December 22, 2023 – Financial Sense Newshour's Jim Puplava speaks with Chris Martenson, author of the best-selling book, The Crash Course: An Honest Approach to Facing the Future of Our Economy, Energy, and Environment to discuss current events impacting the commodity markets when it comes to copper, energy, precious metals, and much more. Chris argues that we are seeing a big disconnect between the fundamentals and prices for a variety of commodities and how the investment narrative around ongoing price weakness in the commodity space is about to shift.
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Timestamps:
00:00:00: Introduction to Market Trends
00:00:12: Commodities Market Discussion
00:00:22: Introduction to the Guest, Chris Martenson
00:00:37: Discussion on Copper Usage and Pricing
00:01:06: Discussion on Central Banks and Inflation Measures
00:01:26: Discussion on Potential Misuse of Central Bank Powers
00:02:14: Discussion on Foreign Central Banks Trading in US Markets
00:02:43: Discussion on Inflation and Impact on Mining Industry
00:03:19: Suspicions Regarding Market Distortions
00:04:08: Discussion on Ineffectiveness of Batteries for Certain Applications
00:05:07: Debate on Oil Consumption and Demand
00:05:34: Separating Myths and Facts Around Electric Cars
00:07:05: Continued Discussion on the Limitations of Electric Cars
00:08:05: Talk on the Practical Challenges with EVs
00:10:00: Reflection on Early Adopters of EVs and Sales Slowdown
00:10:38: Discussion on Feasibility of Green Energy Transition
00:11:43: Discussion on Restrictive Laws Around Green Vehicles in the US
00:12:10: Conversation on the Demand for Energy Resources
00:13:08: Critique on Ev Promises vs. Reality
00:13:23: Discussion on Problems with the Push for EVs
00:14:50: Talk on the Finance System and its Relation to Energy Growth
00:15:12: Discussion on the Resources Required for Green Energy Transition
00:16:01: Discussion on Shortcomings of Wind Energy
00:16:21: Further Discussion on the Limitations of Renewable Energy Sources
00:16:44: Discussion about China's energy policy
00:17:08: Commentary on climate change debate and responsibility
00:17:43: Mention of the CoP
00:18:02: Discussion about climate change as an existential crisis
00:18:56: Discussion about commodity futures and price manipulation
00:21:26: Conversation about silver market and its importance
00:23:16: Understanding the total debt of US
00:23:37: Discussion about how to manage losses on debt
00:25:01: Detailing the current national debt situation
00:26:21: Discussion about Silver as a Strategic Metal
00:28:01: Talk on the financial conditions and deficit
00:29:17: Discussing the commodity market and price control
00:30:39: Understanding the opportunity for investors in the market
00:31:04: Discussion about plagiarism issue in Harvard
00:31:49: Discussion about mining costs
00:32:05: Elaboration on future shortage due to price suppression
00:32:16: Explanation of the process of mining at different ore grades
00:32:45: Rising Cost of Grinding and Exponential Energy Use
00:34:10: Discussion on technology and energy consumption
00:35:19: On Energy Secretary and Energy Efficiency
00:35:46: Conversation about resource scarcity
00:37:37: Discussion on the Fourth Turning and loss of trust
00:39:17: Concerns about Election Integrity
00:40:26: Importance of personal resilience
00:40:52: Questions about renewable resources and energy transition
00:41:30: Closing Remarks and offers from Peak Prosperity
Transcript:
Jim Puplava:
Well, one of the things that we've seen this year, we've seen some of the commodities, whether you're looking at gold, silver or even oil, spike up, but then they fall. So what is going on in the commodities market? Is demand increasing, as many who follow fundamentals are saying, or is demand decreasing, is what the people on Wall street tell us? Well, let's find out. Joining us on the program from peak prosperity is Chris Martenson.
Jim Puplava:
Chris, one of my clients sent me a video you did on markets and commodities in particular, and what I want to begin our discussion with, because last night I just watched a documentary on copper. It's just absolutely amazing what they use copper, and in this case they were using it to coat the bottom of our navy ships. But let's talk about that because this is a strategic metal that has become more important, especially with the green transition. And yet, Chris, the price has gone nowhere in two decades.
Chris Martenson:
So just to set the stage so everybody can follow along, the central banks out there in the world hate rising prices, but not of assets. They love those, right? Stocks and bonds can go up. They never say peep. High end art, trophy properties, yachts, those can all scream through the roof.
Chris Martenson:
They don't care. But they do kind of care when copper goes up and oil goes up and things like that, because that reflects badly on their preferred inflation measures. So I'm establishing here the central banks are not conflict of interest free. They actually would like certain things not to go up in price if they could. Right.
Chris Martenson:
Okay. Second, we know that the Chicago Mercantile Exchange, right on its website, has a program called the central bank preferred incentive buying program. That is that central banks are such good, high volume participants in the Chicago Mercantile Exchange that the CME came out and said, you know what? We should give them special pricing, high volume, good customers. And so this raises a question like what are they doing?
Chris Martenson:
And. Well, let's go further. What do you trade on the CME? Well, it's pretty much oil, metals, softs, grains, bonds, stocks and futures vix derivative products like that. These are highly leveraged futures forwards and other products like that that are traded on those kinds of things.
Chris Martenson:
So next question. Why would a foreign central bank, because they say it's limited to foreign central banks. But once, you know, the Federal Reserve has swap lines with all these same central banks, it gets a little blurry. Who's actually paying for what? But let's ask a question.
