Gold Prices Soften as Trump Makes Cabinet Picks

Mike Maharrey: Greetings, I'm Mike Maharrey, I'm an analyst and reporter here at Money Metals, and I'm here today with Jeffery A. Tucker. He is the founder and president of the Brownstone Institute, a prolific writer. I couldn't even start to go over all of the things that he's written, but everything from academic journal articles to writing at The Epoch Times to books, and it's really a pleasure to have you on the show, Jeffrey, how you doing?

Jeffery Tucker: Sure, sure, good, I'm doing good. Thanks for having me.

Mike Maharrey: Absolutely. Well, I want to talk a little bit, since this seems to be top of everybody's mind right now, about the recent election of Donald Trump and the conventional wisdom, I think, out there, when it comes to the economy. We've been focused on inflation, and I think that the mainstream kind of thinks inflation is done, that the Fed has managed to break its back. And then, I think there's another segment, excuse me, of people out there who kind of are of the opinion that Biden caused the inflation, so now that we have Trump, we don't have any more trouble. I don't agree with either of those, I don't think you do, either, but how do you kind of see the inflation situation right now?

Jeffery Tucker: On the first point about inflation being gone, they've been saying that for three years, from the first quarter of 2021, then, when we started seeing the inflation come about, and everybody was tremendously alarmed. And people were asking Janet Yellen, the Secretary of Treasury about it, she said it was no big deal, it's just transitory, this is all just reflecting supply chain breakages. And people wanted to believe that, but it just wasn't true, and you could look at the money supply data and observe that it had peaked at a 26% per annum rate of increase back in April of 2020. But what was fascinating about that was that nobody was actually sure about what the impact of that would be on prices, and the reason for that is that the psychology of the connection between the money stock, quantity of the money stock, and rate of increase, and the effect of general price level, had been broken as a result of the 2008 financial crisis.

When there was a great deal of quantitative easing taking place, so this is a kind of evil genius, Ben Bernanke spent or created vast quantities of new money, but had pumped them into the banking system and locked them in vaults through a very simple trick, he had the Fed pay a higher market rate, higher than market rate, on loans, so that both recapitalized the banks with fake money, and really, essentially, fake accounting, while keeping the new money off the streets by locking it up behind loan markets that were essentially broken. And that was a fascinating thing, because a lot of the quantity theorists, among whom you could include many people, and including myself, by the way, had expected terrible inflationary results that did not happen.

What we saw instead was ... And by the way, as part of that, in order to get the market rates lower than what the Fed was willing to pay, they were slammed down to zero. That was part of the trick. That introduced a tremendous distortion in production structures throughout the whole of the capital sectors of the US, but one thing it did not result in was a changed price level, prices remained common. So after 2020, when you saw the Fed doing something very similar, many people just really did not know what the consequences would be, and many people, including kind of myself, I was a little bit through with guessing about this relationship between the money stock and inflation.

But after 2021, we began to see in the first quarter some inflation roaring back, and they were all in denial [inaudible 00:04:41], and people wanted to believe it was just supply chain breakage, it was temporary or transitory, as Yellen said. But the truth of the matter is that the money injections took a different course in 2020 than in 2021, because the Fed was nowhere near done with its actions. It took a different trajectory than it did in 2008, it dropped, basically, helicopter money in the form of stimulus, to all households and businesses in the United States. It's something incredible that everybody was staying home but get richer than ever. And if that seems like too good to be true, it certainly was, because I don't know how you would possibly estimate this, but I think certainly by 2022, all of the income gained from stimulus had been wiped out by a dramatically changed purchasing power of the dollar itself. And it just got worse and worse, and then, I think it peaked maybe 2023.

