In this episode, Jeff Deist, General Counsel for Monetary Metals, breaks down why America’s fiscal situation just significantly worsened. He exposes the truth behind the “Big Beautiful Bill,” the political theater of debt ceiling debates, and why there’s no longer a party for fiscal conservatives. From the slow decline of U.S. economic power to the myth of growing our way out, this episode pulls no punches.
Follow Monetary Metals on X: @Monetary_Metals
Additional Resources
Earn a yield on gold, paid in gold
Transcript
Monetary Metals:
Welcome back to the Gold Exchange podcast. I’m joined by my good friend, my coworker, and in many ways one of the smartest guys when it comes to all things politics, policy and more. Jeff Deist. Jeff, welcome back to the Gold Exchange podcast.
Jeff Deist:
Ben, thank you. It’s good to see you.
Monetary Metals:
The big beautiful bill has passed. Obviously there’s a lot of pork in there, a lot of fun stuff as well, so let’s just dive right in. The big beautiful bill has passed. What are Jeff Dice’s thoughts? How might this affect the economy? And of course, what should be people thinking about when they hear that this bill is now passed?
Jeff Deist:
Well, it’s interesting to understand how and why these bills actually get pushed through the meat grinder because it looks like it passed on almost ex explicitly partisan lines. So that, that’s when you know that a bill isn’t necessarily representative of any particular constituency, but it’s a of part political type creation. And you know, this was HR1, it was the first bill introduced in the current Congress. And it’s something that Trump’s been talking about a long time. And I think there was a lot of fatigue around this because it’s been, it’s been grinding both parties for about a week. It’s gone back and forth between the House and the Senate. And, and to be fair, these guys and gals wanted to, to get away for the fourth of July. I mean, people, people think that that doesn’t, that those kind of things don’t matter, but they do. And so what we’ve got here is in my view, a pretty unholy what we might call an omnibus bill. In other words, it combines spending with tax policy, it combines things like immigration policy and deportation policy with Medicaid. And so whenever a bill gets large and impossible for any single member to read or understand, and whenever it gets packaged with a lot of different things, I think from the perspective of fiscal conservatives, we should worry because there’s going to be something in that bill that makes it hard to vote no for almost everyone.
And the Democrats that did vote no simply voted no because it was Trump’s bill, not necessarily for any sort of ideological reasons. And so what we get here is a bill that nobody knows exactly what it does in its entirety. And I think that’s just very bad process in terms of what Congress is supposed to do. And let’s not forget, I mean, first and foremost, this is a spending bill. It’s got about $3.3 trillion worth of money Fed gov spending in it and if we go back and look at the process a little bit, I spent about 10 years as a staffer in the US House, and there’s a process called regular order. And that applies to all bills, but it especially applies to the appropriations bills. Right? Appropriations mean spending. There’s 12 appropriations bills, as they call them, and they, they have names like labor, HHS. You know, they’re. They’re supposed to fund the particular silos of Alphabet soup agencies, the kinds of things that we think that the federal government does. And way, way back in the mists of time, maybe 25 years ago, really until the early 2000s, the. The way the federal government was funded by Congress was an orderly process.
We call that regular order in the House, where everything goes through committee and then is passed on to the full membership to vote on, as opposed to special orders and other rules and mechanical ways in which these big megabus bills are passed. But, but when we had the 12 appropriations bills, you had the appropriations committees in the House and the Senate. So they would come up with the beginnings of a bill. They would pass through committee. It would go to the full House, the full House would pass, it would go over to the Senate. The Senate would do the exact same process, pass it, and then the two sides, the House and Senate, would get together in the reconciliation process, okay, and craft the final bill. Then that bill would get passed by the full House and the full Senate. All 12 of them would be passed. All 12 of them would be sent individually to the president. All 12 of them would be signed before the summer recess in late August of Congress, okay? That was how it worked for many, many, many decades. And that was a far more transparent process, because when you divide federal spending up into 12 pieces, it’s a lot easier for people and members of Congress to understand, and it’s a lot harder for lobbyists to sort of get the ear of an appropriations chairman, let’s say, and slip things in that nobody’s going to read or know about.
