The global financial system is cracking—and few people understand just how fragile it really is. In this episode, Alasdair Macleod returns to expose the truth behind the dollar’s decline, the unstoppable expansion of credit, and the quiet accumulation of gold by BRICS nations preparing for a post-dollar world.
We dive deep into why gold is not just a hedge—but the foundation of final settlement—and why the current system, backed by $130 trillion in unpayable obligations, is already showing signs of collapse. Alasdair explains how credit bubbles form, why central banks are trapped, and how fiat currencies inevitably self-destruct under the weight of their own promises.
This isn’t about fear. It’s about understanding the monetary reality most investors are ignoring. If you own dollars, stocks, bonds, or even real estate, this conversation will change how you think about risk, value, and what comes next.
Watch the full episode and learn how to position yourself before the system breaks.
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Transcript
Monetary Metals:
Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein with Monetary Metals. I’m joined by our good friend Alasdair Macleod, longtime stockbroker, gold expert, and sub stack author of macleodfinance.com. Alasdair, welcome back to the show.
Alasdair Macleod:
Thank you for having me, Ben.
Monetary Metals:
Alasdair, a lot has been happening in the markets, especially in the gold market. But I want to start with gold. Obviously, we’ve been touching near the 3700 mark. The rate cuts happened yesterday from the Fed. Do you see this as an important Is this an important shift in policy where the Fed has said, Hey, we’re going back towards lower rates, and this matters for gold prices, or is this just a blip in a longer trend?
Alasdair Macleod:
Well, it is an important shift. Of that, there is no doubt. Really from two aspects. Firstly, we see the political influence beginning to affect the Fed. Secondly, they are abandoning the inflation target. I’m not necessarily saying that managing interest rates is the way to manage an inflation target, but they’re now looking at, I think the excuse, really, is to try and maintain full employment.
So there is a fundamental shift and it’s taking just a week or two, I think, for markets to settle down. I mean, this was telegraphed with Jackson Hole, so this isn’t huge news. And the Fed has had this ambition to try and reduce rates over time. But with inflation still above target, and if you look at what’s going on with commodities and all the rest of it, inflation is going to rise just purely from that end.
And that is without the input of a weaker dollar, which again is, it’s not Fed policy, it’s Stephen Miran’s policy as a member of the FOMC, and it’s also, more importantly, President Trump’s policy. He wants to see a lower dollar.
Monetary Metals:
I want you to touch more on that. So a lot of people have said, Well, Trump has come out specifically saying he wants a lower dollar. So for those who don’t know as much about this, what does it mean to have a lower dollar?
What does that mean for the economy at home, the economy abroad, and for gold owners? What does it mean when they hear a lower dollar?
Alasdair Macleod:
Well, I think what President Trump, the way he sees it is the lower dollar will boost US exports, and particularly of manufactured goods. So that’s part of his bringing in policies to restrict sales of foreign-made produce into the US market by means of tariffs. And of course, the other side of it is, if you lower the dollar, then against other currencies, then everyone’s going to rush out and buy American Chevroletes and stuff.
I mean, it’s actually a lot… It’s not so simple as that. It really is not. But that, I think, basically is the way in which President Trump looks at it, and presumably, his advisors go along with it, probably against their better judgment in some cases.
Monetary Metals:
And for people hearing about this lower dollar and this strategy between tariffs and monetary policy, Is this all part of one larger or broader plan where the administration has all of these plans in mind and all of them have to work out for the entire plan to work? Or are these individual things that happen, like lower rates or a lower dollar, different policies that when they come together as a whole, have a certain effect?
Is there a 4D chess happening here where the administration is working to do something, or is it a series of blunders that all fit together?
Alasdair Macleod:
I think to put your question another way, is this organized or is it a mess? I’ve been climbed towards the latter, really, because the idea of a policy of lowering the dollar, and that’s going to automatically lead to this, that, and the other thing is completely brainless. It really is. So on that basis, I have to say that the wonderful American administration, I think, has rather lost the plot. I mean, the other thing, which to my mind is actually the big, big danger, is that everything is in a credit bubble.
And if you don’t appreciate that it’s a credit bubble, just look at the debt, debt bubble. Debt bubble equals credit bubble. And the credit bubble has been angled at puffing up asset values, which is why the S&P is, what, 6,600 change. Why it’s risen, really, over the last two years from around about four and a half thousand or less to the current level. I mean, this is scary bubble stuff.
And if you bring about policies which, one way or another, lead to higher bond yields, which is the consequence of a weaker dollar, quite simply, country, then you’re going to pop that bubble.
And foreigners are very much invested in US equities. I mean, according to the Treasury Tick figures, they’ve got 15. 5 to 16 trillion invested in equities. The dollar starts tanking. What are they going to do? They’re going to come out or try to.
