Gold, Energy, and the Future of the Global Monetary System with Luke Gromen

(upbeat music) - All right, welcome. My name is Jed Dorschermer, and I am your host of the Plugged in Podcast, brought to you by William Blair. Today we are recording on December 17th, 2025. Christmas edition, I guess, and maybe it'll be a little gold for Christmas. So my guest, Luke Roman, is somebody that I actually subscribed to his macroeconomic full report. He is a strategist and founder of Forest for the Trees. That's his report. And it's a research firm that focused on global monetary systems, geopolitics, roll of commodities. And most importantly, someone that looks at energy as, you know, a the basis by which economic systems are built off of. Or maybe I'm inferring too much, Luke, but that's my read. And you have probably best known for the work that you've done around US dollar dynamic sovereign debt and gold. And you just put out an excellent piece last night, one that I've read three times. So I think I'm good to kind of go through that with you. But, you know, really gets into your thesis on gold. And I'd point out that you're probably the most bullish that I've seen in terms of what that means. And most importantly in this report, maybe as a starting point, you walk people through this longer timeframe. And I think I'd love to start there because, as you and I were just speaking before we hit the record, I think one of the main problems today is our aperture for most is very narrow. And so if I kind of take my career that's expanded three decades, which is long, I guess, in Wall Street terms, like dog ears. But if we look at that, you know, there's a couple six sigma events, but it's largely been in, you know, a, you know, guard rails on sort of a largely monetary driven fed sort of god type of what that says is going to determine. And there's some polls that if you open the aperture even wider, going back to the great depression and sort of look at the post-World War II order, if those tectonic plates are changing, then it really has profound implications for everything downstream. And you do a really good job in this report and maybe start walking us through sort of, you know, little history lesson on kind of 1971 to 1973 and what happened with, you know, sort of this move off of the Bretton Woods to a fiat and the implications for both gold and in oil. - Sure, no, thank you for that introduction, Jed. Yeah, the report we've highlighted or the we wrote was looking at the history. So if we go back to the end of World War II, the allies all get together at Bretton Woods and they decide on a new monetary system. And there were two proposals, right? When you talk about widening that aperture, there were two proposals. There was the non-American proposal, actually laid out by Keynes, which was let's move to a bank or what do you call a bank or? Neutral reserve asset in which to settle trade imbalances that occur naturally just by virtue of natural endowment of countries, productivity levels, et cetera, that very country to country. And he encouraged tying that to some sort of commodities. The other proposal was the US proposal, I think it was Harry Dexter White. And the American proposal was we're gonna peg the dollar to gold at $35 an ounce and every other currency will be tied to the dollar and managed and practically speaking, the Americans and all the men, all the factories, all the weapons, all the gold. And so as the old saying goes, he who has the gold makes the rules. So we went with the American system and what we highlight in this report is when you look at the title of the report yesterday was why we think the gold oil ratio is likely to continue rising secularly. And so there's a lot of people talking about the gold oil ratio today is about 76 barrels per ounce of gold. It's up from six barrels per ounce of gold in 2008. A lot of people saying that's gonna mean revert. We think there is very little chance it's gonna mean revert. And so we start by looking 1946 to '71. We can see the gold oil ratio, very steady, remarkably steady. And I think for most of that time, if I'm recalling correctly, I think the price of oil was fixed and the price of gold was fixed to the dollar, which I mean, if we're literally a good chunk of that time, it's just a straight line. 1971 that all changes when the US goes off the gold standard or closes the gold window under Nixon. A lot of everyone knows that date. What we highlight in this report is a history or a version of those events that not a lot of people know. We cite a book written by William Angdal called Century of War. And then we also cite an interview with Saudi foreign minister, former Saudi oil, the energy minister, excuse me, shake Yemeni. From an interview he gave with the UK Guardian in 2001. Both of those sources say that Kissinger, specifically, and the Americans more broadly, along with the Brits dictated to the world in 1973 at a Bilderberg meeting in Sweden, that the price of oil was gonna be raised 400% soon. As a way of increasing demand for dollars globally, since oil was priced by convention then in dollars. And also increasing petrodollar flows is what Kissinger called them back into our market. It's basically the goal here was twofold. It was to diversify Western energy supplies from a geostrategic perspective. Given the price of oil as it stood in middle of 1973, you could see clear to where the Middle East was going to supply most of the world's oil. And that was a strategic risk for the Americans. And the Americans and the Brits knew that at a higher price of oil, UK North Sea would come online. Alaska, Prudobay would come online. And that there was probably some oil at Deepwater Gulf of Mexico that would be made economic if the price of oil rose enough. That was the first reason they did it. But then the second reason is it created a support for the dollar. You had to have oil, and if it's only priced in dollars, then you have to have dollars. And they understood this. And these sources show that they understand this. That's the first part of the story. The next part of the story then is you have to manage and discredit gold. Because ultimately, if you look at a situation where the amount of oil being used is rising, the price of oil is rising. That's going to be a lot of oil surpluses and historically, oil loves gold. We didn't get into this in this particular report. We've written about it in the past. I believe it is in the prize, the book the prize about the development of the