People Don’t Realize ‘How Bad This Could Get’; Gold To $7,000 In Dollar Crisis

Real interest rates, not nominal yields, are the key variable of interest; the level of real rates will need to be at least -10% for a sustained period to delever the global economy.

“So to me that the the level of the 10-year is less interesting than the ultimate level of where real rates bottom at. How negative are they? How many double digits is it? I think it's going to be at least 10% for a span of years uh in the West.”

The era of quantitative easing and Federal Reserve control of the economy is over; the future will involve a return to environments like the 1950s with different policy frameworks.

“This era of quantitative easing and the Fed being in control of everything is over as far as I'm concerned. We got to get through that. So, I am constructive on the markets because I think there's going to be a short-term deal and that short-term deal will be lip service.”

As of February 2025 (trailing 12 months), US interest expense plus entitlement spending alone exceeds 100% of federal receipts, and with stock prices having fallen significantly, receipts are likely to decline 5-10% in the next 12 months, meaning the US government will have true interest and interest-like obligations at 115-120% of falling receipts—and if a recession occurs, could easily reach 120-130% of receipts, which qualifies as junk-rated, highly speculative debt rather than AAA.

“the trailing 12 months through February I haven't added in the March numbers yet that just came out but through February trailing 12 months US interest expense plus entitlement spending alone is over 100% of receipts and receipts are all-time highs and receipts on the margin are highly influenced by stock prices. So with what stock prices have done, receipts are going to fall, I don't know, probably 5 to 10% in the next 12 months.”

The Fed funds rate and Bank of Canada rate are now at neutral (r-star), yet Canada is experiencing a balance sheet recession with 'pushing on a string' dynamics (flat LM curve where monetary policy can't stimulate), but the US is different because American consumers are less levered up and the economy has more growth capacity.

“the Fed fund the Bank of Canada rates basically at our star right now right and we're going through a balance sheet recession up here right there is no kickback this is you know we're going back we're walking into pushing on a string right the flat LM curve Right? Folks up here don't understand that. But but here's the difference though. I think America isn't in the same position because of the the strength of the consumer. They're not as levered up.”

The Trump administration's tariffs are constitutionally problematic because the power of the purse (including tariffs) resides with Congress, not the President, making tariffs executive actions legally questionable.

“what is interesting about and Luke brought it up is you know with what was said late February is look if if the president really wants to do this if this is what the states want then this cannot be done through an executive order and what needs to happen is he needs to basically you know this is unconstitutional actually right the power of the purse if you think tariffs tariffs are attacks the power of the purse goes with the house and the senate right”

Trump's claim that inflation is low and will stay low is incorrect—inflation is 'about to get a lot worse' and 'going way higher'—because the combination of $2 trillion-plus deficits, severe supply chain disruption, rate cuts, and suppressed Treasury volatility is 'pretty much to a tea what happened with COVID,' and that led to the multi-year inflation spike we experienced.

“Absolutely. I'm looking at what they have done. You know, we know if the United States government runs a $2 trillion plus surplus and they disrupt supply chains um and then you cut rates into it and and you suppress treasury market volatility, that's pretty much to a tea what happened with CO. That was CO. And so fast forward to today, 5 years later, what do we have? We have the United States government running $2 trillion plus deficits.”

Longer term, the US dollar will trade lower on the DXY (currently at 98) and could go into the 70s or even lower—this represents a 'title wave of liquidity' when combined with the fact that the world has borrowed in dollars, creating tailwinds for emerging markets, EM banks, gold, Bitcoin, and equities.

“Longer term I think the way this movie ends is with the US dollar where we at 98 today. I think it ends with the dollar in the 70s or even lower on the DXY. And to Jim's point, that is a title wave of liquidity when you've got a world that has borrowed in dollars. Uh that's a world that's great for EM, it's great for EM banks, it's great for gold, it's great for Bitcoin, it's great for stocks.”

James expects a relief rally in the near term (driven by Trump negotiating a deal with China or de-escalation of trade tensions), followed by a pullback, then sustained equity market strength through the end of the decade driven by favorable demographics, with the major structural 'come to Jesus' event pushed into the early next decade rather than occurring now.

“So I, you know, the four-year cycle seems to be, you know, and the 60-year cycle seems to be up up for negotiation because I think he's trying to really circumvent and shortcircuit the system and really start to put into place laws that aren't going to be able to be uh shortcircuited by the new administration or the Supreme Court or some lower level judge in Washington DC. So that's sort of, you know, when I'm asking if we were just sitting around the table having a cup, what are they doing? Like this is insane. They shouldn't be doing like that the the stuff in the rose garden was just wrong, right? It's bad economics. Why is he going after Powell? That's not cause, right? It's not. I mean, so is he stupid? Is he Is the president and his team as dumb as a box of rocks? No. What's the game? And so I think we're going to have a relief rally here. And if that's the case, gold works, Bitcoin works, the NASDAQ 100 works, dollar goes down, and then I think as long as the US interest rates are high relative to the rest of the world, then we start to get ourselves a situation where we can start to make this sustainable.”

