Speaker 1This is the Commodity Culture Podcast, where we interview prominent investors, fund managers, analysts, and company CEOs to give you an edge when it comes to investing in the commodity space. Alistair McLeod, it is great to have you on Commodity Culture. I want to kick things off with where we are right now in the life cycle of the U.S. dollar and fiat currencies globally, because you've been saying recently that a collapse in fiat currency could be coming faster than many anticipate, possibly within 18 months. I wonder if you could break that down for us.
Speaker 2Yes, sure, Jesse. I mean, really, the whole thing has been accelerated by this ridiculous American and Israeli war against Iran. They have failed. They have been defeated in it. Of course, it's de facto rather than de jure, as it were. But the consequences are very, very stark. I mean, we can already see, it's finally gone into the mainstream media that there's no diesel. Diesel is vital for agriculture. It's vital for logistics across land. But by the same token, there's no kerosene. That's vital for air logistics and transport. And you've also got ship bunkers. Which are closely related to diesel. It's a heavier form of diesel, basically. So, you know, global logistic distribution, basically, is screwed. And we're going to find this increasingly in the coming months. And already we see fuel prices of the pumps are beginning to rise to levels which nobody seemed to expect. Now, this is going to continue. We are going to see a far more serious inflation problem. In the sense that prices of essentials, such as fuel, energy, and food, which has had its own problems, including the most vicious El Nino, including the drought in Europe, which has cut yields by up to half, cereal yields by up to half. We find that farmers have been feeding their livestock on winter, on their winter crops, food reserves for livestock, simply because there's no grazing. I mean, this is a rolling crisis which is going to hit a peak by the end of this year. That is, I think, absolutely certain. So what we're going to see is we're going to see, if you like, the inflation problem driving bond yields well above this sort of 5% Rubicon, which is common to the U.K. where we've already gone over it, but more particularly for the U.S. dollar. I think when that goes through 5%, convincingly, and you can see that it's not going back down below 5%, then I think the central banks will be panicking. The problem basically is that, on the one hand, you've got this inflation shooting up, which of course, I mean, it's loss of purchasing power of currencies in effect, and on the other hand, you've got the effects of this Iran war basically leading to a business slump. So what does the central banker, what do you do? I mean, the answer basically is that, you know, you're torn between having to protect your currency and protecting, you know, doing the Keynesian bit of supporting your economy and supporting financial markets so that you don't have a crisis in them. That is going to be the dilemma by the end of this year. I think that's what's going to be the dilemma. demand. I mean, there's no doubt that If we get a collapse of the fiat currency system, then economies are going to collapse with it. So demand goes down, obviously. The thing about silver, its industrial demand, is that its demand, I think, is less price sensitive than with many other commodities, simply because it's legislated into requirements for, if you like, the climate change stuff, solar cells and all the rest of it, and all the other applications for which it is superior to almost everything else, electric cars, batteries, and so on. Now, there is no doubt that industrial demand will decline. Now, having said that, what we're really looking at, not so much, is the decline in industrial demand, but the more rapid decline in the purchasing power of currencies. So the value of silver measured in dollars, for example, will go up despite a substantial decline in its demand. I think there's another aspect to this, too, and that is that this demand is really, sorry, the currency collapse looks to me to be centered very, very much on the G7 countries and currencies. If only. On the other hand, you look at China, they've taken steps to protect their yuan. They could put it on a gold standard tomorrow. Russia could equally do exactly the same. So the whole of Asia, if you like, has this protection in the background. Now, it doesn't mean to say that they're going to escape an extremely nasty economic outlook, but it does mean that they've got the protection of sound money and their recovery is likely to be considerably more rapid than ours. So that's one thing. And I think also the point about, you know, well, Shanghai Corporation, Organization of Bricks, and the global south generally, is they can now align themselves or realign themselves away from the dollar towards the yuan, which is likely, as I say, to go on to a gold standard in the scenario that I see evolving. And therefore. If you like, what we call the emerging economies, they actually, you know, could actually have decent protection from the collapse, which we're bringing about ourselves in the G7.
