Speaker 1Hello, everyone. Welcome to the Vancouver Resource Investment Conference. How you all doing today? Hello, everyone. Welcome to VRIC Media, your most trusted voice in metals and mining. I'm your host, Daryl Thomas. And today we have the pleasure of interviewing Jim Rickards, who is a New York Times bestselling author of Currency Wars as well as Money GPT. And it's also the editor of Strategic Intelligence. Hey, Jim, welcome to the show.
Speaker 2Thank you, Daryl. Great to be with you.
Speaker 1Yes. Yes. So I got to start with this. So President Trump came out and said we must inflate the debt away. Typically, governments have three options that they choose. They choose either default on their debt, they choose fiscal austerity, or they inflate the debt away. So we have had we recently had a president come out and say, hey, we must inflate the debt away. And I'm just curious how high could inflation go and how are you positioned to weather a storm like that?
Speaker 2Great. First of all, Daryl, you're exactly right on laying that out. And it's Trump did did say that. And preparation is the key. And I'll explain why. So the three alternatives you mentioned, the U.S. is not going to default on its debt. We don't have to. We can just print dollars. You know, if you look at Argentina, you can almost set your watch by Argentina. But the reason every 10 years or so. But the reason for that is Argentina borrows in dollars, but they print pesos. They don't print dollars. And so they have to default because unless they can get their economy shaped up or generate exports or dollar surpluses, that's the ideal. But they can't actually print the currency. Someone asked me about France the other day because, you know, we see riots in France and deep concern about the French bond market. Well, part of the reason for that is France does not print. They print euros. They have euro denominated debt, but the euros are printed by the European Central Bank. Now, France is an important European economy. They have a voice in the European Central Bank. But the Germans have always sort of run the ECB, the European Central Bank, behind the scenes. So France has a serious problem. The U.S. does not have that problem. We can print the dollars. I'm not saying printing dollars is a free lunch. It isn't. It has costs. And we'll talk about those. But we're not going to default. I think we can kind of lay that to one side. Fiscal austerity sounds nice, but political realities point in a different direction. The last time the United States was debt free. So when a lot of people think, you know, gee, well, we started borrowing money in, you know, 1790 under Alexander Hamilton and George Washington. And it's just been going up, up, up, up, up, up ever since. And now it's $40 trillion. That's not true. It is $40 trillion today. That part's true. But it has not been a straight line. I studied this and wrote about it in a couple of my books. The debt, the national debt, if you will, is sort of a sign where it goes up and then it comes back down again. It goes up, it comes back down again, et cetera. Generally speaking, it goes up in a time of war. Well, you borrow money to fight the war. If you win, you can probably pay it off. And if you lose, it doesn't matter because you're out of business anyway. And then it comes down in times of peace, in effect, getting dry power. Dry powder, rather, for the next war. So, and that pattern has been broken in the last 20 years. We've seen the debt go up exponentially. Now, we've been in some wars, certainly Iraq, 2003. Afghanistan was a 20-year war. We're back in Iran fighting on the, you know, kind of on the sidelines, but not really in Ukraine today. So we're back in some serious wars. But not. Not to the extent of, you know, World War I or World War II or the Korean War or Vietnam or some of the other, the other big wars. But the debt has been going up as if we were in a war. It has been going straight up. And I'll come back to some metrics for thinking about that. The last time the U.S. was debt-free, I said, you know, sometimes we pay it off. When was the last time? It was 1836, Andrew Jackson, when he left office. He abolished the central bank and paid off the national debt. So, thank you. Thank you, Andrew Jackson. Woodrow Wilson brought back the central bank in 1913 and also the income tax. So, you know, thank you, Woodrow Wilson. So, but there was a time when we didn't have any national debt. Now, the way to think about the national debt, Daryl, and I think this is important. People throw out $40 trillion. That's a big number. Okay, I'll grant that. But, okay, it's a big number. But how big is it? How big is it for the economy? In other words, I think it's difficult to think about debt without thinking about the resources available to pay the debt. And the metaphor I use there is let's just say, hypothetically, somebody owes $50,000 on a MasterCard. Is that a lot of money or not? Well, if you make $20,000 a year and you get student loans and your interest rate is 28%, you're probably going broke. That is a lot of money. On the other hand, if you make $5,000 a year, you're probably going broke. If you make $500,000 a year and you're liquid, you can just write a check and pay off the debt. So you can't judge $50,000 as being a lot or not a lot unless you can look at the resources available to pay it off. It's no different with the national debt. So $40 trillion. But how big is the economy? So the metric I use is