China has a fixed exchange rate and closed capital account with roughly 50% of its external debt denominated in US dollars and is experiencing a debt-deflation spiral—this structural vulnerability makes a negotiated deal between US and China likely, which would provide a relief rally for risk assets.

“And so I think you know with the ch with China with basically a fixed exchange rate in a closed capital account with I think I'm I'm going to be wrong but about 50% of their debt external debt denominated in the United States and debt deflation spiral. I think a deal is going to be made and that deal will provide uh a relief rally.”

The present day bond market faces secular deflationary pressures from excessive debt levels, making the risk of deflation (not inflation) the greater danger if policy tightens; pre-COVID, secular stagnation prevented inflation despite years of QE

“there's a lot of you know foundational deflationary pressures that you know are getting stronger right and you know excessive levels of debt or deflationary so the way the the way I I look at this if you go back to precoid Right? I mean, it was secular stagnation pushing on a string. We couldn't get inflation higher.”

A US entity whose interest and interest-like obligations are running 120% of its receipts would be classified as highly speculative junk, not AAA-rated; therefore, a debt downgrade is mathematically inevitable

“that is in no way in no world is an entity that whose interest and interest like obligations are running 120% of their receipts. That's junk. That's that's highly speculative junk. It's not AAA. So that's I I like I said I think it's I think it's inevitable”

The private sector and global supply chains drive most trade deficits and surpluses between the US and other countries, not government purchases; Trump's tariffs cannot unwind private sector supply chains in 90 days, so the trade deficit will persist despite policy pressure.

“The only thing that Trump could really do and then and and I could be wrong is the fact when you're talking to a government, you know, you're really talking about purchases of natural resources, right? You know, you know, China, LNG, what have you. A lot of the deficits and surpluses that have been developed between the United States and the rest of the world is created by the private sector and the supply chains. I just don't see that unwinding in 90 days.”

The US consumer is less leveraged than other developed economies, so rate cuts may have more traction in stimulating US demand than in other countries.

“But but here's the difference though. I think America isn't in the same position because of the the strength of the consumer. They're not as levered up. It's going to be very interesting to see what happens when rates come down.”

The Brookings Institution has issued a paper acknowledging that the global economy needs to rebalance—validating that policy rebalancing is not partisan or new, but has been recognized by mainstream institutions as necessary.

“when the Brookings Institution comes out with a paper saying we need to rebalance. Now, they may have a problem with how President Trump and his administration is doing it, but you know, none of this, as far as I'm concerned, should be a surprise.”

A new global monetary system is inevitable and will involve negotiation of new arrangements, possibly including gold, stablecoins, Bitcoin, and potentially special drawing rights (SDRs) from the IMF.

“I think there is going to be a new global monetary system. It will be negotiated and I would not be surprised if gold and stable coins and bitcoin have some partner. Is it the IMF and special drawing rights? I have no clue. But we can't go on the way we are right now.”

A possible deal between the US and China would provide a relief rally, and James believes a deal will be made given China's fixed exchange rate, closed capital account, and ~50% of external debt denominated in USD (creating debt deflation risk for China).

“I think a deal is going to be made and that deal will provide uh a relief rally. Um I you know the other thing I would add to that is is that you know the way I look at this is I try to overlay the 90s or Japan and the fact that you know we've heard this or at least in my lifetime I've heard this is a matter of national security was the Japanese in coming out of the out of the 1980s. They had all the technology they had all the chips.”

Negative real interest rates are necessary and inevitable because inflation must grow faster than interest rates on nominal terms; the current situation where inflation is below the Fed funds rate is 'silly' and cannot persist.

“I think the real rates and I think you know you look at you look at where we are relative to the Fed and the PCE. I mean it's it's silly where they are. So we need to get we need that's so when you think about David when you say you know when when when inflation is is is greater than the interest rates on for like say the overnight rate that's negative rates. We need negative rates. There's no way there's no two ways about it right.”

The Trump administration's February 21, 2025 'America First Investment Policy' memo is fundamentally reversing the 50-year model where the world sends manufacturing offshore to the US, receives dollars in payment, and recycles those dollars into US financial assets and treasuries—instead now explicitly telling foreign capital to either invest in US physical infrastructure and factories or take their capital home, with no more bidding of Mag 7 stocks from 50x to 100x sales.

“late night February 21st Friday night Trump came out with the America first investment policy memo. And if you read that, it is basically China, take your money and go home. Foreigners, take your money and go home.”

US interest expense plus entitlement spending alone is over 100% of federal receipts on a trailing 12-month basis through February, and receipts are all-time highs and highly influenced by stock prices, so with recent stock declines receipts will fall 5-10% in the next 12 months.

“as we stand today the trailing 12 months through February I haven't added in the March numbers yet that just came out but through February trailing 12 months US interest expense plus entitlement spending alone is over 100% of receipts and receipts are all-time highs and receipts on the margin are highly influenced by stock prices. So with what stock prices have done, receipts are going to fall, I don't know, probably 5 to 10% in the next 12 months.”

