The dollar is under attack from the United States. What the heck does that mean? Well, it means what it says is the United States dollar under attack from within. Well, my guest today a living legend is Rick Rule, and he says that it's not China and not Russia attacking the dollar, It's happening from within. So we're gonna dig into the banking crisis. We're gonna explain what happened. Now, he started a bank, sold a bank, he started another bank.
He knows what happens in banks. We're gonna talk about the banking crisis. We're gonna talk about what's happened in the investing market that's driven people and banks and consumers to this point. We're going to talk about the what the bank and what the governments are doing to restrict the flow of capital and keep it trapped in the system. We're going to talk about the move from fiat currencies, how the dollar is dying and the move to commodity
money is changing. We're going to talk about energy markets. We're gonna talk about central bank digital currencies, and even his view on bitcoin. We covered a lot of grounds. This is amazing conversation with Rick Rule. Now, one thing I do want to say is I want to point your direction attention down to the description down below, because
he has made an offer. He has a living legend, a resource investing legend, and if you go to his website and you post him what your energy or i'm sorry your resource investments are, he will personally grade them for you. Wow, I can't believe you made that opportunity for everybody listening. So check it out in description. Message him. Don't take don't pass up that opportunity to have him look at your own investments in the resource space. He's
something like a legend. Anyway, let's go ahead, just jump right into this interview with Rick Rule. So you know, I know you had started a bank, you built a bank, you sold a bank. I know you work on another bank right now. But let's talk about the banks. That seems to be like the biggest topic of the hour at this point. The banks are melting down. It's a banking crisis. Coming from somebody who is working in the banking industry building a bank and now building a new bank.
What's your take on this banking crisis?
You know, mark banking is a pretty simple business if you do it right. It's really about blocking and tackling. I joke for forty five years and I've basically been a used money salesman. It's important, however, to get things right. Banking is a h fairly highly leveraged business, and that means that you have to be prudent and you have
to implement the idea. As an example, that you would fund a long bond portfolio with very short dated instruments is the same thing that brought down the savings and loan industry. It isn't something that the banking business hasn't seen before. Credit spreads at present are very very attractive for bankers, credit spreads being the difference between their cost of funds and their return on capital employed, provided that the banks get paid back their return on capital employed.
It's interesting that Silicon Valley Bank, as an example, had enough expertise in lending that their primary lending portfolio worked fairly well despite the risky nature of many of the venture loans that they've made. Their problem came because they were chasing yield in a place and in a way that I think was inappropriate. It's strange an inverted yield curve world that they moved out maturities to four or five years, rather than keeping them tight to change differentials
in yield that were fairly low. Albeit perhaps when they put the positions on two or three years ago, those longer dated yields were higher. The fact is that if you have four or five year maturities that you are funding with now deposits and demand deposits, you always put yourself in a precarious position. When the interest rates went up, of course, the stated value of those long duration bonds fell, wiping out, in effect, the tangible book of the bank.
I guess the second problem that they faced Mark, which a lot of people are talking about, is the unstable nature of their deposits, which is saying that they didn't sell deposits to Rick Ruler Mark Moss. They sold deposits that were uninsured in very large amounts to two classes of deposit or, one being venture capital firms that would deposit subscription receipts that hadn't been invested in venture capital partnerships yet, and secondly, the capital raised by technology companies
that hadn't yet been deployed. As uh cost of capital went up and capital became less very available to technology companies, beginning about a year and a half ago. Those two sources of new fund dried up at the same time that both the funds and the companies ran down their existing deposits, So Silicon Valley Bank had a critical, I think,
liquidity squeeze. The bottom line of this for your listeners, Mark, is that the only regulator who really makes a difference for you as a banking investor, a borrow or a lender is you yourself. Silicon Valley was described by the regulators as being very in very good condition forty eight hours before its demise, but the FED.
But then the FED said, we saw last November that they were there was danger in morning signs.
It would have been useful had they communicated that to the market, Yeah, right, rather than trying to avert panic. My suggestion to you is simply that investors need to pay attention for themselves. They need to pay attention to a few things that you can learn from a bank statement of financial condition, which they're required to provide for you if you ask for it. The first is equity is a percentage of total assets. The FED says that a well capitalized bank has equity of seven percent of
total assets. An old guy like me prefers ten to seven. Suffice it to say, a bank that has a seven percent equity slices over ninety percent leveraged, there isn't much room for error. The second thing that one must look at, and the banks must show you this if you ask, is duration risk, which is to say, the median duration of their deposit base versus the median duration and liquidity of their assets. You can spot what Silicon Valley Bank
has done. In fact, there are numerous web websites now that show you the mark to market liability of the chartered banks in thenited states. The third ratio that that your client should look at, both as borrowers and also as depositors is the ratio of cash or near cash
on bank balance sheets relative to their deposit liabilities. An intelligently capitalized bank has cash or near cash, that is to say, ninety day obligations or repos or overnight deposits equal to twenty or twenty five percent of their now or near term deposit liabilities. Relying on the regulators, relying on the investment banks, relying on people like that to do basic due diligence obviously doesn't work. We should have
learned that with Madeoff. We should have learned that with Enron, but we didn't.