But, but because of, among other things, just the deep partisanship in Congress, that process has entirely broken down. They never get this stuff done by the summer recess, because, remember, the US federal government has an October 1st to October 1st fiscal year. So come around August or so, you have to have the spending in the budget for the next year. And because they can never do this, what happens is they constantly just sort of kick the can down the road. They pass what are called, these continuing resolutions, keep funding the government beyond October 1st. Even when a new set of appropriations bills haven’t been passed. And then oftentimes they get into Christmas time, even they haven’t passed the next year’s approach. So they go into January, February with these, with these bills that become what they call omnibus or megabus bills glommed together into one giant package. And the big beautiful bill from Trump represents a form of that. In other words, a rejection of regular order in the House, glomming several different categories into one large spending bill and then passing it in these kind of late night or really unholy arm twisting ways, which I think we saw this last week in terms of the, the Republican Party whipping its own members, many of whom didn’t much like this bill.
So I think it’s a spending bill we don’t much know what’s in, increases the debt ceiling limit by $5 trillion. So we know that that means that Congress can just, can just do deficit spending up to, you know, up to adding 5 trillion more to the deficit, which will take us over 40 trillion in debt. And so when you put it all together, I think this bill is very bad news. And the particular, particularities of it are almost beside the point when we consider these bigger picture items.
Monetary Metals:
And I do want to ask you about addressing that debt limit question, because every year, for those who don’t know, there’s a limit on how much debt we can get into, and every year we have this facade of, oh dear, what’s going to happen? Are they going to keep the debt limit? And then every year we just increase the size of the debt limit. So Trump has mentioned maybe getting rid of the debt limit altogether. This would just simply increase the debt limit. Do you think that the debt limit is kind of a facade that we should really stop talking about and just get rid of it altogether? Or do you think it actually does kind of impose some level of fiscal restraint where people have to at least say to the camera, hey, listen, we have to increase the debt limit.
Jeff Deist:
Well, it’s interesting. I think a lot of members of Congress would like to see it go away because it’s a bit of an embarrassing exercise for them to have to go through every so often, especially the people who consider themselves or posture themselves as fiscal conservatives. But what we have to remember is up until 1917, whenever Congress wanted to, to spend money it didn’t have, whenever it wanted to issue treasury debt, it would go pass a standalone bill in the House and Senate and say, hey guys, we have X money. We want to do something that costs Y. So we all need to get together and vote on this individual Expenditure and this individual issuance of treasury debt. So When World War I came along, war finance made that sort of impractical because, you know, obviously governments ramp up and spend a lot more during wartime, especially as a percentage of gdp. And so that sort of gets embarrassing and cumbersome and, you know, we gotta fund the troops. Right. We can’t leave the boys without what they need. And so since 1917, we’ve had just a broader debt ceiling bill which says that Congress can spend up to this amount.
And so when you mention it’s an annual debt ceiling limit, it’s not actually annual from a statutory basis. It’s just that they spend so much that they bump up against it every six or 12 months. And it’s become sort of an annual, almost a humiliation ritual. Right. I mean, who’s kidding whom here? The whole world knows that there’s nothing politically which is ever going to make Congress spend within its means, meaning not spend more than we bring in, in taxes. And so since the whole world knows that, and yet the whole world continues to buy our debt, it’s sort of a very interesting conundrum from a geopolitical perspective.
Monetary Metals:
Yeah. Warren Buffett famously was on TV saying he had a way to fix the deficit issue, which is that, you know, anytime there’s a deficit, anyone who is Congress is ineligible to be reelected. Obviously, that was not a part of the big, beautiful bill. The big, beautiful bill had two sole defectors on the Republican side, which were Brian Fitzpatrick of Pennsylvania and our friend Thomas Massie of Kentucky. So why do you think there were so few defectors, especially when there was so much in this bill, whether it’s about gambling or Medicaid or Medicare or defense spending or immigration that people could have objected to. Do you think it’s that there’s so much that people kind of can’t say no to? Why do you think there were so few defectors on this big, beautiful bill?
Jeff Deist:
Well, on the Republican side, I don’t think it’s going to cost people dearly in their districts. And what I mean by cost them is whether this would result in a primary challenge. Because whether we like it or not, most congressional districts in the United States are pretty gerrymandered, and most of them lean at least 60, 40 R or D, depending on the particular districts. Now, there are districts that are closer to that, but for the most part, your Congress critter, he or she, their biggest concern is actually a primary challenge, not a general election. So they have to calculate a bit when they pass these votes. And if you’re, let’s say, a fiscal conservative, you’re looking at this bill. Well, on the one hand, if you vote no, someone’s going to say you don’t care about open borders because this has a bunch of Border Patrol money. It has a bunch of ICE detention money in it. And so, you know, you care. You don’t care enough about border security. But there’s also, especially in red states, there’s plenty of Medicaid recipients. And so the flip side is that if you vote for it, a bunch of people are going to accuse you of slashing Medicaid.
