Luke Gromen — Why U.S. Treasury's Bond Market Intervention Is Just The Beginning
"He has a debt spiral problem today. That's why he acted. It's why he acted two weeks ago. It's why he acted yesterday. It's why he's going to keep acting going forward."
One-line take: recorded the afternoon Bessent doubled Treasury buybacks in the 10-to-30-year sector ("literally today, August 19th"), and Gromen's read is that this is not a panic but the next rung on a ladder he has been mapping for eighteen months: "it's essentially operation twist… another soft form of yield curve control," the same vector as the UAE and Japan FIMA swap lines, the yen intervention and the stablecoin push — manage the long end by issuing more at the short end. His firm's note the previous morning was titled "3Q26 TBAC report says Bessent has an emerging-market hard-currency debt-spiral problem today" — underlined today. The arithmetic: entitlements + interest + veterans' benefits = 105% of receipts, with those obligations growing 7.5% year-to-date against receipts at 4%, receipts themselves flattered by an AI boom that "will burst at some point because every capex boom smaller than this one in US history going back 200 years" did, and $1.4 trillion of net borrowing across the next two quarters. Which is why he says it was "mathematically impossible" for Warsh to be a hawk — "go read his December 2018 op-ed… they were begging for the Fed to cut rates because bank stocks were down 15%" — and why the Iran war was "galactically stupid": the 10-year was 3.94% the day of the attack and 4.74% yesterday. The trade reduces to one line in the sand: "over 4.8 on the 10-year, bad things. If it goes over 4.8 and goes into a debt spiral, you want to own gold. And if they inject liquidity to stop it at 4.8, you want to own gold." The precedent is 1946–51 — debt/GDP from 110% to 55% in five years with real rates at −3% and bondholders losing half to two-thirds in real terms — and his own one-month version is explicit: ESF bids gold aggressively, settle China trade deficits in gold, instruct Warsh to revalue the gold certificates from $42.22 (Fed accounting manual §2.10, ≈$5 trillion into the TGA), buy back everything past five years, then stuff the rest into stablecoin T-bills yielding 60bp. Cost: 10–15% inflation for a couple of years, the Dow from 50,000 to 100,000, and "Treasury holders get killed" — banks and boomers. Positioning: long stocks in dollars, short stocks in gold, own industrials and the metals, stay away from the long end — TLT is down 90–95% against gold since 2014 with "another 90 to 95% to go… mostly via gold." The duration he wants is "0% yielding, infinite face value, infinite duration, and finite issuance."
1. Stocks & names mentioned
Gromen is a top-down macro analyst and this is his most macro-first appearance yet — fiscal arithmetic, buybacks, the yen, gold revaluation mechanics — expressed through assets rather than single-stock calls. Stance reflects how each is framed in this conversation. Research legend: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis. Note: Marathon Petroleum, NVIDIA, Alphabet and BlackRock all surface inside host questions or as illustrations of AI-boom financing, not as Gromen picks — they are carried Neutral. The Teucrium corn/wheat/soybean/sugar ETFs are the show's host-read sponsor advertisement and are deliberately excluded.
| Ticker | Name | Research | View | What he said | At |
|---|
| GLD | SPDR Gold Shares | QT · SA · STK | Positive | The whole appearance resolves to it: "all roads lead to gold." The line in the sand makes it a both-ways trade — "if it goes over 4.8 and goes into a debt spiral, you want to own gold. And if they inject liquidity to stop it at 4.8, you want to own gold." Gold is now "a bigger share of FX reserves than treasuries are — that's just a fact," central-bank buying returned to record highs in calendar Q2, and his own one-month fix has the ESF bidding gold aggressively before Warsh revalues the certificates. | 43:56 |
| SPY | SPDR S&P 500 ETF | QT · SA · STK | Positive | Long in dollars, short in gold — stated as a rule twice. "Shorting American stocks in dollar terms is not a good idea. Shorting them in gold has been a great idea": S&P total return is down almost 30% against gold since Powell began hiking in early 2022 and 50% against gold since 2000, and he expects gold to keep outperforming equities "over the next two to five years." Under his own one-month fix the nominal side goes vertical — "Dow probably goes from 50,000 to 100,000." | 40:02 |
| Copper | Copper (commodity) | — | Positive | "I like them. I like silver. I like copper. Copper quietly is what, like almost seven bucks? Everyone was talking about it, no one's talking about it anymore." The reason is the grid: "you cannot build a grid with dollar swap lines" — a self-sufficiency build-out has to be paid for in physical metal, not financial engineering. | 1:18:20 |
| SLV | iShares Silver Trust (silver) | QT · SA · STK | Positive | An explicit view at last, after the Aug-14 appearance where silver appeared only in the video title. Asked about non-gold metals and minerals: "I like them. I like silver. I like copper." Grouped with iron ore and steel as the physical inputs to a grid and an industrial base that cannot be conjured financially. | 1:17:55 |
| IBIT | iShares Bitcoin Trust | QT · SA · STK · FA | Positive | "I like Bitcoin long term" — the clearest statement he has made — but with a sovereign-scale caveat immediately attached: "Bessent's been talking about controlling the pipelines and the on and off ramps to this. And purists know you don't need on and off ramps for Bitcoin. But I think probably at sovereign levels, that's a bit much." Gold's edge in the same passage: you don't need anyone's permission or the banking pipelines to sell it. His 2024 rate-cut/liquidity call also listed Bitcoin as a beneficiary — "check, check, check." | 22:52 |
| Industrials | Industrials / steel & iron ore (theme — no single ticker named) | — | Positive | Stated as positioning: "it tells me you can't short stocks in dollars. Tells me you can short stocks in gold. It tells me I want to own industrials." The driver is the reversal of twenty flat years of US electricity generation plus private manufacturing construction currently down 18% year-over-year — the build hasn't even started. "I think iron ore, steel, all these — you cannot build a grid with dollar swap lines." | 1:16:52 |
