Top Three Videos – August 5, 2023

Quick Summary Bullets:

Central Banks and Gold

• “We have seen for two consecutive years a record purchase of gold from central banks, which was considered ludicrous a few years ago.”
• “Real money is not a paper or a or a digit or is something that we that we can exchange for goods and services in uh in a difficult period of time and if anything all this process is showing that gold is real money and that everything else is credit.”
• Restoring the gold-to-foreign debts ratio could potentially lead to a significant increase in the price of gold, possibly reaching six to twelve thousand dollars.
• “All the stars are aligning and if we don’t pay attention to how many stars are aligning at the same time we might miss important opportunities in a very short period of time.”
• “The reason why central banks all over the world are buying more gold is precisely because they’re not stupid…we should be consistently reminding people of the importance of sound money.”
• Gold is like the goalkeeper in a portfolio, providing defense and preserving wealth in volatile markets where stocks and bonds are highly correlated.

Sound Money and Monetary Policy

• “Sound money is not just a novelty but it’s what should be money to start with.”
• “The movement in price is likely to happen quickly and severely.”
• “We have gone from excess on the supply side to excess on the contraction side and it’s I think many of the people that are watching us right now and listening to us will understand why the Federal Reserve is making two gigantic mistakes in such a short period of time.”
• “2022 completely debunked the entire fallacy of MMT, showing that US Treasuries are not a risk-free asset class.”
• “We’re living in a slow but almost relentless debasement of Fiat currencies.”

Alternative Currencies and Financial System

• “If there is no alternative to the U.S. dollar today…why bother? It has to be a real alternative.” – Lacalle emphasizes the need for a viable alternative to the U.S. dollar, highlighting the importance of a genuine alternative currency.
• “The possibility of dethroning the US dollar right now is virtually in existence, shrugging it off is extremely dangerous.”
• “It’s very very dangerous to start playing around with what gives a bank the power to continue to provide this public service, now if on top of putting in question the confidence of citizens they have in front of them a serious threat like Central Bank digital currencies, they might be staring at the end of the banking system as we know it.”
• “It’s all about education. It’s all about knowing stuff and I think when you know stuff you can make better decisions.”

Transcript Summary:

• 00:00 The movement in price is likely to happen quickly and severely due to the Federal Reserve’s mistakes in increasing money supply and hiking rates while being accommodative, leading to negative real wage growth and elevated core inflation.
  • Sound money is essential and the speaker, Andrew McGuire, discusses the need for it and the potential consequences of not having it.
  • Daniel Lacalle, a Spanish economist and author, joins the conversation to discuss the movement in price, emphasizing the importance of spreading the word about the channel and expressing gratitude for the opportunity to participate.
  • He discusses the importance of crosses and asks for wider information, mentioning that the episode is being recorded before the FOMC announcement and the market has already factored in a 25 basis point hike.
  • The Federal Reserve and major central banks have made two significant mistakes due to their lack of attention to monetary aggregates, resulting in an unprecedented shift from excess supply to excess contraction.
  • The Federal Reserve’s mistake of increasing money supply and hiking rates while being accommodative, along with the slow reduction of their balance sheet, is concerning as it goes against the necessary actions to curb inflation, which include hiking rates, reducing the balance sheet, and reducing government spending.
  • The burden of normalization is falling on families and businesses, leading to a GDP print that appears positive but with negative real wage growth and insufficient government spending, resulting in elevated core inflation and declining prices, creating an environment of disguised normalization.
• 07:17 US Treasuries are not risk-free, debunking modern monetary theory, and the current environment is concerning due to plummeting credit demand, high inflation, and devaluation of fiat currencies, leading to increased interest in physical gold as a first-tier asset class with zero counterparty risk.
  • US Treasuries are not a risk-free asset class, as evidenced by the 2022 market decline, debunking the fallacy of modern monetary theory and showing that sovereign bonds are not risk-free.
  • Government spending and deficit spending do not create reserves for the private sector; instead, wealth and progress come from investing and saving, and the current environment is concerning due to plummeting credit demand, high inflation, and the devaluation of fiat currencies.
  • Sovereign treasuries are not considered a first-year asset class, but as of January 1st, physical gold traded against the dollar must be physically backed by bullion, leading to increased diversity in investments.
  • Physical gold is now considered a first-year asset class with zero counterparty risk, and despite the difficulty of storing it and the risk of confiscation, there has been a record purchase of gold by central banks in recent years, indicating a significant shift in the Central Bank World.
  • Central banks around the world are increasingly purchasing physical gold as they lose trust in the US dollar and other currencies, leading to a shift away from ETFs and towards physical gold.
• 14:33 The possibility of digital assets disappearing is increasing concerns, highlighting the importance of gold as a hedge against the dollar, with potential for significant price movement; however, there are challenges related to asset prices, liquidity, and the destruction of fiat currencies.
  • People are becoming increasingly concerned about the possibility of their digital assets disappearing, highlighting the importance of gold as real money.
  • The Bank of International Settlements and other central banks are reducing their exposure to paper gold and seeking a hedge against the dollar, which could lead to a significant movement in gold prices.
  • The Federal Reserve and other central banks do not consider the price of gold or its role as an asset in relation to outstanding levels of debt, despite it being a relevant factor in the past.
  • There is a level of denial and frustration regarding the monetary system’s expansionary policy and the mistake of not considering the historical context when analyzing the impact of increasing money supply on inflation.
  • Gold’s potential for price appreciation is significant, but its achievement is hindered by the relative nature of asset prices, the liquidity issues of physical gold versus ETF gold, and the destruction of fiat currencies relative to the US dollar and gold.
  • The global monetary picture shows that a significant percentage of fiat currencies are in internal destruction mode, which is causing the dollar to lose purchasing power and creating financial imbalances, but the liquidity aspect and the implementation of Basel III standards in the US could potentially bring compliance for gold and other asset classes.
• 25:41 There may be significant and rapid price movements in the near future due to multiple factors, including the debasement of Fiat currencies, the alignment of supply and demand in precious metals, and the potential for a gold-backed commodity currency to replace the US dollar in energy and commodity trade.
  • The alignment of multiple factors suggests that there may be significant and rapid price movements in the near future, which could lead to missed opportunities if not paid attention to.
  • Regulation is important due to the debasement of Fiat currencies, the diminishing returns of monetary policy, and the Eurozone’s economic challenges.
  • The alignment of supply and demand in precious metals, particularly gold, along with global changes in acceptable reserves and interest in joining the BRICS plus trading block, suggests a potential significant movement in price.
  • An alternative gold-backed or partly gold-backed commodity currency could potentially serve as a solution to replace trillions of dollars of energy and commodity trade between nations, as there is currently no viable alternative to the US dollar due to other contenders making similar or worse mistakes than the Federal Reserve.
  • The Brazil Russia India and China currency is unlikely to work due to the implementation of capital controls, a history of currency devaluation, and the absence of independent institutions, free flow of capital, and investor security.
  • The idea of a nation’s currency being backed by gold or commodities makes sense to citizens, but the debate lies in who will successfully implement it, as the success of a platform comes from the failure of previous implementations.
• 34:10 Central banks are buying more gold as citizens’ wages decrease in value, China and Russia likely have more gold reserves than disclosed, potentially impacting the global economy and the value of the US dollar.
  • Central banks are buying more gold because they understand the importance of sound money and citizens need to be aware that their wages are decreasing in value due to the declining purchasing power of currency.
  • China and Russia likely have larger physical gold reserves than disclosed, and as these ideas gain traction, even small changes can significantly impact the dynamics of the global economy, potentially leading to a decline in the value of the US dollar.
  • China has a long-term view and understands the challenges of implementing a stable currency outside the dollar, which can lead to changes in capital controls and currency stability.
  • China needs to follow certain steps to become a global reserve currency, but it is uncertain if they actually want to achieve that status.
  • China’s focus on managing its trade balance with a stable currency, backed by gold and commodities, is crucial for its ability to grow and support its centralized economy, especially in contrast to the US’s inability to reduce its deficit.
• 41:29 Banks prioritizing objectives over customer support, debanking individuals based on political views, and potential threat of Central Bank digital currencies are dangerous and could undermine trust in the banking system.
  • The possibility of dethroning the US dollar is dangerous and it is important to consider alternative partnerships backed by commodities and gold, while also acknowledging the politicization of the banking system.
  • The debanking of individuals due to their political views exposes the issue of banks prioritizing other objectives over the support and defense of their own customers, which is dangerous and destructive to their own business.
  • Banks closing accounts based on political views is a dangerous and discretionary decision that undermines the trust and fairness of the system.
  • Citizens’ confidence in banks is at risk due to the potential threat of Central Bank digital currencies, which could lead to the end of the banking system as we know it.
  • Banks are tracking clients’ legal activities on social media and may close their accounts based on posts they disagree with, which is concerning and may be connected to the development of Central Bank currencies.
• 48:20 Banks and businesses should prioritize trust and customer satisfaction, as they may collapse before implementing measures that harm their customers, and should focus on managing their balance sheets properly rather than assuming the intentions behind cash transactions.
  • Rent-seeking businesses generate revenues based on their position in a specific area or city.
  • Businesses, especially banks, often fail to realize that they can lose customer confidence and collapse before they have a chance to implement measures that harm their customers.
  • Banks need to prioritize trust and not make decisions that harm customers, as they may lose market share and fail to understand their own business.
  • Be cautious with the glimmer of hope in a bank’s equity as it disappears before the ability to implement repression measures.
  • Lacalle discusses the false assumption that using cash is associated with illegal activities and highlights the need for banks to focus on managing their balance sheets properly rather than assuming the intentions behind cash transactions.
• 55:51 Invest in gold and silver as a defense against market volatility and to preserve wealth, but make sure to buy physical assets rather than paper.
  • Gold is an essential asset for wealth preservation and investment due to its ability to preserve wealth over time and act as a defensive component in a portfolio, similar to the role of a goalkeeper in a successful football team.
  • Have a percentage of your portfolio dedicated to silver as a defense against market volatility and as a bet against the US dollar.
  • Gold is proven to be money in challenging times, while silver is also valuable but to a lesser extent, and it is important to have exposure to the US dollar.
  • Buy physical gold and silver, not the casino paper, and make sure to understand the difference between the two markets.