Chris Martenson:
What compelling reason would a foreign central bank have for having access to the US CME market where they can trade, say, a full size copper contract or a full sized agricultural contract or a silver contract or know, in the US markets, I can't think of a single legitimate reason for a foreign central bank to do that. But there they. So, you know, the way you open this up, I'm a little suspicious when I look at things like, we know how much inflation has gone up just in the past three years. It's like about 50% for most people over the last three years for basic stuff like food and things like that. Right?
Chris Martenson:
Well, energy is part of that, we know that mining is part of that, and we know that mines in particular are highly exposed to inflationary aspects, both for labor, steel, fuel, all that. Right. Well, when you look at a long term chart of copper, you find out that it's trading for exactly the same price today on a per pound basis as it did in 2008. I don't even remember 2008 pricing. I mean, do you?
Chris Martenson:
No. I'd be shocked if I walked in a store and saw 2008 pricing be so quaint. Right? So that's what I put together in that video. I'm just like, this is weird.
Chris Martenson:
Central banks are preferred buyers. They're monkeying around in areas where I have my suspicions that we haven't had free and fair markets for a long time. I'm a little suspicious about why the price of silver gets smacked when it always goes up a tiny bit, why gold bumps around at 2000, why oil went down for all of October while stocks were screaming higher. Something's really off in this story, and I submit to you that really you shouldn't have central banks in those markets. And I'll tell you why.
Chris Martenson:
They are not economic participants. They have political aims, they have monetary aims, but they don't have economic aims. They say they do, but they don't. They're non economic participants. And of course they are, because they print money out of thin air.
Chris Martenson:
So the different problem sets they're facing. When you have a non economic participant in a market where you're trying to get producers and consumers to settle out on a fair future price for something, you get distortions. And I think that's what we're seeing.
Jim Puplava:
Well, it's not just that with copper. If you take a look at, for example, chile, one of the world's largest producers of copper, their ore grades have gone down. I think it's about like a half a gram per ton. So not only have costs gone up from labor to steel, everything that you can think of that goes into mining from fuel costs. But then on top of that, their Orc grades, they have to mine and shovel more dirt to get the same amount of copper and yet the price doesn't go up.
Jim Puplava:
It's just absolutely fascinating. I want to move on to oil because oil is something that all of us as consumers notice right away. The price of oil goes up. You pull into gas station, oh my God, the price of gasoline just went from four dollars to five dollars. And that really drives home politically no politician running for office as president wants higher oil prices.
Jim Puplava:
So oil gets up to 90 and then all of a sudden the EIA and the IEA come out and say, oh, demand is falling. People aren't using as much oil and we're going to go to evs and green so we won't need oil at the end of the decade. I mean, all of a sudden all this stuff comes out, the price of oil goes down. I know in the case of the IA, they've been wrong. Twelve out of the last 14 years, every single year they have to revise their oil estimates up.
Jim Puplava:
But you just kind of find that kind of strange.
Chris Martenson:
Well, it's actually beyond strange when you really look at where we are in the oil story. So first up, let's separate some myths and delusions out. I know that we keep saying we're going to face, we the IEA and other people keep saying, look, we're going to face peak oil demand because electric cars, right? And then you might wander over to your news source and open it up and find out ev sales are kind of cratering and they're going nowhere and they're a small percentage of the overall story. And there's a huge gap between reality and what they say we're going to be experiencing.
Chris Martenson:
But even if 100% of cars magically tonight converted into electric cars and magically we had the distribution electrical grid to manage that load. Even if that happened, we're still going to be refining exactly the same number of barrels of oil tomorrow because we still need the asphalt. There's 2000 separate feedstock chemical components to come out the back end of a refinery. We still need the jet fuel because we don't run those on batteries. We're still going to need the bunker oil to run the big container ships and we're still going to need the diesel for the trucks, right?
Chris Martenson:
So that's the truth of the story. So this idea that because we have a few electric cars somehow demand craters and that leads to a huge decline in oil consumption, it doesn't hang together from a logic standpoint. But then maybe we're simple people. You could do worse than to open up a chart of global oil demand and see that it just goes up and to the right every single year. Right.
Chris Martenson:
With a blip in 2020 because of COVID But otherwise, it's coming on like gangbusters. China is by far the number one importer of oil. It's on track to overtake the United States as the number one consumer of oil in not too long of a time. India is coming on strong. The truth of the matter is we still need oil and we're going to need a lot of oil that's on the demand side.
Jim Puplava:
Oh, I just don't see container ships, oil tankers, cargo ships, trains and 747s running on batteries. That's just not going to happen.
Chris Martenson:
It's not going to happen? No.
Jim Puplava:
How about a semi truck?
Chris Martenson:
Never. I mean, they say they can, but they have these 800 kilowatt hour battery packs and like, oh, that's a lot. I mean, trust me, I wouldn't want to stand next to one of those if it caught on fire. But you have to compare that with like 68 gallons of diesel, which is a pretty typical day of hauling, say, for a logging truck or somebody with an 80,000 pound load that has 2.5 power in it. So the fact that they're coming up with these 800 kilowatt, 900 kilowatt hour battery packs for big trucks, again, it's a niche thing that may have some use to it, but now you're hauling around 30, 40,000 pounds of battery.
Chris Martenson:
I don't know what some number like that. And in addition to your cargo. So batteries are not yet ready for primetime. For a lot of applications, jets, long hauling, super heavy hauling, mining equipment and container ships, I just don't see it, not for a while.
