The New, Unofficial, Global Gold Standard

追加: 2026-05-14

[00:00:00]Welcome to the Melaney weekly commentary. I'm Kevin Oric along with David Melaney. David Morgan uh Lewis has been talking about when the fog of war, the Iranian war, the Ukrainian war with Russia, when that fog of war lifts, we are likely to see a new global structure uh both monetary and uh just the way resources are handled.

[00:00:23]>> Yeah. And a part of the challenge in figuring out what that looks like sort of a new regime going forward is to what degree are there coordinated efforts >> and and is is there a set of rules uh that people are willing to abide by or do you have countries acting purely out of self-interest?

[00:00:40]>> Every man for himself.

[00:00:41]>> Yeah.

[00:00:41]>> Collective action problems. Um you know we we we see that with OPEC. you know, you want to maintain price stability in the oil price and so everyone agrees to production caps even though individually in a high price environment, one country may want to overproduce and capitalize on being able to sell more barrels of oil at a higher price. So the try to cheat the system >> and you know so you have the UAE not wanting to cheat the system just not wanting to be anymore to it.

[00:01:10]>> Yeah. We just don't want to play anymore. And you know the dollar the US dollar since 1944 Brettton Woods has sort of smoothed things over and given you know this global globalism would be coordination based on a single currency.

[00:01:26]But what we're seeing is we're we're seeing that that is starting to break down. you know, oil is now being sold in other things other than dollars.

[00:01:33]>> Yeah. You know, George Freriedman's May 11th commentary um titled the weak, the new global reality showed itself, I think was particularly complimentary to last week's hard asset insights. you know, Morgan connects the dots between the mounting pressures on the post-war deficit uh funding scheme where where the dollar dominance, you know, promoted treasury purchases.

[00:01:58]And essentially what we had was recycling of of trade partner surpluses, whether that was from oil or from the the sale of tradable goods uh finished goods and that went back into treasuries. this recycling it represented a natural funding mechanism for our debt here in the US and our deficit spending again here in the US.

[00:02:20]So the scale of our debts and the the impact of rising rates um now is meeting with the growing disinterest in the US Treasury market and the massive financing and refinancing needs on the horizon which you know makes the system that we've been operating in less tenable by the day >> and you know for us or from our perspective gold is front and center in a world that is searching for a neutral asset for net settlement of trade. M >> so the process that we're seeing I mean this is not a theoretical thing this is this is gold is a neutral asset uh this is not speculation on our part this is happening in real time this is what is being you know sort of put in as a substitute system for uh the old which which was treasury based and dollar based >> yeah just think if you lived for 4,000 years let's say that you could just watch things this little blip on the radar I mean it's just it was just a whisp of air when the dollar was sort of the replacement for gold from 1944 till you know till now. But what we're seeing like you said that's coming back now we're still we still have a deficit to resolve. So how are they going to do that if we can't sell dollars or we can't use this >> recycling? Yeah.

[00:03:35]>> Yeah.

[00:03:36]>> Yeah. Yeah, I mean what's likely to unfold in the in the years directly in front of us and maybe even in the quarters or months on on a much shorter time frame is a massive monetization of Treasury debt by the Federal Reserve and and they're basically standing in filling the demand gap uh left by global players whose interest their interests are no longer served by being our creditors and keeping the game >> by buying our own debt. So there there are needs far greater than treasury script and as they look at what they would rather have whether it's uh reserves in the form of gold or resources in the form of commodity caches uh the unipolar world centered around the US and US finance uh US currency is rapidly shifting to a more regionalized multipolar world with with structural implications for our debt financing here in the United ates uh with implications for dollar stability and you know gold along with other you know economically vital commodities.