So I think things are actually pretty precariously balanced. And the idea of policies to try and manage things and bring about, let’s say, a lower dollar or lower interest rates or both, I think is actually a lot more dangerous than most people think.
Monetary Metals:
Alasdair, so far we’ve seen from the administration attempts to manage trade policies rather than a more free trade approach where countries can trade with each other with few barriers. There have been lots of tariffs.
There’s been other non-trade barriers. And there’s been this attempt to use a big stick of tariffs to push our friends and our enemies into a better relationship with the United States. Do you think that that could create a backlash with the rest of the world where they say, Listen, this administration, whether you like them or not, are way too erratic to deal with.
Therefore, we’re going to deal with other trading partners. Do you see this backlash as something that is likely to happen? And if so, is there a danger to the US economy and to the US dollar as more people say, Listen, we don’t want to play with these guys?
Alasdair Macleod:
Well, the backlash is already happening. I think the clearest example of this is what’s happened with India. India was threatened with tariffs ostensibly because it’s been processing Russian oil. And then, allegedly, people who meant to know about these things say that when President Trump tried to back down, call President Modi and have a conversation with him, President Modi refused to pick up four times. And the following week, guess where he was?
He was in China, hugging and kissing his Chinese enemy and his longtime old friend, Putin. The point is that if you put India and China together, you’re talking about two 8. 8 billion people out of a total on the planet of, what, seven and a half? I mean, that is a major defection. And it’s not just that. This has been going on for some considerable time.
And we’re now in a situation where the rest of the world, outside us, Europeans, maybe, see really America as someone you don’t really want to get too close to. Is it not good news? And this is really the driving force behind the Shanghai Corporation Organization and BRICs, and they’re wanting to do away the dollar.
And I think people will be surprised how quickly that happens now. Everybody says, well, of course, everything’s priced in dollars and everybody trades in dollars. And despite all China’s moves over the last 10 years, it’s gone down from a figure to another figure, and that’s a very slow thing. It’s going to take decades. Yeah, no, it won’t for the very simple reason that we now see that China is actually putting together Bretton Woods version 2 based on the Yuan.
And that is a fascinating development. And as more and more countries move in to that arrangement, I don’t mean tying their currencies to the UN or to gold, but using gold-backed UN for trade settlement purposes. That’s really what’s going to kill the dollar. I mean, it’s just going to drive the dollar out. I mean, I’m sure that markets will still price things in dollars, but basically, they will buy dollars to buy things and then just get rid of the dollars. I mean, the dollars will go.
They won’t hang around as credit. So, yeah, I mean, I think you’re going to see a flood of dollars going home. And bearing in mind that the financial assets held by foreigners, dollars plus underlying assets.
You’re looking at about 40 trillion currently. That’s a hell of a lot. And on an economy of what? Around about 30 trillion. And on On top of that, you’ve got the offshore Euro dollar market, which is another further 10 trillion. And according to the Bank of International Settlements, there’s a further 80 plus trillion tied up in foreign currency settlements. A lot of that’s going to go.
So you’re going to see a flood of dollar credit going back into US economy. We’re looking at $130 trillion taking those three factors together, which is over four times the size of the US economy by GDP. How can America absorb it?
They can. If that really does drive the dollar down, then the Fed’s policy of reducing interest rates at the moment is going to look very, very foolish because a lower dollar means lower purchasing power, lower purchasing power, translated into something which most people can understand, means higher inflation. And that inflation could be significantly It’s technically higher, really higher, because of the dollar collapse.
Monetary Metals:
Alasdair, why do you think so far these countries who have been doing bilateral trade, whether it’s Russia and India or China and Saudi, why do you think they have not been settling trade in gold so far? There have been, of course, reports of India and Russia trading in Rupee, and then Russia having Rupee and going, I don’t really know what to do with this useless currency.
Why do you think so far there has been a seeming hesitation to net out balances in gold, which each country can trust because it’s not a political currency. It is not a centrally planned fiat currency. Why do you think so far there’s been a hesitation to net out balances between these countries in gold?
Alasdair Macleod:
Well, gold is not evenly held. The big repositories of gold are actually not on central bank balance sheets. They’re held in various government accounts, wealth funds, whatever, however you’re likely to define it. And they’re particularly concentrated on China and also Russia. So the idea that you can use gold as an international settlement currency, I mean, basically, most of the BRICS members don’t really have enough gold to do that. I think from China’s point of view, she has resisted going on a gold standard so far because she knows that if she went on to a gold standard, well, there are two things. If she went on to a gold standard, she would kill the dollar.
I mean, it would bring about the dollar’s demise, and that would be, if you like, a casus belli, which could even go nuclear. So she’s not going to do that. She’s only going to wait for America to make such a mess of her own currency that she can claim that she’s doing it for defensive purposes, if you see what I mean. The second thing is that while you’ve got this febrile situation of purchasing power of currencies going lower.
