David Morgan, author of The Morgan Report, joins the podcast to share his insights on gold, silver, and the broader monetary system. He discusses the potential for the gold-to-silver ratio to move back toward historical norms, and examines how the ongoing war on cash may impact precious metals investors.
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Transcript
Monetary Metals:
Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein. I’m joined by our old friend David Morgan. David is the author and publisher of the Morgan Report and one of the best minds in the world when it comes to the monetary metals, in my humble opinion. David, welcome back to the show.
David Morgan:
Ben, thank you for having me back.
Monetary Metals:
David, I want to start off a broad overview. So there’s been a debate between this higher for longer camp, which is saying, no, they think interest rates are going to fall, and then a higher longer for camp that says, no, we think interest rates are going to remain high. First of all, where do you sit in that camp of where you think interest rates are going to be heading in the next couple of months? Then how do you think that is going to affect the precious metals and gold and silver, more importantly? First of all, are you in a higher for longer camp? And second of all, where do you think that affects gold and silver going forward?
David Morgan:
I am in a higher for longer camp. It looks as if the most recent data, meaning the last few months, particularly the last auction, which wasn’t well received by participants, it’s starting to show that the true bond prices/interest rates are being determined by the market and not with a lot of pressure from the politicos. Perhaps it’s indicating that we’ve broken into more of a free market. Having said that, what does that mean? Well, everyone’s taught that high interest rates is bad for gold, and that is true if and only the real interest rate is above the true inflation rate. I’ll digress for a moment, Ben, but if you look at shadowstatus.com from my friend John Williams, and you see the inflation rate based on the 1980 metrics, which were far more fair than they are now, somewhere around 9%, which means if I had a 12% yield on a long bond, I would actually be making 3% above and beyond the true inflation rate. That’s really what happened in 1980. Now, does that mean that’s going to take place just because I said so? Of course not. But my point is we could go 5%, 6%, 7% in that in my belief, and still not really affect the gold price very much at all.
The last thing to make the point even stronger is the Exter’s pyramid. When you look at the liquidity squeeze that happens when you go from the least liquid to the most liquid asset, you go from the top, which is derivatives, which are mostly interest rate bets. And just because there’s a quadrillion or so known interest rate bets, doesn’t mean the counterparty party is absorbed for making good on that bet. And so that’s a real problem. As Warren Buffett said, derivatives are means of financial mass destruction. Coming down the pyramid, the most liquid, our gold, is what was at the pyramid Bottom or Tip with John Exter. Didn’t have silver in there. I would throw it in personally. That’s just an aside. But when you look at that pyramid, it never talks about what the interest rates are. All it is, is what do I trust the most? And when you’re losing trust in the value of a dollar in the next six weeks, that starts to affect thinking about buying a tea bill, or a note, 2-5 years, or a bond, beyond 10 years or so. And so if you don’t trust a dollar six months from now, why would you trust it six years from now?
And that’s what’s happening in the bond market. That’s a broad brush overview. So that’s how I look at it. I am in the camp that it’s going higher or longer, and And that we’re going to start forcing bond purchases. And I forecast this over a decade ago, Ben, that there be a time when your 401k or your IRA, or your Roth IRA, or your CEPRA, or all these Participations that US citizens could partake in will require, and I don’t know the number, 10% buying of US debt or 20% buying of US debt. If you don’t buy 20% spread out between the tenure or longer or whatever, across the spectrum, maybe, you cannot participate in this tax advantage savings plan. I may be proven right, I may be proven wrong, but they’ve got to continue to find suckers to buy a debt that cannot be paid back.
Monetary Metals:
And on that debt question, we’ve seen a couple of downgrades. Fitch downgraded US debt at one point. There’s been another downgrade recently. Do you think these downgraded… Do you think they matter at all? Because on one hand, you have an argument, listen, the US can print their own currency. It doesn’t matter. They’re never really going to go bankrupt. If they owe someone 2 trillion, 2 quadrillion or 2 septillion dollars, they can just print them up. Now, the value of those dollars, that’s a whole another story. But nominally, they can never go bankrupt. So do you think that this downgrade really does matter in a sense, or do you think that this is just a slow progression of people saying, I don’t know, I just don’t trust the value of the currency coming back to in these bonds?
David Morgan:
Yes and no. Your point is well taken. But yes, it could if you are in a situation where you are dictated by mandate that you have to keep triple-rated bonds or nothing less than that. If it were to get to double A or A, then that entity, that wealth vehicle, let’s call it in Europe or anywhere, has to do the mandate, which means I have to have triple A and I don’t anymore. Therefore, I’ve got to off these bonds. And that is a real risk, unless they see it coming, and they rewrite the prospectus, and send it out, and everybody says, Oh, sure. We want to lower rate of debt, or whatever. So yeah, it could.