[00:04:40]>> They remember when you used to travel across Europe and you had to change currencies every time you change countries that that was very inconvenient and the dollar smooth that out. Gold has a way of smoothing that out. But right now the inability to trade dollars for certain commodities is really catching up with some countries like like India 700 billion in treasuries. But they need basically they need fertilizer not treasuries at this point. China doesn't want to take lots of other things. And so they look at their reserves of commodities and you know in the context of of the straight of Hermus being closed um they're having to work through some of their reserves, some of their strategic reserves. You know the current rate right now is between you know 4.8 and and 12 million barrels per day of reserves that are being depleted. And we still have supplies coming to market that were in transit at the time uh the war started.

[00:05:33]>> But that stops at some point, right?

[00:05:35]>> It does. It does stop at some point. So everybody's kind of watching. You know, we we started many months ago talking about the first week in in fact in the first week of of the conflict. Duration is key.

[00:05:47]>> If this is, you know, a two-day event, not a big deal. And if it's a longer term event, it'll show up in inflation statistics. it'll become more uh something that is is sticky in nature.

[00:05:59]So, you know, we've got the Iran conflict, um, which follows on the heels of the Russian invasion of Ukraine, uh, which has underscored the importance of resource security, whether it's Europeans thinking about gas supplies, oil supplies, uh, whether it's a slowing of of grain exports from Ukraine, resource security, again, could be energy resources, or any other commodity needed in in a production and manufacturing supply chain. If you're not adequately stockpiled, if your domestic production of resources is limited or if your trade relationships don't offer a clear and secure supply chain, you are scrambling to remedy this. And this is this is what's shifting is again can we think about the whole like an OPEC concept where we we are making decisions uh based on a collective action model that allows for a better outcome for all >> better for everyone. Yeah. or do people start to think what do we need? Not what do we and as a collective but you know as a nation state, >> right?

[00:07:05]>> And you know so this is this is where you see a real scramble to remedy this and and part of this is knowing that your domestic economy is at risk and therefore your political future is also at risk as constituents deal with the ramifications of higher prices in an quote unquote underresourced world. By underresourced, I'm not saying there isn't adequate supplies, just that accessing them when you need them can be costly enough to become a destabilizing factor politically. Well, and so what you're take taking into account at this point is inflation. And inflation not only has the the effect of not being able to buy things because it they're too expensive, but politically that spreads. I mean the the politicians probably fear inflation more than almost anything, don't they?

[00:07:55]>> Yeah. And and actually there's there is this sort of lever. You don't expect geopolitics to be influenced by domestic politics, but actually with enough economic pressure, there is a responsiveness. Mhm.

[00:08:07]>> domestic politics all of a sudden becomes very important and can be sort of the the the guiding uh light for for geopolitical choices, arrangements um you know negotiated uh you know trade trade relations etc. So global inflation >> pressured by supply chain bottlenecks um that that is the net effect of of not having resource security buttoned up having clarity on that. So European energy needs in the wake of the Russian Ukraine war, Asian demand for natural gas and LNG uh and and a diminishment of supply resulting from the closure of Hormuz. Those are sort of prime examples and you the dominoike effect from from these energy supply disruptions um and and they're observable other places.

[00:08:59]Tech sector well you have to have helium to make chips. Helium is coming from production of natural gas. Uh so you know helium scarcity if that's limited that has implications for the production of of of goods >> well and even plastic I mean plastic you require it's petroleum >> less less available uh financial times back in in early May um Asia is in a plastics crisis with manufacturing warning of shortages was was the headline from May 6th and you know jet fuel and diesel they're re re they're being repriced higher to reflect inadequate supplies. Jet fuel spiked from $85 a barrel uh to at one point over $200 a barrel.

[00:09:44]>> Wow.

[00:09:44]>> Um that's that's an issue. It's you you don't have adequate supplies to to meet demand. Already US airlines have have shut down um I think they've canled two million seats >> in in terms of you know flights. So they're restricting the number of flights, trying to pack them more uh make sure they don't have any empty seats. Um, I noticed that yesterday.

[00:10:06]Yeah, I was flying back from Phoenix and you know, it used to be every once in a while you would be asked if you're flexible on your flying and I'm noticing the more I you when I fly they want to see if you can possibly give up your seat almost every time.

[00:10:19]>> Yeah.

