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Most Americans don’t realize it yet — but the dollar’s dominance is slipping, and the global financial system is quietly preparing for a new era. In this fascinating conversation, Christopher Whalen — investment banker, author, and chairman of Whalen Global Advisors — joins the Gold Exchange Podcast to expose what’s really happening behind the scenes: the decline of the U.S. dollar, the rise of gold as a global reserve asset, and why democracies inevitably destroy their currencies. Don’t wait for the next crisis. Prepare now. Follow Monetary Metals on X: @Monetary_Metals Follow Chris Whalen on X: RCWhalen Additional Resources Monetary Metals: Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein. I’m joined by our good friend Chris Whalen. Chris is the author, investment banker, and chairman of Whalen Global Advisors, and the newest edition of his book, Inflated, is out now. Chris, welcome to the show. Chris Whalen: Thank you, Ben. Monetary Metals: Chris, a lot of people have been seeing the gold markets go crazy. Let’s take your view on the gold markets. Is this a sign of something broader happening that people are thinking, wow, it’s time for an alternative to the US dollar, to the US stock market, and they’re looking to gold? Or is this just a random price fluke where there’s a bubble in gold, it’s on the news, it’s in the mainstream media, and people are taking an extra look, and that’s why we’re seeing a gold price spike? Let’s start with gold. What is Chris Whalen’s view? Chris Whalen: I think gold is returning to being the central reserve asset for most global central banks. The dysfunction in the United States, the big public debt, the inability of the two major political parties to work together, all indicates that the US is headed for a really bad place. It’s not so much that they may default, they’ll pay in dollars, but what will the dollars be worth? And I think you’ve seen this for years. At first, it was rejected by most Americans because they’ve been programmed to think of paper money as money, going back to Franklin Roosevelt. So it’s almost like it’s 1933 again, and that effort by by the US government to move us away from gold and just have legal tender paper dollars that run convertible has failed. And it really failed in 1969, 1970, when the US overdrew from the gold pool in London. Richard Nixon symbolically closed the window in 1971. My dad was a speechwriter to Nixon, by the way. I met him when I was a very young child. I see this as coming full circle is really what it’s about. It was led primarily by the Chinese, also the Russians, really reopening the market for gold in 2002 with the Shanghai Gold Exchange, and it’s just proliferating. Monetary Metals: And I want to ask you now about this idea of, Hey, we were on a gold standard. Maybe people know this. And then there was paper and gold. There was this Bretton Woods thing. Like you mentioned, Nixon got us off gold. There was this closing of the gold window. So in gold’s history, where do you think we are? Are we at a point people are saying, I think it’s time to bring our money back to something that is redeemable, back to something that is sound, or are there more kicks left in this irredeemable currency can? Chris Whalen: I think the US will continue to use the fiat dollar as its primary means of exchange, but I don’t think it’s going to be a store of value. Money has basically three attributes: means of exchange, unit of account, and a store of value. People in the US and outside the US are very happy to use the US dollar as an exchange medium. Indeed, they like it because they can finance things in dollars and then swap that currency into another medium. So for example, a Chinese, they borrow in dollars, they go short dollars in huge amounts, and then they move that into other currencies, into gold, other very valuable commodities. They view it as a bridge. And I think most countries are really in that place, the European central banks. You saw the big change this summer when the Basel bank regulators decided to allow gold as a high-quality liquid asset for banks. And I think there are 15 states now that have passed legislation that allows you to specify payment in gold in contracts. And that again rolls back to the tyrannical approach of Franklin Roosevelt. Monetary Metals: And this idea that there is no alternative, sometimes called TINA as the acronym, there is no alternative. Do you think gold is mainly benefiting from this thesis? Because if you look at the size of the dollar market compared to basically any other currency market or any other market in general, really the only asset that can soak up that much liquidity is an asset like gold, which has trillions of dollars to the market cap. Is that why you think gold has been benefiting from this, if you want to call it Tina Trade? Chris Whalen: I think partly, yes. But I also think that the old-fashioned, even ancient, attitude towards gold, particularly in Asia, is driving it. My friends in Asia trade cryptocurrencies. They trade dollar stocks, but they put their long term wealth into gold and also other precious metals, not just gold, silver, platinum, copper. There’s all sorts of hard assets out there that people can use as a store of value. And I think all of them are going to come back into play, and the result is going to be driving the price up. Monetary Metals: And I do want to ask you about gold versus silver. A lot of people have argued, Well, we don’t really need silver anymore. We have tokenized gold, where you can have really small fractions of gold. You can send it around the world digitally in a fraction of a second. There’s low fees. And basically, all those past historical reasons as to why we needed silver. Well, you pay for Starbucks and silver rather than gold. A lot of those are potentially going away. So do you think that silver is going to remain a monetary metal in the eyes of the investing public, or will it go the way of the monetary dodo bird where people say, Yep, we used to use copper, but no one uses copper anymore in terms of a monetary asset? Chris Whalen: It’s hard to say. I mean, silver has always been a junior asset to gold, and primarily because there was so much of it around. A hundred plus years ago, the Silverites tried to get the US Treasury to buy silver, and it almost caused the government to implode financially. And also the Europeans had walked away, particularly the Germans, from using silver in coinage. Those two factors, I think, plus reestablishment of the gold standard between 1900 and the New Deal, tended to really hurt the following for silver. Now, today, there are still many investors who believe silver is going to come back as a monetary metal. But the interesting thing is, is it’s still very plentiful, and it’s also used in industry. Industry uses a lot of silver. So you have this constant phenomenon of taking it out of the market on the one hand, but there’s still a lot of production. So I think that you’re going to see people using silver as a store of value. Will it become a monetary asset for central