Tariffs & Gold Revaluation Won’t Stop a Systemic Reckoning

VON GREYERZ partner, Matthew Piepenburg, joins Michelle Makori of The Real Story in part one of a thorough, two-part assessment of the key macro themes impacting global currency, debt and precious metals markets – from tariff dynamics and stablecoin legislation to potential gold revaluation signposts out of DC.

For Piepenburg, the 50,000-foot macro assessment boils soberly down to this: The math and facts behind current headline policy-boldness smacks more of desperation than salvation.

US debt levels, for which both left and right administrations are historically culpable, have crossed the Rubicon of any easy, near-term solutions. He warns that hard facts are far more essential today than partisan bias, hope or critique. Mathematically, the home of the World Reserve Currency has created a debt-backdrop/trap for which no single policy or leader can magically resolve without interim pain in currency, debt and risk asset markets, all of which share objectively high and unprecedented risk profiles.

Makori begins with the potential and real-time revenues from positive trade deals emerging from Trump’s aggressive tariff policies. Does the numerical upside of such revenues suggest that these measures could postpone or prevent a systemic reckoning? Piepenburg recognizes the historical lessons, current justifications, and even revenue gains behind policies laudably intended to reshore American manufacturing. Unfortunately, however, current deficit spending far surpasses even the most optimistic tariff revenues. More importantly, and objectively, Piepenburg reminds us that current debt/GDP ratios make economic growth mathematically impossible, regardless of which party or leader sits in the Oval Office.  Until and unless debt/GDP levels fall well below the 100% level, no miracle solution exists. Given that the real spending cuts need to come from politically critical military and entitlement expenses, such cuts are unlikely, and thus so are such miracle solutions.

In this backdrop of a debt-trap, there is growing talk of bringing US debt/GDP levels within a workable growth model (i.e., well below 100%) by simply re-valuing US gold reserves to entirely new (i.e., higher than current spot-price) levels, thereby putting a sizable dent in US debt by effectively “doing QE with gold rather than a Fed-money-mouse-clicker.” Piepenburg cautiously recognizes that such an OVER-NIGHT revaluation (and “instant US piggy-bank filler”) is entirely plausible, which would create a massive and new price floor for gold (and boon for gold owners).

But then what? As Kissinger warned decades ago, such a measure would dramatically create an OVER-NIGHT global POWER-SHIFT if other nations like China and Russia, in fact, own more gold than the US. Here, Piepenburg believes China owns far more gold than reported, and would hence become the global winner in a setting wherein “he owns the most gold wins.”

Piepenburg closes Part-1 by further reminding that the very fact that the US is considering such a gold revaluation (and even a possible gold-backed UST) is a constructive admission that gold has more trust, merit, confidence and strength than a debased USD and unloved UST.

Part 1 (of 2):

Part 2 (of 2):

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