| Semiconductors | Semiconductors / AI chips (sector — no single ticker named) | — | Neutral | Take profits, don't short. "The bubble's not over yet" — the SEC loosening securitization rules for AI paper and Jensen Huang's compute-derivative talk are "making it easier to get more credit to them," and new credit is exactly what keeps a mania running. But: "once you were two to three years into any of those other bubbles… you did better by selling most of the bubble and buying gold. Gold outperformed over the full cycle." Explicitly not a short: "I wouldn't short them here." | 1:11:35 |
| MPC | Marathon Petroleum | QT · SA · STK · FA | Neutral | Named once, in passing, as the obvious expression of the war's one clean winner. The host's point is that refined products — jet fuel, gasoline — stayed "stubbornly high" while crude fell, so "the refining margins have been really really high"; Gromen's answer is the ticker itself. No thesis is developed and no position is implied. | 17:51 |
| NVDA | NVIDIA | QT · SA · STK · FA | Neutral | Referenced as evidence of the credit-creation phase of the bubble, not as a company call: "you got NVIDIA, Jensen bragging about creating a compute security derivative, whatever. That's fine. No judgment. I know what that is. That's making it easier to get more credit to them. So the bubble's not over yet." The host separately argues the track is laid for $300 billion of operating profit. | 1:08:55 |
| GOOGL | Alphabet (Google) | QT · SA · STK · FA | Neutral | Raised by the host, not by Gromen: Google's reported "800 billion dollars in forward purchase commitments" as evidence that the Q4 numbers will confirm what the off-balance-sheet agreements already show. Gromen concedes the near-term point — "I agree with you that it's going higher, the bubble hasn't popped yet" — while insisting every prior capex boom ended in a bust. | 1:10:17 |
| BLK | BlackRock | QT · SA · STK · FA | Neutral | Referenced through Larry Fink, again by the host — "Larry Fink said we're going to create these AI securities… Are you doubting Larry Fink's ability to raise money? I'm not." Gromen's rejoinder is the interesting part and is about the source of the money rather than the firm: "he's probably over in Saudi Arabia getting money. And I would say, from who? What money do the Middle East have to invest now?" | 1:09:44 |
| TLT | iShares 20+ Year Treasury Bond ETF | QT · SA · STK · FA | Negative | Bearish in real terms, deliberately not nominally. "What odds would I ascribe to the United States government nominally defaulting on its treasuries, on its entitlements or veterans benefits? Zero" — so the damage comes through the numéraire: "since 2014, when global central banks stopped buying treasury bonds on net, in gold terms the TLT is down 90 or 95%. I think it's got another 90 to 95% to go against gold and I don't think it's going to move that much" — the next leg is "all gold." Also a vol view: treasury vol stays elevated with hedge funds now 8.5% of the market via the levered basis trade. | 38:22 |
| FXY | Invesco CurrencyShares Japanese Yen Trust (yen) | QT · SA · STK | Negative | The intervention keeps failing: Bessent sold ~11 billion euro of reserves to buy yen, trailed on Instagram so the hedge-fund community would front-run him and do the heavy lifting, and "it bounced back pretty quickly… it's already retraced over half of that full intervention." The war did the damage — "the yen gets killed, energy costs go up on the yen, so now the JGB markets sell." The constraint is symmetric and is why he says they were finished two years ago: too strong a yen unwinds the yen carry trade, too strong a dollar unwinds the dollar carry trade. | 24:54 |
| Private credit | Private credit (asset class) | — | Negative | The non-bid is the tell. Insurers swapped long Treasury duration for SOFR-linked private loans; then the 10-year went to 4.7 and they still didn't buy. "If they could sell it at a decent mark and buy a 10-year Treasury bond at 4.7, 4.75, they would have — and they didn't. That gives you all you need to know about the actual liquidity and solvency of a lot of the stuff that's in private credit." He links the UAE's illiquidity to it — "up to their chin in private credit" when Hormuz shut — and reads the whole thing straight through to more liquidity injection: "we know what to do with that. Buy gold." | 1:22:01 |
Stance = how each is framed in this interview, not a price rating. He also discussed at the macro level: the doubling of 10y–30y Treasury buybacks as operation twist / soft YCC; the 3Q26 TBAC report and the "EM hard-currency debt spiral today" framing; entitlements + interest + VA at 105% of receipts growing 7.5% against receipts at 4%; $1.4trn of net borrowing over the next two quarters; Warsh's December 2018 op-ed and his trimmed-mean/"doesn't have to be a zero" breadcrumbs; the "fair price for assets" qualifier via Greg Ip; the 4.7–4.8% line in the sand on the 10-year; the 1946–51 Fed–Treasury Accord playbook (real rates −3%, bondholders lose half to two-thirds, debt/GDP 110%→55%); the gold-revaluation mechanics of Fed financial accounting manual §2.10 ($42.22 → $20,000 ≈ $5trn into the TGA) and the Clarity Act / stablecoin T-bills at 60bp; a gold–oil peg at 500–1,000 barrels an ounce set by US–China–Arab agreement; Hamiltonian economics (Bessent's New York Economic Club speech + WSJ op-ed, Jamieson Greer at Davos, Vance in 2023); US electricity generation flat 2004–2024 against China's 2× grid; AI halving the tax base (healthcare administration the largest employer in 39 states); every capex boom since the 1840 canals ending in a bust; the UAE swap lines as Bessent financing the Gulf money that funds US AI; the yen-carry / dollar-carry twin tripwire from his August 2024 report; China's EV fleet cutting oil demand and defusing the Hormuz shock; and FX-hedged 10-year treasuries at −120bp for Japanese buyers. See the talking points and the master macro viewpoints.
