Gold & Silver May Gain Further Appeal As Chaos Hedge

UBS Raises Silver Price Target to $36 by the End of 2024


Mike Gleason Mike Gleason
New Radio Release
May 31st, 2024 Comments

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up don’t miss a sensational interview with Peter St Onge, economist at the Heritage Foundation and a fellow at the Mises Institute.

Join Money Metals’ own Mike Maharrey and Peter for terrific back-and-forth commentary on a range of topics including why the Fed is like your neighbor who steals your gasoline. Peter also makes a very good case for why he is so optimistic for America, despite all of our current issues.

So be sure to stick around for our conversation with the highly entertaining Peter St. Onge, coming up after this week’s market update.

As the criminal conviction of former President Donald Trump dominates the news cycle, investors have to be asking themselves whether the upcoming election will be anything like normal.

A potential crisis of legitimacy for America’s electoral system looms. That could bring with it a loss of confidence in U.S. financial markets and the U.S. dollar itself.

The media is aghast that Trump’s legal troubles have failed to dampen his appeal to voters. In fact, Trump holds a polling lead over struggling incumbent Joe Biden in most swing states.

Were the election to be held today, the final outcome would likely to be too close and too bitterly contested to convince backers of the defeated candidate to accept the winner’s victory.

Trump supporters say the Democrat-controlled New York criminal justice system is trying to single-handedly decide the election for the entire country. It’s possible that Trump could be prevented from holding campaign rallies because he is placed under house arrest or even confined inside a jail cell.

Meanwhile, Trump made an unusual campaign stop last week, delivering a speech before the Libertarian Party national convention. In seeking the support of this faction of the liberty movement, he declared that being politically persecuted by forces within the government have made him more of a libertarian than ever before. Trump vowed to uproot the deep state, bring down inflation, protect cryptocurrency holders, and prevent the Federal Reserve from issuing a central bank digital currency.

His remarks were interrupted by chants of “end the Fed.”

It’s not clear whether another Trump administration will result in any fundamental changes in fiscal or monetary policy. In his first term, he rarely used his veto power to push back against deficit spending by Congress. And despite some attempts to point the central bank in a different direction, he appointed establishment insider Jerome Powell to be Fed chairman – a hiring decision among many others that he later came to regret.

Sound money advocates will certainly aim to gain some influence in a Trump administration. A few Trump allies in Congress are proponents of gold and silver as money. Trump himself is known to be personally fond of gold and may be receptive to concerns such as eliminating the punitive “collectibles” tax on bullion.

As to how gold and silver prices might respond to the election results, it’s difficult to predict given how close and unpredictable the election itself is shaping up to be.

Stock market investors may have more to worry about. Wall Street hates uncertainty.

A Constitutional crisis surrounding the election is quite possible, as is social unrest and possibly even martial law. If the election results are in dispute and the peaceful transfer of power is in doubt, then the stock market could gyrate violently to the downside.

In such a scenario, precious metals could gain safe-haven appeal. Longer term, gold and silver prices can be expected to rise as a reflection of ongoing currency depreciation.

Neither Joe Biden nor Donald Trump have submitted any credible plans to balance the budget. But it is possible that in the event of a Trump victory, optimism about a change in course from Bidenomics could cause investment demand for bullion to decrease in the near term.

Renewed investor interest in gold so far this year has helped propel the monetary metal to record highs. Gold is trading slightly off those highs here on this final trading day of May. The yellow metal is off pulling off a bit here today and currently comes in at $2,340 per ounce, up a very slight 0.3% for this holiday shortened week.

Turning to silver, it has been outperforming gold in recent weeks. As a result, the gold to silver has narrowed to a 3-year low. Silver is also suffering a setback here today and is now up only 0.7% since last Friday’s close to trade at $30.59 per ounce.

This week, UBS raised its price target for silver to $36 by the end of the year. The Swiss investment bank cited an expected 9% surge in industrial demand for silver, led by the photovoltaic sector. At the same time, global mining output is expected to suffer a small decline, exacerbating a chronic supply deficit for the metal.

Recent reports out of China suggest silver inventories there are being rapidly depleted as the country ramps up production of solar panels. Silver is a critical component of solar and other electricity generating infrastructure.

Silver along with gold are also critical components of an inflation protection strategy for investors.

Well now, without further delay, let’s get right to our exclusive interview with Peter St. Onge, one you most certainly do not want to miss.

