Inflation Is Not a Mistake – It’s a Strategy, 2025 Crash Explained | Daniel Lacalle
What this covers
The global financial system is cracking — and central banks are making it worse. In this episode of Soar Financially, economist Daniel Lacalle explains why inflation is no accident, but a deliberate policy. We discuss the worst debt-adjusted GDP since the 1930s, the trap central banks are in, the collapse of fiat confidence, and the rise of “yuan-ization.” Lacalle breaks down how reckless monetary policy and false optimism have set the stage for a deeper reset. #Gold #Inflation #FiatCollapse ------------ 👨💼 Guest: Daniel Lacalle, Chief Economist 🏢 Company: Tressis 🌎 https://www.dlacalle.com/en/ 𝕏 @dlacalle_IA 📅 Recording date: April 9th, 2025 --------------------- 📆 Save the Date 📆 DEUTSCHE GOLDMESSE May 16 & 17, 2025 in Frankfurt, Germany www.deutschegoldmesse.com FREE Registration for Investors! ---------------------
📰 Up-to-Date Commodity Prices & Commentary 📰 👉 Clear Commodity Network 👈 🌎 https://clearcommodity.net/ 🌎
►► Follow Us! ◄◄ Twitter: http://twitter.com/soarfinancial Website: http://www.soarfinancial.com/ --------------------- Timestamps (AI generated) 00:00 – Intro 01:45 – Worst Debt-Adjusted GDP Since 1930s 05:10 – Why Central Banks Are Trapped 08:20 – Inflation Is a Policy, Not a Bug 12:30 – Bond Markets & Confidence Collapse 18:10 – Gold, Tariffs, and Market Alarm Bells 25:00 – U.S. vs China: Two Competing Monetary Orders 31:15 – Devaluation = Legalized Theft? 36:00 – Lacalle’s Advice for Trump 44:39 – Stagflation, Energy, and What’s Next
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#Inflation #Gold #FiatCollapse #CentralBanks #MarketCrash #DebtCrisis #DanielLacalle #MacroEconomics #InterestRates #QuantitativeEasing #FederalReserve #BondMarket #USDollar #GoldStandard #TariffTantrum #Stagflation #GlobalRecession #SoarFinancially #Geopolitics #Yuanization
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Central banks and governments have created a monetary crisis through excessive spending and liquidity injection in 2020-2024, masking economic weakness with inflated GDP figures, and now face a trapped position where they cannot tighten policy without triggering financial instability while inflation remains persistent due to policy choices rather than transitory factors.
- Governments and central banks massively increased money supply starting in 2020 (more money created March-October 2020 than since Bretton Woods), then compounded this with continuous deficit spending through 2024 elections, creating persistent monetary-driven inflation
- Central banks claimed to be hawkish but were actually dovish—the Fed's balance sheet reduction was less than half announced, and they cut rates in 2024 amid persistent inflation, demonstrating their priority is maintaining financial stability over controlling inflation
- The bond market and commodity price movements reveal central banks have lost credibility as stewards of currency value, evidenced by three consecutive years of central bank losses on treasury holdings and accelerating demand for gold as an alternative reserve asset
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Artificially weakening a currency does not solve trade and fiscal problems but instead increases inflation immediately by destroying purchasing power, as evidenced by Argentina and Venezuela which have repeatedly devalued yet failed to solve their problems.
“the idea that that that weakening artificially weakening the currency is going to solve your trade and fiscal problems is such a ridiculous uh idea that can only be viewed by people that have no idea about markets and no I and and that see things from a political view because if that was the case, Argentina and Venezuela would have solved their problems decades ago.”
Central banks have experienced three consecutive years of losses on their treasury holdings, causing them to stop viewing US and European debt as safe reserve assets and instead accelerating demand for gold as an alternative reserve asset.
“what we have seen is what is happening right now with bond markets is a direct consequence of three consecutive years of losses at the central banks so ultimately what is what is going on in the economy is is quite far away from the tariff tantrum and it's quite closer to what has going what it has been going on which has been that central banks and governments have been ignoring all the alarm bells”
The world is breaking away from being purely US-centric and moving toward a two-lender system with the United States and China as competing lenders of first resort, ending the period when the US could run massive trade and fiscal deficits without consequence.
“we have a new uh financer of first resort that doesn't attend to the same principles of investor security, legal security and monetary security that we have been used in uh in the in the in the western world or in the old world order that is China. China is lending in a completely different way to other countries. China is addressing monetary and and commercial relationships with other countries in a completely different way than the western world has done. And we have gone, we are breaking the world into two lenders of first resort. The United States and China.”
Governments benefit from inflation because it bloats fiscal revenues and allows higher government spending, creating an incentive structure where governments present themselves as the solution to the inflation problem they created.