If she went on to a gold standard now, it would actually destroy quite a lot of her industry because of purely on a cost basis. So I think there’s the two reasons that she’s reluctant to do it. What she is doing, however, is replacing the cost basis, if you like, as the main influence on overseas market demand for Chinese products with technology. And the consumer technology is already way ahead of anything we’ve got in the West.
I mean, it’s quite remarkable the progress of the Chinese have made. And it’s all been done, really, by private industry in China. It’s really remarkable. And the government hasn’t stood in the way of it. So I think that in In a fairly short time, I mean, within a year or two or three, she would be in a position, I think, to weather a gold standard on her own currency. But I think the key to the timing is the dollar has got to be collapsing at such a rate that she needs to protect her Wuhan. But she’s been planning this for decades anyway. So this is no surprise.
Monetary Metals:
Do you think that the fact that China and Russia are two of the biggest powerhouses in terms of gold mining in the entire world. Do you think that comes into play here in terms of getting gold, owning gold, and putting that on the books in a way that isn’t public or isn’t publicly as available?
Do you think that the fact that China and Russia are these major powerhouses when it comes to mining gold, do you think that’s going to matter in the future?
Alasdair Macleod:
Well, yes, it does. It’s only part of the scene because And really, China introduced the legislation appointing the PBOC with total responsibility for managing the nation’s gold reserves back in 1983. And somewhere in my records, I’ve got the legislation translated into English. And it’s absolutely clear, basically, what the People’s Bank of China did from 1983, remembering the Gold topped out at about $850, one AM fix in London in 1981. So only two years later, China started accumulating gold in that huge, great bear market. Nobody knows where all the Gold went.
I mean, everybody was selling gold. And even the Chinese private banks were dumping gold in the latter part of the last century. Where did it all go? Well, it was all absorbed by China secretly. I mean, they weren’t bidding up for it or doing anything silly like that. They were just taking it in as it was offered on declining prices. And by 2002, she had obviously acquired enough gold hidden around various government accounts to permit the general public to buy gold.
Because until then, they were banned from owning gold. And that was the origin of the Shanghai Gold Exchange, which was set up by the People’s Bank and is controlled by the people’s bank.
And since then, delivered from the SGE vaults, around about 27,000 tons of gold. In fact, more, maybe 28. These are huge numbers. And China, at the same time, was encouraging gold mining. And as you point out, it’s now the largest, and has been for some years, the largest nation mine output. All the refining capability is government-owned, and they’ve taken in Dory from elsewhere. I mean, next door neighbors like Mongolia and so on, so forth, but also elsewhere. They’ve also taken in Silver Dory a lot, adding to their own domestic production.
They’re, I think, the second largest silver mining nation. And it’s It’s like a Hotel, California. It just doesn’t leave. Gold doesn’t go. So they’ve cornered the gold market. Let’s not mince words. They have cornered the gold market. And in the last few months, they’ve turned round and they’ve started international rationalizing it. They’ve said that foreign institutions can become members of the Futures Exchange, the Shanghai Futures Exchange, without having to set up Chinese subsidiaries.
And also they There are opening forts in Hong Kong, Saudi Arabia, and also there will be similar facilities elsewhere in Southeast Asia, in the other nations. Why?
Well, the answer is quite simple. You can deposit your gold and get paid out in Chinese Yuan, or the other way, you can deposit gold and get Chinese Taiwan, or alternatively take out gold and get Chinese. So in other words, it’s purely Chinese Taiwan. The dollar is nowhere in this at all. There will come a point where they can turn around and say, Right, This is the rate, now fixed. Bang.
That would be the new Breton Wood. I mean, individuals won’t be able to go along and submit Chinese Taiwan for gold, but governments will on their international trade, and that’s the whole point of it. So this is fascinating. And I think this development isn’t really being reported or analyzed properly in the West. But it is, as far as I can see, the basis of a new version of the Breton Wood system that existed from 1944 to 1971.
Monetary Metals:
All right, Alasdair, let me give you some thoughtful pushback. So some people will hear, Okay, well, for the citizens, they probably won’t be able to redeem their gold or their gold Yuan. So the citizens, they’re out, as usually happens in these types of schemes. But institutions might be able to exchange Yuan for gold and gold for Yuan and vice versa.
So the criticism might be, well, hey, isn’t this basically a structured product from China? It’s a structured product with Chinese characteristics basically saying, hey, here’s exposure to gold, but you also get exposure to Chinese politics the same way that a gold-backed product from the United United States isn’t just gold, it’s gold plus exposure to US politics.
So what do you think about the fact that people have to take this counter party risk with a government that has central planning, it has capital controls? What would make these institutions interested in a gold-backed or gold-linked Wuhan currency?
