Debt, Currency Debasement, Inflation & War—History Repeating Itself

In this brief yet substantive MAMChat, Matterhorn Asset Management principals, Egon von Greyerz and Matthew Piepenburg, address the overlay of escalating geopolitical tensions, oil markets, currency direction and, of course, gold’s critical and increasingly obvious role in preparing for the same.

Egon opens by asking a repeated question: “Is this fall the fall of falls?” Specifically, he addresses rising risk levels from inflation forces, unsustainable debt levels and toping markets to banging war drums, which sadly, are a fundamental symptom and aspect of debt cycles and debt crises. Naturally, tensions in the middle east will have ripple effects in oil markets which in turn impact the USD and hence gold, a theme which Matthew addresses in greater detail.

Specifically, Matthew discusses the double-barreled stresses on US oil production as a result of increased CAPEX costs on the back of Powell’s rising rate policies and the negative impact Biden’s pro-Green, anti-oil policies have had on US oil production. Strategic Petroleum Reserves, last year at over 650 million barrels, are now clocking in at 350 million barrels, and thus getting dangerously closer to supply-driven price hikes. Adding insult to injury, we are also seeing sanctioned nations like Iran, Venezuela and Russia selling oil outside of the USD to oil-thirsty nations like China, all of which point toward a slow drip away from the Petrodollar, which will impact Dollar-demand. Longer term, this will mean more artificial USD production and hence currency debasement in favor of precious metals.

This all-too-familiar (as well as historically-confirmed) interplay of debt, currency debasement, inflation and war is theme to which Egon returns in the concluding remarks. Gold, of course, can not and will not solve all of the myriad problems—political, military and social—making headlines at increasing speed today. Nevertheless, gold’s role as a preservation asset against undeniably weakening fiat money around the world is now undeniable. As Matthew then adds, once the role of gold is fully understood, it is equally critical for investors to understand the best jurisdictions to store this asset as well as the need to avoid paper gold in ETFs and gold “storage” in fractured and levered commercial banks.

Debt, Currency Debasement, Inflation & War—History Repeating Itself

In Part II of his conversation with Wealthion founder, Adam Taggart, Matterhorn Asset Management partner, Matthew Piepenburg, transitions from the broader (and increasingly unsettling and fractured) macro themes of Part I to addressing specific portfolio approaches and viable asset classes for concerned and informed investors.

Taggart reminds that despite Piepenburg’s longer-term expectation of debilitating inflationary forces, that nearer-term deflationary or dis-inflationary forces from falling markets and recessionary economies are expected. This view provides a needed context for portfolio preparation today.

Piepenburg, like many clear-eyed portfolio managers, argues that further Fed liquidity, and hence further market support/tailwinds, won’t emerge until after risk asset markets in general, and equity markets in particular, experience at least a 30%-40% mean-reversion/drawdown.

In short, the Fed won’t pivot until markets inevitably puke.

This means investors currently falling for the “soft-landing” narrative and chasing stock market tops are doing so at unacceptable risk.

Piepenburg further reminds that investment advice does not come in a one-size-fits-all package, as there are clear and legitimate differences between those seeking (understandably) to grow wealth and those seeking (understandably) to preserve wealth.

Furthermore, there are those who have the experience to invest on their own; whereas the vast majority rely on third-party advisors. To this later group, Piepenburg underscores the importance of vetting and selecting sober portfolio managers who: 1) prioritize risk management over lofty projections in these topping markets; 2) understand the importance of cash equivalents and short-duration sovereign bonds as an allocation and risk tool; and 3) who have the proven ability to hedge, both long and short. This final skill of active, rather than passive management, is admittedly difficult for even seasoned portfolio managers as volatility twists and turns dramatically.

Overall, Piepenburg aggressively warns against the consensus-think faith in traditional risk parity portfolios of de-worsified equities and de-worsified credits. Given unhinged, post-08 monetary policies by all the major central banks, both stock and bonds are simultaneously over-valued. This means bonds, once designed to hedge stock risk, are now correlated assets and hence correlated risks.

Naturally, Piepenburg addresses his preference and style of wealth preservation through real assets in general and precious metals in particular. Although everyone claims to buy low and sell high, nearly no one actually does this. Toward this end, Piepenburg prioritizes longer-term investing and preservation goals, as well as tracking commodity cycles against stock cycles. In the end, the next many years will reward those who understand these relationships.

The conversation briefly returns to, and ends with, current political and financial leadership and the implications going forward, both optimistic and pessimistic.

Watch part 1 here.

Debt, Currency Debasement, Inflation & War—History Repeating Itself

The health of the world economy is clearly linked to the health of global leaders. That clearly raises the question if unhealthy leaders create a diseased economy or if an ailing economy creates sick leaders. 

It doesn’t really matter what came first since the Western world economy is now as close to being terminally ill as it has ever been and its population is continuously getting unhealthier. 

And weak Western leaders focus on peripheral political issues, whether it is climate, ESG, Covid vaccines, gender and other woke topics. 

Nothing new in that. Arranging the deck chairs on a sinking world economy clearly seems meaningful to hapless leaders rather than preventing the ship from sinking. 

Gargantua in the picture above/below personifies, gluttony, greed and a self-indulgent world. But we don’t need to turn to a 500 year old story book by the French author Rabelais to study the vices of mankind. 

The health of a nation is clearly also reflected in the health of its leaders. 