Gold could easily reach $5,000 by the end of 2028; the 'plume is off the rose' on fiat money systems and markets broadly understand the jig is up with unsustainable debt, but the move will unfold in 'puts and starts' with periods of relief rallies rather than linear advance.

“I think gold by the end of 28 is going to be 5,000, right? Easy. Um it could go much higher. I think the plume is off the rose in terms of I think everybody knows that the jig is up with fiat money and the unsustainable debt.”

In U.S. history, the typical way excess global economic capacity has been reconciled is through warfare (World War I, World War II, etc.)—we are in the first historical period attempting to manage excess capacity without a major war, which will be unique in approach and will feel 'absolutely terrible' in execution.

“we know that there are periods of time left to their own devices that have get significantly unbalanced. The way that we've dealt with that previously in history is through war. We've wiped out the excess capacity. Really, that's what happened in World War I. And you can think about that in World War II. This is the first time in history that we're dealing with excess capacity, which we're not basically trying to, you know, reconcile it with a world war.”

The Trump administration explicitly wants to reverse the flows of capital and trade that have defined the last 50 years by financing the government through tariffs rather than income tax, as stated in the late January sentiments and February 21 'America First Investment Policy' memo.

“if you go back to late January Trump came out and was uh echoed the sentiments were echoed by Bessant essentially saying I would like to reverse the flows of capital and trade as they have defined the last 50 years. Um and uh he when he he said that by by virtue of saying I want to finance via tariffs not income tax.”

If Trump achieves a supermajority in House and Senate and implements MAGA supermajority policies into law (possibly including constitutional changes), and extends his presidency beyond two terms, the implications would be severely negative from a market and stability standpoint

“I really wonder what the, you know, think about what would happen if there is a super majority in the House and and the Senate for, you know, and their MAGA people, right? And and, you know, Trump gets to start implementing a lot of these things in law, right? He could change the Constitution, folks. He could get it as as you know, Bannon's talking about another term like the world. We think it's bad now when he's doing EOS. Imagine if he had control of the House and Senate with a supermajority and I think he might be trying to do that. And if he does, I would be really concerned after that.”

The U.S. should consider using stable coins to create a 'petrodollar equivalent' where stable coins are required to hold a certain percentage of Treasury bills as reserves—this creates a captive audience for treasuries and allows the government to lower yields by mandating reserve requirements.

“if you make Bitcoin big enough and then you mandate stable coin reserves of a certain level relative to the market cap of Bitcoin and then you mandate that stable coins have a a reserve base of a certain percentage of T bills. Now you've created for yourself a captive audience in stable coins where stable coins are paying 0%. They're getting 5% the government can can sort of compress that down.”

Trump is engaged in a 'game of chicken' with Fed Chair Powell—if Powell won't cut rates, Trump will intentionally tank markets and bond market functioning until Powell is forced to cut (as markets will demand it), because 'Powell can't be the Fed chairman that lets a Treasury auction fail'—Trump is effectively trying to force a run on the Fed by weakening the dollar through trade war, similar to how Bessent created a run on the Bank of England.

“I think ultimately what he wants. People have some people have have have speculated that Bessant will will create a run on the PBOC like he did on the Bank of England. I think he's causing a run on the Fed. I think it's is forced Powell won't play ball. we will just tank things and and we'll do things and then once the bond market breaks which took a grand total of four and a half days after he announced the tariffs then Powell will have to play ball and we just because at the end of the day Powell can't be the Fed chairman that lets a Treasury auction fail”

Steven Mnuchin wrote a missive about reordering trade in November of the prior year; he disavowed that statement but then re-avowed similar positions when speaking at the Hudson Institute recently, signaling consistency with Trump administration intent on trade rebalancing.

“he wrote his this this missive uh about reordering trade in November of last year. He has since sort of disavowed that, but not really. But more importantly, he stood up in front of the Hudson Institute a couple weeks ago and basically re-avoued that statement.”

Luke would sell gold if geopolitical uncertainty is resolved through revolutionary change in China or Russia (installing Yeltsin-like figures who sell assets to Americans at discount for dollars), or if breakthrough energy technology is confirmed (UAPs/UFOs are real US technology enabling energy revolution).

“I think it depends how the uncertainty is resolved. I think if it's resolved in extremists by, you know, she being overthrown, Putin being overthrown, you know, a version of Yeltson being installed in both countries who proceed to sell their assets to the Americans on the cheap at, you know, only in dollars, then I'm a seller of gold all day long. Uh I don't think either of those things are going to happen at one end. And so at the other end I think it's really around um price of gold implementation of policy right if we if the United States comes out and it turns out these UAP energy technology things or whatever we're discussing of the these UFOs are actually our stuff and we're going to be able to roll out over the next 6 to 12 months some sort of energy revolution. I I take profits in gold there too.”