Mike Maharrey and Saleha Mohsin

Mike Maharrey: Greetings, I'm Mike Maharrey, I'm a reporter and analyst here at Money Metals, and I'm here today with Peter St. Onge. He is an economist at the Heritage Foundation, a fellow at the Mises Institute, Peter holds his PhD in economics from George Mason University and a Bachelor's degree in Economics and Political Science from McGill University. Peter, thank you so much for taking a little time to chat with me, how are you doing today?

Peter St. Onge: I'm great, thanks for having me on.

Mike Maharrey: Well, you're very welcome. So I was perusing your bio and I would be remiss if I didn't start off by asking you about retiring at 25, you've got to share that story.

Peter St. Onge: For the young guys who know about the whole crypto thing, we've seen this before, we had the exact same schtick in the 1990s with the dot-com boom. And at the time, I was, I don't know, 23 and I saw an interview with Paul Krugman where he talked about what was going to happen with the internet and he said that the internet was a bubble because everybody was going to get bored of it and we were going to get sick us sharing cat photos and debating politics, and then people were going to stop using it. In the end, "it would've less impact on the economy and on society than the fax machine."

I heard that interview, I think I might've read it in Wired Magazine, which back then was a little bit more based, and I thought, this guy is a PhD at Princeton, if he is that stupid, then how many other guys on Wall Street are also that stupid? And those guys probably run a lot of money and they're eventually going to realize that the internet is the biggest deal in a fricking century, and when they do, they're going to move a crap load of that money into internet stocks and those internet stocks are going to soar.

I took every dime I had, which was not many, I was 23, but I put my salary in .coms, I put everything I had in .coms, typical Bitcoin hodler, but for dot-coms. And of course those took off, everybody told me I was an idiot, they actually went down for a year and I did look like an idiot, but come on, if there's that much stupidity running around, you got to take advantage of it. Of course, they took off and so I was a millionaire at 25 and I thought, all right, well, I could invest it at 7% in high yield bonds, but I could also go backpack the world and hit on like Irish nurses vacationing in Thailand. And I thought, all right, I'm not going to be able to do that when I'm older, perhaps someday in the future I'll be a millionaire again, but I will not be 25, and so that's what I did.

I went goofed around for about two years, everybody kept telling me I'll get sick of it, but it took two years to get sick of it, and I got all over the place, North Africa, Japan, everywhere in between. Well, and then of course, how the story ends, I kept looking at the stocks, it was kind of obsessive, when it's that much money, it goes up 6% a day, it goes down 4% a day, whatever. And I thought, all right, well let me stop doing this so I can actually have my life back, and so I moved to this Thai island with no internet connection, and I learned Muay Thai, like Thai kickboxing.

And I went in for supplies one day and there's an internet cafe, and I figured I'd go in and tell the family I'm still alive. And I saw that stocks had just completely collapsed, it'd been like a month and they dropped 80% or something. So I was not quite bankrupt, but close to, so I went back, packed up my crap, moved to Japan, went back to my fallback career of being a bartender, then goofed around there for a while, somewhere along the way, I got back on track and got the PhD.

Mike Maharrey: Fascinating. Well, it's interesting because you think back to the dot-com days and you realize things haven't changed a whole lot.

Peter St. Onge: Zero. No, heck, you can go back through history, the 1830s railroad boom in Britain was the exact same thing over and over, we do the same thing over. And every time people think, this is changing everything, when they talk about AI, they're so excited about the AI, it's going to change everything, the productivity is going to go up 20%, we're going to have hyperinflation and wealth. We've all seen it, it has happened over and over the internet itself, you can compare that to Gutenberg's Press, so Gutenberg, that was movable type, he imported it from China, of course, which it had for hundreds of years, and at that point, writing became really cheap.

Before the Gutenberg press, you had to have a bunch of monks sitting there and writing crap. After Gutenberg, it was social media, you could print up a thousand pamphlets talking about all the crap that your local abbot or local Lord is doing, all the corruption, you could rile people up and you could have a peasant revolt in a week flat. That then led to this long, it was bloody for a long time, finally, it led to constitutions and human rights, everything we're seeing, there have been historical episodes that have been almost identical. And so it's fascinating to go back to those historical episodes and ask, well, what happened? What happened next? And you can do that now too.