And it was at that point, they said, oh, the inflation's over. Well, they never admitted the inflation was bad in the first place, and the overall inflation rate probably approached, once you include interest rates and real estimate of housing, and look at extra fees and inflation, all the other factors, it might've peaked at 30% per annum at some point. But certainly, over four years, right now, the official data show that we've lost about 22 cents of purchasing power from January of 2020 to the present, which is a tremendous loss in a very short period of time. And that's just with the official data, once you start including interest rates and housing rates, especially housing insurance, which is not part of the official data, and take out the hedonic adjustments and do all these things, I mean, you're definitely looking at 40% losses, like nearly 50%, nearly 50 cents of a dollar, pillaging of the American public in a mere four years.

And unfortunately, despite continuing propaganda from the financial press month after month, that inflation has been licked, and it's been conquered, and it's gone, it just never goes away. The report that we got, I think it was only just yesterday, was quite terrible, actually. It was quite terrible, it came in at 2.6%, but actually, sticky prices haven't looked at where they stand right now, but I think they're over 3%, which is 50% over the target of 2%. So we're not done with it. And then, when you look at ... Now that we've established the relationship between money stock and general price level is there, especially with velocity on the increase, and it's wise to look at money creation rates, over 12 months, we got $1.1 trillion in new money being created, mostly out of fed purchases of treasury debt, which had been unleashed to somehow boost the GDP going into the general election.

So Trump arrives in Washington with this serious, serious problem, and I'm fully expecting, if the present lag rates in recent history persist over into next year, we're going to be looking at a re-acceleration of inflation all the way through the summer. And there's truly not much that Trump can do about that directly, and it's a major problem because he has promised to bring down inflation. And as you mentioned in the second part of your question, the American politics is just burdened with this crazy mythology that whatever happens under anybody's watch is caused by that president. That's just the way we are, we can't tolerate the idea that something might have been set in motion by some other previous president, or maybe we'll tolerate that for a few months. So I don't know, it's a major problem. I think there are ways around it for the Trump administration, that's what I laid out in my article this morning.

Mike Maharrey: Can you, real quick ... You did a pretty good job in the article, and I think this really confuses a lot of people, because I think most people think that oil prices go up, that's inflation, and there's this disconnect between what inflation really is and what's causing this general rise in prices, as opposed to, something's going up and something's going down. Can you kind of make that distinction? What do we really mean by inflation in terms of that more general term?

Jeffery Tucker: This subject gets enormously frustrating, because one of the things you hear is that Trump's tariffs are going to fuel inflation. That's just simply untrue, I mean, if we want to talk about inflation as a general increase in overall prices and a generally realizable loss in purchasing power of the dollar in terms of domestic goods and services, tariffs do not contribute to inflation, what they do is increase the relative prices of imports relative to domestic production, which is exactly what Trump wants to do. And I'll tell you something that's fascinating to me, there is strangely room for that to take place right now without affecting general inflation, and I'll tell you how I know that.

You can reassemble the inflation data based on import prices versus domestic production, and domestically-produced, dollar-based goods and services, I guess you would say, produced within a dollar world of accounting, has been extremely high, as we've said, 20, 30%, but if you look at the price of input to goods, goods finished in non-dollar countries, and then, imported, the inflation has been far, far less. It's actually not been ... I think been above normal, but not anything remotely like general inflation rates.

So there's a lot of room ... Imports are still very, very cheap, I mean, which is why ... And you can test this yourself, I mean, you can figure out some good that's produced ... A product that's finished internationally somewhere, let's just take, for example, Texas, and go to Amazon right now, and be shocked to find out that you can get a set of sheets for 30 bucks, okay? Decent quality sheets for 30 bucks. And it was true before the great inflation, it was true now. Why is that? It's because both the wholesale and ... Everything but the retailing has taken place in non-dollar countries, but as a consequence of this, the US is faced with ever-growing trade deficits.

And the trade deficits are only a measure, okay, so we call them trade deficits mainly because we're still using this 19th century-style accounting methods to expect settlement mechanisms between [inaudible 00:12:51] flows between various countries, so we still call them trade deficits. So what they represent today, though, is just the complete reliance on economic structures for imported goods relative to exported goods. And so, what does the US export? Well, we don't export anything except financialization, debt, and-

Mike Maharrey: Dollars.