Yeah, yeah, I love what you're saying. There something I've been saying, like the age of personal responsibility is coming back really hard. We've given our health care to the government, our education to the government, our pensance to the government, our health to our doctor. We've just shrugged off every single piece of personal responsibility. But we're all finding out why that's a problem. Which you take personal responsibility. I wanted to talk about who's supposed to be protecting us?
But before we do, what about if we're looking at the bank, what about like the clos that they're hiding.
Well, if you're asking me about unexploded bombs, I guess is what you're asking me about.
Because those seem to be very hard to see. What's lurking un a balance sheet on and Wells Fargo is like on page one hundred and forty and it wasn't even fully disclosed. It didn't seem like.
I can tell you what bothers me, and you know more about real estate than me. I've been a real estate lender and a real estate beneficiary, but not a real estate operator. I think the high ratio loans in commercial real estate pose a potential problem for banks. I realized for some borrowers they're a very pleasant thing, but for a lender they can be unpleasant. When I was more active in banking, I considered a reasonable ratio for a commercial loan to be sixty five to seventy percent LTV.
I thought seventy was a bit aggressive. Lots of banks have been rating eighty five and ninety percent commercial firsts.
I think that's problematic. The second thing that's problematic is that the senior secured doesn't always put in place a negative pledge, which is to say, even though they're in first, they don't restrict a borrower's ability to take on a second or a third to the extent that some barrow hors have taken out more than one hundred percent of the value of the project, and in liquidation and bankruptcy, that becomes a problem settling up the estate between various claimants.
As I say, I'm not particularly an expert on many aspects of commercial real estate, but I notice that virtually every aspect, as an example of the office market, is experiencing some distress, and I suspect that banks that made office loans without understanding an awful lot about the collater and an awful lot about the borrower have some things to face. I think too, the banks that invested in mortgage bonds without understanding the constituent bond, the constituents of
the bond, pardon me, probably face some difficulties. I think the third area where there are unexploded bombs mark and I think it's true in the ETF world as well as the banking world is in the general high yield or junk credit arena. Investors have been chasing yield without regard to credit quality for at least ten years. As long as interest rates were falling and borrowers had access to ever cheaper credit and lots of credit, life was good.
With various lenders now trying to repair their own balance sheets, borrowers' ability to refinance, both in terms of real estate and junk credit is going to be constrained. That's going to be a problem. And the related problem I seated banking is in the ETFs, where you have these junk credit ETFs, where retail investors have chased yield, and where the ETF itself is highly highly liquid. But the parts that make up the ETF. The junk bonds are very very illiquid.
If you have a circumstance where Joe citizen becomes concerned about credit quality and begins to redeem their ETFs in size, and the ETF manager tries to sell the underlying securities, which are illiquid, you could have a run on a different sort of bank. I'm reminded of my career as a young stockbroker where we described I liquid bonds as owl bonds. We call them owl bonds because the customer would call the broker to sell, and the broker would
say to who, to who? And I'm afraid that both bankers and ETF managers are going to discover the perils of weak credits and I liquid secondary markets, much to their chagrin.
You know, as you were explaining all of this unstable deposits and a mismatch on durations and not enough equity, but really you summed it up by saying, you know the nature of their depositors Silicon Valley, massive deposits. Now they're getting with draws, but they're not having enough deposits. And the whole time I'm just thinking, sounds like a Ponzi scheme, like a Ponzi scheme, Like as long as
there's more going in than coming out, everything's fine. But as soon as that reverses the whole thing on winds, it seems like and it seems like it's being unwound. Well, it doesn't seem like it. Well, the FED seems to be the arsonist and the firefighter here, right. So in a sense, they took yield to zero and pushed everybody out, as you said, chasing yields. So everyone's chasing yield going into these junk bonds things like that. Because rates are
at zero. Then the FED raises rates to five percent. Everyone's like, oh, what the heck am I in this junk for I'll just go to the treasury for five percent? And that drained all that that's draining all the liquidity out of these things, which is then starting to cause this liquidity crisis. Is that potentially the way you'd see it.
I see the artificial manipulation of interest rates by the political class, not just the FED, as being an extraordinary problem. I would rather see free markets and interest rates. Of course, that would be chaotic, but I think it would be honest. And the artificial manipulation of interest rates down and then the recovery up.
Would it be chaotok to get there? Or you think in a free market where money was priced by the market, that would be kadok.