There's one of the reasons a lot of my videos are negative stuff, talking about companies collapsing, inflation, debt, and people are like, why are you so cheerful? And the reason is because we've been here before, and in fact, we've been in much, much worse straits than we are today. You compare the whole Davos, totalitarian, all that crap, you talk about the inflation, the censorship, all this, we have been through much, much worse. And the tools that we have today are so much better than what we had in the past, I am extremely optimistic, these idiots, they had a good thing going, man, they were boiling that frog and they jumped the gun, and now the frog is jumping and it is fantastic.

Mike Maharrey: That's a good point. I think that the whole pandemic thing really kind of ... I think they overplayed their hand.

Peter St. Onge: Do you think? For a mile!

Mike Maharrey: In many ways, they overplayed the totalitarian card that we were going to lock you in your house, but I think they also overplayed the whole monetary thing - the amount of money and stimulus that they created in such a short time, and now we're seeing the impacts of that.

Peter St. Onge: Yeah. They took a garden variety flu, it was a severe flu, it was definitely worse than most flus, but it was a flu, and they cranked that up and they went for broke. And in the process, they threw their masks off 10 years ago.

Mike Maharrey: That's an ironic statement.

Peter St. Onge: They threw that off.

Mike Maharrey: They threw theirs off and made me wear one.

Peter St. Onge: Yeah, they did, beautiful. Ten years ago, if you told normal people, if you were like, everything the media says is a lie, and they're just serving larger interests to this totalitarian cabal who wants to concentrate power, people would look at you like you're crazy. Now, half the country believes that, and growing every single day, just look at the predicted numbers on Trump, he's even with Hispanics, he's got one out four black voters, these are people who never, never would've been responsive to the argument that the system is broken, that there are these powerful left wing forces arrayed against you. People are waking up to this already half the country, not just in the US but also in Europe, in Japan, people are waking up all over because they launched too soon, they were not ready.

Mike Maharrey: Well, let's talk a little bit about one of the impacts that we've seen from all of that, and that's the price inflation that we've been dealing with in space. And let's be honest, we've been dealing with price inflation for decades, but now it's noticeable for most people, but from what I understand, the Fed's killed it, inflation's dead?

Peter St. Onge: Always and everywhere, yes, the heroic inflation manning the walls for us all. Peter Schiff had a number the other day talking about how in the 1800s, in that a hundred-year period, prices fell by 50%, so why is the 20th century different? Well, because we had a Federal Reserve, and so since then the dollar has lost, what, 97% of its value. The Fed is an inflation factory, and usually when you look at it in the newspaper, you see the Fed's fighting inflation, the Fed is concerned about inflation. Normal people think that the Fed is fighting inflation, and fundamentally what's happening there, of course, is that the Fed is like a gasoline thief, if you'd like to rip off your neighbors and steal their gasoline, there's one trick to that gig, which is don't take too much at once, take a half gallon, take one gallon. If you drain their tank, they're going to notice.

And so that's how the Fed runs, they crank out as much inflation as possible, but the trick is, they got to keep it out of the headlines, keep it under the radar, that's why they stick to the 2% inflation target. There is zero economic justification for that, you can look it up, there are zero papers, there is no research whatsoever that says 2% is a good number. What 2% is, that's marketing, that's what empirically the people don't think of 2% as a real number. What kind of number can you ignore? If I'm going to borrow money from you and I'll pay it back in three years, 2%, who's even keeping track of? 7%, you'll keep track of, 2%, you won't.

That's fundamentally the inflation or the Fed is an inflation machine, takes as much as it can get away with. It's actually more than 2% because remember, the economy's growing, there's more people in the world, there's more people per given amount of gold, the gold gets more expensive, it goes up in value. So actually, inflation is probably more like five, 6%. But of course in COVID, they went bonkers, so there's one point where almost one out of $3 in existence had fresh ink on it. They printed up, what was it, 7 trillion at the peak, so $7 trillion on about 14 trillion before COVID. And so that of course made inflation take off, the dutiful lapdog media as always, they talked about Mr. Putin's war, the Peloton shipments, people were buying too much on Amazon, greedy workers, greedy companies, you name it.

Mike Maharrey: Unicorns.

Peter St. Onge: Yeah, the supply chains, the boat stuck in the Suez Canal, it was just whatever, what do you got? We need more excuses people. And of course that's sticking around, and now we're in an interesting spot because the supply chains were definitely part of it, right?

Mike Maharrey: Sure.

