I clipped this bit of the Grant Williams podcast I subscribe to to share with an article I wrote:
Summary:
In the latest episode of The Super Terrific Happy Hour, Steph and Grant are joined by an all-star panel of guests to discuss the macro environment as it pertains to inflation and how each of them is using their vast experience to position themselves correctly for the way they see the inflationary pulse playing out.
- James Davolos of Horizon Kinetics,
- Adam Rozencwajg of Goehring & Rozencwajg and
- Dave Iben of Kopernik Global Investors
join forces to offer a series of hugely enlightening perspectives about where the world finds itself, how we got here and, importantly, not only where we’re headed, but what to do about it.
Excerpt:
Adam Rozencwajg:
So what do you do? And it seems as though our best guess, and we read all the same people that I’m sure you all do. We read Zoltan, we read Louis and Charles Gave, we read Forest for the Trees, all these different things. What it seems as though the most likely system may or may not be, would be one where you trade… Take Brazil for example. Brazil sells a whole bunch of iron ore and soybeans to China. They get a ton of renminbi back. They can’t use their renminbi to buy a townhouse in Belgravia. So, what they do is they try to buy as many cheap Chinese goods as they can and with the imbalance that remains, they settle that via the Shanghai Gold Exchange in gold. And so people say, “Well, is that a gold standard?” Not really. In fact, it’s quite the opposite. A gold standard has gold as the center of value and fiat currencies as these proxies and slips of paper that you switch back and forth. This has a fiat currency, in fact a highly managed fiat currency at the center, holding value.
And then gold is used to transact on the margin and settle imbalances. So, it does represent a world where gold is more monetized or monetized or it has a monetary role more than it does today. But by no means is a gold standard or anything like that. Is this going to happen? We have absolutely no idea, but we are seeing more and more commodity settlement that is being done now outside of the dollar. And as I pointed out at the top of this interview, every time real assets in the past have gotten so out of whack with financial assets, it has tended to coincide with some shift, sometimes big, sometimes small, in how we conduct the global monetary plumbing system of the world. Is that a necessary condition? No. Is it scientific proof? No, but we operate in the dismal sciences and things like that, and so it’s something that we have noticed over and over again. And I think it could be beginning to happen right now, so we’ll have to wait and see.
All of these BRICS countries have been buying a ton of gold, tons, I suppose literally of gold, more than any time in the last 30 years. But on the flip side, not to talk out of both sides of my mouth here, everyone was waiting for this BRICS meeting earlier this year to be this huge announcement and clearly that did not take place. And so maybe things will happen more slowly or more quietly or maybe not at all. It’s just, I think, a tail risk that people should be more aware of than they have been in the past. How’s that for tempered?