the ratio of debt to GDP. GDP, I mean, it's imperfect. There are flaws in it. But basically, it's a measure. It's a measure of how much income the economy is generating, which can be, obviously, is a source of taxation. And that's the money that you have to pay off the debt. So what's the ratio? Well, right now, that ratio is about 125%. It's $40 billion, and GDP is kind of in the high 20s. So it's about. So it's about 125%. That is extremely high. That is an all-time high. The previous record was at the end of World War II when it was about 120%. But as I say, at least we won the war. The U.S. was a global superpower. We had half of global GDP at the end of World War II. So it's a high number. But the question the market wants to know, and this has. This has to do with interest rates. And I'll get back to your question about inflation, because that's really important. What the market says is like, OK, 125% debt-to-GDP ratio is very high. But is it going up or is it going down? If it's going up, you're going to get much higher interest rates, much slower growth. You're going to head for some kind of debt crisis sooner than later. If it's going down, we, the market, will give you time. We don't like it. It's not good where it is. But if it's moving in the right direction, then that is sustainable. And, you know, the idea that you have to pay off the national debt is nonsense. We're not going to pay off the national debt. Forget it. We don't have to. What we do have to do is roll it over. You know, as the debt matures, as instruments mature, can you issue new debt to pay off the old debt and kind of keep it going? That's the sustainability. And in the course of issuing new debt, what's the interest rate? And that's a very big deal. So the key to sustainability is. Bringing that ratio down. Now, we've done this before. I mentioned that at the end of World War II, the debt-to-GDP ratio was 120%, which it was. In 1980, at the end of the Carter administration, when Ronald Reagan was coming in, it was 30%. In 35 years, from 1945 to 1980, we got it from 120% to 30%. And the thing that impresses me about that, and particularly given the dysfunction in politics today, that was a bipartisan effort. It was not highly political. You had Democrats like Harry Truman, JFK, Lyndon Johnson, Jimmy Carter. And you had Republicans like Dwight Eisenhower and Richard Nixon and Gerald Ford who worked together to achieve that. Everyone thought it was in the best interest of America. It wasn't a political hot potato the way it is today. So, as I said, we have done it. And we could do it again. And that's a good thing. But then you say, well, how did we do it? Well, if you go, again, take the period from 1945 to 1980, the debt, the annual, sorry, the deficit, rather, tripled. The deficit did not go away. It tripled. The debt did not go away. It tripled. So, wait a second. If the deficits are going up and the debt's going up, how did you get the ratio down? The answer is growth. Growth. The other things went up 300%, but growth went up 1,000%. It was 10 times. And so, that's how you got the ratio down. So, the key to that was growth. But here's the footnote. Here's the part in getting back to your original question. When you're talking about the debt to GDP ratio, when you're talking about what we're talking about right now, you're in nominal space. Now, I like real space. That's how I do most of my analysis. But if you're talking about debt. and deficits, those are nominal costs. concepts. If I owe you a dollar, I owe you a dollar. It's interesting if it's actually worth $1.05 or $0.95 relative to some index that matters, but it's contractual. I owe you a dollar. And so how do you get the debt-to-GDP ratio to come down? Well, you have to grow the denominator faster than the numerator. The growth has to go up faster than the debt. You'll still have more debt. Again, to be clear, you'll have more debt, you'll have more deficits. But if growth is going faster than the debt, the ratio is coming down and that's sustainable. But the trick is that growth calculation is a nominal calculation, meaning you have to take real growth, which matters, that's really important, plus inflation. Inflation plays a role in all this. So right now, we just learned that the most updated figure is the projected deficit for fiscal year 2026 ending, well, it just ended actually September 30th. So the fiscal year is over. The fiscal year 2026 ending September 30th, 2026, so a couple of weeks ago, was about 6% of GDP, a big number. But. Growth. So what's growth? Well, we don't have the final numbers yet, but projected growth is around 3%. So you're like, wait a second, we've got 6% increase in the debt, but there's only 3% increase in growth. But that 3% is real growth. You have to add inflation. Now, if inflation is, let's say, 4%, then that nominal growth is 7%, 3 plus 4. So if the deficit's going up 6% and nominal growth is 7%, then that's a real growth. So if the deficit's going up 6%, 7% because you add inflation, then your ratio is going down. Inflation is a bad thing, but it is the solution to the problem, which is that the ratio is going down. And so you actually. Someone obviously briefed Trump on this, or he had a good intuitive understanding of it. I'm surprised he said it. Most of the politicians don't want to talk about it. But inflation is the key to getting nominal growth high enough to bring down the debt-to-GDP ratio. And if you can do that. The debt is sustainable.