“governments are super happy with inflation. Bloated uh fiscal revenues, uh higher level of government spending there. The the government presents itself as the solution to inflation. the inflation reduction reduction act which was in fact the inflation perpetuation act”
When governments devalue their currency, debt issuance becomes scarcer and longer-term debt becomes replaced by shorter-term debt because bond holders recognize the pattern and know that future administrations will devalue again, creating an unsustainable debt structure (as demonstrated by the euro area's experience).
“if you're a bond holder and the way to address the fiscal and trade imbalances is to devalue artificially the currency, then why are you going to buy long-term debt when you know that at some point in the next four, five years, somebody else is going to do it again? You see what I mean? So, so the issuances of long-term debt become scarcer and people at best continue to buy shorter term debt which makes it even more unsustainable.”
Stagflation (slow growth with high inflation) requires both money supply growth AND money velocity increase simultaneously; in 2009 and 2016 money velocity declined despite supply growth preventing inflation.
“if if the economy starts to slow down because of the tariff tantrum, prices are not going to go up. The only way in which prices will go up is if government spending, deficit spending and monetary easing coincide, i.e. money supply growth source and money velocity source as well. Both things have to happen. Remember that in 2009 and 2016 we had money supply growth but money velocity was actually declining”
There will always be some country able to destroy its currency faster and longer than others, making currency devaluation a race to the bottom that no country can win.
“Therefore, the idea that you're going to compete by devaluing the currency with the rest of the world is easily debunkable because there's always somebody else that's going to be able to destroy their currency faster and longer.”
Artificially weakening a currency does not solve trade or fiscal deficits; evidence from Argentina and Venezuela shows currency devaluation has failed to solve imbalances despite centuries of attempts.
“if that was the case, Argentina and Venezuela would have solved their problems decades ago”
Germany became a global leader in exports with one of the strongest currencies in the world alongside the Swiss Franc with the Deutsche Mark, disproving the claim that export competitiveness requires currency weakness.
“We have seen uh Germany became a world global leader in um exports with an with the with one of the strongest currencies in the world alongside the Swiss Frank with the Deutsch mark.”
The United States ended 2024 with the worst growth of GDP adjusted for the increase of debt since the 1930s.
“we ended 2024 with the economy of the United States with the worst growth of GDP adjusted for the increase of debt since the 30s”
Central banks and governments have ignored three separate expansion limits: the deficit limit, the economic growth limit, and the inflationary limit. When debt increased, inflation and growth both worsened instead of improving, triggering simultaneous alarm bells across all three domains.
“They have ignored the deficit limit. They have ignored the economic limit and they have ignored the inflationary limit. No. So when more debt was actually leading to higher not lower inflation, when more debt was leading to worse but not better economic growth and when more debt was leading to worsening fiscal situation in terms of deficit and in terms of interest expenses, not better. All of the alarm bells started to ring at the same time.”
Currency devaluation creates a political incentive trap: bond holders expect future administrations to devalue again, so they shift to short-term debt, making long-term debt issuance scarcer and the fiscal situation more unsustainable.
“if you're a bond holder and the way to address the fiscal and trade imbalances is to devalue artificially the currency, then why are you going to buy long-term debt when you know that at some point in the next four, five years, somebody else is going to do it again? You see what I mean? So, so the issuances of long-term debt become scarcer and people at best continue to buy shorter term debt which makes it even more unsustainable.”
A strong economy does not require a weak currency; a weak currency is not a tool for growth or debt reduction but a tool for cronyism that transfers wealth from the productive sector to government.
“a strong economy does not need a weak currency. that a weak currency is not a tool for growth and for reduction of debt but a tool for cronyism and that impoverishes everybody.”
A strong economy does not need a weak currency; a weak currency is not a tool for growth and debt reduction but a tool for cronyism that impoverishes everybody.
“a strong economy does not need a weak currency. that a weak currency is not a tool for growth and for reduction of debt but a tool for cronyism and that impoverishes everybody.”
Currency devaluation represents an enormous transfer of wealth from the productive sector to the government, functioning as an unfair hidden tax that steals wealth created by the private sector to disguise government fiscal problems, which then tend to increase rather than decrease.
“Ultimately, a devaluation is the following. A devaluation is an enormous transfer of wealth from the productive sector to the government. So it's an enormous an enormous and unfair taxation that is literally stealing the wealth created by the private sector to disguise the problems of the of the public sector. But the public sector when it is able to disguise its problems tends to do what? Increase them.”
Currency devaluation increases inflation immediately by destroying purchasing power of the currency, directly contradicting claims that it would help address inflation problems.
“You don't fix the US economy by devaluing artificially. That that actually does increase inflation immediately because you're you're destroying the purchasing power of the currency.”
Germany became a world leader in exports with a strong currency (the Deutsche Mark), proving that competitive advantage comes from productivity, not currency weakness.
“We have seen uh Germany became a world global leader in um exports with an with the with one of the strongest currencies in the world alongside the Swiss Frank with the Deutsch mark.”