Jeffery Tucker: ... dollars, and oil. That's it, right? And otherwise, everything is imported. And so, Trump wants to turn that around with a new emphasis on domestic manufacturing, but that is going to require a fundamental rethinking of the role of the dollar in the world economy, and I don't know if he's ready to go there. I think JD Vance is. But the most immediate problem is going to be this domestic inflation, and the only way out of this is something that ... The national media is still attached to kind of Keynesian-style hydraulics, where inflation is caused by overheated production. And this is widely said, and I don't know, every journalist out there still believes this gibberish, I mean, it's just incredible, it never goes away.

The truth is exactly the opposite, high wealth creation, high growth, high production, high output, mitigates against inflation. So this is a lesson that the supply siders tried to teach in the early 1980s, and they were screaming against the Keynesians. That's 40 years ago, right? They're screaming, no, no, no, we need tax cuts to inspire more production, and that will outrun inflation. And if your economy is growing at 6%, and your inflation's reducing the value of money by 3%, there's still 3% real growth. So the higher you can drive growth rates, the better off, or the less damaging that's going to be in terms of purchasing power losses, which is just to say, the pillaging of the American public, or kind of, hidden taxation. So that has to be a priority, so how do you get there?

Oh, and I'll tell you somebody else that has to happen, you have to do something about the money printing, right? Well, the Fed's going to keep buying treasury debt so long as there's this tsunami of treasury bills pouring out, and that's going to continue so long as Congress spends money. So the very first thing that needs to happen is that the budget needs huge cuts at a trillion dollars, two trillion, two and a half trillion dollars, three trillion dollars, whatever you can do to cut discretionary spending. Of course, this is limited by the fact that a lot of the spending is just paying interest on the debt.

I'd say there's nothing you can do about that apart from default, which is true enough. And then, you've got all the entitlements, and Trump won't touch social security, Medicare, and so on. And you do want to stay away from setting yourself up for obvious political failure by, for example, at a moment like this, cutting the ... What's it called? Electronic benefits transfers, EBTs, with the SNAP program and all these things. I mean, you actually don't want to be taking food out of poor people's mouths at this point, so it's just not politically wise to do this, which leaves where they really want to cut, which is the administrative expenses of the gigantic two to three million person bureaucracy in Washington. That's why it all comes down to Elon Musk and Vivek Ramaswamy's new independent commission that is going to be recommending sweeping cuts like, immediately.

And I tell you, this needs to happen, and it's got to happen right away. And I don't know how far they're willing to go, but if they go far enough, then, even if inflation starts entering into a second wave, the growth will eat the inflation in some ways, and then, we can stop the money printing, and stop the linkage from the federal budget by the fall, or going into next year, then we will not have an inflation problem in 2026, moving into the midterms, and that will just leave the economic growth. So that's the theory, that's the way it could work, I am in no position to say whether or not that will actually happen or not.

Mike Maharrey: Yeah, yeah, I'm very cynical whenever I hear about budget cuts in DC and cutting the size of government. It's easy to say, it's hard to do. And I hope that there's the political will to do that, because I agree with you, it's something that's going to have to be done, because the ever-increasing debt ... That's why we have the money printing, and the money printing is the root of the inflationary pressure, so it'll be interesting to see how much of the rhetoric can be transformed into actual policy. I would love to-

Jeffery Tucker: A lot of that's got to come from Trump leveraging his mandate. That's something that I don't think anyone in Washington anticipated, that he would have that level of popular appeal. And these people are really intimidated by this stuff, and I think Washington's about to get a real wake-up call. I see a lot of Republican senators out there giving press conferences that are putting down Trump's cabinet picks.