Monetary Metals:
That’s a really interesting point. And what I’m hearing you say is that, listen, it might not matter in terms of feasibility or physically able to print out dollar bills and hand them to them. It might It might not be impossible for the US government to print out more currency and hand it to people. But the problem is if that rating, let’s say it’s a Moody’s rating or a Fitch rating, goes below a certain criterion of AA, that outside investors, outside institutions might say, Listen, I might love to hold US bonds, but legally, as part of my financial charter, I am no longer able to hold assets like the US dollar or US government debt. Do you think assets like gold and silver Are they ever benefited by that, or do you think that actually they’re hurt by that because in this scramble, people are looking for different safe haven assets, one that will fill that AAA bond status?
David Morgan:
Well, there would be some mitigation into that status. But no, overall, again, going back to the extra pyramid, when the trust is broken, there’ll be a run to gold. I’ve probably never seen before because it’s not a, I don’t trust the US dollar, which was happening in late 1979, 1980 and accumulated with the Afghan war. In this case, you’ve got several wars going, the Middle East problem and the Ukraine situation. It doesn’t seem to be getting any better. In fact, it seems to be getting worse. And then on top of that, everybody knows how to buy gold on the Internet now, and it’s the reserve currency. I think the run in the gold will be, forget interest rates, forget real estate, I want liquidity. I want what I can trust. I can trust gold. It’s free of government intervention for the most part. Not to say we couldn’t have a 1930s event again, but I doubt it highly. So there’ll be… And the run has already started, as you well know, Ben. I mean, central banks have been buying gold hand over fist for this the last couple of years, and it hasn’t really slowed down. And so that, I think, is the answer I would give.
Monetary Metals:
And let’s talk about the central banks for a minute. So for those who don’t know, central banks hold reserves in multiple different currencies. Almost all hold US dollars. Some also hold things like the Euro or other smaller currencies like the Yen, but also lots of central banks own gold. Now, do you think that there is a chance that central banks are going to sell their gold and use that to buoy their currency or strengthen their currency, and that could actually lower the gold price? Or do you think that central bank purchases are going to overpower that feeling and overpower that potential selling pressure? Because right now, we’ve seen increased purchases of gold. But do you think at some point central banks are going to turn around and say, Hey, we need to sell some of this gold that we’ve been accumulating to protect our currency, or is something else going to play out?
David Morgan:
I doubt that it’ll happen now. It’s already happened in the past. Basically, when there was too much leverage in the gold market, you saw the UK, basically under brown, sell basically all UK’s gold. There was something going on behind the scenes that gets into the foil hat situation. So I’m I’m not going to put one on, but just imagine, why would a country give up its gold for a piece of paper? When you can print pieces of paper for basically seven cents per unit for a $1 bill or $100 bill, and the Federal Reserve buys them at cost, so seven, eight, nine cents per bill, it loans them to the federal government at face value and interest. Why would you sell any of it? But there were times that both Canada and the UK both under the Crown, sold all their gold. There’s a reason for that. Again, I’m not going to go into it. So go into your question, will that happen again? I doubt it. I think that those two countries obviously are out of gold. But I think anyone holding gold now, especially when you look at who owns the most of it, I would say the Chinese, regardless of what the official statistics tell us, they’re not going to give it up.
I don’t think Russia is going to give it up. How much of Europe really is in the gold? I mean, The Swiss certainly are probably quiet about their true holdings, but Switzerland is a pretty small country. So it could happen. There might be pressure to make it happen, but I doubt it will happen. I think, as I said, what took place last lesson learned, and to keep the gold price within a management position or a manageable position in terms of currency, that play has been made, and I don’t think these banks that exist now are going to make that mistake again.
Monetary Metals:
We had John Reade of the World Gold Council on the show a couple of weeks back. And one thing that he said, he thinks it’s a low probability, but he said it would be high impact if the US sold any part of its gold reserves, even if it was a small amount, that it would signal to other market participants, like institutions or central banks, that the US is trying to unload their gold position. They have a large gold position, and maybe they’re looking to offload some gold and maybe add in some crypto. So do you think that this selling of US Gold Reserves is A, probable, and B, what impact do you think it would have if it were to happen?
David Morgan:
Well, respect for John. We’ve crossed paths once or twice. I would say he’s correct. I think it’s a psychological phenomena. It’s a gesture. It really would have no impact if it was a small amount. But psychologically, it could have a big impact. Probable? No. Unprobable. Very unlikely, in my opinion.
