➡ Raf from The Endgame Investor explains how to predict the impact of a new round of Quantitative Easing (QE). He says QE can either create a credit boom, making people feel richer and boosting the economy, or it can lead to debasement, increasing consumer prices without affecting asset prices. The key indicator is long-term interest rates: if they decrease as the Federal Reserve cuts the federal funds rate, a credit boom is likely. However, if long-term rates increase during a Fed cutting cycle, as is currently happening, it suggests a credit bust is coming instead.
➡ The Federal Reserve’s rate cuts are not influencing the 10-year yield anymore, leading to higher consumer prices without an industrial boom. This could result in businesses closing due to rising prices and decreased purchasing power. The price of gold is expected to rise faster than industrial commodities, indicating a debasement cycle. This could lead to a crisis where the government either defaults or orders the central bank to buy all Treasuries, destroying the currency.

Hey guys, Raf here from The Endgame Investor and one of the questions I get most often, if not THE most often of any other question, is how do you know that this next round of QE when it starts, how do I know it’s going to be the last one until the endgame? I’ve never really had a great answer for that question until now, when Mermechan Capital, Daniel Oliver, my favorite this will be the last round and I agree with it. I can show it to you graphically, on a chart, and explain it conceptually.

Before I show you the chart, I’ll just explain that there are two possible results to a money printing round. One is that it creates a credit boom where the purchasing power of credit, of all of credit as a market cap of credit that exists, the purchasing power of that stuff in the economy increases and the purchasing power of money bleeds at the expense of credit. So the price of gold, which is money, goes down at the expense of credit, which is the total market cap of dollars that exist. This we call a credit boom.

It makes people feel that they are richer than they are. They can afford more assets and they can afford more stuff because they can finance it at lower interest rates. So what creates a credit boom is low interest rates, where people can consume more, go higher into debt, get more assets and this triggers industry to create more of this stuff and it creates an economic boom. Eventually, when that busts, you see the debasement in the credit value and the purchasing power of the dollar goes down, not just in individual dollar units, but in the total market cap of all dollars that exist goes down and all of that purchasing power heads back into money, into gold itself.

And that’s why during a bust, the purchasing power of gold goes up relative to the purchasing power of all dollars, even if the value of an ounce of gold goes down in dollars, still the purchasing power of it goes way, way up. So to put it succinctly, a QE round can either create a credit boom, which will bring the value of gold down and the value of credit up, or it can just create debasement, which increases consumer prices and doesn’t do anything for asset prices at all. And there is one way to tell what is happening.

Are we going through another credit boom or are we going through a debasement where it’s just the prices of consumer products that go up and make everyone poor and there is no credit boom? Because if that’s the case, then this is the last round of money printing and there won’t be another one. How we can tell is if long-term interest rates are heading down as the Fed cuts the federal funds rate, then that would create a credit boom because most of industry is dependent on the 10 year rate, 20 year rate, 30 year rate, long-term rates generally.

So if those rates are going down as the Fed is cutting, then the economy is following the Fed into another credit boom. And that means that there will be some time before the end game hits. But the question is, is that happening now? And the answer is emphatically no, not this time. So before we get into the graphs, check out the end game investor on Substack. I wrote about this issue at the end game investor explaining it step by step. And I put a lot of stuff there that I don’t do on videos.

This is one of those rare instances where I’m going to cover what I wrote at the end game investor on a video so you can see what it is that I write about there generally. Get your gold and silver at miles Franklin link in the description below and mention the end game investor and get yourself a dirty man safe. Use the code end game 10 at checkout for 10% off. So you can have some of your gold and silver on hand and let us go into the charts now. This is broadly speaking, what I wanted to show you.

The blue line is the federal funds effective rate. The Fed funds rate. That is the rate that the Fed cuts or hikes and it’s under its direct control. As the blue line goes down, that is a Fed cutting cycle obviously as the rate goes down. If the Fed is in control and they are able to create another boom, this will bring the 10 year yield down with it generally speaking. And you can see that’s exactly what happened here in 2008. You can see they started the Fed cutting cycle here in 2007. This is around October 2007 or so.

And they start cutting and the 10 year yield goes down and down and down and down until they stop cutting for a few months over here and then it kind of wobbles up and down here. And then they cut again during the financial crisis way down and the 10 year yield follows it straight down almost immediately. And then they’re hanging around. They can’t cut anymore. So the 10 year yield wobbles for several years. And then you start hiking rates again here until you get to 2019. And then they start another Fed cutting cycle here.

