Gold & Silver Are About to Re-Enter the Monetary System — Here's When | Andy Schectman Silver

[00:00:00]Just like they're absurd the other way, it's absurd this way. To see gold rally by $130 on this when it should have been rallying the whole time because you know, this this inflation is real.

[00:00:12]It's not going anywhere and it is a function of the war and for the market to believe that the Fed has to lower rates for gold to go higher is absurd.

[00:00:21]And if you look at how the central banks have been inelastic in their gold purchasing, doesn't matter if the currencies were strong, it doesn't matter if rates were high, they continue to purchase gold.

[00:00:32]Tells you the real story and and it's just um silly that the markets are behaving this way and it it instead of seeing the big picture, they they focus on the leaves instead of the forest, the rustling leaves of the trees and I think it's um I I think it would be 50/50 at best if this gets ratified.

[00:00:52]>> So, regarding gold rallying on war news, there's been some confusion there because typically gold is a safe haven asset, rallies when there's geopolitical escalation. And doesn't rally uh when there's peace, shall we say? And we've seen the opposite during this conflict. Initially, there was a spike in the first day, but then as this conflict continued uh and even intensified, gold did not rally on escalating geopolitical tensions. And now we have we'll call it a deal or what people are interpreting as a deal and and gold is rallying on peace, not rallying on geopolitical uncertainty, which is the opposite of its usual safe haven function. So, what what's going on there?

[00:01:34]>> Yeah, it's just the belief, this this stupid illogical belief that the only road to higher gold price has nothing to do with with the fundamentals. It only has to do with whether or not the Federal Reserve will be a dovish rather than hawkish. And if the Fed were to lower rates, why then gold will do very well. But because inflation is ignited through the war and oil prices go higher which drags the CPI higher which drags the inflation level higher why then the Fed has to pause on on rate decreases and maybe even as the market has been signaling a move towards a rate hike like we just recently saw in the European Union and many expect to see in Japan in the next couple of days and so which again is silly because we saw gold move um massively in in the highest and fastest uptick in interest rates in history from roughly zero to 450 basis points.

[00:02:32]Um in a very short period of time yet gold kept moving higher so it's convenient for them to bring out this narrative to roll out this narrative when the price is getting hit. Um and it's it's it's faulty as far as I'm concerned and what betrays it is the amount of gold we continue to see being delivered in the month of June we've already seen close to 14 13 or 14 I haven't checked it today as of as of Friday a couple of days ago was approaching 13 billion in deliveries on COMEX. Now that doesn't mean it left COMEX but someone or some ones are standing for delivery prioritizing physical delivery over cash settlement.

[00:03:12]This is massive. These people who are standing for delivery for 12 billion 13 billion of gold in the first 10 days of the month which follows a pattern we've seen for 18 straight months that that to me betrays all the price action and it's the silly market that is is falling for this narrative while the central bankers they're laughing all the way to to the vault with what they're accumulating.

[00:03:35]>> And focusing on just one angle right just focusing on the Fed angle.

[00:03:41]>> It's stupid. It's not real.

[00:03:42]>> And the idea is there is that higher rates increase the opportunity cost of holding gold. I mean that's usually the sentiment that gold doesn't yield rates and you're better off uh having and and also less liquidity driving into gold.

[00:03:59]>> well, look at it. You You right now you got you got the CPI up at what? 4.6% month-over-month and uh at from the last read and um or is it year-over-year? Whatever.

[00:04:10]The point of it is the uptake of almost, I think it was 60 basis points uh for the month. You're approaching um pandemic level inflation. And so, the the level of inflation is at or higher than the rate that you're going to get. And we know the inflation number that they tell us is a bunch of nonsense. So, the point of it is you're at almost basically at real negative returns and we get we're supposed to believe that this is enough to entice people from owning gold to to own dollars that are being bled away in value, being paid an interest rate that barely, and if we were being honest and using Shadow Stats numbers, massively puts you at a negative return.

[00:04:53]>> And again, even if the steal is legit and it sticks and it holds, we still don't know what the long-term accumulative inflation impact is. Or just that we've had this conflict for over a >> There's a big lag effect and that lag effect hasn't happened yet, but it will.

[00:05:07]And I think I think most people know that the inflation that they're feeling, the grocery store, with tuition, with insurance, um that it's much higher than the three 4% we are led to believe.

[00:05:19]>> Well, and we also have a new Fed chair coming in to take his first meeting, uh Kevin Warsh. He will also hold a press conference on Wednesday, which of course will be widely watched. And this meeting is widely expected to produce no change in interest rates despite President Trump's demands that the Fed keep cutting, as he was making very clear to Warsh's predecessor, Jerome Powell.