Monetary Metals:
Let’s talk about silver as well. So lots of central banks are adding gold to their reserves and have large gold stockpiles. But why do you think silver is not being stockpiled as much? Do you think it’s simply just because, Hey, you need a lot more silver to get the same amount of value as gold? Do you think that at some point central banks will add silver to their reserves, or do you think that maybe crypto has overtaken silver as a reserve asset? Where do you see silver in play here, specifically when it comes to the central bank theme?
David Morgan:
Yeah, I would say no, they wouldn’t add silver But let me just move on from there. If you had a chart that was every foot was 100 years, if you go back in the history, 5,200 years or 52 feet. So you went from left to right, and you had a 52 foot chart. The Gold/Silver Ratio would not go above 20 for all of those feet. So for 51 feet, it only be in the last foot and a half where the gold-silver ratio got above 20. Why? Because gold and silver were money for those 5,000 years. It’s only been the last 150 years, you might say, where it’s been demonetized. And so the Banks would buy silver if it were at its highest and best use, which is money. If you go back and do a quick back of the envelope and say, Well, you go back in the 1873s or whatever, if you were really making high cotton wages, that was a dollar a day. Well, if you look on the Internet, and I haven’t done this in a while, Ben, but the idea is right, the exact amount may be wrong. But I was surprised at this.
The average wage in the US was something like $26 an hour. So eight times 25 is 200 bucks. That means that three quarters of an ounce of gold, which is what a dollar is, it’s 0. 77 Troy ounces, is equal to 200 bucks. An ounce would be worth whatever that difference is, 20% more. If you had silver priced at 250 the ounce, the banks might be interested. If it’s at that 60: 1 ratio, 10: 1 ratio, it would be valuable enough for them to take up the space to store it. But since it’s been basically demonetized, it doesn’t serve the function of money. It can, and it does, but it’s not priced relative to money only. It’s priced primarily as an industrial commodity. The answer is a little complex, but I wanted to go into that because silver in the past, during the hunt run, actually got to a 16 to one ratio at the top of the market, which was back to the classic or monetary ratio. Could that happen again? The answer is yes. I think that’s more probable than last time, even though we’re sitting at 100 to one. I’m certainly aware of that.
But when gold gets to a certain level, be it 3,500, 4,000, 4,200. It’s a different price for everybody. But there is a a breaking, where people start to distrust the dollar, as we talked about earlier, and say, Gee, whiz, I can’t afford gold, but I sure as heck can buy silver. And there’s a lot more people in that modality than there aren’t people that can write a $40,000 check for 10 ounces of gold.
Monetary Metals:
And let’s talk about silver and its different uses. So most people think gold doesn’t have that many industrial uses, and they’d be correct, it doesn’t have that many industrial uses. But when you look at the industrial uses of silver, there are so many industrial uses of silver, and the demand seems to be increasing, especially with this AI bull or AI hype that’s been happening where silver is used as a component in these computer chips. So do you think that silver is going to have more industrial demand and more industrial pricing? Or do you think that there’s a monetary demand and a monetary pricing that’s going to reassert itself?
David Morgan:
Well, they’ll be both. I mean, there’s a chart that Matt Watson did that shows the ongoing deficit over the from the last three or four years, going out in the next 25 years. And every year, the deficit gets bigger and bigger and bigger because of more industrial demand. And then all markets move at the margin, which means any monetary demand, which is above and beyond the industrial demand, which is basically not barely making the needs now, will force prices higher. And his chart shows a steady demand on silver over the next 25 years of about 200 million ounces a year. I say, Matt, I love you and you do great work, but I disagree because as I just said, as things get deteriorating more and more on the monetary base, we’re going to see more and more people seek refuge, which is the extra pyramid again, which means gold. And then I put silver at the very tip because there’s so little of it value-wise than there is relative to gold. So I do I think that we could, in theory, we’ll never be out of silver. But in theory, what’s in silver bars, commercial bars, which is what the silver market is based upon, in theory, you could be out of those within four or five years, depending on current industrial demand and an increase in investment demand where pension funds or whatever.
There’s someone out there right now while we’re doing this discussion saying, You know what? It’s a hundred to one ratio. I’ve got the leeway to put 2% of my pension funds into any asset I want. I wish it could be 5%, but it’s 2. I’m going to buy silver. I don’t think there’s much downside. If somebody’s having that thought right now, whether they take action or not, we’ll find out. But more and more, let’s say, people, be them retail or institutional, will start to realize the silver story is a pretty powerful one.
Monetary Metals:
Yeah, I hear that story a lot from clients saying, Well, listen, the reason I own gold is this, but the reason I own silver is that. So can you tell me a little bit, at least in your perspective, what are the different reasons to own gold versus silver in a portfolio? Is silver really just junior gold, and you should think about it that way, or should you think about gold and silver differently when it comes to putting them in your portfolio?