Developed economies created more money between March and October of 2020 than in all preceding years since the Bretton Woods agreement.
“developed economies created more money in the period between March and October of 2020 than in the preceding years uh since the Bretonwoods uh agreement”
German and Japanese bond yields are rising alongside US yields despite being safest developed economy assets in risk-off environment, showing investors are concerned about credibility of all developed sovereign debt.
“it's happening also not just in the United States it's happening in Germany it's happening in Japan Germany and Japan bonds which in a mo in a in an environment like today should be the safest assets in the in the world with gold actually are behaving uh in a in in actually almost the opposite way of where of how they should be behaving”
The euro declined from 1.4 to 1.1 USD, nearly reaching parity, resulting in euro area stagnation rather than improved export competitiveness.
“You've seen the euro go from 1.4 uh to the US dollar to now 1.1. It went close to par. What have they done? Stagnation.”
Gold soaring in 2024 was an alarm bell that policy makers should have heeded, as it was already indicating that the monetary destruction happening in the fiat world was 'absolutely crazy'.
“gold was soaring, which was already an alarm bell that policy makers should have looked at because it was already telling us that the monetary destruction that was happening in the fiat world was absolutely crazy.”
China's lending model, unlike Western lending, does not prioritize investor security, legal security, or monetary security as Western institutions do.
“We have a new uh financer of first resort that doesn't attend to the same principles of investor security, legal security and monetary security that we have been used in uh in the in the in the western world or in the old world order that is China.”
Central banks are caught between a rock and a hard place—they cannot become suddenly hawkish because market reaction would be very negative and cause significant financial sector damage and disruptions, but they also cannot be too dovish because financial conditions are already exceedingly positive and inflation is not under control.
“They're caught between a rock and a hard place. They're trapped. No, central banks cannot go and suddenly become hawkish because uh market reaction is going to be even further negative and that can create very significant damages in the financial sector in banks. uh it can it can it can lead to very very significant disruptions. No, on the other hand they cannot be too doubbish because uh financial conditions continue to be exceedingly uh positive. Uh the inflation is not under control.”
In 2024, central banks and governments achieved disinflation almost entirely through external energy price declines, not through tightening policy, yet continued to cut rates and increase spending despite persistent core inflation.
“all almost all the disinflation that we saw in the previous months had been due to a completely external factor which was the energy component”
Central banks' three consecutive years of losses on their sovereign debt holdings (due to rising yields and currency depreciation) are causing a fundamental shift in reserve asset preferences away from US and European treasuries toward gold.
“what we have seen is what is happening right now with bond markets is a direct consequence of three consecutive years of losses at the central banks”
The US economy's 3% GDP growth in 2024 was illusory because it was boosted by approximately $2 trillion in deficit spending; the actual underlying economic growth generated by the private sector was minimal.
“you would think somebody in Washington might have figured out that well all the two trillion deficit spending is not really leading to 3% GDP growth. It's it's just a hoax, right? Like why”
China's lending model to developing nations differs fundamentally from Western approaches because it prioritizes commercial and monetary relationships that undermine US dollar hegemony rather than following principles of investor and legal security.
“China is lending in a completely different way to other countries. China is addressing monetary and and commercial relationships with other countries in a completely different way than the western world has done.”
The euro area's problems are not export-side problems but fiscal and growth problems caused by weak currency that transfers wealth to bloated government administration.
“the euro area has not had a problem on the export side where it has had a problem by having a weak currency has been where in the fiscal side everything connects everything connects it's a it's a no growth it's a no growth area with strong companies”
Demand for US Treasuries is weakening not because of risk-off market conditions but because world is not in risk-off and therefore not piling into sovereign debt, indicating structural loss of reserve asset status.
“the world is not in a riskoff environment should be piling up on treasuries and piling up on sovereign debt and it's doing the opposite”
The Federal Reserve's reduction of its balance sheet in 2024 was less than half what was announced, meaning the Fed continued net money printing despite claims of being hawkish.
“The reduction of the balance sheet of the Federal Reserve was actually less than half what they had announced. And that means more money printing because it goes in levels. It's cumulative.”
The reduction of quantitative tightening from the Fed's last press conference is a form of quantitative easing and a critical policy signal, but mainstream media missed or underreported its significance.
“QT uh the reduction of QT from the last Fed press conference. I'm not sure it got enough attention because I think that was quite pivotal in what Jerome Powell has been saying and I think the mainstream media sort of brushed it off not really understanding what he what what's been going on there because it's it's a form of QE. Let's be honest by by stopping QT you are easing.”
The world is transitioning from a US dollar-centric system where the US could sustain large trade and fiscal deficits, to a bifurcated system with two competing lenders of first resort: the US and China, each unable to tolerate the other's economic model.
