Jim Willie: Golds The Safe Haven When Theres Now Escaping The Debt Default | Arcadia Economics
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Which means I need to rate hike and a rate cut. They need a rate hike and a rate cut. Okay? They have no way out. And that’s why I focus on my top reasons for the gold market. Gold is the safe haven when there’s no way to avoid the debt default. Well, hello there, my friends. Chris Marcus here with you for Arcadia Economics and excited today because as you can see, joining me is one of our most popular guests on the show and quite a legend in the gold and silver space and Internet world who has been digging into a lot of the things that we’re now more rapidly seeing play out in the world.
And Jim has been talking about these for quite a while and lot going on. Obviously we had escalation with Iran and Israel over the weekend in the midst of quite a stunning gold and silver rally which had a big reversal on Friday. I’d be excited to get Jim’s comments on that as well as a bunch of other things. And joining me is Doctor Jim Willey, editor of the Hat Trick Letter, which can be found on golden hype and jackass.
com. And Jim, I guess this is going to be a quick interview today. I heard you have little to say on any of these non exciting events that have been happening lately. So we’ll get a couple minutes, wrap it up, and. Well, you know, I think 30 seconds for each of the four different events and I can’t think of more boring time. I fell asleep just reading about gold yesterday because it was so uninteresting.
I just saw for the first time a chart and I don’t know who to give credit to, but it was the Delta. I’ve been calling it the Delta how Shanghai is above the Comex and London gold price and it’s $58 higher now. Okay, this has been jumping around, but in all seriousness, this is the most exciting time I’ve ever seen in the gold market. This is the most exciting I’ve ever seen.
It’s like we have a perfect storm. We’ve got the treasury bond and government debt default. We’ve got monetization and the resulting price inflation. We’ve got a big historical wealth transfer where foreign nations are swapping out treasuries for gold. We’ve got big banks that are in trouble. We have the BRIcs that are de dollarizing and looking for multiple options. We’ve got weaponization of the dollar that’s been going on for about eight or nine years, and resentment and blowback.
We got central banks in a hidden manner, loading up on gold. I think the central banks are going to send us to five and 10,000. I’ll be very plain. We’ve got, I think, the growing sense of an inflationary depression in the United States. So we’re going to half the lower rates, even though that’ll be deadly. We’ve got a war specter. This is, we’re not in a global war.
We’re in a multiple regional war risk. Ukraine, Gaza, Central Africa, Taiwan. And we’ve got like a civil war starting in western Europe. Pardon my, my voice. Other than that, it’s going great. Chris, I have to lead with the Japan case study. This is given no western press coverage. None. I was awakened to it last October and November when the yen concluded a 22% decline. And I’m going to be really simple, and I’m not going to explain a lot of the complexities.
I’m going to get really simple back in the end, toward the end of 2021. If you could do a five year, that would be great. Okay, very good notice. Toward the end of 2021, the dollar was around 110 ¥112 in October. Actually, if you could get to October. Okay, 113. And in the next twelve months, it got up to close to 150. Look at that peak. It looks like it’s right around September.
Yep, it’s right around 150. What Japan realized was a 22% decline in their currency. This is the dollar going up. This is the yen going down. Why did the yen go down? I’m going to talk in yen terms. The yen went down because they sold $180 billion worth of treasuries in a twelve month period. That’s $15 billion a month for a year. Now here’s the paradox, Chris. The Japanese sold treasury bonds and the yen went down.
The Japanese sold a lot of dollar instruments and the dollar went up. Okay, this is a paradox. The yen went down because they reduced their dollar based reserves as foundation for their currency. All forex currencies have a dollar basis. When a foreign central bank sells treasury bonds and exits the dollar from the proceeds, they reduce their dollar reserves and their currency goes down. Japan sold $180 billion worth of treasuries, and their yen currency lost 22%.
Now here was the after effect. Because it caused shockwaves, it caused a tsunami, because foreign holdings of the japanese government debt called the JGB japanese government bond, they lost 20%, and they started dumping the japanese government debt. So the Japanese had to react. They printed money to cover their own abandoned foreign held debt of the japanese government bonds. That caused the yen to go down another three or 4%.
The japanese central bank decided we need to abandon our support of the treasury bond and fortify our currency with gold. So now the Japanese are now de dollarizing in a manner far more effective and thorough than the BriCS nations. The Japanese are now more in tune with the de dollarized theme of the BRICs nations than the BRICS nations are. The Japanese have not ended their crisis. They’re still struggling with trouble in their banks, trouble with their government debt and trouble with their yen currency.