[00:10:20]>> Yeah. I mean >> over booking >> and and and certainly there are policy stimulants to inflation as well. We talked about supply chain issues. That's that's a reality. We had that postco um but policy stimulants to inflation are real. Those are factors we're likely to see in the future in the context of financial market stabilization efforts.

[00:10:40]So you're talking about fiscal policy stimulus, monetary policy stimulus, um you know up to and including what we mentioned a moment ago, monetization of US debt. Um but first we are today engaged with an energy crisis >> which always leads to inflation in some >> it's it's it's one that's not quickly resolvable. Um while while you know we may have truth social posts that suggest that re resolution is just around the corner.

[00:11:07]I think I think we we get those notices um every Monday and Tuesday. Uh that improves trading within the markets and commodities do their thing uh in reaction to uh a hope a glimmer of hope that that all is well and and we're moving >> and it's going to end soon. Yeah.

[00:11:24]>> By Friday it's back to you know well things have changed, >> right? Um >> I'm so disappointed. Yeah.

[00:11:31]>> Yeah. So um a reappraisal of supply chains post conflict is likely to be as meaningful as the postcoid reappraisals.

[00:11:41]Um but but I in this sense it's it's at a more molecular level. It's at a more basic level.

[00:11:47]>> Real things.

[00:11:48]>> Where do you source the stuff >> the stuff the real things >> that allows you to make other stuff. Uh so raw materials not just parts that go into finished goods. Uh but the commodities required to produce anything.

[00:12:02]>> Well, if you want to see a politician care about something, really, really care about something, if their self-interest is, you know, in in jeopardy, their next election, they're going to care. This is something that they would probably care about, isn't it?

[00:12:16]>> They care when they're implicated. So self-interest moves center stage when domestic economic concerns can't be assuaged by rhetoric and and politicians are scrutinized and held accountable for the status quo. Um raising the stakes for for whoever is in leadership and this is you know a global issue.

[00:12:35]Inflation is a major source of economic pressure which very easily turns into political volatility. um you know best case that volatility is is seen you know in in the election process the electoral process and in the worst case you can look at historical precedents for you know revolutionary chaos where people are just fed up and and somebody's got to pay the price. Uh but whatever the status quo it gets associated with the current leadership. Let's just talk about this too though because the halves, let's just say the the upper element of the economy, they don't feel the inflation like like the masses do, right? We, you know, I was telling my wife the other day that Durango being a tourist town and having a lot of milliondoll, multi-million dollar uh money coming in for housing is creating sort of a rich man's ghost town in a way. It's it's like we've got a rich ghost town. Tell youide that happened to we saw it happen to Aspen. But in this particular case, it's happening worldwide, isn't it? I mean, we're starting to see that the rich are getting very, very rich and the inflation is actually helping them to some degree, right?

[00:13:45]>> Yeah. It was interesting. We've got a friend that has a shop on Main Street and, you know, it's it's kind of a tourist oriented shop and and plenty of traffic in the first quarter. Uh but people would come into the shop, look around and walk out and they hadn't bought anything.

[00:14:02]>> And they weren't carrying bags from other stores. They were walking in with empty hands and walking out with empty hands. So just kind of perusing and you know very different than 2025. So sort of the the pressure on consumers still traveling to Durango, tourist destination. Um there >> spending less >> but spending a lot less. Yeah.

[00:14:24]>> So, you know, of course, in a in a K-shaped economy, your reality may be very different than your neighbors or or someone else in your community. The status quo for those that own assets, you know, your your proverbial halves, uh, looks pretty good.

[00:14:40]>> Equity indices are looking past the conflict to the other side. They're basking in the glory of the AI trade.

[00:14:47]Semiconductor meltup, uh, the inflation of asset values. It's a boon to personal balance sheets. And Trump's leaning into that, sponsoring one of the one of the first presidents in in history to promote bubble dynamics in that way or to this extent uh within the equity markets. And you know, it's it's his litmus for success. You know, look at what the Dow's doing.

[00:15:10]>> Look at the Dow. We're near 50,000.

