With all due respect to Jim Rickards, and I have read his books and many papers, but he is a one trick pony. While he may have been part of the Kissinger team that developed the Petrodollar system of the 70's, the main purpose was to support our UST market. He did not mention that once in the conversation with Steve, that is almost disingenuous. We needed buyers of our UST's to support our addictive penchant of spending money we did not have - Full stop! We were a true super power, only the USSR was close but that was only in the number of nuclear weapons, otherwise there was no match. We were able to easily offer a safety umbrella. Foreigners with surplus dollars had to buy UST's to neutralize their own currencies from appreciating. PLUS, we as a country were in a much better fiscal situation, and even though we went through the "malaise" as per Carter and I remember sitting in line for gas with my dad on even days (remember that), Volcker was able to snuff it out with 20% interest rates. The dollar roared back.
Petrodollar 2.0 - I call bullshit on that? With the dire fiscal situation we are in today, and no gold backing who the hell would want a depreciating piece of printed paper for an appreciating hard asset, especially knowing what is too come in the next 2 decades (massive entitlement spending)! Going in with any kind of stick now would have been a miserable failure. We are certainly not as powerful of a Super Power as we were 50 years ago, we have NOT won a war in 70 years, our military has atrophied and we would not be a match for the combined China/Russia tag team. As a patriot this is painful to say, but it is true as it became apparent by getting our ass kicked in Ukraine. Twenty years ago, all you could get was cheap plastic shit from China, today the quality of their manufactured products are as we would have (even though we make little) and now their technology is almost as good as ours. So to ask what are they going to do with all that yuan? also disingenuous. And besides, any leftover yuan they go the SGE and trade them for gold! Trump and Bessent's biggest mistake was NOT taking down the debt/gdp (like < 80) or significantly bringing the USD down (like DXY < 90) before imposing these tariffs. Without these adjustments first, we go into a debt spiral. We can not handle a 10Yr much greater than 4.5% and we folded like a cheap suit within days as our UST market could not handle the stress after implementing tariffs. They both know we need a much weaker dollar and they do not want the UST as a world's reserve asset. The dollar will continue to be the world's reserve currency as there is so much of it, but only for transactional purposes. It certainly is not a store of value.
If he had something else in mind, he should have spelled it out. But rebranding the same thing as Petrodollar 2.0 - no way.
Pug, so what are you actually reading in the tea leaves for the structure and incentives in the new system? Rickards is an intelligence guy and always has been. But beyond citing what Luke Gromen says, what are you thinking is actually the play on the chessboard here?
I have been a huge fan of Luke since I first listened to The Anatomy of the US Dollar found in the Timeless Series at macrovoices.com back in 2018 and have been an avid reader of his weekly subscription since 2020. I listen to most of Erik Townsends interviews and have even listened and followed Brent Johnson's Milkshake Theory. While his theory is sound, Bessent will not allow the USD to rise as much as Johnson believes it could. It would cause yields to rise and we are out of runway, much higher than we are now and the UST market dysfunctions. Just look at a chart of the SPX and an inverted MOVE index. The later gets to high and things turn crazy, quickly. My journey down the rabbit hole of sound money was started by Ross Perot and my first ounce of real money was purchased for under $300. At the end of the day "there is no stopping this train", as described by Lynn Alden.
Your question is a loaded one? But in reality the US is in a real conundrum. Fifty years of offshoring, and horrible mismanagement. Trump and Bessent are the first to say the truth out loud. They are trying to reverse 70 years of zeitgeist, but unfortunately it could take decades to fix, our demographics are working against us and more than half the population is on the dole. China works on decade long strategies we work on 2 year cycles with no term limits. All of this with the possibility of AI putting a shitload of people out of work in the next decade, all with mortgages, car payments, school loans, credit card bills, etc... The only way we can compete with the rest of the world is by significantly reducing the value of the USD quickly relative to other currencies and continuing the transition out of UST's as the world's reserve asset, which many have been doing since 2014. Ultimately, the FED will be forced to enact YCC, no different than after WWII for 10 years, putting a lock on the 10 yr at about 2.5% while inflation ran hot and real rates were significantly negative throughout this period. LT bond holders will get creamed, but it is the only way to reduce the debt/gdp. Naturally, Trump and Bessent know this but have to be careful as they put the pieces together to achieve Bessent's 3% gdp; 3% deficit/gdp (now near 7%); an +3 "equivalent" mbd. While many believe the later can not be achieved with $50-$60 (great for US at the gas pump) as the cost benefit to frackers (since they represent the world's marginal increase in oil production since 2010) does not exist, Doomberg seems to be of the opinion that Bessent was referring to "equivalent" or in the form of other hydrocarbons (i.e. Natural gas). Other wonder how the Middle East will work with these price levels as it does not cover their social programs (they need >$80/bbl). Well, they do have lots of gold - again we come full circle we need a lower USD and higher value of gold and allow the balance of trade to settle in a nuetral asset. The low oil price would also be supported by a deal with Iran which would add significant volume to the market.