2. Talking points
0:44 AI and the Treasury are bidding against each other for the same capital
- The December thesis played out: hyperscaler issuance is running toward $500 billion this year and long-end yields are ~50bp higher, with the 30-year well above 5%.
- "You've got essentially AI bidding for capital. Secretary Bessent bidding for capital. The two of them are competing with each other" — and the paradox is that AI bids up the cost of capital "against a government who is dependent on receipts, half of the receipts from employment," while AI in the short run must reduce employment for its own case to work.
- Three causes of the yield rise, in order: AI, bigger-than-expected deficits after the Supreme Court struck the tariffs down, and "the stupid Iran war."
2:49 "He has a debt spiral problem today" — the TBAC report
- FFTT's client note the previous morning: "3Q26 TBAC report says that Bessent has an emerging market hard currency debt spiral problem today. And we underline today."
- Market framing that he rejects: "People are saying, oh, it looks like he panicked. They said he should be panicking."
- The 10-year was 3.94% the day the US attacked Iran and closed "at almost 4.74%" the day before the announcement.
3:34 Doubling buybacks is soft yield-curve control — and it is the same vector as everything else
- "It's essentially a version of, depending on how you want to spin it, operation twist. It's another soft form of yield curve control."
- The previous week's FFTT report already had the title "Secretary Bessent accelerates towards yield curve control": the yen interventions were soft YCC, the push to upsize the FIMA swap lines so Japan could use them was soft YCC.
- "Whether it's the UAE swap lines, whether it's the Japan swap lines, whether it's the stablecoin thing, whether it's Treasury buybacks… it's all in the same direction, which is managing the long end by issuing more at the short end. And that's fine… The trade-off is that it's going to be inflationary."
4:51 It was "mathematically impossible" for Warsh to be a hawk
- The record: "Go read his December 2018 op-ed… They were begging for the Fed to cut rates because bank stocks were down 15% off the highs. He's no hawk."
- The parallel he keeps returning to: "in the same way that the math suggested that there was no way that Elon could DOGE 200 or 500 billion or a trillion, there's no way Warsh could be a hawk."
- The frustration of being early: "for four months you get these stretches in markets where everybody in New York, they all repeat the same hymnal… oh yeah, he's a hawk and yes, sell gold, buy bonds."
6:52 "What is the math?" — 105% of receipts, and the wrong side of the growth rates
- Entitlements + interest + veterans' benefits are 105% of receipts through fiscal Q3, with receipts near all-time highs and flattered by the AI boom.
- The kicker is the differential: those interest-like obligations are "growing 7 and a half% year-to-date. Receipts are only growing four."
- The obligations are effectively hard-currency debt: "Bessent doesn't owe boomers dollars. He owes them inflation adjusted dollars in social security. He owes them hips, knees, pharmaceuticals, doctor's time" — so printing raises the liability. "Just as if Argentina owed dollars. Just as if Venezuela owed dollars."
8:54 Not this administration's fault — FDR, LBJ, and fifty years of cowardice
- 80% of the receipts consumed go to Medicare, Medicaid and Social Security — roughly $4 trillion a year — legislated in 1935 and 1968.
- "Then you had 50 years of political cowardice by every politician since, because any idiot with a calculator could go: wow, 70 million boomers born. Someday they're going to turn 65. What do we do?"
- "The math didn't change because Warsh is younger and handsomer and has better hair. It didn't change because Secretary Bessent ran a hedge fund and Janet Yellen was an academic."
10:52 Warsh's dovish breadcrumbs were in plain sight
- He keeps citing trimmed-mean and other measures that print below actual inflation — "he keeps on laying dovish breadcrumbs that the market didn't really pay attention to."
- The first press conference: after the task forces, "there doesn't have to be a zero at the end of the inflation thing" — 2.1 or 2.9 rather than 2.0. The host: "Jay Powell would never say that."
- The Bessent tell is the same shape — savage about Yellen in '23–'24, "and then he gets in the seat, he does all the same things except bigger and faster and harder… he's not making himself a meme for giggles. He's doing that because he has no other choice."