industry. But the original deal the Americans had with the Saudis was oil for gold. And we basically cleaned out the world of gold bullion shipping it to the Saudis for oil. And so if the price of oil was going to rise 400%, then what that would risk driving is the price of gold would rise more as an oil market that has consistently been 10 to 20 times the size of gold in terms of annual physical production terms would bid up gold. And the gold to oil ratio would rise meaningfully. And so the gold price had to be managed. How was this done? Again, we cite multiple historical sources going back from WikiLeaks noting in 1974, US Embassy Cable from London saying that the creation of gold futures, very large and size relative to the underlying gold market would create gold market volatility and dissuade Americans from buying physical gold. We can go back to Surretty George, the governor of the Bank of England in 1999, saying that the Americans in the Bank of England had the Fed and the BUE had capped gold prices in late '99. We can go to Peter Hambro, a 40-year veteran of the gold bullion markets saying that the BIS and others had been managing gold prices all along and all via the creation of credit gold, paper gold. It worked, you can look at this on a price chart and you can see from '73, '74 when oil goes up 400%, up until about '08, the gold oil ratio remains again, remarkably steady despite a lot more oil dollars relative to the amount of gold market cap, if you will, being created. How was it done? They created a lot of paper gold. Why was it done? Because now by making by dissuading flows into gold that money flowed into the treasury market instead, treasuries as a share of global effects reserve assets went in 1973, '74, I want to say was 10% if that. It peaked at 90% of global effects reserves assets in 2008, which meant the Americans could run deficits without tears. And in contrast, the gold share of effects was hers, which in '74 was 90%, fell to 10% by 2008. And this had a very clear set of outcomes, which is Washington, one, Wall Street one because they were handling that debt. And the US industrial base and networking in middle classes lost on a relative basis as we had to offshore to create the deficits under this arrangement. And so that brings us to where we are now, which is 2000, let me back up. This system worked for 30 years. It started to break down in '03 for a couple of reasons. Number one, peak cheap oil. We were starting to see some of the world's super giant oil fields run into marginal production problems. Matt Simmons famously wrote his book, Twilight in the Desert No 5. And so peak cheap oil is starting to put upward pressure on oil prices. And then number two, China entered the world economy in a big way and started using a lot more oil. And so what we show in this report is that from '73 to '03, we kept the gold oil ratio steady to keep gold from competing with tragedies. And then we also saw the dollar was essentially kept what we call as good as gold for oil, which is basically oil from '73 through '03 traded between $15 a barrel and $25 a barrel, most of that time. It was essentially an oil back dollar. And when oil got to $2,530, the Fed was tightening and Saudi was growing production or raising production to keep oil in that range. And vice versa, when oil got near the low end of the range, you would see the Fed cutting and you would see Saudi tightening production to try to keep oil prices up. And all of that could work because we were the biggest economy in the world, the Fed was the center of things. And that worked for 30 years. And like I said, that relationship of keeping oil between $15 and $25 a barrel, keeping the dollar as good as gold for oil, broke down in '03. Number one, because of peak cheap oil. And then number two, and this was really, I think the straw that broke the Campbell's back, China entering into the world economy as peak cheap oil. Oil goes to $30, $35, $40 in the mid-2000s, $50. And the Fed starts tightening rates and promptly breaks the sub-prime market. And so in 2006, 2007, the Fed faces a choice. The oil market under the petro dollar currency deal of the prior 30 years is saying oils at $55, $60, it's supposed to be the dollars collapsing against oil. The treasury market is collapsing against oil. The Fed should be raising rates to crush the economy, crush oil demand, and to defend this system. Problem is, is the Fed hikes that they did, we're now blowing up the banking system via sub-prime. And so in 2007, the Fed faced a choice. Keep hiking and blow up the banking system or start cutting to save the banking system and lose the relationship with oil. And of course, they cut rates, and we can see in '07, '08, oil goes from 70 to 150 in about nine months. And paradoxically, accelerates exactly what the Fed was trying to avoid in terms of blowing up the banking system, sub-prime, et cetera. And so between the '03 time frame, when we saw the Fed cutting rates, '03, Fed cutting rates with oil prices getting up near the top end of the range. And then in the '07 time frame, where they could cut rates with oil way above the top end of the range, this system of we're going to keep the dollar as good as gold for oil fell apart. The Americans had, by their actions, twice in six, seven years, shown we cannot and we will not keep the dollar as good as gold for oil anymore. And as a result, the world began shifting reserves back to gold. That started in '08. That was the absolute low in the gold oil ratio at six barrels and ounce. That's when Russia started stockpiling gold again. And I think I'll stop here after saying this last part. The gold oil ratio is essentially just a pressure gauge on the health of the US dollar system and the petrodollar aspect of it specifically, which is to say, a low gold oil ratio means a relatively low gold price, relatively low competition for treasuries as global reserve asset, and a relatively high oil price, which means relatively healthy petro flows and petro flows into dollar assets, and also demand four dollars from the world to buy oil. And conversely, a high gold oil ratio means high gold prices, high competition for dollar assets and treasury markets specifically, and a relatively low oil price, which means relatively low petro flows, relatively low dollar demand for oil. And so the fact of a rise that we've seen since 2008 of the gold oil ratio going from six barrels and ounce to 76 barrels and ounce is a massive, massive weakening in the global dollar