Alasdair Macleod:
Well, it worries us, obviously. The thought of us doing, Why should we deal with these guys? They’re not democratic, they’re not this, they’re not that. They’re nasties and the Uyghurs. I mean, we’ve got every reason not to do it. But that’s not the way the rest of the world thinks. The rest of the world has been exposed, dare I say, to American-inspired regime change, cutting off from Swift.
I mean, we could be cut off from, say, MasterCard, etc. And then everything has to hold. I think if you’re if you’re not European, if you’re not perhaps Japanese, there’s not necessarily the case in that instance. And certainly, if you’re not, if you’re American and so on, so forth, you would think I mean, if you’re not, sorry, if you’re not of that Western G7 cadre, really, you’re already going down the line of saying, Well, that’s fine.
I don’t mind. Because the key The difference between us and China is we tell people how to behave. We insist they behave, otherwise we sanction them. China doesn’t. China says, You’re a fair, you run your own country how you like. We might invest in your country, but these are the terms of our investment, which is fine.
They’ve been doing this with Africa, building railways and other communication, all really round about industrializing the lesser-developed world. And the lesser-developed world actually likes it, because apart from anything else, our approach to the LDCs is we give them money, we give the politicians a bit of money under the counter.
We say, Shut up. People are a bit fed up with this, and the politicians are no longer really impressed with this form of bribery. It’s very, very difficult to resist that form of bribery, but there is a resistance to it, particularly Particularly when you think in terms of the baggage that comes with it. Americans telling everybody, This is the way in which you must behave, et cetera. They don’t like it.
America is not popular outside the G7. It’s damn down popular. I think that’s the way the rest of the world looks at it.
And it’s very difficult to understand that when you’re so Anglo-saxon or Euro-centric.
Monetary Metals:
Alasdair, now I want to ask you if this were to happen where countries like China or Russia, or India decide, Hey, let’s start using a gold-backed or gold-linked product or currency. Is there a chance that the US and these other G7 nations, like France, like Germany, they decide to weaponize their own gold holdings, whether that’s through products of their own that are linked to gold, or whether that’s through selling gold or dumping gold?
How do you see the weaponization of gold happening from either end of these countries?
Alasdair Macleod:
Well, I think it’s game, set, match, basically. Well, let’s look at two instances. Let’s say they decide to introduce their own gold standards. Whoopey. Great. Lovely. Stabilize the whole thing. I think that’s extremely unlikely because they wouldn’t be in a position to keep things going for very long under a new gold standard. Not only that, but we’ve got economies who swear by the ability to deficit finance. So that’s not going to happen. Dumping gold?
Well, I think there’s no accounting for the stupidity of our political class. But if they did that, China would say, Thank you very much They take it. They get rid of some more dollars on the way. So would everybody else. It really is game, set, and match. We are in terminal decline. We’re looking at the end of the fiat currency system. The only thing we don’t know at this stage is how long it will take.
Monetary Metals:
Alasdair, why do you think it has taken longer for members of the retail and the private investment community to look at this gold narrative or investigate where they see gold as part of their portfolios compared to central banks and other governments who have been supposedly and reportedly, buying massive amounts of gold?
Why do you think there is such a change such a difference, such a delta between the private investment community and the public central banks?
Alasdair Macleod:
Well, it’s quite normal in any investment scenario. The insiders get there first and the public buy at the top. It’s as simple as that. I mean, portfolio ownership of gold is less than half a % of the total. I mean, we’re talking about something like $300 trillion worth of financial assets in portfolios. There is a little bit of investment in ETFs, but there’s not that much. And as far as the investment community is concerned, gold is not a regulated investment.
So nobody has been talking about the merits of gold. And not only that, but nobody in the investment community actually understands gold. They don’t know what it is. They have some… It varies on one extreme from this is a pet rock, a no longer part of the monetary system It’s absolute rubbish, so forget it. That’s one extreme. The other extreme is, well, it’s always been, if you like, the go-to investment, when things are a bit too risky and all the rest of it. And it seems to give you some…
But they don’t understand that the point about gold is that by law, and by everybody’s common law, it is final settlement without counter-party risk.
Everything else is credit. Where you got a counterparty is credit. So you might think, Ben, when somebody’s done some work on your house and you’ve paid them, that’s the end of the matter. In terms of credit, no, it’s not, because you pay them out of your bank account.
So what you’re doing is you’re transferring a liability which your bank has to you to someone else with maybe another bank taking it on. Yeah? And when you look at the currency, again, that is not final settlement. That is credit. Why? Because it appears on a central bank’s balance sheet in the liability column. It has to be backed by assets on the other side of the balance sheet. It’s a liability.
The test is, is there a debt on the other side of it? The answer is always. You never use gold for transactions. The role of gold is that final settlement. And if we ever get to the stage where we’re looking at final settlement, then the whole economy is just gone completely under. This is the important point. The way in which a gold standard works is it secures the value of the credit. If you like, the currency becomes a gold substitute.