Recent health leaders in the USA, Belgium, Canada and Britain certainly don’t give a signal of “mens sana in corpore sano” or “a healthy mind in a healthy body” as the Roman poet Juvenal wrote 2000 years ago.  

Or as the Greek philosopher Thales said 2600 years ago: “What man  is happy? He who has a healthy body, a resourceful mind and a docile nature.”

We must also ask if the poor health of the global financial system is linked to the choice of the chief of the Bank of International Settlement (BIS, the central bank of central banks). 

The latest BIS quarterly review refers to the opaque off balance sheet derivatives market. I am still of the opinion that total derivatives including the shadow market could easily be $2-3 quadrillion. $2 QUADRILLION DEBT PRECARIOUSLY RESTING ON $2 TRILLION GOLD

Well, it certainly seems like Gargantua was a role model for many of these leaders. But unhealthy living is not just the privilege of leaders. Only 10% of adult US population was obese 50 years ago and today 45% are obese. So the trend is clear and within the next 10 years, over 50% of the US population will be obese. And Western Europe will of course follow the US example as they always do. 

So why am I talking about obesity in a financial newsletter? Well because as I said above, it comes from self-indulgence and greed which is the current state of the Western world economy.

As I have discussed many times, we are coming to an end of a major economic and cultural cycle.

Only future historians will  know if this is a 100, 300 or 2000 year cycle. If I ventured a guess, I would have thought that it could be a very long cycle like 2000 years. 

There are many similarities with the ending of the Roman Empire like, debts, deficits, taxes, decadence, self-indulgence, wokeness etc. 

Empires don’t disappear overnight. It is a long outdrawn process. If we take a starting date for the beginning of the decline of the current Western Empire, dominated by the USA, it would probably be the creation of the FED in 1913. This private central bank was the great enabler for bankers and industrialists to control the system. As Mayer Amschel Rothschild said in the late 1700s: “Give me control of a nations’s  money and I care not who makes the laws.”

The mighty US economy emerged after WWI as a major economic power whilst the European continent was suffering from the effects of the war. In spite of superior economic performance, the US already started to accumulate  budget deficits in the early 1930s. And since then buying the people’s votes was the number one criterion rather than a balanced budget.

So far, in the last 110 years there have been less than 10 years with a real surplus in the US. As I often point out, the Clinton years produced fake surpluses since the debt continued to rise. But plus ça change – things never change. 

As long as there has been any form of money, governments have always found ways to destroy its value. 

There are many ways to debase a currency, like less gold or silver in a coin or using a cheaper metal. Paper money has obviously been the perfect tool for corrupt governments. This is “the Finger Snapping Method” as a Swedish central banker explained when asked how money is created. Just snap your fingers and the money arrives. Or as my colleague Matt Piepenburg calls it “Mouse Click Money”. 

EMPIRE OF DEBT AND MEDIOCRITY

Having driven through Corsica this summer, you realise that wherever you go in these parts of the world, you are in the midst of history, a history which was so much more glorious than the current Empire of Debt and mediocrity.

Corsica was ruled by the Republic of Genoa from 1284 to 1768 when it was ceded to France. Napoleon was from an Italian noble family and was born in Corsica in 1769 a year after the island became French. So by just one year, history could have looked very different with Napoleon as an Italian General and leader. 

Napoleon wasn’t the only famous Corsican, Christopher Columbus was born there 3 centuries earlier and became famous for having led the way to the colonisation of the Americas when he in 1492 sailed across the Atlantic believing that he would reach Asia. 

But sadly, those glorious periods of history are long gone. Today there are no heroes and few statesman or explorers who make history. 

Not a single one of today’s “glorious leaders” will be remembered by history, whether we talk about Biden, Sunak, Macron, Scholz, or Meloni.

Sadly the world has a motley crew of aspiring statesmen who will be forgotten the day after they have left office. 

But they will all have left a memorable legacy – a debt burden of $340 trillion plus derivatives and a shadow banking system of $2 quadrillion at least. 

And it is this debt and the irresponsible deficit spending that leaders should focus on if they intend to cure their economies. 

But sadly no one has the courage to rein in unlimited deficit spending. Because buying the favour and votes of the people is the only way to conclusively hang on to power. 

So what will happen next is self-evident:

MORE DEFICITS & RUN AWAY DEBT

As the graph below shows, US debt will at least be $40 trillion at the beginning of the next presidential period. I forecast this already 7 years ago when Trump was elected president. No genius required for this forecast just pure extrapolation of the trend. On average US debt has doubled every 8 years. 

But $40 trillion debt by 2025 is just the beginning. Just look at the next graph. 

With the same extrapolation of debt doubling every 8 years which has been very accurate, debt will be $100 trillion in 2036. 

As the interest rate cycle continues to rise, we will at a minimum see 10% by 2036. Personally I think it can be a lot higher. 

Still at 10% on $100 trillion debt, just the interest cost will be $10T against $1T currently. 

I would be surprised if the budget deficit in 2036 will be less than $10T!!

So there we have it, the road to perdition for the US seems very clear. 

Sure, it could be argued that this is all speculation.  Of course it is, but it is more than that since all it does is to extrapolate historical trends. So dismiss it at your peril. 