system. And a shift towards multi polarity is what it's a symptom of. And that brings us to today. So kind of a long-winded background to summarize the report, I skipped the round a bit, I apologize, but that I think lays out kind of what we were talking about in this pretty completely. Yeah, a lot there to digest, but one point I want to make that I think somewhat ironic is, I would argue strongly that World War II was largely determined in terms of the outcome by energy, a combination of oil versus a Germany that had abundant coal, and then of course nuclear. And one of the benefits of tethering to a commodity is you can't get too far over your skis wearing a fiat, you can get leverage upon leverage, which can be both very much a positive, as we've seen, and could potentially be a negative. And so as you look at what you described in terms of going from gold to oil to perhaps a gold again, or certainly a gold to oil ratio in terms of, and the rise of China, which presented a great opportunity because is we offshored, and one of the things that I've measured is the energy intensity per dollar of GDP, which coincidentally peaked in the 1920s, at about 17 megajoules per dollar, and has come all the way down to about 3.873 megajoules per dollar, which just means that you're not doing steel production in Bethlehem PA anymore, and that's being done offshore, which as long as you have a partner, and the rise of China's industrial prowess, they needed to buy our treasuries in order to return for trade. And so we had this pretty good relationship where the debt, the sovereign debt issue in the US, wasn't as big of an issue because we had partners that wanted to buy, you know, starting with Japan then South Korea, or maybe it was Middle East, South Korea, or Japan, South Korea, and then, China, but China's, I guess, decoupling, if you will, and the fact that oil and natural gas is something that they don't have and have to import, is led to this gold. So I guess question for you, you know, do you see it as China that's driving gold up and not a US type of issue in terms of desire to drive gold prices up? Or do you see that somewhat differently that, you know, in order to deal with the debt issue, maybe best wants gold prices to go up. And so, you know, how do you think about that? And then afterwards, I want to kind of come back to energy 'cause that's, you know, I think that's the intrinsic link in all of these. - Yeah, I think it's in the interest of all of the US and China. I think they each have an interest and I think you raised a great point about World War II, right? Exactly. We had the oil production, the Russians had the oil production. Germans were trying to do coltal liquids. There's some historians that say Germany went after the caucuses, exactly for that reason and that ill-fated invasion of the USSR was because they needed the oil. They, and it was a Hail Mary on their part, who knows? But we can see the echoes of how important energy is in global geostrategic competition. Even if we go back to the US moves in the '70s, right? When we go off gold and go to effectively oil, I wanna be clear, it was really a genius strategic move by Kissinger in the very short run because what it did is it took someone with energy and commodity superiority to us, the Soviets, and because I remember American oil production, it peaked in 1970 and changed the terms of competition. So now we could print dollars for what the Soviets had to do work to lift out of the ground. And basically, the rest of the world helped finance through the dollar system tied to oil, the breaking of the Soviet Union. In a perfect world, what would have happened after the Berlin Wall came down in the Soviet Union broke up as we would have had another monetary conference to say, okay, this oil dollar system worked for this period of time and now we need a new system with a neutral reserve asset. Because otherwise America is just gonna hollow out its defense industrial base and that'll be good in the short run, but it will leave US extremely weak and at some point down the road. That's what a wise policymaker would have said. But it would have taken several years of, several decades of foresight. And I mean, you and I were younger men in that timeframe. You remember how triumphalist it was. It was just like, hey, we won, it's the end of history. It's all gonna be sunshine and roses forever more. And so we started off showing our production base first in Mexico than to China. And all of that worked for China as long as the treasuries are going to buy them what they need because China's strategic vulnerability is imports. It's oil and other commodities, it's energy. And so if the dollar starts collapsing against energy, if their FX reserves held in dollars start collapsing against energy, that is a strategic threat to them. And they know it and importantly, we know it. There's a great interview by Kyle Bass, a few years back on CNBC or on Hedge I or something where he flat out lays out in 2019. Hey, here's how we, here's how we crushed the Chinese. The Chinese only have three trillion dollar reserves. They import a lot of oil. The price of oil is gonna go up. They're gonna run out of reserves and they're gonna have a 97 Southeast Asia crisis. And on the math, Kyle's exactly right. And he knows that the Chinese have known it for years that this is a risk. And so the reason the Chinese have moved away, they've moved back toward gold is it's not so much they hate America, they hate that it's, it is literally a weak spot for them. It is a matter of utmost national security. Their economy will collapse if they don't get away from the dollar, if they don't gain the ability to print yuan for oil and other imports, which they have done supported by the Russians, the Iranians, the Venezuelans, certain others at times. But nobody, a, nobody trusts the yuan over the dollar, probably not even Putin. And b, the Chinese wanna keep their capital account managed. They wanna keep it mostly closed. And so they don't wanna run the system that we run. They don't wanna offshore their industrial base, create a bunch of ReminB debt in order to get the ability to print ReminB for commodities. What they have done is they have set up their capital account to be open on a limited basis through gold. And the gold floats in ReminB and the gold floats in oil. And so the gold to oil ratio rising is a symptom of this system gaining traction. The, the people have been looking around, waiting for the ReminB to collapse