banks and others who want to have bars of it in a vault somewhere? No, I don’t think so. But we’ll see. I think in a world where paper money loses its value, all of these hard commodity assets are going to become more and more valuable. And you’re going to see people increasing their allocation to these assets and decreasing their allocation to things, for example, denominated in dollars. So stocks, real estate, anything that has to go through the US dollar from a foreign perspective, right, is going to suffer. So I wouldn’t write off silver entirely, but the history of it is tough. That’s the key point I always make with my clients. Monetary Metals: And now I want to ask you about this potential dynamic we’re seeing in the crypto world Obviously, the current administration seems to be very bullish or pro-crypto. And in a way, this is almost, if you want to think about it, added more demands to the US dollar or treasury instruments than otherwise would have been there. You can have someone like a Tether saying, We’ll buy treasury bills. You can have cryptos that are a stablecoin to something like a US dollar or a US dollar asset. So has crypto given second life to these US dollar assets or the US dollar in general? Chris Whalen: No, I don’t think so. Crypto is the It’s essentially a zero-sum game. And if I give you my fiat currency with a stablecoin, for example, you then go out and buy treasury bills to back it. If you have a stablecoin that actually has a stated yield, it’s a security, by the way. There are some firms that have gone to the SEC and done all of this. But net net, have we helped the demand for treasuries? No. The thing that drives demand for treasuries is when people don’t know what’s going on, as we’ve seen in the last couple of weeks. You’ve seen the 10-year treasury go through 4% very quickly because the government’s shut down, there’s still trade tensions with China, and all of these factors tend to make people want to hold treasuries really as a short-term haven if they don’t want to own stocks. Now, recently, last week, you saw that cryptocurrencies or crypto tokens, I like to call them, were not really correlated to gold. They were correlated to stocks. So when the stock market sold off, so did the crypto. And the basic problem is the opposite of gold. When somebody wants to sell a large chunk of crypto, the price falls dramatically. There’s no liquidity on the short side of crypto. And so you have all of these people trying to manufacture perpetual futures and other methods to keep crypto up when really the demand is finite. There’s always so many people in this country who are going to get sucked into what I call the crypto fraud. To use a literary The metaphor from my book Inflated, there are always so many people in the United States who think we can use buttons as money. And that’s actually a reference from the Great Depression. I think crypto is an interesting phenomenon. Bitcoin was an extremely clever invention that I think leveraged the uncertainty and the fear that people have about the dollar long term. That’s why it took off all by itself. No consultants, no marketing. Boom, it just went. But the other tokens, I think, are inferior compared to the Bitcoin model. Monetary Metals: And let me ask you one more question on this similar topic. Obviously, if you’re living in another country outside of the US or maybe outside of the West, your currency or your local currency, they might have problems, too. It’s not only the US dollar that faces inflation. Having access to a crypto version of a US dollar might actually be quite helpful to people who are looking to escape their local currency. So what do you think happens to the rest of the in these other currencies, whether it’s a currency in Namibia or Ghana or the Czech Republic? Do you think that these currencies last now that people can say, Well, I’ll just get a crypto version of a dollar? Chris Whalen: No, I think you make an excellent point. I always talk about a couple of my friends in Lebanon. Lebanon doesn’t have a government, so they use Bitcoin to pay bills. They use Bitcoin as a means of exchange. They often hand one another the numbers in person. Okay? So what you have here is you’re living in a part of the world that has no government. The system is completely broken down. They’re facing hyperinflation. Argentina is another case in point. So if you have a way of escaping the local problem with the local currency, I think it makes a lot of sense. Many countries around the world, by the way, are heavily dollarized already, de facto. Even if they still have a local currency, they will be forced to index people’s employment, real estate transactions, other significant transactions to dollars, because nobody trusts a local currency. So I think it’s a use case that makes a lot more sense than it does for Americans. The people offshore who are in unstable venues, Bitcoin could be a salvation for them. And I think it’s to be applauded, really. Monetary Metals: And what do you think about this idea of the dollar milkshake theory by our friend, Brent Johnson, who says, listen, all these other currencies in countries, they have much weaker economies, much weaker capital markets. And when a crisis happens there, people go to the safe haven asset, which is the US dollar, gold, and maybe US stocks. So do you think that this spells US dominance for at least the medium or short term because these other countries are faring much worse than the United States? Chris Whalen: The US dollar is not going to disappear tomorrow. What’s going to happen, though, is that global central banks and then financial institutions are going to start diversifying their reserves in the gold for the simple reason that they’re afraid that the dollar is going to lose value over time. It’s a pretty practical move if you think of it. On the other hand, the US market is still so big, and the ability of global businesses, global investors to finance transactions in dollars, that they don’t have, even in the Euro. Think about it, you could go to Yen, but the Japanese don’t want you bringing large amounts of capital in there. It would cause inflation. Same thing with the Swiss. If you try and bring large amounts of capital into Switzerland, it’s Swiss francs, they’re going to to go away. So there are really not too many practical alternatives. The Chinese don’t want this. They’re not going to expand their currency to accommodate those trade flows. And if you’re talking about big commodities like oil, anything that requires large payments, you’re going to do it in dollars. I think for the time being, the means of exchange role of the dollar is secure. But I anticipate that whereas 80% of foreign exchange transactions were in dollars a couple of years ago, it’s going to drop down below. Half. And that means that the US is going to have to compete with other nations. And other nations, slowly, are going to be forced to expand their monetary systems to accommodate more activity. If you keep your currency limited, then over time, you’re going to have a problem. So I think all of the major trading partners