The yield trap
The most common question I get: why hold gold when yields are rising and gold pays nothing? Twenty years ago I thought the same - gold is a yieldless "pet rock" that just stares at you, and it matters even less when you can earn 8% or 9% on a SoftBank bond or on Nvidia (NVDA) debt. The flaw sits in the measurement. A bond paying 7% still destroys your purchasing power if inflation runs higher than the coupon.
CPI and PPI prints are fiction. Inflation reflects the broad money supply and the rate of debt, so real inflation sits closer to 10%, not the 3% to 4% reported. A 7% bond does not beat that. You are earning more dollars while losing what those dollars buy. This is not a gold-bug claim - people on the bond and equity desks of major hedge funds and banks, many of them my clients, see it now. Gold pays no yield, but it does not melt like an ice cube the way the dollar does.
Measured in gold, the gains vanish
Over the last five years the S&P 100 and the Nasdaq were each up about 150% in nominal dollars. Measured in gold, they were down 20% and 30%. A rising stock market creates the illusion of wealth while you lose ground against hard assets. You are measuring returns in a currency that is robbing you while your government says inflation is under 4% when it is at least double that.
For every dollar of income, there is $4 in debt. By Q4 of this year global broad money supply reached $150 trillion - a 50% jump in printed money in six years. That is the definition of inflation and debasement, and it is exactly what central banks do not want you to see. It does not matter who runs the White House or the Fed - Bessent, Powell, Trump, or Santa Claus. Anyone in power would inflate away the debt; the only honest choice would be to admit it.
Negative real rates are policy
Governments in the US and Europe need inflation to run higher than the yield on their debt. That is how they inflate their way out, a practice as old as economics - David Hume and Ludwig von Mises warned that once debt climbs far above GDP, you cannot grow or earn your way out. It is mathematically impossible. The US 10-year and 30-year are not beating inflation; they run negative real rates on purpose, and the government lies about inflation to hide it.
This is good for the government and bad for Joe Six-Pack. The debasement is an invisible tax, and it is what puts citizens in the streets. I recognize many of them, fed up and angry, do not have $4,000 or $5,000 to buy an ounce of gold. It is not an easy thing to hear.
I am on the sell side, based in Switzerland selling gold, so be skeptical of me - I was indifferent to gold for years myself. But others outside the gold space see it too. Jeremy Grantham, Jeffrey Gundlach, and bank clients who sell a different narrature to their employers keep their gold with us in Switzerland because they know.
Judy Shelton and why it is too late
Dr. Judy Shelton was appointed counselor in the office of the Treasury Secretary. She is one of the more outspoken sound-money voices in Washington, and I respect her, though the political system forces Faustian deals - Alan Greenspan abandoned everything he knew about sound money once he became Fed chair. Even Scott Bessent holds private views on dedollarization and gold that he cannot say openly as Treasury Secretary.
Her appointment cannot fix the problem. US debt is around $40 trillion with yields near 4.6% to 5.2%, and demand for Treasuries is falling - more sellers than buyers now. China cut its Treasury holdings from over $1 trillion to about half that. Japan sold more Treasuries this year to support the yen than in the prior four to five years combined. The old rules are breaking because the US weaponized the dollar and overissued its debt. To save the bond market you must create demand and cut issuance, and at these spending levels you can do neither. You cannot force demand at gunpoint.
Shelton has proposed a gold-convertible 50-year bond for the 250th anniversary, called the Treasury Trust Bond - a couponless, redeemable gold bond. The name gives it away: they invoke "trust" and the word "gold" alongside a US Treasury precisely because the greenback dollar is that distrusted. Her presence is optically powerful, a confession of a failing dollar. A couponless bond would save Uncle Sam interest payments and pressure the fiscal opportunists toward discipline they will never show. It is also an attempt to optically one-up China, which is buying gold at a record pace at fire-sale prices, getting ready to make its currency more respected internationally.
Gold revaluation and the other escape hatches
There is also the gold-revaluation idea: the roughly 261 million ounces still carried at $42.22 could be revalued to throw money into the Treasury General Account and ease pressure on the unwanted Treasury market. That would change accounting but erase no obligations. None of the fixes - stablecoins, a gold-backed 50-year bond, or a revaluation - solves the core fact that spending runs beyond means and growth cannot close the gap.
Stablecoins are sold as "the new gold." The pitch: the market grows from a $400 billion cap to $2 trillion in three years, issuers buy T-bills for the yield, and that saves the Treasury. I do not buy it. The world does not want an e-dollar in enough volume to bail out the Treasury market; the US is not that trusted. The same goes for claims that the quadrillion-dollar eurodollar and derivatives market will create permanent dollar demand - not true either.
What the Fed will likely do
Asked what the Fed and government would need to do to keep inflation down and prevent French-style civil unrest from reaching the US: the honest first step is to tell the truth, which will never happen. More realistically they buy time. The likely menu:
- More yield curve control, an Operation Twist 2.0, issuing from the short end to take pressure off the long end. Bessent has tried this; it has not worked.
- A gold-backed 50-year bond under Shelton.
- Gold revaluation, possibly next year.
- QE "to the moon" when nothing else is left.
- A restructuring, which Jeffrey Gundlach - the bond king, not a gold bug - says is possible: the Fed extends maturities, stops issuing 20- and 30-year bonds, extends maturities on 5- and 10-years, caps yields at 1%, and blames an outside villain. Capping yields is itself a default. It would create chaos in the bond market but force a budget rebalance, inflate away debt with a weaker dollar, help the trade balance, and crush pension funds, annuities, and 401(k)s. The government would not care, because what is best for them is best for them.
- Passing the Clarity Act with a special US stablecoin to force the world to use it to access any US asset - stocks, bonds, even junk private-credit paper - so stablecoin issuers absorb T-bills.
None of these will save us. That does not mean America ends. The only real fix is politically fatal: dramatically cut spending, issue in austerity, and tell the public like you would tell a spouse that there is too much debt and cuts are coming. You almost cannot get elected or stay in power that way. So the cycle of extend-and-pretend continues until the blame lands on a villain in the Middle East, Russia, South America, or little green men.
The debt is too high and growth will never come at this debt-to-GDP level - it is like sprinting through water with a cannonball tied to your ankle. Politicians and economists are opportunists who will never take accountability. That is the vicious, ironic circle, and it keeps coming back to gold, which outperforms the very currency you measure your yields in.