against the dollar, they missed the show. The ReminB is absolutely collapsed against gold over the last five years, collapsed. It's down over 70% against gold. Chinese people own a lot of gold, so they're not exactly unhappy. It's balanced that way. But it's this energy core that you highlight, I think is so super important in how it has affected the decisions, how we got here. And to draw on your point about Bessent, we've now reached the point where our debt has gotten so high that it's a fiscal problem. It's a matter of critical national security for our biggest trading partner and where a quorum of the factory-based backing our country is located in terms of China. China can't stockpile treasuries as their wealth reserve because our debt pile is so high that we literally need, it's a mathematical guarantee. It's a certainty that we have to devalue our debt relative, we have to have negative real rates. We have to have our debt below inflation just to keep it sustainable. Well, what we're saying is we need our treasuries to collapse against oil, against energy over time, just to not nominally default on you, China. Well, for China, that's a lose-lose. Either you're gonna default on me or you're gonna erode away my wealth asset and I'm not gonna be able to afford to import energy anymore and then I'm gonna have a Southeast Asia currency crisis in China, blah, blah, blah. What do I do if I'm China? I go to gold. I work with partners to sell me my commodities, my energy in yuan. On the margin, it doesn't have to be a lot of it. Just has to be on the margin. And then I provide for net settlement in gold, at which they've done. They have offshore reminbee clearing banks in London, Switzerland, Dubai, Hong Kong, Singapore. Three of the four biggest gold markets in the world, along with their own Shanghai. So four of the four biggest gold markets in the world. And the world's, you know, the hub for the refining of 95% of the world's gold in Switzerland. So they've set the system up. It's working. It's why the gold oil ratio is where it is. That's why I think it's going a lot higher. But it's really not about gold or the dollar or reminbee. It's about energy. - Yeah, I mean, it's interesting to me. So first off, you know, one of the things I just want to highlight that I don't think there's any emotions from a state perspective. It's just understanding how the interests are aligned and that states will always operate in their own self-serving interest above all else. And so is we look at, you know, the way that I look at debt is just a future lean on energy. And it depends on, you know, because capital energy doesn't come from capital. Capital comes from energy. It's a really, really important point in terms of the layering. And this is where neoclassical economics has gotten it so wrong. And what's ironic is if you go actually back to the classical economists, they actually understood this. It was a concerted move, post-World War II, that we shifted in this direction. Because I think it was freely available and, you know, like water around a fish and never thought about that. And however, as we start to look at the interest of China and the interests of the West, but I'll just use US for this example. We'll limit it to the two superpowers right now. The US has vulnerability on the amount that we, if I look at a spectrum and I have on one end, resilience and on the other end, efficiency, we went very high on the efficiency. Coming down from 17 megajoules to 3.8. And China actually looks the exact opposite because they were the beneficiary of that offshoring, where Southeast Asia was, but really China in terms of, so the energy intensity increased. So if there's a decoupling though, this is where, you know, if everybody wanted the same thing from a diplomatic perspective, there is a yin and yang, but it seems that we're not close to that in terms of at least the signals. So the US extensively has to bring back energy in order to get to some level of resilience to be self-sufficient if we're going to decouple. And this has military or defense implications and widespread in terms of what we actually make. And I guess my question for you is, in a world where AI and information seems like it's the future commodity or currency. How do you think about China returning back to, so if you think about the arc of this, you go from gold to really oil. And then China is trying to go back to gold, it deal with their structural vulnerability, which is lack of gas, lack of oil. And then the US is, you know, looking at bringing back energy. And do we go gold or do we look at sort of crypto in terms of, how are you thinking about that shift in terms of what is the future commodity that backs currency? - Short answers, I don't know, I agree with the framing of that. I think that the shale was in part of a market driven response to, it was sort of the first down payment of this, right? Of American policy makers understood still that we're alive then from the 70s, the way you reduce the way you reduce dependency on the Middle East as you get oil prices up. They knew about, the shale was not something they figured out in 2001 or 2005. They knew about the shale deposits back in the mid '80s, late '70s, it was all just a question of price initially and then to really get the returns, some of the technology long, you know, long lateral, steerable depth technologies. But it wasn't like they just discovered that then. They knew that they got priced to a certain level, domestic production would pick up. So we did return some energy that way. I would amend or add dend your point that we need to return energy to, we need to return midstream. We, even if we, you know, we hear, you know, once or twice a week, yay, we found this big lithium deposit or we're gonna produce more rare earths here. Great, where are you gonna send it to refine it? And they very rarely say that in the releases and no one ever asked the question because no one wants to be the spoiled part at the party because the answer would be we have to send it to China to get refined. And this to me is the fundamental issue of the next five to 10 to 15 years for investing and it faces the Defense Department and it faces the Treasury Department, which is we need to bring back midstream because otherwise all we're doing is digging up our stuff sending it to China. But to bring back midstream, we've got to increase that energy intensity, which is a very, I would say it's a technical way of we need to inflate a ton. We need