What it means is that a Toyota is going to be cheaper in the United States, but they don’t want the treasury bill, they don’t want t bills. So we’re left with a conundrum at the west coast. The Japanese want to sell us cheaper toyotas and Hondas and Nissans and we don’t have proper currency to pay them. Okay, they don’t want our treasury bill. The Japanese now have provided an example.
This japanese case study, in my opinion, has rendered Operation Sandman in a required state for revision. Let me give some background. A year ago, we were told that the BRICS had a devastating plan of Operation Sandman. They were going to have 20 different countries sell $2 trillion in treasury bonds in a two day period or a 24 hours period. I like two days because I’m working the two theme here, Chris.
20 nations, 2,000,000,000,002 days. The Japan case study has shown them if they do that, they risk a lot of problems, a very important and powerful crisis in their own home country and banking system. So here’s my revised operation Sandman. At least 20 countries, at least 2 trillion in at least two year period. We’ve got a very, very long gold bull market. We’re going to be over 2500 in the next couple of months.
It could be a couple of weeks at this rate. Expect a pullback. I don’t get caught up in pullbacks and movements. It’s kind of like I give this argument to clients and colleagues who get on my case. Jim, why aren’t you watching the daily movement now? I’m thinking for the same reason I don’t watch my son’s monthly growth. I don’t mark it on the wall. Every few months, he’s taller, and in three years he’ll be my height.
I know my son. My boy is going to be 6ft tall in five years. Why do I need to watch it every damn day? Okay, the revised operation Sandman is now part of the BRICS agenda. They have not launched a massive treasure bond sale. They’re realizing they can keep the United States off guard, off balance, and vulnerable by doing steady, relentless treasury bond sales. And as they do so, they’re going out of the dollar entirely.
They’re buying gold. And the biggest questions are. The biggest question is who’s selling the gold to the foreign nations? I think it’s China, Russia, the chinese dynasties, the Persians, Iranians and the Saudis. They’re selling gold. The surprise to me was the Persians and the Saudis, when they signed on to the BRICS, they promised to be sources of gold for the BRICS nations. We got an interesting phenomenon now, Chris.
I don’t even care whether BRICS is signing on more nations. What they’re doing now is they’re creating a parade of de dollarization. And after the parade moves well along, a recognized member in the parade will be invited to join the BRICS. And if they say no, it won’t stop their de dollarization. De dollarization is a way of describing the gold, the global gold bull market demand. They’re selling treasuries.
They’re buying gold. Foreigners hold $7 trillion in US treasury bonds, but I was told they hold $34 trillion, Chris, in treasury bonds, corporate bonds, and stocks. They own more stocks than they own bonds. And if you’re looking for who is the big holder of us stocks, it’s the swiss central bank, the Swiss National bank, and that’s where they’re laundering narco money. Narco money is going into the fangmat stocks.
Facebook, Apple, Netflix, Google, Microsoft, Amazon, Tesla. Narco Money through the Swiss is going into the US stock market, creating, let’s say, fascist icon managers like Bezos and others. I like picking on Bezos because I think he’s scum and a trader and a fascist. Jim, what do you make of how some of these guys have actually been selling some of their stock holdings in the recent months? I think they sense a Treasury bond default and a us government default, and the ripple effect will be hit in the stock market if we have.
Okay, I’m going to be clear because I’m being misquoted, Chris, not by you. Here’s the misquote. Jim really thinks the treasury is going to default in June or July? No, it didn’t say that. What I said is we’re going to have talk. We’re going to have debate on whether there’s a Treasury default in progress this summer, June and July. We’re going to have talk and debate. Now, I’ve learned a long time ago that when they debate something and deny something, it’s usually happening in the background.
So I believe we’re going to have a lot of discussion, a lot of debate, a lot of angst, a lot of foreign resentment. Foreigners are going to say, you’re never going to pay us back, you’re never going to redeem these bonds, what the hell is going on? And quietly they’re going to get seventy cents to the dollar, which means the default is in progress. The indication that the default is in progress is the was told in 2016 that that was happening if the central bank wanted the treasury bond proceeds in their own local currency.
And I was told that South Korea did that for some, not all, some. That’s a debt default. That’s a bond default, technically speaking. Okay. I believe this bond default, Chris, has been going on for at least four years. I was telling people a long time ago, you’re not going to see gold and silver go up until the treasury bond default is near in hand. Near at hand and nearly visible and disgust.
We’re here. We’re here now. Pardon me, I’ve got something in my throat. I cannot get rid of it. This is a very dangerous time because we’re not going to be able to pay back our debt. We’re probably going to monetize it. Now, a lot of people don’t even know what that means. They think, well, that’s a nice term. Well, it’s about as obscure as quantitative easing. Quantitative easing means we print money to cover our debt and we buy the long end.