Speaker 1If you want to learn how to make money in precious metals, you need two things. To hear from people who've been right about the sector for decades, and to get face-to-face with early stage mining companies before everyone else does. That's exactly what's happening at the Above and Beyond Summit. You hear from thought leaders such as Lynette Zhang, Jay Martin, David Morgan, and myself, and hard money advocates like Arizona State Senator Mark Fincham. And you hear from people who've been right about the sector for decades, and to get face-to-face with early stage miners themselves, able to walk up, ask questions, and size them up in person. This conference is happening from November 22nd through November 24th in Scottsdale, Arizona. So sign up now and take $500 off with promo code VR500. That's VR500. You can click the link that is pinned in the comments or in the description, and we'll see you in Scottsdale. Okay, so inflation is the key for that. So we must grow faster than the debt, and that's what happened from the period of 1945 to 1980. Because I was thinking about that when you shared that, and I was like, wait, we were in the Vietnam War. We were spanning welfare programs and stuff. And how was our debt to GDP that low? And so that makes total sense. I appreciate you breaking that down. So how are you positioned for this type of inflation, this type of currency debasement, loss of purchasing power in our currency?
Speaker 2Sure. And by the way, I lived through the period we're talking about. From 1977 to 1981, cumulative inflation was 50%, 5-0, not 15, 50. The dollar lost half its purchasing power in five years. Now, people like to say, oh, we go back to 1913, the dollar's lost 95% of its purchasing power. That's true, by the way. But you can lose 95% and then lose 95% of whatever's left. You can keep losing 95%. It kind of shrinks to a really small real value. But just in that five-year period, we lost 50%. And that was very important in terms of the dynamic. We just talked about it by getting the overall debt-to-GDP ratio down. So in those days, the 30-year Treasury bond, they were being auctioned at 13% interest, 13%. But inflation was 15%. So in those days, the 30-year Treasury bond, you know, your real return was negative, too. It paid to be a borrower. That's the thing about inflation. It favors the borrower, and it disadvantages the creditor. Around that time, 1980, you know, approximately, I got my first mortgage. My wife and I bought a condo in New York. And the interest rate on our mortgage was 13%. And I told my mother, and my mother cried because her first mortgage was like two and a quarter or something in the 1950s. I said, Mom, yeah, I'm paying 13%, but inflation is 15%. So my real rate's negative two before taxes. And I lived in New York. It was a 50% tax bracket. And the mortgage interest was tax-deductible. So I was getting seven points back on the tax deduction. So my real rate was like negative nine. I was making money being a borrower in real terms. That's a little abstract, but it's literally true. So to get to your question, Darrell, in terms of how do you position yourself for that, I don't suggest that people go out and borrow head over heels. But the truth is, and you have to watch the interest rate. Remember, if the interest rate you're paying is less than inflation, you're a winner. But if you're paying 29% on a credit card and inflation's, let's say, 5%, that's not good. There, you're a loser because your interest rate is way higher than your inflation. So you can't do that. You can't do that. You can't do that. You can't just say, be a borrower and pay interest. You have to ascertain that the interest on whatever you're borrowing is less than inflation. Then you come out ahead. So leverage works. But obviously, precious metals, gold and silver, real estate, natural resources. I like energy stocks. I like defense stocks for other reasons, really having to do with the war situation. So there are agricultural goods and commodities, companies like Cargill, et cetera. So we're always going to need food, the huge demand for precious metals, strategic metals, metals and mining more broadly, not just precious metals, defense stocks, definitely. And there's room, again, with care and careful attention to the cash flows. There's room for debt in these situations because when you have, and I expect inflation to go up, when you have that kind of inflation, unfortunately, there are winners and losers. Anyone on a fixed income, so if you've got annuities, insurance proceeds, social security, you're a bondholder, any kind of fixed and determinable income is going to lose in inflation. You'll get your money. It doesn't necessarily default. Good, but probably won't necessarily default, but that money will be worth less because of inflation. Who wins? Again, it's a winning combination. Again, going back to my experience in the late 70s and early 80s, I mean, that was kind of the start of my career. I was working at Citibank at the time. I was their international tax counsel. They used to give us a raise every six months. I mean, we didn't have to wait for an annual performance review or two-year cycle or anything. They would just hand out raises because they knew that people would leave because inflation was so bad, you had to get more money. And so there are ways to get through that, but unless you have that kind of job or hard assets or use leverage prudently, I would say, or the right investment portfolio, you could end up on the wrong side of that trade.
