De-Dollarization Debate with Brent Johnson, John Butler, Whitney Baker and Izabella Kaminska

0:00this is largely why the dollarization is a myth if it if it could happen it would have already happened it is happening so we've always been in this position before is a global reserve currency it is never ended well they all die if governments wanted to go to gold they already could they already would have so now that they have chosen not to go to gold officially the only thing that matters is the capital stack of fiat you're saying that they have chosen not to go to gold i think this will spiral in the way that i just discussed until they're forced to go to gold and that's what we're we're in for we're ultimately going to see outright golden monetization because that will be the only thing left on the balance sheet that is not defaulted you know that you're describing the milkshake i just want you to acknowledge that but with gold at the center not the dollar not the dollar not the dollar milkshake you know this is this is the fundamental misunderstanding of the milkshake we talk about accumulation of gold being a signal that people are losing trust in the dollar so why is it that when china accumulates gold it's not a signal that it's a loss of trust in the

1:00you on let me just express to you why this is starting to frustrate me i've already acknowledged gold you go to fifty thousand dollar goodness and art can we now talk about something other than gold i just did you just don't you just don't like my answer if you think that we are going to have a war in order to come to this new system and the dollar is going to fall versus foreign currencies i'm just going to disagree with you a hundred percent welcome to the future of gold in Cape Town where we invited some of the most renowned thinkers in the financial markets to discuss macroeconomics geopolitics and all kinds of things related to precious metals but before we start i would like you to know that you have 20% discount on any transaction fees if you buy gold silver or platina at goldrequabili.com see more in the description below all right welcome to the second session of the future of gold

2:01here in Cape Town in South Africa joined by my beloved guest on my left i have Whitney Baker from Totemacro John Butler Isabelle Caminska and Brent Johnson this is the second session this session is about the future of gold in this session we will try to unravel the role of gold in this constantly changing monetary order that we see happening today but first of all i would like to kind of give a bit of context 2025 has been quite a crazy year for gold right i mean we've had 53 all-time highs we're flooding back to the last all-time high now with the current crisis that we've seen in the Middle East approaching 5400 thousand ounce we've also had in terms of central bank purchasing gold three times in a row about 1,000 tons of gold purchased by central banks in a row last year alone 5,000 tons of gold have been purchased it's the world records in terms of purchase of gold globally so gold is kind of reaffirming its role it's old role

3:06as a monetary anchor and this is also what we're trying to do here is to see and look at the past and see if the future of gold will be also the same as the past of gold um so my first question to you is where do you see gold as its role in the monetary system today now and i would like to start with you with me um so so right now obviously you know as we talked about in our prior session gold used to form the basis of the monetary system and it was important that it did because it constrained the amount of credit that could be extended and therefore the amount of debt that we could accumulate and more importantly not just from a monetary tether perspective but from a debt affordability perspective the debt that we took on at that time had to be basically productive in that it had to generate future income to repay it and when you're taking on debt in order to fund consumption and you're consuming imports from abroad which is the model we've operated under what that naturally does is means the the debtor consumer country ends up with a load of debt

4:08and the supplier surplus country ends up with a load of claims on that debtor but also all the manufacturing capacity all the real income growth but fundamentally that system has a architecture that is unsound unless it continues to grow in an exponential way which is why we have these constant crises so the whole point of gold as an anchor is to basically you know create productive and self-funding growth through time that's non-inflationary and without you know arbitrary political and social redistribution effects so getting rid of that has been the reason why we have these giant imbalances now like the part of the good thing we were sort of debating last night was well how do you actually get out of that like this is where we are now right and you can't abruptly change that system because of the level of the imbalances like global debt relative income has never been anything remotely close and all of this wealth you know paper wealth on the other side is just sitting there supporting a lot of economic function so how do you like

5:08wean yourself off this and kind of it is it's so large and unstable can it even be done and I think it can you just have to actually have policymakers and policies that at least there's a good chance it can it's just going to involve a lot of real wealth destruction and that's going to undermine stability and that's where gold comes in as a new basically the foundation of as it always is the the initial first stage of any monetary cycle always has fixed currency and it's it's always been gold it doesn't have to be but it just has always been gold sometimes silver like it back in the day debasing the currency was adding silver right so I think it will play that role again and I think that things like stable coins can be the transaction layer you know that gold is essentially backing but makes it easier to transact in gold that's a possibility but I think it's going back to gold but not after a lot of disruption sorry not before a lot of disruption John well I mean gold today does not officially function as money and yet behind the

6:11scenes it is reasserting itself it is being in certain respects remonetized you mentioned the huge purchases by central banks in recent years central banks may still say that oh are not gold backed monetary systems still works okay we just need to make sure that regulation keeps up with it and not too much leverage gets into the system but actions speak louder than words and these very large purchases of gold by central banks are an acknowledgement that in reality trust and confidence in the current system are declining very very substantially they're probably declining for a variety of reasons Whitney just mentioned a few of them that I think are extremely important there are geopolitical concerns there are all kinds of concerns today but gold is doing what it always does historically when attempts are made to move away from it that result in credit access

7:11credit access that may be used to finance wars that are destructive of the capital stock making countries less productive gold is the natural historical hedge against all of the above and so when you look at the world today and you're concerned about economic imbalances you're concerned about shifting balances of power and geopolitical possible big conflict such as we're seeing possibly emerging now in the middle east gold is the ultimate hedge so whether gold is officially remonetized or not the price is likely to keep moving higher but beyond a certain point I do believe we will eventually see some form of official remonetization how exactly we get there and how disruptive it is is very unclear but some in some way shape or form I strongly believe that's going to happen so I certainly see a role for the for gold in the new emerging financial

8:12system and I think my hunch is that it's going to play a very important sort of liquidity role for countries that do not feel comfortable being using US dollar stablecoin coins of being in the US dollar system per se or even in the west any western sort of currency system whether it's the euro it's not going to be sterling but you know what I mean so you certainly obviously see this huge accumulation of gold in places like China that said I would I think it's important to remember that if that is the case that changes the paradigm for for how an economy like China works as well so I I just would caution that it's I think a little bit too simple to just say well China's going to with you know outperform everybody because it's

9:14accumulating all this gold we have to recognize that if it is true that that pushes China to a hard budget constraint that changes its economic model completely in a way that doesn't necessarily allow for that it's continued export dominant you know model so yes I think if you don't want to use the dollar gold is going to be there as the backup but it it fundamentally fundamentally transforms the the way the geopolitical order is currently structured as a result because you just won't be able to get away with that kind of mercantilistic approach yeah you know I think I'd build on what John said regardless of whether gold becomes officially money or remains unofficially in some people's mind money it doesn't mean that the price won't go up and it doesn't mean that it's not important I personally don't believe it's going to be remanetized anytime soon it's not to say that it can't happen I think you need to acknowledge why

10:17it could happen and be prepared for it to happen I just don't I guess I think it's the last thing any government wants if the government wanted the gold backed currency they would already have it they have the power to do it and they've chosen not to despite many opportunities and reasons along the way to do it and so I don't think that's they may do it as kind of a last-ditch effort perhaps they do it as some kind of a Nash equilibrium you know move can't rule it out I just I think it's very low probability that that happens and so I think of gold this is I know this is going to sound ironic because I'm a huge believer in gold and I think gold could be money and if I think if we had a free market gold would be money but I consider gold anti-money in other words it is the money that is unofficial money but that's not the world that I live in I live in the world as it is and as a market participant I have to analyze the world as it is and I think that there will be many steps taken to reinforce or reintroduce or how would develop however you want to