Yes and yes, okay. You know, the truth is that while markets work, they're invariably very messy, and price discovery is an ongoing circumstance, and it is in fact messy, and people don't like messy. That doesn't much matter. I think it's disingenuous to blame the FED for all of it, though. I think that investors have been through forty years of benign economic climate and we've been lulled into a sense
of security. We've been lolled into believing that we can consign our future as you suggest, be it medical or financial or anything else, to the big thinkers, and I think that's an enormous mistake. I think that the FED has accommodated our own individual stupidity, and given that the FED is a political creature, I think it's important that
we recapture a sense of responsibility for own future. Listen, I'm in front of the FED right now starting a new bank, and I got to tell you, the young employees of the FED that I have to deal with superb human beings, much to my dismay, smart, nice, curious, hard working, But they work for an organization that is political. They work for an organization where their success or failure is human beings, is determined by Congress. That's not so good.
I don't think it's going to change. So the idea that individuals, be they depositors, borrowers, or bank shareholders, need to rely on their own resources rather than on the FED, on the OCC and on the FDIC.
Do you think that you know, there's the saying of a general is always fighting the last war. And so obviously everyone still has the PTSD from two thousand and eight, and we had the banking collapse, the banking crisis. So everyone's looking now, oh, the banking crisis, the banking crisis. It seems that yes, there's problems in the banking sector, but it seems like this is something much bigger, potentially the unwinding of a one hundred year sovereign debt crisis.
And it's the sovereign debt crisis that's then causing the strain into the banks in the commercial real estate, et cetera. What's your take on that on it. From a bigger picture, I.
Guess I sort of hope that there is a sovereign debt crisis. Understand that the sovereigns regard me as collateral. Their ability to solve this crisis involves ringing more blood out of my stone.
Stones don't have a lot of blow. Stones don't have a lot of blood. That's the problem.
I recognize that, but they seem to believe that I do. The part of the I mean, the part of the sovereign debt crisis that causes people to lose faith in government securities and at the same time actually causes people to believe that the size of government should be constrained
is something that I applaud. The idea being, however, that the answer to the sovereign debt crisis is to find more resources from the citizenry to fund more official sector stupidity is not particularly attractive to me, Mark, and I suspect it's not particularly attractive to you. The idea that you may be referring to is the idea that we rely on the commonwealth as a solution to every want
and need in society, rather than relying on ourselves. And I completely agree with you there, and I completely agree that the idea than in addition to having the government satisfy all of our wants and needs, that they should satisfy them with quantitative easing, which, by the way, if Mark Moss did it would be called counterfeiting or through borrowing.
The idea that we're spending our children and our grandchildren's money to satisfy our wants and needs is I think the author of the sovereign crisis.
I think if if it was really trying to squeeze more blood out of us, I think that would be met with a lot of resistance. But of course they silently and secretly inflate it without asking us, right, and so secretly they print themselves more money, so it's not really coming directly from the Commonwealth, and that lies in the problem.
Right.
If they had to go house to house begging for gold, like in King Richard's day, it would be a whole lot different story. But instead they inflated away, and so you know, now they're in this situation where we're seeing nations around the world high inflation. War tends to be very inflationary. Nations around the world are being forced to liquidate government bonds to pay for high energy costs, for example, and just a little bit of bond selling starts to
unravel and cause massive volatility in the treasury markets. And then we have this massive volatility which is then being responded with more printing, and it says more of the same problem that just causes a bigger problem.
It seems like, you know, Mark, I shouldn't laugh so hard that I have seen this before. In some support of what you just said, I note that the government just extended the banks as sort of a financial lifeline of two hundred billion dollars and they did that without borrowing it and without raising tax. Now, how did they do that? They must have printed it. They must have
conjured it up. You know. In addition to all the other problems that you and I have discussed, we have to discuss quantitative easy because it really truly is counterfeiting. The printing of new specious currency units does not make existing units more valuable, the opposite, And we need to understand end that that constitutes a tax in an end of itself. We just don't feel it. We don't feel it coming out of our paychecks. Although if your income
tax and capital gains tax aren't indexed to inflation. Perhaps you do see it coming directly out of your paycheck or out of what your paycheck will buy you. Yes, after they take their bite.
Yeah. I just read this book and I interviewed the author. It's called The Revolt of the Public, and it talks about how the rise of the Internet and all this information that goes around and through the internet spread information has led to all these revolts and overthrows of the government. And he spent a lot of time in twenty eleven talking about Arab Spring and what happened in Egypt and Syria and Tunisia and all of those things, and even
Occupy Wall Street, which happened in twenty eleven. And it seemed like as I was reading the accounts of all these happening, it all was traced back to people were ready to revolt, like we're seeing in France today when their cost of when their quality of life goes down, when inflation affects, then when they can't buy as much food, that seems to be the trigger point for all of this. Even today in France are saying, oh, it's you know, we have to raise the retirement age by two years.