13:45 "A fair price for assets" translated
- Via Greg Ip's column on Warsh's congressional testimony: stand aside, don't be the referee — "and then he leaves a qualifier of unless we're in a crisis, and then I'm going to make sure there's a fair price for assets."
- Gromen's translation: "I'm going to make sure Treasury bond yields are low enough so that the US government can afford to make its interest payment."
- The circularity the Fed chair won't acknowledge: he says he's watching the market, "but the market is being influenced by the Treasury."
15:08 Iran: the straw that broke the camel's back — and the call he got wrong
- "This Iran war was so galactically stupid… it's going to be seen as the straw that broke the camel's back." Warsh's ability to be a hawk "died on February 27th."
- Three of four calls landed: the war lasts longer than expected, Hormuz stays closed longer than expected, "the Treasury market will break way before the Iranians or the Chinese." The miss was the global supply-chain implosion.
- Why he missed: China took 3–4 million barrels a day of demand out, roughly a million of it permanently through EVs. The irony: "China now controls the oil market as a result of this action that was said to grab control of China's oil."
18:21 Netting the war out: good for stocks in dollars, bad for stocks in gold
- All else equal the war means higher oil and commodity inflation and higher bond yields — but containing yields is "probably even more inflationary for commodities," while being good for nominal GDP and for financing AI.
- "When I blend all of this together, I think the war ends up being positive for stocks in dollar terms and negative for stocks in gold terms. Basically a continuation of what we've seen."
- The mechanism underneath is one sentence: "the only way the US is able to stop itself from a debt death spiral… is by keeping real rates negative."
20:21 Gold sold off because it is back in the system
- The puzzle: gold peaked around Warsh's appointment and fell during the war, the opposite of the old geopolitical-hedge behaviour. The answer: "gold's now part of the system again. It's a bigger share of FX reserves than dollars are, than treasuries are… when it rains you got to sell."
- China took the other side all the way down — "10 tons this month, next month 12 tons, next month 14, 19, 26" — and central-bank buying overall returned "to basically all-time highs" in calendar Q2.
- The property that matters: "nobody needed to do gold swap lines. Nobody needed to intervene in the yen because people were selling too much gold. It just worked. And they didn't need Bessent's permission to sell gold, like US allies need reportedly permission to sell treasuries."
23:59 The yen intervention, the FIMA swap lines and the nastygram
- Mechanics: Bessent sold ~11 billion euro of reserves to buy yen, pre-announced with a stylised Instagram post "to try to get a bunch of friends in the hedge fund community to front-run him and do the heavy lifting for him."
- It didn't hold — "it's already retraced over half of that full intervention." Nick Timiraos questioned whether the FIMA swap lines were in the true spirit of Fed policy; Bessent answered with a nastygram.
- What the anger reveals: "that smacks of the desperation that Bessent feels — which is at the end of the day the Fed's job is one thing: finance the US government… They never thought it would happen again. It happened in World War II. It's happening again."
26:54 The twin tripwire — and why he thinks they were finished two years ago
- The dollar leg he had tracked for years: $13–14 trillion of offshore dollar borrowing against foreigners' $22 trillion net / $65 trillion gross dollar assets including $9.5 trillion of treasuries. A too-strong dollar forces them to sell treasuries and stocks.
- The leg that surprised him in August 2024: "I forgot there's also a yen carry trade, and if the yen gets too strong it triggers forced selling of stocks, bonds around the world."
- "That's where I knew they're done… if the yen gets too strong, they're screwed. You have a crisis. If the dollar gets too strong, you're screwed. They have a crisis." The only play is brake-and-spur liquidity to keep USD/JPY rangebound: "you're just moving pieces around the chessboard, playing for time before you're checkmated."
34:32 Two live wires that keep narrowing
- Dollar too weak → inflation expectations rise → the long end sells off. Dollar too strong → foreign selling → the long end sells off. "The more you keep adding debt, those two live wires that they're on, they keep narrowing."
- Debt passing $40 trillion "today, tomorrow, next week, something like that" — a former Treasury staffer's benchmark from six or eight years ago was $19 trillion.
- A modestly weaker dollar buys time, "but ultimately he's going to have to do something very drastic," because the spending is 80% boomers and interest and "docs aren't going to work for free."
36:46 The line in the sand: 4.7–4.8% on the 10-year — and both sides of it are gold
- "Over 4.8 on the 10-year, bad things" — the level moves a little with oil and the dollar (4.6, 4.7, 4.8) but the policy reaction doesn't.
- The trade written out: "if it goes over 4.8 and goes into a debt spiral, you want to own gold. And if they inject liquidity to stop it at 4.8, you want to own gold."
- He is explicitly not nominally bearish long bonds: the odds of a nominal default on treasuries, entitlements or veterans' benefits are "zero." The loss is real, not nominal.
42:07 The only precedent that matters: 1946–51
- "The last time debt to GDP was here, 110% debt to GDP, was 1946 and we got it to 55% in five years… They killed bondholders on a real basis between '46 and '51."
- Real rates bottomed at −3%; "they lost probably half to two-thirds of their money on a real basis in five years. That's what has to happen."
- The Reagan comparison is a category error: "Reagan had debt to GDP of 30%. Because they had run debt to GDP from 110 down to 25% from 1946 to 1970." Today's buyback upsize is plausibly "the down payment on that."