David Morgan:
Well, the correlation used to be 85 %. So you could say that silver is gold junior. It’s not that high anymore. I think it’s somewhere around 72 now, but they are still very highly correlated. But I’ll just explain how would I put in our new members. So when you become a member of the Morgan Report, first thing you’re supposed to read is how to use the Morgan Report. And I start with physical metal, even though I’m not a metals dealer. And I say, the older you get, the more you should favor gold over silver. And here’s why. It’s establishment. It doesn’t have the volatility. It’s recognized, and it’s easier to buy and sell, and certainly doesn’t take as much space. However, silver is still necessary because of a high tech society. It could be used in the worst case, Mad Max, I’m not saying we’re going there, but worst case scenario, I’ll put in those terms, it could be used as barber. And it could be used outside of barter. I mean, I’m getting some work done here in the house, and the workmen have a choice. You want field, you want silver. Some take one and some take the other.
So it does have that use as a monetary reserve, but also industrial need isn’t going away. It’s just going to increase. So I think both, but I think, again, it’s a balance. So again, if you’re young and aggressive, you look at that chart that Matt Watson put out I just alluded to. It’s almost like it’s a no-brainer. There is no such thing. But you look at what the demand on the silver market is going to be worldwide over the next decade. And if I’m sitting there as a 30-year-old, I would definitely take a bigger silver position and a gold position.
Monetary Metals:
And what do you think about the fact that there’s this younger generation who are coming up? Most of the time, they’re hearing about things like crypto or NFTs or blockchain or Bitcoin or Ethereum. Maybe not so much about gold and silver. Oh, yeah, it’s a boomer asset or grandpa had some gold and silver. But do you think what do we need to do to get inroads in with the younger generation So more people who look like me might be interested in getting into gold and silver versus into Bitcoin or Ethereum, or do you think that’s already happening?
David Morgan:
It’s happening. I have 30 podcasts on my website. Go to the blog tab. And then I’ve done so many interviews, as you know, Ben, over the years, I don’t know what, 1,000 to 1,200. It’s a big number. But if you go to the search engine on the blog tab and you type in Crypto Conspiracy, there’s 30 podcasts that deal with what you just said. And we proved beyond the shadow of a doubt that the blockchain cryptocurrency phenomena has definitely taken funds that would have, could have, and should have gone, or might have gone. I won’t say should have, but could have gone to the precious metals. And I’m free market. I mean, if you want to blow your brains out on Bitcoin or what have you, who am I to say don’t? And I’m not against them, really. I think the blockchain technology certainly has its use. But it’s not everything is cracked up to be. I mean, basically, you’re looking at an Excel file that’s on the web. I mean, it’s not like it’s some fantastic formula for free energy or something. I mean, we’re talking about a ledger. We’re talking about an Excel file.
I mean, we’re really not talking about some phenomena here. But there’s people that say, I don’t understand Bitcoin. I would challenge them with my background, what I understand. Do I say, I know every nuance of Bitcoin Probably not. But I understand what it really is more than, say, the proponents said, Well, you just don’t want to be rich.
Monetary Metals:
So what do you think about the merging of things like this blockchain technology, which can say, Hey, you delivered the gold at this time to this person. They signed off. Cool. That’s on this immutable ledger forever and ever. Do you think there’s going to be a merging between this blockchain technology and gold, or do you think that people are going to want to keep them separate, which is, Hey, I’ve got my digital assets here, and I’ve got my physical assets, like precious metals over here. Do you think there’s going to be a merger, or do you think these are going to split over time?
David Morgan:
There has been a merger. In fact, I was with one which was a miserable failure, and I hate to look in the camera and say that, but I’m a man of integrity. And there are others. I mean, Kinesis, Glint, I can’t name them all. And they seem to be working okay, but I’m a bit skeptical after what happened to the load project that I was involved with for 17 years. But it’s certainly a very good idea. I mean, the idea behind the load project was that you could buy gold and grains in silver and grams. You could be a very low-income person and still protect yourself from inflation by buying grams of silver. On the blockchain, you can actually spend a gram or 2 grams or 10 ounces or whatever. It’s not got the encumbrances that working in the physical silver rounds or silver coins or gold coins impairs on you. I still like the idea. I’m just, let’s say, a bit gun-shy at this time, but it already happened, and I think it will happen more. I think what really will take place is maybe something like Texas, where they do a depository. The state is in charge of it.