But it's all about that quality of life, that's that silent tax.
I think what you say is very, very correct. I think on the one hand, what the French you're doing is revolting against arithmetic. They're suggesting that raising the retirement age from sixty two to sixty four is somehow some enormous travesty, when in fact it's a reflection of the financial ability of the French state to support their citizenry. On the other hand, I think the Citistry have come to understand that they have each voted themselves too much
mono from heaven. Everybody seems to believe that mana from heaven that they receive is justified, but any mona from heaven that someone else receives as a consequence of their effort is some crime against humanity. And I agree with you one hundred percent. In a politicized world, we believe that we have calls on the wealth and efforts of others, but we try to defend ourselves against other people's claims
against us. When the allocation of benefit is occurs politically, rather than from servicing your customer, you come to believe yourself to be politically entitled and to the extent that there's a failure, you don't accept blame for the failure, You assign blame on society as a consequence of that, you revolt against it. And we're seeing that around the world.
Yeah, I'm curious, you know, on your take on when you look back through when you see the end of the empire coming. It seems like one of the last final stages of these empires is to restrict capital flows and so capital controls, because they know if they don't keep that capital in, the whole thing collapses. And it's
not just a historical lens. That's why China doesn't want to have open capital markets, and so it seems that, you know, maybe that's sort of this stage that we're in the United States right now, is capital control laws. And so, you know, I don't know how much you've been paying attention to some of the headlines. There's a talk of this choke point two point zero coming back
out where the banks are starting to restrict flows. Potentially these three banks that went down Silvergates, SBB and then Signature we're all crypto friendly banks, and so are they taking down these banks to take out these crypto exits? Are they doing everything can to block the exits to keep this capital control in. And then there's two more examples. Recently, Caitlin Long she tried to get a new bank charter open called Custodia Bank, which was going to be a
full reserve bank. They're going to keep one hundred and percent of reserves, and the FED shot them down. They shot down another bank called Narrow Bank for the same thing. They don't want a full reserve bank because then everybody would go to that full reserve bank and it would drain all liquidity. So it seems what's your take on trying to restrict their Capitalpholles, Do you think that's what they're doing. I know you're trying to open a bank.
I haven't seen, as an investor who invests internationally, anything that I could describe as a concerted federal effort to cause me not to be able to invest or deposit money overseas. Certainly, know your client regulation and the extra territorial imposition of American law on foreign institutions makes my international investing more cumbersome. I think that's probably more a function of stupidity than perniciousness on their part. I'm amazed
that Caitlin Long's application wasn't accepted. I don't know the reason for that. I would assume that it's in the interest of the American consumer to have many different approaches to safeguarding savings, and I suspect that most of the
employees of the banking regulators feel the same. When the employees of the banking regulators looked at our application for Battle Bank and they understood that our mission was to be a community bank where community was defined by needs and values rather than by locality, I would describe them
as very, very, very supportive. I can only say that thus far, the reception that we've had from the regulatory agencies, perhaps because we've been involved as a group and so many banks before, perhaps because we're known entities and not threats to career, the response that we've enjoyed has been much better than the responses that have been enjoyed by others.
Now will say that all three agencies asked us point blank what our view with regards to crypto was, and our response was, we didn't understand very much about crypto, and we had no interest in lending against or accepting these deposits asset classes that we had no experience in we didn't describe ourselves as anti crypto. We described ourselves as focused on asset classes that we understood. But I need to say that all three agencies were very relieved to hear that response.
Yeah, yeah, I mean, it's certainly something that I've been thinking about. Is it is it really trying to choke off money exiting the system, or is it specifically trying to choke off fraud inside the crypto industry? And so
you can certainly look at it from either lens. That's why I was just kind of curious to get your take when I see what happened with Caitlin Longs Bank, though you know, apparently she had already kind of passed all these regulators and at the end was denied, and it just seemed like they didn't want that competition of
a full reserve bank and what that could do. Because at the end of the day, it's something that I want to talk about, which is it seems back to that kind of book that revolted the public, and what it talks about is that now information moves so freely that we don't put value, We don't trust these authority figures anymore, no longer does CNN carry the weight or legitimacy that they used to. Now it's Matt Tayibe on substack or something like that. And information moves so fast,
and so we're losing this confidence. And the banking system is really a game of confidence. Right. If the American people, as Henry Ford said, if they knew how the banking system worked, there'd be a revolution before morning. But if the people started to withdraw their funds, then the system collapses, similar like SVB. So they have to keep the confidence in the game, so we keep our money in there.
Right, what you say is in some measure true, But you said a lot.
There, Okay, and break it down from.