Speaker 1Yeah. I want to talk a little bit about energy, natural resources. So a lot of geopolitical risks right now, outside of the Strait of Hormuz, then we have the issue with the Houthis, and they recently bombed the Saudi airport, from what I was reading, and some problems there. And then you have this issue with Russia and Ukraine heating up even more. I guess Trump had said that there was an agreement between the two, and both parties came out and said there wasn't no agreement, and Trump said it's an agreement because I said so. And the issue was around these Russian refineries being blown up. And then there was a deal with Russia to pretty much for diesel gas. And then there was a threat to stop supplying Ukraine with weapons. And it's kind of a mess. And so I'm just curious, how are you thinking through these geopolitical risks? And what types of energy stocks you think will perform the best? What type of natural resource stocks will perform the best in that scenario?
Speaker 2Yeah, that's a pretty good summary there. I want to add to that. It is confusing. At least you have to take all these news reports and kind of parse them a little bit. And then there is a a connection to Iran. I'll come back to that in a second. So just kind of focusing on Ukraine for a minute. Yeah, unfortunately, Trump, I would say, has zero credibility in terms of what he says on Ukraine. Well, and Iran, for that matter. You know, he says that straight-up Hormuz is open. Well, it's better, but it's not really open. The Iranians are still blowing up vessels. The Houthis are selectively closing Red Sea passage to Saudi Arabian vehicles. They blew up a Saudi pipeline. The Saudis fixed it. They'll get blown up again. So, you know, how long do you want to kind of go through that process? But, you know, I mean, going back to the beginning of March, right after the war in Iran started, just to pivot to Iran for a second, Trump said this will be over in days. Well, it wasn't. He said it'll be over in weeks. It wasn't. You know, the days went by. The weeks went by. The months went by. It's not over. But he said this 10 or 11 times. I actually stopped counting because I just didn't give it any credence anymore. So this, you know, this business about, you know, there's an energy ceasefire. There's no energy ceasefire. Russia blew up a Ukrainian energy facility like about four or five hours after Trump announced the energy ceasefire. So there's no ceasefire. Russia had never heard of it. They didn't agree. Ukraine's like, yeah, we'll do it. But, you know, if Russia agrees, well, Russia didn't agree. The U.S. and NATO are very good at talking to each other. They're not so good at talking to the Russians. So I don't put any weight on that comment by Trump. However, the other things you mentioned are real and they're very important. And kind of here's why. So there were three separate deals that were, one of them is concluded. The other two are tentative, but they're kind of on the table. And the other two are on the table. The first one you mentioned is that the U.S. will relieve, give sanctions relief for Russian exports of diesel. And in exchange, Russia agrees to basically, you know, to start exporting diesel, make more of it available. Yeah, we all were familiar with the price of gasoline and gas at the pump. Diesel is actually more important. We don't drive 18 wheelers, at least most of us don't. But the point being, everything, you buy, that's tangible. Every single thing, whether they have it delivered to your porch or in a store or distribution center or whatever, it moves by truck at some stage in the supply chain and trucks run on diesel. What that means is that the higher price of diesel gets passed through to everything on the truck. You know, you say, gee, to be honest, the truckers, they got to pay a lot more at the pump. They do. But that then, that price increase then goes into everything. From toys to vegetables to appliances or anything you buy. And so that's really the driver of inflation right now, the main driver. And it's critical. And that is where the real bottleneck is. Everyone's like, well, the Persian Gulf is closed. It's not exactly closed. It's kind of an on again, off again kind of thing. But a lot of oil is getting out of the Persian Gulf. Now, it's a lot more expensive because the insurance costs have skyrocketed. You've got military escorts. You have to take, you know, you have to transship it from one vessel to another vessel to evade blockades. You know, there's a lot. And all that adds to the cost of the oil. So the quantity of oil that's getting out is a lot higher than it was. But the price is also much higher because of the things I mentioned. But that is not the most serious bottleneck in the energy supply chain. The serious bottleneck is refined products. So gasoline, diesel, and kerosene. Kerosene is jet fuel. And the refining capacity you need to turn crude oil into those refined products is where the problem is. You know, as I say, we don't put crude oil in our cars. We put gasoline. Well, that comes from refiners. Russia's refinery network has been under attack by Ukraine. And so that has slowed down significantly Russian diesel