Liquidity is coming to market within the next couple of months. Treasury/FED are talking about easing the SLR, like during covid (take a look at the charts from 4/2020 through 3/2021 to see how assets performed during this period of eased SLR rules), and there are those that believe Trump and Bessent will eliminate the exemption of foreign witholding tax on interest and dividends which has been in place since 1984 (needs to be done by Congress). What do you think will happen if a 30% tax is imposed on foreigners for US investments? Do you hear that sucking sound? While the income would be great, it would also aid in reducing the value of the USD, it will be negative for our markets, something Trump and Bessent can not afford for long. The Treasury just reported the 2nd highest monthly tax revenue last month (from 20%+ gains in the markets in 2024). If the market even as so much goes sideways forget about down, tax receipts will decline quickly and all those economic metrics named above will worsen. The stock market provides support to the bond market - it keeps it functional!
Net Capital gains (think stock option compensation) + Taxable retirement distributions = 200% of US PCE growth;
PCE growth = 2/3 of GDP; so it is mathematically impossible for PCE to rise if stocks are NOT rising;
If PCE is NOT rising then it is mathematically impossible for GDP to rise;
If GDP is NOT rising then tax receipts do NOT rise (but decline); and if tax receipts do NOT rise when you have debt/gdp >125% you have a debt crisis.
Sideways or fall stocks = debt crisis. There is no stopping this train.
Perhaps there is a lot of Luke's influence here, but few macro people disagree, (forget the yoyo's on wall street, they have their own agenda, Vince demonstrates that week after week). Well it is Saturday and I have been working on finding a short in my house, getting close, but have to focus on getting it fixed. At the EOD, we are all here becuase we believe one way or another the world order is changing, we have front row seats, and we want to make the best decisions today to come out the other end maintaining the purchasing power of the assets we have all worked so hard to accumulate. There is too much evidence out there to suggest that gold along with silver and perhaps bitcoin will in fact be an integral part of the plan. Time will tell! I do not think it will be much more than a couple of quarters. Patience is a virtue and right now I have plenty! Enjoy the rest of the weekend.
Also, I have wondered if this game is not rigged to give our friends sweet deals on tariffs so they're not left holding the UST bag (haha didn't know that was a double entendre until after I typed it), when it APPEARS as though the US is forcing people out of their current bonds and into newer bonds (and eventually some type of "gold-backed" bonds?) and into the metal itself (which i'm guessing we have acquired much more than we let on which is why we let our alternative media run rampant with the idea that China has a ton more than we do and we have nothing (again, likely another info warfare narrative.
My question wasn't meant to be loaded, per se, it was intended to help you find YOUR inner voice having acquired all that knowledge/information/perspective over the years to see what you see as probable, likely, or certain. I always suspect in the chess game that they cheat and unlike in chess, they pull rabbits out of the bishops' hats. So I expect that.
However, I've been looking at this for nearly 30 years now and realize that I'm not smart enough to figure out where its going so I tend to just take notes, draw dots, and attempt to connect them as best as possible while tuning out all the information warfare operations to the extent we're able to. Rickards is a part of those operations.
However, who else is? Another? FOA? FOFOA? GATA? Maguire? Alistair MacLeod? and all the other current ones we have who are one-trick ponies as you have labeled them (P. Schiff I'm looking at you!).
This smacks of desperation. Trump is trying to blow hot air into a baloon that has a fucking hole in it. Why would the Saudi’s want Shit dollars and shitty US IOU’s when they can have gold without the risk?
You can tell Trump is on the ropes, he has trashed bibi to cut the deal with the Arabs. There is no honour among thieves. Between the Jews, the Arabs and Trump if they all told me each day of the week ended in “day” I would not believe them.
Could the peg be gold to oil since the current trend is looking to over-turn globalism back towards mercantilsm. the reserve currency goal would be counter-productive.