“the world is breaking into a US-ccentric world that will continue to have the US dollar as the world reserve as at that world's reserve currency but in which the United States does not afford the luxury of having the enormous trade and fiscal deficit that it had when the world was a wash with dollars”
Tariffs are both an important catalyst and a consequence of deeper structural changes in the world monetary order and the breakdown of post-WWII dollar hegemony.
“tariffs are an important catalyst but are an important catalyst and a consequence of what Rey is saying”
The US dollar carry trade fundamentally broke due to central bank losses on fixed-income holdings, not due to tariff dynamics, making tariffs a symptom of deeper structural change rather than its cause.
“ultimately what is what is going on in the economy is is quite far away from the tariff tantrum and it's quite closer to what has going what it has been going on which has been that central banks and governments have been ignoring all the alarm bells”
Inflation is always a monetary effect, and factors like deleveraging, deglobalization, and wage growth are not causes of inflation but consequences of inflation driven by money supply growth.
“Inflation is always a monetary effect always um all those elements that you have rightly mentioned are uh not causes but consequences of inflation.”
The Federal Reserve claimed to be hawkish in 2024 but was actually dovish—the reduction of the balance sheet was actually less than half what they announced, meaning net money printing continued while they simultaneously cut rates during a period of persistent inflation.
“In 2024, in that period, central banks said that they were very hawkish. But they were actually not. The the reduction of the balance sheet of the Federal Reserve was actually less than half what they had announced. And that means more money printing because it goes in levels. It's cumulative.”
Brazil, Russia, Indonesia, and India may increase dependence on China as lender, moving toward 'unionization' (using UN as reserve) rather than true dedollarization.
“Brazil, Russia, Indonesia, India, all those countries may actually start to use more the UN. Not create a new currency. That would be impossible technically and and legally actually in many cases. No, but to be more dependent on China as the lender of first resort.”
Central banks and governments have been ignoring three fundamental alarm bells: the deficit limit (more debt leads to worse not better fiscal situations), the economic limit (more debt leads to worse not better growth), and the inflationary limit (more debt leads to higher not lower inflation).
“central banks and governments have been ignoring all the alarm bells in terms of the uh limits to uh to expansionary policies. No, they have ignored the deficit limit. They have ignored the economic limit and they have ignored the inflationary limit. No. So when more debt was actually leading to higher not lower inflation, when more debt was leading to worse but not better economic growth and when more debt was leading to worsening fiscal situation in terms of deficit and in terms of interest expenses, not better.”
Central banks and governments increased government spending enormously in 2024 specifically because there were over 70 nations holding elections, creating a pattern of countries 'spending like drunken sailors' to boost apparent economic performance during election years.
“we had 70 more than 70 nations with elections. What does that mean? That means 70 countries spending like drunken sailors. So what ultimately ended happening was that money supply growth exploded in 2024”
The excessive optimism in markets during late 2024 was infused by central banks' misleading messaging, and Laya places the blame for the January correction on this central bank-created optimism rather than on the tariff tantrum itself.
“I I I place the blame in the excessive optimism infused by central banks on markets in 2024.”
The disinflation observed in late 2023 and early 2024 was almost entirely due to the external factor of declining energy prices, not due to Federal Reserve policy being hawkish or effective at reducing inflation.
“almost all the disinflation that we saw in the previous months had been due to a completely external factor which was the energy component.”
QT (quantitative tightening) reduction from the Fed is a form of quantitative easing; slowing the pace of balance sheet runoff is still easing, and the Fed's $5 trillion cap is cosmetic, as it could have announced zero rolloff but chose the higher number to avoid waking people up.
“QT uh the reduction of QT from the last Fed press conference. I'm not sure it got enough attention because I think that was quite pivotal in what Jerome Powell has been saying and I think the mainstream media sort of brushed it off not really understanding what he what what's been going on there because it's it's a form of QE. Let's be honest by by stopping QT you are easing. Uh, and the five trillion is I think more cosmetics and putting lipstick lipstick on a pig than anything else because he could have just said zero, but that zero would have woken people up.”
The Maraago Accord is purportedly based on the false historical claim that 1980s US dollar devaluation solved the fiscal and trade deficits, but neither the fiscal deficit nor the trade deficit was actually solved in that period.
“The Mara Lago accord is apparently um based on something that actually never happened that actually never happened. No, which was the idea that in the 80s the uh devaluation a devaluation of the US dollar went and solved the fiscal and trade problem of the United States. None of those two things happened. None of those two things happened.”
The Maralogo Accord proposal—weakening the dollar and forcing trading partners to hold long-term debt—is economically nonsensical and would destroy confidence in US debt, a failed strategy demonstrated by euro-area experience.
“the idea that that that weakening artificially weakening the currency is going to solve your trade and fiscal problems is such a ridiculous uh idea that can only be viewed by people that have no idea about markets and no I and and that see things from a political view because if that was the case, Argentina and Venezuela would have solved their problems decades ago.”