exports. In fact, Putin said, we, Russia, are going to stop exporting diesel. We need it for ourselves. So Russia's not running out of refined product. But they had to stop exports in order to have enough for themselves to run their own economy. And the key to that is, can we stop the Ukrainians from blowing up Russian refineries? Because that's what the Russian refineries are. So a couple of days ago, about a week ago, Trump and his envoys, Jared Kushner and Steve Rykoff, did this deal with Putin and the Russian counterparts. And Trump spoke to Putin that, as mentioned, the U.S. will stop sanctions on Russian diesel exports and Russia will start exporting more diesel, lowering the price. But the key to it was Trump told Zelensky in Ukraine to stop blowing up the Russian refineries. Well, Zelensky didn't listen. He continued to blow up the refineries. Well, how do they do that? How does Ukraine actually do that? They do it with U.S. satellite intelligence. They don't have the kind of spy satellites. They don't have the geolocation technology. They don't have the ability to direct these drones. I mean, they may be launched from Ukraine. So it just kind of gives you a little bit of a shield from saying, you know, NATO's attacking Russia. But NATO is attacking Russia because it's our technology and surveillance and satellite location facilities that are making this all possible. So I kind of look at the White House and say, why don't you stop yelling at Ukraine and just cut off the intelligence? We do control that. And if you stop assisting this, then Ukraine will stop blowing up Russian refineries because they won't be able to do it. But Trump tried kind of like getting Zelensky to do it. So then about two days ago, Trump said, we may start cutting off your intelligence. So he kind of, you know, dropped the hammer a little bit. And the U.S. can do that. And that might actually stop it and help Russia increase its exports of refined products. The other big refiner, by the way, is India. They're putting out a lot. A lot of refined products come out of the Persian Gulf. It's not just crude oil. There are a lot of refineries in the Arab-speaking countries that are not refined. And so they're putting out a lot of refined products. And so they're putting out a lot of refined products that produce, you know, as I mentioned, gasoline, diesel, and kerosene. So you got to get that going. But Trump's getting a lot of pushback. And he's getting it from Democrats who just kind of have Trump derangement syndrome. But he's getting it from Republicans also. There are a lot of warmongers in the Republican Party. And forget Europe. I mean, well, Western Europe, they just want a war with Russia. They want to start World War III. So it's a lot of pushback. And they're getting a lot of pushback. It's easier said than done. You can relieve the sanctions, and you can do a deal with Russia. But making it stick is difficult. So will it help a little bit? Yes. But it'll only take you so far. Now, the other deal, you mentioned a couple other deals. One is that there's some talk about, this is not like a done deal by any means, but in the works of reopening the Nord Stream pipeline. Now, this is the pipeline that pipes natural gas from Russia directly to Germany. Germany is the biggest industrial city in the world. And it's a big deal. And it's a big deal. And it's a big deal. Europe, they were a lot of their success, but they don't have any energy. A lot of their success as a manufacturer and as running large trade surpluses came from the fact that they had relatively inexpensive Russian gas. Well, we blew up the pipeline. I say we, it was clearly the United States and UK, MI6 were involved. I don't know exactly who went down there and planted the explosives, but it wouldn't have happened without US special operations support and intelligence support. But this new deal would repair the pipeline, reopen it, but there would be US investors involved. And that's a very good thing because presumably if you had US investors involved, you wouldn't blow it up again. And so that might make it a lot more real. And the third deal, one of the major Russian oil companies is Lukoil. There's Rosneft and Gazprom and a couple others, but Lukoil is one of the biggest. And Lukoil has a very large retail distribution network. So they're not just an explorer, producer, refiner, but they've got gas stations all over the US. They have been severely sanctioned by the US, but we might do a deal where A, we relieve the sanctions and let their refined products go downstream to their retail distribution network, which would help and also allow US investors to take over a lot of those assets, not all of them, but the distribution side of it. So that could help too. The Lukoil deal and the Nord Stream deal, if they happen, they'll take months or a year or longer to have much of an impact. So they're not going to do anything for the Republicans prior to the midterm elections, which are kind of upon us. They're good for the long run. I think they're smart moves by the Trump administration, but they're not going to have any short-term impact on inflation. So the inflation we talked about is going to persist.