of the US are going to be forced to grow their own currencies in terms of size. And then we’re going to have a multilateral currency system, much like we had before the Second World War. Monetary Metals: And when When an investor hears that, listen, these other countries, if they’re going to want to compete, they’re going to have to expand the amount of currency in circulation. Is that an argument that gold against or valued in these other currencies is going to basically continue to rise as countries realize, Hey, listen, if We want to be on the global stage. We need more of our physical currency, but they’re not backing it against some real asset. So does that mean gold in the countries that we’re talking about in their currency is going to rise in price? Chris Whalen: Oh, I think so. It’s interesting question you asked, because there is a three to four-legged relationship here. It’s not just a bilateral relationship between dollars and gold. If you track the larger currencies and the gold price in those currencies, it moves around quite a lot. But again, if the US wasn’t so libertine in its political behavior, if we had managed to not have these huge fiscal deficits, people would be happy to use the dollar forever. That’s the great tragedy of the American system. We got this franchise handed to us after World War II. Everybody in the world was broke. If you read Keynes, if you read any of the great observers of the time, basically, they were all on their knees. So having the US pretend that the dollar was equivalent to gold solved a lot of problems. And then we printed a lot of money, we gave away a lot of money, we rebuilt all of these societies using dollars, and that dollar system created enormous prosperity. Unfortunately, our system like any system, is a democracy. And as Hayek said, this is a quote I have in the front of my book, it is impossible for a democracy to have a sound currency. It really is, because as soon as people realize that there is a way to get more out of the system than they’re putting in, they asked for it. You see this in New York City, the great progressive capital. That whole construct from 100 years ago with Robert Moses, built most of that city, is falling apart because the city can’t afford it anymore. But we’re going to pretend until it does, right? Monetary Metals: And my guess is that if people had to choose between a sound money where, Hey, guys, you got to tighten the belt. We can only put out so much currency as we have gold in the vault, the ramifications of that would be so drastic and so different from the country that we’re currently living in, where we can monetize debt. We can say, Oh, if you need something, we can afford it. You want a Green New deal, you want free health care, here you go. Doesn’t that basically mean that all of these major Western powers that do have democratic institutions and are beholden to their citizens, doesn’t that basically mean that we’re going to see this inflationary regime continue on? And what that means is that people who own hard assets, while there will never be a formal structure between the currency and hard assets. There will be a larger and larger disconnect between the value the currency quoting goods and services and the hard assets that they own. Chris Whalen: Oh, very definitely. You see this in the third world, as we call it, right? But I think more to the point, you’re going to have a bifurcation. In other words, if you and I do a contract of a significant size, we may specify payment in gold. That means that contract is going to retain value, whereas the fiat currency that people use to buy their groceries and everything else is going to continue to deteriorate in value. And you see this all over the developing world in Latin America and Asia, where the common man is using the fiat money that’s government-supported, and private people are using commodities as a means of exchange. And that is, I think, unfortunate, but it’s inevitable. Look at the United Kingdom. The UK, and the pound sterling, which, of course, was named after silver, is basically on its knees. France, the same way, Italy, all of these nations are facing major problems because they cannot generate enough GDP, enough economic activity to support their people with employment, with other services and everything else. So that want… I think inevitably, you’re going to see a division between those who have gold, either in physical form or they have it in their investment portfolio, and those who don’t. And for the US, what? That’s more than half of the population. Monetary Metals: Well, Chris, what is interesting, which you may not know, in the past, there was laws saying you’re not allowed to have contracts denominated in gold. And That was actually lifted. I guess the US monetary authorities thought, No one thinks about gold anymore. So already, private citizens are saying, Hey, I don’t want my return in dollars at the end of the year because I’m not sure what dollar is it going to be worth. But my question to you is, why have we so far not seen central banks doing this? You’ve had Russia saying, We’re out of the Swift system. We’re trying to get out of dollars trading with India for oil. And yet when they get Rupees from India, they go, Yeah, these are basically worthless. We can’t spend them anywhere, and saying, We no longer want to trade with India because the only thing they’re giving us in return are Rupees. Now, someone like me thinks, Hey, isn’t this your time to trade in gold? And yet we haven’t seen central banks and large bricks nations trading in gold yet. Why do you think that is? Chris Whalen: The BRICS don’t have the wealth that would allow them to really move to a gold-based system. When they’ve had their meetings and they’ve talked about setting up an alternative payment system to get away from the dollar, away from US sanctions, and all the rest of it, it’s still a barter system. First and foremost, there’s no way to finance anything in these alternative systems. It’s just like you say, you get the Rupees, and then what do we do with Rupees? India doesn’t have enough gold or silver. They’re really big on over in India, to be able to finance their trade in metal. And so I think that’s why all of these states, regardless of whether or not their people start to accumulate gold, are going to be forced to continue to use fiat because they just don’t have the resources to make the change. Now, you had earlier talked about the change in the US. That was actually done by Jesse Helms, the Senator from North Carolina, in 1974. He inserted an amendment into piece of legislation that repealed the New Deal era Prohibition on Gold. And this is what opened the door for the various states around the US to start allowing their citizens to have contracts that are enforceable at law in each of those states. That, to me, was a huge change. I did an interview with Alex Pollack that you would love, I’m sure your listeners would appreciate as well, where we talk about this. I had to go double check to make sure it was Jesse Haule’s Well, what I find interesting is a lot of these states are