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 borrowing to go deeper into debt to pay greater interest to so that you have to borrow more to go deeper into debt to pay greater interest. There's there's no way out of this which means we're totally screwed. I mean that that means we have reached the endgame. It's just taking a little longer to play out. Hi, it's Mike Maloney with Alan Hibbert once again and Allan has a surprise presentation for me. So, you're getting a live reaction. Alan, how are you doing? I'm great, Mike, thanks. How

are you? Excellent. So, hit me with what you got. Yeah. Well, King Dollar may not be king anymore. Um, the the third and final rating agency has just downgraded the US federal debt uh credit rating. And so, instead of having a AAA rating, the dollar is is uh not the top tier anymore. So this has wide wide implications for the dollar, for US treasuries, for gold, and for the world in general. Yes, it does. Um, personally, I've been downgrading it since my first book. So, it's been almost 20 years that

I I just don't trust the US dollar. Yeah, exactly. Well, you are not the only one. Um, we're going to look at the timeline of the other credit rating agencies and their downgrades as well as the free market downgrading uh US Treasuries. So that's what we have in in this presentation today. Excellent. Yeah. So first we have Moody's strips US government of top credit rating citing Washington's failure to reign in debt. So this is from uh May 16th. Moody's ratings stripped the US government of

its top credit rating Friday citing successive government's failure to stop a rising tide of debt. So successive governments, not just the current administration, but many administrations in a row. This is a chronic problem. and Moody's is saying, "All right, it's no longer AAA rated. We're we're lowering it a notch." Yeah. You know, I was hoping that Doge would take care of this, but their actual effectiveness, the bureaucracy has blocked any cuts. And so, we thought it was going to cut

half a trillion dollars. They were they were trying for a trillion and we thought it was going to cut half a trillion. Now they're down to I I don't know what figure they're at or maybe I'm under stating all of those. I I'll have to research it and come up with something better. But it's it's not as dangerous for the drop in GDP that I was worried about, that sudden drop. However, the fraud and theft will continue and it'll feed into GDP and hopefully we won't fall off a cliff into

this recession or depression that we're going into. But the tariffs still will. So, let's get back to the US government's credit rating. They are out of control. The left does not want the fraud and theft to be reigned in. They think that this is fair and the government should be doing more spending. the right. I mean, anybody that's supporting these tariffs just knows nothing about economics. Anyway, let's look at this. You know, in our book, Great Gold and Silver Rush of the

21st century, at the end of chapter six, we did a chart that shows we when we used to spend a dollar, no, when we would borrow a dollar right after World War II, we would get back uh within five years $8 of GDP growth. But since the uh 2008 financial crisis, every time we borrow a dollar, we get less than a dollar back, averaging about 50 or 60 cents worth of growth, which means we're totally screwed. I mean, that that means we have reached the end game. It's just taking a little longer to play out. And

these downgrades are uh the result of that endgame that we put in the book. Borrowing to go deeper into debt to pay greater interest to so that you have to borrow more to go deeper into debt to pay greater interest. There's there's no way out of this except to suddenly grow GDP faster than uh the government takes on debt. Yeah. I just want to read a little bit here about what happened. Moody's lowered the rating from a gold standard AAA gold standard gold standard to double A1 but said the United States

quote retains exceptional credit strengths such as size, resilience and dynamism of its economy and the role of the US dollar as global reserve currency but we know that is tenuous at best as well. Yeah, the the dynamism is uh going to be going away in this uh coming recession and the global reserve currency has been slowly chipped away at and the uh current administration's tariffs policies these trade wars that he has established has an unintended side effect of driving countries that were allies into the there's like an

Asian trade union that is developing Russia is trading uh with yuan and you know China and Russia are trading in yuan and rubles now instead of dollars as settlement and so the reserve currency status is constantly being chipped away at and what will happen most likely is that uh it gets to this uh critical point and then there's this sudden shift that happens uh and we won't know when that is going to happen gradually And then suddenly, that's what we're seeing here. Exactly. Yeah.

Moody's is the last of the three major rating agencies to lower the federal government's credit. S&P downgraded federal debt in 2011, so kind of a while ago, and Fitch followed in 2023. We're going to look at those in just a second. In a statement, Moody said, quote, "We expect federal deficits to widen, reaching nearly 9% of GDP by 2035, up from 6.4% 4% in 2024 driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation. Okay.