11:20mention what's going on with the monetary system now I think there will be many steps that are at least attempted before gold is remanetized now that that does not to say that gold won't raise its hand and say I'm right here you know hello and I think that's what we're seeing now gold is putting itself forward as a worthy successor or a worthy option but you know I I have a hard time seeing the governments around the world saying okay let's go with that one um well I think that what's interesting about gold right now is that it is doing that but it's not like it's it's gold doing that it's China doing that largely it's central banks basically opting out of the dollar system by buying gold which is the traditional flight that prompts that kind of a move but I completely agree with what you're saying in the sense that they will only do anything with gold as a absolute last resort like we have shown that every every time you'll do bailouts you'll do self bankrupting and this is part of the foundational reason why like you know in an ideal world gold would just remain or something less arbitrary than gold would remain the standard and it would

12:24constrain imbalances and we wouldn't be in this position but every empire gets to this point where they essentially overextend and decline and become decadent and want to buy off the population and the electorate and so on and a self bankrupting but it's followed this cycle like you know tens of different cases you can go through in like very linear um anticipating succession and the the final stage of that is they just they hit an ultimate constraint and one of the main ultimate constraints is a run from your currency that prompts this so I don't think that though I think that probably this um this alternative of basically China accumulating gold at the margin not reinvesting in dollars but both because the the you know jurisdictional risk but also because of the over valuation of the dollar um and so they move into gold they have a lot of the stock of gold and then ultimately that they say look why don't we just become the new global hegemon and we've got a sound currency right here that's more like the competitive way that it um approaches

13:28uh or sort of remodetizes because then money leaves the US system out of much quicker rate so they could do that as like an actual I wouldn't call like an active financial war but it's it's something like that like but you're right that it constrains excesses in both surplus and debt or markets and they would both have to deal with a huge debt work through can I just ask and I know it's Alexei who's supposed to be asking but um it's the inner in a journalist in me um like so where I where I have trouble with that I agree 99% agree but where my 1% quibble is you know we talk about accumulation of gold being a signal that people are losing trust in the dollar so why is it that when China accumulates gold it's not a signal that it's a loss of trust in the yuan that's my point exactly it's official sector doing it and and I would say it's not China China's the one running the surplus the US is the one running the deficit so China's not

14:28dependent on foreign capital the US is and so I think the perception globally I don't think that's true that China's not dependent on foreign capital at all I think no it's very marginal for China though it's not marginal I think it's very key have they yeah they're working on trade oh they're global goods trade I don't think that's true they're still like the dominant like settlement currency in China is still at the kind of merchant level it is still for international supply chain stuff it's still the dollar now why are they raising dollar why are they raising dollar bonds in re-ad in Paris if they don't need dollars because you borrow and a currency you expect to fall that's right no yeah and the settlement that's transaction data is not you can't look at the swift data because it obviously excludes their main trade so emerging markets that forced borrow and dollar do so because they are strong emerging

15:29markets haven't been forced to borrow borrow and dollars for 25 years they're net dollar credit donations by and large except for turkey and argentina and Indonesia I believe is still it's running a deficit it's running a current deficit but it's net-long dollars yeah well okay I'll start going net-long dollars if you're considering that they could sell all their US dollar assets correct but when you sell US dollar assets the prices fall whereas the debts do not so this idea that they yeah but the debts live in the US not in Indonesia but the idea that they could sell all their US dollar assets and pay off all their US dollar debts is completely erroneous that could never happen why I mean Indonesia is not big enough because when you start selling US dollar assets they will go down 50 percent not from Indonesian selling it's very small right if an individual country or an individual company right decided to dedalize that that very small bank run works or that that very small country or that very small corporation could do it yes on a systematic basis it cannot happen but the incentives are for each individual to do it which is the exact incentive but as soon as every individual starts doing it together in the same way

16:32that the match in the same way that the match equilibrium on when you become positive it can also become negative and if everybody does it it hurts them yeah more than it hurts you but this is the prisoner's dilemma we're in as we live in this world but that's but this is largely why the dollarization was a myth if it if it could happen it would have already happened it is happening so okay to be clear foreign holdings of US treasuries on a unit basis has never been higher relative to gold no it's the lowest it's been or decades John we all agree that gold has gone up a lot that's it's relevant it is it is it's got it's then why haven't we talked about gold has risen versus European treasury holdings and you want your holdings it's risen versus everything that's right because all these fiat expressions of credit and imbalances that cannot be serviced without a general global massive fiat currency devaluation right gold is the only alternative to that but we all we all agree with that good right so look at who's actually buying treasuries though to connect it to their motivations right foreign official sector ownership of treasuries and agencies peaked in

17:372008 and then went up a little bit after QE and then peaked again in 2015 when Russia and China and the same thing happened in european sovereigns this is not right right exactly who sits at the total capital totally right so we can talk about we can talk about who's going to go down faster like that's a thing we can talk about but the idea that no one's going down because you know that's because it's impossible that idea doesn't be clear everybody knows the fiat goes down everybody knows that yeah there's no debate right so let's talk about which of the fiat's are going to remain dominant because if governments wanted to go to gold they already could they already would have so now that they have chosen not to go to gold officially the only thing that matters is the capital stack of fiat well no you're you're you're saying that they have chosen not to go to gold i think this will spiral in the way that i just discussed until they're forced to go to gold and that's what we're we're in for okay but it will start with small increase not possible fear you could say it's not possible because it would create a crash

18:38but that's exactly why you guys are not listening yeah you guys are not listening it can happen and gold could go to $50,000 i agree i think is the agrees i think michael agrees but if that doesn't happen you know it can but if it doesn't until it happens the fiat hierarchy matters more than anything in the world it is the single most important variable until the day gold goes to $50,000 but that's where we disagree on the on which currency does worse because the in that environment now we can talk about growth and interest rates and different mechanisms that equilibrate these imbalances but if we're doing it in a fiat world with without you know we'll have capital controls at some point but without capital controls in the near term the the currencies that do worse under this scenario are debtor currencies that are not just reliant on the money they're currency well yeah but we've always been in this position before as a global reserve currency it is never ended well they all died when the US still has

19:40like there's not any other special they're absolutely there's got what you want to say is it not i mean i'm not sure i'm asking you guys as gold experts like is it not the case that the US still in terms of official reserves if you believe the numbers has the most gold yes but the problem is even those official reserves at current market value would only cover about nine months of the US current account deficit so in other words the US has very little gold cover and when you when you analyze the creditworthiness of a country the coverage ratio of their reserves is essential but the US has more than china does on that on that same basis and it's not like you know it absolutely does no no it's not that export if you they don't need import cover to do you need import no for a cut isn't expected that isn't export because i'm talking about their monetary base in their monetary but what you guys are talking about are just two sides of the same coin you have your account and capitol if your a certain if that i let me finish my story which is that a currency price is determined by the marginal marginal supply and demand for that

20:45currency okay in a situation where fiat is even constrained in any way there's a constraint to to the amount of net borrowing that can happen. The debtor countries, this is the emerging market problem, right? The debtor countries that run 3, 4, 5% current account deficits, they need that amount of money to come in willingly just to hold the currency where it was. Okay, they have a run to stand still problem that the surplus countries don't. And in an environment when people's domestic incomes are contracting and they have falling asset values or debt work through that they have to do like the Chinese case, they're going to sell those foreign assets that they own, bring it back into and support their domestic currency and use the proceeds to try to smooth out the adjustment. It's just how this is going to play out, it's how it's always played out. It's why there's constraints ultimately at the end of the day. I disagree that China is in this infallible position. No one's playing. It may be like an export in terms of finished goods and manufactured goods. It is still hugely dependent on commodities

21:45and obviously rare refs is one of the issues. But when it comes to silver, for example, which it needs as an industrial metal to create solar panels and EVs, which is one of its key areas that it wants to like out-compete the world on, turns out it's the West that controls most of the global silver supply, not China. And a lot of the current run up in silver I think is also a realization that we've seen this with the, she has been very upfront actually recently saying that China has to buckle down on these lost, like perpetually lost making state-sponsored enterprises. And as it does so, hard budget constraints are coming back into the corporate sector in China. And as they do, things like runaway silver prices are posing a problem. So we're now seeing a lot of like solar companies understressed in China.