And you can see as they cut rates, the 10 year yield goes down with it, which means they are creating another credit boom, meaning a credit boom that all of the market cap of all existing credit in the economy gets more purchasing power as the power of money, the purchasing power of money bleeds into it. And gold loses purchasing power at the expense of a credit. That is a credit boom. And you can see here as we cut to zero during the lockdowns of love, insanity and moderation and brotherly feeling and care for children and all the other wonderful things that happened in 2020.

Anyway, this, what is happening here, you see I put a red rectangle. I think that’s red. I hope it’s red. If it’s not, whatever. And you can see here, here is where the Fed funds rate started to get cut. This is September, 2024. And you can see here, and we’re going to zoom in on this on the front, on the next charts. You’ll see each of these cycles. So exactly. The 10 year yield is down here at like 3.6 or something like that 3.75. Maybe I think that’s, that’s what it is here.

So 3.75 when the Fed cutting cycle starts. And as they cut, you can see what happens to the 10 year rate here. It goes up. It goes up. So the cutting is not gendering. It’s not creating another credit boom. It’s actually creating a credit bust as interest rates go higher as they start cutting. This has never happened before. And they’ve been cutting since September, 2024. That’s a year and a half or so. And since they’ve been doing this for a year and a half, 10 year yields have been trending higher, not lower.

We’re over here now at about 4.1. We were here at 3.75 when the credit cycle, when the, when the cutting cycle, excuse me, started. So now let’s zoom in and you’ll see what I’m talking about here more closely. The 2008 cutting cycle. So this is what we saw. We were at 5.3 exactly where we’re at the top of the cycle this time. This is about June, 2007. They start cutting over here. Every time they cut, the 10 year yield starts to go down almost perfectly. And now when they stop cutting, right? A few months over here from May, 2008 to about July, 2008 or August or whatever it is, then the yield starts to drift up again, meaning they want another cut to create more of a credit boom.

And it is exactly what happened in September, 2008. We had to go through the bus first, but the fact that the 10 year yield was responding positively, meaning it was falling as they were cutting rates and they needed some QE to do this as well. They needed QE to like supercharge it. So you could see that this was going to create another credit boom. And then after this, the value of gold or the purchasing power of the market cap of gold was going to bleed into credit and we’re going to have another credit boom.

You can see the same thing in 2019. As they cut rates, you can see the 10 year yield responds to it positively by falling as these rates are cut. And here you have a pause. And as it pauses, the 10 year yield also pauses and then you cut again into the lockdowns of sanity. And you see that the 10 year yield responds positively to it. That means another credit boom. But now look what’s happening this time. The 2024 rate cutting cycle, I put two trend lines here from the beginning and the end of this, not the end, well, where we are the present, from the beginning of the cutting cycle to the present where we are now, you can see here September, 2024 rates were at 3.6, 3.75, 10 year rates.

And this is exactly when we started the cutting cycle. When the Fed cut the Fed funds rate for the first time, immediately the 10 year yield started to rise, not to fall. And when they stopped cutting rates over here for a few months from January, 2025 or December, 2024 until September, 2025, the 10 year yield didn’t do much of anything. It meandered up and down around this line. And we see here as they’ve been cutting again, right? They started cutting again in September, 2025 and here and here and here. So from here to here, from this cut in September, 2025 to here where we are now, rates started to rise gently again, or they’re basically even they’re slightly higher than they are now.

We were at 4.0 or 4.1. We’re not influencing the 10 year yield anymore, which means as they cut, they’re just going to create debasement, higher consumer prices and not any industrial boom. Industrial booms depend on long-term interest rates because they’re long-term projects. If you do not have an industrial boom, you have rising prices where people do not have the purchasing power to match those rising prices and things start going out of business. Now, here is where Daniel Oliver explains this process and I’ll put the link to these articles in the description below.

I recommend you read all, both of them, or is it just one? I don’t know. Well, whatever it is, read them. I’ll put the links in the description below. So here he says, Mermechan explains a neutered fed. More importantly, says Daniel Oliver, while we are confident that industrial commodity and retail prices will follow gold’s lead higher, meaning yes, industrial commodities are going to rise in dollar value. They’re going to follow gold higher. We are skeptical that such increases will be to the same magnitude. And why is he talking about himself in the plural? Well, it’s we, you know, the royal we.

In previous cycles, fed printing catalyzed commodities to increase more than gold by reducing long-term rates. Remember that 10 year yield that has to follow the fed’s cutting rates, cutting cycle, which is not now, reducing long-term rates to usher in an economic boom, which also pressured gold mining margins, right? It pressures gold mining margins, how so, because when commodities go higher and gold miners have to buy those commodities in order to keep mining, it pressures their margins and gold mining stocks fall because of this. Anyway, this is no doubt why large investors remain reluctant to buy gold mining share is talking about today.