HIGHER INTEREST RATES AND INFLATION, COLLAPSING BOND MARKETS, 

Interest rates peaked in 1981 with the 10 year treasury at 16%. We saw the cycle bottom in 2020 at 0.5%. Rates are now going up for probably decades but with the normal violent volatility. 

Long term inflation has just started an uptrend. No one should be fooled by the temporary correction of the rising trend.  

HIGHER COMMODITY PRICES, ESPECIALLY OIL

As fracking returns now have peaked, the world has seen peak oil. Add to that the increased cost of producing energy as I have written about in previous articles and we will have the perfect energy storm. 

LOWER ASSET PRICES

The Everything Bubble will now turn to the Everything Collapse as I have outlined in previous articles. 

HIGHER GOLD PRICE

As gold buying continues to move from West to East with gold most probably becoming the new Reserve Asset for central banks instead of the dollar, there will be a total repricing of gold as I have covered in previous articles, such as A DISORDERLY RESET WITH GOLD REVALUED BY MULTIPLES. Gold demand will increase substantially. Since gold production cannot be increased, an increase in demand can only be satisfied with higher price, not more gold. 

IT IS NOT ABOUT BEING RIGHT BUT ALL ABOUT NOT BEING WRONG

As I often say, forecasting is a mug’s game. So it is easy for critical voices to reject my predictions above. 

However, no one should focus on if my predictions are inaccurate. 

Instead, everyone should consider the massive risk cloud that is hanging over the world currently. And I haven’t even discussed geopolitical risk. 

The key is to protect yourself, your family and your investors.

Wealth Preservation is absolutely critical and physical gold is historically one of the best investments for protecting your assets. 

Everyone is going to lose out in coming years. The ones who lose the least will be the winners. 

Debt, Currency Debasement, Inflation & War—History Repeating Itself

In many recent articles and interviews, I’ve warned that Powell’s “higher for longer” war against inflation will actually (and ironically) lead to, well… greater inflation.

That is, the rising interest expense (nod to Powell) on Uncle Sam’s fatally rising 33T bar tab will inevitably need to be paid with an inflationary mouse-clicker at the Eccles Building.

I’ve also consistently maintained that Powell’s war on inflation is mostly just optics, as he secretly seeks inflation to help pay down that bar tab with an increasingly inflated/debased USD.

Powell achieves this open lie by publicly declaring a steady decline in inflation by simply misreporting the true CPI number.

As John Williams recently argued, true inflation using an honest (rather than the openly bogus BLS) measure is now closer to 11.5% rather than the officially reported headline rate of 3.7%.

This should come as very little surprise to those whose eyes are open to the Modis Operandi of debt-soaked/failed regimes. As former European Commission President, Jean-Claude Juncker confessed: “When the data is too bad, we just lie.”

But even for those who still believe the current Truman Show inflation (and “soft landing”) narrative out of DC, the Bezos Post or legacy media A, B, or C, there’s more fire adding to the inflationary flames than just bogus narratives and calming platitudes.

In particular, I’m talking about oil-driven inflation, and nothing burns faster.

Scary Flames in the Oil Supply

Left or right, the dumb out of DC just keeps getting dumber.

Between rising rates (nod to Powell), which make capex investing untenable for US oil producers, and a Weekend at Bernie’s White House, which has spent years effectively legislating US oil into oblivion, US energy supply is falling, and we all know that weakening supply leads to higher prices—and inflation.

Meanwhile, Saudi Arabia, whom that same White House called a “pariah state,” has not been warming to Biden’s awkward fist-pumps and increased production pleas, but rather joining other OPEC leaders in cutting, rather than expanding, oil production.

Gee, what a geopolitical shocker…

Net result, both national and global oil inventories are falling, and falling hard.

The Awkward Oil Two-Step

The once “go green” White House realized that the world, and inflation scales, still revolves around oil, especially after sanctioning Western Europe’s former energy supplier in one of the most short-sighted (i.e., stupid) policy decisions since the Iraq war.

This may explain why Biden changed his stripes and why there was a sudden pivot toward allowing greater US shale output in 2023 by pumping more cash into those shale fields at a pace not seen in 3 years.

Unfortunately, however, this may be too little too late (like Powell’s QT) to prevent oil price shocks and higher inflation into year end, thus adding insult to an already injured (and rising) US CPI measure of inflation.

As oil supply tightens, oil prices, and hence inflation rates, rise together with bond yields and interest rates—a perfect storm for over-inflated bond, stock, and real estate markets.

Those prices and inflation rates would be even worse if Chinese oil demand rises—which is why current Western headlines are literally praying for China to implode first. This might explain why The Economist has had two consecutive cover stories about an imploding China.

See how big media and big government sleep together?

Tying it Together

Regardless, we need to tie all this together.

If, as I see it, inflation (however misreported) becomes obviously more real and felt, the consequent rising bond yields will make the USD stronger and Uncle Sam’s bar tab more expensive, which hardy bodes well for America’s twin deficit black-hole of unpayable debt unless…

…Unless the Fed starts printing more fake and inflationary money to buy its own IOUs and weaken its export-killing, and BRICS-ignoring, USD.

Again, no matter how I turn the macros, the Fed will eventually have no choice but to pivot toward more instant liquidity and hence more inflationary policies to save/monetize its broke(n) bond markets.

Once this inevitability becomes a headline, the temporarily rising USD will be seen for what most of the informed world already recognizes—just another fiat monster backing a world reserve currency in the hands of a nation whose debt to GDP and deficit to GDP ratios mirror that of any other banana republic.