Of course, it doesn’t really slash anything, but perception is everything in politics. So there’s all kinds of calculations that a member has to make with respect to trying to stave off a primary challenge. And let’s also not forget, I mean, this is only July of an odd year. So they’ve got all the way until November of 26 before they have to face voters. And will the big, beautiful bill really be what sticks in people’s memories in terms of what their member voted for or voted against? Probably. You know, in a sense, Trump, despite being an outsider in the gop, is, has been pretty effective in whipping Congress to get behind him. And I think his own personal popularity, you know, let’s say in the 2024 general election, was, was part of what gave him that ability. It feels like it’s waning a bit, but for the most part, you know, despite being an outsider, he seems to be able to herd cats better than the, you know, the geor, George W. Bush’s of the world.
Monetary Metals:
What I did find interesting, at least in this go round, was that Elon Musk, who was previously part of this Doge effort, Department of Government Efficiency, kind of allied or aligned with Trump, has basically split from that coalition from this specific bill, specifically on the spending. And when primary challengers were kind of discussed, for any Republicans who went against this bill, specifically the guy Thomas Massie we discussed, Elon Musk actually said, hey, I will finance this guy’s campaign because I think the fact that he’s objecting to this bill is the right thing to do. So do you think that Elon Musk threat, whether it’s financing different primary campaigns or starting his own party, do you think that’s a real threat? Or maybe not so much?
Jeff Deist:
Well, we have to remember that there are campaign finance limits. Even a billionaire can only give any particular member of Congress to his or her actual campaign fund. I believe it’s $2,700 per, per cycle. That includes 2700 for the primary and the 2700 for the general. I might, don’t quote me. It might have, they might have raised it a bit above that now. But. So he can’t just go give, you know, millions of dollars to a particular candidate. That’s not how it works. What he can do is give huge amounts of monies to a particular pac, a pack that he starts, and that PAC is allowed to do issue advocacy in, in a particular member’s district. And let’s, let’s take Thomas Massie, for example, and there are very easy ways to basically take PAC money and sort of shade it into ads that would benefit Mr. Massey, for example. So he can’t just buy a particular seat in, in terms of a gross donation, but he can certainly affect it. And let’s not forget, I mean, the whole idea behind Doge is, and Trump’s support for that at one point was that there, there is, you know, people don’t necessarily like this term, a deep state, but there certainly is an administrative state that has grown wildly beyond, in my view, it’s, it’s what it was supposed to be.
And that the president is supposed to be the head of the executive and is supposed to run the administrative state. But in fact, presidents come and go, and something like 90% of all these administrative agencies and departments, their employees never come and go. They’re protected oftentimes by very strong federal union protection, employee protections. And so they sort of become the government unto themselves. And if a new president comes in and, and has policies with which they disag, they just wait them out. And that’s not how it’s supposed to work. Right. We’re not supposed to have unelected bureaucrats making effectively policy decisions and acting like both the executive and the legislative branch all in one. Your member of Congress is supposed to tell them what to do, they’re supposed to execute it. But that’s not how it works. And we all know that. And that’s a problem, I think, regardless of your, your personal ideological view. And so Trump wanted to fix that, and Doge was supposed to get rid of a lot of wasteful government spending and get to the bottom of that. And, you know, the fact that it fizzled and that it failed to do so, and we can see simply by the size and scope of this big, beautiful bill that even the cuts that Doge was contemplating were so minuscule in terms of the big picture.
I think that doesn’t bother Trump a wit, simply because, look, there’s Nothing in his past, even before he was a presidential candidate, but certainly during his, I guess he’s run three times now. You know, he’s a, he’s a populist protectionist, he’s not a fiscal conservative, he’s not a libertarian, he’s not a small government guy. And so nothing should really surprise us in that sense. And if, if you worry about, let’s say, fiscal discipline, if you worry about the size of the federal debt, there’s really no political party available to you at this point. That’s simply not on the table. When we look at what the federal government spends most of its money on, its so called entitlements, which is our Social Security and Medicare in particular, which are what’s called non discretionary spending in the federal budget, which means that every year Congress has to start with a budget not of zero and figure out what to spend, but it starts with certain minimums, you know, the, the non discretionary spending they have to spend. And so between that entitlement spending and between the defense spending, which is almost untouchable as a political matter, you have at least 75% of the federal budget more or less locked in stone.