deciding, Hey, we want to protect either ourselves, our treasury, or our citizens. Monetary Metals: And gold is one of those opportunities where they could say, Hey, maybe we’ll have a depository, and you can deposit in gold. You can pay your taxes in gold. You can have gold as legal tender. And it is interesting that many states are looking to alternatives inside the US system or inside the US dollar system. So do you see this as a potential alternative where, yes, maybe Maybe third-world countries, maybe the BRICS countries, they don’t have the opportunity to pay in gold. They just don’t have the wealth. But inside the United States, we’ll see pockets of sound money where people say, Hey, if you want to pay for that burger, I’d love silver. Or if you want to pay for your house, I mean, you pay in gold, I’ll give you a discount. Do you think that this sound money can be a decentralized rather than a centralized exchange? Chris Whalen: Not under current law. I’ve talked to a number of media about, can you use crypto, for to buy a house? And the answer is no. The system in the United States is made for fiat paper dollars. So you keep your wealth in gold. And when you get ready to buy something, you have to transition back to the fiat system because banks, exchanges, the bond market, everything here is about fiat. Now, that doesn’t mean you can’t have what you’re talking about, which is a sound system in terms of value. But the states are prohibited from issuing their own money. There’s a federal monopoly on currency in the United States. So what you’re going to see, I think, is people saving in gold. They’re going to invest in gold or gold miners. They’re going to see that appreciation, both directly in the gold or in fiat. For example, I’ve got about 15 % of my portfolio in gold and miners. The numbers are really impressive, some of the best performing positions I have. And it’s still in dollars, but that’s okay. I could transition and buy physical tomorrow. But for most Americans, owning physical gold is a very expensive proposition. You have to be quite wealthy to pay the storage and everything else. But the flip side of this, Ben, which is really interesting, is that today, if you have gold in the vault or even silver and other types of metals, the banks will lend against it, partly because they’re now allowed to put their own capital in gold. It’s like high-quality liquid asset under Basel III. So the banks are more than happy to accommodate you. The trouble is many banks don’t want to run safe deposit boxes anymore. Running vaults is expensive. You still have them, but a lot of banks have gotten out of that business. So I foresee a proliferation of storage facilities that are going to safe-keep gold for people. They won’t be banks. They’ll be in bond warehouses. But it’s going to give people a way to avoid the inflation in the fiat currency and protect themselves and their families. Monetary Metals: So just like you’re saying, at Monetary Metals, one of the things is we offer gold leasing. So this is a way to rent out your gold. And there’s a storage fee, right? Because what people want is, Hey, I want the benefits of gold, but I don’t want to be penalized when I’m right. So if gold prices rise and my storage fees rise, in a way, I bet on the right asset, but I’m getting kicked while I’m down. Chris Whalen: You got to be really big to justify that. It’s a shame. You can always have the old bank safe in your garage and do it that way. But that means you’ve got to be worried about security. It’s much better if you have somebody who’s really in that business, who takes care of the security issues and safe keeps not only gold, but other precious assets. Imagine if you want to protect art, same way. Art is going to become another vehicle for protecting people from inflation. You have to have a place to store it. A bank will only lend against a painting if it’s protected in the vault and insured. My family has been in the art business this for a long time, and I think that there are other alternatives, too. But what we’re talking about here is a decline in the usage of the paper dollar and alternatives proliferating. And I think it’s a beneficial thing for people. Monetary Metals: What do you think about this idea of arbitraging back and forth between paper markets where we all know, yeah, they’re inflighting this away over time, but I can dart in and out. And then I’ll just arbitrage between my real assets, whether it’s art or gold or classic cars or some other alternative where people say, Listen, my true wealth, I’m really thinking about, what am I passing down? What is my generational wealth? That’s the real stuff. That’s my art, my gold, my classic car in the garage. But listen, when I got to pay for groceries or when I got to trade my stocks or pay my taxes, that’s when I dart in and out of the dollar system. Do you think that that’s a world where we’re headed? Chris Whalen: Yes. And I think it’s a world that people should consider. Americans have had a long, long period of stability since World War II and Bretton Woods. We We have been desensitized to thinking about inflation and thinking about that arbitrage. But let’s be very specific. Jay Gould and Jim Fisk and all the great robber barons of the late 1800s, they were the ones who first started to play that arbitrage between gold on the one hand and paper on the other. So you should play that arbitrage. For example, if you have gold wealth and it’s appreciated a lot, and you see, for example, we’re probably going to have a correction in home prices in the United States in the next couple of years. At the right time, you sell some of your gold, you go into fiat, and then you buy real estate. Because real estate is still going to be a good asset. It depends on location, location, location, right? You have a lot of real estate in the commercial world that’s been taking a kicking in recent years. There’s a big mall across the river for me here in New York and NIAAC. The bondholders just lost everything because the value of The mall has gone down so much. So what you have to do is be astute. But this is a challenge for Americans because we haven’t had to think about currencies and inflation the way that people live in other countries have grown up. I mean, my wife is from Uruguay. Uruguay is like the Switzerland of South America. That’s where people put their money when things were going to hell across the border in Brazil or Argentina. It remains that today. People will domicile file assets in Uruguay and then invest them in New York. They’ll send the money to Pershing. So what I’m saying is that we have to be a little more flexible, and we have to live with a little bit more uncertainty and also fear, because Americans are not used to this. When I have conversations with Americans about gold, they get very uncomfortable. They get visibly uncomfortable because you are threatening the assumptions that they have about their life and their investments and everything else. They’re not used to this. And this Inflation has come back as a political issue in the United States in a way we haven’t