There is a significant difference between a weak dollar and collapse of the US dollar system; James does not see a new US dollar system emerging, but rather stabilization through stablecoins and Bitcoin while the US Treasury retains pole position.

“I think there is a significant difference between weak dollar and the US dollar system. And I really suggest that I do not see a US dollar a new US dollar system. I I think you know we're going to get with the stable coins in Bitcoin. Um you know we're going to get some type of solution.”

If Powell cuts rates five times from the current level or does an emergency cut, the dollar would fall to the low 90s on the DXY very quickly, which is exactly what Trump wants.

“Um I I have not counted those up. I'm assuming that's correct. But let's assume it's right. The Europeans have lowered seven times and the dollar is falling like a stone against the euro. What happens if Powell cuts five times from here or cuts does an emergency cut? I mean, we're going to have the dollar down in the low 90s before anyone can even.”

Bitcoin bonds—where the Treasury issues bonds with 90% allocated to deficit financing and 10% used to buy Bitcoin, with upside sharing between government and investors—work conceptually but face political economy challenges because investors would prefer to buy Bitcoin directly rather than owning bonds with mixed exposure.

“I I think in a vacuum it would work. Uh the problem is I think it ignores the political economic reality which is by them doing that it would effectively make Bitcoin uh it would make Bitcoin the new neutral reserve asset effectively which I'm not saying is a bad thing. Uh it might be a good thing. It would because why why would I own those bonds if I can just go buy Bitcoin? Why do I want, you know, I would rather have a 100% of the upside um and just own the Bitcoin and just cut the government right out.”

Gold should be held as marginal capital allocation until clarity emerges on policy direction and Trump's intentions; it is the only asset where the holder doesn't require the seller (US government) to lose money to avoid default

“I don't buy assets where the seller needs me to lose money on a real basis just for them to avoid defaulting, which is what we're discussing here... I think until you get any clarity, what we've been saying is the only thing uh we have any conviction in his gold and tea bills uh in terms of marginal capital”

The Fed and Treasury are already signaling they will intervene in the bond market through jawboning and regulatory exemptions (SLR suspension), as evidenced by the Boston Fed, Treasury Secretary Bessant, Fed Governor Waller, and Treasury officials all discussing bond market intervention within 72 hours when yields hit 4.5%.

“I think we've already gotten the jawbon uh when we saw the tenure go to 4.5% we had in the span of 72 hours we had bessent no sorry we started with the fed on Friday not last Friday but two Fridays ago Boston Fed said we will absolutely get involved with the bond market if it keeps acting this way you had uh Bessant uh talk about it on Sunday I think on meet press. You had Waller talk about it on Monday at the Fed saying, "Hey, you know, it's like the tush push. We just inflation is transitory here again. Let's let's just try again." And then you had the number two at Treasury um I can't think of his name, but at any rate, uh saying that the they are having discussions around the bond market and suspension or exemption of treasuries for SLR again to Jim's point.”

There is a significant difference between a weak dollar and the collapse of the US dollar system—James does not see the US dollar system ending, but rather expects some type of solution through stablecoins and Bitcoin that preserves the US Treasury's role as the pole position for global store of value.

“I think there is a significant difference between weak dollar and the US dollar system. And I really suggest that I do not see a US dollar a new US dollar system. I I think you know we're going to get with the stable coins in Bitcoin. Um you know we're going to get some type of solution.”

There are foundational deflationary pressures in the current environment (excessive debt, global excess capacity) that could overwhelm inflation from tariffs and fiscal stimulus—secular stagnation pressures are 'still pushing on a string'—so achieving any inflation at all to grow out of the debt is actually desirable and breaking the 'curse of Elvin Hansen' (secular stagnation), and policymakers should not 'grasp defeat from the jaws of victory' by fighting inflation.

“I would add maybe it's a good thing that we get inflation because the deflationary there's a lot of you know foundational deflationary pressures that you know are getting stronger right and you know excessive levels of debt or deflationary”

Bitcoin bonds—where the US government issues bonds and allocates 90% to finance itself but uses 10% of proceeds to purchase Bitcoin—would work in a vacuum but face a political economy problem: investors would rationally ask 'Why own the bond structure when I can just buy Bitcoin directly and get 100% of upside?' making the construct economically irrational without a mandate.

“I I think in a vacuum it would work. Uh the problem is I think it ignores the political economic reality which is by them doing that it would effectively make Bitcoin uh it would make Bitcoin the new neutral reserve asset effectively which I'm not saying is a bad thing. Uh it might be a good thing. It would because why why would I own those bonds if I can just go buy Bitcoin? Why do I want, you know, I would rather have a 100% of the upside um and just own the Bitcoin and just cut the government right out.”

An era of 'quantitative easing and the Fed being in control of everything is over'; the long-term structure will look more like the 1950s (higher nominal growth, negative real rates, manageable debt ratios, less central bank dominance).

“This era of quantitative easing and the Fed being in control of everything is over as far as I'm concerned. We got to get through that. So, I am constructive on the markets because I think there's going to be a short-term deal and that short-term deal will be lip service. It'll be putting lipstick on a pig.”