Jim Puplava:
Well, it's not only just that evs don't work well in cold weather. If you're in Buffalo, New York, I'm not sure how many miles you're going to get on your ev charge. The other thing that we've seen come out of Detroit, they're losing money on this. And then, as you pointed out, Wall Street Journal did an article that they're stacking up and a lot of these dealers don't want to take any more evs because they're not selling. They're more expensive.
Chris Martenson:
Well, yeah, that's the thing. If we were being smart about know I'm not totally against the technology. I don't want to come off that way. Europe is doing it really effectively. I was just in Iceland and they had european models there where they have plug in electrics.
Chris Martenson:
Now, this makes total sense, right? So if it gets cold out, your internal combustion engine takes over and you get the things you need, like heat and distance and range and things like that. But otherwise, for most of your around town stuff, hey, electric works just fine. So those make sense. But you literally cannot get those vehicles here in the United States.
Chris Martenson:
They are against the law. So the things that are most sensible we've made against our own laws here in the United States, which I don't have a good answer for. Maybe you do.
Jim Puplava:
No, I don't either.
Chris Martenson:
And you would think that they would.
Jim Puplava:
Be going more like Toyota, which is hybrids. Because one of the problems, I actually own an ev. My house is solar powered, and I have my own charging station because, Chris, when I got my ev, the first two weeks, they put these charging stations in a bank of America parking lot is where I went. First of all, I had to wait 20 minutes in line for the person in front of me to get done with their charge. Then I pull up to the charger and it takes me 30 minutes.
Jim Puplava:
So instead of five minutes putting gasoline in a gas car, it took me 50 minutes. I did that a couple of weeks, and I said, this does not work. So I got my own charging stations, but not too many people are doing that. And here in California. And I wonder what you think my personal feeling is a lot of this is a novelty.
Jim Puplava:
It's new technology. Hey, wow, this is cool. I don't have to buy gas, but I think a lot of this has gone to what I call early adopters. And I think that's why ev sales are slowing. Okay, so the people that like new technology in California, you see Teslas all over the place.
Jim Puplava:
They bought them, but the rest of the country, I'm not so sure.
Chris Martenson:
Yeah, there's a number of issues there, not least of which is that at scale, it's unclear that we could make that transition, particularly in places like California, which has done a great job destroying its domestic electrical production, shutting down nuke plants and not allowing new plants to open up, and then just sort of mandating that somehow we're going to do away with all internal combustion engines by 2035. And, hey, Hosanna will all have evs, right? But first you kind of have to sort out, can you make all that electricity and where and how, and how do you distribute it? And there's a lot of things to be resolved, and that's the issue. I was just talking with Grant Williams the other day.
Chris Martenson:
I talked with Doomberg. I talk a lot of people about this, and our frustration is the same is that the people making these laws and edicts and mandates, as well meaning as they may be in their own minds, they lack substance. They just don't do the math, and they don't invite anybody to the table who can do the math. And it's not difficult math. So it's very difficult for me to see this any other way, Jim, except to say, we're heading for a crack up on this front and we'll solve it when we get there.
Chris Martenson:
But I don't see how we do it without a lot of pain at this stage.
Jim Puplava:
No, I see that coming. And not only are we pushing these evs, but what goes along with an ev, you have to have charging stations. Number one, we don't have enough of those. Number two, evs take electricity. So what kind of demand here in California?
Jim Puplava:
We get brownouts all the time. And, Chris, that's only about five or 6% of our fleet with evs. Just imagine, by 2035, magically, it's 100%. There's no way we're replacing reliable electricity with Nat gas, which is one of the reasons our carbon footprint has gone down. Because of natural gas, we're closing down nuclear power plants.
Jim Puplava:
We're closing down, I think coal is now only 28%, and that's due to drop. So we're replacing reliable electricity that's efficient and more return on what we call Eroi, more return for dollar invested. We're replacing it with intermittent, unreliable, more expensive power.
Chris Martenson:
Yeah, this is something. I just did a deep dive on all of this for my subscribers because it's really important to me that, well, there's two things. There's risks. We've been talking about that there's opportunities, too. I mean, someday we wake up and we go, oh, we're going to need a lot more copper.
Chris Martenson:
Unfortunately, there's, like, a ten year lead time to get a big new mine up and running. And someday we're going to wake up and go, oh, we really need more oil, and maybe we should get busy drilling off the shore. But somehow, because we suppress the price of oil for too long, transocean goes out of business or close to it, and all the gray hairs leave the business, and you don't have new people joining, and next thing you know, you have all kinds of problems. You don't have the skills, you don't have the capital. There's lead times.
Chris Martenson:
And so for the nimble investor, I do think there are opportunities here, if we want to look at it that way. I worry about really, though, for generally speaking, this is, I'll be kind a suboptimal way to go. We're going to have real problems. And in particular, we have this myth that we're going to do this green energy stuff. And I interviewed this guy, Simon Michelle.
Chris Martenson:
He's a professor. He's got a lot of mining experience, and he just did the math, simple math, right? How much copper comes out of the ground every year? How much lithium, how much cobalt? How much nickel, et cetera?
Chris Martenson:
And then how much would we need to do this green energy transition? Okay, now we have two numbers, and we divide how much we need by how much we get out of the ground each year. And you get a number, it's like, well, how many years would that take right now to just do a 48 hours battery backup for our national grid globally? If we were in this globally, Jim, it would take 1148 years of mining to get the lithium out we need. Okay.
Chris Martenson:
Not happening. Do we have another battery chemistry? Nobody's. We got some stuff in benches here and there, but not at scale. So this whole thing is really starting to smell like a grift to me.