I think first of all, that there are lots of in the United States that are well run, good stewards of capital. I think, as an example of farmers and merchants, Bank of Long Beach with equity as twenty percent of total assets, banks that expand their market share during banking crises because they were well run. But I think that what you suggest with regards to the banking industry as
a whole rings very true. There is a confidence in the banking industry that I suggest as partly born of ignorance, which is why neither borrowers, nor depositors nor bank shareholders know anywhere near as much about banking as they ought to. Part of the panic comes about from ignorance, and much of the confidence comes about as a consequence of ignorance.
Banking is not a complex business done right. It is really about using your lending expertise and using your equity to shield the depositors deposits from excessive risk while paying them rent on the deposit, a fairly simple process if done right.
Do you think that that what you just said, they're paying them rent. Well, first of all, so I do want to agree with what you're saying. I kind of wanted to bring the listener's point back to that SVB was a horribly run bank. I believe they had seventy eight percent of their investments into MBS mortgage backed securities when the industry averages like thirty percent for example. I mean, just just very basic things. They're way out on the risk curve, and these are things they should have known
better they had. I think one of the guys from Lehman Brothers was on board, someone from the San Francisco fred was on board. Like they should have known better. They went way out on the risk curve, didn't practice propers management. So I would agree with you on that, But what about just the changes back to kind of this technolology and driving change and just changing things. So
you said that they should pay them rent. So all of a sudden, my bank is paying me zero point five percent or zero point eight percent, and the Fed's going to pay me five percent. What should I do?
It's outrageous. Well, that's that's really obvious. You know. I went into a big bank. I'm not going to say which one. I've been a customer there is for over fifty years. I went into the local branch, and I have to say the branch manager was a very nice woman,
but she didn't know very much about banking. It turns out they had fourteen savings products, savings and deposit products, and when I began to ask her questions about these, she pointed me to a white service phone, I guess, to connect me to India to learn about their products. I learned that five of the fourteen products proposed to pay me little or no interest. Now why would they need fourteen products? First of all, my last bank and my new bank has one deposit product, you know you
could write checks against it. You can do what you want. It's a high yield deposit that you can write checks against. You don't need fourteen. But in particular as a customer, I don't need fourteen that where five of them don't
pay me interest. I can only believe mark that the last forty years have been so benign that savers have become lazy with their checking accounts because they've made so much money in real estate, They've made so much money in the stock market that they figure convenience is more important than yield. I'm old and fat and rich. I happen to believe that yield is important. If somebody's going to use my money and expose me to some risk,
they got to pay me some rent. As you say, the idea that you would have money in a checking account, in a now account and get paid fifteen basis points when you can go treasury direct and get four hundred and forty basis point in short term fed funds. The idea that there's still money, trillions of dollars in these bank products that pay no interest rate is astonishing to me.
Ignorance and laziness. I suppose, right, are the two things, But so what do the banks do? So the world changes and it seems like the banks need to change now, typically competition would make the banks need to change. The banks haven't had any competition, and maybe to Caitlyn Long's bank, the FED has purposely kept competition out of it. But they don't have any competition. I mean now they sort
of do it, the FED. But it seems like they're going to have to offer me a better deal than what the FED is doing since the bank typically the model, I think most people believe that the model would be I give my money to the bank and deposits. They loan that money back out and make somewhere between. Probably I've heard it's an average of about seventeen percent when you take your high interest credit cards down to mortgages or whatever, and then they pay a percentage of that
back to me. So should they be paying like, you know, short term treasure yields plus a premium on top of that.
I don't want to say what they should pay because I think that depends on what they do with the money. Banks that take more credit risk, which is to say, banks that are making as an example, credit card loans where there's an expectant six percent default should pay me more.
Banks like farmers and merchants. Bank of Long Beach is an example, that have a lot of their own money in very short term treasury securities that run very high cash reserves relative to deposit liabilities should probably have to pay me less, but they should have to pay me something, particularly because there's so many banks out there, there's solvent that will pay you something.
I should have to pay you at least what they what you could earn in short term treasuries, right.
I would think so. Now, perhaps people want deposits with shorter term, that is, they don't want to invest money for nine months. Necessarily they want overnight money. But even overnight money should pay an interest rate that is reasonable compared to what the banks receive for that same overnight
money that they on lend. It shouldn't be any particular difficulty to get three point one five, three point three five, and now accounts and checking accounts, given the opportunities available for the banks to reinvest in short term money market style investments.