This structural shift is being compared to Bretton Woods (1944), the greenback era after Alexander Hamilton's Revolutionary War debt restructuring, and the post-WWII rebalancing—suggesting it is among the largest monetary system realignments in US history.

“Historians are going to write about this. This is ci Brenton Woods 45 or you know go back to you know the greenback uh you know Alexander Hamilton after the revolutionary war. It's that big.”

In the past, when Trump has escalated tariffs, the U.S. dollar has typically risen; however, in the current period (early 2025), capital is flowing out of the dollar and the dollar index (DXY) is declining despite tariff escalation.

“typically, well, in the past, not typically, but in the past, when Trump has escalated tariffs, the dollar has risen. Not so much this month, capital outflows are the name of the game for the dollar.”

Trump is forcing Powell into a game of chicken: if Powell doesn't cut rates, Trump will crash the bond market and economy until Powell capitulates, because Powell cannot be the Fed chair that allows a Treasury auction to fail.

“I think ultimately this is the goal. I I think ultimately what he wants. People have some people have have have speculated that Bessant will will create a run on the PBOC like he did on the Bank of England. I think he's causing a run on the Fed. I think it's is forced Powell won't play ball. we will just tank things and and and we'll do things and then once the bond market breaks which took a grand total of four and a half days after he announced the tariffs then Powell will have to play ball and we'll just because at the end of the day Powell can't be the Fed chairman that lets a Treasury auction fail”

The US fiscal and monetary situation is so unprecedented and systemically important that it is being actively war-gamed and negotiated by sophisticated players including Treasury officials, Fed officials, and possibly foreign governments; the apparent policy chaos may actually be coordinated strategy

“if we had another participant here and and his name would be Scott Bent, right? Everything that Luke and I just dropped on you, right? He knows, right? he. So, you've got some really smart people um dealing with this.”

The current bond market is not the same as the bond market of prior decades because hedge funds are heavily leveraged in that space and were frontrunning deregulation (specifically the supplemental leverage ratio) that would have allowed banks to resume pre-Dodd-Frank behavior.

“looking at the movement in the yields over the past couple of weeks. I think what's interesting is um I would suggest that the bond market that we're dealing with today is not my grandfather's bond market and you have a lot of hedge funds playing out in that space and I think a lot of them were levered up to try to basically uh frontr run deregulation specifically the supplemental leverage ratio which would have allowed basically banks to go back in and and and and somewhat act the same way as they did before DoddFrank”

The initial jawboning of the bond market (Fed officials, Treasury officials, and Bessent all making statements about bond market functioning within 72 hours of 10-year yield hitting 4.5%) shows the policy response cascade is already underway and will escalate to explicit yield curve control if yields continue rising.

“when we saw the tenure go to 4.5% we had in the span of 72 hours we had bessent no sorry we started with the fed on Friday not last Friday but two Fridays ago Boston Fed said we will absolutely get involved with the bond market if it keeps acting this way you had uh Bessant uh talk about it on Sunday I think on meet press. You had Waller talk about it on Monday at the Fed saying, 'Hey, you know, it's like the tush push. We just inflation is transitory here again. Let's let's just try again.' And then you had the number two at Treasury um I can't think of his name, but at any rate, uh saying that the they are having discussions around the bond market and suspension or exemption of treasuries for SLR again”

Until Bitcoin reaches sufficient value that it can serve as de facto reserve asset (higher than current levels), policies using Bitcoin as collateral or reserve backing risk entrenching Bitcoin dominance without solving the underlying Treasury market problem; political economy constraints are real.

“So that's that's the tricky side of it. Um that still gets into the political economy side of um you know until Bitcoin prices are high enough um Bitcoin is sort of the deacto reserve asset of the world. if the US government does that.”

Luke would also sell gold if macro uncertainty is resolved via extreme geopolitical outcomes (e.g., overthrow of Xi or Putin with installation of USD-friendly regime that sells assets to Americans on the cheap), or if breakthrough energy technology (UFO/UAP-related) is announced that would trigger a major energy revolution, or if gold remains at ~$3,500 while the S&P 500 recovers to higher levels, allowing relative value rotation.

“I think it depends how the uncertainty is resolved. I think if it's resolved in extremists by, you know, she being overthrown, Putin being overthrown, you know, a version of Yeltson being installed in both countries who proceed to sell their assets to the Americans on the cheap at, you know, only in dollars, then I'm a seller of gold all day long. Uh I don't think either of those things are going to happen at one end. And so at the other end I think it's really around um price of gold implementation of policy right if we if the United States comes out and it turns out these UAP energy technology things or whatever we're discussing of the these UFOs are actually our stuff and we're going to be able to roll out over the next 6 to 12 months some sort of energy revolution. I I take profits in gold there too.”

The bond market today is 'not my grandfather's bond market'—it has been heavily infiltrated by hedge funds leveraged to 'front-run deregulation' of the supplemental leverage ratio (SLR), which would allow banks to act more like they did before Dodd-Frank, creating artificial demand for US Treasuries that may not be durable.