wages to go up, we need industrial production to go up, we need pollution to go up a ton. And let's just set aside the political difficulties of regulatory and environmental and what have you and say we can resolve those quickly, which we probably can't. The reality is is the Treasury market as it sits today. If you came out and said we are gonna bring back midstream for our defense industrial base, broadly speaking and go from wherever 3.7, whatever, megajoules per dollar to take it back there. You are saying that inflation's going to 10. That's what the announcement says. And the markets won't figure it out right away, but they will pretty quickly. And the second to market figures, and the problem is our debt levels are so high by virtue of the remnants of the pressed, now dying or dead system, the 10 year Treasury will can't afford five. Everything starts to unwind globally at 5% yields on the 10 year. We've seen this empirically repeatedly, 10%. My point here is is announcing the reassuring of the midstream in just a quorum of it would quickly crash the bond market and force the Fed into a choice of do you stand aside and let inflation really rip, basically by the bond market into inflation that's on its way to 10%. Or do you stand aside and wait for the banking system to start collapsing because yields are wherever they are? And that to me is the macro question of the next five to 10 years, if we are going to, if we make the assumption that we are going to move back towards resiliency and away from efficiency, if we're going to bring back the midstream processing and I think that's the odds of us not doing that are de minimis because we've seen it now moving in that directions for three straight administrations. Trump started it, Biden continued it with a different slightly different flavor and now Trump is accelerated it meaningfully. And so I don't know, I have high conviction that ultimately what this means is basically the Fed is gonna have to buy a large share of the treasury market, the Fed is going to buy a large share of the bond market, the mortgage back market, et cetera, basically in World War II type yield curve control. But in the meantime, we're gonna see capital costs continue to rise, these stresses we're seeing in financial markets at the front end in recent months. These rising long end rates around the world, the fact that oil has plunged in 10 year treasury yields contrary to Besson's expectations have not. These are all symptoms of this fundamental question which is, and oh by the way, the reason gold has completely separated from US real rates in addition to the sanctions on Russia, et cetera, have been higher rates or lower rates at this point at these levels that debt the GDP are good for gold 'cause higher rates make the debt less sustainable and lower rates are inflationary and so gold doesn't carry their way at wins. And so that is to me the big question, that's the big, this is like the whole, this is like a huge deal and it's all around energy and midstream of if you wanna divorce from China, you gotta bring back the midstream and if you can bring back the midstream, you know, processing of kind of everything, you've gotta increase that energy intensity and you've gotta increase inflation. You know, barring, you know, I think there's still a hope we can get some sort of fusion, you know, miracle. If we get some sort of fusion miracle, something like that, then you can do it in a way that you don't have to blow up the bond market, that the Fed doesn't have to buy it. I'm not seeing anything yet that suggests that, you know, this is coming by next Christmas or two Christmas, which you bring up a really good point is something we put this white paper out called Pain at the Plug and the fifth pillar, we lay out a five point energy policy for the US to get back to abundance and the fifth one is, you know, moon shots. But moon shots are only possible if you have the energy surplus to have a culture where you can take those risks. So if you go into a tightness, you actually can't, it stifles the innovation and I think part of the reason the West in the US, in particular, has been leading from an innovation, I would go back for the same reason that World War II was decided that we had the energy surplus that allowed for that petri dish of innovative culture to develop things. And so as the risk here is that is you move to lower surplus from an energy perspective like spending down a battery, you have knock on effects, downstream of innovation, healthcare, arts, humanities, et cetera, that will get tighter. And so if I think of this Venn diagram that we're kind of theoretically developing, the union on all of them is building out an energy base, which quite frankly, China is leading by country mile in terms of adding a coal fire plant every single week. What's interesting is their air cooled coal fire plants, you're paying a huge thermodynamic penalty or tax on that. Which I think brings up a systemic water issue in China. And then too, they've got I think 26 nuclear plants underway. And so I do think that there's time, but the US really, if we get in the back and forth politically, I sort of think that this should be the most bipartisan issue that's on the table and kind of getting back to firm base load, which is just that we need industrial energy base, no matter how you look at it. Like this isn't an AI is a bubble or AI is not a bubble or it almost from a defense posture that building out the energy base should be priority number one for both Democrats and Republicans. - Well, it raised a great point about of these things being downstream of that energy policy, that energy surplus, because it's another one of the unintended consequences and tragedies really missed opportunities of not sitting down in 89 when the US is our collapses and setting up a new monetary conference to basically bring back a neutral reserve asset system that doesn't lead to the hollowing out and the massive financialization of the US economy, because now the US has a conundrum, which is for 40 years, you've been sending your best and brightest into the financial markets by large. And I'm not denigrating any of our engineers or many brilliant engineers, but many people, I went graduated from college in '97, I went to college in '93 and it was an acute decision. I was told by one of my mentors who was an engineer with British petroleum and had been for years. He said, listen son, I got my degree in petroleum or nuclear engineering. He goes degree