That’s desperately important to appreciate that that is, if you like, the proper relationship between credit and physical money. Physical money in itself is a form of credit because it is the result of the storage of people’s labor, which is as yet unspent. But I think the easiest way to define this is the way in which John Pierrepont Morgan defined it back in, was it 1912, before Congress. Gold is money and all the rest is credit, or all else is credit. And It’s actually as simple as that.
And people who think that ownership of financial assets is somehow not credit are actually mistaken. I mean, a physical property, like a building, sure. But what determines the value of a building? Well, the ability to finance it. It all depends on credit. And when it comes to equities, they’re all credit. Because when you buy an equity, what you’re doing is you’re buying a promise from the management to supply you with an income stream or to accumulate an income stream on your behalf in the company’s books.
So it’s still a promise, a promise which may or may not be kept. So everything in the economy is credit.
So when you see the relationship between gold and credit altering, it’s actually extremely important. It’s an extremely important signal about what’s happening to the credit. Because the gold bit basically doesn’t alter. Okay, it does alter a little bit. But in these circumstances, when you see, for example, from 1971, when we went to our Bretton Woods, $35 an ounce,
We’re now over $3,500 an ounce, which basically tells us that the relationship between gold and credit, dollar credit, is dollar credit has lost more than 99% of its value, more than 99% % of its value over 54 years. And that rate is now accelerating.
Monetary Metals:
Yeah. And one way I try to help people visualize this metaphor is that if you live in a country like Venezuela and you have a house, and you have a bar of gold, and all of a sudden And four years later, you realize, oh, my goodness, in bolivars, I’m now a millionaire. Well, is it really true that you are now a millionaire? No. What happened is that the currency became much weaker.
There was more credit than there were physical assets. And that goes for gold, it goes for houses without mortgages, things like that. And so do you think there’s going to be a shift into these more physical goods away from things like crypto and AI and these structured products where people can’t tell who’s the counterparty and where the credit is coming from, that people just want to buy local. They want to have a house of real estate in their country.
They want to have a gold bar that they can keep at home. They want physical assets. Do you think there’s going to be a shift back towards these real assets and away from these more credit type assets?
Alasdair Macleod:
Well, there will be, and it’ll probably happen more on a value basis. I can see an awful lot of credit, particularly in the financial sector, just losing its value. Currency itself loses its value. I mean, the thing about credit is that unless someone actually goes bust, it doesn’t get wiped out. So on that basis, when you get a credit crisis, then the crisis is manifest in the value of the credit collapsing rather than the quantity of the credit collapsing. And that’s an important point.
So obviously, if you get a situation where the financial sector, the value of credit and financial sector diminishes, then there is going to be, if you like, a shift in terms of asset values. Real things. I mean, you’ll find, well, when it comes to real things, consumer items, particularly food, things like that, the prices, obviously, will reflect a contraction in supply in extremis because what happens is that farmers won’t export their product into the cities, because Nobody can afford to pay them.
I mean, I’m looking at, if you like, the end game. And that’s when you get what the Austrian economy is called the crack-up boom. And in Germany, in 1923, after the the Reichsmark had lost an enormous amount of its purchasing power.
It was only then that people actually understood that it was a currency going down and not prices rising. And of course, as soon as they to realize that, then they get rid of the currency as quickly as they can. And you had this dichotomy that the printing presses couldn’t keep up with the demand for the currency because people were taking money out of the banks, or they were taking their deposits out of the banks in order to go buy anything, barrel loads of notes for loaves of bread and all the rest of it.
And one of my favorite anecdotes about that period, which I think puts the whole of the property thing into context, is that towards the death in 1923, you could buy a house, a big six bedroom house, swanky part of Berlin for $100, $100 at the time, being slightly less than five ounces of gold at 20. 67. And that’s what happens. You find that the rentals on property become valueless because you don’t adjust the rental along with the retail price index, moment to moment to moment, or whatever other index you might use, or the gold price or something.
No, every quarter is usually the minimum, sorry, the maximum opportunity to adjust it. And the other problem is that the cost of maintaining property exceeds the value of the property. It’s not good. And even productive property like farms and so on and so forth, their value goes down, priced in gold or valued in gold. So much so that you find that the people who own them are in such distress. They have to sell them. They’re forced citizens, just to survive.
So in Germany, you had lots and lots of, if you like, upper middle class estates and so on and so forth, which were just sold out for peanuts to the inflation kings, people like Hugo Stinners, who, at one stage, was reckoned to own about a quarter of all the assets in Germany. He was making his money basically by manufacturing in Germany and exporting and getting paid in gold-backed dollars.
And he was encouraging an accelerating rate of inflation. He was telling the central bank, the Reichsbank, Come on, you’ve got to… This is good for the economy. And people like Fritz Thiesen as well as a name which exists still to this day.