And there’s no political constituency, no political will to dramatically or even slightly shrink that. We’ve seen the outcry over Medicaid. Imagine the outcry if you were talking about Medicare cuts or Social Security cuts, and not even cuts, but just maybe reductions in the rate of growth. You know, not cutting anything but growing it slower. You would have a hue and cry that would make every member of Congress and, and you know, worry about their seat. It would make any presidential candidate promoting that basically his or her campaign would be a non starter. I mean the, let’s recall that America’s aging. I mean America’s demographics are such. There’s very low birth rates among the under 40s and the over 65 segment of the population is set to double by about 2050. So you know, those over 65s are not going to be voting to cut Social Security benefits. They’re not going to be voting to increase the age at which one begins to receive Social Security. I mean, all these things work against any kind of fiscal discipline. And so I think we have to dial back and say, okay, that’s the political reality that’s hard to change.
You know, how do we begin to think about deficits and debt in our own, you know, personal financial planning?
Monetary Metals:
Yeah, now I do kind of want to move towards that financial planning and our personal portfolios. So obviously people were very supportive of this Doge idea of cutting the deficit, of cutting the debt. That didn’t really seem to pan out, or maybe it did fizzle out a little bit on the other side. Trump and his team, like Bessant, have said, oh, we’re going to grow our way out of this. We’re going to unlock productivity like you’ve never seen before. These kind of big claims, maybe that parts of this bill can help, whether it’s, you know, less taxes on tips or salt deductions, whatever it may be, but that growth is going to need to so outpace the debt and the deficits. Do you think that’s even a realistic scenario at this point? Do you think there’s something that we can say, hey, there’s a realistic way we grow our way out of this, or do you think people should be positioning or thinking about how to position their portfolio for continued debt and continued deficits?
Jeff Deist:
Well, it’s an interesting question. Can we grow our way out of it? I mean, in theory we could, but that would also require a real shift in political will and political thinking to pass the kind of policy that would be required to attract capital from all over the world to the United States. In other words, you talk about, how do we outgrow this? Well, how about slashing capital gains taxes? There’s not a lot of political will for that, certainly on the left, but that would be the kind of thing that would attract a ton of capital, the United States, which could really increase tax revenues even at lower rates, simply because there’d be more investment, more businesses created, and more as a result, greater productivity. So the, the right has always liked that we’re going to grow our way out of it argument. That’s, that’s a very supply side argument. People like Larry Kudlow have argued that, you know, that we can, we don’t have to worry about debt because we’ll grow our way out of it. I don’t love that simply because we, it seems like we always get the spending, but we never get the, the growth that’s promised in, in GDP or otherwise.
And I’ve always thought that, you know, how did America get so rich in the 20th century relative to, let’s say, some of its, I guess you could say it’s, it’s comparative countries in Europe? Well, I think part of that is that we had not a lot, but we certainly had slightly more liberal economic policies, slightly more pro growth, slightly, you know, smaller taxes and regulatory state than a lot of the West. But that state grew quite a bit during the 20th century and we still got richer. And I would argue that’s because basically technology, in other words, productivity grew faster than the state. So even though the state and its regulatory net grew a hell of a lot in the 20th century, we still feel wealthier because all kinds of things that used to be incredibly expensive. Look at the supercomputers of the 1960s. We have more computing power in our iPhone in our fingertips today than a giant IBM mainframe computer in the 1960s. I mean, all kinds of things like that are basically due to technology and productivity. So I always hope that that’s going to continue. But it feels like Atlas is shrugging and that we’re at a point now where, where neither party serious at all about cutting the size and scope of not just the spending, but all these other things that the federal government thinks it needs to do.