in nuclear engineering. He goes, if I was you, I would not go into engineering because all's gonna happen is you're gonna work a lot harder and you're not gonna enjoy college as much and then you're gonna go work for a few years in engineer and then the company's gonna send you to business school and you're gonna get an MBA and you're gonna be in finance. So just go into finance and I did and he was 100% right and millions, legion of millions of men and women in America did the same thing. And so that's number one, you have to change that incentive. Okay, the other problem though is since '95, we have tied the solvency of our government to those financial markets. So in '95, there was legislation under Clinton where he was trying to actually reduce the wealth gap. He was doing legislation that cash comp over a million dollars per year would no longer be deductible to the corporation. And then that I guess they wrote in at the last second, what have you, that stock-based comp would be exempted. And so guess what happened? All of the executive comp shifted into stocks and from '95 on, the relationship between the equity markets and the federal government's marginal tax receipts basically moved to like 0.9 on a correlation with like a three month life. And so that leads to the fundamental conundrum, which is you need to defenancialize the U.S. economy significantly in order to create the free market incentive for people to say, you know, you get your brilliant people and go, I can work really hard and never go out and never make as much money as a guy's in finance or I can go into finance and create derivatives and what have you make way more work or way less hard and what have you. And that's sort of number one. But then number two, if you take down financial asset prices, to incent this, to right size the financial, the finance insurance real estate side of your economy to create an energy surplus of people into these engineering, these problems, growing, building these problems, you immediately have a sovereign bond market crisis in America because your tax receipts fall and you're debt to GDP so high. So basically stocks go down 20%, which in early in our careers was like, oh, this is a bad correction, but so what? You take stocks on 20% and leave them there for three months, your receipts are gonna be falling and with interest in entitlements where they are, you're literally gonna be over 100% of receipts on interest in entitlements if stocks fall 20% and stay there for three months, which means within three months, the American government is in print or default on entitlements and its debt decision. So to your point where we've, not only are the Chinese running away with it on the energy side, but because we didn't make these decisions 40 years ago, 30 years ago, 20 years ago, we can't let the only, we can't let the free market, we can't implement a free market decision of, well, let's do something that tanks markets that redirects and diverts energy, human and energy capital into rebuilding the midstream. The only way to do this is basically print money, buy commodities, buy industrials, and let's see how long the bond market lets us get away with this until the Fed has to cap it. And I think that's basically where we are. When we see the Trump administration, nationalizing, antimony and nationalizing these critical minerals, when we see them in center-vising, zinc investments in the billions of dollars in Tennessee, when we see they're basically selling treasuries to buy commodities and trying to kind of do this when hoping the bond market won't notice too quickly. But it's a very challenging thing because when you make the wrong decisions financed by debt for long periods of time, sooner or later you're left with not just bad choices, just galactically terrible choices or the only things you have left. And that's kind of where we are, which is inflate a whole bunch or collapse the whole system, trying to bring back a midstream. Well, let me reframe a little bit for you and tell me what you think about this. So we haven't had a rules-based order change in 80 years, and it seems, so let's go on the axiom that that is changing right now. And let's say that let's remove China from this equation for a second here, but assume China continues to try and promote the yuan, and by doing so, is going to continue buying gold. So gold prices go up. Let's say gold doubles in price hypothetically and kind of gets into the 10, 11,000 per ounce range. In that scenario, that does give Secretary Bessent the opportunity to re-value US gold and deal with some of the debt, if not all of the debt issue. But it doesn't take away the need to. So again, if we look at the Venn diagram, the union of all of it is you have to build out the energy systems, like in doing so, also as you point out, build out midstream, so that you have some level of resilience. We calculate that that's seven to nine megajoules per dollar is up from 3.8. So basically a 250% increase. Now, as you point out correctly, so that would be hypothetically significantly inflationary to the likes that we have not seen. And this is where I kind of enter AI and data centers where I wonder whether or not Sam Altman said the quiet part out loud in terms of getting the government to backstop. So do where the financialization was the too big to fail, does AI become the too big to fail? And therefore the effort to put a disinflationary hedge on the inflationary power build out. Tell me, pick that apart and tell me where I'm wrong in that analysis. No, I think you're attacking exactly the right pivot points, which is something we've been harping on as you know, for over a year is there's an over, as part of moving towards the rules based global orders breaking down, it necessitates a restructuring of the US economy and with that a restructuring of the US sovereign balance sheet. And you have to start with the restructuring of the sovereign balance sheet because anything else you do, the bond market is we're so lavered, it's gonna, it's gonna shut down anything immediately. So you basically step one is restructure the sovereign balance sheet. And you're exactly right, the financial accounting manual for Federal Reserve banks, it's a publicly available document. Section 2.10 provides for the Secretary Besson to direct the Fed to revalue US official gold from the $42 per ounce where it still sits on the balance sheet today up to the market price, and any increase would be, would be directed into the Treasury