With all due respect to Jim Rickards, and I have read his books and many papers, but he is a one trick pony. While he may have been part of the Kissinger team that developed the Petrodollar system of the 70's, the main purpose was to support our UST market. He did not mention that once in the conversation with Steve, that is almost disingenuous. We needed buyers of our UST's to support our addictive penchant of spending money we did not have - Full stop! We were a true super power, only the USSR was close but that was only in the number of nuclear weapons, otherwise there was no match. We were able to easily offer a safety umbrella. Foreigners with surplus dollars had to buy UST's to neutralize their own currencies from appreciating. PLUS, we as a country were in a much better fiscal situation, and even though we went through the "malaise" as per Carter and I remember sitting in line for gas with my dad on even days (remember that), Volcker was able to snuff it out with 20% interest rates. The dollar roared back.
Petrodollar 2.0 - I call bullshit on that? With the dire fiscal situation we are in today, and no gold backing who the hell would want a depreciating piece of printed paper for an appreciating hard asset, especially knowing what is too come in the next 2 decades (massive entitlement spending)! Going in with any kind of stick now would have been a miserable failure. We are certainly not as powerful of a Super Power as we were 50 years ago, we have NOT won a war in 70 years, our military has atrophied and we would not be a match for the combined China/Russia tag team. As a patriot this is painful to say, but it is true as it became apparent by getting our ass kicked in Ukraine. Twenty years ago, all you could get was cheap plastic shit from China, today the quality of their manufactured products are as we would have (even though we make little) and now their technology is almost as good as ours. So to ask what are they going to do with all that yuan? also disingenuous. And besides, any leftover yuan they go the SGE and trade them for gold! Trump and Bessent's biggest mistake was NOT taking down the debt/gdp (like < 80) or significantly bringing the USD down (like DXY < 90) before imposing these tariffs. Without these adjustments first, we go into a debt spiral. We can not handle a 10Yr much greater than 4.5% and we folded like a cheap suit within days as our UST market could not handle the stress after implementing tariffs. They both know we need a much weaker dollar and they do not want the UST as a world's reserve asset. The dollar will continue to be the world's reserve currency as there is so much of it, but only for transactional purposes. It certainly is not a store of value.
If he had something else in mind, he should have spelled it out. But rebranding the same thing as Petrodollar 2.0 - no way.
Anyone interested in Jim's books:
https://u.pcloud.link/publink/show?code=kZT92h5Z8fx6QN2XhDXOSF2jPj9YbSJvgSxV
Pug, so what are you actually reading in the tea leaves for the structure and incentives in the new system? Rickards is an intelligence guy and always has been. But beyond citing what Luke Gromen says, what are you thinking is actually the play on the chessboard here?
I have been a huge fan of Luke since I first listened to The Anatomy of the US Dollar found in the Timeless Series at macrovoices.com back in 2018 and have been an avid reader of his weekly subscription since 2020. I listen to most of Erik Townsends interviews and have even listened and followed Brent Johnson's Milkshake Theory. While his theory is sound, Bessent will not allow the USD to rise as much as Johnson believes it could. It would cause yields to rise and we are out of runway, much higher than we are now and the UST market dysfunctions. Just look at a chart of the SPX and an inverted MOVE index. The later gets to high and things turn crazy, quickly. My journey down the rabbit hole of sound money was started by Ross Perot and my first ounce of real money was purchased for under $300. At the end of the day "there is no stopping this train", as described by Lynn Alden.
Your question is a loaded one? But in reality the US is in a real conundrum. Fifty years of offshoring, and horrible mismanagement. Trump and Bessent are the first to say the truth out loud. They are trying to reverse 70 years of zeitgeist, but unfortunately it could take decades to fix, our demographics are working against us and more than half the population is on the dole. China works on decade long strategies we work on 2 year cycles with no term limits. All of this with the possibility of AI putting a shitload of people out of work in the next decade, all with mortgages, car payments, school loans, credit card bills, etc... The only way we can compete with the rest of the world is by significantly reducing the value of the USD quickly relative to other currencies and continuing the transition out of UST's as the world's reserve asset, which many have been doing since 2014. Ultimately, the FED will be forced to enact YCC, no different than after WWII for 10 years, putting a lock on the 10 yr at about 2.5% while inflation ran hot and real rates were significantly negative throughout this period. LT bond holders will get creamed, but it is the only way to reduce the debt/gdp. Naturally, Trump and Bessent know this but have to be careful as they put the pieces together to achieve Bessent's 3% gdp; 3% deficit/gdp (now near 7%); an +3 "equivalent" mbd. While many believe the later can not be achieved with $50-$60 (great for US at the gas pump) as the cost benefit to frackers (since they represent the world's marginal increase in oil production since 2010) does not exist, Doomberg seems to be of the opinion that Bessent was referring to "equivalent" or in the form of other hydrocarbons (i.e. Natural gas). Other wonder how the Middle East will work with these price levels as it does not cover their social programs (they need >$80/bbl). Well, they do have lots of gold - again we come full circle we need a lower USD and higher value of gold and allow the balance of trade to settle in a nuetral asset. The low oil price would also be supported by a deal with Iran which would add significant volume to the market.