We print money and buy the 30 year and the ten year treasury. That’s what Chile did when they had 100% price inflation 30 years ago. We’re not going to get 30% price inflation, but we might get 15. Again, I said again because that’s what we had in 2011. I don’t believe the official statistic. They’re wrong. By six and 7%. And if you subtract the economic growth by six or 7%, which is the lie on price inflation, you see that we’re in a depression.
Okay, Chris, I think there’s something really big going on with the petrodollar and it needs to be put on the table and discussed. Can we make that transition? Sure. Although if I could just ask one question on something you just mentioned there, where the idea of getting another wave of inflation, which I’m not sure if you’ve seen that paper on fiscal dominance that was published by the St.
Louis Fed, who I might add that you were saying should hire you, which would be great. I heard you mention that in a couple of your other interviews. But basically the concept that as you get to a certain portion of debt to GDP, as that gets big enough, whether you lower interest rates, you get more inflation, or because the deficits debt expense keep growing and create a feedback loop there that you could raise interest rates and you get more inflation too.
And where I’m going with that is that even with the rally that we’ve seen in gold and silver over the past two months, still very little american participation. And I know a lot of people wonder if we get to the point where Americans on a broader scale are trading paper dollars in for gold and silver. And I think we’re a bit a ways away from that in terms of a mainstream audience.
Although I have wondered if we get, or you could say when we get the next wave of inflation, does that really start to change? I mean, I think people’s eyes were definitely open by what we saw in the past couple of years. And while we may not be at that point where there’s a broader awareness of that, do wonder if there’s some point where the prices start going up again.
And then you add in that now we see gold and silver in Costco, so somewhat reentering the mainstream consciousness a little bit. And do you see an environment like that where we finally get a bigger, wider audience in the US, perhaps as a response to another severe round of inflation where that does begin to happen? Yeah, I think the severe round of inflation is in progress. I don’t think it’s something you have to wait for.
I’ve talked to about six or eight clients and friends, you know, people who went back to the United States, living in Atlanta, back to the United States, visiting here once in a while and going back to Houston. And they say, jim, Mike, my home insurance has gone from 1200 to 5000 in three years. And then a California guy said, my home insurance went from 1500 to 7000 in the last three years.
So where’s the 6%? Where’s the 6% CPI there? No. All right. That’s triple in three years. Okay, I saw. I’ll get to the crux of your question in a minute here. I just saw a Big Mac price inflation index and in the last two years it’s up 6%, 7%, 8%, 5%, 6. 5%, 8%. Okay. I also saw something akin to what was called the Chapman basket price inflation that made the rounds in 2015 or so.
Do you remember Chapman? Grasp 500 items? He said the price inflation for a ten year, 1212 year, 1012 year period was about 8%. And in the biggest cities, it’s 10%. So we have a 22% decline in the economic size. What he’s saying is, what does a decline in the economic size mean? That means we have a 20% decline, a 20% depression, a 20% reduction in the economy, a 20% depression.
Get that word through into people’s heads. We have a depression. We have a -5% depression right now. Okay. People are reacting, Chris, to higher prices. People are going to pawn shops and selling items, selling family heirlooms. People are actually selling up to a couple months ago they were selling gold and silver to dealers. I heard all last year, Jim, it’s amazing. These are dealers in New York, in Atlanta and Florida and California and Texas.
Jim, the net is dealers are buying, not selling gold and silver because of the squeeze to households. Okay, here’s some of the consequences. I agree. In a treasury bond situation now, there’s no escape. If they lower interest rates, they’re going to get a stock rally. Pardon my glasses. Once I hit the age of 70 I had for reading purposes, I’m no longer a young. If they lower interest rates, we’re going to get a stock rally.
We’re going to get a bond rally. And it won’t be really long because there will be a rejection of the treasury bond by foreigners. They will see it as an opportunity to dump more treasuries at a better price than two months ago. They’re not going to show up for bond auctions. What we will see is a paper explosion, crack up, boom. We’ll lower interest rates and we’ll get more paper wealth.
And foreigners will not want our treasuries and they will dump. If we raise interest rates, we will eliminate the opportunity to escape the depression. Okay, I got news for people. We’re using knee jerk Pavlov moron response. Knee jerk Pavlov moron response. We think all price inflation is from too much money. This price inflation is from too little supply. The economic lockdown did severe damage to the supply chain.