Chris Martenson:
Where we got these people promoting this stuff, they can't be this dense. They have to know that they're promoting something that has not a hope of ever becoming reality. And so I figure they're just doing it because they can and they make money and it's power to them or something. But if you saw the cop, 28 out of Dubai just closed, and they just released a statement, 200 countries signed up and said, we're going to limit this whole thing to 1.5 degrees celsius, and we're going to go to net zero by 2050. That's like 26 years from now.
Chris Martenson:
Ain't happening, right? Not without skinnying our population down to like a billion or something. I'm not being hyperbolic. There's not a chance in the world we could get to net zero from here to there without either doing an extraordinary crash course in nuclear production, by which I'm talking like, 200 small modular nukes being produced and installed per day from here to there, right? You'd have to get pretty serious, because we build zero currently, or we're going to have to figure out how to operate our huge economy without energy.
Chris Martenson:
And nobody has an answer for that. And as well, we have a finance system that, you know, just needs to keep growing exponentially. And more and more debt, which is itself just a claim on output. Which won't happen if we don't have energy. I mean, it's turning into.
Chris Martenson:
It's comical at this point, really, how far apart we are from rational sense making and what's being proposed.
Jim Puplava:
Well, you mentioned two things. And to make this green transition, it takes two things. It takes oil, because mining companies use heavy duty equipment that runs on diesel fuel, so you need more diesel. And also, as you just talked about, we consume more minerals, whether it's copper, lithium, cobalt, nickel, any of that. I mean, you have guys like Elon Musk talking to mining companies, hey, you can produce nickel, I'll sign a ten year contract.
Jim Puplava:
Because he knows if he doesn't have nickel, he doesn't have batteries, he can't make cars.
Chris Martenson:
And the truth is, we don't actually have the basic resources to get to generation one of this green energy transition as it's being configured right now. I mean, can we just admit that solar and wind aren't fit for purpose? Listen, I have solar on my house, and I think we should put wind towers up. But the idea that you could go from that to saying, oh, this is what we're going to rely on, right? It was just in November I saw this headline from Alberta.
Chris Martenson:
They've got, I don't know, 44 wind farms up there. Big old territory in Canada covers a lot of territory. For whatever reason, the wind didn't blow that night. And they mentioned that they had gotten 0.3% of their rated output out of their wind farms, and they had to scramble and spool up a whole lot of peak or gas plants to try and make up the shortfall. So it happens.
Chris Martenson:
Right? Well, that's not tolerated. I mean, really, nobody could seriously propose that we could actually subsist on wind without some sort of a battery or buffer or gas power plant backup. Right? Otherwise, we're saying, you know what, from time to time, hospitals, the ventilators turn off in the middle of the night, and dialysis machines don't run, and the aluminum foundry, all the aluminum sort of crystallizes and solidifies in the channels and et cetera.
Chris Martenson:
Nobody would go for it. That's going backwards. So you hear me stumbling for words because it's so cartoonishly bad right now. I don't know what to tell you, except that China has an energy policy that makes a ton of sense. They've parsed through all of this.
Chris Martenson:
They are not going to put alternative into their grid mix at a faster pace than 1% replacement per year, hitting a maximum of twelve to 16%, depending, because that's what they figure grid stability could go for. And we're over here saying, oh, we're going to 100% in the next 25 years. It's just not going to happen for starters. But a lot of trouble is going to be created between here and recognizing.
Jim Puplava:
That, well, not only that, about 75% of the planet doesn't buy into climate change. China is not going along with it, India is not going along with it, Africa is not going along with it, South America is not going along with it. So it's mainly western countries, Europe, US, Canada, places like that, that are buying into this. So it's kind of a western conceit in a way that we're going to force this ideology on the rest of the world when the rest of the world isn't buying it.
Chris Martenson:
I know. Did you hear? I don't know if you heard, but it really caught me because I listened for these sorts of things. So Antonio Guterres, secretary general of the UN, came out right before the CoP 28 meeting. And his intro speech to all the Assembled world leaders was, listen, glaciers are melting, it's really bad.
Chris Martenson:
There's a sickness on the planet, and only you, the leaders, can really help address this sickness. Well, he just called you and I a really. That's the way they think about this, Jim, that this is an existential crisis. We have to do anything, including ruining our economies and destroying lives and prosperity, because we have to attend to this thing called climate change. And it's that serious.
Chris Martenson:
But somehow when they're saying those words, it never occurs to them that flying 80,000 people to Dubai was maybe not the best way to address climate change. Maybe they could have used a Zoom meeting, I don't know. Right.
Jim Puplava:
Especially the private jets. I want to address another one. As we're dealing with commodities, when you are on the commodity futures, you put 10% down, so you're leveraged ten to one. The thing that really strikes me, I was looking a while back and I think the short positions on silver were like 25 to 28 times the available silver. And, Chris, in my opinion, that's like naked shorting.
Jim Puplava:
Because if, let's say, even 10% of those contracts asked for delivery, they don't have it. And we know when you short something more than there is available supply. Let's say I did the same thing. Can you imagine what would happen if I decided to short Exxon 20 times more than the available shares of Exxon? What I could do to the price and what I would have to do if I had to cover?
Chris Martenson:
Well, you couldn't, of course, so you'd be facing infinite risk. But I think we all know that when, not if, but when Comex finally gets into deep trouble on this front, they'll just change the rules, right? So there are all these people playing their paper games and thinking they're in the silver market and there's a lot of commodity traders out there. And listen, there's some legitimate hedging, right, producers and consumers. Right, I get that.