[00:05:43]Uh but sources are saying that the president trusts Warsh, so he will give him some scope of action. People familiar with the Trump Fed dynamic speaking under condition of anonymity told CNBC that uh he's going to give him a lot of free range to do what he wants and that he will attempt to use that freedom to make his case internally for some big changes at the Fed. Uh his regime change that he said he wanted to do. Um there are reports that that could include how Warsh and the Fed calculate inflation. Um and Warsh is expected to focus more heavily on whether inflation is being driven by monetary expansion uh rather than external shocks. This is what he said during his Senate confirmation hearings. He said, "The measures I prefer are looking at things that are called trimmed averages.

[00:06:36]A trimmed mean inflation measure essentially removes the most extreme price moves from the calculation, allowing policy makers to focus on what they view as the underlying inflation trend rather than temporary spikes."

[00:06:51]So this brings up two questions. First, what are your expectations from Warsh in terms of keeping rates steady, potentially hiking rates, potentially cutting rates for the near term?

[00:07:05]And do you see him and the Fed coming up with another measure of inflation which then down the line could justify rate cuts because they bring inflation down to 2% under this new calculation should they implement that?

[00:07:20]>> this trim measurement in in essence lops off the highs and the lows, the outliers if you if you will.

[00:07:26]And it would put it right now at just barely over 2%, which is close to the mandate. Yet the PPI numbers from May come in at at 6.5% above expectations uh or 6.5% above expectations of 6.4%.

[00:07:42]Um and it's the highest level since the pandemic since 2022. And and so the PPI numbers, the producer price index is kind of the precursor to the CPI. How much does it cost for the producers to produce this stuff? Inflation came in at 4.9%.

[00:07:57]And so you know, you are very close to these pandemic levels. And and so inflation is real and for them to to trim it again and and make it seem as though the rates are much lower to me is is is a pipe dream at least in terms of how it will deal with the real problem of inflation. Whether or not they do it, I guess they probably will do it, but the average person is just going to be hurt.

[00:08:29]>> Explain what that means for the average person when it comes to purchasing power because we throw out PPI, CPI, trimmed means this calculation. What actually means is that your dollar is buying you less.

[00:08:42]>> Yeah, and if you look at the amount of money that's that's flown into the money market accounts as an example which which are paying right now not even 4% and there's there's trillions of dollars in the money market accounts of people who are in there supposedly for the safety and just to get a return, their real return is negative based upon the real CPI right now.

[00:09:02]And so that really is going to make anyone who looks at it with a discerning eye say, "What the hell am I doing here if I'm actually going backwards?"

[00:09:10]Especially any sophisticated trader would say, "I'm out." But when you trim it again and blur the reality of of what inflation truly is, you may catch more people sleep if you will. Um and and and accept that negative that negative real return.

[00:09:30]>> But there was some talk that Walsh will try to rein in quantitative easing that he wanted to >> I think he will.

[00:09:39]>> How How does that happen?

[00:09:40]>> I think he will do that in January with the with the with the passing of the genius act. See, this is the part that that the mainstream is ignoring, Michelle. To me, the the passing of the genius act neuters the dual mandate of the Fed because the genius act says anytime money moves after January 1st, it will be primarily backed by 90-day or less short-term treasuries. You pin the front end of the curve to the floor.

[00:10:04]And so, that mandate of the Fed and their interest rate adjustments when anytime money moves, it is synthetically creating demand for short-term treasuries, the Fed overnight lending rate the very, very front end of the curve will have zero impact when anytime money moves, whether you buy a pack of cigarettes or a new house, it's backed by short-term treasuries.

[00:10:26]This will paste the front end of the curve to the ground. And so, you'll have very, very low rates with the ability to then to slowly repair your your balance sheet. Now, um that again would move, let's hope, into Judy Shelton's idea of backing the back end of the market with gold. And if that were to happen, you could actually, I mean, this is this is the argument I've been making, foolishly perhaps, kind of like I did with BRICS in 2019. I don't hear anyone else saying this. So, either I I fall on the sword or or again, I just have the stupidity or the courage to say something I believe, which is the front end of the curve is done with the genius act as is the dual mandate of the Fed. The back end of the curve would be backed by gold. You would be able then to if all of the money this and the clarity act says you can't you can't transfer the interest. We see what Tether has been doing, buying more gold than anyone but the country of Poland.