43:56 "I could have this thing done by the end of the month" — the five-step fix
- (1) The Exchange Stabilization Fund bids gold aggressively. (2) Announce all trade deficits with China settle in gold — "we've kind of been de facto doing that." (3) Once gold is at a big number, instruct Warsh to revalue it, creating a TGA deposit free and clear. (4) Buy back everything beyond ~five years for cash. (5) Roll out the Clarity Act and push the rest into stablecoins — "a stablecoin T-bill doesn't yield three and a half, it yields 60 basis points. Have a good day."
- Who pays: "Treasury holders get killed. Inflation goes nuts. Wages go nuts. Nominal GDP growth goes nuts… Who holds all the bonds? Banks who got bailed out and never paid for it, and boomers, who are the richest generation in history and are consuming 80% of the budget."
- Price of admission: 10–15% inflation for a couple of years, the midterms lost, and "Dow probably goes from 50,000 to 100,000."
46:50 How a revaluation actually books — Fed accounting manual §2.10
- The Federal Reserve's financial accounting manual, section 2.10, holds the gold certificates at $42 and lets the Treasury Secretary instruct a revaluation "at his sole discretion."
- The entry: "It's basically just debit gold, credit cash… you have to have an offsetting journal entry" — 261 million ounces, "every $4,000 is roughly a trillion," so $42 → $20,000 books roughly $5 trillion into the Treasury General Account.
- "That's like the MMT platinum coin trick except it's actually on the books in the Federal Reserve manual" — and it may be "one of their only ways out of this."
49:50 The fireside chat he'd give
- "I would do the FDR thing… Listen, something that is extraordinary is going to happen over the next month. And the reason it's happening is because your leaders have been lying to you for 80, 90 years."
- The distributional promise is the political core: the inflation "is going to be most painful to those areas of the US economy and world that benefited most from this arrangement: Washington, Wall Street, and retirees. And least painful for those who were hurt most: the working class, the middle class, wages."
- "And then I stand aside because I don't want to run again."
52:40 Gold high enough doesn't destroy the Treasury market — it collateralizes it
- The live example: "the more the yuan collapses against gold — and it has collapsed… What's happened to Chinese yields? Down, down, down, down, down."
- "At the right price of gold, you're basically going to have a gold collateralized de facto treasury market" — citing Judy Shelton's groundwork, 2% long rates, "maybe three," if it's gold-collateralized.
- Sizing: $20,000 gold makes the US hoard worth ~$5 trillion, "probably 100% of everything over at least seven years and maybe over five years, and you can buy it all back." The paradox: inflation ripping in the short run, lower yields on the other side.
55:04 Peg gold to oil — never to a currency
- Explicitly not a currency peg. The arrangement is an international agreement — "you could do this through agreement between China, Russia, and the Arabs" — fixing gold against oil at something like 500 to 1,000 barrels an ounce.
- The arithmetic and its consequences: $60 oil at 500 barrels/oz implies $30,000 gold; a euro-priced version implies ~50,000 euro gold. "The whole exorbitant privilege goes away. We can't print dollars for oil anymore."
- The second-order effect on China: cheap oil implies cheap gold in yuan, "yuan's going to strengthen a lot against the dollar. China's ability to be mercantilist will also be hamstrung."
58:44 Hamiltonian economics is stated administration policy
- Bessent's Tucker Carlson line from April 2025 — "Gold can't have a fiscal problem. Gold cannot have a giant budget deficit. Gold cannot have a war" — plus his admission that he'd "probably be considered a gold bug when I ran my fund."
- June 2026: a New York Economic Club speech on Hamiltonian economics backed the same day by a Wall Street Journal op-ed — "Trump's economic statecraft is based on Hamiltonian economics… neutral reserve asset, high tariffs, tax foreigners to pay for America rather than tax Americans to pay for foreigners."
- Corroboration up and down the administration: Jamieson Greer at Davos calling out Keynes's neutral-reserve-asset proposal at Bretton Woods as the better idea, and Vance saying in 2023 that reserve-currency status is no longer in America's interest. "They're all on board. They're doing it. But we're still in this bargaining of, well, what do we do with the bond market? Simple. Kill it."
1:03:37 Twenty flat years of electricity — the cleanest measure of what happened
- "One of the easiest ways to look at the real economic growth and power of a country is to look at its electricity generation. The United States did not generate any more electricity from 2004 to 2024. Flat for 20 years. Most of the growth of the US economy from 2004 to 2024 was inflation."
- China had less than half the US grid in 2004 and now has more than twice it.
- The tariff logic follows from self-sufficiency, not revenue: "I'm not going to invest in a metals factory in America that has to compete against the Chinese. No businessman is." And the political stakes: without narrowing the legs of the K, "we're going to go back to 1855, 1856, 1861… there's going to be a lot more Mangiones, a lot more Charlie Kirks."
1:06:02 AI is revolutionary — and it eats the tax base first
- "I think AI is going to be revolutionary. I think it will drive a productivity miracle eventually. But before it does, I think it is going to undermine the tax base… because half of the tax base comes from jobs and a lot of those jobs are white collar service jobs."
- The specific exposure: healthcare administration is the biggest employer in 39 US states, "uniquely suited to being disintermediated massively by AI. And all those people have mortgages, cars, student and consumer loans that they will then default on."