I’m not a big statist, as you well know. But nonetheless, someone that’s trusted by all in Texas State depository. It’s there. It’s audited every week or every month. Your gold is there, and you put it on the blockchain. And as I said, I could send you $31. 22 worth of gold because we can divide ride it down that far using math. It’s very simple. So I think the time has come for that. And again, there are some out there, but it has not become ubiquitous. It’s not really well known. And I think it could be. So I actually I wouldn’t say it’s not going to separate. I think it will come together. But be careful, people. I mean, it’s not just the gold-backed cryptos that have problems. We know about FTX. We know about, what’s it, BITConnect. You might have to bring me up to speed or I can’t remember. But the one that was going to put a credit card or a debit card with Bitcoin, and it was a big scam, and it was caught on to later on. And one of my clients had a fairly substantial number of Bitcoin at Mount Gox, and he lost it all.
Well, he’s getting some back, but it’s your pennies on the dollar. Anyway, back to you.
Monetary Metals:
Yeah, I do want to ask about this. I’ve been thinking about this dilemma for a while, which is that if we do have this merger where people are able to use gold on a blockchain, and you can spend $31. 26 worth of gold or $14 worth of silver, does that lower the value of silver as a monetary asset? Because part of the issue was, hey, listen, you have gold, and getting a gram off to pay for a Starbucks is really quite difficult or an encumbrance in a physical world. And so that’s why silver was also a monetary metal, because you could pay for a Starbucks with a coin of silver, and it had different uses for different mediums. So large much purchases, capital assets that was gold, smaller purchases, day to day transactions that could be silver. But in a world where you have a digital payment app or a digital gold, do you think that there’s less of a case for silver as a monetary metal, or am I missing something?
David Morgan:
I don’t know if you are, but I haven’t thought about it long enough because I’m a deep thinker. I might argue the other direction only because of the gold-silver ratio right now. So you’re actually getting more for your money, especially if you had a gold position and wanted to swap some of it into silver because now they’re both serving their highest and best function, and that’s money, as I already explained. So I might argue the opposite, especially if people look at that chart I’m talking about and see, Well, wait a minute. I’m 30, and by the time I’m 40, in theory, we’re going to take the above-ground stockpile down to practically nothing. Now, again, technology could change. We could get substitutions for silver. There’s already some graphene that can deck the electricity. Probably as well as silver, but it’s not as cheap as silver. But there are things I got to look out ahead and think it through. But I would say no, monetizing silver, I think, would actually add to its use rather than take away from it. But I get your point. You’d only need gold in theory, because if you could sell it by the grain, you wouldn’t need silver because you could take it down to those small, small, small denominations.
Rather, before, you’d have to have silver or gold because of what they were worth relative to buying a cow for an ounce of gold, rather than buying a steak for an ounce of silver. But I think the monetary aspect is what will drive silver’s price, and I’ll just leave it at that.
Monetary Metals:
Well, maybe some of the smart people in our comment section will give us their opinion and their thoughts as well. Now, I want to talk a little bit about the space in general, the space in general. So we’ve seen a really big bull run in gold prices, a little bit of movement in the silver prices as well. Why do you think the gold miners and the silver miners haven’t moved in the same way? A lot of people have this pitch that, oh, the miners, they’re just buying like gold, but with leverage, right? Because there’s this business attached on top. So why have we not seen that thesis play out in the way that most people thought it might have?
David Morgan:
Yeah, that’s a bit baffling. I mean, we are starting to see some of the better miners move, and we did have a breakout in the sector recently, and the value plays are in the gold producers. I do think that you will see more and more investment come into them. That’s delayed. It’s really a gift, in my view. I mean, one thing that I learned the hard way was in the last bull market that peaked in January 1980 was I sold my gold stocks too soon because what happened is they actually peaked about six months after the gold peak. Well, Why is that? Because even though gold peaked at 850, it settled down around 6, 650 or so. I’d have to look at a chart, but something like that. So the profits in these gold miners were phenomenal because they were used to like $300 gold. Now, their average price for the quarter is $600 gold. So stocks are supposed to move on earnings. When you buy a company, people say, I buy a stock. We’re really buying a company. If that company produces a widget, you want the highest margin, the highest profit on that widget company.
And it’s no different in a gold miner. So they are, I think, going to be the best place for investors. I know we both are very much buy physical first. I won’t step off that platform. But if you want to catch people that bought gold at 2,000 the ounce, which is where a lot of these gold miners, gold companies are priced at the equivalent of gold being at 2,000, and we all know it’s around 3,400. I mean, that’s a gift. That would be my argument there. Silver, even though it only hit $50 intraday, January 19th or 20th, 1980, the average price for silver was $20 for the whole year, 1980, which was three times like the high it had been a year before, which is like six. So the silver miners did actually better than the gold miners. Will that happen the next time or not? I don’t know. So there is that case to be made. I get some flack from people in the bullion business. I don’t say flack, but they point out that they’re much better off just buying the bullion. There’s too much risk in the stocks, and the bullion outperforms it.