Peter St. Onge: During COVID, especially China went nuts and locked down all these factories, and so you couldn't get a toaster. That went away, that brought down some of the inflation, and so at that point, the Fed declared victory, they haven't quite cut rates yet, but they're starting to flirt with it, they're doing things like, what is it, they're scoping back on the quantity of tightening. They're fixing little things under the surface that basically amount to trying to get back to easy money. But the trick here is that now since October, inflation's been coming back up again, so we're starting to see this 1970s style double hump on inflation where you get this big jump and then it comes down a little bit, the fed declares victory, eases up, and then it takes off.

And last time that happened in the 1970s, it was much worse the second time. The second time we had five years, not one like recently, but five years of double-digit inflation paired with double-digit unemployment. And that's what lost Jimmy Carter the election, that's why Reagan came in. When Reagan was running in 1980, it was exactly like Trump, all right, the media went after him, he's going to cause World War three, he hates the gays, you name it, the exact same script every single time. Back then, if you told people the media was lying, most people didn't believe you, Americans didn't know yet, they didn't understand yet, and so that might have worked.

But the thing is, double-digit inflation, double-digit unemployment, you can't survive that, you could be the slickest guy in the world in terms of a candidate, and you're not going to survive that. So that's where we are now, inflation is now taking off, it's looking like about four or 5% ongoing, you've got unemployment even rising. Again, of course, the real unemployment rate is probably six and a half, 7% if you count people who dropped out of the workforce, these are people like if you're strung out on fentanyl in Philadelphia, you're not counted as unemployed because you're not looking for a job. Only people who are actively looking for a job are unemployed, which is real cute, because that's not how people think of unemployment.

Anyway, we're in a situation where the economy is getting much worse, Joe Biden is of course panicking as he should, we even got Democrats now who are trying to encourage him to drop out. Of course he's not going to drop out because he and his ne'er do well son are in such a legal jeopardy, that'll be a cold day in Florida. But at any rate, that's where we're now, so the election is actually starting to look competitive again, even with the ballot stuffers.

Mike Maharrey: It's interesting how all of those dynamics play in together. You were talking about 2% inflation being propaganda, it reminds me of six feet apart, that was just pulled out of somebody's rear end too.

Peter St. Onge: Yeah, pretty much everything. This is why I have trouble believing the science, and the science comes out of a rear end, no, I don't believe it.

Mike Maharrey: Right, the science trademarked.

Peter St. Onge: If you take global warming, for example, if you are a climate, what is it, professor or whatever the heck they are, and if you say the wrong thing, you get fired, you're done, you don't get the funding for the paid studies, you don't get the awards, you don't get invited to, you are a non-person at that point, you are disappeared. And there have been cases of this, Judith Curry, for example, she started to doubt the global warming consensus, she's out of everything. There's a woman up in Canada, I think at UBC, she did a study saying that polar bear populations are actually increasing, and the reason they're increasing is because humans are moving up there to drill oil and stuff, and then the humans throw away trash and then the polar bears eat trash. Polar bears love trash, trash is a lot easier to catch than a seal, usually it doesn't fight back.

Anyway, the polar bear population is exploding, but apparently that's not the narrative. So she literally got fired, she actually sued UBC. So if you're censoring science, no, I don't believe the science, if one single person is censored, then it corrupts the entire field, the entire field is garbage until that person is reinstated. And if you go through all of the fields where people are censored, they're censored in economics, I'm not a professor anymore, I wasn't fired because I would be, I pre-fired anything to do with social policy, LGBT, any of that stuff, anything to do with climate, the list of topics that are censored of course during COVID, it just exploded.

There was a minute there where they were going after people for misinformation for talking about the inflation rate. And I did not expect you to be censored for talking about inflation or unemployment, but we were darn close for a second there. So given that even if you're not censored for unemployment, you are going to suffer professional consequences if you're a professor and you take the other view. If you say that the COVID lockdowns weren't worth it, for example, of course they weren't, if you take that position, you're going to have all kinds of professional consequences, your career track is going to be a whole different level. If that's the case, I don't believe a single thing that comes out of those professors, not until the science is actually back on a level footing.

Mike Maharrey: Yeah, that's a fantastic point. You can't have true science when you can't have discussions or debate, because that's part of the whole process, right?