“the bond market that we're dealing with today is not my grandfather's bond market and you have a lot of hedge funds playing out in that space and I think a lot of them were levered up to try to basically uh frontr run deregulation specifically the supplemental leverage ratio which would have allowed basically banks to go back in and and and and somewhat act the same way as they did before DoddFrank”

If Trump truly wants to implement tariff-based trade policy through tariffs as described, this cannot be done via executive order because the 'power of the purse' constitutionally belongs to the House and Senate—tariffs are attacks on the power of the purse—so Trump may be strategically front-loading economic pain in his first 100 days to clear the market, aiming to show strong markets and economy by midterm elections and thereby secure a 60-seat Senate supermajority to enshrine these policies into law.

“what is interesting about and Luke brought it up is you know with what was said late February is look if if the president really wants to do this if this is what the states want then this cannot be done through an executive order and what needs to happen is he needs to basically you know this is unconstitutional actually right the power of the purse if you think tariffs tariffs are attacks the power of the purse goes with the house and the senate right”

A simpler and more viable approach than Bitcoin bonds is to allocate 5-10% of Treasury bond face value in Bitcoin as a 'kicker' (sweetener), allowing coupon reduction on the remaining 90-95% to one or two percent on a 30-year maturity; this compensates investors for expected inflation without creating the arbitrage problem of full Bitcoin bonds.

“I I think that would be the better construction, which is look, take 5% of the face value of the bond, straight Bitcoin, and whatever you get, you get. And I will now would I own a bond with a 2 and a half% a 10-year bond where 5% or 10% of the face was 100% Bitcoin with 100% of the upside? Yes. Because now that takes away or compensates me for what we know mathematically must happen, which is US government's going to have to inflate the debt away.”

The Trump administration's policies should be interpreted not as economically illiterate actions but as a deliberate, coordinated strategy by smart people who understand the costs and are willing to accept short-term pain (market declines, inflation, economic slowdown) in pursuit of long-term strategic goals (dollar devaluation, capital reallocation, geopolitical repositioning); accusing them of incompetence misses the point.

“So is he stupid? Is he Is the president and his team as dumb as a box of rocks? No. What's the game?”

If you view the United States as an empire like the Roman Empire, then with interest payments on debt greater than military expenditures, you've crossed the Rubicon where the US era of global dominance is over.

“if you view the United States as an empire like the Roman Empire then with the interest payments you know plus on debt uh greater than military expenditures you're typically at the at the at the you've crossed the Rubicon where the US era of of of global dominance is over, right?”

James expects significant volatility and market hiccups near-term, but is constructive on a secular bull market for equities lasting into the end of the decade, driven by favorable demographics.

“I think we're in a secular bull market until the end the end of the decade. I think all I'm disagreeing with with Luke is I think I want to push out the end of the world and I use the end of the world not in a disrespectful but that that come to Jesus event I think is early in the next decade. It's coming. Let's just I'm just arguing about time. So I think we're going to we're going to rally here. We're going to have other hiccups like this. Um and I think we're going to move uh higher into the end of the decade based on demographics.”

Gold, even at $3,400 per ounce, is still significantly undervalued relative to historical benchmarks—the market value of US official gold reserves as a percentage of foreign-held treasuries is only 10%, versus 20% in 1989 and a long-term average of 40%—meaning gold would have to double just to reach 1989 levels and quadruple to reach the long-term average.

“with gold having done what it's done, uh, it is now value, the market value of US official gold, um, as a percent of foreign held treasuries is now 10%. In 1989, that number was 20%. So gold would have to double from here just to get back to 1989 levels. The long-term average is 40%. the US. Well, that's how much foreign debt we now have. Um, gold would have to quadruple just to get back to the long-term measure.”

Unless 'something drastically changes,' the shift in capital flows represents a 'tectonic sea change' that people waiting for it to revert 'might be waiting a while'—suggesting this is not a temporary policy correction but a structural reordering.

“Unless something drastically drastically changes. I think this is this is a tectonic sea change that um I I think people waiting for it to revert or it might be waiting a while.”

The trade policies being implemented today are similar to those deployed against Japan in the late 1980s and 1990s, suggesting history may repeat with China facing similar sanctions and restrictions.

“I I would still sit there and say to you that we are still way early in this phase about innovation in terms of AI and blockchain. And so I would suggest to you that a period of time where we're going to go back and we're going to go back to innovation. Um, and and what I would say is this, and I'm just gonna steal, you know, the thunder of drunken Miller, right? A couple, you know, I steal stuff from Luke. I steal stuff from everybody, right? Because I'm I'm learning still learning. But, you know, Drunken Miller said a couple of things. One is don't fight fund. You know, if if if the Fed starts cutting rates aggressively and we know we've got the dollar down, then we're going to have a lot of liquidity. If we have a global reflation cycle, then risk assets are going to go on. And we know that all you have to do is overlay, you know, you know, M2 and you know, I think Ralph Powell does that, you know, with his big, you know, with you overlay it and you get, you know, what works in an a period of time of reflation.”