- The bind is symmetric: "if they don't create a bunch of unemployment, then that hits receipts" — because then AI isn't productive enough to justify the trillion in debt, the trillion in lease commitments and the trillion in semiconductor commitments. "A snake eating its own tail."
1:07:25 Every capex boom since the canals has busted — and year two or three is when you rotate
- The Bloomberg chart shows five prior capex booms as a percent of GDP back to the 1840 canal boom — "several US states defaulted, went bankrupt after the canal boom" — and "every single one of those prior five booms ended in a bust. And this one will end in a bust too."
- The bust makes the fiscal hole worse: "Bessent's 4 billion in Treasury buybacks will probably turn to 40 or 400 billion… and the Fed will probably be helping with that at that point."
- The rule, from the same report: "once you were two to three years into any of those other bubbles, you did better by selling most of the bubble and buying gold. Gold outperformed over the full cycle… every other one of them." The extreme case: sell the Dow in May 1929 for gold and "you are still up 15% 103 years later."
- Not yet, though: the SEC loosening AI securitization rules and Jensen Huang's compute derivative are new credit arriving — the pattern he took from reading about the South Sea and Mississippi bubbles. "The bubble's not over yet."
1:12:23 The circular reference nobody has named: Bessent is funding the Gulf money that funds US AI
- Where does BlackRock raise the AI money? Saudi and the UAE — "and I would say, from who? What money do the Middle East have to invest now?"
- What the UAE actually did after the missiles flew: "we need swap lines. We're illiquid. And if you don't give them to us, we're going to go to the Chinese. Scott Bessent was like, whoa, whoa, whoa. I'll give them to you."
- "If Bessent's given swap lines to the UAE to invest in us, who's actually investing in it? He's just creating the money. Which again is fine. I know what to do with that."
1:14:55 The boom hasn't even started — construction spending is down 18%
- Private manufacturing construction is down 18% year-over-year, partly an IRA hangover — "and that's with AI doing what it's doing."
- The thought experiment: "the 10-year is at 4.7 and construction spending is still down 18%. What do you think inflation in this country is going to be when construction spending is actually up? What do you think wage growth is going to be?"
- Which is the whole argument in one turn: "when they actually decide to kill the bond market is when America will actually be great again." At 6–8% inflation, which long bond do you want, and can the government finance itself there? "None of them." "No."
1:17:55 Metals: "you cannot build a grid with dollar swap lines"
- "I like them. I like silver. I like copper. Copper quietly is what, like almost seven bucks? Everyone was talking about it, no one's talking about it anymore." Iron ore and steel go in the same bucket.
- The choice being made: "do we want to be the bank for the Chinese and the world or do we want to actually grow our grid and be a nation that can actually make stuff? I think we've made the choice."
- But the bargaining stage persists — you cannot keep post-1971 reserve-currency status and reshore. "It has to go back to a neutral reserve asset."
1:19:57 Why the dollar hasn't fallen: synchronised debasement hides in the crosses
- The one-line answer to "why hasn't the dollar weakened?": "Gold's up 100% the last year."
- The June–July NATO meeting had the US, Germany, Korea, UK and Japan all announcing more defense spending — "that's like four drunks all going, we're going to get bottles of whiskey and drink more. The UK is in no position to increase defense spending. Japan is in no position… and yet they all are."
- "If we're all debasing against defense spending and gold at the same time, nobody notices. It's brilliant. The dollar is getting weaker. Inflation is back. It's just against stuff, not against other currencies." And they have to do it that way — moving the crosses too far trips the carry trades.
1:21:40 Private credit: the insurers' non-bid tells you the marks aren't real
- Structural damage to Treasury demand: insurers that used to buy 10-, 20- and 30-year duration now hold SOFR-linked private loans with a duration of zero.
- The tell: the 10-year went to 4.7 and they still didn't buy. "If they could sell it at a decent mark and buy a 10-year Treasury bond at 4.7, 4.75, they would have — and they didn't. That gives you all you need to know about the actual liquidity and solvency of a lot of the stuff that's in private credit."
- The Gulf link: the UAE is "up to their chin in private credit" and hit a liquidity wall when Hormuz shut. The conclusion is the same as everywhere else: "they're going to have to inject more liquidity to liquefy everything… buy gold."
1:26:49 Japan is the lead indicator — FX-hedged treasuries at −120bp
- The global long-duration selloff "is kind of not coming from the US. It's coming from Japan," where the 40-year is 4.15–4.2% and there is no yield-curve control beyond the 10-year.
- The number to watch: "FX hedged treasury yields at the 10-year tenor — they are negative 120 basis points in Japan." Which means only two resolutions: "the dollar's got to get a lot weaker to make hedging costs go down, or 10-year Treasury yields in the US have to go way higher."
- "Japan's just telling us what's going to happen in the US. And we know Bessent's not going to let it go above 4.7, 4.8 — which means it isn't enough."
- Japan's own trap is circular: it's borrowing to raise defense spending and just cut a food tax in place since 1989 to fight inflation; if it stops spending on defense, the US pays, and "our treasury market sells off" either way.
1:29:34 "All roads lead to gold" — the duration he actually wants
- The closing formulation, and the cleanest statement of the whole thesis: "I love duration. I just want to own duration that is 0% yielding, infinite face value, infinite duration, and finite issuance."