Yeah, yeah, and you know the thing, times have changed, and so today we have smartphones and I don't have to go drive whatever, however hard to get to town and stand inland of the bank. I just opened my app and push a button and I can move all my money out of the account. And so the banks are going to have to get with this. We saw with SVP as forty billions and moved in a single day, I mean amazing, and that wasn't from people standing in
line withdrawing a few thousand bucks. I want to jump to a bigger topic and back to kind of this sovereign debt crisis. And Zoltan Posar put out this work which I kind of think is a pretty good mental model, and he talks about this Breton Woods three. I'm sure you're probably familiar with that, and kind of Brettonwood's one was the gold back currency informally, Brettonwoods two went to just a paper fiat system what he calls inside money, and now Bretonwoods three is moving back to a commodity
type money. So the US, you know, through sanctions, have sanctioned all these countries, including now Russia, and now we're seeing it seems like potentially moving back. We're seeing central banks adding more gold than any time in history. But it's not just gold. We saw GM put six hundred and fifty million into a lithium mind, they'd rather have
the lithium in the ground. And we're seeing, you know, Russia wants to pump out less oil, and so we're seeing it's almost like nations would rather keep the commodity in the ground than hold treasuries that could be sanctioned or lose value or not buy as many of those commodities in the future. What's your take on that thesis if you heard it, or just that overall idea.
Again, you said many things there, so.
I'll make I'll make my questions a little shorter. I feel free to back it.
Well, I heard three and so I'll try to deal with those. I agree with the thesis that we are coming into a period of increased commodity prices and also increased geopolitical strains on commodity pipelines. So I think that you will see in the investment business and in geopolitics more attention paid to commodities. I mean, that makes absolute sense. The Chinese in terms of trying to secure their economic future with security with the resources. They're doing the same
thing that the United States did in the fifties. And sixties. We even taught them how so that makes absolute perfect sense. The idea, however, that breton Wood's three to the extent that it's a government dictate will do anything to back a currency with gold or commodities or anything else, strikes me as being unlikely. The politician's currency is power, and having a currency tied to any form of reality limits
the power of the constant of the politicians. The idea, as an example, that the guy who runs China GI would have a gold backed Chinese yuan, which would limit his ability to impact the economy, seems to me like a one hundred percent non starter. Now, the reason that you're seeing more gold in central banks is, I think central banks have come to understand the challenges that they face as individuals, and they believe that the challenges that
other central banks fail face are just as high. And they, I think would like an asset that isn't simultaneously somebody else's liability. If you own US treasuries, you implicitly believe that the US will pay you back and not steal it. And goal doesn't have to pay you back, it's already paid you. So it makes perfect sense, particularly in an era in an era of artificially low interest rates. Why
you would do that? Why would you own, if you were China, large amounts of US tenure treasuries that pay you three and three quarters basis points in a currency where its value is depreciating by seven and a half percent a year. The US government solemnly swears to you that they will reduce your purchasing power by three and a half percent a year for the next ten years. Jim Grant calls that return free risk. The Chinese are simply being smart that way.
So, you know, lots of talk just these last couple of days. CNN put out a piece, it was on Fox News, It was on you know, it's a lot of talk these days about the US dollar losing its reserve status. And you think about maybe a reserve currency like what you're actually using to store your savings, your
reserves in versus maybe a medium of exchange currency. So in regards to this reserve, this store of value kind of this reserve currency, do you think that I guess what you're saying is then a lot of these countries are saying, well, I'd rather just hold gold, I'd rather reserve my assets, my value in gold than some other form of currency.
I think that's true. Mark, going back to the first thing you said. When I was still actively employed, I spent a lot of time selling to very large quasi governmental investors, sovereign wealth fund stuff like that, And I asked them about their holdings of US Treasury. And I said, point blank to some of these sovereign wealth fund managers, do you trust us? They laughed and said, of course not, but we trust you more than we trust each other.
Right.
I once heard the US dollar described as quote, of course a lie, but a deeper and more liquid lie than we are told by other flyers, meaning that I think that the US dollar probably is the world's reserve currency for a while. The biggest enemy of the US dollar isn't the Chinese, It isn't the saudiast It's Congress. We're doing our very best to debase our currency. We're doing our very best to limit its ability to be a reserve currency by weaponizing the dollar and by the
export of US values and politics across our borders. There is nothing that our quote competitors are doing to devalue the dollar that comes close to matching what we're doing to ourselves and I think it's important that the US citizens that generate real value from the US dollar as a reserve currency and the ability to export inflation as an example, understand the damage that's being done to the US franchise by the US Congress.
Yeah, that's a good point. I've often thought about that. I mean, it's it's the United States race or positioned to lose, and so to your point, they're doing the most to damage it. You know, I know, I don't want to say, I know. I suspect that you have a long term perspective. I know you you know you're deep into golden resources, and so you must take the long view on this directionality wise. I mean, it just seems like that's the direction we're going in and they're
only going to continue. It seems like back to kind of maybe earlier I said, at the end of this empire, they start to squeeze and try to kind of restrict and so potentially maybe you know what they're doing having to print, for example. I mean, that's only going to continue. This is just the direction we're in.