[00:15:12]>> But the status quo for the asset light, the the the have nots, it's grown uncomfortable. Mhm. You had uh Craftine CEO Steve Callahane warning in the Wall Street Journal uh recently that most people are uh I quote him literally running out of money at the end of the month.

[00:15:32]>> And true makes me think of of Bill Clinton's election slogan >> economy stupid. Yeah. you powerfully harnessing discontent uh with the status quo at a time when a whole socioeconomic segment was feeling left behind or was feeling economically pushed into the danger zone.

[00:15:55]That is the reality of the lower leg of the K-shaped economy. Uh the economic discontent um left alone, not resolved quickly enough breeds political change.

[00:16:07]Well, and we are in an election year. I I was watching TV with my wife last night and sure enough, they're back. All the commercials, you know, there were three different governor commercials for three different people running for governor. Uh just back to back. And so, do you think this is an opportunity then for the Democrats if they play their cards right, if people are discontent?

[00:16:29]>> Yeah. Yeah, I mean I guess the question is can they can they control themselves a bit because you know if Democrats lean into the sort of FTR animus uh sort of what some of >> Trump derangement syndrome >> correct instead of the economy >> if if if they're leaning into sort of the the ramped up hatred uh instead of looking at the economy and looking at math uh if they don't use the Clinton playbook I think they'll be in trouble.

[00:16:56]Um, alternatively, you know, connecting inflation to the war in Iran, uh, which we've talked about in previous weeks.

[00:17:05]Actually, inflation was picking up before, right, >> we had an energy and energy shock.

[00:17:10]>> Um, >> but if if if they connect inflation to the war in Iran and pin economic security, >> pin it pin that tail on the elephant instead of the donkey, I think that's a winning strategy. if if if they can first tame their hostility uh and hatred and and and think straight. Just let the math speak.

[00:17:30]>> Well, and everybody watches gas price. I was with my mom this weekend and she's like, "Is your gas cheaper than our gas?" And I'm thinking, you know, my mom's almost 86 and she still is just she knows where the gas prices are and so they could What is the magic number with gas right now? I mean, what what's the magic number where people say this is too expensive?

[00:17:51]Almost every phone call I have with my father-in-law, he starts with a number really, >> 327 or whatever the number is, and it's what he's paying for a gallon of gas.

[00:18:03]>> Is it really >> in the state of Texas?

[00:18:06]>> Um because he's so proud of the fact that it's always going to be cheaper in the state of Texas. Of course, I think there's a subtle ploy. If you lived here, you realize, you know, you wouldn't be paying astronomical fees.

[00:18:17]No.

[00:18:18]>> And we'd be near the grandkids. We don't live in California where things are stupid largely because of taxes and regulations and things, but 456 is all the donkeys need.

[00:18:30]>> And that's the national average of a gallon of gas >> for now. Right now.

[00:18:35]>> Yeah. So, gasoline prices are up 60 to 70% from the same time last year.

[00:18:41]>> That's the end of the story.

[00:18:43]>> And you know, if if the if the Democrats want to win that, that's it. just leave it there, >> right? CPI this week, uh, up 3.8% year-over-year. Uh, the month-over-month number, that increases 6, uh, for the headline. Um, annualizes out to 7.2 if you want to extrapolate. And, you know, of course, that's a full percentage point lower than the annualized PCE. We talked about that last week. Uh, so we're looking at the March number for PCE. and we've got April CPI which comes out first then later this week PPI and then at the end of the month we'll have April PCE. Um but bond markets are now pricing in an increase in interest rates as they know that with inflationary pressures. Um it's it's it's got a bad it's got a bad look if you've got a Fed that's lowering rates. So either do the safe thing, stay neutral, do nothing, which is what we had at the last meeting, or by the end of the year, you've got an increase in rates. And that's what bonds are set telling you is coming towards the end of this year or early next year.

