Alright, so let’s go through the main points. They’re not as obvious as you would think. First point, Powell is less restrictive. That seems very tame, but he’s going to cut more. He just doesn’t want to do it all at once. And he’s less restrictive because of several reasons. One, the United States is heavily over-long stocks, very top-heavy stocks, very demographic, very bloomer-oriented type stuff. Two, and this is a problem, consumer spending is still good despite the fact that leverage isn’t really that high. So if you were to look at leverage in the population, the borrowing is coming from the poor people.

Rich people are not borrowing, which is what you would expect from savers. So the people that have gained more wealth over the last, say, five years, have kept that wealth. And they’re still buying stuff, but they’re not using their credit cards. And the effect of that is inflation, meaning consumer goods are staying high in price because they’re really rich are still buying them. And because they’re still buying them, the poor people have to borrow to buy them. This is the point he’s trying to make here. So essentially, the high net worth spenders are supporting the economy, causing inflation to the low net worth spenders.

But it’s not really being felt throughout the whole economy. I think we’ve all felt that. It’s basically the K economy. QE, he explains, has distorted equity values, and it must remain in place. The Fed put, he’s calling it, is still in place. I’m calling it the fiscal put now. So the Fed’s going to cut rates, sure. But you can’t let the equity bubble deflate. This is a generational bubble. I mean, they’re not going to let it deflate for 20 years. I mean, they’ll fight it. They’ll have to fight it. Despite homes being on all-time highs, near all-time highs in price, stocks are overvalued relative to homes.

I don’t give you an idea how big stocks are. He’s got a nice chart on that chart, too. He makes the point that with the Fed propping up stocks, it creates liquidity. Liquidity powers retail spending. Think of it this way. The wealth effect is very big for people that are long stocks. As they make money, in their mind, they’re putting their stocks on margin. So we need to keep the consumer economy going while we’re retooling for a manufacturing economy. I made that point before, but he makes it a little bit more pointedly here. Chart five, higher retail spending will keep inflation from falling.

That’s another reason inflation is not going to travel. I think I was just alluding to that. The title comes from his point that while this is going on, meaning retail spending is staying high as an old engine that’s making the economy go, we’re trying to retool it. This is a quote at the end. He says, against this backdrop, which I just mentioned, the plan for the US is hoping that sharply cutting rates plus tariffs resetting domestic business capex generates real growth to eventually justify equity valuations. Simply put, spending money now to build out the economy in manufacturing and capacity will hopefully generate justifications for the values later.

So looking at this way, the marketplace, the government likes to kick the problem down the road, worry about it later. Now they realize that the problem has to happen. The problem has to be solved. The problem is the equity valuations have to be justified by the actual economy. And that’s because the world isn’t globalizing anymore. That’s because when you de-globalize, your equity valuations kind of look a little bit more naked and you lose the benefit of the global network. And so people are looking at our stocks saying stocks are really high and they can’t come down.

What are we going to do to make sure that they justify being high? And so this is what MAGA is all about. Again, cutting rates plus tariffs plus capex should generate real growth down the road to eventually justify equity valuations and encourage households to lever their balance sheets. Okay, so the key word for me is eventually, eventually justify equity valuations. So how long will this take? It will take one year, then we’ll be fine. But it will take one year. See, no one’s talking about this yet, but they will be. Just because we build the manufacturing and just because we build the next school products, we have to be able to sell them to other countries.

And we’re not worried about that relationship yet. And we’re burning those bridges with tariffs. So while we’re creating, let’s pretend that we give our manufacturing perfectly done. Right? Right. And we invent the new iPhone. Is China going to buy? No, they’re going to knock it off. They’re going to use protectionism like we are. And they’re going to make their own. I mean, you know, pretty much products are commodities now. So I believe I’m going, I’m looking way ahead here, but down the road is, what’s the manufacturing’s fixed? You got to get people to buy stuff.

