USEconomic Policies of Past 40 Yrs Intentionally Being ‘Trashed,’ Impact on Gold& BTC: Luke Gromen (youtube.com)
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Gold - the new reserveasset: Price target of $7k-$15k by 2030 is just a return to the ‘long-termaverage,’ Bitcoin at $420k? Luke Gromen
By Anna Golubova and MichelleMakori
Published:
Jun 14,2024 - 11:42 PM
Updated:
Jun 14,2024 - 11:49 PM
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(**promotion blocked** News) - U.S. Treasuries willbe dumped as global reserves by 2030 as the U.S. dollar gets re-priced from "widelyovervalued" levels, triggering 3X returns in gold and 6X returnsin Bitcoin, according to Luke Gromen, founder and president of Forest for theTrees (FFTT).
Gromen told Michelle Makori, leadanchor and editor-in-chief at **promotion blocked** News, that the economic policies of thepast 40 years are intentionally being "trashed" in the U.S., whichwill have a massive impact on everything from U.S. Treasuries and the dollar togoldand Bitcoin.
Over the last few decades, the U.S.has become good at exporting Treasury bonds and bad at exporting everythingelse. This is what is changing right now, Gromen notes.
"What Janet Yellen's tellingyou, what Jake Sullivan [National Security Adviser Jake Sullivan] is tellingyou, what the Department of Defense is telling you is that it's a nationalsecurity interest to get out of the Treasury export business and to get intothe stuff export business again," Gromen said. "But we can't do thatwithout a much weaker dollar, and the arbiter of that is going to be the priceof gold.You're seeing U.S. Treasury Secretary Janet Yellen throw 40 years of economicorthodoxy in the trash."
This shift from Yellen, whose purviewis the dollar, is significant. "This is about as big as when [formerPresident Richard] Nixon closed the gold window," Gromen described. In the future,"the 130 trillion bond market is the sucker at the cards table."
Gromen explains that the dollarsystem as we know it is dying, with the the U.S. treasury bond losing itsposition as the world's primary reserve asset. This is why the greenback willget re-priced. However, Gromen rules out that the USD will get replaced,stating that it will remain the global reserve currency.
Watch the videoabove to find out why the U.S. dollar will be re-priced and not replaced asthe global reserve currency and according to what.
Thenew global reserve asset
TheU.S. Treasury market has been losing its share as a primary global reserveasset since 2014 because global central banks have sold $400 billion worth ofTreasuries on the net and bought $600 billion worth of gold on the net.
"Globalcentral banks stopped buying U. S. Treasury bonds ten years ago on a net basis,and U.S. debt has not stopped growing," Gromen said. "There's awidening gap between the supply of U.S. Treasury bonds and demand from globalcentral banks."
ForGromen's reason why this has been happening, watch the video above.
Goldhas been seeing solid gains this year, up 12.5% year-to-date, after hittingmultiple new record highs, and it will keep rising towards 2030, Gromennoted.
"Everysingle thing in macro is telling you it will keep going higher. You're seeingthe BRICS go into gold. You're seeing Yellen throw 40 years of economicorthodoxy in the trash. You're seeing the Fed say we won't let Treasury marketdysfunction happen by adding liquidity when it is needed," he said.
Thealternative to the Treasuries as the global reserve asset is gold."Treasuries for central banks are no longer risk-free instruments. If youdo something the United States government doesn't like, they will take theTreasuries—full stop. They've done it to Russia and others, which has openedeyes," Gromen said.
Gromenadded that nobody trusts the Chinese yuan when it comes to finding anotherreserve option, and even if they did, China doesn't want to open its capitalaccount and issue debt.
"Goldis doing what it's doing because gold is taking the place of Treasury bonds as a primaryreserve asset globally at the central bank level. And as that happens, that's alot of buying against a gold market whose annual production is $240billion," he explained.
Goldprice forecast
Themarkets are sensing this shift away from Treasuries, increasing goldprices.
"Marketsare reflexively beginning to understand that Treasury market dysfunction willnot be allowed on a sustained basis, in which case you've got a 130 trilliondollar global bond market increasingly squeezing into the 65 trillion dollarU.S dollar equity market, roughly 14 trillion dollar gold market and the 1.4trillion dollar Bitcoin market," Gromen said.
Thisis why there have been spikes in S&P 500, Nasdaq, gold, and Bitcoin chartsover the long bond. "All of this has happened in the last 18 to 24 months.Those are the signs of the bond market recognizing that, on a real basis, it isthe sucker at the card table. The bubble is in the long-term U.S. Treasurybonds," Gromen noted.
Toput gold's upcoming multi-year rally into perspective, Gromen said that gold'smove higher has barely begun. "To reflect a reversion to the mean of beingthe primary reserve asset, it needs to be orders of magnitude higher inprice," he said.
Toget a more precise outlook, Gromen looks at the market value of U.S. officialgold relative to foreign-held treasuries outstanding.
"In1989, when the USSR fell, that percentage was 20%. When we had a dollar crisisin 1979 and 1980, the percentage was 134%. Fast forward to today, this ratio isat 7%. So gold would need to triple just to get back to the very bottom of thelong of this range where we were in 1989, the last time we had a great powercompetition," he estimated.
Thisis Gromen's conservative outlook; for his other price scenarios, watch the video above.
Whatit all means for Bitcoin
Bitcoinalso plays a key role in this new reserve asset environment.
"Bitcoinis an energy-linked neutral reserve asset for the people. It is a digitalgold-like instrument in that way. More dollar liquidity means a weaker dollar,and that's good for Bitcoin," Gromen said. "It does a lot of thingsthat gold does arguably better than gold. But again, it has a lot morevolatility, and it is a much smaller market."
Gromenis not ruling out 6X returns for Bitcoin in the next six years as investorssell bonds and buy assets that hold value. "Something that holds value isU.S. stocks, gold, and Bitcoin."
Inthis scenario, Bitcoin would outperform gold due to higher volatility. "Ifgold goes up 3X, I wouldn't be surprised if Bitcoin goes up 6X. They can bothwin," he said.
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Anna Golubova is the Producer forKitco News. With more than ten years of experience in media, she has covered arange of topics, focusing on economy and politics. Anna began to exclusivelycover economic news in 2013, attending media lockups at the Bank of Canada andStatistics Canada to report on a range of key macro economic events, includinginterest rate announcements, GDP, unemployment, and retail. She holds a Masterof Arts in International Relations from NPSIA, Carleton and a Bachelor's degreein Political Science and History from the University of Ottawa.
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