that's impossible for a number of reasons. And so it's really going to come down to, you know, competition. And, you know, China and their factories and and Russia and uh their their commodities, if they decide they want gold, then, you know, they can compete for that. But ultimately, you know, the free market between gold and Bitcoin, you know, it is, um, that's that's where it'll be decided, right? If you if you are Russia and China and you reserve gold and you don't reserve Bitcoin, and Bitcoin wins, you lose.

But why couldn't there be a system where you have two reserve assets?

Just because ultimately one, you know, without having an Iron Curtain that separates the two economies entirely, you'll have too much leakage, right? So you're, you're, you know, one one is harder than the other. One is going to be used or the other. And, you know, basically Gresham's Law, right? Like, you know, you've got currency that is, you know, in circulation. You know, pre-1964 dimes are silver and they're worth, I know, three bucks a rattle. And post-1964 dimes are also in circulation and they're worth 10 cents. And you can never find basically any pre-1964 dimes because everybody knows they're worth three bucks, not 10 cents. And in the same way, it is a reserve basis. If you've got a flowing economy where, you know, you're ultimately going to want to reserve the best asset, and that's, you know, I think we're sort of figuring out what that best asset arguably is, but it's very multicurrency systems generally haven't worked. You had a gold and silver system, right, back in the late 1800s in the US, and there was constant friction around what's the ratio of gold to silver. You would have constant friction. You the governments could say, well, you know, gold is worth this much Bitcoin or Bitcoin is worth this much gold. And at the end of the day, if if if you're wrong, the market's going to sell the one and buy the other. Just like they did with gold and silver, just like they do with the, you know, the post-1964 dime and pre-1964 dime. That's you'll only end up with one whether you declare it or whether you actually do it, unless you put an iron wall and there is no more trade. Chinese no China does no trade with us. The Russians do no trade with us. Oil is no longer a globally fungible market, which is of course, in my opinion, impossible in in an era of the internet.

Right? So it doesn't necessarily mean like a net zero game in terms of value because obviously, you know, silver still has value. You know, granted it has industrial uses, but do you mean, do you see, so you're not necessarily saying that, um, if say, you know, Bitcoin becomes a neutral reserve asset, then gold becomes worthless, or if gold becomes a neutral reserve asset, Bitcoin becomes worthless?

It's a fair point. I think both can be neutral reserve assets, and I think ultimately you would see what we've seen, right, which is, you know, for example, gold and silver, they're both precious metals. What's the gold to silver ratio done over the last 30 years? Right? It's up and to the right. Silver buys less and less gold over time. What has the Bitcoin to gold ratio done over the last 10 years? Bitcoin has massively outperformed gold. Now, since 2021, Bitcoin's only up a little bit and Bitcoin's volatility has been, you know, face-peeling. So, there have been times where gold has been crushing Bitcoin. And that to me is ultimately, you know, where the great contest will be when we talk about these neutral reserve assets. It's the Bitcoin to gold ratio. You know, we saw the gold to long-term treasury ratio, GLD over TLT. For a long time in the mid-teens, it was kind of flat, and all of a sudden gold took off. Gold has crushed treasury bonds as a reserve asset. You know, we are flat Bitcoin to gold, Bitcoin gold ratio since 2021. Ultimately, I think Bitcoin probably outperforms over time. Uh, but again, I think the face-peeling volatility of Bitcoin is likely to continue in that time. But I think, you know, Bitcoin, gold, and then everything else. I think Bitcoin and gold are going to go up versus virtually all other commodities, many other assets as we move away from a debt reserve system, as we clearly are, as we've been discussing.

But, you know, uh, to your point, in volatility, critics would say that Bitcoin is too volatile, um, to serve as a serious neutral reserve asset, at least for now. Why would the US bet on Bitcoin then instead of just leveraging, you know, its own massive gold reserves to counter the BRICS gold strategy? Why not buy more gold? Also keeping in mind that as we've discussed, central banks around the world have already effectively made their choice, at least for now, and that choice is gold.

Yeah, I think uh, there's probably two things. I question whether central banks always have the United States interest at heart. I think that's probably one thing. And I think maybe the bigger thing is that there's one industry where the US retains a real semblance of dominance, and that's tech. And in particular, the way maybe the the last great way the United States reaches the world through this thing, right? Our our iPhone and and US consumer tech, and US consumer tech and tech properties around the world. Tech dominance around the world much more easily with Bitcoin than it can with gold. And I think that's probably part of the gambit as well. You know, you know, we'll see how it works out. But I think that's part of the gambit and logic as well.