22:46We're seeing a lot of EV companies, like the reason there's only one big player is because all the others were so lost making it has to consolidate everything. Whether they can continue to produce at the rate that they've been doing, when some of these raw inputs are now well above, I would say the unit cost that allow for that in a increasingly hard budget environment, I don't know. And secondly, I think China has a lot more debt internally than anybody appreciates. They do, but yeah, but they all come to terms. It does. Hold on, hold on, let's address it, hold on. They owe it to themselves. But that's a huge problem. Oh, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no. My last point, just on that front, and I'm sure you will address and add to it, is that a lot of the accumulation, like so China, you know, there are no real private sector companies in China,

23:48so much of the dollar positioning has shifted to the banks, and the banks, you know, so it doesn't show up on the official accounts, but the banks do what the government tells them to do, right? So when the banks are continuing to load up on dollar assets, they're basically the ones buying the dollars, and also extending dollars. So there is an element of dollar leverage in the Chinese banking sector that I think people don't appreciate it. It is so tiny. It doesn't matter if the marginal factor is the key. Now, if a transaction doesn't cross borders and change hands between currencies, it does not impact the price of a company. Who has been financing all of, like, so we've now seen rebooting of a lot of the manufacturing via places like Vietnam. So who has funded Vietnam to allow for that? Who are the main banks that have allowed the Vietnamese to? It's been, it's been a huge, it's been doing it through. I'm looking at the number.

24:49Let me see how you share it. It's Japanese banks. Japanese banks are the number one funders of the, of the regime. Yes, you're right. China has a vast amount of problem. And so it's actually their dollar float that is financing the re-routing. Japan is just the last one. Sorry, but on that, Japan has taken over the role in this cycle that the European banks played in the GFC cycle, being like, basically, borrowers and lenders of dollars with mismatched durations and all sorts. And that's about four and a half trillion dollars now. So they're the marginal lenders and they will have all sorts of bad exposures in there. So I agree with you, but that's not China's problem. Brent, I just want to address the problem of China owning it to themselves. For them to resolve that problem, which I think we all admit is a problem, it means a massive devaluation of the purchasing power of the currency. That is the way you handle too much debt is you write down the currency to bail out the bad lenders. And so everybody will always talk about this huge debt problem

25:50the United States will have and it's going to have to devalue the dollar as a result. But China faces the same thing. The fact that they owe it to themselves does not save them from this problem. You only have to devalue. It doesn't save them. But the currency is not the adjustment net. Yes, the internal price level, the internal price level is the purchasing power. The purchasing power absolutely is the balancing mechanism. Yes, it's the internal deflation. It's internal deflation, that's all. When you don't owe it a fresh border. It's internal inflation. That's why they're trying to get that. To pay off the debts internally, 70 trillion dollars of corporate debt, they will have to devalue the currency massively to plug the holes that exist on the internal banks. But if there's no dollars involved in the debt problem. I'm not talking about the dollar. I'm talking about the purchasing power that you want. I understand that. But it doesn't actually matter vis-a-vis the rest of the world. It matters to the... If you're a citizen in China, it matters to the purchasing power of your currency. And that's why you buy gold. Not because Jay Powell has lost his mind and Donald Trump has a moron, they buy it because they know that you want

26:51is not going to hold your interest in China. He wants, I would like to bring up another point. Maybe there hasn't been mention. That was like the trial of China to actually peg more and more gold to the Yuan and use it as a, let's say, a de facto base for commodity exchange. And they started with oil with Saudi and they've also started to create some nodes, vault nodes in which there would be convertibility of gold to Yuan. And most famously, since a few years now, the Shanghai Stock Exchange and the Future's Exchange have actually been opening vaults for the first time to foreigners to actually allow that convertibility. Wouldn't that be a window for the China to actually have still control of the Yuan, but still be able to convert it to gold? Absolutely. Yes, absolutely. Why are you doing it? It is my opinion that at some point, one of the sort of signposts on the road to a more official form of gold remalatization will be that the global oil trade is going to shift into a largely gold-denominated oil trade. Because then, of course,

27:53you're trading in the world's largest tradable commodity, but doing so in an underlying money, which cannot be arbitrarily devalued, manipulated, defaulted on or anything else, that creates a neutral playing field for the global oil trade. And that, to me, again, is an expression of this Nash monetary equilibrium. It will still allow countries to trade with one another as these disruptive imbalances are wound down and sorted out. What you're saying is China has defected from the system already? They're beginning to. And so, as they do that, the incentive for every remaining player is to do the same, except for obviously the current hedgehog on. Is it you disagree? This structure you describe, which is, I'm not going to deny it's happening. It is happening. But I think, again, it's the causation and the rationale for why it's happening, which is being misunderstood. The reason this is happening is because the commodity producers are not comfortable holding unbacked, you on debt. And dollars, and dollars. And you know, that's the end of it. The finishing point is your finishing point is your... Why do you think OECAC changed the oil price

28:55in conventional, in the 1970s? It was here. That's where it is. That's where it is. Is it to finish your point? OK. So the reason the Gulf states are looking to China is because China is the biggest marginal buyer. The US is no longer a net importer of oil. It is a net exporter for the most part. So the days, the cushy days of the Middle East, you know, petro-dollar, you know, high life, are gone, because they're not getting that inflow of dollars, right? So they have to look for other markets. China is the obvious, obvious market to service, but there is a reluctance to service it because the track record of China, the capital markets, is way worse. That's why you asked for it. That's one other time please. But my point is that it's only, it's on the, like the people asking for these gold back settlement yuan instruments are the oil producers who are not comfortable selling or holding yuan that is unbacked, because they know that this is not a sign of strength of the Chinese economy. I agree. Let me ask

29:58you a question that follows exactly on this. When an oil producer sells oil to China and China essentially pays for it in gold, because the producer doesn't want you on. We all together so far. This is the idea. Yeah. Okay. Although I think the acceptability of you on to the. So when the oil producer receives this gold, what do they do with it? It's on their balance sheet. Do they hold the gold? If they're a net exporter, they can hold the gold indefinitely. I know that they can. I know that they can. They can use that accumulated gold to pay for incremental imports. So why would they? Why wouldn't they hold the gold because they're not because they're not, they're not, they're not gold brokers. They're not gold investors. They are corporations. That's the same thing as holding. Hold on. Hold on. Hold on. Hold on. Hold on. Hold on. Hold on. I understand that this could happen. We all agree. We're responsible. You're not guys. Let's, let's finish it. First with Ren's. Can I ask my question? Yes. Do you expect them in the real world that we're living in today for Exxon or Aramco to sell oil to China, have China pay for it in gold

31:03and they put it on their balance sheet and hold it in a vault in China? Do you think they will do that? We will get to that point. Yes. In how many years? Well, it's difficult to time it. But that's okay. No, no, no, no. No, no, no, no. We can talk about the things that drive currencies between here and then because there are different flows at work. But we're talking about a secular discussion of reserve currency shifts. Right. But here's the point I want to make. Here's the point that I'm trying to get to. The oil guys probably understand this better than most. And I would argue you to understand it even better than the oil guys do. So my question is how much oil or how much gold do each of you have stored in China? What you're saying is, okay, we can't go to a new monetary order because it doesn't exist. No, you can do it right now today. You can store gold in China today. Do either of you do it because you guys understand the importance of it. I'm sure you own gold in Switzerland. I'm sure you own gold in Switzerland or Singapore or wherever it is. Why have