Mike Maharrey: ... Yeah, yeah. Were you surprised that Trump won as handily as he did? Honestly, I was. I was kind of anticipating him winning, but I wasn't anticipating it being nearly the size of victory.

Jeffery Tucker: Well, like everybody, I was following the betting odds, and it looked pretty sizable based on the betting odds. But as with most things, it's a lot clearer in retrospect, what was going on for four years, and we didn't see it coming. And the reason for that is that the Trump team, which is the least surprised of anybody, had mapped out a clear strategy and executed it well over four years. And after they left in 2020, they looked at the numbers, they looked at the votes, they said, there's between 10 and 20 million votes here that are not plausibly real. If we curb those with some voter ID tests and some better police in polling stations, and really kind of have eyes out, see something, say something, kind of culture, concerning election fraud, we can minimize that. And then, we will fire up a new and re-enfranchised, the least enfranchised, voter block in the country that likes Trump the most, which means men under the age of 40.

And if we could just at least tie the women's vote, which they did, the men will make up the difference and minimize the amount of voter fraud, then we could actually get, this is the way they did the math, fewer popular votes than Trump got in 2020, and still overwhelmingly win the Electoral College and the popular vote. So that was their strategy, and it was hatched four years ago. Team Trump is fanatically attached to their secrecy, they tolerate no leaks ever, and they wanted to shock the world with this victory. And so, yeah, they were confident, but not publicly too confident, because if they were too confident, they [inaudible 00:21:24]. So they didn't mind it coming down to the wire, and they didn't even mind the fake polls that were talking about a Harris comeback. I never believed the polls, I have to tell you, I always thought there were bogus.

Mike Maharrey: Yeah, I have that same cynicism about them. I would love for you to tell us a little bit about the Brownstone Institute, what you guys do, and why it came to be.

Jeffery Tucker: I started Brownstone because I felt like we needed a new voice to take on new times. It was after lockdowns happened and the shot mandates and the disruptions and labor disruptions, and the crazed deployment of public health and censorship. I was looking around and seeing that ... I didn't really see any group of researchers that were coming together to examine the cause of human freedom itself in light of the new circumstances that we learned from this period. I was and am continued to be devastatingly disappointed by the response of what I would call my old community, who proved themselves to be utterly useless and destructive during that entire period. And so, Brownstone was born out of a new coalition that seemed to be coming together, and I could smell it happening already in 2020, it was like the left and the right, and all these things.

The other thing is, the COVID response is very much a class response, it rewarded professional upper class and the overclass, it was like, stay at home with your laptops, and then, get all the poor schlubs delivering in groceries to drop them off at your front door, and we're good. And I looked at that and I thought, that never works in history, where an overclass exploits everybody else and throws them out in front of a virus, and then, demands that they all get injected with an experimental potion. I mean, you can't do that and not expect some reaction, it's just crazy. But it was also the way the COVID response unfolded was something I didn't anticipate, that we had developed a kind of exploitative hegemon within the professional classes that would just so aggressively and cruelly ignore the interest of workers and poor people.

And people on the left who were blind to it, people on the right who were blind to it, but there were many of us who saw what was happening, so we just came together, and Brownstone represents a coming together of all of these kind of dissidents. And then, Brownstone also anticipated what we see happening within the Trump ranks, which is this merging of health and medical freedom concerns with pro-peace and anti-globalist politics otherwise, together with a kind of anti-censorship agenda. And this interesting ... This is a fundamental ... So Brownstone anticipated this realignment before it happened, because we were founded in 2021, so we anticipated this.

And everybody told me know Brownstone was crazy, we're never going to make this work, but I knew it. I wasn't entirely sure what was going to happen, but I knew that the COVID response was as big as World War I in terms of its significance, and I needed a vessel, I needed there to be at least one research institute out there focusing on these problems, this merger of health concerns with economic concerns and all these other things. And so, when RFK joined up with ... Who faced his own problems with his third party bid and all these things, linked up with the MAGA Republicans, and then, recruited into that the thoroughly anti-lockdown, Elon Musk, who hates censorship, and kind of loves the American system, it just became magic. So it just so happens that Brownstone sort of caught the winds of that. Mostly what we do is support [inaudible 00:26:06] intellectuals with fellowships and community and that sort of thing, but we also publish a lot.