That’s on aggregate. It’s not on an individual case. There’s one miner, it’s a streaming company now, and that is up 20-fold. It was a silver company, so people could guess what I just said, which is fine. But silver is not up 20-fold. Silver started roughly at five. Silver is up 20-fold, it’d be at $100 an ounce. It’s one-third that price. However, if you would have bought this streamer that I recommended years ago, it would be equivalent to $100 silver, and you’d be getting dividends, and you could write options against your position to hedge it. I get a little bit frothy because it is my business. That’s what we do at the Morgan Report. But I know what I’m doing. Other people can recognize that, and others will say, Well, I’ll just buy bullion and outperform. Not in all cases.
Monetary Metals:
Now, I want to do a quick rapid fire, lightning round with you. These will be questions from all different areas: investing, personal finance. You can answer as quick as you want or as long as you want. Happy to have both. Okay, so let’s start. Which do you think is more likely in terms of a financial scenario in the next, let’s say, 6-18 months? Do you think we’re going to see inflation where CPI and prices actually move forward and higher? Or do you think we’re actually at a risk of deflation where people see things like housing prices fall, stock prices fall, or do you think it could be a bit of both?
David Morgan:
Both. Things that we need will continue to go up. Things that are leveraged, like mortgages, which we need. You need shelter, but anything leveraged will come down. So your houses will come down, but your food prices will increase.
Monetary Metals:
What do you think about the fact that Trump has been antagonistic, to say the least, between Trump and Jerome Powell? So Trump has said he’s a loser, that he doesn’t know what he’s doing. He’s too late Powell. Do you think that there’s going to be a point where Trump says, Hey, I’m getting rid of Powell. I’m replacing him with someone else? Do you think that this Fed independence starts to go away under Trump, or do you think this is just him being a bully for the week, and he’ll move on to someone else later.
David Morgan:
That’s kabuki theater. I think he’s a lot of bark and no bite. The Fed is independent, and Powell can tell him how the cow eats the cabbage anytime he wants.
Monetary Metals:
What do you think about this big, beautiful bill? Obviously, there’s a lot of debate over whether it should be passed or it shouldn’t be passed, what’s inside the bill, what’s outside the bill. But in terms of the idea of, Hey, we were going to get these deficits under control. We’re going to change up the spending. We’re going to lower the debt. Do you think that that is also just completely out the window, or do you think there’s actually something here that could be done to lower the deficit and lower our debt?
David Morgan:
No. I mean, Elon called him out on it, and it’s right. I mean, the savings from the DOGE was not that significant. And of course, this bill just blows it out of the water. What I don’t like is page 278 and 279 saying that no state can push back on the AI, that basically the AI gets a free reign for a decade. And this deficit thing is out of control Everybody knows it. We’re really beyond the point of pretending that it can be solved. But the major financial houses are still pretending, although it’s getting almost embarrassing to do so. So we’ve really got to move forward with a plan, and I think the bankers have one. I think there will be a reset of some type, and how the debt is canceled or moved off the books or re-rated or moved into a higher length of time to pay it back, I don’t really know. But I do think that we’re getting near the end game.
Monetary Metals:
What do you think about this argument that, Hey, listen, there’s this crazy debt, there’s this crazy deficit every year. Everyone admits there’s no way to really get spending on control. Really, the only other option is to grow the economy and grow our way out of this debt problem. First of all, do you think that that’s a legitimate argument? There’s a chance that we can grow our way out of this debt issue. Do you think that these AI people who are saying AI is going to grow the economy like you’ve never seen before, do you think that’s part of this answer, or do we need to go in a different direction?
David Morgan:
You could grow your way out of it if and only if you had enough energy, because the world runs on energy, not on money. Basically, the amount of increased energy demand on AI is so astronomical, we can’t support it right now, especially doing it with the green technology. So we’re really in a dilemma where we might be able to do it if we had free energy or something. But with the current system as it stands, you cannot do it. In fact, you’re going to probably accelerate a downgrade in standard of living rather than an increase in standard of living. It’s a sad situation. And there’s very few people that will speak that truth about the real situation at hand.
Monetary Metals:
What do you think about this argument that, hey, because these AIs have such a demand for energy and all these AI companies are hooking up to nuclear power plants next door, do you think that that’s actually going to help in terms of a nuclear renaissance, which helps platinum, it helps miners, it helps the commodities as a whole because people are needing more minerals and more metals and more mining? Or do you think that this AI bubble pops because they realize, Hey, we just can’t get the energy that we need?