Chris Martenson:
But for the most part, I think it's like 95, 96% of that is not that signal between a producer and a consumer. It's just the noise of speculators and bullion banks and people who are price manipulators, which we all know they are, right? So price discovery is when there's a legitimate bid ask structure, there's participants, everybody can see the same data and somehow the price gets sorted out. Price manipulation is when you crush the bid stack with a wall of shorts to come in in a 1 minute tick, designed specifically to smash through whatever's there from a market structure so that you can get a different price on the back end of that adventure. That's price manipulation.
Chris Martenson:
It's been going on a long time. The SEC is nowhere to be found, the CFTC is nowhere to be found, the CME doesn't care. It's just how the game runs. So, no surprise. But this is why I tell everybody, Jim, there's going to come a dislocation in that story someday.
Chris Martenson:
And it has a before and an after moment before you could still buy silver, you could get it in your hot little hands. And I'm talking bars, coins, you own it, right? Not derivatives or paper claims in a vault somewhere that it belongs to a pooled thing. Hot little hands, your silver, okay? And then there's after part when this all kind of blows up.
Chris Martenson:
And at that point it's no longer available for people to get their hands on. And we've seen this almost happen. Well, it's happened for a few weeks here and there. Remember the 2008 price crash? Went from like twelve to $8.
Chris Martenson:
And remember what was it, 2016? There were moments where there was these big crushes in the price, which weirdly is designed to destroy people's interest in the metal. And weirdly, it takes us silver bugs and makes us really excited and we go out and buy more. And when we do that, just that interest alone is sufficient to overwhelm the supply side of the story and create things like six week lag times before you can get delivery and all of that well, what happens when 5% of the population instead of the 0.5% that I would call silver bugs? What happens when that goes to ten times 5% of the population says, you know, I think I'd rather have some.
Jim Puplava:
Of that and I'd like to own it physically. Not paper silver or paper gold, which is a lot of the traders. And this gets back to what goes on in the market. You got a lot of speculators in there and for them you go into SLV or you go into GLD. This is a trade.
Jim Puplava:
I'm going to go in here. I think gold's going up. I go in there and then I sell it. And it's amazing because I've been watching gold and over the last, I think it's the last couple of years, if I have my figures right, individual investors have sold about 600 tons of gold while central banks have bought close to 1400 tons of gold. Since they're buying gold, I tend to think I want to go in the direction they're going.
Jim Puplava:
They probably know something that most of us don't.
Chris Martenson:
I would agree. I trust actions more than words. And it's been a long time since the central banks have had this much sort of interest in this overall story. But I think to widen that out. We all know that our fiat money system is in trouble.
Chris Martenson:
This is when, not if, but when it gets into its final trouble. And so we see, let's talk about the US dollar because that's the center of this whole thing, right? So we have two plus trillion dollars of deficit spending by the US government. We've got just out of control liquidity conditions that are being fostered in increasing amounts by the Federal Reserve. All this talk about tightening, by the way, Jim, is poppycock.
Chris Martenson:
There has been zero tightening going on. Oh, but their balance sheet's winding now. Yeah, they had $2 trillion of reverse repos to draw from and those have been used to finance a whole lot of stuff. Oh, but they just raised rates a lot.
Jim Puplava:
Yeah.
Chris Martenson:
Well, November was the easiest financial condition. Easing of financial conditions. The most amount of financial conditions easing in November in the past 40 years. What was the emergency? We don't know, but we can hear them fighting for something.
Chris Martenson:
These are the final throws which could go on for a long time of this system where it's clear we can't pay all that back. Right. You just look at total debt in the US, not federal debt. People focus on that. 33 trillion total debt in the US is now $93 trillion.
Chris Martenson:
That's just debt, not including unfunded Social Security and other stuff. Right? Those are liabilities 93 trillion, and somehow that's going to have to grow to 100 and then 120 and then 150, and it's like going to get 300 trillion. Who knows, right? It just grows and grows.
Chris Martenson:
But we all know there's a math problem built into that. And that math problem resolves by answering only one question. Who's going to eat the losses? That's it. So there's only three ways you eat losses on debt piles that are too big.
Chris Martenson:
One, you default on it. That's pretty obvious. We just don't pay it back. Very unpopular, that one, because the holders of the debt tend to be the same people making the loss. Two, you pay it all back.
Chris Martenson:
But if you've lived beyond your means by borrowing too much and consuming today, that means in the future you reverse that process. You live below your means, you experience austerity. Everybody hates that. Nobody wants that. And then the third way is you got to inflate it away.
Chris Martenson:
Right. But again, that's just spreading the losses out. And that's the process that the government with the Fed has been really foisting on all of us, shrugging their shoulders, acting as if they really care about inflation. But they do. They want inflation and they want people to have to live in a regime where, at a minimum, your money gets cut in half every 35 years.
Chris Martenson:
That's a 2% rate of inflation. I think they'd be a little more comfortable with three to four, which means your money's getting cut in half every 22 to 16 years. Right. Cut in half, stolen. Right.
Chris Martenson:
That's how they're kind of hoping this all continues to go. I don't think they're going to get there. I think this blows up on them. I think oil is the pin on that grenade. But that's a longer story.
Jim Puplava:
Yeah, because I'm just looking at the national debt clock. So we've got Medicare at about 1.5 trillion, we've got Social Security at 1.4 trillion, we've got defense at 832,000,000,000. We've got interest at 700. It is larger, Chris, than the total tax revenues to the federal government, which are basically 4.4 trillion. So if you take a look at how we're spending, nearly 30% of what the government spends is done with borrowed money.