And how are you going to get people to buy stuff? Well, they’re not going to be talking to us. So we’re not exporting anything, which means we’re going to have to be selling it to our own people. I don’t know where that goes, but just coming back to the paper here. We need to get manufacturing back. We need to have the capex and the growth of the real growth. Real growth is what matters now. We’re going to have basically a bubble or balloon that from time to time will try to deflate and defend the pump it up.

And while it’s happening, we’re going to look to get the economy up to stuff to make it measure the balloon. He ends with what could possibly go wrong. Man plans and God laughs. There you go. Build it and they will come is what is what we’re thinking about here. And it’s not going to happen that way. Anyway, I’m pessimistic on it happening on a short timeframe. Let’s put it that way. These are generational changes that started in 1973. When they pumped up the economy, then they slowed the economy when it wasn’t working in 1979. And then they went into fiscal austerity between 1979 and 1987.

And then we benefited from it. So this could take years. Well, thank you, Vincent. And thank you to everyone who is watching at home. Sure. Hope you had a fun week here watching the gold and silver markets with us and all of the wild swings and not just that, but the activity that’s going on behind the scenes. I was thinking about it. One of the key differences between now and 1980 or 2011 is that especially with what’s going on with the LBMA silver supply. Let alone the whole situation. Remember a couple of months ago, we heard that there were delays at the Bank of England and certainly at least the possibility that all that metal that came from London to New York.

Was there something else going on there? I don’t know for sure, but certainly an open question that we’ll look forward to digging further into with Vince as well as myself on my own show here on the Arcadia channel. So anyway, if you enjoyed today’s show, do hit the thumbs up button, leave a comment, let us know what you thought. And I might also add yesterday in our Arcadia economics, Gold and Silver Daily Substack, did write an article about how money is really starting to pour into the mining stocks at this point. And certainly for those of you who have heard for years or even decades about what happens when gold really start moving and the mining stocks really start moving.

Especially the conversations I’ve been having in the last couple of days in particular, there is a lot of money coming into the miners quickly as well as gold and silver, but certainly the miners and then the possibility that is the government going to do more investing like they did with MP materials. We will find out and keep you posted on the sub stack and fortunately as we wrap up, just would like to thank for Tuna Mining, one of our crowd sponsors that is certainly benefiting from the rally as well as their progress. Where their flagships of Guilhermine came online on time and on budget and has certainly been driving the stock price rally they’ve experienced this year.

Of course, as they continue their shift to even lower cost ounces as the price rally, which obviously results in the margin expansion. They’ve been moving forward their Diambasu project where we could see a construction decision as early as next year and for a timeline of the events there. Well, here’s a word from Fortuna’s CEO Jorge Pinosa. The news flow for Diambasu look forward for continued results. We’re not drilling right now anymore because we’re in this rainy season pause that we’re taking right now, but you’ll see results continuing to come from our last drill holes. Second, end of October, early September at the latest, we should be publishing a PEA, a preliminary economic assessment based on those million ounces.

And straight moving into a definitive feasibility study and a construction decision next year. So that’s the path and consistent with that, you should see the news flow that accompanies that work. Exploration drilling will not stop. We will continue drilling non-stop because we have lots of opportunity to make this bigger and better. We just need the drilling to take place and a bit of luck with the drill bit. Well, thank you, Jorge, and thank you to everyone at Fortuna. I’ve had the privilege of getting to meet a lot of the people there, see two of their minds in person.

I did see that Seguela Mine and also their mine in Salta, Argentina, an impressive company and impressive, especially getting that Seguela Mine up and running on time and on budget in the midst of the inflation error that wasn’t as transitory as Jerome Bell. But I thought that was an impressive execution by Fortuna. And certainly if you’re looking for mining exposure and leverage on the Gold Rally, Fortuna Mining is certainly the company to take a look at and do your own further due diligence. Although just to help make that a little easier, here is the call we did with Jorge following their second quarter earnings, where you can find out more about the company and the man running it by clicking on the video that’s coming your way now.

Thanks for watching!
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