Maybe true, maybe not true, But why take a chance mark with some part of your portfolio. I think you need to own insurance you need to pay DP. Gold has traditionally done well when investors were nervous about other forms of savings. So let's look at the arithmetic of those other forms of savings. The US ten your treasury, they pay you three and three quarters in a currency that they acknowledge is depreciating in value by seven and a half.
Percent, And that's understanding.
Why is to be nervous about that, wouldn't they? The second thing to understand about gold ownership today is the value proposition associated with longer bonds. From two perspectives, A large institutional investor who has forty percent of his or her portfolio and long bonds has two problems. The first is that his interest rates rise the capitalize value of
their distributions, which is the bond prices fall. The second is that the yield is insufficient to make up the actuarial assumptions that will provide for the benefits of those pension funds twenty years from now. What that means is that I think we're going to see disintermediation from long bond portfolios into other asset classes. One of those I
think will be gold. The most important part I think of the case for Americans owning gold is that it's under owned, precisely when the wind ought to be in its sales. The market share of gold is one half of one percent of total savings and investment assets in the United States. The four decade median is between two and a half and three percent. Gold doesn't need to win the war against the US dollar, doesn't need to win the war against the US Treasury. It needs to
lose it less badly. If the market share of gold merely returned to mean, demand for gold would increase by four or five or six hundred percent in the largest savings and investment market in the world. That I think is the case for the gold price one hundred percent of your net worth, of course, not but more than half of a percent.
Yeah, what is that? How does that stack up to India and China, which I know that people buy a lot of gold in those countries.
I don't think that the statistics exist.
Okay.
One of the reasons why the US dollar is the world's reserve currency is relative to other countries, we're you know, pretty transparent. The data exists. It might not be good data, but at least it's data, right.
Yeah, And of course you have to keep in mind that gold is a global asset. So you know, Russia's central Bank doubled their reserve requirements for gold from twenty to forty percent, and so those are those are big demands for gold as well. We see I think it was Turkey right, It was one of the biggest buyers of gold. So there's massive amounts of demand all over
the world. What would you say to the fact that since twenty eleven, the money supply has gone up by about fifty percent, yet gold's price is the same.
Well, a couple of things. I think that we've lived in a very benign time. I think the fact that we've lived through forty of benign economic climate means that the FED has been able to counterfeit without people taking refuge in gold. I also think that while markets are messy, they ultimately work. And I do believe that as long as we have negative real interest rates, which is to say, as long as the rate of inflation is substantially higher than the rate of the long US government bond yield,
that we continue to compress the spring for gold. I'm in the odd position mark of owning a lot of gold when a financial planner would tell me. As a consequence of my other investments, I probably didn't need to own too much gold, but it allows me to sleep nights and stay calm, which is a seventy year old
is a very good thing. I suspect that the statistics will tell you, given that the market share of gold across the length and breadth of the country is one half of one percent, that other investors aren't as well invested in gold as they should be.
Yeah, what about what about all the talk of central bank digital currencies? Now? Lots of talk about them. I think just today I saw the ECB banging their drum again, Christine Legardo. They're talking about how fast they're rushing out their CBDC. Of course, China, the communist country, of course put theirs out first. Lots of talk about that. Some people think it could be I think you would probably agree.
I know you don't pose to be an expert in crypto, but I'm sure you've seen enough to know the CBDCs would be a extremely orwellian in nature. But some people think that the government might use a CBD suo to get themselves out of this crisis that they're in.
Well, one thing that I mean, there's many things chilling about the central bank digital currency. The most chilling is that they could cancel it.
Shut you off.
What happens right now if they come after my money is they have to find me and they have to take it from me by due process. The idea that they could issue me currency and then if they didn't like it, they could cancel that currency does not seem like a good idea to me, although it might seem like a very good idea to them. Sure, I think that money is supposed to be a medium of exchange, and if they cancel it, you can't exchange it, can you?
No, you can't. You can't do anything if they cancel your money.
I guess if you really trust Congress more than you trust yourself or your customer or your supplier, you think central bank digital currencies are a very good thing. I've watched Congress for a fairly long time, and I would rather take my chances with my suppliers and my customers.
Yeah, what do you think? I mean? You could see the battle already heating up in the US. We have some lawmakers or trying to put like Ted Cruz or Emmer, putting bills forth trying to really block even on DeSantis, blocking CBDs from getting into the state, or into the Fed or into Congress. While some obviously wanted, there's certainly
a battle there. Do you think that pesky document called the Constitution or some of these new laws could prevent this or is this something that's going to probably steamroll through no matter what.
I don't think many Americans have a strong belief in the Bill of Rights.
They don't even know what it says.