Peter St. Onge: Exactly. For example, global warmers, they got a million studies because they're paid by your tax dollars. They got a million studies, and they'll come at you with the study and they'll say, well, what about this, that, and the other? And my response is always, there is no data in this field because it is censored. You can bring all the studies you want, it is a censored field, which means that there exist experts who would blow a hole through whatever study this guy is pulling up, but those people are silenced. They're either afraid to speak or they're out of academia now, they're on what's up with that or some other website still getting the word out, but they're no longer credentialed, they're no longer in the academic journals.

Mike Maharrey: Yeah, they're not the science anymore.

Peter St. Onge: That's the thing. So at that point, my response on any global warming debate is, there is no data, not until the censorship ends.

Mike Maharrey: Well, let me pivot back to inflation here, because we talk about it as if it's pernicious because we understand that it is. But if you talk to a lot of people, they'll say, it's not really that big a deal because after all, your wages are going up too, and it's pretty much a wash when it's all said and done. What's wrong with that line of thinking?

Peter St. Onge: There's a couple of problems with it. So first of all, there are huge transitional costs, people make plans, they lend money, and then when the inflation is a different number, then they get screwed up and they end up having made a lot more mistakes than they would've hoped for. The broader issue though is how exactly the inflation is created, so this has to do with Cantillon effects where you're not just looking at the inflation. The inflation doesn't fall out of helicopters, it doesn't fall like rain hitting all houses uniformly, it comes in a specific way, and the person who gets the money first makes out like a bandit because prices haven't gone up yet, they got the money, but the prices didn't go up. Meanwhile, the person at the very end of that chain loses out, they spent years and years with high prices, but they still didn't get the money.

And so if you look at how the fed creates inflation specifically, the way it does that is by printing up money and flooding it into asset markets. Well, who owns assets? Rich people. And who borrows money? Because if you're flooding into asset markets, you're giving a big subsidy to borrowers, well, the vast majority of borrowing is also rich people. Most people think of borrowing as poor people borrowing $500 paycheck loan, no, if you sum up the dollars, almost all of the borrowing, you had $10 billion at a time going to some chip fab or something, almost all of the borrowing is either rich people or of course, the single largest borrower on earth, governments, so governments make up roughly one third of all borrowed money.

The Fed is printing money, it's not raining it down on everybody, if it were, then yes, you could argue it would be harmless. Like if you just added a zero to everybody's dollar, if the tooth fairy snuck in at night and put an extra zero, so your $1 bill is a 10, if that's how it worked, then yes, it would've no effect, but it would also be completely pointless.

But the problem is that's not how inflation works, the way it works is that it comes into rich people and the government, and then years later, it filters down to the middle class and then yet more years later, it filters down to people on fixed income. So people on older pensions where it was a fixed amount of dollars you were getting, or people on social security, which always lags inflation, plus of course social security, that has stepped up according to the government's score of inflation. And the government is grading itself, so amazingly, the government tends to underestimate inflation, therefore, your social security check is not keeping up with the actual inflation.

Mike Maharrey: In other words, it's benefiting the powers that be, and it's basically hosing all the rest of us.

Peter St. Onge: Exactly. There's this great political cartoon, and anyway, it's like this flood of money with all these bankers and whatnot glued to the orifice out of which the money is coming. And that's exactly it, they feed on it, and then what comes out of their other end, eventually it trickles all the way down and you get at the bottom. And of course, the irony is that socialists sit around and complain about income inequality and wealth inequality, which is dire, it's getting worse in this country, it's at historic levels. That is the fed, that is not the tendency of the free market, what the free market does is that it'll take something like an iPhone or a microwave oven, you remember when microwave ovens first came out, it was really, really expensive, it was like 600 bucks in 1970, which is a lot of money, it was close to a car.

Mike Maharrey: And it weighed about 47 pounds.

Peter St. Onge: It did, and only rich people owned microwave ovens. And the beauty of capitalism, free market, greedy capitalists, is that they want to sell a microwave to every single person of the world. And how can they do that? Not at 600 bucks, they can't, so they work day and night and they pay a lot of money to try to make that thing cheaper and cheaper and cheaper, and eventually you go to Walmart, you got a $49 microwave, that is what the free market does. The free market helps the poor above all, why? Because they're greedy. If you are seeing income inequality, that is not the free market, that is politically captured process where the rich and the powerful have themselves right first in line and everybody else is way the heck back there.

Mike Maharrey: Yeah, it's frustrating that people don't see it, they recognize that there is a problem, but they miss the actual guilty part. It's just like the whole greedy corporation mantra of greedy corporations are just willy-nilly raising prices and that's what causing inflation. And of course, the propagandists in government and at the central banks, they feed into it because it helps their narrative, they can basically get off scot-free when really they should be looking in the mirror.