And so I don’t, I don’t much buy into this idea that we’re going to grow our way out of it. I think what we are instead going to enter is an era of permanent large deficits. There’s, there’s neither an appetite for significant spending cuts nor significant tax raises. So I think you put that together and we just have to get used to the idea that every year Congress will spend maybe twice what it brings in, in taxes. That’s, I think, a near term close rule of thumb. And that the US Debt, deficits and debt are going to grow as a result. And then the question becomes, what happens to that treasury debt? How does it work its way through the system when it’s issued? What are the mechanics and plumbing of all that? Who buys it? Does the Fed ultimately create the backstop for that, as we’ve seen during QE, you know, since 2008, successive rounds of that. And what does that mean for the global economy? I think it means an America that’s less competitive. I think it means an America that is, that is American government that’s forced to spend more and more and more tax revenue on debt service.
And I think it means potentially the long, slow decline of the United States as the world’s economic superpower vis a vist China or, or whatever it might be. And I know that sounds gloomy, you know, if you look at, let’s say Britain in 1900, right, versus Britain in 2000, just 100 years later, it had gone from the, you know, unquestionable world superpower to a, you know, a shadow of that. However, Britain is still a pretty nice place to live. It’s still wealthier than most Places. I mean, I’m sure that was psychologically injurious to the good people of the United Kingdom. But you know, it’s still a western wealthy country. I mean, you could sort of see a century long slide by the United States into that sort of, you know, no longer top dog status. I hate to say it, but I think that’s entirely possible.
Monetary Metals:
Let me give you two potential pushbacks. You might hear pushback number one is from the kind of futuristic the AI camp. They say, Jeff, what you don’t understand is we’ve had technological development that’s kind of outpaced regulation in the past. And AI is going to do the same thing. We’re going to need nuclear power plants. So the government’s just going to give way because they realize we can’t let China get AI. So we need AI, which means we need nuclear power, we need solar power, we need energy abundance, we need AI. We need technology that’ll help with health care and innovation and military technology. And so the needs of AI, this kind of race between China and the US will force the government’s hand to allow this kind of technological evolution to happen. That’s objection number one. What do you say to that?
Jeff Deist:
Well, I certainly like AI. I don’t view as something that’s going to put us all out of jobs any more than software. In the beginning of the digital era did buggy whips go away and people drive cars, but everybody still has a job. It just seems like government always increases spending with these things. I also wonder about the sheer amount of electricity that’s going to be required for all this. I mean, we either need to burn coal or natural gas or we need to develop nuclear energy in this country. I mean, there’s no other way around it. We’re not going to do it. Sorry, Elon. With solar panels and windmills, we’re just not. I mean the efficiency of those things and the storage in batteries of intermittent power sources, you know, the sun doesn’t always shine, is just, it just hasn’t been solved. And I think we’re a ways from solving it. So in the near term we’re going to have to make a decision. We’re either going to burn coal, natural gas, or we’re going to go nuclear. Those are very politically fraught things. A lot of people dislike coal even though it’s far cleaner than it used to be.
And you know, ever since the Fukushima disaster, I want to say that was 2011, as a, as a regulatory matter, bringing a single nuclear power plant online is a multi decades matter. Forget the billions of dollars it takes to invest. I mean, getting it approved is such a crapshoot that you can’t imagine that too many investors would want to do that. And so there hasn’t been a single new nuclear power plant built in the United States for many, many years. One new reactor was brought online in Georgia a few years ago. But I mean that basically a regulatory dead end. And when something’s a regulatory dead end from an investment perspective, you know who’s going to do that. So I worry quite a bit about this, what green energy overstating its possibilities in terms of actually running the electric grid in the United States and all that means. And I think we underestimate the opposition, especially on the left, the environmentalist left to new sources of coal, new sources, new exploitation of natural gas, and certainly building nuclear power plants. So without those three, I don’t know how we power AI. And let’s not forget, AI doesn’t solve scarcity.
I don’t believe in a singularity. I don’t believe that machines become more intelligent than humans. If you were to go to year 1500 and pluck a peasant from, let’s say, you know, medieval Europe somewhere and bring that peasant into 2025, they would look around and basically say, oh my gosh, you guys solve scarcity, right? Everyone’s fat, right? I mean, it’s like, it’s like there’s, there’s calories. I can have a day’s worth of calories for like one hour’s work or whatever. These, these cars drive themselves around, these magic airplanes fly through the air. You can talk to someone the other side of the world with this cell phone. You, you know, this is it. There’s no more scarcity. And yet those of us who live in this age, obviously, we, we, there’s still scarcity. There’s, there’s poor people, there’s, there’s even starving people on earth, unfortunately. And there’s all kinds of things we might want that we don’t have the economic means to buy. Even if that’s something goofy like a Lamborghini. Right? Ben has scarcity when it comes to his Lamborghinis. And so I don’t, I don’t buy into the idea that scarcity is ever solved.