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Speaker 2The problem is, is an intellectual one. Since Keynes wrote his general theory, basically, the science is a false science of macroeconomics. And this has grouped all economists into basically two camps. You know, they're either monetarists or the Keynesians. And governments basically are Keynesian. They have a duty, which is now written into their laws completely, to intervene in markets, intervene in their economies, in order to protect, if you like, their own revenues, government revenues. That's the basis of it. And so what you've got to have before, you know, G7 countries would contemplate going back onto some sort of gold standard is you've got to have a complete revolution in economic thinking. And then, Jesse, there's a further problem, and that is that when you do get a currency crisis, such as the one that we're talking about, it's politics that drives it, not economics. And indeed, it's the economy that drives it. And indeed, you'll find that politicians won't accept anything put forward, you know, anything radical, anyway, put forward by central banks. So if a central bank had the temerity to turn around and tell the politicians, look, the answer to this is you've got to not only balance your budget, you have got to ensure that you cut your spending to the point where you can maintain a surplus on your budget come what may. I mean, the answer basically is no way. They're not going to do that. That's not what it's about. And, you know, also think through what happens in this scenario, because the first thing is, from the point of view of government, the government budget, is that tax revenue drops, welfare commitments increase, so the deficit rises. Are they going to tackle that? No. Because all that Keynesianism tells them they've got to keep stimulating the market in order for the recession to go away or the slump to go away. So you're really not going to get the sort of thinking which is required for a sound money environment. They take the view that what happened in the 19th century is completely inappropriate for analyzing the current situation. And that's the economists, let alone the politicians. So, you know, we're doomed, basically. And actually, if you look at what happened in Germany following the First World War, and the destruction of their currency, of the Reichsmark, I mean, you can see the relationship between politics and the Reichsbank at the time. It was politics that was driving it. Helfrich, who was a very well-known economist, Helfrich, who was a very well-known economist, Helfrich, who was a very well-known economist, I mean, at least as famous in his day as Keynes was afterwards, correctly analyzed the problem. And he was very much involved with giving the government the advice. And what happened? I mean, he was, if you like, effectively supporting, if you like, maybe not actively, the destruction of his own currency. He was also the man who came up, basically, with a sort of proto-solution to stabilize it once it had collapsed. So, you know, when you get the economic establishment acting like that, and, I mean, today they haven't even got, you know, the knowledge that Helfrich actually had following the First World War and running up to the mid-20s. You know, this is what happened. There is no, there is no salvation, none whatsoever. You made the point also that Canada's got no gold. Britain has, we've got about 300 tons, sort of thing. You know, I mean, we can go on to a gold standard. I mean, basically, what we have to do is we have to raise interest rates to attract gold. I mean, once you've got, once you've turned the currency into a gold substitute, then in pure banking terms, you raise interest rates above everybody else's. And what that does is it gets your banks out into the market, buying gold to sell it to the central bank in return for the currency, which is as good as gold. You know, you make, you can make, I mean, look at the situation in Russia. I mean, at the moment, interest rates in Russia, you're looking at something like 14.5%. Put the ruble onto a gold standard, and the Russian banks will run out, buy as much gold as they can get, you know, submit it to the reserve bank. And when the reserve bank thinks it's got enough, cutting interest rates that is the function of interest rates not to try and manage the economy and you find that quite rapidly interest rates in in in russia on a non-inflationary basis would decline to towards the sort of four five percent level from currently nearly 15 percent think what that does to the economy sound money is good for an economy don't tell you don't try and argue that one with the um keynesians because they just don't believe you they're in a belief mechanism and it's completely wrong so
Speaker 1it sounds like it's an individual physical gold is kind of the ultimate asset to hold in terms of protecting oneself preserving one's wealth against um all of these issues that you're seeing emerge at this time i would love to get your thoughts on central bank gold accumulation do they see what's coming up ahead do you think that could be part of the reason why they're stacking gold at such a time yes of course it is