Reality is Hard to Look at Directly, But not for the BRICS

Many in the US or EU may not wish to see this. Bad news, like death and the sun, is hard to stare into.

But the BRICS nations, no strangers themselves to embarrassing balance sheets, are seeing this clearly.

Although I never bought into the gold-backed BRICS currency hype, I have zero doubt that this amalgam of commodity-heavy nations has a common enemy in the current US-dominated (and USD-driven) international trade system, whose hegemonic days are now numbered and whose alliances, as we warned from day-1 of the Putin sanctions (economic suicide), are forever de-dollarizing away from DC.

Moreover, the BRICS don’t need an “official” gold backed currency to trade their real assets in gold rather than Dollars. All they have to do, as Marcus Krall and I recently discussed, is request payment for their exports in gold.

The BRICS+ nations are hardly the perfect marriage of unlimited trust and efficient coordination. Nevertheless, they share an existential threat from an over-priced USD and negative-returning UST.

Furthermore, and as I recently noted at the Rule Symposium, they may not trust each other completely, but they do trust gold completely.

System Change is Now a Matter of Survival

Never has the phrase the “enemy of my enemy is my friend” found a better home than among the rising list of BRICS+ actors who recognize that their very survival hinges upon escaping the suffocating death of paying > $14T of USD-dominated debts whose rising costs (rates) they can no longer afford lest they become vassals of DC.

As Luke Gromen recently observed, from the perspective of the BRICS nations, it’s “either hang together or hang separately.”

A Changing Petrodollar?

China, for example, can not abide forever by a petrodollar system of oil purchases. As the world’s largest oil importer, it mathematically recognizes that it will eventually run out of dollars to buy that oil.

In short, China needs to come up with a better plan—outside the Greenback.

And they will.

By the way, have you noticed the next BRIC in the wall? It’s Saudi Arabia.

See a trend? See a looming change in oil currencies?

Just saying…

As I warned months ago, this Saudi trend away from DC and closer to Shanghai could eventually be a key driver in slowly unwinding the current petrodollar system between a once “friendly” US-Saudi relationship toward a now weakening relationship which hitherto ensured the global demand (and hence the survival) of an otherwise debased paper Dollar.

If the petrodollar system radically or even slowly unwinds, this will do far more to destroy demand and the inherent purchasing power of the USD (and send gold skyrocketing) than any gold-backed BRICS trade currency.

And yet with all the recent sensationalism preceding the BRICS summit in South Africa, almost no one saw this—at least not in the legacy media.

Imagine that…

Other Tricks Up the BRICS Sleeve: More USD Assets than Liabilities

Aside from knee-capping the USD via a shift (gradual or sudden) in the petrodollar trade, it’s worth noting that but for South Africa, the remaining BRICS nations have more USD assets than liabilities, which means they can start dumping USTs to the detriment of Uncle Sam in order to raise USDs.

Many idealogues and US-thinktankers still think the US has all the power over these silly little BRICS nations who allegedly suffer from a dollar shortage.

The chest-puffers still see the USD as all-powerful and all-controlling, after all, just ask Iraq or Libya…

But the dollar-forever crowd is missing the forest for the trees or the basic math of fantasy debt.

If you haven’t noticed, the US just added an extra $1.9 trillion of insane borrowing to the back end of 2023.

And they did this as rates are rising and with the Fed still in full QT/suicide mode.

This mathematically places downward price pressure on bonds and hence upward cost pressure on yields, a scenario America simply can’t play out for much longer at $95T+ in combined public, household and corporate debt.

If the BRICS nations chose to add a layer of US asset dumping to this toxic mix, the ramifications for Uncle Sam would be even more staggering/painful for a debt-based system already on the cliff’s edge.

This is Bad, Really Bad

To repeat: The macros, no matter how I turn them, have never been this bad, this vulnerable and this foreseeable.

The US is now trapped in a vicious circle of debt for which there is no way out other than a currency-destroying return to more artificial, QE “stimulus” and the mother of all inflationary waves.

The horizon is now clear: Yields are up, twin deficits are up, inflation, even the mis-reported kind, is up, and yes, GDP is up too, but as I recently wrote, debt-driven GDP growth is not growth, but just debt.

Unless DC cuts spending at record levels (which kills election results for political opportunists and thus won’t happen), the only tool Washington DC has is more fake money and more real inflation, which means the Dollar in your wallet, checking account or portfolio is about to insult you.

Debt, Currency Debasement, Inflation & War—History Repeating Itself

Matterhorn Asset Management partner, Matthew Piepenburg, sits down with Rick Rule and Jim Rickards at the recent Rick Rule Precious Metals Symposium to discuss the future of the USD, the rising BRICS tide and the Realpolitik of any realistic (i.e., immediate) gold-backed BRICS trade currency.

Each of the trio share their views on the de-dollarization trend, with Piepenburg and Rule taking a far less optimistic view of any immediate gold-backed trading currency emerging among the BRICS nations in 2023.

Toward this end, Piepenburg argues that not even BRICS nations are ready to limit themselves or their financial powers to a gold-backed trading currency; and certainly not to a gold-backed sovereign currency. That said, all agree that the weaponized USD is losing trust and that the UST is losing demand as a post-sanction world moves further and further away from Dollar-based trade agreements.