David Morgan:
I think it’s the latter. You can’t get the energy you need. Yeah, it will force more ideas and plans to promote more energy. Nuclear would be one of them, but it’s like the Monorail system in California. I don’t know how many billions are spent on that. They got, what, 100 feet of track? I think that’s a good analogy for the reality of the situation.
Monetary Metals:
For history buffs out there, what decade would you say we are closest to in terms your financial outlook? Would you say, Hey, this is looking like the 1970s and maybe prepare for an outlook more like that? Is this more like the ’20s, a different period in financial history? Where do you say, Hey, if you’re an investor looking out at 2025 into 2026, what should they be using as a metaphor or a historical example?
David Morgan:
Well, the fourth turning does a better job than I am, so I don’t remember exactly where we are in the fourth turning. But I would say probably more like the ’20s, where a stock market can only go up Everybody’s got much more adoption than in years past. We got the political party we need. Things could just keep going. Party isn’t going to end. Yeah, there’s some blips, but my guy is going to take care of it. Nothing to worry about. Then the rug gets pulled. I think that’s where we’re at.
Monetary Metals:
Next, I want to ask you about the CBDC, which is a central bank digital currency. We have some guests who come on and say, Oh, it’s no big deal. We basically already have a CBDC. Don’t worry about it. This is just fear mongering, basically. And then we have some other guests who are like, No, hey, this is really important because it centralizes currency. And if that currency is centralized, payments can be shut off. We can impose negative interest rates, all types of financial shenanigans can happen. So where do you sit on that spectrum between, hey, total boogie man, and, hey, something you should be afraid of?
David Morgan:
Oh, 90 % boogie man. I did the lecture at the 50th anniversary of the Gold Show in New Orleans, and my whole talk was about the new monetary system. I took almost every slide off the BIS website. It’s very clear what the bankers bank wants, and it is a CBDC at some level, and it is unbacked, and it is a cashless society and that type of thing. It will be based primarily on your credit score when we talk about the Chinese social credit score, which is how you interact with Big Brother. But here in the US, they will probably have the veneer that, Oh, you’re still free, but you can’t drive your car too far. You burned up too much carbon. I fear it in a way. But I’m on the, I wouldn’t say extreme extreme. Most people in our sector give me a compliment, I’m level-headed. I don’t get too radical about gold’s going to be 50,000 an ounce or stuff like that. But nonetheless, I do lean toward a libertarian viewpoint where freedom is probably our most asset on an individual basis. The more that you lose, the less of a high living standard you have.
You could have all the amenities you want, but if you’re restricted to only traveling within a 15 minutes city, how free are you really? Those are the philosophical questions I think about a great deal.
Monetary Metals:
Very interesting answer. Next, I want to ask you about something called negative interest rates, which most people have never heard of or never dealt with. But there’s negative real interest rates where maybe inflation is higher than what you’re earning. But there’s also negative nominal interest rates where the actual interest rate itself is negative. So first of all, my question is, how likely do you think it is that we will see a world with negative nominal interest rates?
David Morgan:
Well, if CBDCs are adopted more or less globally, I guarantee you’ll see them because what will happen is you’ll get your UBI, your Universal Basic Income, pick a number, 2,000 a month. If you don’t spend 2,000 by the end of the month, negative interest rate will say you lose it. You lose whatever the excess is. It does not roll over in the next month. That will continue to keep the velocity of money at the lower levels anyway, percolating along because you’re penalized if you don’t spend it. I do think that’s part of the overlay that the banking elite see to be able to manipulate the currency supply to their liking.
Monetary Metals:
Now I want to ask you about the other potential threat to savers, which would be inflation. In the past few years, people have all of a sudden remembered that inflation exists and prices can go higher. If supply chains are disrupted, oh my gosh, the price of eggs has gone up or the price of weed or steel or whatever. Where do you see the inflation picture? Has inflation been slain by the Fed? Do you think that tariffs are going to potentially put inflation higher? Or we think about this the wrong way entirely and we should be looking at somewhere else?
David Morgan:
That’s what I said before. I think everything that we need, so basically, if you want to look at a commodity perspective, everything that you need is all your food stuff. So you’re looking at wheat, you’re looking at rice, corn, soybeans, soypine oil, all the eggs. Then you’re looking at the softs like cocoa, cotton, you need to wear clothes, coffee, sugar, those will go up. Anything that you basically consume for life, that will continue. Stuff, again, that’s So a mortgage on a commercial building, a mortgage on a residential area, a big builder that’s got huge credit lines with the bank, and all of a sudden they’ve overbuilt, they’re going to be in jeopardy. So this is a buy for system, but it’s basically what can you pay for now with cash? Anything that you have to take a loan to get up to probably come down. Anything you got to pay for cash, be it your socks and underwear, your shoes or your meals, that’s going to continue to see inflation.