Mike Maharrey: Looking back at the COVID era, at the time, I think a lot of people were kind of like, what is this? But for myself personally, I was somewhat skeptical from the beginning, especially when they started the lockdowns. Where it really clicked with me, I live in Florida, is when they closed the beach. I'm like, this is dumb on any level. But I felt like I was a voice in the wilderness for much of that time. Everybody's, oh, we've got to follow along, we got to do ... They know what they're doing, etc., etc. And how do you think people ... Just kind of in a big picture way, do you feel like a lot of people have, at least in retrospect, realized, yeah, maybe that wasn't such a great approach, or do you feel like that there's still a lot of, well, they're doing the best they can, and thank goodness for them? What's your impression of how people have processed what happened during the COVID era?

Jeffery Tucker: The response is being repudiated, but much more slowly than I ever would've expected. We're now four and a half years deep into this, and I think it's more and more difficult to find people that defend lockdowns, but we're also still dealing with the loss of trust that comes from the failure of the shot. In retrospect, it was clear what they were doing, they were trying to lock everybody down to wait for the vaccine. Well, okay, but the vaccine didn't work right, and it hurt a lot of people, so that's not good, we would've been far better off never having a lockdown and never issuing a vaccine, so we would've been better off overall. In other words, we would've been better off doing absolutely nothing at all.

And in fact, we did nothing at all between October and March. October of 2019 is when the viruses was spreading all over the country, the US and Canada, and really, a lot of places in Western Europe, and people just went about their business, and then, suddenly, the middle of March came, and there was this kind of scripted panic, oh my god, oh my god, there's a virus everywhere. And looking back at it, it's just so crazy, I mean, the virus had-

Mike Maharrey: It is crazy.

Jeffery Tucker: ... it had been circulating for the previous six months, there's no sense that it suddenly arrived. And then, we've got this wave of death that hit New York, especially in the Northeast immediately, and respiratory viruses don't work that way, they don't lay in wait for six months, and then, rip through the population.

Mike Maharrey: Yeah, right there, yeah.

Jeffery Tucker: ... None of it makes any sense. So there's a lot of evidence that a lot of the death that came about during those weeks in New York was iatrogenic, in other words, just panic. People are just freaking out and go to the hospital, and then, vented to that.

Mike Maharrey: Vented, yeah.

Jeffery Tucker: And then, just passing out with panic about, the world's breaking. It was just crazy times, it's going to be a lot of years before we can figure out exactly how and why all this whole thing unfolded the way it did. I'm more and more getting the sense that there's a lot of things that happened we don't want to know, that we don't want to look at, and that a lot of it is still classified. Craziest times of my life, for sure.

Mike Maharrey: Yeah, me too, yeah. Well, where can folks follow Brownstone, and also, your work? Where would you like to point people?

Jeffery Tucker: Well, I mostly post on ... My private posting is on X, Brownstone posts on X a lot. I use that rather than Facebook, which is still heavily censored and controlled, and so is TikTok and all the rest, and YouTube. So we're on Rumble and X, and then, our own website publishes articles every day, and that's brownstone.org.

Mike Maharrey: Well, really appreciate the work that you're doing, it's really important. And it is interesting, I think we've seen a fundamental rearrangement of the political order over the last 5, 10 years, and it's cool that you are on the forefront of that, and looking forward to seeing your continued work. Appreciate you taking the time out of your day to spend a little bit with us, and appreciate all of your insights, and we'd love to have you back at some point.

Jeffery Tucker: Very good. Thank you so much, I appreciate it.

Mike Maharrey: Thank you.

Jeffery Tucker: Bye-bye.