[00:19:51]>> And the bottom of the barrel literally is coming on the oil because you talked about us using oil reserves at this point. It's almost like a train. The train passes you, you see the cars going by, but at some point the caboose is going to come. And uh Jeff Curry made the comment that he thinks that caboose is coming for Europe uh sometime in late May and for us here in the United States sometime in July where we'll really see the spike in energy costs uh when that when the bottom of the barrel is reached.

[00:20:21]>> Yeah. Because to date, we've just been anticipating um a real supply crunch. We have plenty of of strategic reserves.

[00:20:29]Global oil reserves are being depleted at a at a decent clip. Um even though we've got some things still in transit and and available will be available to the market. Um we're we're still seeing strategic petroleum reserves across the globe. Um they're coming down between 4.8 to to 12 million barrels per day. Uh a variety of estimates there. Uh so the real effect of the Hormuse Straits closure has yet to be felt. We're still working through barrels already in the system and that's counting barrels that are stored. That's floating supplies and of course the strategic reserves as well. When you get near the bottom of the barrel, so to say, or when tanks and shipping vessels run dry, >> then you run the risk of a sharper price spike. And and >> what do you think response?

[00:21:18]>> What do you think it could spike to?

[00:21:20]>> $150, $200 a barrel. And of course that's if we get there. Again, we're back to the duration question and um whether or not we we have the the willingness for countries to to lower their strategic reserves. Um so, you know, if we get to $150, $200 a barrel, you're talking about the na average price per gallon for for gasoline um well over $7.

[00:21:46]>> So, but if we have a burn rate in the millions right now, how many barrels do we have still in reserve? I think we ended 2025 with about two and a half billion with a B barrels of strategic reserves. Uh that's globally and then we in March we had the the coordinated release of of 400 million barrels. Uh that was agreed to in March. Um I they're estimating somewhere between 1.8 and 2 billion barrels still in reserves.

[00:22:13]It's a lot um but it's not an infinite supply.

[00:22:17]>> Okay. Okay. But the pressure is growing not just on the energy. the energy actually adds to other types of things.

[00:22:23]>> Well, worth worth noting that on on some of those, you know, strategic petroleum reserves, like here in the United States, we'll we'll pump them into the ground. You know, salt domes, >> there's a certain amount that you have to keep in ground or or the the cavity that holds them will collapse. So, so it's not as if, you know, if we've got, you know, uh, whatever our number is, let's say, >> you have to keep replenishing the what you're what you're storing.

[00:22:50]>> But the point is, you can't bring it down to zero. You can never bring it down to zero. So, you may have a strategic petroleum reserve and you can cut it in half, but you cannot cut it by 3/4.

[00:23:00]>> Otherwise, you're you're attempting structural collapse.

[00:23:03]>> Wow.

[00:23:03]>> So, >> okay. So, with this being said, we've got a couple of wars going on right now.

[00:23:09]We've got Iran. Uh we've got this ongoing war from 2022 with Putin in Ukraine. Uh do you see that shifting?

[00:23:17]>> Yeah, I mean I I think these issues are global and I think they relate to deeper structural shifts in going back to to Freriedman's article. Um that's where that comes in. You know, he he says that pressure is growing in Russia for Putin to end the war in Ukraine given that the battle lines are frozen and the Russian economy has become extremely weak. Um, and here in the last week, we've got the the recent Putin Trump phone call, got the combined you combine that with the the cancellation of the full ceremonies on May 9th, uh, commemorating the end of World War II and a request to negotiate an end of the war, working directly with the Europeans. And Freriedman puts a lot of emphasis on this particular point. It it's it's a negotiation with the negotiation with the Europeans and preferably with Germany. Uh top of the list is retired German chancellor Gart Schroeder.

[00:24:15]>> Is that because he has both German and Russian background?

[00:24:18]>> Well, I mean, yeah. Subsequent to serving as German Chancellor, uh he served as chairman of Rosn, the the Russian energy giant. So uh Freriedman suggests that Putin wants to return to a period in which Russia seemed to be preparing for a role within the European system. And he goes on to say what's important is that Putin asked to turn the clock back >> because there is massive domestic opposition to the war in Russia because the economy is reeling and because there are rumors that the FSB, Russia's intelligence service has turned against him.