Jim Puplava:
We will add 3 trillion. We're about ready to cross 34 trillion probably by next week. We'll be next week, or at least the week after. By the end of the year, we're going to be over 34 trillion. They're projecting next year that we could add 4 trillion of debt.
Jim Puplava:
So we're going to be at 38 and 39. Who knows what it is? Especially as the lower interest bonds and t bills roll over. Instead of paying one 10th of a percent or a half a percent on a ten year treasury, you're going to end up paying anywhere from three, four to four and a half. So looking at that, in my opinion, there's no way out of this other than the way you mentioned, they're going to have to inflate that.
Jim Puplava:
I don't know if you saw, I think one of the networks, they took the movie home alone and they took, when little Kevin went to the grocery store to buy all that stuff, they took his list of what he paid in 1990 when the movie was made.
Chris Martenson:
That's genius. Yeah.
Jim Puplava:
And I think it was like $16. Today it's closer to 70. So in that period of time since that movie, the cost of Kevin's goods have gone up 260%. And that was in a period of lower inflation. I don't know how you feel, Chris.
Jim Puplava:
I see higher rates of inflation, higher energy prices, and debt monetization. Because like you said, it's math.
Chris Martenson:
Well, it is. And here's the part. It's getting out of control. It's getting bigger and bigger and bigger. Right?
Chris Martenson:
So I don't know what was popping and creaking behind the scenes, but the Fed had to engineer a softening of liquidity and financial conditions. It was the largest on record in my entire data series. So why did they do that? Who knows? Oh, gosh, Covid came along.
Chris Martenson:
Well, that took $4 trillion of intervention. Almost five, right? Oh, gosh, I'm old enough, Jim, when I first started cutting my teeth on this stuff, I remember when the Fed would print like $2 billion in a month and I'd be like, freaking out. That's why I bought my first gold 2001. I was like, watching the Fed start to dial this up.
Chris Martenson:
Now they're doing that we don't even know, like, they have this bank term lending facility, right? It has 123,000,000,000 of lending that just popped out in the last few months. Like, what is that? Right? They just like hundreds of billions just flying around all the time now.
Chris Martenson:
But it's getting bigger and bigger and it's having less and less effect. We're piling on more and more debt. We're getting less and less GDP. And I even think that's fictitious because we fail to back out government deficit spending from that equation, which we really should, because it's not legit economic growth. It's different.
Chris Martenson:
And so we're just carrying on. And I think what we're really whistling past here is this whole idea that our prosperity really comes from energy. It comes from real people doing real things, comes from real products, real goods, real services. And the keepers of the system are in some fantasy land where as long as they can dominate the narrative and tell you this thing often enough, it'll somehow come magically true. And if we can just create the financial conditions for more borrowing, it'll all sort itself out.
Chris Martenson:
But I feel like, Jim, I'm watching. The Federal Reserve is like a know, and they're just like. They're up to two fifths a day, and where they were at one fifth, and they don't see the problem. They don't see the trend. It's getting bad.
Jim Puplava:
You know, the thing that really strikes me about all of this, too, is you have these inflation numbers that we're talking about, but we're talking about this big, huge green transition. You just had cop 28. Before that, you had the Paris climate thing, and here we are. What are we going to need to make that transition we talked about? We need copper.
Jim Puplava:
Copper hasn't gone anywhere in two decades. And I have to believe, Chris, it's more expensive to mine copper today than it was 20 years ago. You have to have silver. Gosh, you take a look at the electronic devices you have, whether you have an iPad, an iPhone, I watch, whatever, all these gizmos that we have, you have to have silver. Silver has not gone anywhere since 1980, so it has been 40 years.
Jim Puplava:
And silver is one of the few metals that are strategic. We need them for solar panels. We need them for cars. We need them for electronics. We need silver.
Jim Puplava:
The uses for silver are staggering. And yet the price of silver today is selling at 50% below where it was 40 years ago.
Chris Martenson:
I know, it's just silly. And I think that's done for narrative control. I do believe in my heart of hearts that there are players out there that are, let's call them official, whether it's the Federal Reserve, it's proxy agents, government, but there are powerful players who are interested in commodities, staying low. And of course, there's a lot of incentives for that in the whole structure. Right?
Chris Martenson:
Like corn. Same thing. Corn costs the same per bushel today it did in 2006. Right? Farmers have extraordinary input things anyway.
Chris Martenson:
But I'll guarantee you the price of a box of cornflakes is not the same as it was in 2006. It's gone up at least 200%. Right. So there's a lot of players who are interested in sort of squishing the commodity side of this down. And it works, right?
Chris Martenson:
But it works until it doesn't. And you know what happens is silver mines don't get opened and copper mines won't get opened. And then by the time you wake up and go, oh, price signal was a little off the mark, it should be a lot higher because what we need is more supply. It's kind of late in that story to get going. So looking forward, I mean, you can't wave your arm in a lazy circle on the Internet and find articles from all the commodity analysts saying, wow, we have a huge, obvious structural shortfall in copper and silver going forward.
Chris Martenson:
Silver, we're down three years. Mine output is down three years in a row. Demand is up three years in a row. How do you do that and have prices basically go nowhere? Zero.
Chris Martenson:
Silver is exactly where it was ten years ago in terms of pricing. And we have very obvious mismatches. So, again, for the people who are paying attention to this, I think it's an opportunity. I actually am thankful to be able to buy stuff cheaper. I kind of like that.