32:04you not chosen to store it in Hong Kong? Well, they're specific geopolitical risks. Okay. Somebody that also exists in the Western. They also exist for the Western oil companies. No, it's completely different because you have basically a Western block and an Eastern block. And as usual, a non-aligned block of suppliers in the middle and they get to choose where they go. But people that live in the Western block that are subject to basically, you know, the US old order and the military protection that provides and all of the other features of our system, no, you don't actually want to store your money in China because one of the things the US government will do when cornered is suspend your access to that money. But so will China? Okay, so let me ask another follow-on question. It won't face a currency run. If we just said for China to deal with the 70 trillion of internal corporate debt, no, we just agree with you on that point. We don't agree that causes a currency problem because they'll simply sell their dollars to support their currency and to generate a real liquefile, real liquefile system. That's the benefit of being a so-to-be clear, because they owe it to themselves, you guys don't think that

33:08China has a yuan problem. You don't think they will have to devalue other times in order to fill the hole. I think China has a fiat problem, but it's a smaller fiat problem than the net deficit, the deficit countries have in my opinion. And currencies are just a zero-sum price, right? So it's a relative size that we're comparing here. And when your problem is internal, it has zero growth at the moment. It has no investment. No one's arguing that. No, it is, it's a very important point. It's in a decrease. It's an important goal. So, so how is it going to get out of its debt crisis? It's going to sell no assets. Bring the currency back. It sells its dollar assets. And when they do that, what does that best in doing return? And also it's first now that it's not bad. You know what I mean? Well, what does that best in doing when they do that? Because when they sell the whole thing, one of the times is what does that best in doing return? Okay. Firstly, countries access to their own dollar funds has never, the only time that was ever impeded, and this is part of the problem with the US Reserve currency status, was in 19, it was in 2022-23 when they actually just seized and canceled all of

34:12the assets that Russia had accumulated that were claims on the US. So you think you're going to be a hegemonic standard that everybody's just going to follow and you go and you seize the assets. Let me finish, please. I have your biggest creditor of one of your biggest creditors. You just cancel their assets. So you're basically saying you're telling me they're going to sell them all. So they're known. No, I'm just saying that was the starting gun. Okay. Like there's for anybody operating under this system, you cannot have your national wealth in the hands of a system that can expropriate it at a pen. Exactly. But why would you show your goal in China? So is he? You want to get a share of the Western? Let me let me go. I can't have a simple answer to that. If I'm an oil company and I want to do business with China and China says, look you do understand if you're going to sell your oil to us we're going to pay you in gold, but the gold will remain in our custody. It's take it or leave it Hobbesen's choice. The oil company can say I'm not going to do that and China will say, okay, we'll find someone else who will. That same thing exists with the United States, and you guys it does. I totally agree, but China is then an exporter, the US is not. And so and China's the big net importer however of oil

35:16specifically, and the U.S. is not. So this is one area. This is one big crack that may become more evident as we start, again, as we start to move towards a more official form of gold remonetization. Let me ask you guys, just because we are, where we are in the world, politically, geopolitically. If China were to say, we are settling all our treasures because we don't trust you. We no longer believe you're a good partner and we think the dollar's going to lose value and you may confiscate our assets so they sell them all. And let's say the U.S. says fine. The treasury... I doubt that would happen. The treasury of the Fed says we buy them in 10 seconds and the market doesn't care. And then we go forward six months. And now, Iran, or whoever it is, Russia starts sending oil into China. And copper on the boats from Chile goes to China. Do you think the United States as the global hegemon is going to sit by and let that happen? No. Okay. So when that happens, so when it happens,

36:18what happens to the relative price of the Iran versus the world? The problem is the... No, no. Let me answer your question. Let me answer this question. No, no, no. Let me answer your question, which I'm going to. Okay, I'm doing that. I'm in the process of answering your question. The scenario you just, the sequence of steps, you just laid out to get to this hypothetical is not possible. Because what you just said is that China will sell all their treasures and the Fed will print roughly $2 trillion and give them to them. No, it's only $7 billion at this point. No, there's a bunch in Belgium and they have some agencies. So let's say they get rid of all of that, right? And the Fed just like, here's $2 trillion bucks. And there's an immediate $2 trillion transaction in the currency market and the yuan sky rockets. Okay, that is the situation where the dollar just automatically tanks very quickly. The Fed can't print dollars and give them in exchange to a foreign creditor who's going to convert them one-to-one from China. Right, but with printed money, like whether it's indirect or direct, that money leaves the currency. There's a massive transaction of dollar selling and yuan buying by the people, i.e. China,

37:20who is doing that sale. So you can't actually get to your scenario without a donation of the yuan due to the export model of China and its capacity to continue funding its domestic liabilities. Well, that's a good point because yuan just dropped below $7 recently, right? And there was a big... But there's a reason there'll be ones dropping below $7. Exactly. And it's not a positive one. It's because they have depressionary level deflation in China. Right. And currently it's rallying. And what happens is... Because of massive deflation. Right, because of all the debt. For real? And how do you deal with the debt deflation? You sell your dollar assets. You think I use the currency. Yeah, I agree. You sell your dollar assets. Yeah, and you also... And you buy your currency. No. But I believe that if China does try a massive sale of dollar assets to compensate for what may be an imploding domestic debt bubble because of this geopolitical rivalry, the U.S. may just say, nope, sorry, we're not going to honor that. You're stuck with them. Yeah. Too bad. Right. We don't like you anymore. So, you know, you're good luck to you. Oh, yeah, that could easily happen.

38:21And then of course, gold is going to be remanetized immediately to the world over. That's the end of the fiat system. And they have fiscal debt. We already did that, right? Well, they're the Russian central bank. Well, Russia prepared for that. Yes, yes. And they execute that. But they sent that message. That they were willing to do that. Russia has sent an example around the world that with reliance on non-US trading partners and a willingness to actually use gold as a means of exchange for other real assets, you can build a moat around your country and you can continue to grow your economy and have sovereignty. And have sovereignty. There is maybe, maybe, in addition to Russia, maybe one other country in the world that can do that. I agree there aren't many. I agree there aren't many. But more than one. But I would argue that many, many countries are watching this. And they see, wow, this is where it's going. We need to start preparing for that sort of world. So do you think, sorry, to add to this because there was discussions about that have been a bit, let's say, slowed down

39:23or not a fold up upon about the pegging of, let's say, gold and the basket of bricks currencies. There has been also more and more countries around the world. Maybe small countries, not big countries, but important countries that also put interest and also joined this bricks plus alliance. Do you think that this is then maybe, like, a joining forces and trying to fend the settlements of the whole base that's possible? I think that is possible. It would be much more difficult for China to try to move away from the dollar and remodetize gold alone than to do so in concert with the bricks. China trades considerably more with the bricks than it does with the United States. And the bricks trade more with one another net than they do with the United States. If they move together as a block to reduce use of the dollar and remodetize gold instead, that would be far less disruptive for them. Sadly, it would still be very disruptive for the United States, which would no longer be able to finance its deficit as easily

40:24and at low interest rates as it does today, but it would be an easier transition for the bricks. Still very disruptive, no free lunch. There are huge imbalances in the world today everywhere. But if push came to shove, that's one way in which this could happen. And I do write about that in my book, by the way. That is a scenario I go through. I would say that if we were at a place in the economic cycle or the fourth turning cycle, that we weren't at the fourth turning part of it. And everybody was not kind of at the end of their rope in debt terms. And as a result, we could have another economic cycle, such as we had over the last 20 or 30 years. Then I would agree that the scenario you guys paint is more likely. But because every country is kind of at the end of their rope from a debt perspective, that we are now at a geopolitical and historical perspective that will not allow for the scenario that you guys lay out to play.

