Matt Smith: Gold, The Changing World Order & USA Strategic Investment in Critical Mineral
What this covers
Matt Smith, co-author of "The Preparation" and host of Doug Casey's podcast, joins Stijn Schmitz to examine the structural forces reshaping gold markets and US monetary policy. Rather than treating the current gold rally as a typical market cycle, Smith argues the price surge reflects a deliberate policy choice by the US government—possibly in tacit coordination with China—to use gold as a mechanism for managing unpayable debts. The conversation moves from this thesis through the economic arithmetic that makes such a strategy necessary, then outward into the geopolitical and investment implications of a world being quietly recalibrated through the price of precious metals.
The discussion covers several distinct domains. On the macroeconomic side, Matt Smith examines why conventional valuation frameworks fail here: with roughly $175 trillion in unfunded liabilities and tax receipts covering only a small fraction, devaluation becomes the only politically acceptable solution, and gold absorbs that liquidity without the second-order economic damage that oil caused in the 1970s. He extends this to the financial markets layer, pointing to Morgan Stanley's 20% gold allocation recommendation and gold's performance measured against other assets—particularly housing, which has halved in gold-denominated terms since 2000. The conversation then touches on critical minerals, China's long accumulation of gold via the Shanghai Gold Exchange, the role of tariffs and stablecoins, and the geopolitical logic of current US military positioning. Smith is skeptical of traditional higher education, advocating instead for experiential preparation, a view that emerges as part of his broader skepticism toward institutional solutions to economic problems.
Matt Smith argues the current gold bull market is unlike any other because the US (likely with China's tacit cooperation) is deliberately using gold as a 'liquidity sink' to enable a massive dollar devaluation that will resolve unpayable debts, meaning gold has no upper price limit and conventional valuation indicators don't apply.
- US debt, especially ~$175 trillion in unfunded liabilities, is unpayable except through inflation/devaluation
- Gold is the ideal liquidity sink because, unlike oil in the 1970s, it has no second-order inflationary or economic damage
- The absence of any state suppression of the gold price signals a deliberate, possibly coordinated, policy
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Silver and platinum will be pulled along by the devaluation but cannot replace gold as the monetary metal: silver is 'too useful' for industry, whereas gold's near-uselessness for anything else is precisely what makes it the clean liquidity sink without second-order effects.
“the problem with you look at silver, for instance, is that it's just it's too useful to be a to be a monetary metal ... Gold is great because can't really use it for that much else”
Tariffs have not been used as a genuine revenue tool in over 100 years but as a bludgeon to coerce trading partners, and historically in 1971 tariffs were announced in the same statement that closed the gold window precisely to secure cooperation in dollar devaluation.
“in the same announcement that we're closing the gold window there was an announcement of tariffs you know and why because we needed the cooperation of our trading partners to cooperate in the devaluation of our currency”
College is a misallocation of time, capital and energy: the median all-in US cost including opportunity cost is about $300,000 (equal to median household net worth) merely to be able to pay rent, while a structured 16-quarter 'preparation' of real-world skills better channels an 18-year-old's peak energy and openness to novelty.
“the the the median cost in the US is $300,000. Now that's the same as the median net worth of American households ... at 18 you have incredible amounts of energy. You're open to novelty in a way uh that you'll never be again in your life.”
The US lacks domestic production of nearly all critical minerals (e.g., producing ~1% of needed lithium, near-zero despite abundance), creating an investable trend as the state pours capital into companies on the defense department's critical minerals list.
“even lithium ... we have a abundance of lithium, but we can't actually we produce basically zero in the US ... I think we produce 1% or something of what we need”
Trump's tariffs are not designed to generate income but to coerce trading partners into cooperating in a devaluation of the US dollar, leading toward a new monetary framework (the 'Mar-a-Lago accord').
“the purpose of the tariffs was not to generate income but to actually coers your trading partners into cooperation in a in a devaluation of of the US dollar. That's the way it's been used in the past.”
China's accumulation of roughly 27,000 tons of gold off the Shanghai Gold Exchange since ~2002, combined with yuan-to-gold redemption mechanisms, has effectively repaired the balance sheets of the Chinese people and offset their housing bust losses.
“since was it 2002 something like that there's been like 27,000 tons of gold that has been taken off the Shanghai gold exchange by ch the Chinese. So their balance sheets are rich.”
US military action against Venezuela is a regime-change / oil operation disguised as drug interdiction, since fentanyl doesn't come from there, the boats can't reach the US, and Venezuelan heavy oil is ideally suited to US refineries that cannot process domestic shale.
“The fentanyl doesn't come from there. Maybe cocaine comes from there ... they've got a lot of oil ... it's perfect for the US refineries by the way. Venezuelan oil ... most of [shale] cannot be processed at US oil refineries”
National security objectives supersede presidents, so despite Trump's rhetoric about ending the Ukraine war quickly, US backing continues; the war could be stopped instantly by ceasing US payment of Ukrainian government salaries and pensions.
“these like national security objectives supersede presidents ... you could have stopped it in a minute by saying we're not paying the salaries of all of the government workers in Ukraine anymore or their pensions which we currently pay”
The real US debt problem is roughly $175 trillion in unfunded liabilities owed by Americans to each other—not the headline $37 trillion federal debt—and with tax receipts at about 5% of that annually, it is unpayable, leaving inflation as the only politically acceptable solution.