seen, really, since the post-World War I period, when people were going to the cities and they were discovering that housing and food and everything else that they needed was very expensive, and the prices would continue to rise. Today, we have the same problem. Why are we yelling and screaming about the affordability of housing? Because of inflation. That’s the bottom line. So I think you have to recognize that it’s given. It’s actually the norm, but we haven’t had to deal with that in decades. Monetary Metals: And Chris, what do you say to these people who say, Yeah, I don’t want to think about hyperinflation. That’s crazy. It’s never going to happen. I don’t want to think about the stock market dropping 50 %. That’s just never going to happen. And to them, they see gold as whether it’s a barbarous s relic, it’s a conspiracy theory, crazy people, preppers own gold. I mean, come on, you don’t really think that the S&P 500 is going to go away. What do you say to those people? Chris Whalen: I say you should reconsider your position because ultimately, the paper chase in the US financial markets are a function of liquidity. The fact that we have liquid markets where we can finance new businesses or whatever is our major advantage as a society. The reason people want to bring their money to the United States is we still have reasonable secrecy for investments, confidentiality, everything else. All of those attributes are great. But when you have $40 trillion in public debt, what is going to happen? Eventually, the Federal Reserve is going to have to monetize that debt. It will happen very simply. We’ll just turn a lot of the debt of the United States into currency, which is essentially what Abraham Lincoln did to fund the Civil War. The first cryptocurrency was the dollar in the Civil War. People got to realize that at the time, the state chartered banks would issue their own paper back by gold. Abraham Lincoln creates national banks It’s not to strengthen the currency. That’s what it says in the textbooks, right? But it was really to create a market for the government’s debt because they couldn’t finance the war any other way. So that fiat system, I think, is going to remain. And if you want to protect your family’s wealth, there’s going to be a combination of precious metals, real estate, and other real assets, not crypto tokens, that are going to be able to give you that security and peace of mind. Monetary Metals: I want you to talk to me now about this relationship between the Fed and the Treasury. A lot of schools have thought, Oh, we just lump them together. Fed, Treasury, yeah, it doesn’t really matter. Do you think that there’s a meaningful difference now between the Fed and the Treasury? Do they have different roles, different incentives at play, different ideas of what a good economy is or what their roles are? Do you think it still matters that there’s dissent on one end, Powell on another? Or do you think we’re moving toward a time where Treasury Secretary might be the head of the Fed or vice versa? Chris Whalen: In historical terms, we We had a long period between Andrew Jackson and 1913, when we didn’t have a central bank. So all you had was the treasury, and the cash flows in and out of the treasury, tax payments, everything else. That’s what determined the amount of liquidity that was in the US economy. So today, when I talk to people about the Fed, I always emphasize that they are alter egos. What’s an asset in one is a liability in the other. So the Fed buys the debt from the US Treasury, and it gives the Treasury back the interest in principle when that debt matures. Are they really that different? No. The Fed is simply a layer of leverage on the outside of the US government that enables the management and the stabilization of cash flows in a way that gets rid of some of the big peaks and valleys that you used to see when we didn’t have a central bank. It provides liquidity when people are afraid and they’re running out of the markets, like 2008, March of 2020. In March of 2020, the US Treasury market almost collapsed. The Fed had to come in and buy everything. So today, when you look at the federal deficit, the amount of cash that the Fed keeps on deposit for the treasury is close to a trillion dollars. And what we’re going to start seeing is that the Fed is going to have to start lending that cash out into the repo market to make sure that there’s enough liquidity for banks and others so that they don’t have problems. But ultimately, at the end of the day, they’re one in the same. The Fed is the banker. The treasury is the borrower. So you don’t want the President to control the Fed. You can’t have him controlling both. He’s a borrower. On the other hand, the Fed can never be independent because it’s ultimately an appendage of the Congress. The Congress’s power to coin money is where the Fed comes from. So when people talk about central bank independence, what we really want to say is that the Fed needs to be independent of the President, but they’re never going to turn around at the President and say, Well, we can’t help you. Sorry. That would take about 15 minutes to fix because Congress would immediately eviscerate the Fed and tell them what to do. You saw that during World War II. You saw that during the Great Depression. So I think the realistic reality is that in a democracy, the central bank is always going to be subservient to the treasury, and especially today with the big public sector debt. If we didn’t have all this debt and the federal budget deficits and everything else, we wouldn’t even be talking about central bank independence. And I think what we’re going to have to see at some point, probably after the next financial crisis, is that the Fed is going to have to have a new mandate where it solely focuses on currency stability and the value of the dollar. And then it’s going to be really up to Congress and the Treasury to get their deficits under control. And let’s be fair, the federal budget deficit and the debt is a demographic problem. It was caused by the baby boomers after World War II. We had this huge party. Nobody picked up the tab. And now we have to clean up the mess. And this is why young people in this country are so angry at boomers. You see all kinds of verbal and other types of violence directed at baby boomers because we dropped the ball. Let’s be fair. Monetary Metals: What do you think the chances of some fiscal reckoning where people say, Wow, it is time to tighten our belts instead of spending all this money on deficit spending and putting out money for wars and health care. You know what, guys? We just don’t have the money, and we’re going to have to tighten our belts. Is that in any way realistic without some major crisis happening? Or does America need to see a great depression until people go, Guys, we just cannot afford it? Chris Whalen: No. I’ll tell you a quick story. Franklin Roosevelt, when he came into office, his view was rather Republican. He thought that they had to cut spending and get government under control. But there was a guy named Mariner Eccles, who ended up being chairman