Okay. So, um, let me give you a hypothetical here. If, uh, I had to cry you for 50 years, uh, and you can only put your assets, uh, all your money in one asset. You can't touch it. You can't trade it. You just have to put it in one, and you're going to wake up in 50 years time as refreshed and handsome as ever. What is that asset that you would choose?

God, you you're going to make me piss off somebody, aren't you? Um, if I had to choose just one, I I don't I I really I really don't know. Um, I I can make cases of both way. The safest is probably gold. The safest is probably gold. But, you know, for me, I I would rather own both. I don't I wouldn't limit myself to one or the other. I would own them both. Sure. And

And diversifying is certainly a wise strategy, but if if you had to choose one?

If I had to choose one, not knowing anything else, the safer choice is for for most people is probably gold. It it it probably is. Um, you know, but that's such a wild card, right? You know, if if you came and said, "Hey, in the next 50 years, America's going to have a revolution. You need to flee."

It'd probably be Bitcoin.

Um, you know, so there there's, yeah, but I I appreciate you playing along. I won't make you squirm or have to sip uh any more water nervously.

Yeah. All the hate mail you're going to get me. Yeah. But uh, yeah, it's it's a very difficult. I I really think you got to own both.

Yeah. And and that's certainly been my position. But you mentioned technology, and so, you know, I want to bring up the idea of quantum computing because that has been seen by many as a potential existential threat to Bitcoin and the cryptography there. Uh, granted that there are Bitcoiners addressing it, working on it. It's certainly on the radar, but how do you see that playing out?

Yeah, I think it's a risk. Um, it's above my pay grade in the terms of the technology of it, but the people that I talk to in that world that I really respect openly admit it's it's a risk. Um, technology moves fast. Technology moves exponentially. There are people in the Bitcoin world working on essentially using, you know, making making Bitcoin quantum proof using, you know, in theory at some point in the future quantum uh uh verification, quantum quantum uh um strengthening of the security of Bitcoin. Uh, and at the same time, like Bitcoin's a two trillion market cap, maybe $2.4 trillion today, $2.4 4 trillion at risk from quantum. There's $18 trillion in the United States banking system just in deposits. And I I would bet my house that it's easier to hack banks than it is to hack Bitcoin with quantum. So if I'm not, you know, if I was really worried about quantum, the first thing I would do would take all my money out of a bank. And then there's $40 trillion in my 401k, you know. Well, not my 401k, I wish. Uh, but there's $40 trillion in American 401ks. And so if quantum can break the cryptography of Bitcoin, which is very, very strong, de facto, then it probably can easily break the cryptography or the security protection of $18 trillion in banks and $40 trillion in 401ks. And, you know, as the famous bank robber Willie Sutton said when they said, "Hey, Willie, why do you rob banks?" He goes, "That's where the money is." So, if if quantum is a a threat to robbing the bank of Bitcoin for $2.4 trillion, yes, it's a bearer asset and, you know, whatever, but in the end, so is cash. There's $18 trillion in cash sitting in banks. You know, if you're worried about Bitcoin, I would argue you should be much more worried about the cash in your bank vis.

All right. If we take that, um, similar concern as quantum potentially being an existential risk to Bitcoin, is there something that you see is the equivalent to gold? Is there a quantum computing existential risk equivalent that could challenge your position on gold?

Fiscal responsibility? You know, an American and Western government that sells its, you know, its baby boomer and voter class that, you know, we're not paying anymore and we're we're going to cut spending. That's not going to happen. Um, you know, there have been discussions of alchemy and fusion and these types of things and, you know, bringing an asteroid back and there's some asteroids circling around and Elon's going to bring it back because that's got, you know, $1.4 quadrillion of gold on it. Like, okay. Yeah. And it costs like $20,000 a pound to bring stuff home from the, you know, to bring stuff into, you know, out of space, right? So, let's figure that out first, right? Because yeah, maybe there's a $1.1 quadrillion in gold on some asteroid somewhere, but it's going to cost you like 200 quadrillion to get it here. And that's not bad for my gold holdings, per se. That's that's the whole point of owning gold is the energy cost of producing it preserves your purchasing power. That's the whole point of Bitcoin. The energy cost of producing it preserves your purchasing power. So, you know, the reason gold's worked for 5,000 years or whatever it is is there's not a whole lot that breaks it. You know, it just it just does what it does. It preserves purchasing power, particularly in times of insolvent governments, which is a time where we are now.