For Piepenburg, the end-game is clear. Debt drives policy and debt drives current market directions. This debt will not and cannot be sustained by GDP growth or tax revenues, which means ultimately money printers will continue to de-value that world reserve currency, and hence devalue the once hegemonic respect for the US holder of that currency. All agree that gold’s role in protecting investors from this increasingly beleaguered, self-destructive, debased and less popular US currency is becoming increasingly clear.

Debt, Currency Debasement, Inflation & War—History Repeating Itself

This 25 minute video with Matthew Piepenburg and myself is probably one of the most important discussions that we have had.

For years we have both warned investors about the consequences of a system based on unlimited money printing, debt creation and money debasement.

The world economy and the financial system is now on the cusp of a precipice. 

No one can forecast when the coming violent turn will come. 

It can take years or it can happen tomorrow. 

Future historians will tell us when it happened.

In the meantime investors have one duty to themselves and their dependents which is to protect their wealth from total destruction. 

Money printing and debt creation have taken markets to dizzy and unsustainable levels. 

Since Nixon closed the gold window in 1971, both global and US debt is up over 80X!

And asset markets have been inflated by this fake money with the Nasdaq up 120X and the S&P up 44X since 1971. 

But the bubbles are not just in stocks but also in bonds,  property, art, other collectibles etc, etc.

In our view, the time to pay the Piper is here and now. The consequences will be costly, even very costly for the investors who ignore this major risk. 

Just as bubble assets can go up exponentially they can implode even faster. 

RISK OF MARKETS FALLING 50-90%

Sustained corrections of 50% to 90% in stocks and bonds are very possible and when the bubble bursts it will go so fast that there won’t be time to get out or to buy insurance. 

Whether the Everything Bubble turns to theEverything Collapse today or tomorrow, the time to protect your assets is before it happens which means NOW. 

Forecasting the gold price is a Mug’s game . But understanding the significance of gold for protecting against unprecedented risk is not. We had the Ides of March in mid March this year when 4 US banks, led by Silicon Valley Bank and Credit Suisse, Switzerland’s second biggest bank all went under in a matter of days. 

That was a rehearsal. Bad debts and rising interest rates are a timebomb for the banking system. So is the $2-3 quadrillion derivatives risk. This gargantuan risks are before us  now and could materialise at any time starting this autumn. 

The risk ofA Catastrophic Debt Implosion is just too big to ignore. 

In our video discussion below Matt and I discuss these risks and most importantly, the best way to protect or insure against this risk. 

Owning physical gold outside the banking system is by far the superior method to preserve wealth.  

But it is not just about buying physical gold but how you own it, where you store it, in what jurisdictions etc.

This is an area which MAM/GoldSwitzerland has focused on for a quarter of a century and has developed a superior system for HNWIs. 

Please watch this important discussion. 

Egon von Greyerz

Debt, Currency Debasement, Inflation & War—History Repeating Itself

In this brief yet engaging conversation at the recent Rick Rule Symposium in Florida with Charlotte McLeod of Investing News Network, Matterhorn Asset Management partner, Matthew Piepenburg, calmly separates harsh realities from BRICS hype with regard to the de-dollarization themes of 2023.

After a brief discussion on Piepenburg’s path to precious metals and role at Matterhorn, the conversation turns to Piepenburg’s understanding (and prioritization) of risk management and wealth preservation. Piepenburg sees the lack of such risk thinking as a central concern and open threat to personal wealth in a current backdrop of artificially elevated markets and herd-buying/chasing of unsustainable market tops. 

Equally ignored is the hidden risk of currency debasement slow-dripping in real time as debt levels cross the Rubicon of sustainability. Piepenburg argues that “soft-landing” narratives of late are far too soon to call, and that evidence of current and pending “harder landings” are all around us.

Piepenburg keeps it simple. If we assume the US will not allow sovereign bonds to fail or deficits to contract, we can easily foresee more synthetic liquidity, and hence inflation, as the longer-term endgame.

Piepenburg also addresses the “horrifying” profile and slow rollout of CBDC in the years ahead.

As to the BRICS narrative and the rising headlines around a gold-backed trading currency emerging from the August BRICS conference, Piepenburg is far less sensational. Despite his open concerns for the USD and the clear evidence of post-sanction de-dollarization trends, he is not holding his breath for any immediate and gold-backed trading currency to de-throne the USD. Instead, Piepenburg foresees rising inflation forces, continued currency debasement and increasing evidence of centralized controls over our personal and financial lives—all of which make a strong case for owning physical gold outside of the global commercial banking system. 

Debt, Currency Debasement, Inflation & War—History Repeating Itself

In this extensive discussion with the Jay Martin Show, Matterhorn Asset Management’s founding partner, Egon von Greyerz, addresses the catastrophic consequences of the current (and historical) debt cycle. History confirms that such debt bubbles inevitably collapse under their own weight, leading to potential hyperinflation and an implosion of assets. While von Greyerz cannot predict the exact timing of these events (no one can), it is essential that investors inform and prepare themselves for the obvious. 