Speaker 1Okay. So I got to ask you this. So I bought a stock before the sanctions went in on Russia. I thought I was being brave. I was following Rick And, like, buy when there's fear in the market. And I've been stuck for, like, years. And so now I'm seeing these sanctions being lifted and, I mean, Luke Coyle being in that discussion. Do you think there's a possibility that Americans could trade those stocks again?
Speaker 2Yeah. I mean, I obviously don't give personal financial advice, but at a macro level, yeah, I think that's part of what we're talking about, which is the – I don't know what took the White House so long to wake up. And I've been, you know, slamming them and I'm in other programs and so forth. So I've been very critical of the Trump White House conduct towards Russia. And there's a Russophobia in the United States, and as Democrats and Republicans, it makes no sense to me. I can't think of a better natural loss. There are only really three countries in the world, Daryl, that matter, that I would say have superpower status – China, Russia, and the United States. And I don't know if you're a poker player, but there's a saying in poker, if you're in a three-handed poker game and you don't know who the sucker is, you're the sucker. In other words, it's always two against one. And if you're not part of the two, then you're the one, and the other two are, like, teaming up to clean you out, and then they'll turn on each other. And this is what Nixon did in 1972. The main enemy was the Soviet Union. So Nixon pivoted to China, went to Beijing, met with Mao. Mao Zedong and Zhou Enlai and others, and struck up a relationship with China that made Russia the odd man out. Let's say Russia, Soviet Union at the time, but basically Russia. Well, it worked. It took a while, but, you know, in 1989, the Berlin Wall fell. In 1991, the Soviet Union was dissolved, you know, et cetera, and they became much weaker throughout the 1990s. Well, that worked. We were part of the two. They ganged up on the one. Well, now you have to do a reversal. You have to pivot to Russia, have some kind of detente with Russia in order to isolate China, because China is the main enemy. The Chinese Communist Party is, you know, the greatest threat to the United States. And so an alliance of some sort, I'm not saying a treaty, I'm not saying you have to be best friends, but at least work together to achieve common goals with Russia to isolate China. But there could be more than that. Russia is the key to ending the war. Russia is the key to ending the war in Iran. Trump has no off-ramps. We're not going to do a land invasion. I mean, what would it take to, you know, invade Iran and march to Tehran? We're not going to do it, by the way, just to be clear. You're talking about at least 200,000 troops, like 20 divisions, but probably 300,000 or more with air support and a lot else. You know, Americans, I don't know when they stopped teaching geography in this country, but Americans, you know, should look at it. If you took Iran, like a silhouette of Iran, and placed it over the continental United States at the same scale, it would take up the entire continental United States east of the Mississippi, you know, except maybe just kind of chop off Florida. But, you know, marching to Tehran would be like marching from, you know, Maine to Louisiana against 80 million people. You're not going to do it, nor should we. I'm certainly not advocating that. Now, you could surrender. Basically, agree to the Iranian terms. What are the Iranian terms? Iran controls the Strait of Hormuz. They get to charge tolls. U.S. withdraws from the Middle East. We pay them reparations. We pay them. We relieve the sanctions. We free up all their assets. We're not going to do that. I mean, that's the deal that's on the table, but the United States is not going to do that. So, if we're not going to do the surrender deal or the Iran deal, and we're not going to invade, what's left? Well, we can start. We can start another bombing campaign and special operations and all that, but it doesn't work. You know, we bombed Vietnam for 10 years from 1965 to 1975, and we lost the war, so that doesn't work. So, the point being, Trump doesn't have an off ramp, but there is one, which is if we could ally or work together with Russia, Russia has far more leverage over Iran than we do. Russia is Iran's lifeline right now. Russia provides them with gold, weapons, hard currency, trade, you know, imports, et cetera. China does, too, but not to as great an extent as Russia. So, if we could help Russia achieve their aims in Ukraine, which I think we should, then Russia would help us achieve our aims in Iran, and we could actually end both wars on very favorable terms, plus work with Russia as an energy partner. So, if we could help Russia achieve their aims in Iran, and we could actually end both wars on very favorable terms, plus work with Russia as an energy partner. to buy oil, there's some competition for gold in the form of higher U.S. Treasury interest rates. And so those two factors alone are a headwind for gold. But then again, the central bank buying, which you mentioned, Daryl, that's the support. So the fact that gold's not plunging, the fact that it's kind of hanging in there around $4,200 now, skip or take, kind of moving sideways lately, that is a very good sign of strength, because eventually those other things will go away. The inflation is going to linger. The price of oil will stabilize at some point. It's not going to come down a lot, but it might not keep going up a lot. The central banks are still going to be buyers. The inflation is not going away. And so the gold is positioned for the next leg up. But now is a good time to get in.