Right? Um, but yes, to your point, gold has been around well before irresponsible fiscal policies. Uh, you mentioned Elon. Luca, it's a good way to segue into AI, which uh, you said could wipe out a huge swath of of white collar jobs. And you said that the play there is still gold and Bitcoin. Walk us through the connection. Why do all roads lead to gold and Bitcoin even in in the face of the threat of AI?

Yeah. Because ultimately we've seen, you know, if AI does even a fraction of what its proponents and and the mainstream view says it's going to do in terms of job disruption, it's fundamentally incompatible with the debt-based monetary system. Um, what do I mean by that? You've got, you know, the top employer in 38 out of 50 US states is healthcare. Most of that's an administration. Most of those jobs are like right in the crosshairs of AI disruption. Those people all have mortgages. Those people all have car loans. They all have credit card loans. When AI starts disrupting their jobs, and it's probably already started, um, over the next two, three, five years, these people are going to start defaulting on their houses, on their cars, on their credit cards, just like manufacturing workers did when their jobs were offshored to China in '01. And once that hits critical mass, the US is going to face a choice, which is, you know, uh oh, the banks are in trouble again because AI has has displaced so many workers. They're defaulting on their mortgages and on their car loans and consumer loans. Are we going to print the money or are we going to let the banks go bust? And if the banks go bust, guess what the banks are holding as their reserves, um, in case of a crisis? We know this from 1Q3. They're holding treasury bonds. They're going to dump treasury bonds as to to offset their loan loss reserves caused by AI causing job disruption. Then what? Well, then interest rates are going to go up in a severe recession. Something we've never seen in the United States, but which everybody in, you know, emerging market world sees all the time. They call it a cycle. They call it a recession. But with a US government with $37 trillion in debt and true interest expense at 100% of receipts already, receipts that will be falling, you're going to have interest rates going up in a recession as your receipts fall. So, the Americans are going to have to go, are we going to print the money to pay the interest and the entitlements, or are we going to default? And if we default, the debt backs everything. And so that's sort of, you know, a version of hyperinflation. If we print the money, it's very high inflation. So your AI paradoxically is initially very deflationary, but ultimately in our debt-based system is overlevered. It is is is catastrophic in terms of the structure you have. And that's why I say all roads lead to gold and Bitcoin. Ultimately, they're going to have to print the money to make the banks whole.

To, you know, they're probably have to create some sort of universal basic income, etc. Um, that's my view of it. And there's, you know, there are more optimistic interpretations of what AI might do. And, you know, maybe people will, you know, get fired from their job by AI and they'll find something else to do. A lot of people will, a lot of people won't. A lot of people won't. In the real history, you know, when you want to be honest about it, a lot of people don't, right? Remember, learn to code. Don't worry. All these manufacturing workers, they'll find something else to do. They didn't. Million of them died of drug overdoses. And then, you know, they were given, you know, subprime loans to paper over their consumption until the subprime market blew up and then the economy blew up. So that's why I think AI to me the easiest way to play AI is just own Bitcoin and gold.

Now when you say own gold, are we talking physical gold in this scenario, paper gold? Because I do know that you have said that holding paper gold is like holding a picture of a gun when you need it. And and I I love that metaphor because I thought it was very very amusing, sadly but very amusing. So in this particular scenario, what is the way that you suggest people hold gold? What is the way that you suggest people hold gold in general?

Yeah, all credit for that that quip goes to Rudy Havenstein on X. Uh, it's his, not mine, but I just repeated it. But look, if you want to own gold, own gold. Own physical gold bullion coins. Um, why be wrong for the right reason? What do I mean by that is, you know, odds are that if there's a crisis and you own some form of paper gold that you'll get paid, but there's a risk you won't because ultimately it's not that the people who say they have the gold don't have the gold. They probably do have the gold. They almost certainly do. Their auditors ensure that. However, if you understand the structure of the gold market, you understand there's huge amounts of unallocated gold in centered in London. And ultimately, it's not about your provider of paper gold. It's about the City of London. And there's only so much gold to go around. And if the Saudi Arabian government shows up and your paper gold vault is there, if push comes to shove, the Saudis are going to get the gold and you're going to get a, you know, sorry about your luck, kid. Here's your cash settlement at, you know, maybe at prior night's close. Go buy your own gold. Go buy it in the physical market. And so you might have to go buy it up a ton. You know, it's not that you'll lose money. It's just you'll lose opportunity cost possibly. So for me, you know, that's a tail risk, but the more extreme things get, the more extreme debt gets, the more fat tail that gets. And I don't like, you know, I don't like fat tails. I just just particularly when it's so easy to remove the fat tail. You want to own gold, buy gold. You know, some of this, you know, that's that's how I've always thought about it. Buy buy gold bullion.