• 00:00:00 The Fall of Empires? Jay opens by asking von Greyerz his thoughts on the potential fall of the US Empire and the overlooked risks within Europe. Egon addresses the conditions typical to the end of an economic cycle and warns that the ramifications of such an unprecedented debt cycle could be catastrophic for the world.
• 00:05:00 Debt & Currency Risk. Egon ties currency risks to the debt cycle discussion. He emphasizes that debt is the overwhelming and undeniable danger to the global economy. Despite efforts by governments and central banks to manipulate credit markets and postpone pain, Egon sees no avoiding a global currency crisis. He describes an exponential phase where inflation gradually increases before suddenly skyrocketing, leading to potential hyperinflation. Ultimately, he foresees an implosion of assets in which bond values will be detrimental to the global economy. Rather than predicting exact dates, von Greyerz focuses on protecting himself and others from these risks.
• 00:10:00 Warning Signs. The conversation turns to the warning signs of the looming debt crisis, including the recent banking failures, rising credit defaults and bankruptcies. Egon also points out that inflation may be higher than officially reported, causing increased costs for everyday items. While the signs are not yet causing panic in the market, Egon argues that the continuous stream of money creation has artificially propped up the markets beyond their natural expiration dates. As a result, debt levels have skyrocketed to higher levels, which means the consequences will be greater when they implode.
• 00:15:00 Debt is Global. Von Greyerz reminds that previous debt bubbles were limited to individual countries or continents, but now every country around the world is facing a debt crisis. Global debt, officially reported at $325 trillion, is in fact much larger when factoring in the grotesque expansion of the derivatives and the shadow banking system. 
• 00:20:00 What Matters Most. The conversation turns to “safe haven” locales whereby some have the luxury and ability to live in different countries. Most people, of course, don’t have such options. For Egon, the truest safety rests with a strong support system of family and friends rather than material possessions. He suggests that changing our values and focusing on things like nature, books, and music can bring fulfillment and happiness. He also mentions the need for a shift in societal values, as the world is currently focused on materialism.
• 00:25:00 Ignored Realities. The conversation turns to more cracks in the global economy, including nations losing sight of their founding ideals and freedoms at the same time that migration problems and realities are not being realistically addressed. China, in particular, will suffer from its debt situation and speculative bubble; but it is a closed economy and perhaps easier to control, despite immense suffering within its borders. The conversation then pivots to the Ukrainian War, where Egon believes it is not a war between Ukraine and Russia, but rather a classic proxy conflict between the United States and Russia. He points out that the Ukrainian people and the Russian people do not want war; it is the leaders who are pushing for it. Peacekeeping efforts are not being prioritized, worsening the situation. Both speakers conclude that the war is detrimental to the world and Ukraine, and that a resolution is urgently needed.
• 00:40:00 War & Energy. In this section, von Greyerz addresses the relationship between the US and Europe, particularly in terms of sanctions against Russia. Von Greyerz argues that Europe is weak and simply follows the instructions of the US, while the rest of the world does not participate in these sanctions. The US has successfully separated Germany from Russia in terms of energy dependence, but this has caused unnecessary suffering for Germany. Toward this end, von Greyerz addresses the global energy crisis, marked by rising energy costs. As a result, the world will have less and more expensive energy in the foreseeable future, as renewable energy cannot fully compensate for the decline in fossil fuels. Von Greyerz reminds that there is currently no viable alternative to fossil fuels in the short term, as renewable energy sources like wind and solar are still decades away from replacing them. 
• 00:50:00  Gold Stacking Banks. Egon then explains the trend of central banks stockpiling physical gold. He argues that there is no gold rush yet, but the inflows are gradual and steady. He predicts that the real gold rush is still to come, as the world faces the biggest financial and currency collapse in history. The shift from the West to the East, particularly with the rise of the BRICS countries and the Shanghai Cooperation Organization, will have a major effect on the gold price.
• 00:55:00 The Dying Dollar. Egon closes by highlighting the devaluation of the Dollar and other Western currencies due to excessive printing, prompting a mass move away from the world reserve currency. Von Greyerz suggests that gold will be the most natural replacement for central bank reserves, emphasizing the need for a significant revaluation of gold to accommodate future demand. He believes that those who fail to recognize this shift will be left behind and face costly consequences. Von Greyerz emphasizes the need for individuals to start considering and understanding risk rather than focusing on monetary gains, as he anticipates a major perception shift in the world.

Debt, Currency Debasement, Inflation & War—History Repeating Itself

Before I got the invite to a swank prep-school out East, I used to spend my Spring afternoons on a baseball diamond not too far from the home field of Derek Jeter, who was still playing local ball in Kalamazoo while I was harboring high-school fantasies of playing for the Detroit Tigers.

Glory Days, Simple Lessons

Those were dreamy days of young fantasy. Alas, the Tigers never called, so I hit the books rather than the minor leagues and never looked back.

But like all old men with “glory days” memories, sports taught me a lot of metaphorical lessons.

Like having a team ringer who could hit or pitch years ahead of his time (or for you football/soccer folks, a deadly striker).

Even before the first inning was over, we all knew the harsh pleasure or pain of either: 1) having a “ringer” on our team, or 2) facing one on the other team.

In short, if one team had the most obvious “heat” (or unstoppable striker), it was the team that was going to win.

It was simply the Realpolitik of sports.

Thus, if we were playing against a Derek Jeter (or a Lionel Messi), we all silently knew the game’s outcome before we bravely trotted onto the infield.

Or to put it even more realistically, if my high school baseball team ever had to play the NY Yankees, there was not a snowball’s chance in H.E. double toothpicks that we were going to win that game.

This is fairly easy to grasp. Even our coach (McKenzie) would/could admit such hard truths.