History is too clear. They already missed the boat. They missed the surge and now costs will creep higher and end the boom. That’s what most people think, but it’s not going to be that this time. The increase in the 10 year yield in the face of a decreasing fed funds rate. Those are the charts that we just showed you that the royal we, the royal Rafi, we just showed you suggests otherwise that the fed is neutered. One, this guy has no nuts. That there will be no credit bubble this time, only debasement.

Commodities will rise, but gold will go up faster. Just as in the 1970s from mid 1971 to early 1980, the gold price rose by 25 times. Whereas the copper price increased by only 2.4 times led by 4.3 times 10 by 4.8 times. They go by 2.2 times and zinc by 2.4 times. Only oil kept pace increasing 22 times. These were big increases, tripling a price over 10 years yields an annual inflation rate of 12%. But the effects of debasement were nevertheless muted by demand destruction, meaning the effects of debasement were muted by demand destruction.

That means that there was less demand for these commodities or debasement would bring the price up in dollar terms because that’s what debasement does. Demand destruction brings the price down otherwise because it goes in the opposite direction. Less demand, lower the price, which is why those consumable commodities, industrial commodities didn’t go up as fast as gold did in the 1970s. Now he gives an example of this, a concrete example of what debasement does versus a credit boom. To illustrate, beef is a commodity and viewed in the abstract a ranch may appear to be safe haven from the ravishes of inflation.

They can’t print more cattle. Initially, customers like kindling that is a restaurant will suffer some margin compression to keep their customers and perhaps hope for a price relief not knowing if the higher prices of beef reflect a temporary supply shock or debasement, allowing the rancher to increase his prices to cover the rising costs of his own inputs. But with only 5% gross margins in each meal, remember this is a restaurant, they get about 5% margins on each meal, kindling can suffer food and alcohol price increases of only 13% after the 40% last year before there is no margin left.

The restaurant has to raise prices. That’s fine if the Fed’s printing has engendered a new bubble, a new credit bubble, and kindling’s customers can pay the higher prices. But if general price increases are the effects of debasement, the price is simply masking the country getting poorer, then kindling can’t survive. The higher prices end up lowering sales volume to an extent that the fixed capital expense allocated across a declining number of meals makes the restaurant lose money on each meal. The restaurant closes. The rancher loses a customer. The rancher suffers the same fate.

He must raise prices to cover rising input costs but finds that increasing prices loses customers the same dynamic applied to copper and steel and lumber and tin. This is why industrial commodities did not keep up with gold in the 1970s, preserving gold mining margins. We think similar dynamics are at play again with two major outliers, oil and silver. So basically he’s saying, Daniel Oliver is saying that we are in a debasement cycle now, which means that business is going to go down. The prices of industrial commodities are going to rise but not as fast as gold.

The price of gold is going to go higher and higher relative to other commodities. And as the Fed prints more and more money, they are going to debase further and further and it’s going to destroy the entire currency. How does that work? He gets into it right here. This is the end game described by Mermechan and he uses the word end game. The words end game. They’re two words actually, right? End and game. This will be the second phase of the gold bull market, a move that has not yet begun, the move to reflect the market realization that the Fed is powerless to save private equity or control interest rates without buying the entire bond market.

Meaning the Fed can’t control interest rates anymore. As we see, the 10-year yield is going up as they are cutting rates right now. They are starting to lose control already. The third phase will be when higher rates create a government bond death spiral. The higher the interest rates rise, the larger the interest payments go, the worse the deficits, the greater the supply of Treasuries and the higher rates will rise. This is the rapidly intensifying government crisis. Either the government defaults or it orders the central bank to buy any and all Treasuries destroying the currency.

This has always been the end game. And then he quotes Mises, who you can see in my background. There is no means, this is from the book Human Action, I believe, there is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved. So how do we know, the royal we, or you could say Daniel Oliver and I, how do we know that this is going to be the final round of money printing when they start QE again because they’ve lost control over long-term interest rates already.

And as they cut more and more, they will be forced to buy more and more bonds and that money will stay within the US. Countries will be forced to use gold rather than the dollar as a settlement medium and the dollar will die on the next printing round. The only question is, when does that start? Well, before it does, you want to get some gold at Miles Franklin, link in the description below and get a dirty man safe. Use the code ENDGAME10 at checkout for 10% off. And if you want someone to help hold your hand and make you laugh a little bit while the end game comes right at us, it’s coming right for us! Then check out the Endgame Investor on Substack and I’ll see you guys soon.

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See more of Rafi Farber on their Public Channel and the MPN Rafi Farber channel.