The Global Monetary SYSTEM IS BREAKING And Gold Knows It

0:00Hello, everyone. Ray Dalio is predicting a breakdown of the global world. Gold continues rallying higher, the potential next Fed chair wants to cut interest rates by 100 basis points, and we have new data that shows economic freedom makes a country rich. We're live today from the desk of Anthony Pompliano.

0:25Before we get into today's episode, I need your help. We currently have 42 ,151 different people who have hit the subscribe button, but you, You sitting right there who hasn't hit the button yet, you're leaving us hanging dry. Come on, hit the subscribe button. Let's get into today's episode. All right, ladies and gentlemen, the world is rapidly changing. It feels like we're witnessing volatility, chaos, uncertainty, and an acceleration all at the same time. It's honestly hard to wrap our heads around what exactly is happening here. Ray Dalio says that the monetary system as we know it is breaking down.

0:57Take a listen to his explanation. The United States needs a lot of capital, right? Our countries are worried that the capital that they're owning could be cut off. And there's a natural dynamic that's playing an important role. And that's also showing up now already in the form of central banks shifting to gold. We're seeing the central banks build up gold reserves, as is traditional when great conflicts emerge. And so we also could see, that related to Greenland, that you could see the not making the purchases of the American capital and then that would have a dynamic for the capital markets which would be probably more significant in its impact than the trade wars.

1:47It's the beginning of the end of the monetary system as we know it. It's not just the US dollar, it's the fiat monetary currencies. So the UK, the euro, Japan, China all have similar debt problems and so on and are dealing with the same interrelationships, which is the reason you're seeing gold being chosen by the central banks. They want a currency. Gold has always been the main currency, and it's the only non-fiat currency. In other words, not the currency that can't be printed that they want. And so that's why you're seeing central banks move and sovereign wealth funds move to gold. And that's the nature of the shift of the monetary system.

2:35Now, it isn't just the monetary system, though, according to Dalio. He goes on to say that the existing fiat monetary order, the domestic political order and the international geopolitical order are all breaking down. He thinks we're at the brink of wars. It's all happening because of the big cycle that is driven by the five big forces. Listen to what he has to say here. We're such high prosperity periods like this. As people get used to doing well, they increasingly bet on the good times continuing and borrow money to do that, which grows into financial bubbles. Naturally, the financial gains come unevenly, so the wealth gap grows.

3:18Wealth gaps are self-reinforcing because rich people use their greater resources to reinforce their powers. For example, they give greater privileges to their children, like better education, and they influence the political system to their advantage. This causes the gaps in values, politics, and opportunities to grow between the rich haves and the poor have-nots. Those who are less well-off feel the system is unfair, so resentments grow. But as long as the living standards of most people are still rising, these gaps and resentments don't boil over into conflict. Having the world's reserve currency inevitably leads to borrowing excessively and contributes to the country building up large debts with foreign lenders.

4:10While this boosts spending power over the short term, it weakens the country's financial health and weakens the currency over the long term. In other words, when borrowing and spending are strong, the empire appears very strong, but its finances are in fact being weakened. The borrowing sustains the country's power beyond its fundamentals by financing both domestic overconsumption and international military conflicts required to maintain the empire. Now, a great way to see this is in the prices of consumer goods. Peter Schiff, the famous gold bug, he recently explained why the natural tendency for prices is to go down, not up.

4:56Yet the Federal Reserve is trying to artificially engineer inflation. Take a listen to how Peter described it. The natural tendency for prices is to go down, right? If you look at the CPI in 1900. Because of efficiencies. Yes. If you look at the CPI in 1900 and you look at it in 1800, it was down by 50%. So for 100 years in America, prices went down. And during that time, we had the Industrial Revolution. We had the most rapid period of economic growth in the history of America, which was after the Civil War and into the early 1900s. All the time, prices were coming down. Today, the Federal Reserve says that we need to have 2 % inflation.

5:36Prices have to go up 2 % a year. Why? I mean, why does the cost of living have to go up? Why can't it go down or at least remain the same? And what is the answer to that? What's their rationale for that? Well, they have a bunch of BS explanations, and it's all to justify the fact that the government wants inflation. It's not that it's good for us. The government needs it. It's the way the government raises revenue and repudiates its debts. See, here's the thing. You can't artificially engineer inflation for decades and expect nothing to break. There's potential breaking in the geopolitical order breakdown that Dalio was describing.