Speaker 2um i mean they can only really do it in the context of the reserves that they have the foreign currency reserves that they have um and uh you know basically they're getting rid of fiat currencies in return for gold yeah it's as simple as that i mean i think it's worth making the point that um in everybody's common law gold without counterparty risk is money and all the rest is credit i mean apart from obviously physical commodities and things like that but basically all the financial stuff is credit different forms of credit and therefore entirely dependent on the ability of a borrower to um pay that in gold but of course that's all been denied if you like by subsequent government uh regulations and laws banking laws and so on um because nobody you know i mean you go turn around to the bank of england i mean oh our bank notes still have on them um you know i promised to pay pay the bearer on demand the sum of and if it's 10 pound note 10 pounds and that's signed by the chief cashier at the bank of england well what's that 10 pounds it's 10 individual sovereigns that is the promise it's still on the bank notes you turn up the bank of england say i want you know here's your promise you know you'll be sharing the door um they are i mean it is fraud fraud by the bank of england and they're state if you like against common law um and uh well i mean obviously what's happened is that uh the fair currencies currencies which you cannot uh exchange for gold as promised um have declined in value very very substantially like since 1971 they've lost over 99 of their value i'll tell you something else i mean just the importance of sound money in 1750 in london in the city of london you could have gone to a coffee house called jonathan's now jonathan's was the forerunner of the london stock exchange because that was the place where various people met to buy and sell shares in companies and the cost of coffee of a cup of coffee you sit there and listen and listen and participate the cost of a cup of coffee was one penny one old penny translate that into gold i mean in those days there was 240 of those pennies to to um a sovereign the equivalent of a sovereign the the sovereign as we know it today actually came in somewhat later but um effectively if you translate that into the price of a cup of coffee today you're looking at a price of something like 3.75 which surprisingly is what you would pay starbucks for a cup of coffee in the city of london i mean you know okay there's a certain amount of coincidence but it does illustrate the fact that the reason that you've got to get into gold is because you preserve your capital by doing that in these vicarious times um and that's just an illustration of exactly why over 275 odd years uh the price of a cup of coffee in a coffee house has hardly changed measured in gold so when
Speaker 1it comes to individual stacking precious metals gold versus silver obviously gold has the at the moment has more of a monetary component and seems to be as i mentioned the ultimate asset to protect oneself um there's some religious silver stackers out there who stack only silver would you recommend that they convert some of that to gold and also you have the situation where the cost of an ounce of gold is getting out of reach and you're not getting much of many people nowadays so in in that case silver is is that still an effective alternative in your view would you go down from an ounce to lower weights and pay a higher premium just to get your hands on gold would love to get your thoughts
Speaker 2on all that well uh yeah i mean the first thing is that uh gold basically is um regarded by the central banks who at the end of the day will issue the gold substitutes it's regarded by the central banks who at the end of the day will issue the gold substitutes it's regarded by them as uh as money and they don't regard silver as money now having said that there is another relationship which i think people are unaware of and that is that um if you look at the value of a basket of commodities such as base metals or agri products measured in gold then the value has actually gone down very very significantly what's likely to happen is that the value of the gold is going to go down very very significantly uh what's likely to happen or what will happen is that the the value of those commodities will rise priced in gold i mean we can't put timing on it i mean we can get an idea of timing from other factors but basically um uh base metals other metals um agri products etc etc they are all cheap against gold still cheap against gold measured priced in gold um which is why you have basically got um a roaring bull market in commodities that is going to continue and if you look at energy in particular oil i calculate in order to get oil back to where it should be measured in gold you're looking you know with the current gold to dollar um price ratio you're looking at a price of around about nearly 300 a barrel that's just getting back to where it should be measured in real money so the collapse in fiat currency is obviously going to take that level measured in fiat currency even higher so you can see that the amount of disruption that we're going to get is very very substantial and it's so people haven't even begun to think on those lines at all when it comes to silver i have no doubt what you're saying is right now there is this misnomer that the gold price is rising no it isn't it is the value of the currency which is falling and that's the way to understand it so the idea that gold prices are rising is that the value of the currency is falling is actually completely wrong it is the currency which is expensive not gold so when it comes to whether you should buy silver because um you know it's it's cheap relative to gold this is a pure purely psychological argument i don't dismiss it because obviously psychology drives people's actions and um i have no doubt that what you were implying is that um you know price of silver at less than 70 dollars an ounce is a lot more attractive to investors and our investment is completely the wrong term here uh than a gold price you know than an ounce of gold priced at 400 and i don't know 4 300 where we are at the moment um that's you know there is a lot in that argument and i have no doubt that against a background of limited physical availability that this could drive silver considerably higher so i think a combination of two factors really the first is that uh the silver price is attractive to investors at the current at the current level but on top of that it's a far less liquid market so it won't take an enormous amount of um shift in investor in investor um uh understanding um or bullishness which would drive the silver price up considerably faster than that of gold