“everyone knows about the $37 trillion of debt, but it's really the $175 or so billion dollars of unfunded liabilities ... total tax receipts are like 5% of that annually ... it's just totally unpayable”
The US government taking equity stakes in companies (e.g., Intel's 10%) is effectively confiscatory theft because existing shareholders are diluted, and we should expect more such state-capitalist behavior going forward.
“you take the Intel example ... where Intel gave the US 10% of the company ... all the other current shareholders got diluted for that to occur. So ... this is like that's definitely feels like theft”
Housing has actually fallen in price in gold terms over the last 25 years: a median US home cost around 400 ounces of gold in 2000 but only about 100 ounces today, meaning gold owners profited and the long revaluation trend is entering its final stages.
“if you bought a house in you know in the year 2000 in the US it would take I don't know how many like 400 ounces of gold or something on for the median home and it's 100 today which means housing has gone down in the last 25 years in gold terms”
Deep-sea nodule mining will not happen soon because, even if technically possible, abundant easier-to-access and easier-to-refine land-based resources (including many mothballed mines on care and maintenance) make it economically unjustifiable; such projects are mainly vehicles to attract investors.
“there are enough resources that are known that are on land that are easy to get access to that are easier to process and refine ... Even if it's technically possible, it's not economically justifiable”
Gold is the ideal liquidity sink because, unlike oil in the 1970s, soaking up world liquidity into gold accomplishes dollar devaluation without the negative second-order consequences (inflation, economic damage) that oil caused.
“in this 1970s, oil was the sink, the liquidity sink ... it causes inflation. It causes damage to the economy. The great thing about gold being the sink, it's not going to have those negative repercussions”
Stablecoins are less about solving the US debt problem (they don't touch the $175 trillion liabilities) and more a post-reset digital control mechanism that, after devaluation, could be rolled out backed by gold or treasuries, as Tether's gold token is testing.
“it's less about solving the debt problem because it doesn't get close to solving that $175 trillion debt problem ... that's really more for like the post reset ... the roll out of more of these digital controls”
Because gold as a liquidity sink has no upper price limit, gold miners' cash flow will keep up with and exceed inflation, making them a leveraged bet on gold, while juniors—being 'pico caps'—will explode higher with any attention.
“if gold has no upper limit, what does that mean for the miners? ... that means that their cash flow is going to keep up and exceed inflation”
There is an unspoken understanding between the US and China to use gold as a giant liquidity sink to devalue currencies and reestablish balance sheets, evidenced by the absence of any effort to suppress the gold price.
“there is a there is an understanding that they're basically going to use gold as a giant liquidity sink to devalue the currency and to reestablish everyone's balance sheets ... there's no effort to suppress the gold price at this point”
This is not a normal gold bull market but 'the last gold bull market' because once gold becomes money again, the arbitrage that allows bull and bear cycles in gold will disappear.
“Doug said to me like 18 months ago, just off-handedly during our podcast, he said, 'Oh, this is the last gold bull market.' ... once gold is money again ... there won't be that arbitrage to take in bull and bare markets related to to gold”
Morgan Stanley recommended 20% of client portfolios be allocated to gold, an unprecedentedly high allocation, indicating all other assets are in real trouble relative to gold.
“even Morgan Stanley came out as a couple weeks ago and recommended 20% of their clients portfolios be allocated to gold ... I've never heard of anybody recommending that high of one to anyone before”
Gold could reach the M2-implied level of roughly $23,000 by around 2030, which sounds crazy but is conservative once you understand gold used as a liquidity sink has no upper price limit, just as oil rose from a couple dollars to $12-14 a barrel in a short window in the 1970s.
“It's hard to imagine we don't get to that, you know, that M2 money number, you know, of 23,000 roughly there by 2030 ... when you use gold as a liquidity sync, there is no upside limit to it”
The Dow-to-gold ratio has fallen from about 20x in 2000 to about 11x now, and is expected to eventually reach the 1:1 point that Bill Bonner has long predicted.
“the Dow gold ratio ... something like um 20 times uh ... in 2000 and now it's 11 times ... Bill Bonner has been saying forever ... waiting for this one one point”
If the US-China cooperation thesis is correct, the US is unlikely to act against Iran in a way that would block the Strait of Hormuz, because closing that strait (through which ~20% of global oil and gas flows) would mainly hurt China.
“mostly to China is who it would affect ... if I'm right about my theory of there's some cooperation between them ... then that probably wouldn't happen. Then that would be an argument against the US acting in Iran”
Stablecoins are extremely popular in high-inflation parts of South America (e.g., Argentina) because they offer people an easier way to flee into the dollar.
“in Argentina it's extremely popular ... that's a dollar they can get a lot easier frankly”
The huge, unexplained inflows of gold into the US starting in January before Trump took office were likely driven by the Treasury or the Fed.
“We saw these huge inflows of gold into the US at the very start of Trump's term ... they're inexplicable ... I still think that the Treasury or the Fed was behind those those massive imports”
Gold has risen well over 100% (host says 55% year-to-date) and topped $4,000, around $4,040.
“topping 4,000 the other day. I think it's like 4,040 or so”