of the Fed, who said, No, we have to spend. And the reason for that was that there was so much deflation already in the farm, in real estate, and other areas, that if you hadn’t had the government leading the way in the ’30s and then in the World War II, we’d still have the deflation. To get this under control, though, to have a really severe deflation, the lower prices, generally, is not an answer. I think what you have to do is gradually get the government back within its means. You probably have to raise taxes. Americans don’t like paying taxes, as we know. We talk about that a lot in my book, by the way. It’s quite funny. And then you can have some balance. But the real problem that the US had was World War II. We won. And when you are the winner, there’s a certain amount of hubris and arrogance that comes along wrong with that. And so we thought we could legislate outcomes. We could just wave the magic wand to get whatever we want. And this goes from the great society in the ’60s and the ’70s on forward. So today, the Democrats refuse to accept that there’s a problem. They don’t think there’s a spending problem. They just want to print money. The Republicans, too, are not particularly, righteous when it comes to fiscal issues because their constituents want stuff, too. Everybody wants to take more out of the system than they put in. And that’s human nature. It’s just the way it is. Most societies cannot generate enough real wealth to meet all of the needs of their people. And that’s why I think the smarter members of our society are going to be the ones who look at things like gold and real estate, and maybe even have to consider moving to different states or even different countries, because the number of people in this economy who are not making it, who are being crushed by inflation, is increasing every debt. That’s why you see the kinds of protests we’ve seen in some of the cities. That’s why we’re about to elect a Marxist in New York who thinks you can freeze rent. Well, the problem is that the cost of running those buildings goes up every day. New York City owns half a million apartments that were built by Robert Moses. They only receive half of what it costs to run those apartments every year in subsidized rent. How long is that going to go on? Are we going to eventually give people free housing? Maybe. There’s actually a mandate in New York State Constitution that says you have a right to house it. We have to re examine mandates and all of these governmental programs, but that means society gets to be a much crueler, much more difficult place for those who do not perform. In nature, obviously, if you fail, you die. But many of the liberal societies, especially since World War II, have tried to say, Well, no, everybody’s going to be okay. Again, you look at the United Kingdom, which unfortunately virtually is a really extreme example of this. They are in big trouble because that economy is not nearly generating enough wealth to pay for all the things they want to pay for and need to pay for. And so the people are getting crushed by inflation. Monetary Metals: And Chris, let me push back. You might have a skeptic who goes, Yeah, I hear all this doom and gloom. There’s not enough money to go around, and people are going to have to tighten their belts, and gold is going to do well because there’s going to be inflation, and the currencies are useless. But you guys are all wrong on this podcast because we have the power of AI. AI is going to fix everything. We’re going to have AI stock markets that are going to boom. We’re going to have AI solving cancer, and we’re going to live forever. What do you think of this idea that AI is just going to fundamentally change the fiscal picture? We don’t need to worry about the stock market or the debt levels because we’ll just ask the AI, how do we fix our debt levels? Chris Whalen: AI is just the latest marketing hype on Wall Street. The fact that computers reached a certain level of capacity and power so that we could start to process large large language models and all the rest of it. But ultimately, what is AI? It’s an electronic parent. People like to spend time talking to themselves, and AI keeps them company. It’s really great. But it’s not going to do much other than it does help in productivity. I use AI search when I’m writing because it’s able to aggregate information very quickly, especially if you know what you want. If you just ask it random questions, half the time, it’s going to give you nonsense because machines don’t think. They’re not intelligent. They add and subtract, and they sort. That’s what machines do. But ultimately, to me, it’s just the latest marketing hype from Wall Street, and it’s going to run its course, and it’s going to crash and burn. 90% of the AI startups out there are going to lose money. So how many large language models do we need? One. That’s the reality. And they’re all competing. You have Elon Musk, and Google, and Facebook, and all the rest of them chewing up all of these resources. But at the end of the day, is it going to create employment for people? I laughed the other day when the Chinese were showing everybody their automated auto plants for building electric vehicles and everything, which is great. But you’re not going to employ people that way. The big problem in China is employment. And it’s fascinating, the Chinese Communist Party allows and indeed encourages people to buy gold and put it in their bank accounts. You could buy a gram of gold in the bank in China, but they prohibit crypto. Monetary Metals: Chris, now I want to do a rapid fire section with you. I’m going to ask you questions from all around, whether it’s markets or AI or crypto, and you can answer as short as you want with just one word or as long as you want. Let’s start with crypto versus gold Do you think that there has been competition between crypto and gold? And if the crypto market falls, we’ll see some of that wealth heading into gold and vice versa. Chris Whalen: I think you see that now. Cryptocurrencies are basically an investment speculum It’s a bubble, and it’s done fairly well because you’ve had the support of the Trump administration in this country. Other countries, not so much. I think that there’s a limited audience for crypto tokens, especially when people realize For example, if I buy a stablecoin and I give them my fiat, they invest it in T-bills, they keep the return on the assets. I end up paying fees for the privilege of having their stablecoin. But I think there’s a very limited demand for that. Gold, on the other hand, is going to give people a very, I think, safe and indeed appreciating asset for the simple reason that we don’t have enough of it out there. The major holders of gold in Asia, particularly the Russians, the Europeans, they’re not selling. So when you’re talking about large transactions in gold, the central banks around the world have been buyers for the last few years. They’re part of the reason, a large part, that you saw the price go so rapidly in the past six months. Now, it’s sad to correct. Any market that rises a certain percentage is