Chris Martenson:
I'm getting a little frustrated that they're doing this for too long because I think they are going to create a disaster because they're playing their games for their own reasons, but they're not looking at the bigger picture. It's kind of like, I don't know if you saw this, but when the Harvard trustees got together and looked at these numerous examples of obvious plagiarism by their president, right, and they came to the conclusion that it wasn't a problem. It's like what they're not doing is they're not attending to the core things they need to do to assure that they're a viable institution going forward for the next 100, 200, 300 years, they're sacrificing a whole lot of the future just to get a little temporary repeat today. It's really gross, but good times create weak men, and weak men give you bad times. And I think that's where we are in this story.
Chris Martenson:
This feels really weak to me.
Jim Puplava:
Well, the other issue that they're doing, they are going to create a shortage because if you reduce the price, number one, if I'm a miner and I can't cover my cost of mining because we know fuel costs have gone up, labor has gone up, steel has gone up, all the components of mining have all gone up tremendously over the last two decades, but the price has gone down. So whether you're doing it to oil companies, whether you're doing it to mining companies, you are reducing the supply by the very nature of suppressing prices. So you are actually creating a future shortage at some point in time is going to hit well.
Chris Martenson:
Absolutely. And there's a third hidden component in that, which I got from Simon Michelle, again, the mining guy, he said, look, when you go from, say, a 1% ore grade down to a 0.5% ore grade, it's not a diminishment of half. It's not like things are twice as expensive. You got to get out twice as much rock. That's true.
Chris Martenson:
But step one is getting the rock out of the ground. Step two is you put it in these things called ball mills, and their job is to crush this down to a really fine powder so that you can expose the individual little crystal level so that when you run it through your chemical process, the copper leaches out and floats off. He said, the problem is that you have to grind these things to, let's say, a unit of one, if it's a 1% ore grade, but when it goes to 0.5, you have to grind it four times finer. It's an exponential problem. And so that grinding cost is a lot more expensive.
Chris Martenson:
So we've already worked our way through all the high end ore grades in the world, and now we're chewing our way down to, as you mentioned, lesser and lesser ore grades just on the back end of that. I would just like to alert everybody that the energy costs for that, because the ball mills are expensive, turning a rock into dust, very expensive energy wise and cost wise, that that actually is exploding exponentially higher. So it's not even like you can just take 3% inflation on average and multiply and say, well, that's what the mines have experienced. They're not. They're experiencing also the inflation that comes from having to prosecute lower and lower ore grades, as well as a much higher rate of inflation for core things like labor, like steel, like equipment, like diesel, like the explosives they use.
Chris Martenson:
If they're in a pit mine, things like that, it's vastly more expensive. So guess what? We don't have the mines opened up that we should have. Guess what? Analysts now say we're going to have a huge shortage.
Chris Martenson:
Guess what? For some reason, copper just can't break out of its price range because somebody steps in and is there to sell lots of futures contracts. If it pokes its head up.
Jim Puplava:
Well, we already saw that two Morgan traders have gone to prison for spoofing the gold market. But there's something that's even greater at risk here. When you look at all these things, we talk about technology. Everybody's excited about AI, but the world that we live in, this modern, industrial, technological world. And let's talk about technology for a know.
Jim Puplava:
I think I was talking to. I don't know if it was Simon, Michelle, or Robert Bryce, but if you take a look at an iPhone, and it doesn't take much electricity to charge an iPhone, so Apple can know they're energy efficient and they're carbon neutral. But, Chris, think of what you do with your iPhone. You're on the Internet, you're sending texts, you're in the cloud. Those cloud centers require massive, and I mean massive amounts of energy.
Jim Puplava:
And that's why there's just no, what I call logical, critical thinking in doing this. Yeah, I love my iPhone, but this iPhone is dependent on those huge cloud centers and huge computer farms that allow me to do the things that I do with my iPhone.
Chris Martenson:
That's a really great point. There is that hidden energy consumption, and it's massive. Yeah. So the Internet uses a huge amount of electricity, and I like what the Internet does for us. I think if we don't actually think about this very carefully, and we're not diligent in approaching this in a very logical.
Chris Martenson:
Right, we risk running into an energy poor future, and that's just not as fun a place to live. And by the way, it's totally avoidable. But we'd have to start by not making Jennifer Granholm our energy secretary. Right. A great diversity hire on that one.
Chris Martenson:
Right. But next time, why don't we put somebody in there who actually knows something about energy and the business of it? That would be fantastic, because, boy, she doesn't know what she's talking about.
Jim Puplava:
No, I think she was going to demonstrate the practicality of evs, and they ran into problems getting it charged. So, I mean, they didn't even think that through. Chris, what would you be doing in this situation? We're talking about resource scarcity. That at least I think you and I both see coming this decade.
Jim Puplava:
I don't care if it's copper, if it's silver, even gold, cobalt, lithium, nickel, all the key things that make our modern industrial, technological world. What would you be doing now as they keep continuing to suppress prices?
Chris Martenson:
Well, I do think these make a fantastic investment thesis for somebody who's interested in commodity investing. The ratio between commodities on a cost basis compared to the S p. We're at a generational low in that ratio. And so I do think there's obviously some opportunities there. People should also be aware of the idea that this creates a lot of potential fragility in the system.
Chris Martenson:
So right now, a huge amount of what I consider to be part of my standard of living comes on a box from China. And that requires a very complicated system. It requires good friendly relations, it requires a trade agreement that works out. It requires energy. It requires a lot of things to continue as is.