[00:24:52]At the same time, the relationship between Europe, specifically NATO, and the US has deteriorated to a point where a new geopolitical system must emerge.

[00:25:02]Russia is becoming to whatever degree a part of the European system would give Europe access to Russian natural resources and would give Russia access to European capital.

[00:25:13]>> So, how does this play into Trump going over to China right now? Because, you know, you've got that power structure changing, too, possibly.

[00:25:20]>> Yeah. If if you don't read Freriedman on a regular basis, I think this is an article that's worth digging out. Um he goes on to say that central to all this is the summit slated for May 14th. That could redefine the relationship between the US and China. Importantly, negotiations between US and Chinese officials have continued throughout the war in Iran, obviously intended to work out the details of a new relationship, and they hope to be blessed by the two presidents later this week.

[00:25:48]>> So, this week is a big week. Um, China wants the war to end because it imports massive amounts of oil from the straight of Hormuz. The US wants it to end because ultimately the only way to fight it is on the ground and Trump vowed to end those kinds of conflicts. So you we we have um US and Chinese counterparts which have been meeting in South Korea in recent days um over the weekend and they continue to negotiate the details for the summit which is 14th, 15th, 16th um largely a ceremonial blessing of of the agreements already arrived upon. So, I mean that that the the work is being done elsewhere and then you get the two leaders together and they talk and they shake hands and all >> and it looks like it all just happened right then, but it's being set up. Now, when you're setting something up like that, you've got to talk about the unknown. Okay. When when we used to watch The Apprentice, my wife and I, you know, 15 years ago when when Trump was on, he was pretty unpredictable then.

[00:26:47]What he was going to say, what he was going to do, you really didn't know. you know, he may have had a plan, but it certainly didn't look like he had a plan until he changed his mind.

[00:26:56]>> Yeah, he's an instinct guy. He's he's a gut level guy, and you never know what he's, you know, feeling and what he operates on. So, you know, the caveat is that Trump has a way of flipping the script like like a a bull has a way of breaking things in a china shop, literally perhaps.

[00:27:15]>> Old China shop. U but barring the typical gaffs his typical gaffs and sort of uncomfortable diplomatic phauas u they may actually emerge with an economic and and military deal which would include the most sensitive aspect as far as China's concerned um an understanding on Taiwan.

[00:27:35]>> Yeah. Yeah. And semiconductors definitely factor into that, don't they?

[00:27:39]>> Yeah. And I mean put understanding on Taiwan in quotes because it's it's uh it is a big deal. I mean the world is dependent on Chinese or Taiwanese microchips. Um who doesn't want uh Taiwanese microchips these days? If if AI is going to be the you know revolutionary force in the markets and in the economy uh you have to have Taiwan semiconductor chips.

[00:28:10]>> On Saturday we went up to Sedona, my mom and I from Phoenix and I saw all the building of these huge huge semiconductor plants here in America.

[00:28:20]They're still a long ways off. I mean we're talking acres and acres. a building that would take acres and acres and acres. There were cranes everywhere.

[00:28:28]We're not there yet. Trump wants to get that. What percentage come from Taiwan right now?

[00:28:32]>> Yeah. I mean, and I guess a lot of investors don't know this, but Nvidia doesn't make their own chips.

[00:28:38]>> Taiwan Semiconductors makes Nvidia chips. So, when you think about Nvidia, when you think about AI, this is a Taiwan issue. Um Scott Bessant um he noted in the New York Times back in February that the single largest threat to the world economy, the single biggest point of single failure is the 97% of high-end chips.

[00:29:00]>> It's 97% >> made in Taiwan.