General Account or TGA. That is essentially straight money printing based on the gold without any offsetting increase in debt. Practically speaking, at 261 million ounces, officially every $4,000 per ounce in the price of gold, is about a trillion dollars into the TGA. And then you can get into, okay, how much of the total debt's 37, 38 trillion, but I think the size of the Treasury market is close to 25 trillion. I think within that there's like five to seven trillion that's kind of at the long end. To me, I would think you would want to anesthetize using a gold revaluation, most if not all of the long end because the short end collateral needs in financial markets, stable coins, blah, blah, blah. You can handle the short end. And when you're talking short end, you're talking about T-Build duration versus long end in terms of the curve and the exact thing that Secretary Besson, I think, criticized Secretary Yellen in terms of being on the short, but it's structurally that it's challenged. So it would give him the opportunity to then adjust the curve over that duration. He could, I mean, like a gold $20,000 per ounce. If we were able to get market forces to do that, and I don't think it would be too hard, $20,000 per ounce, he directs Besson, that puts five trillion dollars into the TGA, free and clear. He can buy back the entire long end. That's step one. Now, when we start to step two, which is, let's bring back the midstream more aggressively, let's build out, and inflation goes up a bunch, the bond market is gonna sit there in snooze. It probably would require some sort of modest capital controls to, you know, any remaining debt holders. But if you've bought back the entire long end, you know, you probably have to introduce some sort of, like, belly of the curve capital controls or something like that, right? Like, you own a three or a five-year, congratulations. Those are now, you know, those are now turned on to maturity. But yeah, the thing neither of us have talked about in this podcast so far is what you would be doing extensively is building back the middle class. Because, you know, all of that midstream is gonna require electricians, plumbers, workers that actually do things versus, you know, pontificate on things. And so you kind of get this, like I do, but you would end up having this, this, you know, you restructure fundamentally the middle class to give you a stronger base that them would give optionality on top of that. That's exactly what it does, right? Just think about it. If getting rid of gold out of the system had a very clear set of winners and losers, the Treasury market one, Washington deficit one, Washington power, relative and wealth one, Wall Street, power and relative wealth one, and the US industrial base and the middle and working class is lost. If you go back to a neutral reserve system or neutral assets system, which Bessent would be doing by doing this essentially, the reverse would happen. I'm not saying it would be bad for Wall Street, I'm just saying as Bessent has said over and over and over, he said, it's not that Wall Street's gonna lose, it's just its main street's turn. And you would see a lot more headlines like what we saw last week in the Wall Street Journal of contractors making $200,000 a year in the middle of nowhere, Texas building data centers, except they would be building rail and grid and building everything, everything midstream again. And that's exactly what it would do. It would be huge, it would be the biggest nominal GDP boom since the immediate aftermath of World War II. And it would be that globally because the release valve would be the dollar. And when gold goes up a ton in dollars, it's gonna weaken the dollar, a ton. Well, think about where the world sits. The world via the Eurodollar Market and elsewhere has 13, 15, 20 trillion dollars in dollar-denominated debt. It'd be like you and I, taking out a mortgage in Mexican pesos and then the peso collapses. And I'm not saying it's gonna collapse or, well, it's like we owe a mortgage in pesos and then the peso falls 40%. Are we richer or are we poor on a real basis? We're richer on a real basis. The world that is short dollars via this dollar obligations, these dollar obligations would be much wealthier on a real basis and in a much better position to consume more of their own production, even as we try to produce more of our own consumption by bringing back the midstream. And so it remains poorly understood that it's amazing to me how much all roads lead to gold. In other words, it's on the books. We can use this, and boom up. Yeah, and gold is just a derivative of energy, right? All it's, gold is simply stored energy. That's all it is, right? So this system would, it wouldn't be perfect, but it would much more closely align with your vision of, and my belief, your belief of the base layers energy. And so we have separated the base layer from the paper, and it's just gone too far, and it's now hurting us. It's hurting China, it's hurting everybody. It's in everybody's interest to go back to something with a closer energy tie. Now, could that be Bitcoin here and gold there to answer your question? Sure, Bitcoin does have a gold tie to, or excuse me, an energy tie to it via the proof of work, et cetera. That remains to be seen. I'm long term still very bullish on Bitcoin. I think it could be used in that way. That then sets up a battle really between gold and Bitcoin, which ultimately becomes a battle of who's more productive, right? The Chinese or the Americans? Well, given how productive the Chinese are, culturally, energy, et cetera, that then becomes a currency issue, right? Like we can catch up with the productivity of the Chinese if we haircut the dollar enough against the yuan, which then becomes, that's just an FX rate issue at that point, if you want to try to stand up Bitcoin against gold as a reserve asset. Yeah, I think what we just did is the emergence of a new system is like an artist with a blank canvas. There's a lot of negativity that's spreading around, like, oh, this is, you know, the doomsday. I actually look at it the exact opposite. I just, we have to get back and get on the same page of what needs to be done. But if done correctly, there is a way through to adjust and deal where you can actually have a prosperous west and you may even have a prosperous east as well. What you probably won't have is if you don't have, if you don't have energy reserves and you're consuming more than what you have, that's probably, you