So while, while I don’t, I don’t buy the hype.
Monetary Metals:
Okay, so maybe I’d also like to point out to some people as well. There was this provision in the big Beautiful bill that the federal government would stop states from regulating AI for 10 years that was actually struck from the bill, I think 99 to 1 in the Senate to remove that AI regulation. So maybe the AI channel will not be as good as we thought. So let me get you objection number two, which comes from our friends in the MMT camp saying, Jeff, you don’t understand. It’s totally fine. Yes, we understand that Britain in the 1900s was a superpower. They had the world’s reserve currency and that went away. But you’re forgetting that was because their currency was tied to gold. There was competition where if they printed too much currency, well, they could be in trouble because people would redeem that currency into gold and maybe put them out of business. But we live in this cool new world with fiat currencies. We can just print them out of thin air. And if we need to pay for defense spending or if we need to pay for Medicare, well, we’ll just print up the currency.
Jeff, so what do you say to that objection which it doesn’t matter for 30 trillion in debt, we can just print more of the currency.
Jeff Deist:
Well, it’s an interesting argument. Both Keith Weiner and myself have gone around and around with MMT in the past, and I think it’s very suspicious when you have MMT’ers and Dick Cheney both saying debt doesn’t matter. You know, Dick Cheney, who I think is, speaks directly to Satan himself. So, you know, we have these sort of two camps which ostensibly are ideologically on the opposite end, but they kind of the horseshoe theory when it comes to debt doesn’t matter because, gosh, we’re, you know, Dick Cheney would say, we’re the United States. No one’s going to mess with us. We have this big bad military. We can do what we want. And the MMT’ers would sort of have that same bullying attitude with respect to our currency. You know, we’re a sovereign issuer of US Dollars. We can create as many real or electronic dollars as we care to. We can never run out of money. And the only break on all of this would be some sort of hyperinflation in the actual consumer price marketplace. But short of that, we have, we, we have too little money. And you know, resources are, are, are underutilized or haven’t come into being because gosh darn it, we won’t just create the money we need to give everyone, let’s say, a universal free health care, free college.
All the things that MMT would tell us are possible if we just were a little more realistic about the power of our printing press. You Know, the problem is that resources are always finite and what we care about is not money. What we care about is stuff, actual goods and services which we need or want and, and can consume in the real economy. So without getting into all the arguments about why MMT to me is not monetary policy all at all, it’s fiscal, it’s basically accounting gimmickry, and it’s basically designed to support big government left wing type viewpoints. In other words, I don’t think it can be severed from the politics that tend to underpin it, but I, I don’t think it’s correct. I think that if the United States were to truly go on the kind of printing spree that mmt’ ers advocate, an awful lot of treasury bond buyers around the world, whether that’s foreign governments, whether that’s foreign central banks, whether that’s foreign hedge funds, endowment funds, university funds, etc. Would, would have to reassess and say, gee whiz, you know, at some point we want junk bond rates, not, not 4% for this treasury debt that this crazy person is issuing called Uncle Sam, them.
So, you know, when we look at both these arguments, the MMT forever money printer argument or the AI, we’re going to be so rich, it won’t matter. Why are you worrying about $40 trillion worth of debt? At the end of the day, I think they are both fantastical in their own way.
Monetary Metals:
Let’s bring it back to something more closer to reality and finish our discussion here with gold. So obviously gold prices have been doing quite well, even though most people thought, well, 5% interest rates, that’s probably not going to be great for gold. And of course there’s been a lot of geopolitical tension. So as we end the year, we’re about six months into 2025. Where do you see the story for gold? Obviously there’s a lot of spending in this big beautiful bill. We’ll see what actually comes of that bill. But what do you see as the gold story? Do you think that Elon Musk is basically going to say, hey, we got to get our fiscal house in order, I’m going to start my new party. And that pushes gold prices lower because people think, hey, wow, there’s a guy who can actually make this work, or do you think that we’re on the Trump train where people love Trump, they love the spending, and for now those, those deficits increase, which means the arguments for gold increase as well?