- "I do not want to own duration that is 4.7% yielding, infinite issuance, finite face value, and finite duration treasuries."
- Whatever it takes is already policy: Bessent's "we will do whatever it takes to support our Japanese partners" — which Gromen reads as "we will do whatever it takes to support the Treasury market" — plus more buyback upsizing and Fed cuts if needed.
3. In plain English
A jargon-free summary of the thesis behind each asset — what it is and why he holds the stance. (Plain-language companion to the table above; renders on each ticker's consolidated page.)
GLD — SPDR Gold Shares Positive
GLD is the largest gold ETF — shares that track the gold price, so you own gold without storing bars. Everything in this interview funnels into it: "all roads lead to gold."
The argument is a fork with the same answer on both branches. The US government's interest bill plus pensions, healthcare and veterans' benefits already costs 105% of everything it collects in tax, and those costs are growing at 7.5% a year while tax receipts grow at 4%. So there is a level of long-term interest rates the government simply cannot afford — he puts it at about 4.8% on the 10-year Treasury. If yields break above it, the debt compounds faster than the country can pay and you want gold. If the authorities print money to hold yields below it — which is what doubling the Treasury's bond buybacks on the day of this recording was — you also want gold. "If it goes over 4.8 and goes into a debt spiral, you want to own gold. And if they inject liquidity to stop it at 4.8, you want to own gold."
What's changed structurally is that gold is no longer a fringe hedge: it is now a larger share of the world's central-bank reserves than US Treasuries are, and central banks bought at a record pace again in the second quarter. That is why gold fell during the war — countries that needed dollars sold their most liquid reserve, exactly as a working reserve asset is supposed to behave — and it did so without needing anyone's permission, unlike selling Treasuries. Gromen's own fantasy policy, if he ran the Treasury, is to have the government bid gold up aggressively and then formally revalue the US hoard, which would create roughly $5 trillion of spending power out of an accounting entry.
SPY — SPDR S&P 500 ETF Positive
SPY tracks the S&P 500. Gromen's rule is blunt and he repeats it twice: do not short American stocks in dollars, do short them in gold.
The reason is that inflation flatters share prices. He compares it to shorting Argentine stocks in pesos — a company's shares rise with the currency's decline, so betting against them in that currency is a losing game even when the country is falling apart. Measured in gold instead, the S&P's total return is down almost 30% since the Fed began raising rates in early 2022, and down about 50% since the year 2000. He expects gold to keep beating equities for another two to five years, especially given what he calls "La La Land valuations" in anything AI-related.
The nominal upside is real, though, and large. Under his own one-month fix for the debt, the stock market "goes nuts" — "Dow probably goes from 50,000 to 100,000" — with hiring and corporate earnings booming alongside 10–15% inflation. That is the whole point of the trade: you make money in dollars and lose purchasing power at the same time, which is why he insists on scoring the position in gold.
Copper Positive
This is copper the physical metal, not a mining company. Asked what he thinks of metals other than gold, he answers plainly: "I like them. I like silver. I like copper" — noting that copper has quietly gone to roughly seven dollars a pound while nobody talks about it any more, which is often when a market is most interesting.
The thesis is the electrical grid. American electricity generation did not increase at all between 2004 and 2024, while China's grid went from less than half the size of America's to more than twice it. Reversing that — plus AI data centres and rebuilding a defense industrial base — takes enormous quantities of copper, steel and iron ore. His line is the memorable one: "you cannot build a grid with dollar swap lines." Financial engineering can move money around; it cannot conjure metal. So if the US has genuinely chosen self-sufficiency over financial dominance, the physical inputs get bid.
SLV — iShares Silver Trust Positive
SLV holds physical silver. This is the first appearance in the archive where Gromen actually gives silver a view rather than having it appear in a headline: asked directly about "non-gold metals and minerals like silver or copper," he says "I like them. I like silver. I like copper."
Silver sits in both of his buckets at once, which is part of the appeal. It is a monetary metal, so it benefits from the same debasement that drives his gold call; and it is an industrial input, so it benefits from the grid and reshoring build-out he expects once the US stops trying to be the world's bank. He gives no price target and no allocation — the endorsement is one sentence — so this is a stated preference rather than a developed thesis.
IBIT — iShares Bitcoin Trust Positive
IBIT is the largest spot-Bitcoin ETF, so it moves with the Bitcoin price. "I like Bitcoin long term" is the most direct endorsement he has given in this archive — and he attaches a caveat in the same breath that is worth understanding.
The caveat is about plumbing. He notes that Bessent has talked about controlling the on- and off-ramps — the exchanges and banks through which Bitcoin is converted into and out of regular money. Bitcoin purists reply that you don't need those ramps at all, and Gromen agrees in principle but not at the scale that matters here: "at sovereign levels, that's a bit much." A country that needs to move tens of billions cannot realistically settle around a hostile banking system, whereas gold moves without anyone's permission and without the banking pipelines — which is precisely what happened during the war.
So the ranking is clear even though he likes both: Bitcoin captures the same money-printing tailwind, but gold is the asset he expects sovereigns to use, and sovereign demand is the engine of his whole thesis.