And what would happen in the case of that gold revaluation that we discussed? How do you think uh paper gold would would fare?

I don't know. It depends. Um, look, we have a we have an example of it from 2008. You remember uh the banks held a claim against AIG offsetting laying off all of their subprime exposure to AIG and then AIG went bust. Boom. Now all of a sudden all the banks were upside down. What happened? Well, they acted to to to preserve the banks, right? The banks got bailed. You know, AIG got bailed out to bail out all of the banks who had laid off their subprime risk on AIG. And I think that's instructive. Look, if the banks are all long gold, I think paper gold, you probably get every dime. If the banks are short gold and there's a gold revaluation, look, I don't be surprised that if the banks, you know, they say, "Hey, you get cash settled at Friday's close and the banks who have the bullion on their books, they get to keep the upside." That's how the game has worked. Like, so, you know, now how are the banks positioned? I don't know. Why? But again, why take the risk? Just buy bullion.

Do you have a similar outlook on how people should hold Bitcoin in terms of self-custody or via an ETF? Do you have a similar Go on then?

You should own your own. You should self-custody at least at least some of it.

Uh, and do you have a recommended way of self-custodying, like cold storage, what or through some of these self-custody companies?

Yeah, you can find those online. You know, things like uh, you know, different cold, you know, cold storage companies, etc. There's lots of different ways to do it. But, you know, again, centrally locating it, at least all of it, is, I think, a sub-optimal idea.

Right? Okay. I mean, and that really is sort of the core philosophy, at least for me, with Bitcoin and gold, is that to me, they're sovereign assets, and they're about decentralization, and they channel the same sort of libertarian philosophy of having things in in your own custody and being able to have control of your wealth, of your assets when you need it without the system. You know, that to me is is why self-custody of Bitcoin makes sense and why physical gold holding makes sense. Um, look, I I'm going to put you on the spot here again with a forecast for gold and Bitcoin only because you've been correct in your previous forecasts with me. Uh, when we spoke last, Bitcoin was uh at $70,000 and you were correct saying that it was going to easily breach $100,000. Do you have a a Bitcoin and a gold forecast for the next, I say, uh, six months?

I think I think gold will head towards probably $3,800 over the next six to 12 months. And I think that Bitcoin probably heads towards $200,000 over the next, you know, year.

Okay. So, Bitcoin at $200,000 and gold only at $3,800 in that same time period?

Yeah.

All right. Final thoughts here, Luke, as we wrap up. What is your current highest point of conviction?

My current highest point of conviction is is is I think twofold. I think it is that ultimately the dollar is going to be much lower sometime in the next three years. Um, and that the US is going to get much more aggressive about reshoring and and re- uh balancing global trade. And the other high conviction point is that at the moment, at this moment in time, over the next two, three months in particular, uh, I have extremely low conviction about uh, what that could mean for asset markets. I mean, I ultimately think it means much higher asset markets, much lower dollar, much higher gold, much higher Bitcoin. Right now, it's very, you know, it it is it there's so many different crosswinds, executional risks, etc. You know, it's very difficult to have any high conviction in any one thing. Um, you know, beyond, you know, if you're a sort of a short-term investor trader, uh, and so it's, you know, a bit of a bit of I think short-term dangerous waters with ultimately, um, you know, like I said, much, much weaker dollar, much higher Bitcoin, much higher gold, I think higher stocks, um, and I think much stronger growth ultimately.

All right, well, Luke, thank you so much. Appreciate you playing along with some of my on-the-spot moments and the hypotheticals. Uh, thank you for the big macroeconomic lesson at the top of this interview. And as always, thank you for being so engaging. Really always appreciate chatting with you. Thank you. As we wrap up, where can people find you? Where can they learn more about you? How can they access some of your work?

Absolutely. Thank you. Yeah, if investors interested in either our institutional mass market products, can check out fftt-lc.com and I am on uh, sorry, X, not Twitter, X at LukeGroman all one word.

And you also have a good YouTube channel. I'm going to give you a shout out there myself where you do fun Q&A sessions.

I do. Yes, I do. In fact, we've got a new one coming out this week. So, yes, uh, uh, Google Luke Groman YouTube, you can find that there. And uh, yeah, we do bi-weekly or tri-weekly uh Q&A sessions for 10, 10 or 15 minutes that uh have gotten pretty popular.

Indeed. And we can see why. Luke, thank you again so much. I look forward to chatting with you again soon. Thank you.

Likewise. Thanks for.

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