I think Hugo Steen is, I mean, one of the few companies that he founded, which remains as RWE, the big German conglomerate. He died actually in ’24, so he didn’t live for very long to see his mega, mega, mega riches. Mega riches that would make Elon Musk look pretty poor, relatively.
Monetary Metals:
Do you see this transfer of wealth from people who understand understand gold, understand how its relation to other currencies or other asset works. Do you think an example like Argentina, where their currency was inflated away, where prices went through the roof, people weren’t maintaining the rental properties like you mentioned, there was all these issues.
Do you think that other countries need to get to this low point before they decide to take austerity measures, before they decide to look at other options? Do you think it needs to get as bad as Argentina for us to change, or do you think there’s other options and other ways out of this mess that we’re in?
Alasdair Macleod:
I mean, your question basically is, at what point would the electorate support a politician who actually really address the problems in the sense in which we’re describing them? And at the moment, it’s almost impossible to see where that’s going to come from. So my default position on this is, if you like, the Argentinian one, insofar as it’s crisis, crisis, crisis first, and then solution, second. And I’m not sure that the solution is not necessarily going to be the right one when the time comes.
I mean, Milei is already having difficulties, from what I can understand, because perhaps, I mean, okay, he got very good electoral backing to do what he did originally. But at the moment, I just get the sense that the Argentinian public is saying, oh, whoa, whoa, hold on a minute. We didn’t expect this thing. So even though he’s made huge, huge progress, I think you’ve really got to have an absolute crisis.
I mean, a really big crisis before everybody thinks, oh, my God, The problem is, and this was something that was highlighted very effectively by Hayek in his road to serfdom, when you get a crisis like this, such as we’re describing, the solution comes out of it.
Again, it’s driven by politics. You get everybody saying, they’ve seen weak leadership, which actually is what they elected and what they wanted. It’s the electorate’s fault in that sense. But then people start saying, We need a strong leader. We need a strong leader to deal with this, et cetera, et cetera. And of course, they got Hitler. And we got a second World War out of that one. I mean, thank goodness that you had, if you like, sense. You had Erhard, who was the economy minister after the Second World War, who actually turned the whole thing round and formed the, if you like, the foundation of German recovery.
It could have gone the other way again. I mean, it really could. So this is something I don’t think coming out of this, I don’t think we’re going to get a solution at whatever state age. And then the problems will be over. We’ve learned the lesson, and we’re all going to live happily ever after. I don’t think so. I don’t think so. And I would not make light of the problems that individuals will face in a currency collapse. I mean, we’re talking about real starvation.
We’re talking about our families who don’t understand, even though I explain to friends and colleagues and close family, Yeah, they don’t really believe me. They don’t believe this. It’s a huge, huge, great problem, and we’ve all got to face this down the line.
I just hope that some of us, enough of us, understand this to the point whereby we can actually make a difference for our own families and communities. But this is really the whole point of my sub stack. I’m trying to educate people about this, and I’m sure that as things progress, they will understand it more and more, get the message and so on. That’s my hope anyway.
Monetary Metals:
Alasdair, as we come towards the end of our interview, I want to do a rapid fire round with you. So I’ll just ask you questions from all over the track, all over the sphere, and you can answer as quickly as you like or as long as you’d like. So to start, let’s talk about silver.
Do you still see silver as a monetary metal, or do you just see it a way getting exposure to gold at a cheaper price? Where do you see silver in today’s economy?
Alasdair Macleod:
It is, regardless of monetary metal, the difference is central banks don’t. Accumulated as a monetary metal, but there is no doubt that in a world where gold is the standard, a lower value coin actually does make a lot of sense. To put that into context, under the British gold standard, which ran from about 1820, ’20-ish to the first World War, silver was legal tender in up to 40 shillings, which is £2. Now £2 doesn’t sound a lot, but when you bear in mind that a pound was exchangeable at the user’s option, for one sovereign. And the sovereign today is £650.
Really, we’re talking about it being in today’s values, if you like, currency for legal tender for over £1,000. So it does have this role. And not only that, but as an industrial metal, it is in short supply. I also see base metals rising because of the rest of the world Gold, which we don’t seem to appreciate, is going to be rapidly industrializing under China, stroke Russia.
So, yeah, I think the price is going to rise. And I think, as to your point, as to where people will buy it as a way in, yes, of course, because everybody’s missed it.
They’re thinking the gold price is rising when, in fact, this currency is going down. But if they look at it as an investment. When something’s rising, you’ve got to get in, haven’t you? Sort of thing. That’s as that is, if you like, the depth of the logic.