In a genuine dollar crisis, the market value of US official gold collateralized the foreign-held portion of the debt at 135% in 1980, providing a historical precedent for how gold could anchor the dollar system.

“if we actually have an honest to goodness dollar crisis, uh, the market value of US official gold collateralized the foreign held portion of our debt at 135% in 1980. So, I think that the gold gold I think is still going way higher.”

A managed decline of the US dollar is the first step in resolving global imbalances, and this must be paired with lower interest rates and lower commodity prices (especially energy) to make it sustainable.

“I think, you know, the first step in getting out of this is get having a managed decline of the US dollar. I mean, that's how I view it. I mean how why it's happening I don't know. Um you know as I get older in my life I say that's the first leg in the stool. We need also we need interest rates down and we need we need uh com you know commodity prices down specifically energy and then can we make that sustainable?”

A US defense manufacturer shutting down production due to lack of Chinese rare earths within the next 3-6 months would be a catastrophic signal and an unknown-unknowns risk that could unravel asset pricing.

“And I would phrase that by saying, "What asset do you own the day it is announced that a major US defense manufacturer has to shut down production for lack of of Chinese rare earths?" Because that day is coming in the next 3 to 6 months. And I don't know what to own in that case. Um, other than golden tea bills.”

There will be a short-term relief rally driven by a negotiated deal, but this will be 'lipstick on a pig' that does not solve the structural issues, which will re-emerge later in the decade.

“I am constructive on the markets because I think there's going to be a short-term deal and that short-term deal will be lip service. It'll be putting lipstick on a pig. It will not solve the big structural issues and I think those are those are on the come line that are going to come later in the decade.”

The risk scenario is a US defense manufacturer shutdown due to lack of Chinese rare earth supplies within 3-6 months; this represents tail risk tail risk that would cascade into broader supply chain failure.

“What asset do you own the day it is announced that a major US defense manufacturer has to shut down production for lack of of Chinese rare earths? Because that day is coming in the next 3 to 6 months. And I don't know what to own in that case. Um, other than golden tea bills.”

Bitcoin has decoupled from stock markets since early-to-mid April 2025, trading more in line with gold; this decoupling reflects Bitcoin's reorientation as inflation/currency hedge rather than risk asset correlated to equities.

“Bitcoin and uh the stock markets have kind of been decoupling ever since the beginning of April or middle of April rather. Yeah. First, second week of April. So, that's interesting.”

The S&P 500 is currently down 3%, the Dow dropped over 1,000 points, gold is up 3% to over $3,400 per ounce, and Bitcoin is up 3%—these asset moves reflect the divergence between stocks and precious metals that began in early-to-mid April.

“It's another big down day for the stock markets today as the S&P 500 drops 3%. Uh the Dow is down more than 1,000 points. Gold is up 3%. It's now trading at uh over $3,400 an ounce. Bitcoin is interestingly up 3% as well, diverging from the stock markets.”

The S&P 500 is down 3% on the day of the interview, the Dow is down 1,000+ points, gold is up 3% to above $3,400 per ounce, and Bitcoin is also up 3%, indicating a broad risk-off market dynamic with flight-to-safety (gold) and currency hedges (Bitcoin) outperforming equities.

“It's another big down day for the stock markets today as the S&P 500 drops 3%. Uh the Dow is down more than 1,000 points. Gold is up 3%. It's now trading at uh over $3,400 an ounce. Bitcoin is interestingly up 3% as well, diverging from the stock markets.”

In the near term (next 2-3 years), Luke expects the S&P 500 to decline and is very cautious with marginal capital, recommending gold and Treasury bills only, due to the high risk of a trade war escalation without a US victory.

“in the short run, I'm very bearish. Um, mainly because I think the only way we're going to get a deal is if Trump backs down to China. And I think if he tra a I don't think that's going to happen and b I think there's a whole lot of people that will have to revisit long very tightly held worldviews if Trump and the United States have to back down to China uh visibly. So that's that's why I'm so cautious near-term to say the gold and and T bills and little else with marginal capital.”

Groman is 'very bearish' in the near term (expects weakness in next 1-2 years) because he believes Trump will not back down to China, making a deal unlikely and creating continued supply chain dysfunction and policy uncertainty.

“I'm ultimately bullish as well. It's it's be for the for the reason I think Jim really highlighted, which is ultimately, you know, in the short run, I'm very bearish. Um, mainly because I think the only way we're going to get a deal is if Trump backs down to China. And I think if he tra a I don't think that's going to happen”

Hedge funds betting on 'Don't Fight the Fed' (DFTF) logic—that Fed rate cuts plus dollar weakness will trigger reflation cycle benefiting risk assets (gold, Bitcoin, NASDAQ 100)—will likely be rewarded if the administration pursues its stated policy path

“One is don't fight fund. You know, if if if the Fed starts cutting rates aggressively and we know we've got the dollar down, then we're going to have a lot of liquidity. If we have a global reflation cycle, then risk assets are going to go on.”