Monetary Metals:
Yeah, I want to ask you specifically about cash now. So the penny is potentially gone. If you haven’t seen the news, they’re thinking of getting rid of the penny. I don’t know if the nickel is next. But more importantly, do you think that hard cash, like actual physical currency is likely to go away or be banned? Do you think there’s a future scenario where they say, Listen, we already have digital payments, we have Apple Pay, we have a CBDC, we already have everything online. What’s the point of even using cash? We have credit cards. Most people don’t interact with physical dollar bills or physical coins anymore. We got rid of the penny. The world survived. Maybe we get rid of the nickel, the world survives. Do you think we get rid of cash, and does the world survive?
David Morgan:
It will survive, and yes, absolutely. Basically, there’s so few people that use cash now. It’s been the boiling frog scenario where people just are taught less and less and less cash. When I was your age or younger, most of us would go to the bank and cash check from our paycheck. I was making six bucks an hour as an engineer back in the early days. What is that? 6 times 40, 240 bucks. Am I going to clear 200 bucks a week? I get that 200 bucks in cash. And of course, that’s unheard of. I mean, there’s someone out there doing that, but it’s 0. 000, 0. 01% of the population. So now it’s been just very subtly introduced where you got a debit card or credit card, And then you get points back, and you get travel credits, and there’s a lot of reasons to use the plastic. And I mean, like my kids, I don’t think either one of them even bothers with cash. And they live with me. So if they’re not going to use cash, then who is?
Monetary Metals:
That’s great. Okay, now my final rapid fire question. Do you think the US, either the economy or our currency, the US dollar, do you still think that we’re the cleanest dirty shirt, and that other economies have it worse off? Their currencies are going to be losing value quicker or devalued faster, and our economy will actually gain because of that. Or do you think that there’s actually a potential threat that the US dollar falls worse compared to things like the Euro or the Yen What are these other currencies?
David Morgan:
Well, they’re basically all tied together. Of course, the exchange rates do float. So you could see a blip where the Yen out does the dollar for a few weeks or maybe a month or two, who knows? But no, basically, they’re all pieces of paper. The value of them isn’t a function of the natural resources of the company, which I hear that argument often. It’s a function of who’s printing the fastest. And the reason it’s the best sneaky shirt in the hamper is because most of these other countries are printing at a faster rate than the US is, which is a fast rate. Of course, there are times when you see the M2 Money Supply contract, which we’ve seen. But on balance, we’re all tied together. And the reserve currency is what most of the entire banking system holds as its major reserve. We’ve already been through the bond market at the beginning of the discussion. So we are skating on thin ice. It doesn’t mean the end of the world It doesn’t mean things stop. It doesn’t mean all the wheat and corn and all the buildings melt to the ground. Everything wealth-wise remains in place.
But there’s a financial collapse coming, and that means a repricing of of the goods, assets, and services that exist now. The people that are out of debt will fare far better than people that are in debt. The idea that, Well, inflation will bail me out. I’ll just wait for the dollar to depreciate and pay it back in less valuable dollars. That could hold true for people that have really good credit and a lot of cash on the side. But for your average worker, they’ve got to have a wage increase that’s commensurate with the true inflation which they’re not going to get. So it comes harder and harder for them to play the game that they thought through so carefully, which they didn’t think through carefully. I’m being facetious. Say, Oh, I’m paying back in cheaper dollars. I’ll just borrow. No, you got to really know what you’re and understand how the system works if you’re going to play that game. As far as real estate investors or someone at the leverage position where I said you had to borrow money like a mortgage, if you know the cycle and where we in the cycle, then that could work to your advantage.
If you don’t understand it, some really well-off real estate investor now that’s got too much leverage with a deflationary scenario that I outlined would all of a sudden not be king of the mountain.
Monetary Metals:
What’s a question I should be asking all future guests of the Gold Exchange podcast?
David Morgan:
If they were going to make one change in the world to benefit mankind, what would that be?
Monetary Metals:
All right, David, I’ll turn it around on If you can make one change, you’re going to benefit the whole world. What’s your change?
David Morgan:
It’d be education, but it wouldn’t be state education. It’d be education where we teach people how to think critically. And I think that would be a big change for the world.
Monetary Metals:
David, it’s been so great interviewing you. Where can people find more David and more David Morgan? The Morgan Report, obviously. Tell us where we can find more you.
David Morgan:
Yeah, one place is the best. That’s just themorganreport. Com. Don’t forget the themorganreport. Com and get our free email list.
Monetary Metals:
For those interested earning a yield on gold, paid in gold, check out monetary-metals. Com. David, it’s been so great speaking with you, and I’m sure we’ll have you back again soon.
David Morgan:
Thank you, Ben.
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