[00:11:27]And And Bo Hines is a CEO of USA Tether, the genius act compliant portion of this he was Trump's cryptos are if there was a wink wink nod nod deal and this is a supposition but if they were to let gold go higher and higher and higher and higher by taking that interest and plummeting it into gold and that is the deal that they worked gold goes higher, the dollar goes lower, you sell you sell manufacturing to the public or to the world rather, you bring back manufacturing at zero upfront cost if you can back the back end of the treasury market with gold.

[00:11:58]And I don't know, to me it is doable if all of this pans out. July 4th will be a big deal. I don't think I'll go to sleep July 3rd.

[00:12:05]>> You know Andy, so many of the themes that you've discussed over the years are sort of culminating together and and we'll break those down. I mean you have long said that you need a weaker dollar because of Triffin's dilemma because you want to onshore manufacturing and you need the United States to >> We have to want we have to or our kids are dead.

[00:12:24]>> You've said that you've said that we're going to kill the dollar but save the system by backing treasuries with gold and a lot of well, this isn't getting much attention but it is very interesting that uh Kevin Warsh, the new Fed chair has brought on Paul Winfree >> That freaked me out when I saw that. It truly did.

[00:12:44]>> Now let's explain why because Winfree is a former Trump administration economic advisor and he authored the Federal Reserve chapter in Project 2025, a conservative paper where he discussed the possibility of introducing gold convertible treasury instruments and even allowing a parallel commodity backed monetary system to operate alongside the current fiat dollar. Now you've been talking about this for quite some time.

[00:13:10]Um and you've suggested that we could see this happen and this is the first tie up by the new Fed chair. Someone that has written extensively on linking gold back to the monetary system. Now he's been hired reportedly as an interim advisor just so we're clear.

[00:13:28]But again, he wrote this chapter in Project 2025 on the Fed. Project 2025 is a policy blueprint developed by the conservative think tank, the Heritage Foundation. Was developed ahead of the 2024 US election. Got a lot of hysteria from some of the left uh media.

[00:13:46]Um but the nearly 900-page document lays out recommendations for a future conservative administration could reshape the federal government. And it covers everything from foreign policy and energy to regulation, the Federal Reserve and monetary policy.

[00:14:02]>> Which was his chapter.

[00:14:03]>> And that's where we're getting to. Now, his argument in the chapter on the Federal Reserve was that introducing gold back into the monetary framework could help restore fiscal discipline and limit the government's ability to expand spending through debt and money creation. And here's a quote written by Winfrey from chapter 24 on Project 2025. And he writes, "Beyond full backing, al- alternative paths to gold backing might involve gold convertible Treasury instruments or allowing a parallel gold standard to operate temporarily alongside the current fiat dollar. These could ease adoption while minimizing disruption, but they should be temporary so that we can quickly enjoy the benefits of gold's ability to police government spending. In addition, Congress could simply allow individuals to use commodity-backed money without fully replacing the current system."

[00:14:54]Again, no one is saying that the US is about to return to a gold standard. But it's very, very interesting that this hire by the new Fed chair >> First hire, yeah.

[00:15:05]>> is advocating something that you have suggested along with Judy Shelton could be the solution.

[00:15:09]>> And I don't think we're going to go to a gold-backed system. We're going to go to gold-backed Treasuries, which will allow monetary stupidity to continue. However, the gold within the backing of the Treasury will be kind of the the alarm bell if you will to that monetary stupidity. And case in point, you get you get Van Eck funds, their emerging bond market team came out and wrote a report and said if if the dollar loses reserve status, Triffin's dilemma, we could see gold going to $139,000.

[00:15:40]So, when Judy says, you know, we can sell a 50-year bond deliverable in gold or dollars with zero coupon at the end of the 50-year period. In in her book, she said 5 10 20 30 50, but starting with the 50, that means zero upfront borrowing cost number one because there's no upfront you just sell the bond, you get the money. You have to deliver the gold, no interest payments, but gold at the end of the maturity.

[00:16:06]If the dollar continues to lose value because the interest that is not transferable is piled into gold pushing gold higher and the dollar lower, gold being the only neutral barometer, the only neutral reserve asset by which everything is measured.

[00:16:21]Yeah, I think this can actually happen.

[00:16:23]And but it allows the Fed to continue, it allows monetary policy to coexist with gold backing of the Treasury market, not backing the dollar because that's when you can't expand the money supply if there's not enough gold.

[00:16:35]However, you can still do that and sell bonds redeemable in gold. That is the whole purpose of of of having the redeemability in gold because if the world believes that we will not find fiscal sanity or monetary restraint, then indeed they will choose, you know, the the gold instead of the dollars or any small interest.