In the period between March and October 2020, developed economies created more money than in all preceding years since the Bretton Woods agreement, driving persistent inflation that was then compounded by governments increasing deficit spending rather than reducing it when the economy reopened in 2021.
“2020 governments and central banks decided that because there was no risk of inflation they could increase money supply without any control and at the same time not worry about inflationary pressures. They did and they created more money. developed economies created more money in the period between March and October of 2020 than in the preceding years uh since the Bretonwoods uh agreement. So first enormous increase in money supply. Second, when the economy reopens, governments instead of reducing government spending and reducing deficit spending decided to go allin and increase government spending and increase uh deficit spending, therefore creating further in inflationary pressures.”
The euro area's problems stem not from weak export competitiveness but from fiscal side problems and lack of growth, despite having strong companies, tremendous talent, and great entrepreneurship in the private sector.
“the euro area has not had a problem on the export side where it has had a problem by having a weak currency has been where in the fiscal side everything connects everything connects it's a it's a no growth it's a no growth area with strong companies, tremendous talent, great great great uh uh entrepreneurship.”
Inflation is always a monetary effect; factors like delobalization, wage growth, and supply chain issues are consequences of inflation, not causes of it.
“Inflation is always a monetary effect always um all those elements that you have rightly mentioned are uh not causes but consequences of inflation”
Currency devaluation engages nations in a race to the bottom where each country tries to destroy its currency faster than competitors; this is unsustainable and contradicts real competitiveness based on productivity.
“the idea that you're going to compete by devaluing the currency with the rest of the world is easily debunkable because there's always somebody else that's going to be able to destroy their currency faster and longer.”
The deepseek technology development and initial tariff announcements were catalysts that triggered rapid unwinding of excessive leverage in equities, commodities, and bonds simultaneously.
“we saw the biggest longs and most levered longs uh declined and then we had the tariff tantrum as I call it. No, we have the tariff tantrum and that basically just brings a catalyst that sends margin calls all over the market in commodities in bonds in equities almost at the same time.”
In January 2025, central banks began to get 'cold feet' and started signaling that inflation was persistent and that they might not cut rates even once, beginning a reversal of the optimistic narrative from late 2024.
“suddenly in January central banks start to get cold feet. They start to say inflation is persistent. We may not cut uh even one time um etc. So we have a number of catalysts that start to burst the uh confidence and the optimism”
Bond yields declining to 3.9% in early 2024 while persistent inflation remained high and debt levels were elevated was a 'worrying decline' that was disconnected from fundamentals.
“First worrying uh decline to 3.9%. We're talking remember persistent inflation uh etc. elevated levels of debt etc. How can bond yields go from 4.9% in um in March I believe to 3.9% so quickly.”
Markets experienced an 'enormous level of complacency' in late 2024, with the German equity market soaring despite an economy that was weak and stagnant, as did France, Japan, and the United States, indicating coordinated asset bubble formation.
“we saw the German equity market sore despite an economy that was worse and stagnant. Same with France, same with Japan, same with the United States. markets exploding an enormous level of complacency”
The US government increased deficit spending by approximately two trillion dollars in 2024 (an election year) while GDP only grew about 1.7 trillion, indicating that government spending creates only nominal GDP growth without corresponding real economic growth.
“if I'm in government uh and I'm constantly increasing uh deficit and debt and uh GDP obviously is bloated. I mean, if you if you increase the deficit by two trillion and you don't increase GDP by 1.7 trillion, it's because you're stupid. GDP is such an easy uh aggregate to manipulate. No, through government spending and debt.”
The January 2025 market correction catalysts included the DeepSeek technology development (causing biggest longs and most leveraged technology longs to decline), followed by the tariff tantrum, which sent margin calls across commodities, bonds, and equities almost simultaneously.
“the exceeding level of leverage that market participants were taking to uh to to to be uh uh taking that wave of optimism that started with the blowout of the deepseek uh thing with the with technology companies. Immediately the biggest longs and most levered longs uh declined and then we had the tariff tantrum as I call it. No, we have the tariff tantrum and that basically just brings a catalyst that sends margin calls all over the market in commodities in bonds in equities almost at the same time.”
Global growth will decline in 2025, but the decline will be modest and not primarily caused by tariffs; recession is possible only if government spending is reduced, but recession from reduced spending is not problematic if job creation and investment continue.
“I'm going to sound optimistic. I think that the ultimate outcome of the tariff tantrum is going to be very limited in terms of global growth. We will have lower global growth, but we were going to have lower lower global growth anyhow. Okay. So I think that uh that is that is could we have a recession? We can have a recession by reducing government spending but that is not a problem as long as job creation and investment continue to thrive.”
The US ended 2024 with the worst growth of GDP adjusted for the increase of debt since the 1930s.
“we ended 2024 with the economy of the United States with the worst growth of GDP adjusted for the increase of debt since the 30s”
Bond markets experienced rapid declines to 3.9% yields despite persistent inflation and elevated debt levels, followed by aggressive moves north to 4.5%, indicating distress in the dollar system rather than normal rate equilibration.