Peter St. Onge: And there's a great truth to it, everybody's greedy, companies are greedy, governments are greedy-

Mike Maharrey: I'm greedy.

Peter St. Onge: ... Everybody's greedy in between. The question is, is there competition? So if my local Walmart gets extra greedy and doubles their prices, it's not going to work. If my local government gets greedy and doubles my taxes, what am I going to do? If my country gets that way, am I going to move? I got kids in school, so I'm stuck. So that's the difference, is competition, it's not a question of who's greedy, humans are greedy. The people who work in government do not go through some purifying process where they pass through this cauldron of pure light and come out the other end as the saint, they're just as greedy as the greedy corporate, they're all greedy, people are greedy, you're like, get over it.

The larger point here is that, that is why the battle for free speech trumps everything else, it is the one single battle we absolutely cannot lose. Because one of the saving graces of socialism is that the closer they get to socialism, the more they screw things up. It's like Zeno's paradox, you go half the distance and half the distance, but you never quite get there, that's socialism because the closer they get to it, things start falling apart, there's no food, there's no electricity, the prices, you get hyperinflation like Venezuela. And so in that, when people start seeing that there's no more chicken, there's no more toilet paper, the prices are soaring, if you don't have free speech, they are going to be gaslit, they're going to make the wrong conclusion about that. What they do in Venezuela, they say big business was hoarding, so in other words, Venezuelan businesses used to be super generous and we're cool with low prices, but all of a sudden they got greedy that's why there's no chicken in Venezuela.

Well, if you don't have free speech, then that's the only game going. Most people, because they went through public schools, they don't know anything about economics, they're going to believe what they're told. So that's why that is the one single thing, that's why literally Elon could do just about anything, I can't really think offhand of a crime he could commit where I would stop supporting him because what he has done for free speech has just been absolutely critical.

Mike Maharrey: Yeah, I totally agree with you. So I was reading an article that you wrote not too long ago, I think it was earlier in the month, and you said the Uni-party, I love that term by the way, because I've often said that the system is basically two sides of the same coin. You said the Uni-party is a few steps away from gutting the US dollar, and I think a lot of people would hear you say that and they would say, Peter, that's a little bit of hyperbole, make your case, what do you mean by gutting the dollar?

Peter St. Onge: There's really two things that they're doing, and first off, the uni-party on many topics that play fight, but they do pass a lot of bills that are very harmful. And normally when they do, it's bipartisan, we just saw them hand out 60 billion to Ukraine, somehow they found common ground on that. So they don't really fight that much, they seem to have the same goal on many topics, and specifically on the dollar, I think is where they seem to be on the same page. And that's to, number one, spend as much as humanly possible, which of course, this is pouring water into the wine of the existing dollar, so it makes them less valuable.

Number two, which I think is fascinating, is that for about 50 years, we've had what's often called the Petrodollar, where the US basically traded free mercenary services in exchange for countries pricing their exports in US dollars, most dramatically Saudi Arabia. And what I think is fascinating at this point is that the US has various noises from people within the administration that they seem to be abandoning that, they seem to actually be going for a weaker dollar. Now, one big step they took in that direction was seizing Russia's Central bank assets, so that was because of the Ukraine war, which in my mind is a regional conflict, it is not my problem, both regimes are pretty crappy, I would just like them to stop killing people.

But at any rate, what that does, of course, is it puts every country in the world on notice that the dollar is a risky thing to own. Even during the height of the Cold War, we had hot wars going on Korea and Vietnam all over the place, assassinating each other's people and whatnot, never ever did we do that. Because back then, our government of functionaries, I was going to say leaders, but I had to correct myself, they understood the fact that the US dollar is the reserve currency of Earth is massively valuable to the US. They understood that, why? Because you can print up pieces of green paper for a fraction of a penny and sell it for a toaster, and you can print a lot of them.

We don't seem to understand that now, this move seizing the dollars, you've already got countries who are getting off the dollar now. There was a summit of ASEAN countries, these are the Southeast Asian countries, they don't traditionally have a beef with the US, on the contrary, they're on the US side because they want us as a counterweight to China. So you had this big ASEAN get together, and the Indonesian president, who does not have a beef with the US, he got up there and he said, "look what happened to Russia, we have to diversify out of the dollar." Now, is he planning to invade a Ukraine? Probably not, but that's not the question, the question is that, before the dollar had no political risk, it was like gold in that sense, now it suddenly does, and it was just a boneheaded move, to what end?