41:25I'm not saying it can't happen, but that's what, but it's because we are in the, where we are in the historical cycle. So there has to be a war. Is that the alternative? Why do they say that? There will be one. There isn't have to be one, but there will be one. Now, I'm talking about the world as it is. That's not as I wanted. That's also very classic. Like, that's the classic trick. I agree. I agree. And this is my, this is the point that I've tried to make. Like, the point I'm making is not anti-gold. The point I'm making, if you could argue, is extremely bullish gold. I understand. Extremely bullish gold. War is pro-gold. Right? Where we disagree is just on what happens with relative fiat. But I think we all agree that this is unsustainable. We may not even disagree, but we're saying it from a different perspective. And this is the point that I've always tried to make us. The dollar going down, that entrances the dollar in the world. That doesn't de-dollarize the world. That is a way that new dollar credit has been extended to provide the liquidity, which in the short term makes the dollar fall. But as you move forward in time and that credit that has been

42:27extended now starts to come due, the dollar rises back again. So we could go to a world in which you guys are discussing. But I think the path to that sees the dollar go higher. I actually completely agree with you. I completely agree with you. But I think we just had that period. But you have a supply curve and a demand curve. If the supply of dollars goes up, the dollar is going down because the supply of dollars is going up. That's one thing. What if the demand function for dollars fundamentally shifts away from the dollar because everyone prefers to hold gold balances instead? That exogenous shift in the demand function for gold makes the dollar go down at a constant supply of dollars. Is that going down versus gold? That's a very much so. But versus other currencies? Oh, they all go down together because that blows up the whole system. But they all go down to the other. Do they go down more or less than the dollar in the scenario you just painted? You know what? At that point, as you say, a war could break out. Everyone flees into gold. At that point, everyone flees into gold.

43:27They all go down, whether one goes down by 98% and 99%, you know what? I'm not terribly concerned about that. Gold goes to the moon. And that's why we're ultimately going to see outright gold remonization because that will be the only thing left on the balance sheet. That is not defaulted. You know that you're describing the milkshake. I just want you to acknowledge that. But with gold at the center, not the dollar. Not the dollar. Gold milkshake. Yeah. This is the fundamental misunderstanding of the milkshake. The gold has always been the winner in the milkshake. Always. Go back to the first time I talked about it. And listen to everything. Agreed. Agreed. The point was though, the transition for gold going higher and becoming the new money sees the dollar go higher versus foreign currency. I just think we just need to let that happen. Now, if you think that we are going to have a war in order to come to this new system, and the dollar is going to fall versus foreign currencies, I'm just going to disagree with you 100%. And I'm just going to say that all bets are off. Yeah. World War three Blake cow.

44:28Gold goes to the moon. And that's the only thing I want. But no, no, no, no, no, let me respond to that. Let me let's stipulate that point. Gold goes up. Everything else is absolutely annihilated in any meaningful sense, right? But in the meantime, I think that the answer, I think the point is that in that kind of a scenario, which is almost always the fourth turning imperial switch scenario, it's always chaotic. It always requires like hitting a hard wall. Now, the argument is maybe we could try to engineer something strategically that's less painful. But in that hard wall scenario, the pain is so great, either inflationary debt collapse, income compression, also social unrest, political strife, all sorts of tail risks emerge, which is why usually there's a war to pacify and distract. But, you know, and also just rivalries between these competing powers. But that always happens. And what will happen to currencies at that point will not be a function of the balance sheets or the transactions of global trade or foreign claims. It'll be a function of what policymakers say and do and impose, like capital controls.

45:30And at that point, the incentive is to flee before they do anything. Absolutely. That's the problem with that. And that's the non-linearity. So where everything spirals out of control. Let me just express to you why this is starting to frustrate me, because I love talking to you guys about this stuff. But I've already acknowledged gold that you go to $50,000 in the scenario. Can we now talk about something other than gold? I thought this was about gold. No, I thought this was about gold. No, but when I wasn't talking about gold, I was talking about dollar versus euro, dollar versus yen. I'm not talking about gold. I stipulated that at the start of my point. I think the reason this frustrates you is because you refuse to acknowledge that people are net dollar asset holders. No, no, no, no. They're not net dollar debtors anymore. They can sell those assets. But for the sake of the argument, I will give that to you for now. Now, we agree that gold's going to go to $850,000 in ounce. And that the world is net positive dollars. Can we talk about relative level of fiat just for a second, even though this overall conversation is about gold?

46:32I was just talking about that. So no, no, so then we ask, no, no, no. I just did. You just don't like my answer. I heard your answer, and I've accepted that that's your opinion. I would like to hear from John. In the scenario that you painted, I am curious whether you believe the dollar would outperform other fiat. Some other fiat would probably outperform. Which one? I think Japan and Switzerland hold up very, very well in this scenario. Japan can fund its retirement system for over a decade by gradually liquidating its holdings of treasuries. And so it can get through its demographic time bomb. It can actually diffuse its demographic time bomb, not 100%. But it has a lot of flexibility in that regard with its massive net foreign credit position. So Japan's got a lot of flexibility. Obviously, Switzerland has a lot of financial flexibility. Because of its massive net foreign credit position relative to GDP. So you do have a few countries that have tremendous flexibility. However, as you always are keen to point out, the moment war breaks out, you know what?

47:32If you're holding fiat, you have no flexibility. All that's going to matter is how much gold you have. And if it's a war scenario, you go straight to gold. I don't care what fiat burns first in that scenario. I would also add China to that. I think China as a net creditor, in particularly because it's own, I totally, is yet totally get your point on silver. And China basically has a lot of the refining capacity of a lot of minerals and real assets, whereas the source supply is coming from parts of the Western world. But this is also why they've basically, you know, they've basically extended so much debt through the Belt and Road initiative across Africa to secure these wars. But if you're just, my point is just that China actually now is a pretty partnered with Russia and other folks at the fringe is a pretty self cohesive unit financially. The issue it just has is that then the world will have this issue is that all of the refining supply for raw materials, all the manufacturing capacity, it's all in this block, in the Eastern block,

48:33and all of the demand is in the West. I would like to focus the question a bit more here on also like the pricing of gold. We've seen there's a big divide between, I'm sure if Izzy, your point was to this, otherwise I would like to maybe move on to another point. What did you want to say, very good? I just want to say that if we all agree that all these services are bad and have been like responsible for the hollowing out of industrial manufacturing might in the West, then surely if these countries unwind these services because of the dynamics you're talking about, that will inevitably create demand that allows America and the West to reconstitute a lot of that manufacturing strength. I agree that. I absolutely agree with that. Excellent point. Great, on this agreement, perfect. Everyone agrees that this is wonderful, a miracle. It's suspicious. So one thing I was also like that we, I think, barely mentioned is the pricing of gold, right? We've seen a historically co-max and London

49:35being kind of the source of this pricing, more and more moving East, there's periodically higher premiums and Shanghai, there's a physical demand in East, but still the financial plumbing being heavily still in the West. How does that transform kind of the question that we had then on physical versus paper where paper would be, let's say, still the West dominant way of, let's say, lubricating that mechanism of pricing gold, whereas the East is just going full fledged on physical only and kind of scavenging if it's just not the gold, but also silver and all kinds of other commodities. Can I ask a question, what do you say going full physical, how, what does that mean? Physical being like the purchase of physical action, delivery, delivery, direct, yes. Right, right. You're just comparing the co-max market, which has the option to cash settle in built into the contract. But which mostly does it, right? So there's been a net flow of physical gold from West to East for many, many years. I've just been going on an awfully long time,

50:37but of course the West has a very large gold derivatives market, whereas the East doesn't really have a large gold derivatives market. What I think is interesting here is of course, gold derivatives and silver derivatives require counter parties of some kind. Physical gold does not. And if you require counter parties, then you need a legal framework that is accepted on both sides in the event one of those counter parties is not able to fulfill their obligations. When trust and confidence break down in the markets and there's even a lack of trust and confidence in the legal regime and the jurisdiction itself, perhaps because World War Three is broken out, physical gold is all that matters or silver is all that matters with a company. And I think one reason why there's such a preference for actual physical in the East is because the East simply does not trust Western institutions anymore. And if the West tries to keep the game going in golden silver by innovating around the margins

51:39with new exotic derivatives that somehow have some yield on gold or silver in exchange for supposedly an acceptable risk, I don't think that game is going to be played in the East. I don't think they will go down that road. I would argue that the reason that the East has enough finity for real gold and silver is time and time again their own currencies have been devalued against them. That's part of it. Yeah, I would agree. I struggled to find more than a cursory amount of citizens in China waking up every morning so Jay Powell's lost his mind. But you know, my yuan doesn't buy me but it was so nice. Well, if you're in the China morning post, articles like that appear with some regular help. They're very aware. And if you believe the articles that on the head, I can say from personal experience, in the same way that it might be in New York time. But they have here, of course, I can just tell you from personal experience having interacted with these policy makers that they're well aware of historical cycles. They are well aware. The Chinese more than anybody else studies what happened in Japan?