“First worrying uh decline to 3.9%. We're talking remember persistent inflation uh etc. elevated levels of debt etc. How can bond yields go from 4.9% in um in March I believe to 3.9% so quickly. Second burst up as the debt and the uh inflationary expectations continue to be the same.”
The Maraago Accord is apparently based on the claim that in the 1980s, US dollar devaluation solved American fiscal and trade problems; however, neither of these two things actually happened.
“The Mara Lago accord is apparently um based on something that actually never happened that actually never happened. No, which was the idea that in the 80s the uh devaluation a devaluation of the US dollar went and solved the fiscal and trade problem of the United States. None of those two things happened. None of those two things happened.”
Central banks are caught between a rock and a hard place: they cannot suddenly become hawkish without causing severe market and financial sector damage, but they cannot remain dovish while inflation persists.
“central banks cannot go and suddenly become hawkish because uh market reaction is going to be even further negative and that can create very significant damages in the financial sector in banks. uh it can it can it can lead to very very significant disruptions. No, on the other hand they cannot be too doubbish because uh financial conditions continue to be exceedingly uh positive. Uh the inflation is not under control.”
Ray Dalio warns investors focus too much on tariffs and not enough on breakdown of major monetary, political, or geopolitical orders that are fundamental to asset values.
“Ray Dalio said because he warns investors are too focused on tariffs and not paying enough attention to the breakdown in major monetary, political or geopolitical orders”
In 2023 there was a recession that occurred, but policymakers and the media changed the definition of recession to fit the narrative of continued high growth, allowing them to deny its occurrence.
“We got to change the definition here. They changed the definition of recession so that it would fit the narrative of high growth and positive economic development.”
Gold soaring in price was an alarm bell that monetary destruction in the fiat world was occurring but which policymakers failed to heed.
“gold was soaring, which was already an alarm bell that policy makers should have looked at because it was already telling us that the monetary destruction that was happening in the fiat world was absolutely crazy.”
Stopping QT (Quantitative Tightening) is a form of Quantitative Easing; by maintaining a floor of $5 trillion on the Fed balance sheet instead of allowing it to shrink further, the Fed is easing rather than tightening.
“by stopping QT you are easing. Uh, and the five trillion is I think more cosmetics and putting lipstick lipstick on a pig than anything else because he could have just said zero, but that zero would have woken people up”
German and Japanese government bonds are behaving opposite to how they should in a safe-haven environment, with yields rising rather than falling, signaling that sovereign debt from developed economies is no longer reliably perceived as safe reserve assets globally.
“Germany and Japan bonds which in a mo in a in an environment like today should be the safest assets in the in the world with gold actually are behaving uh in a in in actually almost the opposite way of where of how they should be behaving. I think that is another indication that sovereign debt from developed economies is not as safe a reserve asset as people thought for the past 30 40 years.”
Oil prices will not remain at current low levels for extended periods because oil markets are characterized by overshooting on both the upside and downside, and current supply-demand balance suggests oil prices will normalize closer to $65-70 per barrel.
“oil prices always overshoot uh on the upside and on the downside. And I think that right now the oil market has a certain level of over supply, not too much, but the o supply demand balance is adequate enough to bring oil prices closer to above the $65, $70 a barrel. No, but not not strong oil prices.”
A devaluation is an enormous transfer of wealth from the productive sector to the government, functioning as an enormous and unfair taxation that steals the wealth created by the private sector to disguise public sector problems.
“Ultimately, a devaluation is the following. A devaluation is an enormous transfer of wealth from the productive sector to the government. So it's an enormous an enormous and unfair taxation that is literally stealing the wealth created by the private sector to disguise the problems of the of the public sector.”
Strong commodity prices have not been observed since the short energy spike during the Ukraine war and subsequent decline, indicating a structural shift in commodity dynamics.
“We have not seen stronghold prices since the and since since the short burst of the of the Ukraine war and then it they declined.”
Trade negotiations and tariffs will ultimately lead to a massive inflow of investment into the United States, but these effects do not play out on a day-by-day or one-to-one basis with announced policies.
“I think that the trade negotiation of tariffs is going to end up in a massive uh inflow of investment into the United States. However, those don't play onetoone and they don't play day by day.”
Persistent inflation is likely to continue but not accelerate to 5-6% levels; the disinflation from commodity prices and slowing growth will offset any inflationary pressures from policy.
“I don't think that we're going to see the the the the risk of rising levels of inflation. persistent inflation, yes, but not 5% 6% inflation with negative real GDP.”
A recovery from the current slump will be faster than the slump itself, resulting in net-positive growth for 2025 despite tariff impacts.
“my view is actually relatively optimistic is that we will not have strong growth but we will have uh a a recovery that will be faster than the slump if that makes any sense.”