Thorne disagrees with Groman on timing of crisis 'end of the world' event, pushing it to early next decade rather than late current decade; otherwise aligns on inevitability of major restructuring.

“The only thing I would give a caveat to is, you know, I I don't think it's as unique a narrative as we think it is. And I would suggest to you that, you know, we need to get interest rates down. Um, I think it's going to be very interesting to see how we deal with the debt. I don't buy in to the Austrian school narrative, right?”

Groman is bearish in the near term (short-term, probably next 6-12 months) because he thinks Trump cannot back down visibly to China and will persist with tariffs, causing supply chain and bond market dysfunction; long-term (years out) he is bullish as restructuring eventually improves competitiveness.

“Yeah, I'm ultimately bullish as well. It's it's be for the for the reason I think Jim really highlighted, which is ultimately, you know, in the short run, I'm very bearish. Um, mainly because I think the only way we're going to get a deal is if Trump backs down to China. And I think if he tra a I don't think that's going to happen and b I think there's a whole lot of people that will have to revisit long very tightly held worldviews if Trump and the United States have to back down to China uh visibly.”

Capital flight from the dollar and bond market is occurring because foreign holders and investors have concluded that the US deficit path is unsustainable and that staying in dollars/Treasuries will result in negative real returns; this is a rational response to fiscal deterioration, not speculative herding.

“capital outflows are the name of the game for the dollar. What is your read on what's going on? Why is capital leaving the dollar?”

Luke is waiting for consensus to recognize 'how cornered we are' but does not see it yet—there is insufficient market recognition of the structural crisis the US faces, which is why he remains cautious and maintains gold/T-bills positioning rather than taking on equity risk.

“I'm waiting for consensus to realize how cornered we are and I don't see it yet.”

The policies being implemented resemble those used against Japan in the 1990s (technology controls, trade pressure) following Japan's rise as a competitive threat; the question is whether the US can avoid Japan's lost decade outcome.

“I would overlay the 90s or Japan and the fact that you know we've heard this or at least in my lifetime I've heard this is a matter of national security was the Japanese in coming out of the out of the 1980s. They had all the technology they had all the chips. you know, a lot of the policies that we're seeing right now were implemented in the against the United against Japan.”

Gold would have to double from current levels ($3,400) just to reach 1989 valuation levels relative to foreign-held treasuries (from 10% to 20% of foreign debt), and would have to quadruple to return to the long-term historical average (40% of foreign debt).

“if you look at at at, you know, with gold having done what it's done, uh, it is now value, the market value of US official gold, um, as a percent of foreign held treasuries is now 10%. In 1989, that number was 20%. So gold would have to double from here just to get back to 1989 levels. The long-term average is 40%. the US. Well, that's how much foreign debt we now have. Um, gold would have to quadruple just to get back to the long-term measure.”

When the US has interest payments plus debt greater than military expenditures (as is currently the case), the US has crossed the 'Rubicon' and the era of American global dominance is over, using the Roman Empire analogy where such fiscal distress signals terminal decline of imperial power.

“if you view the United States as an empire like the Roman Empire then with the interest payments you know plus on debt uh greater than military expenditures you're typically at the at the at the you've crossed the Rubicon where the US era of of of global dominance is over”

The current restructuring is generational and systemic (comparable to Bretton Woods 1945 or Alexander Hamilton's debt assumption after the Revolutionary War); a new global monetary system will emerge involving gold, stable coins, and Bitcoin in negotiated partnership, though the exact form is unknowable.

“This is ci Brenton Woods 45 or you know go back to you know the greenback uh you know Alexander Hamilton after the revolutionary war. It's that big. And so do I know exactly what it's going to be? No. But I would suggest to you that the US dollar is still going to be the medium of exchange of the global economy and the US Treasury will still have the pole position.”

Trump is not wrong that the Fed cut rates to help the 2020 election outcome, though timing concerns relate to real bond market stress in fall 2023 rather than pure electoral manipulation

“I don't I don't think Trump is wrong that they did lower they lowered rates to try to help uh the election. I think it was ultimately because the bond market was starting to have some problems in the fall. Uh, I think the timing looked terrible, certainly as it related to the election”

The current tariff policy is creating chaos and market dislocations (4.5-day bond market break, dollar selling, stock declines) at an accelerating pace; this is neither accident nor sustainable, forcing policy resolution quickly.

“once the bond market breaks which took a grand total of four and a half days after he announced the tariffs then Powell will have to play ball”

In the current environment, the only assets with conviction are gold and Treasury bills; marginal capital should be allocated to these, not equities or bonds, until macro uncertainty is resolved or fundamental policy changes occur.

“Yeah, I think until you get any clarity, what we've been saying is the only thing uh we have any conviction in his gold and tea bills uh in terms of marginal capital, even at $3,400 an ounce.”