Yes. So, all of this is really, really bad. People just don't understand how bad this is. Reaching nearly 9%. We expect federal deficits to widen, reaching nearly 9%. Now, after World War II, we had debt to GDP ratios that were very high. They were up above 100, but we were able to grow the economy so rapidly that it didn't matter. And and we were still under the last vestigages of a pseudo gold standard, the Brettton Woods system. I hate gold standards. They're fake. They're a lie. Uh but at

least they're constrained a little bit because they're based on gold. I think we should be just using globally nanogs and milligrams of gold to pay for things. That is a natur system that all governments would have to live within. But if if we're reaching 9% on deficits, then the economy has to grow greater than, you know, it's up from 6.4. H how do you grow the economy at 10%. We're not China coming out of Mauism, you know, severe communism to the point where most houses didn't even

have electric light or indoor bathrooms. Um, we're not coming out of that and then capitalism suddenly being embraced and growing the economy at these rapid rates. We're doing the exact opposite with the government getting more and more involved in business's business every day to where it slows down the economy. So I mean we really have passed the endgame here. This is this is it. We're still down near lows of the interest rate cycle. Imagine what happens if interest if if the dollar is

less trusted and people don't want to buy uh US treasuries uh at a treasury auction. The bidder that bids the lowest interest rate basically wins because the US government wants to sell their debt at the lowest interest rate possible. If people don't trust it, they're not going to bid a low interest rate. And as interest rates rise, uh this all goes up. the expense of the interest payments go up and we're still down near if you look at the long-term interest rate compared to like 1980 when it peaked.

We're still down near the lows and that interest cycle is a cycle and we've we've passed the lowest point and it's on its way back up and so this is just going to grow year after year and it's there's there's no way out of this hole at this point. Yeah, I think if I remember correctly in the 1980s the uh Fed funds rate on a monthly basis hit 19% but on a daily basis it hit 22%. So we have come down a long way from there. Uh so we are absolutely absolutely near the lows right now, right? So it's just

going to get more expensive to to finance all this. We have debt to GDP for the United States. Okay. So, I wish this went back to World War II so you could see that we were up near these levels, but the interest payments uh were coming uh let me see, they were low and rising, but we were growing the economy so fast with all the young soldiers that came back from World War II and the baby boom and everything else. And coming out of the Great Depression just before the war, uh with the economy so depressed, there was uh a

lot of room to sort of unleash capitalism and uh and get this thing growing again. And so, but this is amazing. Uh going from onethird of the economy to 120% of the economy uh is our debt. It's uh Okay. And there's your timeline. So S&P downgrade 2011, uh, Fitch 2023, Moody's 2025. So it's it's all of them at this point. Exactly. And I did look before this video actually I went back and looked at a longer term chart and after World War II, uh, debt to GDP peaked at like 119%.

So we are higher now than we were at the peak of World War II. Insane. And we're not in a war of survival right now. We're not in a war that the entire world depends upon. A war, you know, we we've got all these um by comparison little skirmishes in the Middle East and Ukraine and stuff like that that have the potential to end the world. But but you know it's not a laughing matter but it becomes comical when you look at the bozos that are running things. Sorry. No, I I get it. I mean yeah I get it. I

get it. Uh so anyways, yeah, this is clearly a long-term trajectory. Um you can see right after the 2008 global financial crisis, this this really took off here. So right, so there's two ways of getting this under control. one uh you you stop all the deficit spending and and but that contracts GDP and can kick off recessions which would lower tax revenues which would increase the debt to GDP or you just unleash capitalism and grow the economy faster than the politicians can dig this hole of debt any deeper. I don't see any of

this working out in the future. This is like a doomsday scenario. And look at that COVID spike locking the economies down and sending everybody checks which all came back to haunt us as inflation and still is. Governments are insane. Yes, exactly. So what I wanted to just show here right before we move on um in anticipation of the next slide is you can see that our debt to GDP crossed over 100% in the mid2010s. Okay. And a couple other things happened in the mid2010s as well such as this. the percentage of US federal debt held by

foreigners. Wow. That it was increasing dramatically until the mid2010s and then 5% less than it's 4% back in 1970 when the US uh that's when the end of Bretton Woods happened. So we when we left gold that's when all this US treasury debt became wow a third of all debt was held by foreigners. And um interesting. Okay. Yeah. So that's when the dollar was quote unquote the gold standard you might say of the world. I mean not really but uh the gold gold is the gold standard of course not

gold standards. Gold is the go the standard by which all other criteria should be measured. Exactly. Exactly. So we can see this shift lately. So, I mean, even though we're getting a downgrade from Moody's, you know, last week, um, this is this this trend is decades in the making, right? So, it Yes. And, uh, so this chart, uh, when does this end? What's the last data point on it? Do you know? Uh, well, I made it this morning. So, the most recent data point is probably last month or something or last quarter.