Market participants heard central bank signals of multiple rate cuts and QE expected in 2025, creating excessive optimism and leverage that was burst when central banks reversed course in January.
“Imagine a market that hears from central banks that we're going to have four, five, six, seven rate cuts even in 2025. That sees rate cuts in 2024. that hears constantly the idea that inflation is uh under control and at the same time sees the economy slowing down. So expects some form of quantitative easing in 2025. The level of ex of optimism in markets was so high that we saw the German equity market sore despite an economy that was worse and stagnant.”
Stagflation will not occur in 2025—stagflation requires that money supply growth and money velocity both increase simultaneously; since money velocity is likely declining, persistent inflation is possible but not 5-6% inflation with negative real GDP growth.
“I don't think that there will be stackflation. I think that the the if if the economy starts to slow down because of the tariff tantrum, prices are not going to go up. The only way in which prices will go up is if government spending, deficit spending and monetary easing coincide, i.e. money supply growth source and money velocity source as well. Both things have to happen. Remember that in 2009 and 2016 we had money supply growth but money velocity was actually declining. So if money velocity declines and I think that that is pretty obvious. I don't think that we're going to see the the the the risk of rising levels of inflation. persistent inflation, yes, but not 5% 6% inflation with negative real GDP.”
What is occurring is not true 'dedollarization' but rather 'unionization' where countries increasingly depend on China as lender of first resort rather than creating alternative currency; Brazil, Russia, Indonesia, India represent this pattern.
“There's no ddollarization that's going on. That is all right. But what I do see is that Brazil, Russia, Indonesia, India, all those countries may actually start to use more the UN. Not create a new currency. That would be impossible technically and and legally actually in many cases”
Commodity prices have experienced significant declines (copper down on the year, aluminum down 7%, natural gas down 3.5%), indicating disinflationary pressures that will flow through to food and agricultural prices quickly.
“Natural gas is down three and a half%. Aluminum is down seven. Copper is down on the year despite the enormous level of supply and demand uh challenges that exist in the copper market.”
The US Pentagon budget announcement of a trillion dollars for defense shows the US is investing more in military infrastructure than in economic infrastructure like roads, education, and civilian economy, reflecting a shift in strategic priorities.
“announcing a trillion dollar budget for the Pentagon uh just sort of shows where the focus is. instead of investing in infrastructure, they're investing more into the the military complex.”
Commodities like aluminum (down 7%) and copper (down on the year despite enormous supply and demand challenges) are showing disinflation signals that will transfer quickly into agricultural and food prices.
“Natural gas is down three and a half%. Aluminum is down seven. Copper is down on the year despite the enormous level of supply and demand uh challenges that exist in the copper market. So that is already telling you that there is uh more uh more of a of a disinflationary impact coming from commodity prices and commodities transfer to inflation very very quickly into agricultural prices into food prices etc etc.”
Credit card debt has soared, real wages are stagnant, and productivity growth is very poor—all signs of household financial stress masked by GDP inflation.
“We have seen credit card debt soaring uh real wages stagnant very very poor productivity growth all those elements uh were very very evident already in 2024.”
The US and China clash in Africa, with the US offering military support while China offers infrastructure investment; this reflects different strategic models.
“the Congo right now with the US and China sort of clashing because the US is offering military support while China is more of the infrastructure approach in Africa uh in general”
Politicians run large deficits before elections knowing they will pass the bill to the next administration, and the next administration can then pose as the solution by increasing spending further (a Keynesian playbook).
“if, and you obviously could ask, Why would they do that? Because they were running for the election and they could actually have won the election. No, two reasons. One, if nothing happens, you continue to bloat GDP and you continue to disguise the weakness of the economy. Number two, from a Keynesian perspective, if what happens in the market right now had happened under a Democrat or a Social Democrat administration, what do you do? You increase government spending, increase debt, and increase taxes.”
If Trump's administration shows success through negotiating positive trade deals (with South Korea, Mexico, Argentina, El Salvador, Chile, etc.) rather than pursuing protectionist policies, it can change the negative market narrative and restore confidence.
“Start showing that you're a negotiator, not a protectionist. Start showing that you are uh looking to improve the uh inflation problem of the United States and the debt problem of the United States and not create a protectionist 30s economy. H so very go out and show one, two, three, there's already 70 nations apparently in negotiation. start showing day after day new trade deal with South Korea, new trade deal with Mexico, new trade deal with Argentina, new trade deal with El Salvador, new trade deal with Chile.”
Governments are satisfied with inflation because it generates bloated fiscal revenues and higher government spending levels, enabling them to present themselves as the solution to inflation through programs like the Inflation Reduction Act, which was actually an inflation perpetuation act.
“governments are super happy with inflation. Bloated uh fiscal revenues, uh higher level of government spending there. The the government presents itself as the solution to inflation. the inflation reduction reduction act which was in fact the inflation perpetuation act”
Gold is the only asset class currently performing well and preserving wealth during the 2025 turmoil, in stark contrast to equities, bonds, and other traditional assets.