52:39How did the Soviet Union break down? What happened to us in the various dynasties, 2000 years ago? They've learned through a long continued existence and embodied knowledge of how these cycles work, not to print, not to fiscally stimulate. You see Xi saying, look, China printed well in the United States did. Look, Xi is now saying, look, we're gonna, we're gonna not do that, right? Like he's, no. They've done it. In the last 25 years, China's printed more money than the United States. But this is being called a time. They've made it call a time. No, no, no, no, no, no. It is not. It's one other time. Otherwise it's become a place. Let me finish this point. They are calling time on the whole system. They've been doing that because they've been a willing party to the US dollar fiat system. That's why they've printed. In exchange, the US has printed. Everybody's printed. Everybody's borrowed, okay? The imbalances are everywhere. The Missalications are everywhere. China's opting out of this system. They would have done way more printing last year to deal with this property collapse if they weren't focused on the currency. That's what they're focused on. Strategic dominance of the currency as a transaction unit. Then a savings vehicle ultimately.

53:40They're stuck between, but they don't need that initially. I agree with that. Because they, yeah, they are. It's here, Lisiots. Yeah, so the way I see it is that they're stuck between a rock and a half place. If they allow the currency to appreciate too much, they lose their export advantage. If they allow, you know, if they print the money, they need to print to effectively stave off a massive deflationary crisis. They're forced into liberalization in a way that is incredibly, I think, potentially limits the control of the CCP. And they would have to then allow for the sort of welfare economy that just does not exist in China. That would make it uncompetitive also on an export basis. Wait, why do they have to do a welfare economy? Because they have no welfare economy at all. Why do they need one? They don't believe in it. Well, because their currency gets devalued by 80% they're going to have to pay. Which is kind of also, like without... They're pending. Right. But like, if you have a deflation,

54:41without how else are you going to support your life? How are you going to stop people going hungry? If they market just clear as if you were, I think it would. China has an institution called the family in the extended family. Yeah, but they have no savings. They have no property to save. Because every single time they try to save, she kills one of the bubbles. So they can't... Historically, something is changing now. I don't disagree. I think they're being... They're slowly shifting towards liberalization. They've been forced into a corner where they have to. However, traditionally, every time a Chinese family wants to put their, you know, savings into something solid and secure, something happens. Whether it's shadow banking, that gets constrained. Crypto out of here. Obviously, capital controls, very difficult to get, exposure to the dollar. Real estate. Well, we know what's happening with these. Well, for me, that helps to explain why they market. Look at the Chinese equity market. It has literally flatlined. It totally explains why they're buying gold. Yes. Their currency is going to go to shit. Well, they're all trying to. But the point is they've left with no other option

55:42to put their money. Exactly. Where else are they going to put their money? In gold? And give you every other... Every other... Every other savings option has no yield to it, right? How can you... And you've got your facing a one... Like, demographic crisis on top of that, where most people have one child. Yeah, the demographics are awful. They have... Like, okay. So I think their plan is we can shift into robotics. We can somehow hyper... You know, we can move up the value chain. We don't have to depend on cheap labor anymore. But at that point, you're liberalizing the system. You have to, because without... With the concentration of technology, AI, robotics, how else are you going to distribute the wealth locally and ensure people literally don't starve? And if you do that, you're finally, I think, competing with the West at an equilibrium, at a fair competitive sort of level, where you don't have that sort of continued... The price manipulation to give you an advantage on the export.

56:44I'm going to recent to the conversation here, like, less on China-focused, purely on China, even though I think we covered a lot of that. Sorry. And that was on China. It was like a China gold thing. But I really want to bring it back now to the pricing mechanism, because I think we haven't answered this properly. But can I say on the pricing and on the physical point in China? Yes, please. My understanding, and I could be wrong, is that people in China, there's such demand to basically hedge against you on a risk, that they can't even afford a gold coin. They're buying gold beads. So this is why you've seen this like pushed up. I'll start somewhere. Yes, but on a relative price level, this is not indicative of a rich society that's going to out-compete. Well, if that gold bead is re-value to $20,000 an ounce, they'll become longer. It's going to be good for that kind of purchasing power terms. But the other thing is, though, you're approaching this from kind of a Western mindset. And I think you underestimate the hardiness of emerging market populations who have never had the ability to rely on a welfare state. And somehow are used to in condition

57:45to the volatility they endure. And they do that by not having a lot of debt. That's the main thing they do. So now I want to kind of refocus this, and I want to ask you, like if London remains a primary OTC physical clearing hub, and that the comics dominates liquidity through futures, then what is the thing that the East needs to, let's say, get to price its, then East side. Open markets. When it comes to gold specifically? Yeah. Yeah. Okay. Yeah, liquidity. Yeah, you have to remove capital controls and you have to have open markets. And I don't think so. One thing that I think would help. I think they want to do it. China, in this regard, you have to build trust and confidence in the custody of the underlying metal. China might do a deal with a country that's perceived as a relatively neutral, independent power that's willing to serve as the custodian for the gold in lieu of it being mainland China.

58:47Maybe there's some sort of deal that could be done with Hong Kong or Singapore. Well, they're doing that. Well, but you can see why. Yeah, half way house. It's that, right? A bit of a half way house. Okay. We understand, as you were saying, Brent, we understand Exxon or Chevron or whoever it is, where we expect you to pay gold for the, or the gold market's gonna have to shift over to oil now. But we understand that you don't want it to be mainland. Okay, we've made an arrangement with Singapore or maybe in future the Philippines. Or who know what it is? It's their own option. They've Asia has done this many, many times where they wanna open up but they don't wanna give up complete economic control. And how do you thread that needle? And they do it by creating free trade zones. Little areas like Shenzhen that have basically a self-contained financial system and settlement payments and a different set of legal structures and so on. And now they're adding to those free trade zones, financials and offshore financial zones, which sort of function in the same way as what you're saying with Hong Kong. And Hong Kong was obviously the best example.