6:11It's why gold has been rallying so hard. The precious metals up nearly 20 % in the last month and over 80 % in the last year. Those are big, big numbers for something that people used to think was just stable all the time. In fact, gold has done so well that it is destroying the performance of the S &P 500 since the year 2000. Gold is now up 1600 % in the 21st century. Just look at this chart here as to how well it has performed. Now to add salt into the wound, Philip Pillington, he shows that the stock market priced in gold has essentially collapsed. And now that there has been no return captured by equity investors since the global financial crisis when you compare it to gold.

6:49A big reason for this recent move is that gold is becoming the asset of choice for central banks. Daniel Lacalle writes, the world is not experiencing de-dollarization. It is living a de-fiat currency process, which is very different. Central banks are not selling treasuries and buying euro or Chinese debt. They are buying gold and reducing all holdings of developed economy's sovereign debt, including the Euro and the US. It's obviously a very big deal. As Dalio says, the world order is breaking down. We're reimagining what this all looks like. But through all the chaos, congratulations to the gold bugs.

7:25Right now, they're winning big time. Now I've been saying for months that the Fed should be aggressively cutting interest rates. People kept laughing at me. They thought I was stupid. But the Fed finally started to capitulate at the end of last year. I'm not saying they were listening to me, but I am saying they started to do what I told them to do. They cut rates by 75 basis points going into the end of the year, and there seemed to be some relief on the horizon. But we recently got brand new inflation data. Truflation, the real-time alternative metric, it has inflation sitting at 1.18 % right now.

7:55We must cut rates even further. But don't take my word for it. Rick Reeder, who's rumored now to be the leading candidate for the next Fed chairman, he went on CNBC yesterday, and he said he believes the Fed should cut interest rates by 100 basis points. Take a listen. I think you got room to get that funds rate down 100 basis points. Why aren't they all talking as if they have room? Not everybody agrees with your assessment. They're worried about sticky inflation. They look at the CPI and they say, well, yeah, it beat expectations, but it still shows that it's still a bit of a problem and it's above our target.

8:28So, Scott, I think there's something that's really important. How the interest rate tool affects inflation. You think about the Fed raise rates, 500 basis points. The impact on the economy, inflation, I would argue, not terribly significant. The interest rate tool doesn't do a lot today. You think about how companies finance CapEx, Big Cap. You're not borrowing. You think about asset. The banks are asset liable. The interest rate tool is not that important, except for a couple of big factors. What it does to housing, and you look at mortgage applications, building permits, housing starts, new home sales.

8:58For those, it's stuck. The mortgage rate has to come down. You drop the funds rate. You know, there's some yield curve steepening. It probably happens. And then the other side of it is, A, the low-income people who are the borrowers, they are getting hurt by this. High savings, older people are actually benefiting from the high rates. And the last thing that I will say, I don't think the funds rate has to be at 4 and 3 A's. The cost to the government, we have too much debt in this country to charge an extra 100 basis points. When I think the transmission of how it impacts inflation that I think is dull to start with, is it worth it?

9:35It's a pretty high price to pay. So there you have it. It's not that complicated. If you have deflationary forces like tariffs and artificial intelligence hitting the economy and the real time metrics of inflation are showing that it is coming down this aggressively and you have the GDP now measurement coming in showing over 5 % GDP growth that tells you that you have a high growth, low inflation economy and the Federal Reserve, the thing it should be doing is stimulating more economic activity. cut rates and let's get back to somewhere where we can get closer to 10 % GDP growth because inflation is not going to be a problem.

10:09In fact, they're going to have to cut rates to prevent deflation. And if they don't start doing it now, the Fed will just remain behind the curve like they have been for years. Capitalism works and I've got proof. Joseph Brown recently shared this chart right here and he said more freedom equals more income, more government equals more poverty. The way to look at this chart, the further on the right of the chart a country is, the more economic freedom it has. The higher on the chart a country is, the more wealth the country has. And take a look at the trend. It is crystal clear. The more economic freedom you have, the wealthier your country will be.

10:42So stop listening to all these fools. Capitalism and free markets, they work. If it didn't, all the critics, they'd be trying to move to China and North Korea and Cuba. And I don't see any of them trying to do that. That's it for today's show. Thank you guys so much for watching. Please remember to subscribe on YouTube, and I'll see you guys live tomorrow from the desk of Anthony Pompliano.