Okay, how are we going to go? I mean, we missed it now. It’s 3,700, whatever. Perhaps we ought to buy silver as a cheap way in. So I can see that logic happening, and it could drive drive silver up very rapidly because the liquidity in the market…
I mean, the vaults have got a lot of silver in them, but it’s all spoken for. And I think the actual liquidity is very, very limited. So I think it could… I think silver could run very quickly. And I see the Gold Silver Ratio falling certainly to 50, and I think also, almost certainly, below.
Monetary Metals:
All right, Alasdair. Next one for you. I want to ask about energy security. Do you think there will be a time where this could be more important than even things like monetary policy because countries will say, We’re self-sufficient.
We have a nuclear reactor, we have a solar farm. We don’t need oil from these other countries. We’re self-sufficient, and therefore, getting rid of another currency that we don’t want or not linking as much with geopolitical enemies is not as necessary.
Do you think this energy security is going to matter more in the future?
Alasdair Macleod:
Well, I think it will, but not relative to monetary security. They It’s two completely different things. I mean, the world is hell-bent on this ridiculous situation of trying to do away with fossil fuels. It’ll just drive the economy into economic collapse because there will not be the energy available. I mean, our government is, under the Energy Secretary, is mad.
It’s the only way to describe it, because they’re trying to electrify everything, including transport. And to do away with the internal combustion engine. All that will happen is they just destroy the economy. Something like 95 to 98 % of logistics is diesel-driven. How are you What are you going to replace that? Oh, just do away the logistics. Oh, great. I mean, honestly, it is nuts beyond reason. Energy security is extremely important So is water security.
So we’re looking at monetary security, or if you like, the security value and credit. We’re looking at energy security and we’re looking at water. These things are essential. On top of that, you’ve got food. That is also essential. So we do have these different essentials, and I’m afraid at the moment, our governments just don’t seem to appreciate the importance of it.
Monetary Metals:
Next question for you. I want to ask about these demographic shifts we’ve been seeing. A lot of people have been pointing and saying there’s birth rates below replacement in many of these G7 countries. China, of course, has its own demographic issues.
How do you see these demographic issues concerning the economy? Is there going to be more welfare needed, more health care spending? How do you see these demographic issues playing out?
Alasdair Macleod:
Well, they’re very negative as far as our Western economies, our welfare-driven economies are concerned, because the basis welfare is that it’s only affordable so long as the population increases, so long as you get more taxpayers coming in to shoulder the burden, if you like, of the retirees. And not only that, but you’ve got longevity and all the rest of it is added to the problem. Ben, it is a huge, huge problem, and it is part of our demise. The welfare model is basically broken and it’s irreparable.
The only way of it is just government to back off and to tell their populations, Look, you run your own bloody affairs. Don’t turn to the government and expect us to run things for you. But the whole culture is so against that. I mean, the government regulates everything. It’s phenomenal the amount of regulations there are. In this country, we have things which were called QANGOs.
Now, QANGOS stands for quasi-autonomous, non-government organization. In other words, it is something which is part of government, which has been parceled out. We got 14,000 of these things. Would you believe? Regulating everything in the economy. All that’s got to go.
This is all part of the welfare system. You got to change the relationship between government and people back to where it was in the 19th century. Government knew that it couldn’t get involved in the economy. You don’t manage the economy. You get booms and busts.
The best thing you can do is just stand back and let it all happen. And so in the past, when you had booms and busts, the busts were pretty quick. The reason that 1930s lasted as long as it did in terms of depression was because of government intervention. But the Keynesians, in particular, took the view, well, the problem was we didn’t manage things well enough. In other words, we got to interfere even more. And by monetary means, by whatever, whatever.
The whole of the welfare state model basically is bankrupt. It is de facto, or rather, sorry. I mean, the only way in which this bankruptcy has been deferred is through the depreciation of these paper currencies. Of course, that’s another thing. When we go back to gold standards, you kiss goodbye to the welfare state system. Just doesn’t work.
Monetary Metals:
Alasdair, now I want to ask you about maybe an overrated or an underrated country that could be a new model or a shining light or a good example for the rest of the world. Obviously, we’ve discussed Argentina, we’ve discussed China, maybe a country like Dubai that is light on regulation, hoping that people expand and grow their economy.
What are some countries that you think are overrated and ones that we should not be following in their footsteps? And then maybe some countries that are maybe underrated, that we should be following them and seeing their progress in the following years?
Alasdair Macleod:
Well, I think overrated, you can have pretty much all of Europe. Switzerland, probably a little bit of an exception. Small countries do Hong Kong, Singapore, the island states, and you said Dubai as well. And I would say also some of the other crucial states, possibly. Uruguay, I think if somebody He’s mentioned to me. It’s pretty good. It’s a long way away from anywhere, as far as I’m concerned anyway.