Speaker 1now i have to assume that the powers that be won't just allow a return to sound money or this sort of gold backing of the currency as you've mentioned here if they can help it i i think their hand might be forced which is what you've been alluding to but of course we're seeing the digital euro advance towards being released um the the topic of cbdc's has kind of been a a contentious topic over the past several years how close are they to something like this could they release it tomorrow um what what are your thoughts there on what the powers that be will do to try to stem the bleeding and prevent this sound money from coming into the system do you think these digital currencies could potentially be ready to be released and that they're going to try that first to to in some way get themselves out of this without having to involve
Speaker 2gold i think jesse that yeah we sort of answered the question about the return to sound money um I mean, the answer basically is, no, they'll see the currency destroyed first. The question about digital currencies, I think, is an interesting one because the objective of a digital currency issued by the central bank is that the central bank and the government, if you like, thinks that it can replace bank credit in a credit crisis or in a recession or whatever by stimulating the economy with digital currency. And it can withdraw that currency from people who it doesn't want to stimulate, if you like. So it can be targeted to stimulation. I mean, the answer to this is this is just ultimate Keynesianism. And it's. So really, what you're looking at is people with no skin in the game trying to determine economic outcomes, which can only be determined by people with skin in the game. I mean, it's just crazy. It's not going to work. And I mean, the reason that commercial banking works is that it has been in place since Roman times. It was the Romans who determined what the difference was between money and credit. Banks can expand credit as much as they'd like so long as they retain credibility. That's the whole basis of it. And the idea that a government can do this is completely false. I mean, if they will just bring about the end of it. I mean, there was another example of this. I mean, you go back to the time of the French Revolution, just before the Revolution, the French government at the time introduced the assignat, which was a currency which was notionally secured. I mean, it was a currency which was notionally secured. On a portion of the church's assets in France, which had been taken in by the state. But of course, you know, the finance minister at the time, there's a guy called Necker, you know, sort of cautioned that, you know, okay, we'll do one issue, but you mustn't do further issues because basically you will destroy the value of the assignat. But of course, once you've done one, you do another, and you do another. And they destroyed the value of the assignat. And they became hated. And by the time of the Revolution, I mean, this was something that was already happening. And I think, actually, the collapse of the, you know, the erosion of the value of the assignat was a major, major factor behind the French Revolution. Which, of course, because historians don't understand money, you know, they wouldn't have really brought this in. But then they introduced a new currency called the Mandat Territorio. And, you know, oh, what a wonderful idea. This is rather like the digital currencies, if you like. You know, what a wonderful idea. Okay, that's great. But within six months, that had died. It had died for exactly the same reason that digital currencies will fall by the wayside. I mean, they are no solution to the problem. They really are not. They just make. They make it worse. It's another way of expanding the state spending, if you like, on some sort of excuse that, you know, we can stimulate this economy and we can see all this activity or that or whatever. You know, it's. The thinking behind it is so false and so obviously false. But, of course, when you get the Bank of International Settlements with a committee set up to do this and all the rest, it gives the whole thing credibility, which is completely undeserved.
Speaker 1Now, we're seeing the wartime propaganda really ramp up in European countries. It looks like the leaders are at least making a pretense of going to war with Russia and, at worst, actively planning conscription with a potential kinetic conflict up ahead. Obviously, the war in the Middle East continues. It doesn't look like there's a way out for the United States at this point. I mean, there's so much going on behind the scenes that we don't know. But taken at face value, that's how it appears to me anyways. However, along this whole path, we've seen precious metals kind of grind sideways since the war kicked off. The question has always been, well, why isn't gold and silver rising as this conflict continues? We've seen them rise somewhat more recently, but silver getting knocked back down into the. trying to breach 70 multiple times, getting knocked back down. Gold doesn't appear to be able to get to that $4,500 level or higher. Do you think that will reverse at some point? I mean, I talked to James Rickards recently on the show and he said he thinks we will see gold's wartime premium kick in at some point up ahead as the realization really sets in that, you know, this conflict isn't ending anytime soon. Taking all of this, you know, global conflict, the potential for further global conflict, do you see precious metals eventually acting as that safe haven asset and prices rising in response?