[00:29:02]>> Wow. And so you know in 2022 go back a few years there was a report commissioned by the semiconductor industry association uh which said that cutting the supply of chips from Taiwan would lead to the largest economic crisis since the great depression with an expected decline in economic output of 11% in the US uh which is twice what we experienced during the global financial crisis and 16% uh decline in economic output in China. So, we definitely can't we can't have something that would cut that off. 97% at this point. It sounds like all parties have a reason, whether it's Russia, whether it's China. Uh I can't speak for Iran at this point cuz but but all parties, Russia and China, seek to gain by letting the conflict go down, right? The the temperature go down on conflict.

[00:29:56]>> Well, I I mean avoiding conflict over Taiwan.

[00:29:59]>> Yeah. you know, settling a path forward is in both US and Chinese interests. And so, you know, kind of like the the the story of Solomon presented with a conflict between two women uh determining who was the mother of a a disputed baby and the true mother let go to preserve the baby's life. Uh except in this case, uh neither mother is the true mother. Uh both the US and China have their own interests and Taiwan may be a part of a larger agreement um split to satisfy a more complex balancing of geopolitical priorities and and economic growth trajectories. So we we need critical rare earth minerals. They need the US market to to dump goods into. Uh we need chips. uh so do they if if we're cut off from chips it's a bad day for the US economy um for for that we would fight a deadly war uh to to avoid conflict you know will be to negotiate and to trade right so in in Freriedman's view if all this happens it would be the beginning of a new global geopolitical system replacing the one based on the cold war and the collapse of the European colonial system. How it will look in detail matters a great deal as does the potential Russo European and and US China and taunts to a great extent. Freriedman says we are now at a pivot between the end of the system that began in 1945 and a new one 20 or so years in the making. Now that system in principle if not in detail is revealing itself. Well, so let's go to that because these systems have to be fueled and purchased in certain currencies and we're talking at this point, we talked earlier that the dollar is being replaced. What does that look like going forward?

[00:31:57]>> Well, that's that's why I think tying together the the hard asset insights from the weekend and Freriedman's view that we are at a at a pivot point >> in terms of geopolitical structure. Um, Freriedman's focused on the geopolitics between Russia and Europe and between China and the US. There is the the capital which flows between the interconnected global players and there are the resources that they're motivated to control uh more than ever to to better determine their health and to determine their growth trajectories.

[00:32:31]>> And US treasuries up to this point have purchased most US dollars have purchased most of these things. But we're seeing the shift.

[00:32:38]>> Well, I mean, treasuries and dollars were for decades kind of the element used to grease the gears for global commerce. And times have changed.

[00:32:45]>> Yeah.

[00:32:46]>> And when you think about the treasury market, demand dynamics have changed.

[00:32:53]Needs are are more for basic and elemental reserves and and that too is is changing. So resource procurement has become more of a critical objective and reserve denomination is is more and more biased towards a neutral uh towards a globally trusted expression. Um that what is more suitable to a multipolar world which is which is where gold is is is a unique unique element. Well, and it's unique this time around, Dave, after doing this almost 40 years in the gold business, you know, and you grew up in it, so even longer for you. Um, we always watched the popularity of gold amongst the investors to see, you know, where it was going to go. You know, granted, there was central bank demand, but for the most part, we were looking at are people buying gold or are they selling gold, but it's not really, we're talking about policies here that are buying gold.

[00:33:48]There's a policy shift to a neutral trading unit that's not a dollar. It's not a Chinese yuan and it's not a euro.

[00:33:56]>> Yeah. I I was I was reading the the Elliot wave guys maybe a week ago and they were looking and making trying to make the case that um you know gold was um ready for another correction and their their lead indication for that was uh small speculators in the futures market as an expression of what was driving the gold price and that it was now overbought.

[00:34:21]>> They must be very small.

[00:34:22]>> Well, I mean >> I don't where are they >> again? And I I I think what has built this bull market to the $4500 an ounce price range, $5,000 an ounce price range has been policies. It's been central banks. It's been reserve asset managers who have decided to acquire strategically a reserve which is which is more suitable to a multi-polar world.

[00:34:44]>> And a central bank is not speculating on price. They're literally moving to another currency. This one just being a 4,000 year. Like I said, if you had lived for 4,000 years, you'd go, "Well, gold is pretty much the currency."