In the year that we had the supply chain interruptions and obstructions and removals, we saw a five 7% increase in price inflation that was not from the stimulus, not from the bank COVID stimulus that went straight to the pocketbooks of the banks to eliminate their bond losses. Did not go to the streets. It went for another boat. It went for another chalet. It went for another Aspen chalet.
We’ve had three years now of supply chain interruption and inflation. Result. The way you solve that is by lowering interest rates to encourage more supply chain participants. If they raise interest rates, you eliminate that. We will never get out of the depression if we raise interest rates. If we raise interest rates, we only get minimal interest by foreigners to buy treasury bonds. If we raise interest rates, we will add to the 1.
2 trillion annualized borrowing costs. By not getting out of the depression and by increasing the borrowing costs, we will probably add another war to keep things stable in a sick way. And we will get a quick march to 40 trillion in the debt. There’s no way out, Chris, and foreigners see it. That’s why they’re trying their best to reduce their treasury bonds and to buy gold. Now I’ve got this list, and number one is the treasury bond default.
Although, Jim, go ahead. Just real quick before you get into the list. I think what you’re saying makes a lot of sense. I’m curious what you think the Fed actually will do again. We came into this year with markets pricing in five or six rate cuts. That’s gotten pushed back. We’ve had periods where there’s been speculation about another hike and would love to know which path you think they ultimately follow, regardless of how unideal both options have become.
At this point, that is a really tough question, and I’ll do my best. I don’t need notes for this. This is messy. Very messy. I’ll try to keep to the higher level points because everything I say has five minutes more in descriptions. This is really messy. Back in November, they realized that the big banks were going under from unrealized 740 billion in asset losses, primarily with treasuries that were down 30, 40%.
I heard 45. Even the big banks were insolvent and trouble. Ooh, this is complex. So the Fed decided, let’s trigger a bond rally. Let’s talk. And the emphasis was talk about rate cuts. Let’s talk about rate cuts and say we need to stimulate the US economy and get out of this difficult situation with a threat of recession, because they don’t want to say a worsening depression. So they talked about rate cuts.
And in the following two months, they did not give a late January rate cut. They did not give a February rate cut. Instead they said, we might not be able to give a rate cut. And that took off the table, the rate cuts. They’re doing tribal loans on both sides, Chris, to cut and not to cut. Then we had a remarkable situation. In February. They said price inflation is returning.
So that was interpreted as removing the rate cuts. Then in March, they said, we’re going to pay more attention to the labor market than we are price inflation. So that put back on the table rate cuts. Then something I think unprecedented happened. The japanese cut rates, the swiss cut rates, Canada talked about cutting rates and the Americans thought the coast is clear now the cut rates. So we might have a uniform global rate cutting sequence so that the competition of one currency to the other will be eliminated and no one nation will be made vulnerable.
But it won’t work because the United States stands out with its 34 trillion in debt growing by 1 trillion every hundred days. There’s no way out. I think they’re going to do the following. I got to be clear, because I have a colleague named Euro Raj and he’s a brilliant fellow. I’m going to tell you what I think and then I’m going to tell you what he thinks because we don’t agree.
But that’s okay. And I yield to him. I yield to him. Now there’s something really important, a little asterisk here in a footnote. It’s called emotional IQ. And a fellow named gold having nothing to do with the metal doctor gold 20 years ago talked a lot about emotional iq and it is the ability to manage emotions and groups in order to bring about greater output from the group.
In other words, forming teams. Forming teams, acting in a cooperative manner, getting a consensus, having a debate, yielding position. That’s what I’ve been doing my entire professional life. I did that in graduate school. I helped a few people get a master’s degree. I helped a couple of people in their doctoral program. I went to digital Equipment corp. And I became a team player, building statistics skills in my team.
I went to Staples and I did the same thing when I started the newsletter. I developed a colleague group and I now have built a second colleague group for digital crypto. All right, that’s my asterisk. Side point. I think they’re going to do the following. They’re going to lower interest rates. It’s not going to get much of a bond rally and it’s not going to get much of a stock rally.
And they realize we made the wrong move and we’re going to have to raise interest rates because nobody is showing up at our bond auctions and we have to monetize everything and put the primary bond dealers at risk because they’re under contract to buy whatever doesn’t get sold at the auctions. So I think they might do a rate cut or two, have a very short lived bond and stock rally and realize the damage that they’ve done to foreign holders who are dumping in a huge way.
And not showing up at the bond auction. Why should. Okay, let’s just imagine country X. Country X in Europe, the Fed is cutting rates. They’ve got a bond auction. They’re selling a huge amount, a couple hundred billion dollars in bonds. Why should they show up? They’re being offered less. The only incentive, Chris, is that they’re going to continue with many, many rate cuts and the bonds will go up in value, and that ain’t going to happen.