59:48Oh, it used to be. Now it's question. On the currency level, I had an interview with Rivas Nagyav who was floating the idea of the Hong Kong dollar being kind of like a proxy for the yuan to be able to actually be used kind of. They might repag that to gold. That could be a way to thread the needle a little bit. I don't think they need to do that though but there's a lot of liquidity in Hong Kong that could be immediately converted. So I wanna finish on the tokenization of gold and to see how actually that would be a path forward. It's something that's been obviously like kind of talked about and also explored from the bricks-focused point of view as well. How realistic do you think that this could actually work? And also Lizzy, you've made a lot of work at things in stablecoin especially recently and you're also gonna publish, I think, soon I'm not sure how much you can share about this. And then a report that people in the golden industry know about, how would you say that this system could actually work on a tokenized gold basis? So, I mean, it's been fascinating here

1:00:50for tokenized stablecoin gold because one of the biggest players, Teva has not only been pushing its core product but it's also been buying gold on its own balance sheet with the proff proceeds it has made from issuing dollar stablecoins. So it's this interesting hybrid of a gold, I mean, when you look at, I mean, if you trust the attestations, you know, it's this interesting hybrid of a financial institution going to a gold equity-based reserve system which also happens to have its own dollar rail system which can't be manipulated in the way that the older dollar system could be where banks were effectively, it was very hard to police their capacity to, I mean, obviously, even Teva can't prove it's got the assets,

1:01:53it says it does and this is the fundamental ongoing problem wherever you go. I don't see blockchain or tokenization really solving that. That is, like, we discuss the other day, it's fundamentally about the reputation of the company and are you using good custodians? Are you able to kind of provide proof of reserve in a way that satisfies your market? Now, Teva has, what I find phenomenal about Teva is that despite all the sort of scandals and continuous rheumatrage about its lack of reserves, it still, it seems to defy the odds. You know, it grew despite all of that to this huge level and people seem to trust it and whether that can be true for a goldback system as well, I think, I don't, I mean, I don't really see how the stablecoin innovation helps on the gold front, frankly. I don't see it as that different to GLD

1:02:55or before that to e-gold or any other mechanism. The real innovation is the tracking of the tokens themselves but not the underlying assets, right? So you have to just trust the company. So, I mean, that's broadly what I think. I don't have a big... Why do you think, like, what's your thought on Teva? Yeah, like, why not do it on it? Well, because of that problem, I think being in the grey zone is somewhat useful sometimes. And, you know, they're based out of the El Salvador and they have certain advantages in being in this sort of ambiguity realm. Obviously, all the genius act issued stablecoins that are now firmly, like Teva has issued a US, you know, USAT, I think they're calling it, that has to be fully audited and based on the genius framework.

1:03:59But, you know, I don't want to like, it's hard to answer this question without speculating wildly, but I think there's an advantage in terms of having a bit of wiggle room on what you can promise to redeem and what you don't promise to redeem. And that's the essential principle. From a state craft perspective. Other factors equal the fewer links there are in the custodial change, the greater the trust and confidence in that particular protocol for exchanging gold in a stablecoin format. And you mentioned GLD. One of the possible advantages of a stablecoin is it can be set up in a direct custody way where there's direct ownership of that metal backing the stablecoin, whereas GLD is set up under banking and securities law. And within that banking and securities law, there are forced misjure and other clauses that give GLD some flexibility within the regulatory structure

1:05:03to engage in derivative use for liquidity purposes, temporary liquidity purposes and whatnot. Stablecoins probably could not get sufficient trust and credibility if they operated in that way, saying, oh, by the way, if we get some liquidity issues, we're just going to use gold and silver derivatives instead. So it's a possible way in which stablecoins could distinguish themselves as a potentially superior form of nearly direct personal custody of gold and silver. Visa either way, GLD was set up. But also if the payment rails do switch, right? And this is obviously like an incremental thing. It's unlikely to be like a big one off switch. It's like a atrophy over time is porting it over it over time. If that happens, then GLD and gold back stablecoins would fundamentally offer different functionality. Like you can save and have exposure to gold either the asset or the absolute price through GLD or something like that, but you can't really transact with it,

1:06:03whereas you could transact theoretically if the payment rails do go into blockchain. Another potential advantage, absolutely. Which is why the real proto version of it is e-gold, I think. But I don't know, and I don't know. This is genuine, I don't know. Whether if you have that transaction functionality, does that allow for direct link to the underlying assets? Does it not allow more obscurity? Because if you've got a very liquid pool of tokens that are changing hands, how does the custody directly line up? It becomes a better instrument, which is you would say like some sort of encryption pairing would entitle you to this block of gold. That's just how you see it. Yes, indeed. And keep in mind that financial assets for the vast bulk of the development

1:07:04of the modern financial world were bearer assets. It's like a tally stick, Tom. I mean, that wonderful thriller film, Die Hard, is based on trying to steal bearer bonds in the vault of building. I mean, that used to be the way things were done. So this in a way is going back to the way things used to be. Again, bear assets have advantages and disadvantages. They're subject to potential fraud. You have to do your due diligence. And to be fair, the only regulator for a bearer asset is caveat mentor. I was just like, that is something to think about. And I don't want this to come across as negative gold because I'm a huge believer. But gold actually does have a counterparty. And the counterparty is whoever's storing it. I agree with that, right? And so, and that's why I think... Well, you can go with your own bunker. Yeah, yeah. No, that's something that you can self-custody, right? That has risks, too, right? Your own counterparty risk, too. You might forget your lock. Yeah, you're off seat, right? Yeah. Yeah, there's no perfect solution, Eddie. No, there's not. That's another thing.

1:08:04It's like our hard, like these things have like objective. We have a fragile map. I'm very the gold. We live in an imperfect world. The idea that there is a bulletproof solution to any of this is, there's simply, we just should not have got here. That is like it, but you can't, we are here. We can agree on that. It's not a good place to start, right? Yeah, right, right. So don't just see because, Brenda, you've also mentioned that you see stablecoins as a new Bretton Woods moment, right? But does then tokenized gold also fit into that equation here? Sure, sure. I think it fits in, but proof is like, fact that the stablecoin for a lot of these stablecoin companies like Deva are indirectly reserving their own equity in gold. Yeah. And the question is, why did they all of a sudden start buying so much gold so aggressively? Well, I think, I think there is a growing awareness that fee not fiat has many, many problems, even at like the citizen level, right?

1:09:07I don't think that citizens in general understand monetary theory. They do understand that over time, their fiat currency doesn't buy as much as it used to. And I think that what's happened since COVID has reinforced that to a greater degree. One of the things that we've talked about, I can't remember if we talked about it earlier in this discussion or if it was last night, as we were talking about, to the extent that China or Russia, whoever is no longer buying as many treasures as they used to, and so now that excess has to be sucked up by some other country. I think that excess gets sucked up by a stablecoins. And I think gold continues to rise in importance as well. And I think that's how the dollar and gold end up rising together, which is all the other fiat. Let me ask everyone a question, just a quick, very short question. If you have the choice as an investor, strategic, official, or just an ordinary household, to own a non-intersparing dollar back stablecoin or a non-intersparing gold back stablecoin,

1:10:10which would you prefer? From an investment perspective or from an operational perspective. Either or, you can break that up. If I'm just an investor looking to invest, it's clearly gold. If I'm running a business, it's clearly dollars. Okay. Yeah. So why I'm interested in the equity layer is because, I don't know if you recall, after 2008, there was a great book that was written by Annette Admatti called The Bank is New Close. And her basic argument was that banks should be more like, you know, VCs and fund a lot more of their lending through equity rather than through debt. And if that was the case, the system would be much more resilient, right? That's how I used to work. Yeah, that's how I used to work now. Yeah. So when you look at how the analyst community sort of judges Teva and the credit ratings, and you see they're all sort of, they see it as hype, very risky. And they're saying, you know, even though it's one to one back, there's all this ambiguity about the nature of the reserves,

1:11:13et cetera. But what they, I think, they fail to account for, is that Teva is not, I mean, it's one of the stingiest companies in the world. It has a very small workforce, and almost all the proceeds that reinvest, right? So all the really risky stuff they're doing, and they are, you know, I sat down with the CEO, and he was explaining, like he has, they have a sort of one-third of the proceeds go into gold, and, you know, what they see as hedging against the sort of debasement risk. Another third goes into super high tech investments, where they're doing all these crypto loans, AI loans, and then there's another share where they're buying land, and commodities, and trying to kind of, so they've got a really interesting sort of portfolio mentality in terms of how they're managing the equity, but indirectly, they are turning themselves