know, structural loser in that situation. So, but if I just, you know, pair it between east and west, it doesn't have to be a, you know, a head-on collision and conflict, you can actually develop a system that's quite prosperous. It could go incredibly wrong, 100%, right? There's a lot of threading the needle that needs to occur. But I think it kind of comes back to, you know, that re-anchoring on physical is kind of the path, maybe that even more so than energy, although energy is the basis for physical. But in the heart of that, the union of the Venn diagram that I talk about, that is, you know, all roads kind of lead through whether we're talking physical, monetary trade, it all kind of goes through the same point. You know, it's such a great point because I often get accused of being a doomer and it's actually the complete opposite of my message. Like, I have three draft age sons. The alternative of this solution is they get drafted and go fight somewhere or get enlisted to, you know, for that. That's the ultra, that's the doomer scenario. That's what we're trying, some quarters are trying to pitch us. And, you know, we need to go fight the Chinese somewhere. We need to go to war here or that like, that's the doomer scenario. The good scenario is change the monetary system, re-tie it back. You know, take control of it away from the people that are, you know, electricity comes from a, comes from a plug and water comes from the faucet and food comes from the grocery store. These policymakers and economists that have been running things into the ground for the last 50 years and tie it back to the real world of energy through gold, through Bitcoin, whatever, I don't care. But that's the good outcome. And yes, there it is because we've waited so long and certain things are very extended. It's not always going to be a clean. There are needles to thread. It may not go well, but this is the good outcome. And it's getting very late in the game to where we simply won't have a choice. We will wake up one day and the Chinese will say, we've had it, you've pushed us too far. The next shipment of iPods, I'm dating myself here. The next shipment of iPhones, we only want paid for and you want are in gold. Like you guys did to the Brits in 1940 when the Brits were on the downswing. And I'm not saying we're necessarily on the downswing, but I can see the downswing from here. If we don't get back to a system that doesn't mandate us going into a downswing, which is what this present debt dollar system has been doing. So absolutely, it could lead to the biggest global economic boom. It's just a reversal. It requires some humility from the people that have been enriched by the incumbent system. They have to be willing to let go of some relative wealth and power and let sort of the bottom that has lost a lot of relative wealth and power. Get back up off the mat. And in the long run, it would be very good for them. It would be very good for those people. In the medium term, it'd be very good for those people. I'm hopeful we can get there. Part of why I do what I do is to just and harp on this so much as to me, it's so important. And because I know what the alternative is. The alternative is my boys get drafted and go somewhere to fight like the boys of 1939 did. And that's where this is heading. And so I think it's really important to get this right. Knowing that you've got ties in policy circles. I don't think you can have two nuclear superpowers in conflict. I think the stakes are too great. And we've seen even touching on that with respect to Ukraine. And so I think this option B is much more palatable. And my message is, I've always found that if you help people make money along the way, they're more incented to they deeply believe because it's worked. And the benefit here is by looking at things through this lens, you're seeing, you're looking in the mirror and seeing reality versus fantasy and kind of coming back. And there's very practical steps. We need to build firm base load fast. We need to show up the supply chains. We need to change the economic incentives versus the more we incentivize things that we know won't work or have low value. It's we should just call it a tax, which is what it is. Instead, we call it a subsidy. So kind of moving away from that. And all of that's going to open up the opportunity for the moonshots that you talk about in term, whether it's fusion or whether it's thorium-based vision. But whatever it may be, it opens up our optionality. And I think that's a very exciting, hopefully it comes across, but I think there's a lot of opportunity here. And I love your enthusiasm around gold too and how you're seeing these connections. It actually was reading your work that actually turned me on because I never fully grasped the concept what was actually happening. Now I feel like I have a firm understanding of that. So thank you. You're welcome. Yeah, I mean, for me, what the Chinese are doing with gold is not about gold. It's all about energy. And that, I think, is super important because understandably, in some cases, right? The Goldbug community-- there's a lot of skepticism around parts of it in policies, here, goals, and certainly given sort of the dogma and the economic dogma of the last 40, 50 years. But if you just look at gold as a store of energy, that's it. That's all it is. Gold is just a 0% yielding bond of 0% yielding bond of infinite duration and infinite face value so that in tied to energy, that's all you're doing. You're just swapping out a treasury bond that is infinite supply, a finite face value, finite duration, and increasingly disconnected from energy. You're swapping out one reserve asset for the other to the benefit of everybody in the world. Well, if you're right, Luke, maybe you and I will find in some excavators and join Parker Schnabel up in the Yukon in terms of-- and get on the show Gold Rush to start mining some of this. It's $20,000 an ounce is a long move from where it is today. So well, listen. Thank you for coming on. Happy holidays. And just let the audience know where they can find your work on forest for the trees. Absolutely, thank you. FFTT-LLC.com for more information about our institutional and mass market products. And they can find me on X at @LukeGrowman of a fairly active feed. And thank you very much for having me on. Merry Christmas and happy new year to you as well. And I hope you enjoy the time with your family. Oh, well. Thanks, Luke. [MUSIC PLAYING] [MUSIC PLAYING] [MUSIC PLAYING]