Chris Martenson:
I'm a little worried about how this carries forward. So I like people to think about resilience and build resilience into their lives. I think it's fantastic. If you can, like you have both solar panels and a charger and an electric car, you're relatively insulated now from whether or not the California grid goes into a brownout or the gas station up the street doesn't have supply at some point, for some reason. Right?
Chris Martenson:
So around things like food and fuel and community and all that, I really think it's time for people to understand that this could get a little spicy going forward. And I'm a little worried. I don't want to be Mr. Worry all the time, but I'm a little worried about coming into this 2024 election cycle in the US just because there's just such obvious gaps between how the two branches of parties are starting to think about things. And there's a lot of concern about election integrity.
Chris Martenson:
A lot of faith has been lost. I know you know this framing, so I'm sure your listeners do. But we're in the fourth turning. Institutions are being dismantled, and people's trust and faith in them is gone. And I don't think we're through that cycle at all.
Chris Martenson:
I think we're kind of in the midst of it. So I want people to just be resilient, prepared, really understanding what the context of the larger game is. And if you're careful and lucky, I think there's actually some good profits to be made in here, because I do think the main narrative is wrong. That's being put out there by what I'll call the center mass of our.
Jim Puplava:
You know, the other thing, too, along this is with the scarcity of these things. And a good example of this, Chris, was what happened during the lockdowns with the supply chains. You had people that couldn't get their prescription drugs because they came from China. I mean, think of all the things you couldn't get, whether it was food, whether it was drugs or things like computer chips as supply chain. So that just gives you sort of like a brief glimpse of what could happen down the road.
Jim Puplava:
Because if you don't have the minerals, if you don't have the energy, how are you going to produce the stuff, number one? Number two, how are you going to get it to the consumer? So there are just numerous things here that we could think about. You know, the other item that kind of hit me is we're going into an election, Chris, and you talked about election integrity. You've got the president of the United States that could be possibly going through impeachment.
Jim Puplava:
You've got his opponent who's tied up in four major courts and they're talking about maybe even sending the guy to jail. So imagine what the rest of the world thinks about the United States when those are our two leading candidates going into 2024. And you know what they do during election years? They promise you everything but do nothing.
Chris Martenson:
Yeah, I've studied this long enough beyond a shadow of a doubt that we haven't had election integrity in many, many years. There's just huge, obvious problems with this. It's been suppressed for a long time. That was one of the things that get you kicked off of YouTube. You would get a strike if you dared talk a question.
Chris Martenson:
Election integrity. Right. But they're just obvious questions that anybody should be asking. There's statistically impossible results that have come up over and over again. It got so ludicrous that I was like, what?
Chris Martenson:
Eight years ago you would read headlines in the Washington Post saying, oh, it turns out exit polls aren't reliable anymore. Like, no, that wasn't the know. Exit polls are the gold standard of how you detect that something's wrong on the other part of your story. But they gaslit us and told us that exit polls don't work anymore. Like, that's a weird conclusion.
Chris Martenson:
Right? So that's the backdrop. And then, of course, we've seen that this administration has been shameless about weaponizing and creating a two tier justice system against its opponents, which is very banana republic. And so that's starting to really grate a lot of people the wrong way. And so this could get really, yeah, like I said, this could get kind of interesting.
Chris Martenson:
And I'm very worried about how that will actually play out in other aspects of our lives. So with all that said, just be resilient. And I tell people, you can plant a garden, grow your own food, make sure you have gold and silver out of the system. And there's just so many signs that the keepers of our system have just done a spectacularly good job of engineering it for their own personal, private gain. But the sense that we are a country with a set of shared aims and values is gone.
Chris Martenson:
And welcome to the fourth turning.
Jim Puplava:
Yeah. One final question, the other element to all of this. At one time, we used to have a media. You would have members of the media that would ask critical questions, like what you and I are discussing here. Okay, we're going to go green.
Jim Puplava:
We're going to go evs. Where's electricity going to come from, number one? Number two, how are you going to get the raw materials, whether it's lithium, cobalt, or nickel, where's that going to come from? And how is everybody going to pay for this? And how are you going to do it in less than ten years when we've never done energy transitions?
Jim Puplava:
Take anywhere from 30, 40, 50 years. If you take a look at going from wood to coal, from coal to oil, that takes time. And we're going to do this in ten years.
Chris Martenson:
No, we're not.
Jim Puplava:
Absolutely. Well, listen, Chris, as we close, if our listeners like to follow you do a lot of great stuff down at peak prosperity. Tell our listeners about it.
Chris Martenson:
Well, I'd love to. Thank you. So, for anybody who's interested, this is the kind of conversations we have at peak prosperity every day. We've got a very lively community of people who are subscribers there. And, Jim, for your listeners today, if anybody wants to try, we have a complete 30 day, no questions asked money back guarantee.
Chris Martenson:
But if you wanted to try that and get 35% off sense, 35, that would be the code for your listeners to just give us a try if they were interested in that. Because every single day I'm an information scout, so I just go out and I find stuff, and I talk about, well, just like you do here. We talk about elections, maybe, or resources or oil or what's happening. One thing we didn't get to is Yemen's busy lobbying missiles at container ships and things in the Red Sea. So these are all things I think people should track.
Chris Martenson:
Most people don't have time to do that, so I do. And so that's what I do as an information scout for my followers.
Jim Puplava:
All right, well, listen, Chris, you have a merry Christmas and a prosperous new year. Hope to talk to you again.
