The Tragic Ripple Effects of Historically Unsustainable Debt

By Matthew Piepenburg

Partner

April 17, 2024

VON GREYERZ partner, Matthew Piepenburg, joins John Buttler (Southbank Research) and David Lin in a spirited discussion on the omni-present yet undeniably important theme of the USD and its historical implications for rising gold.

Understanding gold tailwinds requires an understanding of debt forces and their impact on fiat currencies in general and the USD in particular. Toward that end, Piepenburg opens with a high-level (yet fact-focused) assessment on the current and unprecedented debt crisis in the land of the world reserve currency. Piepenburg unpacks how such debt crises impact a broad range of market themes—from risk assets, rate policies, recessionary forces, inflation cycles and precious metals.

When asked about the time horizon for such events to unfold, Piepenburg argues that the process has already begun. He gives example after example of real-time signals of a USD in open distrust and hence open decline. David asks if and how sovereign deficits impact stock markets. Piepenburg and Buttler address this question in divergent ways, but both agree that even a Fed-supported market rising in a background of cancerous debt levels can only be “maintained” at the expense of a debased and terminally ill (Fed-printed) currency. Piepenburg and Buttler then address the causes, risks and opportunities in a rising equity market bubble.

David asks why the USA has yet to experience hyperinflation, to which Piepenburg and Buttler share their opinions. For Piepenburg, the inflationary end-game is a matter of cycling through dis-inflationary interest rate and recessionary cycles, which will be followed by highly inflationary direct and indirect QE policies out of DC. In this light, the conversation turns to current and projected Fed policies, record UST issuance, long-term interest rate direction and the hard math behind real rather than reported inflation.

All themes, of course, lead to gold and the conversation ends with a review of all the forces–from the oil markets, de-dollarization trends among the BRICS+ nations to COMEX changes and a debt-trapped/cornered US Fed–which point toward an inherently weaker USD. This all explains the current gold rise and a much greater to rise to come.