Currently, they're taking money off of those dollars they seized, and they're giving them to Ukraine, why? To keep the meat grinder going. So it's not even going to the American people, it's not like they're selling the dollar down the river in order to achieve some goal of the US, they're doing it to what? To keep some war going where the claim was that we're going to run down Russia's military. And of course, Russia has a bigger military now than it did when the war started, and by the way, they're trained, unlike ours, who at least are diverse.

It's just completely boneheaded, and it raises the question, I think a lot of assumptions about the dollar's future trajectory are based on the understanding that Washington is going to try to keep that, whether it's the Petrodollar or whether it's some other form, and that I think it's now under doubt. And now why do they want a weaker dollar? So the reason is to make American exports cheaper. One way to make American exports cheaper would be to reduce the stupid green regulations and the diversity mandates and the taxes so that it actually make sense to produce things in America, that's one way you could do it. The other way you can do it is by gutting the dollar, so that, sure, you impoverish the American people, but our exports get cheaper. And so if they're doing it on purpose, that would probably be the most likely reason.

Mike Maharrey: Do you think that in the long run, if we see this continued diversification away from the dollar, and we'll not even go as far as suddenly the dollar's not the reserve currency, but let's say we enter into a world where it's more of a, you've got multiple currencies that are in these reserve functions, but the dollar is not as dominant as today. Do you think that that's going to ultimately catch up in terms of the fact that the US can no longer create the dollars in order to support the borrowing and spending? Are they kind of cutting off their own necks?

Peter St. Onge: Yeah, they absolutely are, but politicians in general are extremely short-sighted. There's a great book by Hans-Hermann Hoppe, Democracy: The God That Failed, and he talks about that fact, democracies are interested in the next two years, monarchies, that's like a family business, so there you're interested in the long term. But of course our politicians, they only care about the next two years, so yes, they're absolutely cutting off their nose to spite their face. You've also got a danger that you can't see the impact day to day, it's very similar to how the US lost its manufacturing power, so in the 1960s, the 1970s, they're already gutting it, they had the regulations, Nixon, he created the EPA, you had the OSHA, you just had this endless stream of government interference that essentially made it impossible to manufacture things in the US, and nobody did anything about it.

Because if you said right after World War II, America was literally most of the manufacturing on earth, it was overwhelming. US manufacturing was what the US dollar is today, and there's network effects to manufacturing. All right, so if you're in Tulsa, wait, Akron, Ohio, glass Capital of the world at one time, if you're in Akron, all the glass people are in Akron. If you're going to do a glass startup, of course you're going to do it in Akron, that's where all the experts are. It's like Silicon Valley, but times a hundred for every single manufacturing area.

They said, no, it'll never go anywhere, so what happened? It was erosion, just slice by slice like a salami slicer and none of those slices really did anything, it was just a tiny little shaving off a 10th of a percent. But there was some point where it tipped and it just went into absolute free fall. And you look at it today, actually, Akron celebrated the hundredth anniversary of whatever, some glass event, and they wanted to put up a curved glass wall, and that technique was invented in Akron like a hundred years ago. And so they went around, they tried to find a provider and they could only buy it in China. Now, for obvious reasons, they very, very much did not want to use a Chinese supplier for that, we are celebrating Akron, but they had to.

Once those network effects break, they don't un-break. Now China has a network effect, we're sitting here trying to friend shore and trying to get manufacturing on China to bring it back to America, no. For the same reason that we slept on the wheel before we lost it, it is very, very hard to get back. So that's my concern with the dollars, that we'll be sleeping at the wheel again, you look at the numbers, they're actually moving fairly quickly. So in just a few years, for example, the dollar went from 58% of official reserves, meaning what foreign central banks own, went down to 49% in just a couple of years. That is a huge move, but even so, people laughed, they said, the network effect, the dollar will never be dethroned, that's what people said about American manufacturing. And when that happens, that means that we got to get back in line with all the other losers and we actually got to start to collect taxes for all the crap we spend, instead of selling those beautiful little worthless scraps of paper to foreigners.

Mike Maharrey: Well, that's depressing.

Peter St. Onge: Yeah, always.

Mike Maharrey: You kind of touched on this, but I want to close out, give me your elevator pitch for optimism.