going to correct, right? But there’s a fundamental difference between a crypto token, which is basically a beanie baby, and gold. Gold is an asset that you can use in any type of economic transaction. Banks will accept it, et cetera. I think you’re not going to see people paying directly for things in gold. But if they want to buy something, they’ll sell some of the gold, convert it into paper money, and buy the other asset. So you should think of gold as a way to store value, and you think of the fiat as simply a transmission mechanism. Monetary Metals: That’s what it is. Next one for you, Tina. There is no alternative. Do you think gold has basically disproven this idea that, yes, it’s dollars all the way down. There’s no alternative to dollars. And gold prices in the gold market have basically said, oh, yeah, there is an alternative. And with things like a crypto or a MasterCard linked to gold or loans against gold. Basically, this gold ecosystem has grown to the point where, no, there is an actual alternative to dollars. Chris Whalen: Well, there is, and that’s the threat for the United States. I think at some point, a future government in the US is going to probably try and curtail the growth of gold. That’s going to put Americans who have been astute enough to get involved in a very tough place. And it will mean that we’re going into a more authoritarian period, much like the 1930s. It makes people so uncomfortable, as I said before, when you talk about this, that the politics of it are going to be in the most difficult part. But I think, look, gold is the chief reserve asset in the world now, and that is going to only increase. The use of fiat currencies is not going to really be curtailed immediately, but the amount of wealth that you see in gold versus, say, stocks is going to be very interesting because gold is only going to get bigger and bigger in relative terms. Monetary Metals: Chris, you literally wrote the book on inflation. So I want to ask you as an expert, what is the best metric we can use to think about inflation? There’s people who use shadow stats. No, it’s CPI. No, it’s core CPI. What do you think people should think about when they think about inflation? Chris Whalen: First and foremost, inflation is a personal experience. So how much have your costs gone up in all respects? Food, services, health care, etc. Gold is obviously a good benchmark because it gives you a view of the world’s perspective on inflation, not just in dollars, but in all other currencies. Even if one currency has not lost value as fast as the dollar has versus gold, you still have a very good benchmark for, generally speaking, what’s happening in the prices. Then the other thing is things like real estate and other commodities, hard commodities. That, to me, is the way that you can really measure inflation. Innovation, technology, all of this stuff is mostly about reducing costs and increasing productivity, which is not a bad thing. I’ve made a lot of money on NVIDIA over the years, but to me, I’d rather put the money in the gold. Actually, it’s been one of my best trades over the last 12 months. Monetary Metals: Next one for you, Chris. What are some lies people are told and still believe about history that are actually hurting them now, whether it comes to investing or their understanding of the political process? What are some things about history that people now just have completely wrong? Chris Whalen: One of the big ones that always bothered me, that’s one of the things that got me to write the book Inflated, is the idea that the gold standard caused the Great Depression. The reality The reality is, no. The Federal Reserve system had been created right before the start of World War I, and gold was never a constraint on the Fed. The Fed simply didn’t act. They tightened interest rates in early 1929. That drove the great crash that occurred later. But ultimately, it was not gold that caused the depression. It was simply a fact that you would have a long period of speculation from the end of World War I all the way through the ’20s. You had the breakdown in Florida. You had the closure of Ford’s plant in 1927, which was horrible. The workers had to live in the woods for a year and a half while they retooled the plant. At the time, Henry Ford was the wealthiest man in the United States. The banks in Detroit were the biggest banks in the country. So when they collapsed in February of 1929, what was going to happen? Every bank in the country closed. And it was just one of those things when you have a free market society and you didn’t have any governmental safety nets, prices just went into a freefall. So I think one of the biggest things that people don’t understand about gold is that, especially today, when you can borrow against it, when you can use it as an asset for big financial transactions, it’s just going to become part of the picture. But that doesn’t mean that the paper money is not going to lose value. I think it will. And that’s not an American problem. That is going to be a problem for every society around the world unless you have some that decide to really peg their currency to dollars. People have always thought about Russia in this regard, but the problem is nobody trusts the Russians. Same thing with the Chinese. They could peg their currency to gold tomorrow. The trouble is nobody trusts them because they the Communist Party will steal from them. So ultimately, a free society gets a free ride like the United States, and we are able to act like complete idiots when it comes to fiscal policy. But still, we do have to watch the basics. And when you have a system that has to use inflation to get by, that’s really where the United States is now. They’ll pay you in dollars. Your Social Security check is going to come every month, or I guess the electronic payment. But what’s it going to buy? It’ll be like Weimar, Germany. Monetary Metals: What do you think about this idea that there actually could be a nominal default on treasuries, whether they straight up say, We’re not paying them, or they say, Well, instead of paying you in three years, maybe let’s make it five years. Do you think there’s any point to this, do you think Bacent saying, Hey, we’re going to change up the rules on what we mean by a treasury bill? Do you think that that is actually something that is likely to happen, which could obviously disrupt the financial system? Or do you think they’re going to do what you said, which is, Listen, they’ll always pay it on time. It’ll always come a check in the mail or digits on your screen, but it will basically become worthless. What do you think is more likely that they really try to change the rules around what it means to have a treasury available or be owed by the United States? Or do you think they’ll just simply inflate away and print more currency than they need? Chris Whalen: They will inflate away. It’ll be the latter. The Federal Reserve will buy the debt, and they will put it on their growing balance sheet. When it matures, they’ll give the treasury back the interest on it, less their operating expenses. The Fed is always