There’s No “Optimizing” an Unspoken Debt Nightmare

By Matthew Piepenburg

Partner

November 7, 2024

In this pre-US-election interview, VON GREYERZ Partner, Matthew Piepenburg, joins Jeremy Szafron of Kitco News to address the many ignored “elephants” in the room regarding recession indicators, sovereign debt levels, credit market deterioration, increasingly obvious fiat currency risk and the longer-term direction of precious metal markets. Piepenburg cites the equally ignored insights of veteran economists and market legends to remind viewers that, at some point, the “science” of economics lacks the skills and tools to “optimize” what is otherwise a lose-lose scenario of now unsustainable and irrational global debt levels.

Piepenburg bluntly lays out his consistent case for both a current and pending “hard landing” on Main Street despite a ripping equities market on Wall Street. Furthermore, the global liquidity crisis facing US markets and businesses can be seen in other economies, from Germany to China. This makes modern risk complexity far more untamable (and dangerous) than prior market and business cycle risks and so-called “solutions,” including the GFC of 2008. “As the facts get worse,” Piepenburg says, “my opinions get more stubborn.”

For example, the Fed’s recent rate cuts are a clear sign of a worried rather than confident central bank and a clear sign of a debt-stressed rather than economically robust US—a fact that politicians of all stripes refuse to openly acknowledge. In the end, and regardless of who sits in the White House or Congress, fiscal largesse (and hence a deflation to inflation endgame) is inevitable in the coming years to fulfil campaign promises for which US GDP and tax receipts are insufficient to cover.

For Piepenburg, the facts on the ground and the realities on the horizon make it all-too-clear that debt-soaked sovereigns like the US will do what all debt-soaked nations have done throughout history: Sacrifice their currency to sustain their broke(n) debt/bond markets. This template, of course, is a historical tailwind for gold and explains the all-time highs the metal enjoyed in 2024 and the years to come. Toward this end, Piepenburg reminds us that gold is not enjoying a bull market; instead, fiat money is suffering an openly ignored bear market.

As for the USD in particular, the ongoing (yet still media and politically ignored) reality of de-dollarization is a theme that Piepenburg objectively lays out, the ripple effects of which (from energy markets to gold exchanges) are sadly and largely misunderstood by many. That is large swaths of investors still harbour the illusion of deficits without tears or a world reserve currency that is somehow immune from the simple math of debt and ignores the history of currency debasement.