So, yeah, there are these countries, but I’ll give you one which will probably shock you. Russia. Why? I’ll tell you why. Income tax. The rate of income tax is 13 % flat rate. If you’re really coining it in, you might pay 15 %. Corporation tax is about the same as here, what, 20 or %? Government debt to GDP, in spite of the war, you may not believe this, 20 %. I mean, the snag is, don’t get involved with politics.
There is also a Mafia problem. But I mean, people in America have been used to that one. In a sense, I know that people think this is so left field as to be ridiculous, but those are the numbers. These are the numbers. And the situation in China China is similar in the sense that as long as you keep your nose out of politics, you’re okay.
As long as you don’t bribe officials and so on and so forth, interact with officials, perhaps not quite in the way in which you should, arm’s length and so on. You’re going to have problems. I think this is what happened to Jack Ma.
He disappeared for a while. So he was reeducated, let’s put it that way. We don’t like the The intrusion, the control. I know Chinese families in this country, and they don’t talk politics at all. They suspect that every move someone’s going to report on them, or they’re bugged, or it’s literally that bad. So you would have to live with that.
But I don’t think it’s quite as bad as that in Russia. But this is fascinating. I mean, In theory, Russia is considerably freer for someone trying to make a living than anywhere in the West. You don’t have all these stupid regulations. I mean, the bureaucracy in Russia is bad. It is. But you don’t necessarily come up against it.
Monetary Metals:
Very, very interesting. Alasdair, I want to ask you as our final question, what’s a question I should be asking all future guests of the Gold Exchange podcast? Podcast.
Alasdair Macleod:
You ought to ask them, why is it that gold is regarded as the go-to place, if you like, for final settlement.
Monetary Metals:
Alasdair, let me turn it around and ask you.
Alasdair Macleod:
Okay, I’m going to feed you the answer, and I bet you none of your guys will understand this or would know it. It goes back to Roman law. The first law that really determined the difference between final settlement and deferred settlement were the 12 tables. It was the first law of 448 BC. At about that time, they introduced a coin, which was your final settlement.
And the coin was called an ICE, A-E-S. And it represented about a pound of of bronze. Gold came in later. I mean, it evolved into gold. So that was the beginning of it. And then for about six or 700 years later, various jurors began to really flesh this out and rule sensibly what the difference was between final settlement and also credit, and what value was attached to credit. There were three jurors doing this. The first was Gaias, the second was Alpian, and the third was Paulus.
Gaias took a slightly different view from Alpian and Paulus. What Gaias said was that in order to transfer an obligation, a debt, from one person to another, you should seek the agreement of the debtor. Alpian and Paulus, however, took a different view, and that is that it could be transferred without the debtors’ agreement.
Now, that’s the whole basis of everything. If you think about it, you go into the market and you buy government debt, you don’t have to go to the government and say, Do I have permission? I mean, there was the time in Common Law in England when we went with Gius. The reason for that was that the whole thing was finalized in Justinians’ Pandex, which were 500 in 50-ish AD.
Now, we had left the Roman Empire before then, so we were stuck with Gius in our Common Law, which meant that you could transfer a debt, but It had to be counter-signed the whole way through by all the transferries, which was crazy, crazy, crazy. That went, that went. It was still in our Common Law until about 1873, when we merged the Court of the Exchequer and Common Law.
This is getting a bit too technical for you, I suppose, but the point is that everybody now accepts that a debt can be transferred. And if ever you’ve been in the unfortunate position of not being able to pay your credit card card, you will find that eventually your bank sells that debt onto a debt collection agency at, say, 10 cents in the dollar or whatever.
And then they come gunning for you. So even unquoted debt can be transferred, like freely transferred. And that’s in all our laws. It’s the basis of everything, absolutely everything.
Monetary Metals:
Alasdair- If you can get some of your guests to go through that one convincingly, I think you should be very, very impressed. Alasdair, I think you are the only guest who could end on such an incredible note.
Alasdair, where can people find more you, more of your work, and more of your thoughts?
Alasdair Macleod:
Yeah, maccleodfinance.com gets me to my substack channel, and I write exclusively for that. Some people republish a little bit of what I do, but you really want to get the up to date stuff. I write about geopolitics, about economics. I write about money and credit, always trying to educate people about money and credit. I think it was Keynes who was quoting Stalin. No, not Stalin. Quoting Stalin, I think, who said that not one man in a million understands money.
And that is actually very, very true. Even economists, even economists don’t actually understand it, believe it or not. And I also write about precious metals, about the markets. I do a market report every Friday, which really slightly different from ordinary precious metal market reports,
Because I try to look ahead to the fundamental factors which might influence things, let’s say, in the foreseeable future. And I have at least one article on economics or geopolitics every week as well. So I would encourage anyone who really is interested in this to take a look.
Monetary Metals:
Alasdair, fascinating. As always, please make sure to check out his substack. There will be a link in the description. Alasdair, thank you so much.
Alasdair Macleod:
Thank you very much, Ben.