[00:34:58]>> Yeah. So, I I think I think the the concern they had about the gold market is is um there's too much credibility put into a very small group of US-based specul speculators, right?

[00:35:10]>> And so, I mean, unique to this bull market in commodities and and gold and silver is the added layer of policy preference. And if if you kind of let that sink in a little bit, it is a very different backdrop than we've had in the past. Investors will sniff out the opportunities and they'll see supply and demand uh we we'll see their supply and demand influence the the price discovery process. But the added weight on the scales comes from national security imperatives which seek to not only look at what is needed today but what will be needed to be reserved what is needed as reserves in case you're cut off from what is needed tomorrow.

[00:35:56]>> So just even think about that for a moment. All right. If India needs fertilizer from China and China does not want to take they they don't want dollars for it. They don't want US treasuries. If India offered them gold, what you're basically saying is gold is replacing this international currency unit.

[00:36:13]>> It certainly makes you discount why you hold what you hold in the form of US dollars or US treasuries, >> right?

[00:36:19]>> It's it's not the most vital of reserves. And you know, when you begin to think about reserve management, not only in terms of monetary reserves, but also the the cache of resources that you need to run your economy and insulate it from supply chain bottlenecks or choke points. Um, that's that's where, you know, I think this is this is really critical. Inflation becoming a self-reinforcing dynamic with consumer goods. Um, we know that to be the case when consumers start hoarding. And you know, we're not talking about consumers in this case. We're talking about nation states >> needing much today and hoarding much for tomorrow uh while at the same time competing with that investor class for a stake in those raw materials. So gold and silver are a part of this complex competition um competition for resources and reserves in a world that's gradually leaving behind an old system. Um so it's it is a very different setup having political bigwigs do their best to stake a claim that better ensures economic stability for their people. Mhm. This competition for scarce resources. U as I suggested earlier, it it's it's in large part an expression of self-interest. You politicians smoothing price volatility.

[00:37:45]Um they they think that's going to be rewarded politically.

[00:37:49]>> Yeah. But what happens if they're all doing it at the same time? You know, I mean, if everybody's buying something at the same time or selling something something at the same time, it creates volatility, >> right? So they're all what they're trying to do is secure their supply chains. And that's where the problem lies. Too many people doing the same thing at the same time. And the the price volatility that you're trying to avoid is exactly what you end up with.

[00:38:13]>> And it's it's kind of the classic collective action problem. You rationally pursue your own self-interest. You know, this is resource security. Uh when it's pursued by too many people, it creates big problems. Um, think about somebody who wants to secure uh their savings at a bank that is now suspect in their mind, right?

[00:38:33]>> One person doing it is an expression of self-interest and it's functional.

[00:38:37]>> If everybody does it, >> it's a bank run.

[00:38:39]>> It's a bank run.

[00:38:40]>> Um, you know, but the same thing applies to to over fishing. You know, you've you've got the honey hole, which is great as long as no one knows about it.

[00:38:48]>> It's good for you, >> right?

[00:38:50]>> But if everybody knows about it, it's overfished, right? Um, you know, when I lived in LA, you know, you you leave 45 minutes early to get someplace on time, but if everybody leaves 45 minutes early, you end up with traffic congestion. And even if you thought you were going to be early, you may end up being late, right?

[00:39:05]>> Um because everybody else was thinking the same thing at the same time, >> right?

[00:39:09]>> So, it's these are all examples of kind of social dilemmas or or collective action problems.

[00:39:16]>> And when everybody's hoarding, you've got commodity inflation basically. If >> commodity price inflation is is that, too. And this is this is the bottom line. Whether you're looking at oil or copper or fertilizers, gold and silver, microchips, >> everyone wants greater security and the collective move to secure it determines the the exponential price rise to follow.

[00:39:45]>> Well, you've been listening to the MVY weekly commentary. I'm Kevin Oric along with David Melaney. You can find us at mlaney.com mcalvany.com and you can call us at 8005259556.