Peter St. Onge: The short version, we have been through a heck of a lot worse in the past, the American people are absolutely fierce, they are very independent minded, they're extraordinarily creative. If you look at startups per capita in the US, broadly speaking, startups, new businesses in the US is about twice what it is in North Europe, that's about twice what it's in south of Europe, that's about twice what it's in the rest of the world. Extremely, we love risks, we're bold, we're energetic, so all we have to do, we're like a coiled spring and the government is sitting on us and it keeps pushing harder and harder and harder.,But the thing is, all it needs to do is get off for a second and we pop back.

You saw that during the first couple of years of Trump, and Trump could only change so much, he was up against the entire bureaucracy, they used Lawfare to try to stop him at every turn. But even so, our economy was soaring, we had startup soaring, we had incomes jumping for the bottom for the first time in a long time, that was all over the newspaper at the time, they very begrudgingly admitted it. So all we have to do ... sorry, I have to take these down, I want to make sure the sound is going here, my thing's running out of battery, can you hear me okay?

Mike Maharrey: Yeah, you're fine.

Peter St. Onge: Good. So all we have to do is wait for the government to get its foot off of our back, and we come springing right back, specifically, Americans keep springing right back. The beauty of it is that if they really screw the pooch, historically, when a government really screws the pooch, it can't keep its foot on our neck anymore because it can't pay them. The inspectors disappear, it all disappears, they have enough money to pay the Praetorian guard, and that's it. So either way, the government's going to get off our back, we can do it the easy way or we can do it the hard way, which is at the other end of a crisis, but either way.

Murray Rothbard has got a great book called Conceived in Liberty where he goes through the the 300 years of American history before the Constitution, and it is absolutely fascinating, the stuff we went through. There was one point where New York state that is in the 1600s, they decided that you cannot sell anything whatsoever except at a government store. If your neighbor wanted to buy some blueberries, all right, you're not allowed to do it, and if you do it, you're executed. There's been some crazy stuff in this country that we've gotten past. You've had people literally jailed and tortured for saying things that the king didn't like, we've been through a lot worse. You can even go back to the 1970s, you had no small government media outlets in the 1970s whatsoever. All right, if you wanted to get a small government classical liberal point of view, maybe you could go to an anarchist bookstore and find maybe some mimeograph collection of-

Mike Maharrey: Pamphlet.

Peter St. Onge: ... Pages and then you can subscribe to it, you send them 20 bucks and a self-addressed tab. That was literally the state of discourse, and yet we lived, we survived, we still have most of our constitutional rights. So the advantages we have today between the internet, email, people don't understand how powerful just person to person, you look at what they do with that in China, it's astounding, so I am extremely optimistic. They have absolutely overplayed their hand, people are waking up, and we have better tools right now than all of the previous episodes where humanity struck back against tyranny and won their freedoms.

Mike Maharrey: Beautiful. I love the spring analogy, really, I like putting those visual things in my head, that's fantastic. So I'm going to let you go, but before I do that, where can folks follow your work? Because they definitely need to be following your work.

Peter St. Onge: Well, thank you. I hang out on Twitter, X as we call it now.

Mike Maharrey: Yes, that's what the kids call it.

Peter St. Onge: @profstonge, that's where the conversation is, if you're not on there, get off Facebook, ditch the rest of those. And then I've also got peterstonge.com where I have, let's see, I do daily videos talking about the economics and freedom and weekly articles talking about the same.

Mike Maharrey: I love your videos. And you can also find your articles from time to time over at moneymetals.com.

Peter St. Onge: Yes, absolutely, so check them out there.

Mike Maharrey: Absolutely. Well, again, thank you so much for taking a little bit of time out of your day, I really appreciate it, I enjoyed the conversation, would love to talk to you again. I have a feeling we could probably do a 45-hour interview, we could do the Joe Rogan style, just keep going forever. But we're going to respect your time and go ahead and let you go, so thanks again.

Peter St. Onge: All right, thank you.

A truly terrific interview there and we’ll be sure to have Peter back on again, he was tremendous and we certainly enjoyed having him on our podcast.

Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. And remember to tune in as well to the Money Metals Midweek Memo, hosted by Mike Maharrey. And as always, I want to encourage you to check out Mike’s podcast each week if you’re not already doing so. Just go to MoneyMetals.com/podcasts or find that on whatever podcast platform you prefer.

Until next time, this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a wonderful weekend everybody.

Mike Gleason

About the Author:

Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.