Speaker 1Mm-hmm. Hey, so you slipped this in very casually. So you said that you were part of structuring the petrodollar deal?
Speaker 2Yeah. I worked with Helmut Sonnefeld. Helmut was the deputy national security advisor. So at the time, Henry Kissinger was the national security advisor. Helmut Sonnefeld, as my point of contact, was the deputy national security advisor. He was so smart. They used to call him Kissinger's Kissinger. He was like the big—Kissinger had a big brain, and Helmut was like the big brain behind Kissinger. But what we did, it was a carrot-and-stick approach. So you had Bill Simon, who was the secretary of the Treasury, and Jerry Parsky were the carrot, and inside the National Security Council, we were the stick. So the carrot was, hey, Arabs—really, it's the Saudi Arabians, but by extension, OPEC—price, oil, and dollars. You'll get the dollars. You can buy U.S. Treasury. You can buy bank CDs, whatever. Give the money to the banks. The banks will lend the money to South America. They'll buy U.S. equipment. We'll get the whole global economy moving again. That was sort of the big picture, and that'll be to your benefit. The stick was, if you don't do that, if you don't agree to that deal, we will invade Saudi Arabia, create a military security perimeter around the eastern provinces. We'll pump the oil ourselves, set the price ourselves. We won't steal your money. We'll put it in trust for the future benefit of the people of Saudi Arabia, et cetera. But we had a whole—so I worked on the military side of it, and we actually had maps and stuff like that, and we leaked it to the Chicago Tribune. It was from Persian News and the Chicago Tribune at the time to tell the Saudis, hey, you can agree to this deal, or if not, here's what's going to happen to you. So they agreed to the deal. But yeah, I worked on the stick approach, which was basically a planned invasion of Saudi Arabia. I'm sure those plans are still around. We could do that now because the Saudis really don't fight. I mean, they buy our weapons. They take pilot training, but you don't really see the Saudis very effective against the Houthis, and Trump doesn't want to get involved with the Houthis because we already repped our necks in Iran. And the Persian Gulf, but he might have no choice. But if the Saudis won't fight, then what good are they? So you might even see some desire to basically break up the House of Saud. I like to see Western Saudi Arabia—it's called the Hejaz, but that's the part of the peninsula along the Red Sea. Give that back to the Hashemites, who are basically the rulers in Jordan. They're the last Hashemite kings left. Now, they were the ones who led the Arab revolt. They're the ones who led the Arab war, along with large sub-Arabia. But yeah, get the Hejaz back to the Hashemites and get somebody else in Riyadh and get rid of the House of Saud. I mean, that could happen to them if they don't do more.
Speaker 1Yeah, interesting. Interesting. So I want to get your thoughts on rare earths and uranium. These equities have been getting just decimated recently. Uranium price is still at $90 per pound spot price. And rare earths, I just don't know where we're at with that. I saw that there was an extension of the deal with China until January. And so where are we at with those two commodities? What are your thoughts on them?