1:12:13into what I would call an equity-based financial lender, which is exactly what Annette was saying we should end up with. The banks were never going to do that. The banks were never going to reinvent themselves that way, because, hey, they love the bundling of the payment flow with the credit function, right? They love that. Absolutely, yeah. I mean, the license to print money, and an unwritten laptop. Whereas in this way, like Teva has indirectly allowed us, or shown us a pathway to this unbundling of the two, back into the old sort of lights. The payment flow stays fully reserved, but we have this equity buffer, which is where we're going to do our high-risk lending, our credit lending, all the sort of other kind of macro-focused stuff. Palimates, they've got to be good at that lending. Yes, I agree. But the point is that equity then is indirectly backing the stablecoin element. So when S&P looks at the overall business, it should account for that equity,

1:13:14because that's at the end of the day, there's a problem in the payment rail side. But the problem is that if they make losses, which they will cyclically on the lending exposure, that that will eat into the equity buffer. Sorry? So let's say they have the equity, and it's backing the transactional function, and then they have, even like let's take Tethers' ratios, like I think they've got about 15% in gold, right? So let's say that's their equity layer, and then they've got 6X leverage on that, which is pretty modest from a bank perspective. So if it runs like that, you're still going to have credit cycles, and you're still going to have losses. And so there has to be strict limits. It's accountable, but the problem is there's no, you know, this is going back to Glass-Steagall, right? Like there's no dividing line between the liability you take on the credit book and the backing of your transaction functionality. Because what will happen if it's all one unit, is that as these losses occur with the credit cycle, it will eat into the equity buffer. So that's the right way. And I also have to cap you up. You're very sure, and you go up, just get where it's at.

1:14:16That's the answer. Yeah, yeah, you have to put up the limit and buy it. I'm putting thoughts, and I just must caveat this, because they don't want to be seen as a lender. They don't, they see themselves as an investment, you know, vehicle, not a lender, like just for medium of exchange. So this conversation, and I think this coming days will all about be falling up on that, and just taking those things apart, which is beautiful. I think this was also the aim of the session. Very shortly, though, I would like everyone of you to maybe give you concluding thoughts on the future of gold. Well, so I think we spent a lot of time talking about the secular picture. I think that I have kind of a different view about the recent gold rally in particular, which I think is important for the direction, a directional countervailing headwind against that secular picture. And that is just that, you know, the US economy has really been dying on the vine for several years now, but particularly the good sensitive, rate sensitive economy. And then when the trade war happened last year, there was this huge rush of front loading

1:15:18and consumers bringing forward big ticket spending and companies and multinationals, building supply chain buffers on shore, right? So all of that led to this enormous explosion in trade last year. And that money largely went to, it went everywhere, but all the, all the exporter nations, but a lot of it went to China and China on the official side took that the proceeds and put it in gold. And it's that transfer of dollar liquidity from on shore to offshore and recycling into gold instead of back into the US system, which led to combination of dollar weakness versus other currencies, the gold surge, the silver surge, as well as the relative outperformance of US, of global assets versus US assets as the liquidity flows dictated, which local currency securities did best, right? Both bonds and equities. So tactically speaking, our view is that we're in a recession right now. Then we've just entered a recession that we've pulled forward all of this demand. It's going to be very difficult to stimulate for a bunch of reasons we don't need to get into. And that's going to be a big headwind to trade demand.

1:16:19And so the main channel by which US dollar liquidity gets moved abroad is actually the trade side. And that in a recession starts to fall and go down, which has the effect of kind of narrowing the base of the financial architecture. So that near term is bearish, some a bearish force, it might not be how it nets out, but it's a bearish force for gold prices if we go into a recessionary de-leveraging essentially. In the same way that liquidity contracting is bad for Bitcoin, right? Because the prices are functional to the supply of dollars moving out of the US. But if that happens, that's a very good opportunity to port. I mean, the US reaction to this cycle will be important. But if they overreact and overprint, it's like a very clear time to buy that. John, well, I'm very explicit on this point. And I have been for about 20 years now that eventually gold is going to be properly remanetized. Exactly how long that takes, exactly how we get there, exactly how disruptive it's going to be.

1:17:20I don't know, but I believe history is clear on that point. And I believe game theory is clear on that point. And just one point I'd like to stress is that people push back on me and say, but nobody wants to lose the control of the printing press. But if you want to try to rebalance the system as disruptive as that might be, and still trade with other countries to the theory to the benefit of all, you've still got to have a means of exchange that everybody trusts, as this is going through the re-adjustment process. Gold provides that game theoretical Nash equilibrium because nobody can devalue it, nobody can default on it, nobody can manipulate it to the same degree as they could, their own national currency to their own national benefit at everyone else's expense. It is the true level playing field for international commerce. One that in theory, the world was on for most of recorded economic history in some form when you stray from that bad things happen.

1:18:20That's happened again. And so I think to correct the imbalances and correct the system, that's where we're going. I strongly hope this is possible without World War III being part of the transition. But I admit the risks are high. Regardless whether it's a World War III scenario or not, gold goes up because the demand function for gold will shift so fundamentally versus national fiat currencies, that it'll be sort of a qualitative step function almost of order of magnitude for gold. It'll be high enough to devalue the imbalances, which are all fiat-denominated. That in my opinion is how you rebalance the global economy and ultimately get on a path to sustainable growth again. But that's optimistic at this current point in time. But we'll get there someday. So I just have to correct that when I said, Teva has a three-pillar strategy. It has, I misspoke and I just wanted to emphasize that it's one-third sort of reinvestment in gold, land,

1:19:21sort of debasement hedging. The third strategy is reinvestment in their own business, the network, their rails, and then the other third is VC kind of style high-tech. So I just wanted to correct that. But in terms of the future of gold, I mean, it's like I see gold being the primary vehicle for countries that don't want to use the dollar, basically. And I think that is a, it is they're going to be forced to do that because the era of these soft budget constraints, the era of using your own currency as a manipulation of your own currency or devaluation of your currency to gain an edge in export markets. Those days are coming to an end. And to be able to have access to capital markets, you need to show that people can trust you. And unfortunately, when you don't have, if you're not the global reserve currency, you're going to have to use something else. It's going to be gold, gold-backed stablecoins, some sort of element that provides those countries

1:20:25with a hard currency mechanism. It could also be a bit going, but I don't know. Yeah, I would just say that, I've long felt that gold was very important. Perhaps the most important part of anybody's portfolio or in the institution's portfolio. But I'm not somebody who thinks all your money should be in gold. I think you should have a healthy allocation, but I think you can have other things in there as well. And while I think gold will become even more important in the future, I don't expect it to be... That doesn't necessarily mean the price is going to double or triple in the next six months. Gold could rise in importance and go sideways or even down for the next two or three years. And it wouldn't change anything for me. So I don't really think about it on a price perspective. I think of it on an optionality perspective and gold provides incredible optionality. And the final thing I've said this last night, I'll say it again, is I think the last thing the country wants is a gold standard.

1:21:26It doesn't mean they won't end up there. Maybe their hand will be forced. And that's one of the reasons why gold gives great optionality. But I also still remain of the opinion that fiat currencies are important. And the relative levels of fiat currency are extremely important. And it's important to understand why that is. And so having discussions like this is a good way to kind of... No, it's a good way to... We're never all going to agree on stuff, right? We're just not, because we have... No, but these are the issues. But these are the important issues. And so this is my way of saying thank you to you for hosting something like this. So the people who aren't as versed in it as maybe we are can start developing their own ideas about it. Because one of the things John and I were talking about it in our last night is our kids. And like we have instilled in our kids. We've never told them what to do, it's per se. And we've never told them what they had to think per se. But we like them to be able to think and make up their own minds. Oh, I think this is a good effort in that.

1:22:27Yeah, perfect. Critical thinking is the new goal. There you go. There you go. All right, on this note, thanks to this amazing panel for... Yeah, all the ideas, this intellectual arena that is in the best of settings, I would say. To the viewers and the listeners, thanks for still holding on to this heated conversation. And don't forget, you have a discount code session too. You will see all the details about this in the link in the description. Please like this video and subscribe. And I'll see you in other sessions of the future of gold.