Jeff Deist:
Well, I think the deficits do increase, no question about that. But I think we’ve entered a new era for gold as a commodity, as a monetary commodity for a few reasons. I think first and foremost we have to remember that the last time there was really painful inflation in the United States was basically the 1970s. And from about 1982, which was the height of the Volcker era, right before he left the Fed, about 1982 till about 2022 all the way through Covid, interest rates went down and down and down. They didn’t always go straight down, but as a general trend, they went down pretty precipitously for 40 straight years. So with declining interest rates for 40 straight years, a lot of people alive have simply not known anything else. Now, I think that the Fed and the US Government find themselves in a very different environment where they’re going to have a really hard time keeping interest rates low, even if the Fed does attempt to cut. And when I say attempt, let’s not forget they don’t set interest rates for marketplace. They target what’s called the Fed funds rate, which is an overlight, an overnight interbank lending rate.
So the Fed in and of itself can’t just lower rates or raise rates that you and I might pay on, let’s say, a mortgage. It doesn’t work quite that neatly. But yes, they certainly influence commercial rates that you and I would pay. But I just think that structurally speaking, interest rates have been so low for so long that they’re not going to be able to be maintained at that rate. And historically the cost of capital in the last couple hundred years in the west hasn’t been 4 or 5% for borrowers, it’s been low double digits. I mean, that’s the historical norm. Credit has always been more dear than it was for those golden 40 years, 82 to 2022. So that’s an aberration, not the norm. And I would suggest we’re getting back to that norm in terms of interest rates. And what I think that that means, among other things for gold, is that gold is decoupling. I’ve certainly said this before, but I think gold is decoupling from a lot of those standard indicators, you know, that it was a correlated or an inverse relationship asset. In other words, I think it’s decoupling from interest rates in the Fed.
I think it’s decoupling from GDP growth, I think it’s decoupling from unemployment numbers. I think it’s even in a sense, decoupling from CPI numbers, which, you know, I won’t go, I won’t say they’re rigged, but they certainly undercount in inflation a variety of ways when it comes to housing and energy and medical care and other things. And so I think gold is just becoming an asset unto itself. And, and it’s reflecting, you know, not only structural changes, but also there’s a psychology to gold as an asset, just like any stock or bond.
I don’t want to say animal spirits, but you know, there’s fear and GRE are real things in markets. They do influence both institutional and individual investors. And I would argue since about 2015ish, which was when Trump emerged and Brexit and some other populist movements in Europe really came to the fore, we have been in this era of weirdness. In other words, everything got sort of different. We were used to this post war liberal consensus and that was how it was going to be well into the 2000s. And, and we had people like Francis Fukuyama writing about that. We had the Dick Cheney’s the World and you know, and the Bush staffer. It’s never been exactly detailed who said it, but you know, the idea that, you know, we create our own reality. And so we’ve, we’ve been in that so long that when, you know, 2008 came along and then I mentioned 2015 as a real watershed year, this, this strange new world in which we find ourselves is an uneasy one politically and otherwise. And so I think people across the west, and especially in America, feel uneasy. I think they know the economy and especially the jobs market is not as rosy as advertised.
I think they know that politically we seem like we’re in trouble. And while they may not worry too much about the debt and deficits, it’s in the back of their minds that there’s something wrong with the federal government and Uncle Sam, you know, something has gone awry. So you put all that into a blender and I think gold just becomes a safe haven asset to a greater degree than it’s been even in the past. People don’t necessarily know what’s going to happen. They don’t, they don’t want to make big bold predictions on the stock market or the bond market, but, but you know, gold just goes up steadily because a, a greater degree of price inflation is here than they’ve ever experienced in their lifetimes. It looks to me like that’s going to stick around. It’s going to be harder to beat back than, than advertised. And there’s a, a much greater degree of political unease and political unrest than they’ve ever known in their lifetimes. I mean, 1982 to 2022 looks, looks like Mayberry RFD compared to 2025. And so I think those things just generally have a, you know, exert upward pressure on the price of gold as measured in dollar or euro or Chinese yuan or whatever it is, because gold’s just sitting there while these governments are engaged in their depredations.
Monetary Metals:
Jeff, great speaking with you, as always. For those interested, they can check out Monetary-metals.com to learn more about how to put their gold to work. Jeff, any final thoughts before we head out?
Jeff Deist:
No, Mr. Nadelstein, it’s always good to talk to you.
Monetary Metals:
Jeff, thanks so much. And we’ll see you all next week.