It’s an expense to the US government. The Fed never makes money. It’s always an expense to the Treasury. If you think of it that way, and again, the Fed is the banker, the treasury is the borrower, they’ll always make the payment. But the real issue is, what is that dollar going to buy? The dollar has lost 99% of its value over the last 100 years. So we all know what the story is. The difference was that we made it up in productivity gains, we made it up in terms of growth and other indicators, right? But still, Well, that dollar has lost a lot of its purchasing power over time. If you had invested in gold in 1900, imagine where you would be today. Monetary Metals: Now, I want to ask you about demographic problems, not only in the US, but in the rest of the world. Obviously, as our society ages, people need more health care, maybe they can’t work as much, they need retirement spending or pensions. So how does this demographic or aging of the population matter to our fiscal situation? Chris Whalen: Well, it’s a big driver in politics, whether a Democrat or a Republican, the chief constituency that you have to worry about is the old people. That’s it. If you start talking about reducing Social Security or dealing with Medicare, Medicaid, all the rest of this, that’s the third rail of politics. I think that that’s not going to change because obviously, the society is aging quite a lot. Luckily, the US still has a large degree of legal immigration, and that’s enabled us to continue to grow as a society. So you want to always have more people in the mix than you have previously. But the trouble is, is that whereas in the 1930s, 1940s, you had 10, 12 workers for every retiree, now it’s flipped. Now you have 10 retirees for every couple of workers, and those workers have to generate enough wealth and enough economic output to pay for all of this. That’s the Social Security system. There are no assets in Social Security. They own treasury bonds. So when the Social Security Administration needs to make a payment, they give that piece of paper back to the treasury, and they say, Give us currency. And so in the event that they run out of authorization one day, and I think this will happen, the Fed is just going to paper it over, or Congress will have legislation that papers it over. So ultimately, we are going to see hyperinflation. The question is, can we, as a society, have the courage and the honesty to have that conversation with our people? And I don’t know what the answer is to that. Monetary Metals: Next one for you. Is there ever been an example, whether historical or even fictional, where people have said, Hey, we did the wrong thing in the past. Maybe we bailed out the baby boomers when we shouldn’t have, or we inflated the currency when we really shouldn’t have. But we’re going to do the right thing now and we’re going to flip the script. Has there ever been a historical example that we can turn to, or even a fictional example, where people can say, Oh, this is a good example of what our society should do today to ride the ship? Chris Whalen: A short answer is no. Human nature is that you want to eat. It’s hardwired into your DNA. That’s where greed and avarice come from. So when people see a speculative scheme that is doing really well, they chase the shiny object. This is just basic human nature. Now, the Germans, the Brits, have, in the past, had very tough austerity, especially after wars. In the UK, for example, they defaulted on all of their loans that they got from us, but they paid off their domestic debt. If you’ve ever seen the wonderful movie, Private Function with Maggie Smith, it was in that period, right after World War II, where the country was on its knees. I mean, they had years of austerity because the government basically paid off all of their domestic debt. Now, that’s not the case today. I think, again, the demands of all of these societies on limited resources are We’re not going to force these governments to effectively default by embracing inflation. Monetary Metals: I want to ask you, as we come to the end of the interview, what’s a question I should be asking all future guests of the Gold Exchange podcast? Chris Whalen: How much of people’s investment asset do you think they should have in gold? If it’s less than 10 or 15 %, then there’s something wrong with them. Monetary Metals: I want to ask you now as the guest, what do you think is something that you believe that people in our circle, whether if you want to call them more free market people, people are interested in investing, what is something you believe that you think the rest of our circle doesn’t? Chris Whalen: I believe, well, I’m a little more practical than many of my conservative friends. I work for Heritage Foundation in the old days when they didn’t have the big building on Massachusetts Avenue. And I believe in the democratic free market system. I don’t think the US is in a hopeless mess. I think we could fix this quite easily simply because the assets and the future earnings capacity of the United States are so large that even $40 trillion in debt, well, okay, but I could fix it if I were Treasury Secretary. I think we have to be a little more optimistic and not so dour when we talk about gold. And we have to just say to people, This is a good opportunity to protect your wealth, but the world is not going to end. Monetary Metals: I love that. Okay, last one for you. Scott Bessent, he says, Hey, I watched the podcast. It was incredible. The guy Ben has great hair, and that guy Chris Whalen, really knows what he’s talking about. He says, Chris, I’ve got you for five minutes. What do you think I should do to fix the country? What do you tell him? Chris Whalen: Well, we have to figure out a way to work with Congress. We can’t get anything done as long as we’re fighting with one another every day. Unfortunately, we have midterm elections, and that’s what the government shutdown and the other politics are all about. But as a country, we have to learn to come back into the middle. That’s the toughest thing of all because the opposition in the Democratic Party are largely socialist, and they don’t see any future in working with the Republicans. Republicans look at the Democrats, and they see crazy people. They don’t see any way of having a conversation with them. We have to figure out how to bridge that gap. Monetary Metals: Well, it’s been a pleasure interviewing you. It’s been great, sober analysis. Chris, where can people find more of you and more of your work? Chris Whalen: Well, I thank you, first off. I published the institutional risk analyst. I’m active on X and LinkedIn under RC Whalen. For those of you who like real estate, I publish a column for National Mortgage News. Monetary Metals: Chris, where can people find your books if they want to buy them? Chris Whalen: Online. Go to Amazon. They’ve got them. I the institutional risk analyst. If you want to sign copy, that’s where you should go. Monetary Metals: Chris, it’s been a pleasure interviewing you. Thank you so much. We’ll have to have you on again soon. Chris Whalen: Thank you, Ben. Good luck.