Speaker 2Yeah, uranium, I'm bullish. I know it's volatile, and it was up a lot and came back down to me. Of course, you're right about that. But when you look at what else is going on, particularly in the tech sector, AI, yes. And AI is almost certainly a bubble. But it's not going away. I mean, the bondholders might get wiped out and probably will, in my view. And a lot of the equity prices will go down a lot also. And whether OpenAI and Anthropic can pull out these multi-trillion dollar IPOs, I doubt it. They may get some kind of IPO out there, but not at those kind of valuations. So there are a ton of problems in AI, but it's not going away. And it takes enormous energy inputs to run all these. They're building the data. centers regardless even if the bondholders get wiped out you know too bad for them and it may be more problematic in financial markets but those data centers are are in fact getting built and um there's enormous energy uses uses and right behind that is quantum technology now quantum is not ai you can it's a system you can use as a form of computing you can use quantum computing to run ai apps but quantum computing is a there's a whole separate field but it is also enormously energy intensive we've been talking about mining mining i'm sure well you do know the business it is very energy intensive so when you look around all the things you know uh energy itself energy extraction so when you look at all the things we need energy agricultural commodities minerals and mining uh ai is there here comes quantum they all need enormous amounts of energy and so uh you know when you look at that uh uh when you look at that sector i mean you have to be very very bullish on the sector but how do you solve the problem uranium you know nuclear reactors is is the answer uh and we were seeing as smr small modular reactors are are coming into play so uh now you've got regulatory hurdles technological hurdles uh these plants take 10 years to build hopefully that can be expedited the french uh and the russians are actually the best at building them the us is is pretty good we're probably number three but uh that's going to be very much in demand you're going to start to see it in japan again they shut down after fukushima i think they're going to come back uh the us will start building new nuclear plants so i'm very um i would say very bullish on uh on uranium rare earths uh yeah i mean as you know they're not rare they're all over the place they call them rare because when you mine them that's the the uh the amount of rare earth rare earths you get relative to the amount of ore that you need to process is tiny so they're uh very very thinly spread but you can find them i mean they're all over colorado and wyoming and a lot of other places um that is uh that's also not going away so uh they might have got they might have got a bit overhyped uh and they've come down but a long run i like them both okay
Speaker 1okay okay got it and then uh what are you bearish on i heard you mentioned bonds earlier is that is that what you're most bearish on or any other
Speaker 2sectors yeah the whole the whole ai sector um very bearish again i would separate the technology from the financial merry-go-round the vendor finance the circular financing etc i could we could spend another hour just kind of going through all the problems in ai but ai is not going away so the technology is here to stay but the financial i'll just say how's the cards behind it uh is not a good good analogy um is uh the railroad boom in the late 19th century now that was uh you know very successful the railroads got built transcontinental railroad northern pacific southern pacific uh a lot of people got extremely wealthy henry flagler the hiremen's uh layla stanford that was all real but uh and the railroads you know prevailed you know at least until the uh uh until the 1950s but um but the bondholders got wiped out over and over i mean there were massive investment losses in railroads when they didn't pay off the bonds so just because the the the technology in that case railroads was good and it got built and it stayed around and it was productive that's all true and some people get very rich that's true but it doesn't mean every investor made money a lot of them lost fortunes and i think that's what we're going to see in ai it'll it'll still be around but a lot of the uh lenders and investors and kind of look at the insurance sector for where the holders actually are going to get wiped
Speaker 1out okay okay well jim appreciate you for coming on the show today work in the audience uh find more what are you up to
Speaker 2these days uh thanks daryl uh my uh my x feed you know used to be twitter now it's x at real jim rickards at real jim rickards so when i do interviews like this one i'll i'll put i'll post them there my flagship newsletter is strategic intelligence um by paradigm press um we have a uh you know some very special deals right uh right now we have one you can go to uh records um warning.com recordswarning.com and you'll have an offer to buy it for 17.76 it's a patriotic offer it's the lowest price we've ever offered for three months if you don't like it you can cancel and get your money back but um the vast majority of our subscribers stay with us so um rickards melt sorry recordswarning.com for strategic intelligence and uh at real gym records are next
Speaker 1all right sounds good well thank you jim for sharing your time with us today and you all be sure to hit the subscribe button if you haven't subscribed yet love to have your support and thank you all for watching if you enjoyed this interview today and found it valuable i encourage you to click the link that is pinned in the comments as well as the description to the commodity university as we go deeper into what drives commodities and commodity pricing and we also jump into different dynamics of this industry and so encourage you to click that link to learn more go check it out
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