Speaker 2I think the key to this isn't so much, I mean, the stupidity of European. leaders who are stuck in the worst form of groupthink, anti-Russian groupthink, which is just stopping any, any clarity, if you like, in terms of the consequences for their own economies. I mean, I don't think we look at that. What we look at is we're coming to the end of the fiat currency system. And it's that that's driving the relationship between fiat currencies and commodities, as a whole. And those commodities are best represented by the form of commodity, which also acts as sound money, and that is gold. I mean, I wouldn't disagree with Jim about the outcome, but I think the way to look at it is not so much the way you put it. But, you know, everything is just coming to a complete end of cycle and fin de siècle, if you like. I mean, we've got, I mean, the decline in Christian morality, certainly in this country, is really, it's frightening. We've got no moral compass at all, not only as individuals, but also within our political class. Science has been completely corrupted. To what end? Basically to support political power. I mean, this is the whole thing. Climate change is also about economics. You know, economics is angled to give the state a role in the economy and to, if you like, promote the state as the only, the only arbiter of what's right and what is wrong in the economy. You know, the whole thing is just completely, this is the end of a system. That's what you've got to bear in mind. Now, with respect to the wars, I think the first thing I'd say about the Ukraine war is that's coming to an end. There's a fascinating article by a Ukrainian lady who is very well informed. I can't remember quite what her post was in one of our weekly magazines called The Spectator. And she estimated that with the loss of territory, people fleeing, loss of life, you know, in the battlefields and all the rest of it, the Ukrainian population is more or less halved. Now, this is a country which is now being shut out of global markets because it's poor. Ports in the Black Sea are basically blocked off. I mean, corruption appears to be indigenous. And, you know, they're running out of money. They're running out of everything. And Russia basically is intensifying the aerial attacks. And I think by Christmas, I mean, Ukraine's over. That's finished. So that's important. We've already talked about the consequences of, you know, this crazy, crazy attack on Iran. And how, I mean, the damage that's happened all around the Gulf means that even if Hormuz straits open tomorrow, which they won't, then it's going to take five, ten years to get oil and also derivatives back up to some sort of replacement. So, you know, it's going to take five, ten years to get oil and also derivatives back up to some sort of replacement. This is, this is extremely serious. There is no reason, really, you know, why we should have a direct collapse in the value of currencies from this. It will be as a result of the response by government. Government is the problem. Our governments are the problem, not the wars. So, I think that's the key thing. And this is why, you know, gold and silver are going to appear as if they go to the moon. But they're not as if their currency is collapsing. And in that collapse, the first stage, it's foreigners start selling you dollars if they don't, you know, if they've got dollars and they're based elsewhere. They tend to go back into their own. And some of that will go into gold, obviously. And, you know, from there, I mean, you know, the slide down in the purchasing part of a currency gets to the point where the users of the currency finally understand that it's not prices going up, but their currency going up. done. Now, the moment that becomes generally understood, then a currency has got no more than six months left in its life, and probably even less, which ties in really with why I was saying, you know, this could be 18 months for a complete destruction of the fiat currency system.
Speaker 1Tell us about the McLeod Finance Substack and anywhere else people can go online to follow
Speaker 2your work. Yeah, basically, McLeod Finance Substack, I publish on that. Basically, my objective is to educate people to these dangers and help them understand how to protect what wealth they have, to get them to understand the true relationships between money and credit and everything that that implies. I'm also a special advisor to store gold and silver, really for larger, you know, ultra high net worth, sorry, high net worth individuals, ultra high net worth individuals, family offices, governments, and all the rest of it. You know, in a private vaulting system, which is completely divorced from banking, and from other political influences, if you like, I think that's extremely important. So yeah, I mean, you know, I'm trying to sort of get people to understand how to escape this catastrophe. But of course, people don't understand the extent of the catastrophe. And a lot of the comments we get of the sort where, you know, they're looking to invest in gold. No, it's not investment, it's protection. That's the key thing. And yeah, the other thing is that, you know, the idea that you can invest in gold by buying an ETF, forget it. You don't know, you don't possess it. You know, and if you get a collapse of the system, such as I've described, you got to ask yourself the question, if you own mines, if you own ETFs, whatever, whatever, how are you going to value them? If you haven't got a currency to value them in? This is a very important question. Because when the currency goes, the entire financial system goes with it. End of story. There's no, you know, there's no compromise. Well, at least I've got my shares. Yeah, but what do they value that? How do you value them? You know, this is serious, this is serious. And this is the point behind my sub stack to educate people as to the seriousness of it. And I think there's an awful lot of work for me to do.
Speaker 1I fear. Well, I'm going to put a link in the description below to the McLeod finance sub stack, as well as Vaughn grayers, as you mentioned, for ultra high net worth individuals, the minimum is massive. But there's some great articles on there. The instance of educational pieces on there that people can look at, as well. So if you have any questions, feel free to put them in the comments. As well. As always, Alistair, thank you so much for coming on and sharing your insights with the
Speaker 2audience. That's very much my pleasure. Thank you. Thank you for having me on Jesse.
Speaker 1Thank you for joining us today on commodity culture earn up to a 4% annual yield on your physical gold paid in gold ounces through monetary metals. Go to monetary dash metals.com slash commodity to find out how to put your gold to work for you. Link is in the show notes below.
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