Liquidity is coming to market within the next couple of months. Treasury/FED are talking about easing the SLR, like during covid (take a look at the charts from 4/2020 through 3/2021 to see how assets performed during this period of eased SLR rules), and there are those that believe Trump and Bessent will eliminate the exemption of foreign witholding tax on interest and dividends which has been in place since 1984 (needs to be done by Congress). What do you think will happen if a 30% tax is imposed on foreigners for US investments? Do you hear that sucking sound? While the income would be great, it would also aid in reducing the value of the USD, it will be negative for our markets, something Trump and Bessent can not afford for long. The Treasury just reported the 2nd highest monthly tax revenue last month (from 20%+ gains in the markets in 2024). If the market even as so much goes sideways forget about down, tax receipts will decline quickly and all those economic metrics named above will worsen. The stock market provides support to the bond market - it keeps it functional!
Net Capital gains (think stock option compensation) + Taxable retirement distributions = 200% of US PCE growth;
PCE growth = 2/3 of GDP; so it is mathematically impossible for PCE to rise if stocks are NOT rising;
If PCE is NOT rising then it is mathematically impossible for GDP to rise;
If GDP is NOT rising then tax receipts do NOT rise (but decline); and if tax receipts do NOT rise when you have debt/gdp >125% you have a debt crisis.
Sideways or fall stocks = debt crisis. There is no stopping this train.
Perhaps there is a lot of Luke's influence here, but few macro people disagree, (forget the yoyo's on wall street, they have their own agenda, Vince demonstrates that week after week). Well it is Saturday and I have been working on finding a short in my house, getting close, but have to focus on getting it fixed. At the EOD, we are all here becuase we believe one way or another the world order is changing, we have front row seats, and we want to make the best decisions today to come out the other end maintaining the purchasing power of the assets we have all worked so hard to accumulate. There is too much evidence out there to suggest that gold along with silver and perhaps bitcoin will in fact be an integral part of the plan. Time will tell! I do not think it will be much more than a couple of quarters. Patience is a virtue and right now I have plenty! Enjoy the rest of the weekend.
Also, I have wondered if this game is not rigged to give our friends sweet deals on tariffs so they're not left holding the UST bag (haha didn't know that was a double entendre until after I typed it), when it APPEARS as though the US is forcing people out of their current bonds and into newer bonds (and eventually some type of "gold-backed" bonds?) and into the metal itself (which i'm guessing we have acquired much more than we let on which is why we let our alternative media run rampant with the idea that China has a ton more than we do and we have nothing (again, likely another info warfare narrative.
My question wasn't meant to be loaded, per se, it was intended to help you find YOUR inner voice having acquired all that knowledge/information/perspective over the years to see what you see as probable, likely, or certain. I always suspect in the chess game that they cheat and unlike in chess, they pull rabbits out of the bishops' hats. So I expect that.
However, I've been looking at this for nearly 30 years now and realize that I'm not smart enough to figure out where its going so I tend to just take notes, draw dots, and attempt to connect them as best as possible while tuning out all the information warfare operations to the extent we're able to. Rickards is a part of those operations.
However, who else is? Another? FOA? FOFOA? GATA? Maguire? Alistair MacLeod? and all the other current ones we have who are one-trick ponies as you have labeled them (P. Schiff I'm looking at you!).
Thanks for taking the time to share.
This smacks of desperation. Trump is trying to blow hot air into a baloon that has a fucking hole in it. Why would the Saudi’s want Shit dollars and shitty US IOU’s when they can have gold without the risk?
You can tell Trump is on the ropes, he has trashed bibi to cut the deal with the Arabs. There is no honour among thieves. Between the Jews, the Arabs and Trump if they all told me each day of the week ended in “day” I would not believe them.
Could the peg be gold to oil since the current trend is looking to over-turn globalism back towards mercantilsm. the reserve currency goal would be counter-productive.