The Debt Endgame is Obvious

Oddly, however, when it comes to US debt levels, and hence the end-game for US credit markets, rates, currencies and Fed policy, almost no one wants to see or admit the obvious.

That is, if we were to compare the Fed’s war against inflation to a baseball game, Powell’s odds are about as good as my Michigan high school team (The Lakeshore Lancers) beating the NY Yankees.

And here’s a few (and otherwise obvious) reasons why.

The Ignored Downgrade

Fitch just downgraded Uncle Sam’s IOUs from AAA to AA+.

For now, it seems no one cares. That is, most still think the Lancers can beat the Yankees.

Why?

Because the NY Times, the Wall Street Journal, Bloomberg and the Financial Times are all doing a wonderful, timely and concerted job of telling average Americans not too worry, as recession and inflation fears are now largely behind us.

Alas, has Powell beaten the Yankees?

Hmmm.

A Lying Chorus

Whenever I see a discredited cabal of media sell-outs all telling me at once not to worry, I start, to well…worry.

After all, when an FBI can have Facebook remove posts about vaccine facts or CNBC starts ignoring alternative views on a neocon war in the East, I tend to get skeptical of the “official version” of just about anything and everything.

What these esteemed financial media “experts” are failing to tell you is that the recent (and ignored) Fitch downgrade was premised upon the fact the America’s debt to GDP ratio (125%) is just too high.

In fact, it suggests that Johnson & Johnson or Microsoft have less a chance for defaulting on their debts than the United States.

What our media guides are also failing to mention is that the Fitch downgrade of 2023 was preceded by a similar S&P Rating downgrade in August of 2011.

Two Downgrades, Different Signals

What’s different about the August downgrade of 2023, however, is that Uncle Sam’s debt levels are much higher (scarier) than in 2011.

In fact, bond demand (as measured by the TLT) actually rose by 25-30% after the 2011 downgrade!

Really?

See for yourself:

This was because folks still believed the US of A and its IOUs were simply too big to fail and that such “risk-free” Treasury bonds were a safe-haven in any storm.

By 2014, however, the rest of the world was singing a different tune.

When adjusted for inflation, then as now, those so called “risk-free-returns” were nothing more than “return-free-risk,” which is why foreigners have been net-sellers of Uncle Sam’s IOUs ever since…

And what is even more interesting about the downgrade of 2023 is the fact that more Americans are finally catching on to this.

That is, and unlike the 2011 response to the S&P downgrade, the 2023 downgrade led to a dumping rather than buying of those very same (and increasingly downgraded) IOUs.

Again, see for yourself:

Main Street Finally Catching On?

What these charts are saying is that Americans are slowly starting to see the end-game of our debt-strapped American baseball team.

For decades, our dads and grand-dads have taught us to seek bonds as protection in dangerous times.

That is why US retail investors and US banks have either been suckered (on Main Street) or forced (at the bank level) to buy Uncle Sam’s promissory notes for decades with blind faith in DC’s ability to, well, beat the NY Yankees…

In 2023, however, more folks are distrusting what is an essence a negative-returning 10Y UST (i.e., what the fancy lads call “negative term premiums”), which means US bonds aint our dad’s (or grand-dad’s) “safe-haven” anymore.

Powell Running Out of Good Pitches

This, of course, poses a real problem for Powell’s baseball game against inflation, for Powell has no good fastballs left, just a weak curve ball (Fed’s balance sheet) and a crappy slider (rate manipulations).

That is, whenever the bond market runs out of liquidity (as he saw in the repo crisis of 2019, the UST crash of 2020 or the recent bank failures of 2023), Powel only has two choices/pitches to work with, namely:

1. Do nothing (and watch bonds tank, rates spike, deflation rip, economies crumble and markets frog boil toward implosion), or
2. Reach for that magical mouse-clicker at the Eccles Building and print more fiat money (and hence monetize Uncle Sam’s debt with inflationary bravado).

Powell’s Endgame vs. Powell’s Fantasy

For me, the end-game is clear.

In fact, I see it as clearly as if my Lake Shore Lancers were forced to play 9 innings against Jeeter’s Yankees, namely: “We’re gonna lose this game.”

For now, we are only in the first innings of this painful and embarrassing contest.

Powell, having broken the middle class, a number or regional banks and the normal shape of a robust yield curve, is already declaring victory over inflation and recession (along with a chorus of “yes-sayers” from the WSJ to the FT) and continuing his higher-for-longer fantasy of rising rates into the greatest debt bubble of world history.

How’s that for fantasy?

Maybe I should I try out for the Yankees myself?

Ignoring the Ringer (and the Math)

But what Powell (and the consensus-driven markets) aren’t seeing is the ringer on the other team—namely the fast-ball reality of simple math.

That is, as Powell raises rates, the cost of Uncle Sam’s debt has now crossed the Rubicon of payable.

Ironically (and sports are full of ironies), Powell’s war against inflation is in fact going to end up being inflationary, as the only way to inevitably and eventually pay the interest expense alone on Uncle Sam’s $33T deficit is via a money-printer.

And that, folks, is inflationary (what the fancy lads call “fiscal dominance”), which is bad for long-dated IOUs but good for gold.

Thus, and regardless of current headlines, bullish fantasy and media-ignored credit downgrades, I see yields on sovereign 10-years going higher for longer, which is not a view shared by consensus or those who even feel that a great high school team can beat the Yankees.