Yeah, last quarter. Okay. Last quarter. Uh this is going next time this gets updated there's going to be a dramatic drop again. The tariffs are this this trade war is scaring all countries away from buying US debt. It's a side effect that you know unintended consequences unforeseen. Countries are trying to be less dependent on the US dollar. Now, all of this is just really, really bad policy that is going to probably throw the world into the new greater depression. Yeah, I think so. Yeah. Okay. Next. So,

the next chart actually has the same line. This white line is the same thing we were just looking at, although mine goes a little bit further. And the title here is foreign central banks are transitioning towards gold. So we basically this is a chart from Tavi Casta. He's basically illustrating the point that when foreign governments stopped buying US treasuries at the same time they started buying more gold. So mid the mid2010s 2014 2015 2016 and so back in the late 70s central banks held 73% of gold versus their international

reserves. So very high almost 3/4 of their reserves were gold and then it dropped to about 15% and then it has since turned around. So now central banks are accumulating lower than 15%. Yeah, that's 13 12. Yeah, 13%. Yeah. So so gold is taking the place of treasuries, right? But I want people to realize also this is the value of the gold measured in dollars. Correct. the blue. Um I believe so. Okay. So um back in 1980 the reason that it peaked was gold had gone from 35 all the way up to 873 intraday 850 on a daily uh 600 and

something on a monthly. So you're taking the ounces that they own times the price as a percentage of their reserves. Now down in uh the end of 2015, gold hit a price bottom and then a lot of this rise you know foreign central banks have been accumulating a lot of gold and they're doing it at this record price but uh some of that price rise from late 2015 to uh well this chart ends in mid23 I guess. Yeah, it's a it's an older chart, but we know that these these trends have continued since then. Yes. Right.

Because uh in their they're record buyers. Uh December, January, February, March, April. Um the central banks have just been buying massive quantities of gold. Yeah. So quantity has increased and price has increased. So this right this is up sharply, right? Probably like that arrow. It's probably up. It's above 20% I would imagine now. probably getting close to that 25% line which is an amazing uh amount of gain in such a short period of time. Exactly. So, same idea here. Basically,

gold is replacing US treasuries. What we're looking at here is the price of gold in gold and inverted real rates um in this dark blue line here. So real treasury rates inverted and look at the correlation for all of those years until the beginning of 2022 and then no cor it's it's like a reverse correlation at this point. Yeah, exactly. Wow. Yes. Wow. This is huge. So something shifted. So what was it? So Luke Roman says here inverted US real rates versus gold chart below from uh Bergen tells us the market the free

market downgraded US debt to emerging market in fiscal dominance in third quarter of 2022. So fiscal dominance as opposed to monetary dominance is a situation where the government's spending problem is so severe that the central bank responds to what the government is dealing with. The normal set of circumstances is the opposite where we think of like you know the Federal Reserve Fed independence where the Fed sets monetary policy based on what they think and then the government has to respond to monetary policy.

That's monetary dominance. So when you get fiscal dominance, that's a sign of something like an emerging market where the government spending is so out of control, their debt burden is so bad that the central bank has to respond to what the government is doing. So what Luke Groman is saying here is that Bergen is identifying that the free market is treating US debt like an emerging market where this the fiscal dominance the fiscal policy is so bad and so out of control that monetary policy is going to

have to follow. It's going to have to lack and it uh causes the next paragraph in what he says there. Exactly. And so he continues that that that phrase basically means higher real rates are mathematically certain to push the sovereign into a death spiral. It's kind of what you you talked about video. That's where we are. Yeah. And that that means higher gold prices, right? It's just going to mean higher gold prices. So this this is probably going to continue to widen. Gold's going to

continue to go up in price and uh real rates are probably going to go higher. Okay. Anything else from this? That's it. You know, if anyone's blindsided by this, it's because you haven't been watching our videos. We've been saying everything for years. So, I want to thank everybody for watching and I want to thank you, Alan, for this presentation. Hi, this is just a quick reminder. We're offering you free silver at golds.com as a thank you for choosing us as your dealer. Just click the link

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