Industrials — steel & iron ore theme Positive
Not a ticker — a category. When he lays out his positioning, "I want to own industrials" sits right beside long stocks in dollars, short stocks in gold, and away from long bonds.
The evidence he leans on is counterintuitive: private manufacturing construction in the US is currently down 18% year-over-year, even with the AI boom running. In other words the rebuild everyone talks about hasn't actually started yet — what's finishing is the Biden-era green spending. That matters two ways. It means the industrial cycle is ahead rather than behind, and it means today's inflation is what you get before the building starts. "What do you think inflation in this country is going to be when construction spending is actually up? What do you think wage growth is going to be?"
The companies that benefit are the unglamorous ones — steel, iron ore, grid equipment, fabrication — because the thing being built is physical. He's said the same in earlier appearances through the infrastructure ETFs; here it is stated as the direct consequence of his own inflation forecast rather than as a separate idea.
Semiconductors — AI chips Neutral
His position on AI chips is deliberately two-sided: take profits, but don't short them. "I wouldn't short them here."
The reason the bubble isn't over is credit. Reading about the South Sea Bubble and John Law's Mississippi scheme, his takeaway was that these episodes only end when the new credit stops arriving — and right now it is arriving in volume: the SEC is loosening the rules on packaging AI-related loans into securities, private equity firms are being convened to do exactly that, and NVIDIA's CEO is publicly floating a compute-based derivative. "No judgment. I know what that is. That's making it easier to get more credit to them."
The other side is the timing rule from his own research. Across every previous capital-spending boom going back to the 1840s canals, an investor who was two or three years in did better by selling most of the position and buying gold — gold won over the full cycle every single time, even when the boom itself ran on for a while. So the stance is: stay in for now, trim as it runs, and know what you're rotating into.
TLT — iShares 20+ Year Treasury Bond ETF Negative
TLT holds long-dated US government bonds. Gromen is bearish, but it is important to be precise about how: he is bearish in real terms and explicitly not calling for a crash in price.
He puts the odds of the US failing to pay a bondholder in dollars at zero — that will never happen. Nor does he expect the 10-year to run to 8%, because the government cannot afford it and will intervene, exactly as it did the day this was recorded. So the bonds mostly sit there. The loss comes from what those dollars buy. Measured in gold, long US Treasuries are already down 90–95% since 2014, when central banks collectively stopped adding to their holdings, and "I think it's got another 90 to 95% to go against gold, and I don't think it's going to move that much" — meaning almost all of the remaining damage comes from gold rising rather than bonds falling.
One technical aside for anyone thinking about selling volatility on it: he expects Treasuries to stay choppy, because hedge funds now own 8.5% of the Treasury market — more than Japan, China or Saudi Arabia — largely through a heavily borrowed arbitrage trade that gets unwound violently when markets move.
FXY — Invesco CurrencyShares Japanese Yen Trust Negative
FXY holds Japanese yen, so it rises when the yen strengthens. Gromen expects the opposite, and thinks official attempts to prop the yen up keep failing.
The intervention itself is a good story: the US Treasury sold about 11 billion euros of its reserves to buy yen, and trailed it in advance with a stylised Instagram post — in Gromen's reading, so that hedge funds would front-run the trade and do the heavy lifting for him. It worked briefly and then "bounced back pretty quickly," retracing more than half the move, because nothing underneath changed. Japan imports its oil, the war pushed oil up, so Japan needs dollars, so the yen falls, energy costs rise, and its own government bond market sells off.
The reason he tracks this so closely is that Japan is wired into the US bond market from both sides. Japan sells US Treasuries to raise the dollars it needs, which pushes American yields up; but the trap is symmetric and this is the part most people miss — if the yen gets too strong, the enormous pool of money borrowed cheaply in yen and invested elsewhere has to be unwound, which forces selling of stocks and bonds worldwide. Too strong is a crisis; too weak is a crisis. The only playable path is constant liquidity injection to keep the pair in a range, which is his gold argument by another route.
Private credit Negative
Private credit means loans made directly by investment funds rather than through banks or public bond markets — and crucially, loans that don't trade, so their value is an estimate rather than a price. Insurance companies have poured into them, swapping the long-dated government bonds they used to own for floating-rate loans.
Gromen's read isn't a forecast; it's an inference from something that didn't happen. When the 10-year Treasury yield reached 4.7%, insurers should have rushed back into government bonds — that's a good, safe yield for a life insurer. They didn't. "If they could sell it at a decent mark and buy a 10-year Treasury bond at 4.7, 4.75, they would have — and they didn't. That gives you all you need to know about the actual liquidity and solvency of a lot of the stuff that's in private credit." In other words, they can't sell without revealing that the loans are worth less than they carry them at.
Two consequences follow. First, a natural buyer of Treasuries has been removed at exactly the moment the government needs buyers most. Second — and this is his standard move — a stuck balance sheet eventually gets rescued: "they're going to have to inject more liquidity to liquefy everything and give them the balance sheet to be able to do that. That's okay… buy gold." He also connects it to the Gulf: he suspects the UAE's sudden need for dollar swap lines came from being "up to their chin in private credit" when Hormuz closed.
Summary & timestamps derived from the public YouTube video (transcript in transcript.txt) for personal study. Not investment advice. © Monetary Matters / Luke Gromen / Forest for the Trees (FFTT) for source material.