Okay? So therefore, they start raising rates and take away their rate cuts, and we get higher rates than we have compared to where they started. That’s what I think is going to happen. But Euraj has a different theory. He says they’re going to do a 25% rate hike and it won’t go well, and then they’re going to do a series of rate cuts, 150 basis points, to cause a bond rally.
Now, I’m telling you, I just don’t. I just want to make sure I heard that correct. 150 basis point rate cuts. Yes. Thinks that we might have a 25 basis rate hike, and it really doesn’t do much, doesn’t solve anything. And they resort to try to alleviate the economic depression that they call recession, and they do 150 basis cut, like, you know, could be three different 50 point basis.
50 basis point rate cuts. I tend to think there’s no way out of this. They have to raise rates, otherwise the pain of monetizing our debt is going to be enormous. Okay, let me give you a sequence. If we have to monetize a lot of our debt, because there’s not much in the way of foreign. Who in his right mind is going to want to show up at an auction? If we raise rates? Okay, if we lower rates, who in his right mind would want to show up with lower rates when we know that they won’t continue with even lower rates? They’re going to see it as a chance with a bond rally to dump their treasuries and not show up at auction.
That’s what I expect. But let me explain what happens if no one shows up at the bond auctions and we have tremendous amount of supply, like 9 trillion maturing this year. Chris, nobody’s talking about it. 9 trillion of long dated treasuries are maturing this year and must be funded. Refunded. I don’t like that word, refunded. We must find funding for it. We’re going to have to monetize it.
And that will bring about price inflation because it’s going to enter in the economy. This is no way out. If we’re lower rates, we’re going to get monetary inflation that turns into price inflation. And on top of all that, we’ve got a conspiracy by Blackrock to cause mayhem to force people out of their own homes, raising price, the cost of home insurance. If they can’t get home insurance, they lose their entire mortgage contract and turn in the keys and lose their entire equity.
If they can’t get fire insurance, home hazard insurance, they lose their home and their equity because they can’t sell the home. How are they going to sell their homes? Some of them are now underwater. Okay? They’re going to be left with, oh my gosh, we got 120,000 in equity now. The home used to be worth 300. And what am I going to do? The banks aren’t offering mortgages.
Okay? There’s going to be a tremendous parade of home titles going to Blackrock, purchased by narco money and rented out to migrants at $3,000 a month, paid by tax money. Okay, that is a very big, ugly wrinkle coming, Chris. Unbelievable. Unbelievable. There’s no way out for what is coming. That’s why you’re seeing the Fed dither and what do you call it? Dithering around. Okay. There was a Johnny most, Boston Celtic announcer, Johnny most.
Fiddle and diddle. That was it. Fiddle and diddle. He’s fiddling and diddling. They’re talking about rate cut. And they say we need to delay the rate cut. They say we have to focus on inflation. Then they say, well, we can’t focus on focus on inflation. You have to focus on the labor market. Well, the problem is we’ve got an inflationary depression. So they need to focus on inflation and the bad labor market, which means they need to rate hike and the rate cut.
They need a rate hike and a rate cut. Okay? They have no way out. And that’s why I focus on my, on top reasons for the gold market. Gold is the safe haven. When there’s no way to avoid the debt default, when there’s no good monetary policy, we’re going to get a surprise in the next couple of months. It could be a primary bond dealer going bankrupt saying, well, we got promises from the Fed to help us take in funds in order to buy the treasuries, which is all improper, but they only gave us half of what we needed.
We have to declare bankruptcy. I’m not talking about a Wall street bank, I’m talking about a secondary bank acting as a primary bond dealer under contract to buy unsold bond at auction. There’s no way out. Well, there is part one of the interview with Jim Willey. Always good to hear from him, especially right now where we’re seeing the rally and seeing some of these issues with the treasury build.
And in part two, Jim is going to talk a bit more about how he sees gold and silver playing out as this all develops. So that will be coming up tomorrow. And real quick, before we wrap up, just did want to say thank you to Miles Franklin who brought us today’s video. And certainly if you are looking to purchase silver, they do have a special right now on junk silver, which is the pre 1965 dimes and quarters and that is currently only 275 over spot.
And certainly the junk silver was one of the products where we saw the spike in premiums in the past couple of years. So good special on junk silver right now, which you can find out more about by calling 833-326-4653 or emailing us@arcadiafranklin. com so with that said, going to wrap up for today, but we’ll be back with part two tomorrow with Doctor Jim Willie. .
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