I don't think, as the country is currently constituted, that people care too much about the Constitution. I'm reminded. I think it's the make end quote which suggests that the elections really are advanced auctions of stolen property. And further that you can understand politics by looking at the root of the word polly, of course, from the Greek for many, tick from the colloquial English for small bloodsucking insect. And I think that that process maybe manifest itself with voters.
They are looking at once to victimize other classes of society to advance themselves while protecting themselves from victimization. That isn't what the Constitution is about. I think politics has become very pragmatic and probably much less morals based.
Yeah, certainly. All right, Well we've covered a lot of ground. Now one question I have to ask you about, which you've already told me you're not an expert in, so I won't push too hard. But you know a lot of people have called bitcoin like a digital gold, a Swiss bank account in your pocket. It's certainly like an offshore bank account. It's a way to hold stuff you know self, custy yourself, and transfer over time and space without any authority's ability to sensor, sensor or take over
that transaction. I'm curious. Have you just not really paid much attention to it because you're seventy years old and you don't care, or have you taken a look at it and had your doubts about it? What's your thoughts on that?
I had the good fortune to buy bitcoin fairly early because it abused me and frankly, Mark, this doesn't happen often. But I made too much money too fast, and I thought, Okay, you've made X y Z without really understanding anything about this asset class. If you don't sell it and grab the cash, you're stupid. Yeah, well I was stupid. I made a lot of money and sold at eight hundred on the way to sixty thousand or whatever it went to. So I left, let's just say a little bit on
the table. Yeah, but I don't feel bad about that. I will say that my belief in value is that most of the most of the value in bitcoin is the anonymity which some of its adherents are trying to get rid of. It's frictionless nature, but also the size of the network. What I like about gold that gold has a big network too. It's liquid, but it has intrinsic value that is useful to me. It's more useful to me frankly, that I understand it. I don't have
anything against bitcoin. It just isn't an asset class that I feel as comfortable with from an insurance point of view as I do Bitcoin. If I lived in Venezuela, if there were currency controls and I wanted to change my bolevars for something I could spend, Bitcoin might be extremely useful for me. Right. Certainly, it has proved useful for Chinese nationals who didn't like the controls on how
many yuan they would take out of China. I hope that situation isn't one that confronts Americans in the near future.
Yeah, yeah, no, that's a great point to bring up. And I appreciate that perspective because you know, at the end of the day, we move or react when our pain is high enough. And so in the United States, as dirty as the dollar is, is still the cleanest shirt in the laundry versus Yeah, if you're in North Korea or China, or Lebanon or a Turkey or any number of countries around the world, the pains high enough and
you have to you have to move into something. Eighty percent of all bitcoin transactions under one thousand dollars are happening in Africa, right, they need it there. But in the US that you know, I'm at a bar in Manhattan drinking a twenty dollars cocktail, like the dollar still works pretty dang good, right, and so we don't have that need. If you're in Syria running for your life, you can't really take that money in your bankccount, nor can you carry a bunch of gold bars either. And so, yeah,
great perspective on that. I appreciate that. All right, Well, we man, we covered a lot of ground. So gold commodities protect yourself and that's it. Anything else you want to draw attention to.
I'd love to invite your audience to continue the dialogue with me. If you care what I have to say about natural resources and investing, you can do it really easily by coming to Rule Investmentmedia dot Com. And I'll give you an incentive if you'll list your natural resource stocks, I'll personally rank them one to ten. Wow, and comment on any individual issue or I think my comment might
have value. In addition, if you're concerned about your bank or unhappy with your bank, and you want to do business with a real old fashioned bank, one that has money in it, one that pays you interest on your deposits, and one that will happily lend you money against physical
precious metals stored in segregated storage. In the question and comment section at Rule Investment Media Right bank, and I'll put you on a list for battle Bank information so that you can take a look at becoming a customer when we open once again, Rule Investmentmedia dot Com rankings bank.
Yeah, so that's awesome. I'm we're going to record the intro separately. I'm going to make sure I shout that out in the intro. So everybody hears that as well. We'll link to it in the show notes down below as well. Man, that's an amazing offer. Get your resource investments rated by the legend, the living legend here, Rick Rule. Take him up on that offer. Battle Bank for sure, comment Bank. I'm gonna be using battle Bank when it comes online. I'm excited for that. I think it's very unique.
I think it's great. So I'm wishing you luck with that. So we'll link to that stuff down below, and I guess with that we'll we'll let you go. Thanks so much, Rick.
Mark, Thank you. I really enjoyed the conversation.
All right, that's a wrap. Hopefully enjoyed that conversation with Rick Rule. Like I said, a living legend. This guy is on it and it was a great conversation. Do not pass up that opportunity he's given to you to put your resource investments up and have him personally grde it. I'm doing it. You should do it. We're gonna put a link down below. Like I said, don't pass it up. We put a QR code up on the screen as well as always let me know what you think. Give
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I'm out.