“Only today, gold is the only asset class that is performing, that is doing well and preserving wealth. We'll find out. Hindsight is 2020. We're looking at a short window here, but as of today, gold is the only asset that's performing”
Oil prices will not remain at current depressed levels; the oil market will normalize to equilibrium closer to $65-70 per barrel, but prices will not spike significantly higher due to adequate supply-demand balance.
“oil prices always overshoot uh on the upside and on the downside. And I think that right now the oil market has a certain level of over supply, not too much, but the o supply demand balance is adequate enough to bring oil prices closer to above the $65, $70 a barrel. No, but not not strong oil prices.”
In 2024, more than 70 nations held elections, creating a fiscal spending cycle where governments increased deficit spending as a result of election pressures.
“We had 70 more than 70 nations with elections. What does that mean? That means 70 countries spending like drunken sailors.”
If a Trump-led renegotiation of trade deals occurs through demonstrated successive trade agreements (Korea, Mexico, Argentina, etc.) rather than tariff threats, markets will regain confidence that the administration is a negotiator rather than a protectionist.
“start showing day after day new trade deal with South Korea, new trade deal with Mexico, new trade deal with Argentina, new trade deal with El Salvador, new trade deal with Chile. You see what I mean? And so people the the reason why people are scared is because they don't believe that Donald Trump is what Donald Trump is.”
In 2023, the US economy actually experienced a recession, which policymakers then attempted to obscure by changing the official definition of recession so that the narrative would align with the story of high growth and positive economic development.
“We had in 2023 we had a recession. Remember we had a recession. And what did they do? They changed the This is f This is fascinating. No, no, no. We We got to change the definition here. They changed the definition of recession so that it would fit the narrative of high growth and positive economic development.”
Market skepticism about Trump's true intentions stems from a narrative suggesting hidden protectionist agenda contrary to what he has written and stated, creating a credibility gap between actions and perceptions.
“For me, it's exceedingly clear because I know I I I read what he has written in the 80s. I heard what he has said all the time and I understand what he is trying to accomplish. But there's an entire narrative telling us that this is not the real case. That there's a hidden agenda and that the hidden agenda is a Hoover type uh Roosevelt type protectionism”
Laya predicts the ultimate outcome of the tariff tantrum will be very limited in terms of global growth damage, as lower global growth was already expected regardless; however, tariff negotiations will likely result in a massive inflow of investment into the United States.
“I'm going to sound optimistic. I think that the ultimate outcome of the tariff tantrum is going to be very limited in terms of global growth. We will have lower global growth, but we were going to have lower lower global growth anyhow. Okay. So I think that uh that is that is could we have a recession? We can have a recession by reducing government spending but that is not a problem as long as job creation and investment continue to thrive. I think that the trade negotiation of tariffs is going to end up in a massive uh inflow of investment into the United States.”
Recovery from any near-term tariff-induced slowdown will be faster than the slump, meaning there will be rapid bounce-back rather than persistent recession, as long as investment and job creation continue.
“So my view is actually relatively optimistic is that we will not have strong growth but we will have uh a a recovery that will be faster than the slump if that makes any sense.”
Scott Bessent, who is knowledgeable about economic history and markets, should be able to debunk the Maraago Accord proposal if it actually exists, but the document does not appear to be an official policy proposal.
“the Maraago Accord, which obviously doesn't exist and I'm being told all the time by people in or close to the administration is is pure nonsense that has been sold by by some media. But if it existed is a completely ridiculous state idea that somebody as knowledgeable about economic history and about markets as Scott Bessent should debunk in in in in a nancond like I just had.”
Gold is the only asset class performing well and preserving wealth as of the time of the conversation, at a time when bond markets are volatile, equities are mixed, and currencies are under pressure.
“Only today, gold is the only asset class that is performing, that is doing well and preserving wealth.”
Market fear of Trump administration stems not from Trump's actual intentions (which Laya claims are growth-oriented and negotiation-based) but from negative media narratives about hidden protectionist agendas and 1930s-style economic policy.
“because I know I I read what he has written in the 80s. I heard what he has said all the time and I understand what he is trying to accomplish. But there's an entire narrative telling us that this is not the real case. That there's a hidden agenda and that the hidden agenda is a Hoover type uh Roosevelt type protectionism and that is obviously going to derail the economy. Prove them wrong.”
Daniel Laya has both Spanish-language and English-language YouTube channels, podcasts, a website at daay.com, and Twitter accounts, with his Spanish-language channel being significantly larger than his English-language channel.
“I always say that it's easier to find me than to avoid me. Uh just put in Twitter just put on Twitter Daniel Laya. I have a an English uh language account. I have a Spanish language account. My website daay.com also has Spanish and English articles and I also have two YouTube channels, one in Spanish, one in English and they have different content.”