The Hopeful Crowd

Of course, there are those who may feel and hope that Powell and his squad of weak-armed experts can get US debt to GDP levels from 125% to 80% (which is the only ratio where normalized rate hikes work) by cutting spending costs.

Hmmm.

In that case, Powell and his equally weak teammate at the US Treasury Department (Yellen) or perhaps even Joe Biden, with his 20 MPH mental fast-ball at the White House, can sit down and decide where the USA is willing to tighten its belt.

Will it be by cutting entitlement spending?

Good luck staying in office with that game plan…

Will it be via military cuts?

Those who truly run DC from the Pentagon are not likely to agree…

Or perhaps there are still those deluded fans in those high-school bleachers who think Powell can grow his way out of a 125% debt to GDP ratio?

Hmmm.

Well, mathematically (just saying), such a gameplan would require 6 consecutive years of 20+% GDP growth, something which can (and will) NEVER happen in a high-rate baseball field.

The Angry Crowd

Thus, the only way to “grow,” and the only way to save Uncle Sam’s unloved bond market, is via liquidity, and that liquidity ain’t coming from GDP, tax receipts or 20% economic growth.

Nope.

It’s gonna come from a Fed mouse-clicker. Trillions of fiat Dollars—and that folks, IS gonna be inflationary, and it’s gonna crush the guy on the street, farm or high-school coaching staff.

In short, Powell’s fight against inflation is just in the 3^rd inning.

In the end, inflation and negative real rates are the only pitchers/options left in Powell’s weak bullpen (short of a deflationary depression), which means, alas, he won’t be winning this game in the 9^th inning.

Of course, such baseball metaphors, math, policy and inflation/deflation cycles aren’t easy to time with precision nor be understood with fancy Wall Street lingo by every Jane or Joe on Main Street.

Afterall, not everyone has the time or luxury to debate monetary policy (or baseball memories) when they are just struggling to make a car payment or fill their gas tanks (and those prices are going to go higher) as the BLS fudges the math on inflation data or the NBER tweaks its comical (and lagging) recession indicatorfor political rather than transparency motives.

But whether one be carrying a baseball bat or a guitar, it’s becoming clear from Farmville Virginia to Stevensville Michigan that something is “broken in the force.”

As distrust of a weaponized media, Dollar and justice system collides with politicized science and rigged markets, Americans are steadily losing faith in the so-called “experts.”

Toward this end, I won’t be the first nor the last to remind readers of the recent viral sensation, and Virginia guitar-picker, Oliver Anthony.

He recently opened his new American anthem by declaring “it’s a damn shame” that he’s “been working overtime-hours for bull-sh— pay” in a new world where “your dollar aint sh– and taxed to no end,” while the rich men North of Richmond “just want total control.”

Sound familiar?

Strike a cord?

More times than not, a baseball or a guitar can say more than a financial blog.

This debt game is going to end badly. They ALWAYS do.

PS: I love Richmond.

Debt, Currency Debasement, Inflation & War—History Repeating Itself

In this latest conversation with Tom Bodrovics of Palisades Gold Radio, Matterhorn Asset Management partner, Matthew Piepenburg, offers his latest assessments on the American economic and political decline.

Piepenburg opens with a sober critique of the slow-drip toward increasing but now undeniable centralization in American markets and society. The net result is an ephemeral yet tragic demise of both classic capitalism and true democracy. 

Instead, what Piepenburg sees now and ahead are more signs of a dystopian form of modern feudalism in which a political and financial minority operate behind a façade of liberalism as lords over a middle-class falling deeper into politically ignored serfdom. He unpacks the open marriage between corporate and governmental powers (weaponized/corporatized  media, science, justice system, markets, banking, currencies etc.) which more resemble Mussolini’s definition of fascism than the democratic ideals of America’s founding fathers.

Not surprisingly, the foregoing theme of centralization incudes the frog-boil toward more regional bank failures, the duplicity of the Davos crowd and the Trojan horse of CBDC, which Piepenburg describes as “horrifying.” Ultimately, Piepenburg sees an ironic yet undeniably cornered Fed whose alleged war against inflation will only create more inflation. Powell’s “higher-for-longer” policy to fight the CPI is only making Uncle Sam’s grotesque debt levels grow equally “higher for longer.” As a result, more mouse-click money will be needed to monetize this embarrassing bar tab, which by definition, means more inflation and hence currency debasement ahead—all of which is bad for America but good for gold.

Piepenburg dives deeper into current market distortions (over-pricing), including various examples of ignored risks (needles) pointing at the global and national debt balloon. Toward this end, he links ignored risks in the Japanese markets (the “carry trade”) to equally ignored risks in the ticking time-bomb that is the US (and global) credit markets. He also squarely addresses the ongoing recession narrative and beleaguered US labor markets with sober facts.

The conversation closes with an equally sober (i.e., non-hyped) analysis of the BRICS headlines regarding a potential gold-backed trading currency. Although Piepenburg was among the first to warn of watershed de-dollarization trends last year, he does not see a gold-backed trading currency suddenly emerging from the BRICS conference this month in South Africa. Ultimately, the trend away from the USD is now inevitable, but the process will be slow at first and then all at once. Piepenburg is also keeping a careful eye on Saudi Arabia and the Petrodollar as another risk hiding in plain sight.